TIDMDGRE
RNS Number : 1809P
Delek Global Real Estate PLC
20 March 2009
20 March 2009
DELEK GLOBAL REAL ESTATE PLC
("DGRE" or the "Company")
Results for the 12 months ended 31 December 2008
Delek Global Real Estate (DGRE), the real estate investor with properties
including NCP, the Hilton and Marriott Hotel portfolios and other high quality
investment properties in Continental Europe and Canada, is pleased to announce
its Preliminary Results for the 12 months ended 31 December 2008.
Financial Highlights
+----------+--------------------------------------------------------------------------+
| - | 350 properties in portfolio with an attributable value of GBP2,403 |
| | million |
+----------+--------------------------------------------------------------------------+
| - | Net losses of GBP104.3 million (2008 profit of GBP70.7million) |
| | This was recorded following:* |
| | Property revaluation decreases relating to subsidiaries of GBP124.4 |
| | million* |
| | Property revaluation decreases relating to associates of GBP39.6 |
| | million* |
| | A market net loss of GBP93.0 million on long term interest and LPI swaps |
| | relating to NCP |
| | |
+----------+--------------------------------------------------------------------------+
| - | Loss per share of 39p (2007: profit 30p) |
+----------+--------------------------------------------------------------------------+
| - | NAV of GBP498.3 million or 188p per share (2007: GBP605.4 million or |
| | 228p per share) |
+----------+--------------------------------------------------------------------------+
Operational Highlights
+----------+--------------------------------------------------------------------------+
| - | Occupancy rates remain high at 98.6% |
+----------+--------------------------------------------------------------------------+
| | |
+----------+--------------------------------------------------------------------------+
| - | Disposals in period include part of the parking area in Metro Properties |
| | in Germany for EUR1million, a small site at the Puukeskus property in |
| | Finland for EUR2.2million and a property in Sweden which completed post |
| | year end. |
+----------+--------------------------------------------------------------------------+
| - | Refinancing of investment in Bell Tower and Celle |
+----------+--------------------------------------------------------------------------+
+--------------------------------------------------------------+------------------------+
| Delek Global Real Estate Plc | +44 207 487 9130 |
+--------------------------------------------------------------+------------------------+
| Yossi Friedman, Chief Financial Officer | |
+--------------------------------------------------------------+------------------------+
| | |
+--------------------------------------------------------------+------------------------+
| | |
+--------------------------------------------------------------+------------------------+
| Panmure Gordon & Co. | +44 207 459 3600 |
+--------------------------------------------------------------+------------------------+
| Hugh Morgan | |
+--------------------------------------------------------------+------------------------+
| | |
+--------------------------------------------------------------+------------------------+
| Scott Harris UK Ltd. | +44 207 653 0036 |
+--------------------------------------------------------------+------------------------+
| James O'Shaughnessy | |
+--------------------------------------------------------------+------------------------+
| | |
+--------------------------------------------------------------+------------------------+
| Pelham PR | +44 207 337 1539 |
+--------------------------------------------------------------+------------------------+
| Alex Walters | |
+--------------------------------------------------------------+------------------------+
DELEK GLOBAL REAL ESTATE PLC
CHAIRMAN'S STATEMENT
YEAR ENDED 31 DECEMBER 2008
Western European and Canadian real estate markets continued to weaken throughout
2008, particularly in the UK. The lack of available financing and uncertainty
over the property valuations resulted in historically low levels of activity.
As with many other AIM listed real estate investment companies, DGRE experienced
low levels of trading volumes in its shares despite continuing to generate
strong cash flows from its high quality portfolio.
For the year ended 31 December 2008, DGRE reports a loss of GBP104.3 million
(2007: profit GBP70.7 million), after property impairment losses of GBP164
million and net LPI and interest rate swap losses from NCP of GBP93.0 million.
Net rental income increased by 46% to GBP164.2 million from GBP112.3 million.
The net asset value at 31 December 2008 was GBP498.3 million (2007: GBP605.3
million) equating to 188p per ordinary share (2007: 228p per share).
As previously reported to you at the interim stage, the dispute with Jelmoli
Holding AG has been resolved and the three parties involved have paid Jelmoli
the sum of CHF21.5 million plus the waiver of a further CHF10 million down
payment. DGRE has expensed a total of GBP4.8 million amounting to its share of
the total liability. I am very pleased to report that this matter is now closed.
The highly cautious approach we adopted at the start of 2008 has been maintained
throughout the year. Despite being presented with a number of opportunities,
none were deemed to represent value to shareholders and accordingly no
acquisitions were made.
Since the year end, we have disposed of a single asset in Sweden at a
satisfactory price. We are in the final stages of negotiation to dispose of one
of our properties in Canada. Please see the further details in the CEO report
which follows.
Our investment portfolio is well spread across Continental Europe and Canada
and, at 31 December 2008, comprised offices 41%, car parks 24%, retail and
hotels 33% and residential 2%. Voids are 1.4% of gross lettable space and our
average lease expiry period is 12.9 years. Our average debt repayment period is
6.6 years and at 31 December 2008 and our loan to value was 73.8%.
The CEO advised the Board that a subject to contract approach had been received
in respect of the sale of a proportion of the rental income stream from one of
our substantial tenants. After some debate, the CEO was instructed to continue
discussions and keep the Board informed.
Because Delek Belron International Limited ("DBI"), the controlling shareholder,
has indicated that it would oppose the payment of any final dividend, the Board
has decided not to propose such payment.
H Stanton
Chairman
19th March 2009
DELEK GLOBAL REAL ESTATE PLC
CHIEF EXECUTIVE OFFICER'S REPORT - OPERATIONAL AND FINANCIAL REVIEW
YEAR ENDED 31 DECEMBER 2008
The review for the year ended 31 December 2008 is presented against a background
of a major downturn in the value of commercial real estate from which none of
our investments are immune, even though DGRE has no retail or residential
exposure in the United Kingdom.
Property values continue to fall in the UK and Europe as yields soften further
and debt financing for property acquisition is virtually non-existent, other
than for exceptionally priced opportunities, due to the ongoing liquidity issues
in the financial sector. In 2008 we made only one acquisition of a small office
building in Nottingham at a cost of GBP4.8 million.
Net losses after tax credits for the year ended 31 December 2008 attributable to
DGRE shareholders were GBP104.3 million, compared to a profit of GBP70.7million
in the previous year. The loss for 2008 is recorded after: (i) property
revaluation decreases relating to subsidiaries (before tax and minority
interests) of GBP124.4 million; (ii) property revaluation decreases relating to
associates (after tax) of GBP39.6 million; and (iii) a mark-to-market net loss
(before tax and minority interests) of GBP93.0 million on long term interest
rate and LPI swaps relating to NCP.
The loss per share was 39p with a net asset value at 31 December 2008 of
GBP498.3 million (after the minority interests), representing 188p per share,
compared to an NAV of 228p per share at 31 December 2007.
We disposed of a part of the parking area in one of the Metro properties in
Germany for EUR1 million. In the Puukeskus property in Finland, we sold one of the
small sites for EUR2.2 million, and sold our sole property in Sweden in January
2009, repaying the total debt outstanding of GBP12.9 million (DGRE's share in
this property was 75%). In the period we also successfully refinanced our
investment in Bell Tower and Celle.
At 31 December 2008 there were 350 properties in the portfolio with an
attributable value to DGRE of GBP2,403 million. In comparison with the prior
year this figure is impacted by the devaluation of Pound Sterling and on a
constant currency basis, utilising 31 December 2007 exchange rates, the value
would equate to GBP2,106 million. This represents an overall reduction of GBP164
million in attributable value to DGRE when compared with the attributable value
for the portfolio at 31 December 2007 of GBP2,270 million.
Portfolio at 31 December 2008
i) Portfolio Diversified by Geography (Value attributable to Group share)
The geographical spread of the Company's portfolio is as follows:
+--------------+----------------+----------------+--------------+-------------
+-------------+---------------------+
| Total | Scandinavia |
Switzerland | Canada | Germany | UK(3) |
|
+--------------+----------------+----------------+--------------+----------
=--+-------------+---------------------+
| 350 | 92 | 5
| 36 | 23 | 194 | No. of properties
|
+--------------+----------------+----------------+--------------+----------
---+-------------+---------------------+
| 4,605mGBP | 244mGBP |
365mGBP | 327mGBP | 791mGBP | 2,878mGBP | Total Fair Value
|
+--------------+----------------+----------------+--------------+----------
---+-------------+---------------------+
| 2,403mGBP | 211mGBP |
288mGBP | 281mGBP | 581mGBP | 1,042mGBP | DGRE Share in Fair
|
| | | | |
| | Value
|
+--------------+----------------+----------------+--------------+----------
---+-------------+---------------------+
| 1,772mGBP | 174mGBP |
242mGBP | 151mGBP | 473mGBP | 732mGBP | DGRE Share of Loan
|
| | | | |
| | Balance(1)
|
+--------------+----------------+----------------+--------------+----------
---+-------------+---------------------+
| 631mGBP | 37mGBP |
46mGBP | 130mGBP | 108mGBP | 310mGBP | DGRE Share of
|
| | | | |
| | Attributable NAV(2)
|
+--------------+----------------+----------------+--------------+----------
=--+-------------+---------------------+
| 74% | 82% | 84%
| 54% | 81% | 70% | Loan to Value
|
+--------------+----------------+----------------+--------------+----------
---+-------------+---------------------+
Attributable NAV(2) (ex. Cash) of GBP 631 m
(1) Non-recourse debt at asset level.
(2) Attributable NAV - Aggregate difference between DGRE's share of properties'
fair value and the balance of the Non-recourse loans related to those
properties.
(3) Includes the group investments in the entities that own UK hotels operated
by Hilton and Marriott.
ii) Fair Value Analysis (100% of the values, including properties held by
subsidiaries and associates and investment companies)
The table below illustrates the changes in value of the properties over the last
3 years.
+----------+------------+--------+-------------+--------------+--------+-----------+------+-----------+------+----------+--------+----------+--------+
| |
+----------------------------------------------------------------------------------------------------------------------------------------------------+
| | Country | Sector | *Valuation GBP (000) | | **Difference | | Difference | |
| | | | | | in 2007 | | in 2008 | |
+ + + +-----------------------------------+ +------------------+ +-------------------+ +
| | | |31.12.06/IPO | | 31.12.07 | | 31.12.08 | | GBP | % | GBP | % |
| | | | | | | | | | (000) | | (000) | |
+ +---------------------+-------------+--------------+ +-----------+ +-----------+ +----------+--------+----------+--------+
| | UK | Offices | 600,050 | | 587,700 | | 475,816 | | -12,350 | -2.1% | -111,884 | -19.0% |
+ + +-------------+--------------+ +-----------+ +-----------+ +----------+--------+----------+--------+
| | | Hotels | 1,540,000 | | 1,550,100 | | 1,422,223 | | 10,100 | 0.7% | -127,877 | -8.2% |
+ + +-------------+--------------+ +-----------+ +-----------+ +----------+--------+----------+--------+
| | | Car | 919,000 | | 1,000,000 | | 980,003 | | 81,000 | 8.8% | -19,997 | -2.0% |
| | | Parks | | | | | | | | | | |
+ + +-------------+--------------+ +-----------+ +-----------+ +----------+--------+----------+--------+
| | | Total | 3,059,050 | | 3,137,800 | | 2,878,042 | | 78,750 | 2.6% | -259,758 | -8.3% |
+ +---------------------+-------------+--------------+ +-----------+ +-----------+ +----------+--------+----------+--------+
| | | | Valuation C$ (000) | | C$ | | % | | C$ | % |
| | | | | | (000) | | | | (000) | |
+ +---------------------+-------------+-----------------------------------+ +-----------+ +----------+ +----------+--------+
| | Canada | Offices | 372,500 | | 386,000 | | 344,000 | | 13,500 | 3.6% | -42,000 | -10.9% |
+ + +-------------+--------------+ +-----------+ +-----------+ +----------+--------+----------+--------+
| | | Residential | 78,100 | | 81,900 | | 83,300 | | 3,800 | 4.9% | 1,400 | 1.7% |
+ + +-------------+--------------+ +-----------+ +-----------+ +----------+--------+----------+--------+
| | | Retail | 172,000 | | 175,675 | | 156,300 | | 3,675 | 2.1% | -19,375 | -11.0% |
+ + +-------------+--------------+ +-----------+ +-----------+ +----------+--------+----------+--------+
| | | Total | 622,600 | | 643,575 | | 583,600 | | 20,975 | 3.4% | -59,975 | -9.3% |
+ +---------------------+-------------+--------------+ +-----------+ +-----------+ +----------+--------+----------+--------+
| | | | Valuation EUR (000) | | Euro | | % | | Euro | % |
| | | | | | (000) | | | | (000) | |
+ +---------------------+-------------+-----------------------------------+ +-----------+ +----------+ +----------+--------+
| | Germany | Offices | 293,990 | | 448,260 | | 421,190 | | 8,150 | 2.8% | -27,070 | -6.0% |
+ + +-------------+--------------+ +-----------+ +-----------+ +----------+--------+----------+--------+
| | | Retail | 161,600 | | 416,821 | | 407,370 | | -3,850 | -2.4% | -9,451 | -2.3% |
+ + +-------------+--------------+ +-----------+ +-----------+ +----------+--------+----------+--------+
| | | Total | 455,590 | | 865,081 | | 828,560 | | 4,300 | 0.9% | -36,521 | -4.2% |
+ +---------------------+-------------+--------------+ +-----------+ +-----------+ +----------+--------+----------+--------+
| | | | Valuation EUR (000) | | Euro | | % | | Euro | % |
| | | | | | (000) | | | | (000) | |
+ +---------------------+-------------+-----------------------------------+ +-----------+ +----------+ +----------+--------+
| | Scandinavia | Offices | 79,500 | | 86,600 | | 70,480 | | 7,100 | 8.9% | -16,120 | -18.6% |
+ + +-------------+--------------+ +-----------+ +-----------+ +----------+--------+----------+--------+
| | | Retail | 127,000 | | 188,815 | | 184,800 | | 4,430 | 3.5% | -4,015 | -2.1% |
+ + +-------------+--------------+ +-----------+ +-----------+ +----------+--------+----------+--------+
| | | Total | 206,500 | | 275,415 | | 255,280 | | 11,530 | 5.6% | -20,135 | -7.3% |
+ +---------------------+-------------+--------------+ +-----------+ +-----------+ +----------+--------+----------+--------+
| | | | Valuation Sfr (000) | | Sfr | | % | | Sfr | % |
| | | | | | (000) | | | | (000) | |
+ +---------------------+-------------+-----------------------------------+ +-----------+ +----------+ +----------+--------+
| | Switzerland | Offices | 459,800 | | 581,640 | | 514,760 | | 3,340 | 0.7% | -66,880 | -11.5% |
+ + +-------------+--------------+ +-----------+ +-----------+ +----------+--------+----------+--------+
| | | Retail | 59,666 | | 57,700 | | 52,910 | | -1,966 | -3.3% | -4,790 | -8.3% |
+ + +-------------+--------------+ +-----------+ +-----------+ +----------+--------+----------+--------+
| | | Total | 519,466 | | 639,340 | | 567,670 | | 1,374 | 0.3% | -71,670 | -11.2% |
+----------+---------------------+-------------+--------------+--------+-----------+------+-----------+------+----------+--------+----------+--------+
| |
+----------------------------------------------------------------------------------------------------------------------------------------------------+
| * | In the valuations at the 31.12.06 /IPO and 31.12.07 part of the figures are |
| | purchase price. |
+-----------------------+----------------------------------------------------------------------------------------------------------------------------+
| ** | New assets for which previous corresponding valuations do not exist, are, |
| | consequently, not included in all difference analysis. |
+----------+------------+--------+-------------+--------------+--------+-----------+------+-----------+------+----------+--------+----------+--------+
iii) Net Operating Income by Geography
Our assets are located in countries with stable regulatory regimes. Our strategy
remains unchanged; we develop our contacts in each country by building
relationships with existing tenants, brokers, partners and financiers in order
to access additional deal flow, improve financing terms and generate additional
income from existing assets with limited capital expenditure.
+-----+------------------+---------------+--------------+-----------+-----------+-------+
| Country | No. of | Value (¹) | % | NOI(2) | % |
| | Properties | GBPm | | GBPm | |
+------------------------+---------------+--------------+-----------+-----------+-------+
| UK | 194 | 1,042 | 43.3% | 62.5(3) | 41.8% |
| | | | | | |
+------------------------+---------------+--------------+-----------+-----------+-------+
| Canada | 36 | 281 | 11.7% | 21.3 | 14.2% |
+------------------------+---------------+--------------+-----------+-----------+-------+
| Germany | 23 | 581 | 24.2% | 37.2 | 24.9% |
+------------------------+---------------+--------------+-----------+-----------+-------+
| Switzerland | 5 | 288 | 12.0% | 14.9 | 10.0% |
+------------------------+---------------+--------------+-----------+-----------+-------+
| Finland | 91 | 197 | 8.2% | 12.7 | 8.5% |
+------------------------+---------------+--------------+-----------+-----------+-------+
| Sweden | 1 | 14 | 0.6% | 0.9 | 0.6% |
+------------------------+---------------+--------------+-----------+-----------+-------+
| Total | 350 | 2,403 | 100% | 149.5 | 100% |
+------------------------+---------------+--------------+-----------+-----------+-------+
| (1) | Fair value attributed to DGRE share |
+-----+---------------------------------------------------------------------------------+
| (2) | Net operational Income = Rent less any operational expenses related to the |
| | asset |
+-----+---------------------------------------------------------------------------------+
| (3) | Includes Hotels' NOI in spite of the fact that DGRE receives only dividends |
+-----+------------------+---------------+--------------+-----------+-----------+-------+
iv) Portfolio Diversified by Sector
DGRE's portfolio encompasses a broad range of sectors in order to limit exposure
to any one asset type; the portfolio has been built with a continued focus on
the high residual value inherent in the assets themselves.
+------------------+-------------+--------------+
| Sector | Share | Attributed |
| | | Value GBPm |
+------------------+-------------+--------------+
| Office | 41% | 986 |
+------------------+-------------+--------------+
| Car Parks | 24% | 578 |
+------------------+-------------+--------------+
| Retail | 23% | 550 |
+------------------+-------------+--------------+
| Hotels | 10% | 242 |
+------------------+-------------+--------------+
| Residential | 2% | 47 |
+------------------+-------------+--------------+
| Total | 100% | 2,403 |
+------------------+-------------+--------------+
Geographically and Sectoral Diversified Portfolio
By Number of Assets
+--------------+-------------+-----------+----------+------------+----------+
| | Hotels/ | Offices | Parking | Petrol | Total |
| |Residential | | lots | stations | assets |
| | | | | and | |
| | | | | retail | |
+--------------+-------------+-----------+----------+------------+----------+
| UK | 58 | 9 | 127 | - | 194 |
+--------------+-------------+-----------+----------+------------+----------+
| Canada | 2 | 2 | - | 32 | 36 |
+--------------+-------------+-----------+----------+------------+----------+
| Switzerland | - | 4 | - | 1 | 5 |
+--------------+-------------+-----------+----------+------------+----------+
| Sweden | - | 1 | - | - | 1 |
+--------------+-------------+-----------+----------+------------+----------+
| Finland | - | 2 | - | 89 | 91 |
+--------------+-------------+-----------+----------+------------+----------+
| Germany | - | 8 | - | 15 | 23 |
+--------------+-------------+-----------+----------+------------+----------+
| Total | 60 | 26 | 127 | 137 | 350 |
+--------------+-------------+-----------+----------+------------+----------+
v) Lease Expiry Profile
The lease expiry profile of DGRE's portfolio provides stability and resilience
in the current volatile market.
Our average unexpired lease length is 12.9 years and our void rate is 1.4%.
+------------------+--------------+
| Term - Years | |
+------------------+--------------+
| <5 | 22.1% |
+------------------+--------------+
| 5 - 10 | 31.2% |
+------------------+--------------+
| 10 - 20 | 22.4% |
+------------------+--------------+
| >20 | 24.3% |
+------------------+--------------+
| | 100% |
+------------------+--------------+
vi) Development potential with NCP
We have previously reported on the development potential associated with the 127
NCP car parks that form part of the DGRE portfolio. While we continue to keep an
open dialogue with potential developers, development plans have been put on hold
due to current market conditions, other than the sites as reported below, which
have been earmarked for development in the short-to-medium term. These include
the Cardiff car parks mentioned below, and the Finsbury Square car park in
London, where an underground car park is to be converted in part to a night club
and the remaining part to be extended.
During 2007 three car parks in Cardiff were subject to a Compulsory Purchase
Order. We are in advanced negotiations to exchange these sites for new car parks
which will form part of a large shopping centre.
Debt Analysis at 31 December 2008
i)DGRE's share in the total debt at 31 December 2008 is summarised below.
All Group debt is non-recourse at the subsidiary level. 95% of our interest
obligations are fixed or hedged and the average maturity period for outstanding
debt is 6.6 years. All debt is arranged in the local currency of the country
within which the property is located. DGRE is debt free at the holding company
level.
+--+------------------------+-------------------+------------+----------+-------------+
| Country | Debt- Local |Debt- GBPm | % | Exchange |
| | currency million | | | Rate |
+---------------------------+-------------------+------------+----------+-------------+
| UK | GBP732.2 | 732 | 41.3% | 1.0000 |
+---------------------------+-------------------+------------+----------+-------------+
| Canada | C$ 268.8 | 151 | 8.5% | 0.5610 |
+---------------------------+-------------------+------------+----------+-------------+
| Germany | EUR 495.7 | 473 | 26.7% | 0.9548 |
+---------------------------+-------------------+------------+----------+-------------+
| Switzerland | Sfr. 376.1 | 242 | 13.6% | 0.6425 |
+---------------------------+-------------------+------------+----------+-------------+
| Finland | EUR 172.3 | 164 | 9.3% | 0.9548 |
+---------------------------+-------------------+------------+----------+-------------+
| Sweden* | Sk 109.6 | 10 | 0.6% | 0.0878 |
+---------------------------+-------------------+------------+----------+-------------+
| Total | | 1,772 | 100% | |
+---------------------------+-------------------+------------+----------+-------------+
| *| The Swedish debt was repaid in January 2009 |
+--+------------------------+-------------------+------------+----------+-------------+
ii) Debt repayment profile at 31 December 2008
+----------+-----------+------------+
| Term | Debt- | Share |
| | GBPm | |
+----------+-----------+------------+
| <1 | 72.4 | 4.1% |
+----------+-----------+------------+
| 1 - 2 | 182.8 | 10.3% |
+----------+-----------+------------+
| 2 -3 | 264.1 | 14.9% |
+----------+-----------+------------+
| 3 - 4 | 148.9 | 8.4% |
+----------+-----------+------------+
| 4 -5 | 404.8 | 22.8% |
+----------+-----------+------------+
| 5 - 10 | 333.8 | 18.8% |
+----------+-----------+------------+
| 10 - 15 | 39.8 | 2.3% |
+----------+-----------+------------+
| >15 | 325.6 | 18.4% |
+----------+-----------+------------+
| Total | 1772.2 | 100% |
+----------+-----------+------------+
iii) Value and debt at 31 December 2008
Our debt profile shows a balanced and gradual expiry schedule with some elements
of refinancing coming up this year and also in 2010, 2011 and 2013.
In January 2008, the existing Bell Tower loan, which had an annual interest rate
of 6.45%, expired. The Company was granted a new loan by the same lender for 25
months for the same principal amount but with a reduced annual interest rate of
5.18%.
In June 2008 the refinancing process of the Celle asset in Germany was
completed. An existing loan from Goldman Sachs was repaid, and a new loan of
EUR24.5 million was obtained from Hypo Real Estate Bank with an annual interest
rate of 5.12%.
+-------------+-------------+---------+------------+---------+-------------+--------------+--------------+
| Country | Sector | Average | DGRE Share | LTV | Average | Loan |
| | | DGRE | (000) | | Interest | balance on |
| | | share | | | | expiry |
| | | | | | | after |
| | | | | | |amortization |
+ + + +----------------------+ + + +
| | | | Fair | | | | Loan |
| | | | Value | | | | 31/12/2008 |
| | | |31/12/2008 | | | | |
+ + + +------------+---------+-------------+--------------+--------------+
| | | | DGRE Share GBP (000) |
+-------------+-------------+---------+------------------------------------------------------------------+
| UK | Offices | 46.5% | 221,336 |203,076 | 92% | 6.22% | 186,424 |
+ +-------------+---------+------------+---------+-------------+--------------+--------------+
| | Hotels | 17.0% | 241,778 |203,605 | 84% | 6.07% | 201,044 |
+ +-------------+---------+------------+---------+-------------+--------------+--------------+
| | Car | 59.0% | 578,202 |325,600 | 56% | 6.80% | 232,482 |
| | Parks | | | | | | |
+ +-------------+---------+------------+---------+-------------+--------------+--------------+
| | Total | 36.1% | 1,041,316 |732,281 | 70% | 6.44% | 619,950 |
+-------------+-------------+---------+------------+---------+-------------+--------------+--------------+
| | | | DGRE Share C$ (000) |
+-------------+-------------+---------+------------------------------------------------------------------+
| Canada | Offices | 100% | 344,000 |168,116 | 49% | 5.75% | 157,672 |
+ +-------------+---------+------------+---------+-------------+--------------+--------------+
| | Residential | 100% | 83,300 | 45,947 | 55% | 4.32% | 42,799 |
+ +-------------+---------+------------+---------+-------------+--------------+--------------+
| | Retail | 46.7% | 72,933 | 54,737 | 75% | 5.47% | 48,693 |
+ +-------------+---------+------------+---------+-------------+--------------+--------------+
| | Total | 85.7% | 500,233 |268,800 | 54% | 5.45% | 249,164 |
+-------------+-------------+---------+------------+---------+-------------+--------------+--------------+
| | | | DGRE Share EUR (000) |
+-------------+-------------+---------+------------------------------------------------------------------+
| Germany | Offices | 62.5% | 263,426 |203,015 | 77% | 5.34% | 193,893 |
+ +-------------+---------+------------+---------+-------------+--------------+--------------+
| | Retail | 84.8% | 345,479 |292,697 | 85% | 5.24% | 281,801 |
+ +-------------+---------+------------+---------+-------------+--------------+--------------+
| | Total | 73.5% | 608,905 |495,712 | 81% | 5.28% | 475,694 |
+-------------+-------------+---------+------------+---------+-------------+--------------+--------------+
| | | | DGRE Share EUR (000) |
+-------------+-------------+---------+------------------------------------------------------------------+
|Scandinavia | Offices | 73.2% | 51,596 | 37,122 | 72% | 4.68% | 35,004 |
+ +-------------+---------+------------+---------+-------------+--------------+--------------+
| | Retail | 91.8% | 169,609 |145,282 | 86% | 5.28% | 140,126 |
+ +-------------+---------+------------+---------+-------------+--------------+--------------+
| | Total | 86.7% | 221,205 |182,404 | 82% | 5.16% | 175,130 |
+-------------+-------------+---------+------------+---------+-------------+--------------+--------------+
| | | | DGRE Share Sfr (000) |
+-------------+-------------+---------+------------------------------------------------------------------+
|Switzerland | Offices | 82.1% | 422,422 |353,640 | 84% | 3.60% | 330,315 |
+ +-------------+---------+------------+---------+-------------+--------------+--------------+
| | Retail | 50.0% | 26,455 | 22,485 | 85% | 3.89% | 20,962 |
+ +-------------+---------+------------+---------+-------------+--------------+--------------+
| | Total | 79.1% | 448,877 |376,125 | 84% | 3.62% | 351,277 |
+-------------+-------------+---------+------------+---------+-------------+--------------+--------------+
Debt repayment profile by country
+-------+------+--+------+---------+------+---------+------+---------+------+---------+------+-----------+------+
| Term | Debt - GBP Thousand |
|Years | |
+ +-------------------------------------------------------------------------------------------------------+
| | UK | Canada | Germany | Switzerland | Scandinavia | Total |
+-------+----------------+----------------+----------------+----------------+----------------+------------------+
| <1 | | | | | | | 62,759 | 26% | 9621* | 6% | 72,380 | 4% |
+-------+---------+------+---------+------+---------+------+---------+------+---------+------+-----------+------+
|1 - 2 | 25,879 | 4% | 85,167 | 57% | 12,816 | 3% | 58,929 | 24% | | | 182,791 | 10% |
+-------+---------+------+---------+------+---------+------+---------+------+---------+------+-----------+------+
|2 - 3 | | | 33,271 | 22% | 66,285 | 14% | | | 164,537 | 94% | 264,093 | 15% |
+-------+---------+------+---------+------+---------+------+---------+------+---------+------+-----------+------+
|3 - 4 | 103,093 | 14% | | | 45,830 | 10% | | | | | 148,923 | 8% |
+-------+---------+------+---------+------+---------+------+---------+------+---------+------+-----------+------+
|4 - 5 | 32,403 | 4% | | | 331,734 | 70% | 40,640 | 17% | | | 404,777 | 23% |
+-------+---------+------+---------+------+---------+------+---------+------+---------+------+-----------+------+
| 5 - | 205,511 | 28% | 32,365 | 21% | 16,637 | 3% | 79,342 | 33% | | | 333,855 | 19% |
| 10 | | | | | | | | | | | | |
+-------+---------+------+---------+------+---------+------+---------+------+---------+------+-----------+------+
| 10 - | 39,796 | 5% | | | | | | | | | 39,796 | 2% |
| 15 | | | | | | | | | | | | |
+-------+---------+------+---------+------+---------+------+---------+------+---------+------+-----------+------+
| >15 | 325,600 | 45% | | | | | | | | | 325,600 | 19% |
+-------+---------+------+---------+------+---------+------+---------+------+---------+------+-----------+------+
|Total | 732,282 | 100% | 150,803 | 100% | 473,302 | 100% | 241,670 | 100% | 174,158 | 100% | 1,772,215 | 100% |
+-------+---------+------+---------+------+---------+------+---------+------+---------+------+-----------+------+
| | * | The Swedish debt was repaid in January 2009 |
+-------+------+--+------+---------+------+---------+------+---------+------+---------+------+-----------+------+
At 31 December 2008, DGRE held cash reserves of GBP16.9m (excluding cash held by
subsidiaries and associates) and the loan-to-value ratio across the portfolio,
excluding cash, at 31 December 2008, was 73.8%.
Asset held for sale
Subsequent to the year end, sale and purchase agreements ('SPA') were entered
into by the relevant subsidiaries of the Company for one of its Canadian assets
and the Swedish asset which are included in the financial statements as
non-current assets held for sale.
* The SPA for sale of the Canadian residential asset stated a purchase price of
CAD 37.5 million. This transaction is expected to close during the first quarter
of 2009.
* The SPA for sale of the Swedish office asset stated a purchase price of SEK
217million and the transaction completed in January 2009.
* A further four assets have also been designated as held for sale.
Approach from a tenant
We received a subject to contract approach in respect of a proportion of the
rental income stream from one of our substantial tenants. Discussions continue.
Outlook
We maintain a cautious outlook in the belief that weakness in the global economy
and a lack of liquidity in the financial system will continue to impact the real
estate sector. However, assuming we can maintain a stable cash flow and
satisfactory resolve the refinancing coming up this year, and in 2010, 2011 and
2013, I remain confident that DGRE will weather the storms ahead.
Ilik Rosanski
CEO
19 March 2009
DELEK GLOBAL REAL ESTATE PLC
YEAR ENDED 31 DECEMBER 2008
CONSOLIDATED BALANCE SHEET
British Pounds in thousands
+-----------------------------------------------+--+--------+--+------------+--+------------+
| | | | | 31 December |
+-----------------------------------------------+--+--------+--+----------------------------+
| | | Note | | 2008 | | 2007 |
+-----------------------------------------------+--+--------+--+------------+--+------------+
| | | | | | | Restated * |
+-----------------------------------------------+--+--------+--+------------+--+------------+
| ASSETS | | | | | | |
+-----------------------------------------------+--+--------+--+------------+--+------------+
| | | | | | | |
+-----------------------------------------------+--+--------+--+------------+--+------------+
| Investment properties | | 5 | | 2,182,852 | | 2,187,401 |
+-----------------------------------------------+--+--------+--+------------+--+------------+
| Property, plant and equipment | | 3 | | 160 | | - |
+-----------------------------------------------+--+--------+--+------------+--+------------+
| Intangible assets | | 7 | | 85,750 | | 85,750 |
+-----------------------------------------------+--+--------+--+------------+--+------------+
| Investment in associates | | 4 | | 41,069 | | 77,544 |
+-----------------------------------------------+--+--------+--+------------+--+------------+
| Non-current receivables | | 8 | | 101,529 | | 85,212 |
+-----------------------------------------------+--+--------+--+------------+--+------------+
| Derivative financial | | 20 | | - | | 4,539 |
| instruments | | | | | | |
+-----------------------------------------------+--+--------+--+------------+--+------------+
| Available-for-sale | | 10 | | 52,080 | | 62,859 |
| investments | | | | | | |
+-----------------------------------------------+--+--------+--+------------+--+------------+
| Deferred tax asset | | 22e | | 4,315 | | 319 |
+-----------------------------------------------+--+--------+--+------------+--+------------+
| | | | | | | |
+-----------------------------------------------+--+--------+--+------------+--+------------+
| | | | | | | |
+-----------------------------------------------+--+--------+--+------------+--+------------+
| Total non-current assets | | | | 2,467,755 | | 2,503,624 |
+-----------------------------------------------+--+--------+--+------------+--+------------+
| | | | | | | |
+-----------------------------------------------+--+--------+--+------------+--+------------+
| CURRENT ASSETS: | | | | | | |
| | | | | | | |
+-----------------------------------------------+--+--------+--+------------+--+------------+
| Trade and other receivables | | 12 | | 19,638 | | 14,673 |
+-----------------------------------------------+--+--------+--+------------+--+------------+
| Loan to parent company | |17a(5) | | 6,302 | | - |
+-----------------------------------------------+--+--------+--+------------+--+------------+
| Cash and cash equivalents | | 9 | | 46,126 | | 83,290 |
+-----------------------------------------------+--+--------+--+------------+--+------------+
| | | | | 72,066 | | 97,963 |
+-----------------------------------------------+--+--------+--+------------+--+------------+
| Non-current assets held for sale | | 6 | | 206,402 | | - |
+-----------------------------------------------+--+--------+--+------------+--+------------+
| | | | | | | |
+-----------------------------------------------+--+--------+--+------------+--+------------+
| | | | | | | |
+-----------------------------------------------+--+--------+--+------------+--+------------+
| Total current assets | | | | 278,468 | | 97,963 |
+-----------------------------------------------+--+--------+--+------------+--+------------+
| | | | | | | |
+-----------------------------------------------+--+--------+--+------------+--+------------+
| | | | | | | |
+-----------------------------------------------+--+--------+--+------------+--+------------+
| Total assets | | | | 2,746,223 | | 2,601,587 |
+-----------------------------------------------+--+--------+--+------------+--+------------+
| | | | | | | |
+-----------------------------------------------+--+--------+--+------------+--+------------+
| | | | | | | |
+-----------------------------------------------+--+--------+--+------------+--+------------+
*See note 2.4p
The accompanying notes are an integral part of the consolidated financial
statements.
CONSOLIDATED BALANCE SHEET
British Pounds in thousands
+-----------------------------------------------+-+-------+--+------------+--+------------+
| | | | | 31 December |
+-----------------------------------------------+-+-------+--+----------------------------+
| | | Note | | 2008 | | 2007 |
+-----------------------------------------------+-+-------+--+------------+--+------------+
| | | | | | |Restated * |
+-----------------------------------------------+-+-------+--+------------+--+------------+
| EQUITY AND LIABILITIES | | | | | | |
+-----------------------------------------------+-+-------+--+------------+--+------------+
| | | | | | | |
+-----------------------------------------------+-+-------+--+------------+--+------------+
| Equity attributable to equity | | | | | | |
| holders of the parent: | | | | | | |
+-----------------------------------------------+-+-------+--+------------+--+------------+
| Share capital | | 14 | | 132,558 | | 132,558 |
+-----------------------------------------------+-+-------+--+------------+--+------------+
| Share premium | | | | 150,823 | | 150,823 |
+-----------------------------------------------+-+-------+--+------------+--+------------+
| Capital contribution | | | | 5,700 | | 5,978 |
+-----------------------------------------------+-+-------+--+------------+--+------------+
| Retained earnings | | | | 144,028 | | 281,516 |
+-----------------------------------------------+-+-------+--+------------+--+------------+
| Foreign currency | | | | 75,950 | | 21,669 |
| translation reserve | | | | | | |
+-----------------------------------------------+-+-------+--+------------+--+------------+
| Hedging reserve | | | | (21,428) | | 2,071 |
+-----------------------------------------------+-+-------+--+------------+--+------------+
| Reserves related to | | | | 10,710 | | - |
| non-current assets held | | | | | | |
| for sale | | | | | | |
+-----------------------------------------------+-+-------+--+------------+--+------------+
| Other reserves | | | | - | | 10,779 |
+-----------------------------------------------+-+-------+--+------------+--+------------+
| | | | | | | |
+-----------------------------------------------+-+-------+--+------------+--+------------+
| | | | | 498,341 | | 605,394 |
+-----------------------------------------------+-+-------+--+------------+--+------------+
| Minority interests | | | | 48,732 | | 75,226 |
+-----------------------------------------------+-+-------+--+------------+--+------------+
| | | | | | | |
+-----------------------------------------------+-+-------+--+------------+--+------------+
| Total equity | | | | 547,073 | | 680,620 |
+-----------------------------------------------+-+-------+--+------------+--+------------+
| | | | | | | |
+-----------------------------------------------+-+-------+--+------------+--+------------+
| NON-CURRENT LIABILITIES: | | | | | | |
+-----------------------------------------------+-+-------+--+------------+--+------------+
| Loans from banks | | 16 | | 1,516,148 | | 1,372,768 |
+-----------------------------------------------+-+-------+--+------------+--+------------+
| Loans from associates and | | 17 | | 12,161 | | 13,287 |
| related parties | | | | | | |
+-----------------------------------------------+-+-------+--+------------+--+------------+
| Loans from minority | | 18 | | 20,409 | | 22,005 |
| shareholders | | 11 | | 33,419 | | 25,687 |
| Loans from others | | | | | | |
+-----------------------------------------------+-+-------+--+------------+--+------------+
| Derivative financial | | 20 | | 212,414 | | 95,458 |
| instruments | | | | | | |
+-----------------------------------------------+-+-------+--+------------+--+------------+
| Other liabilities | | 13 | | 24,052 | | 44,736 |
+-----------------------------------------------+-+-------+--+------------+--+------------+
| Deferred tax liability | | 22e | | 163,316 | | 216,489 |
+-----------------------------------------------+-+-------+--+------------+--+------------+
| | | | | | | |
+-----------------------------------------------+-+-------+--+------------+--+------------+
| | | | | 1,981,919 | | 1,790,430 |
+-----------------------------------------------+-+-------+--+------------+--+------------+
| | | | | | | |
+-----------------------------------------------+-+-------+--+------------+--+------------+
| CURRENT LIABILITIES: | | | | | | |
+-----------------------------------------------+-+-------+--+------------+--+------------+
| Loans from banks | | 16 | | 12,701 | | 74,546 |
+-----------------------------------------------+-+-------+--+------------+--+------------+
| Loans from parent company and related | | 17 | | 848 | | 3,416 |
| parties | | | | | | |
+-----------------------------------------------+-+-------+--+------------+--+------------+
| Trade and other payables | | 23 | | 49,457 | | 52,575 |
+-----------------------------------------------+-+-------+--+------------+--+------------+
| | | | | | | |
+-----------------------------------------------+-+-------+--+------------+--+------------+
| Liabilities related to assets held | | 6 | | 63,006 | | 130,537 |
| for sale | | | | 154,225 | | - |
+-----------------------------------------------+-+-------+--+------------+--+------------+
| Total current liabilities | | | | 217,231 | | 130,537 |
+-----------------------------------------------+-+-------+--+------------+--+------------+
| Total liabilities | | | | 2,199,150 | | 1,920,967 |
+-----------------------------------------------+-+-------+--+------------+--+------------+
| | | | | | | |
+-----------------------------------------------+-+-------+--+------------+--+------------+
| Total equity and liabilities | | | | 2,746,223 | | 2,601,587 |
+-----------------------------------------------+-+-------+--+------------+--+------------+
| | | | | | | |
+-----------------------------------------------+-+-------+--+------------+--+------------+
| Net asset value per share (in | | | | GBP1.88 | | GBP2.28 |
| British Pounds) | | | | | | |
+-----------------------------------------------+-+-------+--+------------+--+------------+
*See note 2.4p
The accompanying notes are an integral part of the consolidated financial
statements.
CONSOLIDATED INCOME STATEMENT
British Pounds in thousands
+--------------------------------------------------+-+---------+--+-----------+--+----------+
| | | | | Year ended 31 |
| | | | | December |
+--------------------------------------------------+-+---------+--+-------------------------+
| Continuing operations | | Note | | 2008 | | 2007 |
+--------------------------------------------------+-+---------+--+-----------+--+----------+
| | | | | | | |
+--------------------------------------------------+-+---------+--+-----------+--+----------+
| Revenues: | | | | | | |
+--------------------------------------------------+-+---------+--+-----------+--+----------+
| Rental income | | | | 164,166 | | 112,258 |
+--------------------------------------------------+-+---------+--+-----------+--+----------+
| | | | | | | |
+--------------------------------------------------+-+---------+--+-----------+--+----------+
| Total revenues | | | | 164,166 | | 112,258 |
+--------------------------------------------------+-+---------+--+-----------+--+----------+
| | | | | | | |
+--------------------------------------------------+-+---------+--+-----------+--+----------+
| Other income: | | | | | | |
+--------------------------------------------------+-+---------+--+-----------+--+----------+
| Movement in revaluation of investment | | 5 | | (103,704) | | 87,153 |
| properties and movement in the liability | | | | | | |
| in respect of the bank agreement | | | | | | |
+--------------------------------------------------+-+---------+--+-----------+--+----------+
| Net gain on disposals of investment | | | | - | | 324 |
| properties and investments in | | | | | | |
| associates | | | | | | |
+--------------------------------------------------+-+---------+--+-----------+--+----------+
| Share of (loss) /profit of associates | | 4a | | (35,407) | | 11,952 |
+--------------------------------------------------+-+---------+--+-----------+--+----------+
| Dividend from available for sale | | 10 | | 1,913 | | 5,469 |
| investments | | | | | | |
+--------------------------------------------------+-+---------+--+-----------+--+----------+
| Finance income | | 25d | | 9,219 | | 8,168 |
+--------------------------------------------------+-+---------+--+-----------+--+----------+
| Other income | | 25e | | 3,599 | | 352 |
+--------------------------------------------------+-+---------+--+-----------+--+----------+
| | | | | | | |
+--------------------------------------------------+-+---------+--+-----------+--+----------+
| Total revenues and other income | | | | 39,786 | | 225,676 |
+--------------------------------------------------+-+---------+--+-----------+--+----------+
| | | | | | | |
+--------------------------------------------------+-+---------+--+-----------+--+----------+
| Expenses: | | | | | | |
+--------------------------------------------------+-+---------+--+-----------+--+----------+
| Operating | | 25a | | 21,023 | | 17,363 |
+--------------------------------------------------+-+---------+--+-----------+--+----------+
| General and administrative | | 25b | | 10,814 | | 6,237 |
+--------------------------------------------------+-+---------+--+-----------+--+----------+
| Other | | 25c | | 4,901 | | 12,466 |
+--------------------------------------------------+-+---------+--+-----------+--+----------+
| Finance costs | | 25d | | 193,205 | | 82,483 |
+--------------------------------------------------+-+---------+--+-----------+--+----------+
| | | | | | | |
+--------------------------------------------------+-+---------+--+-----------+--+----------+
| | | | | 229,943 | | 118,549 |
+--------------------------------------------------+-+---------+--+-----------+--+----------+
| | | | | | | |
+--------------------------------------------------+-+---------+--+-----------+--+----------+
| (Loss)/ profit before taxation | | | | (190,157) | | 107,127 |
+--------------------------------------------------+-+---------+--+-----------+--+----------+
| Income tax benefit /(expense) | | 22c | | 54,455 | | (11,160) |
+--------------------------------------------------+-+---------+--+-----------+--+----------+
| | | | | | | |
+--------------------------------------------------+-+---------+--+-----------+--+----------+
| (Loss)/ profit for the year | | | | (135,702) | | 95,967 |
+--------------------------------------------------+-+---------+--+-----------+--+----------+
| | | | | | | |
+--------------------------------------------------+-+---------+--+-----------+--+----------+
| Attributable to: | | | | | | |
+--------------------------------------------------+-+---------+--+-----------+--+----------+
| Equity holders of the parent | | | | (104,349) | | 70,736 |
| | | | | | | |
+--------------------------------------------------+-+---------+--+-----------+--+----------+
| Minority interest | | | | (31,353) | | 25,231 |
+--------------------------------------------------+-+---------+--+-----------+--+----------+
| | | | | | | |
+--------------------------------------------------+-+---------+--+-----------+--+----------+
| | | | | (135,702) | | 95,967 |
+--------------------------------------------------+-+---------+--+-----------+--+----------+
| | | | | | | |
+--------------------------------------------------+-+---------+--+-----------+--+----------+
+--------------------------------------------------+-+-------+--+-------------+--+-------------+
| Earnings per share (in British | | | | | | |
| Pounds): | | | | | | |
+--------------------------------------------------+-+-------+--+-------------+--+-------------+
| Basic and diluted (loss) | | | | (0.39) | | 0.30 |
| /profit for the period | | | | | | |
| attributable to | | | | | | |
| ordinary equity holders of | | | | | | |
| the parent | | | | | | |
+--------------------------------------------------+-+-------+--+-------------+--+-------------+
| | | | | | | |
+--------------------------------------------------+-+-------+--+-------------+--+-------------+
| Weighted average number of | | 24 | | 265,115,168 | | 234,968,729 |
| ordinary shares for basic | | | | | | |
| and diluted | | | | | | |
| earnings per share | | | | | | |
+--------------------------------------------------+-+-------+--+-------------+--+-------------+
The accompanying notes are an integral part of the consolidated financial
statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
British Pounds in thousands
+----------------------------------------+-+------------+-+------------+-+--------------+------+--------------+-+-------------+-+-------------+-----------+-------------+-+--------------+-+-------------+---+--------------+-+
| | | Attributable to equity holders of the parent | | | | | |
+----------------------------------------+-+---------------------------------------------------------------------------------------------------------------------------------------------+-+-------------+---+--------------+-+
| | | Share | | Share | | Capital | | Retained | | Foreign | | Hedging | Held | Other | | Total | | Minority | | Total | |
| | | | | premium | | | | earnings | | | | reserve | for | reserves | | | | interests | | equity | |
| | | capital | | | | contribution | | | | currency | | | sale | | | | | | | | |
| | | | | | | | | | |translation | | | reserves | | | | | | | | |
| | | | | | | | | | | reserve | | | | | | | | | | | |
+----------------------------------------+-+------------+-+------------+-+--------------+------+--------------+-+-------------+-+-------------+-----------+-------------+-+--------------+-+-------------+---+--------------+-+
| Balance as | | 132,558 | | 150,823 | | 5,978 | | 281,516 | | 21,669 | | 2,071 | | 10,779 | | 605,394 | | 75,226 | | 680,620 | |
| of 1 | | | | | | | | | | | | | | | | | | | | | |
| January | | | | | | | | | | | | | | | | | | | | | |
| 2008 | | | | | | | | | | | | | | | | | | | | | |
+----------------------------------------+-+------------+-+------------+-+--------------+------+--------------+-+-------------+-+-------------+-----------+-------------+-+--------------+-+-------------+---+--------------+-+
| | | | | | | | | | | | | | | | | | | | | | |
+----------------------------------------+-+------------+-+------------+-+--------------+------+--------------+-+-------------+-+-------------+-----------+-------------+-+--------------+-+-------------+---+--------------+-+
| Net | | - | | - | | - | | - | | - | | (24,589) | - | - | | (24,589) | | (2,540) | | (27,129) | |
| unrealised | | | | | | | | | | | | | - | | | | | | | | |
| gains on | | | | | | | | | | | | | | | | | | | | | |
| hedging | | | | | | | | | | | | | | | | | | | | | |
| instruments | | | | | | | | | | | | | | | | | | | | | |
+----------------------------------------+-+------------+-+------------+-+--------------+------+--------------+-+-------------+-+-------------+-----------+-------------+-+--------------+-+-------------+---+--------------+-+
| Foreign | | - | | - | | - | | - | | 66,081 | | - | - | - | | 66,081 | | 7,399 | | 73,480 | |
| currency | | | | | | | | | | | | | | | | | | | | | |
| translation | | | | | | | | | | | | | | | | | | | | | |
| adjustments | | | | | | | | | | | | | | | | | | | | | |
+----------------------------------------+-+------------+-+------------+-+--------------+------+--------------+-+-------------+-+-------------+-----------+-------------+-+--------------+-+-------------+---+--------------+-+
| Assets | | - | | - | | - | - | - | | (11,800) | | 1,090 | 10,710 | | | | | - | | - | |
| held | | | | | | | | | | | | | | | | | | | | | |
| for | | | | | | | | | | | | | | | | | | | | | |
| sale | | | | | | | | | | | | | | | | | | | | | |
| reserves | | | | | | | | | | | | | | | | | | | | | |
+----------------------------------------+-+------------+-+------------+-+--------------+------+--------------+-+-------------+-+-------------+-----------+-------------+-+--------------+-+-------------+---+--------------+-+
| Net | | - | | - | | - | | - | | - | | - | - | (10,779) | | | | - | | (10,779) | |
| profit | | | | | | | | | | | | | - | | | (10,779) | | | | | |
| on | | | | | | | | | | | | | | | | | | | | | |
| available-for-sale | | | | | | | | | | | | | | | | | | | | | |
| investments (Note | | | | | | | | | | | | | | | | | | | | | |
| 10) | | | | | | | | | | | | | | | | | | | | | |
+----------------------------------------+-+------------+-+------------+-+--------------+------+--------------+-+-------------+-+-------------+-----------+-------------+-+--------------+-+-------------+---+--------------+-+
| Net | | - | | - | | - | | (104,349) | | - | | - | - | - | | (104,349) | | (31,353) | | (135,702) | |
| loss | | | | | | | | | | | | | | | | | | | | | |
+----------------------------------------+-+------------+-+------------+-+--------------+------+--------------+-+-------------+-+-------------+-----------+-------------+-+--------------+-+-------------+---+--------------+-+
| | | - | | - | | - | | (104,349) | | 54,281 | | (23,499) | 10,710 | (10,779) | | (73,636) | | (26,494) | | (100,130) | |
+----------------------------------------+-+------------+-+------------+-+--------------+------+--------------+-+-------------+-+-------------+-----------+-------------+-+--------------+-+-------------+---+--------------+-+
| | | | | | | | | | | | | | | | | | | | | | |
+----------------------------------------+-+------------+-+------------+-+--------------+------+--------------+-+-------------+-+-------------+-----------+-------------+-+--------------+-+-------------+---+--------------+-+
| | | | | | | | | | | | | | - | | | | | | | | |
+----------------------------------------+-+------------+-+------------+-+--------------+------+--------------+-+-------------+-+-------------+-----------+-------------+-+--------------+-+-------------+---+--------------+-+
| Dividends | | - | | - | | - | | (33,139) | | - | | - | - | - | | (33,139) | | - | | (33,139) | |
| distributed | | | | | | | | | | | | | | | | | | | | | |
| (Note 14e) | | | | | | | | | | | | | | | | | | | | | |
+----------------------------------------+-+------------+-+------------+-+--------------+------+--------------+-+-------------+-+-------------+-----------+-------------+-+--------------+-+-------------+---+--------------+-+
| | | | | | | | | | | | | | - | | | | | | | | |
+----------------------------------------+-+------------+-+------------+-+--------------+------+--------------+-+-------------+-+-------------+-----------+-------------+-+--------------+-+-------------+---+--------------+-+
| Share-based | | - | | - | | (278) | | - | | - | | - | - | - | | (278) | | - | | (278) | |
| compensation | | | | | | | | | | | | | - | | | | | | | | |
| (Note 17) | | | | | | | | | | | | | | | | | | | | | |
+----------------------------------------+-+------------+-+------------+-+--------------+------+--------------+-+-------------+-+-------------+-----------+-------------+-+--------------+-+-------------+---+--------------+-+
| | | | | | | | | | | | | | | | | | | | | | |
+----------------------------------------+-+------------+-+------------+-+--------------+------+--------------+-+-------------+-+-------------+-----------+-------------+-+--------------+-+-------------+---+--------------+-+
| |1 | | | | | | | | | | | | | | | | | | | | |
+----------------------------------------+-+------------+-+------------+-+--------------+------+--------------+-+-------------+-+-------------+-----------+-------------+-+--------------+-+-------------+---+--------------+-+
| Balance as | | 132,558 | | 150,823 | | 5,700 | | 144,028 | | 75,950 | | (21,428) | 10,710 | - | | 498,341 | | 48,732 | | 547,073 | |
| of 31 | | | | | | | | | | | | | | | | | | | | | |
| December | | | | | | | | | | | | | | | | | | | | | |
| 2008 | | | | | | | | | | | | | | | | | | | | | |
+----------------------------------------+-+------------+-+------------+-+--------------+------+--------------+-+-------------+-+-------------+-----------+-------------+-+--------------+-+-------------+---+--------------+-+
| | | | | | | | | | | | | | | | | | | | | | |
+----------------------------------------+-+------------+-+------------+-+--------------+------+--------------+-+-------------+-+-------------+-----------+-------------+-+--------------+-+-------------+---+--------------+-+
The accompanying notes are an integral part of the consolidated financial
statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
British Pounds in thousands
+----------------------------------------+-+------------+-+------------+-+--------------+-+-------------+-+-----+-------+-+----------+-+-----------+-+-------------+-+-----------+--+----------+--+--+--+--+--+--+-+--+--+--+
| | | Attributable to equity holders of the parent | | | | | | |
+----------------------------------------+-+-----------------------------------------------------------------------------------------------------------------------+-+-----------+--+-------------+-----+-------------+
| | | Share | | Share | | Capital | | Retained | | Foreign | | Hedging | | Other | | Total | | Minority | | Total | | | | |
| | | | | premium | | contribution | | earnings | | currency | | reserve | | reserves | | | |interests | | equity | | | | |
| | | capital | | | | | | | |translation | | | | | | | | | | | | | | |
| | | | | | | | | | | reserve | | | | | | | | | | | | | | |
+----------------------------------------+-+------------+-+------------+-+--------------+-+-------------+-+-------------+-+----------+-+-----------+-+-------------+-+-----------+--+-------------+-----+-----+--+----+
| Balance as | | - | | - | | 5,704 | | 221,385 | | (2,601) | | 608 | | 11,658 | | 236,754 | | 9,314 | | 246,068 | | | | |
| of 1 | | | | | | | | | | | | | | | | | | | | | | | | |
| January | | | | | | | | | | | | | | | | | | | | | | | | |
| 2007 | | | | | | | | | | | | | | | | | | | | | | | | |
+----------------------------------------+-+------------+-+------------+-+--------------+-+-------------+-+-------------+-+----------+-+-----------+-+-------------+-+-----------+--+-------------+-----+-----+--+----+
| | | | | | | | | | | | | | | | | | | | | | | | | |
+----------------------------------------+-+------------+-+------------+-+--------------+-+-------------+-+-------------+-+----------+-+-----------+-+-------------+-+-----------+--+-------------+-----+-----+--+----+
| Net | | - | | - | | - | | - | | - | | | | - | | 1,463 | | 206 | | 1,669 | | | | |
| unrealised | | | | | | | | | | | | 1,463 | | | | | | | | | | | | |
| gains on | | | | | | | | | | | | | | | | | | | | | | | | |
| hedging | | | | | | | | | | | | | | | | | | | | | | | | |
| instruments | | | | | | | | | | | | | | | | | | | | | | | | |
+----------------------------------------+-+------------+-+------------+-+--------------+-+-------------+-+-------------+-+----------+-+-----------+-+-------------+-+-----------+--+-------------+-----+-----+--+----+
| Foreign | | - | | - | | - | | - | | 24,270 | | - | | - | | 24,270 | | 1,607 | | 25,877 | | | | |
| currency | | | | | | | | | | | | | | | | | | | | | | | | |
| translation | | | | | | | | | | | | | | | | | | | | | | | | |
| adjustments | | | | | | | | | | | | | | | | | | | | | | | | |
+----------------------------------------+-+------------+-+------------+-+--------------+-+-------------+-+-------------+-+----------+-+-----------+-+-------------+-+-----------+--+-------------+-----+-----+--+----+
| Net | | - | | - | | - | | - | | - | | - | | | | (879) | | - | | (879) | | | | |
| loss | | | | | | | | | | | | | | (879) | | | | | | | | | | |
| on | | | | | | | | | | | | | | | | | | | | | | | | |
| available-for-sale | | | | | | | | | | | | | | | | | | | | | | | | |
| investments (Note | | | | | | | | | | | | | | | | | | | | | | | | |
| 10) | | | | | | | | | | | | | | | | | | | | | | | | |
+----------------------------------------+-+------------+-+------------+-+--------------+-+-------------+-+-------------+-+----------+-+-----------+-+-------------+-+-----------+--+-------------+-----+-----+--+----+
| Net | | - | | - | | - | | 70,736 | | - | | - | | - | | 70,736 | | 25,231 | | | | | | |
| profit | | | | | | | | | | | | | | | | | | | | 95,967 | | | | |
+----------------------------------------+-+------------+-+------------+-+--------------+-+-------------+-+-------------+-+----------+-+-----------+-+-------------+-+-----------+--+-------------+-----+-----+--+----+
| | | - | | - | | - | | 70,736 | | 24,270 | | 1,463 | | (879) | | 95,590 | | 27,044 | | 122,634 | | | | |
+----------------------------------------+-+------------+-+------------+-+--------------+-+-------------+-+-------------+-+----------+-+-----------+-+-------------+-+-----------+--+-------------+-----+-----+--+----+
| Issue | | 104,911 | | 78,133 | | - | | - | | - | | - | | - | | 183,044 | | 38,868 | | 221,912 | | | | |
| of | | | | | | | | | | | | | | | | | | | | | | | | |
| shares | | | | | | | | | | | | | | | | | | | | | | | | |
| in | | | | | | | | | | | | | | | | | | | | | | | | |
| consideration | | | | | | | | | | | | | | | | | | | | | | | | |
| for | | | | | | | | | | | | | | | | | | | | | | | | |
| conversion of | | | | | | | | | | | | | | | | | | | | | | | | |
| loans and | | | | | | | | | | | | | | | | | | | | | | | | |
| acquisition | | | | | | | | | | | | | | | | | | | | | | | | |
| of investment | | | | | | | | | | | | | | | | | | | | | | | | |
| (Note 14c) | | | | | | | | | | | | | | | | | | | | | | | | |
+----------------------------------------+-+------------+-+------------+-+--------------+-+-------------+-+-------------+-+----------+-+-----------+-+-------------+-+-----------+--+-------------+-----+-----+--+----+
| Issue | | 27,647 | | 72,690 | | - | | - | | - | | - | | - | | 100,337 | | - | | 100,337 | | | | |
| of | | | | | | | | | | | | | | | | | | | | | | | | |
| shares, | | | | | | | | | | | | | | | | | | | | | | | | |
| net of | | | | | | | | | | | | | | | | | | | | | | | | |
| expenses | | | | | | | | | | | | | | | | | | | | | | | | |
| (Note | | | | | | | | | | | | | | | | | | | | | | | | |
| 14b) | | | | | | | | | | | | | | | | | | | | | | | | |
+----------------------------------------+-+------------+-+------------+-+--------------+-+-------------+-+-------------+-+----------+-+-----------+-+-------------+-+-----------+--+-------------+-----+-----+--+----+
| Dividends | | - | | - | | - | | (10,605) | | - | | - | | - | | (10,605) | | - | | (10,605) | | | | |
| distributed | | | | | | | | | | | | | | | | | | | | | | | | |
| (Note 14e) | | | | | | | | | | | | | | | | | | | | | | | | |
+----------------------------------------+-+------------+-+------------+-+--------------+-+-------------+-+-------------+-+----------+-+-----------+-+-------------+-+-----------+--+-------------+-----+-----+--+----+
| Share-based | | - | | - | | 274 | | - | | - | | - | | - | | 274 | | - | | 274 | | | | |
| compensation | | | | | | | | | | | | | | | | | | | | | | | | |
| (Note 17) | | | | | | | | | | | | | | | | | | | | | | | | |
+----------------------------------------+-+------------+-+------------+-+--------------+-+-------------+-+-------------+-+----------+-+-----------+-+-------------+-+-----------+--+-------------+-----+-----+--+----+
| | | | | | | | | | | | | | | | | | | | | | | | | |
+----------------------------------------+-+------------+-+------------+-+--------------+-+-------------+-+-------------+-+----------+-+-----------+-+-------------+-+-----------+--+-------------+-----+-----+--+----+
| |1 | | | | | | | | | | | | | | | | | | | | | | | |
+----------------------------------------+-+------------+-+------------+-+--------------+-+-------------+-+-------------+-+----------+-+-----------+-+-------------+-+-----------+--+-------------+-----+-----+--+----+
| Balance as | | 132,558 | | 150,823 | | 5,978 | | 281,516 | | 21,669 | | 2,071 | | 10,779 | | 605,394 | | 75,226 | | 680,620 | | | | |
| of 31 | | | | | | | | | | | | | | | | | | | | | | | | |
| December | | | | | | | | | | | | | | | | | | | | | | | | |
| 2007 | | | | | | | | | | | | | | | | | | | | | | | | |
+----------------------------------------+-+------------+-+------------+-+--------------+-+-------------+-+-------------+-+----------+-+-----------+-+-------------+-+-----------+--+-------------+-----+-----+--+----+
| | | | | | | | | | | | | | | | | | | | | | | | | |
+----------------------------------------+-+------------+-+------------+-+--------------+-+-------------+-------+-------+-+----------+-+-----------+-+-------------+-+-----------+-------------+-----+-----+-----+-+--------+
| | | | | | | | | | | | | | | | | | | | | | | | | |
+----------------------------------------+-+------------+-+------------+-+--------------+-+-------------+-+-------------+-+----------+-+-----------+-+-------------+-+-----------+--+-------------+-----+-----+--+-------+
| | | | | | | | | | | | | | | | | | | | | | | | | |
+----------------------------------------+-+------------+-+------------+-+--------------+-+-------------+-+-----+-------+-+----------+-+-----------+-+-------------+-+-----------+--+----------+--+--+--+--+--+--+-+--+--+--+
The accompanying notes are an integral part of the consolidated financial
statements.
CONSOLIDATED CASH FLOWS STATEMENT
British Pounds in thousands
+------------------------------------------------------------+-+-----------+--+-----------+
| | | Year ended 31 |
| | | December |
+------------------------------------------------------------+-+--------------------------+
| | | 2008 | | 2007 |
+------------------------------------------------------------+-+-----------+--+-----------+
| Cash flows from operating activities: | | | | |
+------------------------------------------------------------+-+-----------+--+-----------+
| Net (loss)/ profit | | (135,702) | | 95,967 |
+------------------------------------------------------------+-+-----------+--+-----------+
| Adjustments to reconcile net (loss) | | 166,922 | | (68,669) |
| /profit to net cash used in operating | | | | |
| activities (a) | | | | |
+------------------------------------------------------------+-+-----------+--+-----------+
| | | | | |
+------------------------------------------------------------+-+-----------+--+-----------+
| Net cash provided by operating activities | | 31,220 | | 27,298 |
+------------------------------------------------------------+-+-----------+--+-----------+
| | | | | |
+------------------------------------------------------------+-+-----------+--+-----------+
| Cash flows from investing activities: | | | | |
+------------------------------------------------------------+-+-----------+--+-----------+
| Proceeds from disposal of investment | | 2,988 | | 11,120 |
| properties, net | | | | |
+------------------------------------------------------------+-+-----------+--+-----------+
| Proceeds from disposal of investments | | - | | 916 |
| in associates | | | | |
+------------------------------------------------------------+-+-----------+--+-----------+
| Investment in new business combination | | - | | 19,423 |
| (c) | | | | |
+------------------------------------------------------------+-+-----------+--+-----------+
| Purchase of investment properties | | (25,629) | | (310,470) |
+------------------------------------------------------------+-+-----------+--+-----------+
| Purchase of investment in associates | | - | | (943) |
+------------------------------------------------------------+-+-----------+--+-----------+
| Cancellation fee | | (3,861) | | - |
+------------------------------------------------------------+-+-----------+--+-----------+
| Purchase of available-for-sale | | - | | (17,265) |
| investments | | | | |
+------------------------------------------------------------+-+-----------+--+-----------+
| Granting of loans to associates | | - | | (7,520) |
+------------------------------------------------------------+-+-----------+--+-----------+
| Receipt of loans from associates | | 4,004 | | 7,004 |
+------------------------------------------------------------+-+-----------+--+-----------+
| Repayment of loans to minority | | - | | (4,327) |
| interest in subsidiary | | | | |
+------------------------------------------------------------+-+-----------+--+-----------+
| Repayment of loans from minority | | (47) | | - |
| interest in subsidiary | | | | |
+------------------------------------------------------------+-+-----------+--+-----------+
| Advance payment | | - | | (53) |
+------------------------------------------------------------+-+-----------+--+-----------+
| Refinancing costs for | | (988) | | (153) |
| financial instruments | | | | |
+------------------------------------------------------------+-+-----------+--+-----------+
| Purchase of fixed assets | | (221) | | - |
+------------------------------------------------------------+-+-----------+--+-----------+
| Increase in restricted | | (796) | | (1,774) |
| deposits | | | | |
+------------------------------------------------------------+-+-----------+--+-----------+
| Interest received | | 1,576 | | 494 |
+------------------------------------------------------------+-+-----------+--+-----------+
| Decrease in bank deposits, net | | - | | 80 |
+------------------------------------------------------------+-+-----------+--+-----------+
| | | | | |
+------------------------------------------------------------+-+-----------+--+-----------+
| Net cash used in investing activities | | (22,974) | | (303,468) |
+------------------------------------------------------------+-+-----------+--+-----------+
| | | | | |
+------------------------------------------------------------+-+-----------+--+-----------+
| Cash flows from financing activities: | | | | |
+------------------------------------------------------------+-+-----------+--+-----------+
| | | | | |
+------------------------------------------------------------+-+-----------+--+-----------+
| Receipt of long-term loans from banks | | 34,527 | | 251,450 |
+------------------------------------------------------------+-+-----------+--+-----------+
| Receipt of long-term loans from others | | - | | 25,687 |
+------------------------------------------------------------+-+-----------+--+-----------+
| Repayment of long-term loans from | | (41,750) | | (15,629) |
| banks | | | | |
+------------------------------------------------------------+-+-----------+--+-----------+
| Loan to parent company | | (6,151) | | - |
+------------------------------------------------------------+-+-----------+--+-----------+
| Repayment of long-term loans from | | (3,355) | | (807) |
| others, net | | | | |
+------------------------------------------------------------+-+-----------+--+-----------+
| Dividends paid | | (33,139) | | (10,605) |
+------------------------------------------------------------+-+-----------+--+-----------+
| Share issuance, net of expenses | | - | | 100,337 |
+------------------------------------------------------------+-+-----------+--+-----------+
| | | | | |
+------------------------------------------------------------+-+-----------+--+-----------+
| Net cash (used in)/ provided by financing | | (49,868) | | 350,433 |
| activities | | | | |
+------------------------------------------------------------+-+-----------+--+-----------+
| | | | | |
+------------------------------------------------------------+-+-----------+--+-----------+
| (Decrease)/ increase in cash and cash | | (41,622) | | 74,263 |
| equivalents | | | | |
+------------------------------------------------------------+-+-----------+--+-----------+
| Net foreign exchange differences | | 5,448 | | 716 |
+------------------------------------------------------------+-+-----------+--+-----------+
| Reclassified to assets held for sale | | (990) | | - |
+------------------------------------------------------------+-+-----------+--+-----------+
| Cash and cash equivalents as of beginning of | | 83,290 | | 8,311 |
| year | | | | |
+------------------------------------------------------------+-+-----------+--+-----------+
| | | | | |
+------------------------------------------------------------+-+-----------+--+-----------+
| Cash and cash equivalents as of end of year | | 46,126 | | 83,290 |
+------------------------------------------------------------+-+-----------+--+-----------+
The accompanying notes are an integral part of the consolidated financial
statements.
CONSOLIDATED CASH FLOWS STATEMENT
British Pounds in thousands
+----------------+------------------------------------------------------+--+----------+--+--------------+
| | | | Year ended 31 December |
+----------------+------------------------------------------------------+--+----------------------------+
| | | | 2008 | | 2007 |
+----------------+------------------------------------------------------+--+----------+--+--------------+
| (a) | Adjustments to reconcile net (loss)/ | | | | |
| | profit to net cash used in operating | | | | |
| | activities: | | | | |
+----------------+------------------------------------------------------+--+----------+--+--------------+
| | | | | | |
+----------------+------------------------------------------------------+--+----------+--+--------------+
| | Income and expenses not | | | | |
| | involving operating cash flows: | | | | |
+----------------+------------------------------------------------------+--+----------+--+--------------+
| | | | | | |
+----------------+------------------------------------------------------+--+----------+--+--------------+
| | Depreciation of fixed | | 61 | | - |
| | assets | | | | |
+----------------+------------------------------------------------------+--+----------+--+--------------+
| | Loss on disposals of | | - | | 325 |
| | investment in associates | | | | |
+----------------+------------------------------------------------------+--+----------+--+--------------+
| | Share of losses/ | | 35,536 | | (9,817) |
| | (profits) of associates, | | | | |
| | net (*) | | | | |
+----------------+------------------------------------------------------+--+----------+--+--------------+
| | Fair value adjustments | | 103,704 | | (87,153) |
| | investment properties | | | | |
| | net of bank liability | | | | |
+----------------+------------------------------------------------------+--+----------+--+--------------+
| | Changes in fair value of financial instruments | | 95,283 | | 16,294 |
+----------------+------------------------------------------------------+--+----------+--+--------------+
| | Amortisation of expenses from raising loans | | 3,344 | | 1,159 |
+----------------+------------------------------------------------------+--+----------+--+--------------+
| | Cancellation fee | | 3,861 | | - |
+----------------+------------------------------------------------------+--+----------+--+--------------+
| | Share-based compensation | | (278) | | 274 |
| | | | | | |
+----------------+------------------------------------------------------+--+----------+--+--------------+
| | Interest received | | (1,576) | | (494) |
+----------------+------------------------------------------------------+--+----------+--+--------------+
| | Loans written off | | (2,247) | | - |
+----------------+------------------------------------------------------+--+----------+--+--------------+
| | | | | | |
+----------------+------------------------------------------------------+--+----------+--+--------------+
| | | | 237,688 | | (79,412) |
+----------------+------------------------------------------------------+--+----------+--+--------------+
| | Changes in operating assets and | | | | |
| | liabilities: | | | | |
+----------------+------------------------------------------------------+--+----------+--+--------------+
| | | | | | |
+----------------+------------------------------------------------------+--+----------+--+--------------+
| | Increase in long-term | | (16,056) | | (13,524) |
| | receivables | | | | |
+----------------+------------------------------------------------------+--+----------+--+--------------+
| | (Increase)/decrease in | | (2,985) | | 370 |
| | trade and other | | | | |
| | receivables | | | | |
+----------------+------------------------------------------------------+--+----------+--+--------------+
| | Increase in trade and | | 6,213 | | 14,540 |
| | other payables | | | | |
+----------------+------------------------------------------------------+--+----------+--+--------------+
| | Deferred taxes, net | | (57,938) | | 9,357 |
+----------------+------------------------------------------------------+--+----------+--+--------------+
| | | | | | |
+----------------+------------------------------------------------------+--+----------+--+--------------+
| | | | (70,766) | | 10,743 |
+----------------+------------------------------------------------------+--+----------+--+--------------+
| | | | | | |
+----------------+------------------------------------------------------+--+----------+--+--------------+
| | | | 166,922 | | (68,669) |
+----------------+------------------------------------------------------+--+----------+--+--------------+
| | | | | | |
+----------------+------------------------------------------------------+--+----------+--+--------------+
| | (*) Dividends received | | 129 | | 2,135 |
+----------------+------------------------------------------------------+--+----------+--+--------------+
The accompanying notes are an integral part of the consolidated financial
statements.
CONSOLIDATED CASH FLOWS STATEMENT
British Pounds in thousands
+-----+-------------------------------------------------------+-+----------+--+----------+
| | | | Year ended 31 |
| | | | December |
+-----+-------------------------------------------------------+-+------------------------+
| | | | 2008 | | 2007 |
+-----+-------------------------------------------------------+-+----------+--+----------+
+----------------+--------------------------------------------------------+-+----------+--+-----------+
| (b) | Investment in newly consolidated | | | | |
| | subsidiaries | | | | |
+----------------+--------------------------------------------------------+-+----------+--+-----------+
| | | | | | |
+----------------+--------------------------------------------------------+-+----------+--+-----------+
| | Working capital (excluding | | - | | (380) |
| | cash and cash equivalents) | | | | |
+----------------+--------------------------------------------------------+-+----------+--+-----------+
| | Investment properties, net | | - | | (540,176) |
+----------------+--------------------------------------------------------+-+----------+--+-----------+
| | Investment in associate | | - | | 42,209 |
+----------------+--------------------------------------------------------+-+----------+--+-----------+
| | Financial instruments and | | - | | (2,318) |
| | other assets | | | | |
+----------------+--------------------------------------------------------+-+----------+--+-----------+
| | Loans from banks | | - | | 371,040 |
+----------------+--------------------------------------------------------+-+----------+--+-----------+
| | Loans from minority | | - | | 41,480 |
| | shareholders | | | | |
+----------------+--------------------------------------------------------+-+----------+--+-----------+
| | Deferred tax liability | | - | | 26,271 |
+----------------+--------------------------------------------------------+-+----------+--+-----------+
| | Minority interest | | - | | 32,199 |
+----------------+--------------------------------------------------------+-+----------+--+-----------+
| | Share capital and premium | | - | | 29,675 |
+----------------+--------------------------------------------------------+-+----------+--+-----------+
| | | | | | |
+----------------+--------------------------------------------------------+-+----------+--+-----------+
| | | | - | | - |
+----------------+--------------------------------------------------------+-+----------+--+-----------+
+----------------+-------------------------------------------------------+-+----------+--+-----------+
| (c) | Investment in new business combination: | | | | |
+----------------+-------------------------------------------------------+-+----------+--+-----------+
| | | | | | |
+----------------+-------------------------------------------------------+-+----------+--+-----------+
| | The assets and liabilities upon | | | | |
| | date of the business combination: | | | | |
+----------------+-------------------------------------------------------+-+----------+--+-----------+
| | | | | | |
+----------------+-------------------------------------------------------+-+----------+--+-----------+
| | Working capital | | - | | 23,487 |
| | (excluding cash and cash | | | | |
| | equivalents) | | | | |
+----------------+-------------------------------------------------------+-+----------+--+-----------+
| | Investments properties, | | - | | (763,523) |
| | net | | | | |
+----------------+-------------------------------------------------------+-+----------+--+-----------+
| | Loans from banks | | - | | 544,748 |
+----------------+-------------------------------------------------------+-+----------+--+-----------+
| | Loans from minority | | - | | 8,440 |
| | shareholders | | | | |
+----------------+-------------------------------------------------------+-+----------+--+-----------+
| | Investment in associate | | - | | 61,279 |
+----------------+-------------------------------------------------------+-+----------+--+-----------+
| | Long-term receivables | | - | | (56,477) |
+----------------+-------------------------------------------------------+-+----------+--+-----------+
| | Liability in respect of | | - | | 17,770 |
| | bank agreement | | | | |
+----------------+-------------------------------------------------------+-+----------+--+-----------+
| | Derivative financial | | - | | 78,287 |
| | instruments | | | | |
+----------------+-------------------------------------------------------+-+----------+--+-----------+
| | Intangible assets | | - | | (95,254) |
+----------------+-------------------------------------------------------+-+----------+--+-----------+
| | Deferred tax liability | | - | | 145,953 |
+----------------+-------------------------------------------------------+-+----------+--+-----------+
| | Minority interest | | - | | 2,928 |
+----------------+-------------------------------------------------------+-+----------+--+-----------+
| | Share capital and premium | | - | | 51,785 |
+----------------+-------------------------------------------------------+-+----------+--+-----------+
| | | | | | |
+----------------+-------------------------------------------------------+-+----------+--+-----------+
| | | | - | | 19,423 |
+----------------+-------------------------------------------------------+-+----------+--+-----------+
+----------------+-------------------------------------------------------+-+----------+--+----------+
| (d) | Items included in cash flows from | | | | |
| | operating activities: | | | | |
+----------------+-------------------------------------------------------+-+----------+--+----------+
| | | | | | |
+----------------+-------------------------------------------------------+-+----------+--+----------+
| | Cash paid during the year for: | | | | |
+----------------+-------------------------------------------------------+-+----------+--+----------+
| | Interest | | 96,061 | | 60,501 |
+----------------+-------------------------------------------------------+-+----------+--+----------+
| | | | | | |
+----------------+-------------------------------------------------------+-+----------+--+----------+
| | Dividend | | 33,139 | | 10,605 |
+----------------+-------------------------------------------------------+-+----------+--+----------+
| | | | | | |
+----------------+-------------------------------------------------------+-+----------+--+----------+
| | Income taxes | | - | | - |
+----------------+-------------------------------------------------------+-+----------+--+----------+
| | | | | | |
+----------------+-------------------------------------------------------+-+----------+--+----------+
| | Cash received during the year | | | | |
| | for: | | | | |
+----------------+-------------------------------------------------------+-+----------+--+----------+
| | | | | | |
+----------------+-------------------------------------------------------+-+----------+--+----------+
| | Dividend from available | | 1,913 | | 5,469 |
| | for sale investments | | | | |
+----------------+-------------------------------------------------------+-+----------+--+----------+
The accompanying notes are an integral part of the consolidated financial
statements.
NOTE 1:- GENERAL
a. Delek Global Real Estate plc (the Company) (formerly: Oxenford Holdings
Limited), through its subsidiaries (together - the Group) and associates,
invests in income-producing real estate properties in the United Kingdom (U.K.),
Canada, Germany, Sweden, Switzerland and Finland. The Company was incorporated
in Jersey in 1999 and is a majority-owned subsidiary of Delek Belron
International Ltd. (DBI), an Israeli private company. The ultimate parent
company is Delek Group Ltd., a company incorporated in Israel whose shares are
traded on the Tel-Aviv Stock Exchange. The ultimate controlling party is Itzak
Tshuva.
In April 2007, the Company issued 50,000,000 Ordinary shares of GBP 0.50 each
and all of its Ordinary shares were admitted for trading on the Alternative
Investment Market (AIM), a market operated by the London Stock Exchange, in
consideration of GBP 100 million.
Effective 27 October 2008 the Company changed its name from Delek
Global
Real Estate Ltd to Delek Global Real Estate plc.
b. Acquisition of investments from DBI and consolidated financial statements.
Prior to the placement of Ordinary shares of the Company and the admission of
the Company's shares to trading on AIM, as described in Note 14, the Company
acquired several investments in real estate companies that were controlled by
DBI (the Acquisition). In consideration for the Acquisition, the Company issued
Ordinary shares to DBI.
Since the Company acquired these investments from its controlling shareholder,
the Acquisition is not a business combination within the scope of International
Financial Reporting Standard 3. The Company is accounting for the Acquisition
under the pooling of interests method of accounting. Accordingly, the Company
has prepared consolidated financial statements to reflect the Acquisition as if
it had occurred at the beginning of the earliest period presented. Thus, the
consolidated financial statements comprise the consolidated financial position,
results of operations and cash flows of the Company and of the companies
acquired from DBI.
NOTE 2:- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2.1 Basis of preparation
The consolidated financial statements have been prepared on a historical cost
basis, except for investment properties, derivative financial instruments and
available-for-sale investments which have been measured at fair value, and have
been prepared in accordance with the Companies (Jersey) Law 1991. The
consolidated financial statements are presented in British Pounds and all values
are rounded to the nearest thousand (GBP000) except when otherwise indicated and
per share values.
NOTE 2:- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont.)
Statement of compliance
The consolidated financial statements of Delek Global Real Estate plc have been
prepared in accordance with International Financial Reporting Standards (IFRS),
as issued by the International Accounting Standards Board (IASB).
Basis of consolidation
The consolidated financial statements comprise the financial statements of the
Delek Global Real Estate plc and its subsidiaries. The subsidiaries are entities
over which the Company has the power to govern their financial and operating
policies and generally have a shareholding of more than one half of the voting
rights. The existence and effect of potential voting rights that are currently
exercisable or convertible are taken into account when assessing whether the
Company controls another entity. The financial statements of the subsidiaries
are prepared for the same reporting dates as the parent company, using
consistent accounting policies. All intra-group balances, income and expenses
and unrealised gains and losses from intra-group transactions are eliminated in
full.
Subsidiaries are fully consolidated from the date of acquisition, being the date
on which the Group obtains control, and continue to be consolidated until the
date that such control ceases.
As set out in Note 1b, the consolidated financial statements includes the
financial position, results of operations and cash flows of the companies of DBI
that DGRE has obtained control of as part of the IPO.
Otherwise, the purchase method of accounting is used to account for the
acquisition of subsidiaries that are considered to be businesses when the
transaction can be identified as a business combination. The cost of an
acquisition is measured as the fair value of the assets given, equity
instruments issued and liabilities incurred or assumed at the date of exchange,
plus costs directly attributable to the acquisition.
On acquisition, the identifiable assets, liabilities and contingent liabilities
of a subsidiary are measured at their fair values at the date of acquisition.
Any excess of the cost of acquisition over the fair values of the identifiable
net assets acquired is recognised as goodwill. Any excess of the fair values of
the identifiable net assets acquired over the cost of acquisition (i.e. discount
on acquisition) is credited to the income statement in the period of
acquisition.
Upon acquisition of a subsidiary, the interest of minority shareholders is
initially recognised at the minority's proportion of the fair value of the
identifiable assets, liabilities and contingent liabilities recognised. Minority
interest does not include a portion of any goodwill recognised in the
acquisition. Subsequently, any profits or losses applicable to the minority
shareholders are attributed to the minority interests in the income statement
and equity.
Acquisitions of subsidiaries which own properties that are not a business as
defined by IFRS 3 are accounted for as an acquisition of individual assets and
liabilities at their relative fair values where the actual purchase
consideration is allocated to the separable assets and liabilities acquired.
NOTE 2:- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont.)
2.2 Changes in accounting policy and disclosures
The accounting policies adopted are consistent with those of the previous
financial year.
2.3 Judgments
The preparation of the Group's financial statements requires management to make
judgments, estimates and assumptions that affect the reported amounts of
revenues, expenses, assets and liabilities, and the disclosure of contingent
liabilities, at the reporting date. However, uncertainty about these assumptions
and estimates could result in outcomes that could require a material adjustment
to the carrying amount of the asset or liability affected in the future.
In the process of applying the Group's accounting policies, management has made
the following judgments, apart from those involving estimations, which has the
most significant effect on the amounts recognised in the financial statements:
Operating lease commitments-Group as lessor
The Group has entered into commercial property leases on its investment property
portfolio. The Group has determined, based on an evaluation of the terms and
conditions of the arrangements, that it retains all the significant risks and
rewards of ownership of these properties and so accounts for the contracts as
operating leases.
Estimates and assumptions
The key assumptions concerning the future and other key sources of estimation
uncertainty at the balance sheet date, that have a significant risk of causing a
material adjustment to the carrying amounts of assets and liabilities within the
next financial year are discussed below.
NOTE 2:- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont.)
Investment properties
As described in Note 5, the directors use significant judgment in determining
the fair value of investment properties where there is an absence of an active
market for similar property in the same location and condition and subject to
similar lease and other contracts. The directors have engaged accredited
independent valuers to determine fair value based on comparable arm's length
transactions, where they exist, together with discounted cash flow projections.
The fair value of investment properties at 31 December 2008 is GBP2,183 million
(2007: GBP2,187 million). Details of the key factors considered in the
valuations are provided in Note 5.
Impairment of non-financial assets
The Group assesses whether there are any indicators of impairment for all
non-financial assets at each reporting date. Goodwill and other indefinite life
intangibles are tested for impairment annually and at other times when such
indicators exist. Other non-financial assets are tested for impairment when
there are indicators that the carrying amounts may not be recoverable.
When value in use calculations are undertaken, management must estimate the
expected future cash flows from the asset or cash-generating unit and choose a
suitable discount rate in order to calculate the present value of those cash
flows.
Available-for-sale financial assets
The Group classifies certain assets as available-for-sale and recognises
movements in their fair value in equity. The directors use significant judgement
in determining the fair value of available-for-sale investments. When the fair
value declines, management makes assumptions about the decline in value to
determine whether it is an impairment that should be recognised in the income
statement. At 31 December 2008 no impairment losses have been recognised for
available-for-sale assets (2007: GBPnil).
Deferred tax assets
Deferred tax assets are recognized for all unused tax losses to the extent that
it is probable that taxable profit will be available against which the losses
can be utilised. Significant management judgment is required to determine the
amount of deferred tax assets that can be recognised, based upon the likely
timing and level of future taxable profits together with future tax planning
strategies. Further details are contained in Note 22.
2.4a. Foreign currency translation
The consolidated financial statements are presented in British Pounds, which is
the Group's functional and presentation currency. Each entity in the Group
determines its own functional currency and items included in the financial
statements of each entity are measured using that functional currency.
Transactions in foreign currencies are initially recorded at the functional
currency rate ruling at the date of the transaction. Monetary assets and
liabilities denominated in foreign currencies are retranslated at the functional
currency rate of exchange ruling at the balance sheet date. All differences are
taken to the income statement. Non monetary items that are measured in terms of
historical cost in a foreign currency are translated using the exchange rates as
at the dates of the initial transactions.
NOTE 2:- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont.)
Non monetary items measured at fair value in a foreign currency are translated
using the exchange rates at the date when the fair value is determined. Any
goodwill arising on the acquisition of a foreign operation and any fair value
adjustments to the carrying amounts of assets and liabilities arising on the
acquisition are treated as assets and liabilities of the foreign operation and
translated at the closing rate.
The assets and liabilities of foreign operations are translated into British
Pounds at the rate of exchange ruling at the balance sheet date and their income
statements are translated at the weighted average exchange rates for the year.
The exchange differences arising on the translation are taken directly to a
separate component of equity. On disposal of a foreign entity, the deferred
cumulative amount recognised in equity relating to that particular foreign
operation is recognised in the income statement.
b. Investment property:
Property held for long term rental, for capital appreciation or both is
classified as investment property.
Investment property is measured initially at its cost, comprising its purchase
price and all directly attributable costs (including transaction costs).
Subsequent costs are included in the property's carrying amount only when it is
probable that future economic benefits associated with the item will flow to the
Group and the cost can be measured reliably. The carrying amount of investment
property excludes the costs of day-to-day servicing. Subsequent to initial
recognition, the investment property is stated at fair value as determined by
independent property appraisers, which reflects market conditions at the balance
sheet date. Gains or losses arising from changes in the fair values of
investment properties are included in the income statement in the period which
they arise. Investment properties are not depreciated.
The last valuation for investment properties was carried out at 31 December
2008. All investment properties have been valued individually, not as a
portfolio.
Investment properties are derecognised when either they have been disposed or
when the investment property is permanently withdrawn from use and no future
economic benefit is expected from its disposal. Any gains or losses on the
retirement or disposal of an investment property are recognised in the income
statement in the year of retirement or disposal.
NOTE 2:- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont.)
c. Investment in associates:
The Group's interest in associates is accounted for under the equity method of
accounting. An associate is an entity in which the Group has significant
influence and which is neither a subsidiary nor a joint venture.
Under the equity method, the investment in the associate is carried in the
balance sheet at cost plus post-acquisition changes in the Group's share of net
assets of the associate. Goodwill relating to an associate is included in the
carrying amount of the investment and is not amortised. After application of the
equity method, the Group determines whether it is necessary to recognise any
impairment loss with respect to the Group's net investment in the associate. The
income statement reflects the share of the results of operations of the
associate.
Where there has been a change recognised directly in the equity of the
associate, the Group recognises its share of any changes and discloses this,
when applicable, in the statement of changes in equity.
The reporting dates of the associate and the Group are identical and the
associates' accounting policies conform to those used by the Group for like
transactions and events in similar circumstances.
d. Investments and other financial assets:
Initial recognition
Financial assets in the scope of IAS 39 are classified as either financial asse
s at fair value through the income
statement, loans and receivables, or available-for-sale financial assets, as
appropriate. When financial assets are recognised initially, they are measured
t fair value, plus, in the case of investments not at fair value through the
income statement, directly attributable transaction costs. The Group
determines the classification of its financial assets after initial recognition
and, where allowed and appropriate,
re-evaluates this designation at each financial year-end.
Subsequent measurement
Financial assets at fair value through the income statement:
Derivatives are classified as held for trading unless they are designated as ef
ective hedging instruments.
NOTE 2:- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont.)
Loans and receivables:
Loans and receivables are non-derivative financial assets with fixed or determi
able payments that are not
quoted in an active market. Such assets are carried at amortised cost using the
effective interest method.
Gains and losses are recognised in income when the loans and receivables are de
ecognised or impaired, as well as through the amortisation process.
Available-for-sale financial assets:
Available-for-sale financial assets are those non-derivative financial assets t
at are designated as available-for-sale or are not classified in any of the pre
eding categories. After initial recognition available-for sale
financial assets are measured at fair value with gains or losses being recognis
d as a separate component of equity until the investment is derecognised .
The fair value of investments that are actively traded in organised financial
markets is determined by reference to quoted market bid prices at the close of
business on the balance sheet date. For investments where there is no active
market, fair value is determined using valuation techniques, where reliable
information is available. Such techniques include using recent arm's length
market transactions; reference to the current market value of another
instrument, which is substantially the same; discounted cash flow analysis and
option pricing models.
Impairment of financial assets
The Group assesses at each balance sheet date whether there is any objective
evidence that a financial asset or group of financial assets are impaired. A
financial asset or group of financial assets are deemed to be impaired if, and
only if, there is objective evidence of impairment as a result of one or more
events that has occurred after the initial recognition of the asset (an incurred
'loss event') and that loss event has an impact on the estimated future cash
flows of the financial asset of the group of financial assets that can be
reliably estimated. Evidence of impairment may include indications that the
debtors or a group of debtors is experiencing significant financial difficulty,
default or delinquency in interest or principal interest payments, the
probability that they will enter bankruptcy or other financial reorganisation
and where observable data indicate that there is a measurable decrease in the
estimated future cash flows, such as changes in arrears or economic conditions
that correlate with defaults.
NOTE 2:- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont.)
For available-for-sale investments, the Group assesses at each balance sheet
date whether there is objective evidence that an investment or group of
investments are impaired. In the case of equity investments classified as
available-for-sale, objective evidence would include a significant or prolonged
decline in the fair value of the investment below its cost. Where there is
evidence of impairment, the cumulative loss - measured as the difference between
the acquisition cost and the current fair value, less any impairment loss on
that investment previously recognised in the income statement - is removed from
equity and recognised in the income statement. Impairment losses on equity
investments are not reversed through the income statement; increases in the fair
value after impairment are recognised directly in equity.
De-recognition of financial instruments
A financial asset is derecognised when:
* The rights to receive cash flows from the asset have expired; or
* The Group has transferred its rights to receive cash flows from the asset or has
assumed an obligation to pay the received cash flows in full without material
delay to a third party under a 'pass through' arrangement.
e. Intangible assets:
Goodwill
The excess of the cost of acquisition over the fair values of the identifiable
net assets acquired is recognised as goodwill.
The Group assesses whether there are any indicators that goodwill is impaired at
each reporting date. Goodwill is tested for impairment annually and when
circumstances indicate that the carrying value may be impaired. Impairment is
determined for goodwill by assessing the recoverable amount of the
cash-generating units, to which the goodwill relates. Where the recoverable
amount of the cash-generating units is less than their carrying amount an
impairment loss is recognised. Impairment losses relating to goodwill cannot be
reversed in future periods. The Group performs its annual impairment test of
goodwill as at 31 December.
However, goodwill linked to deferred tax liabilities is only considered for
impairment when the deferred tax changes.
NOTE 2:- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont.)
f. Trade receivables:
Trade receivables are recognised and carried at original invoice amount less an
allowance for any uncollectible amounts. Provision is made when there is
objective evidence that the Group will not be able to collect the debts. Bad
debts are written off when identified.
g. Cash and cash equivalents:
Cash and cash equivalents consist of deposits in banks and short-term
investments (primarily time deposits and certificates of deposit) with original
maturities of three months or less.
h. Leases:
The determination of whether an arrangement is, or contains a lease is based on
the substance of the arrangement at inception date: whether fulfilment of the
arrangement is dependent on the use of a specific asset or assets or the
arrangement conveys a right to use the asset.
Group as a lessee:
Leases where the Group is the lessee and the lessor retains substantially all
the risks and benefits of ownership of the asset are classified as operating
leases. Operating lease payments are recognised as an expense in the income
statement on a straight line basis over the lease term.
Finance leases, which transfer to the Group as lessee substantially all of the
risks and benefits of ownership of the leased item, are capitalised at the
inception of the lease, at the fair value of the leased property, or if lower,
at the present value of the minimum lease payments. Lease payments are
apportioned between finance charges and reduction of the lease liability so as
to achieve a constant rate of interest on the remaining balance of the
liability. Finance charges are recognised in the income statement.
Leased assets are depreciated over the useful life of the asset. However, if
there is no reasonable certainty that the Group will obtain ownership by the end
of the lease term, the asset is depreciated over the shorter of the estimated
useful life of the asset and the lease term.
NOTE 2:- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont.)
Group as a lessor:
Leases where the Group does not transfer substantially all the risks and
benefits of ownership of the asset are classified as operating leases. Initial
direct costs incurred in negotiating an operating lease are added to the
carrying amount of the leased asset and recognised over the lease term on the
same bases as rental income.
i. Interest-bearing loans and borrowings:
All loans and borrowings are initially recognised at the fair value of the
consideration received less directly attributable transaction costs. After
initial recognition, interest-bearing loans and borrowings are subsequently
measured at amortised cost using the effective interest method. Gains and losses
are recognised in the income statement when the liabilities are derecognised as
well as through the amortisation process.
For all financial instruments measured at amortised cost, interest income or
expense is recorded at the effective interest rate. Interest income and expense
arising from financial instruments recorded at fair value through the income
statement are recorded on an accruals basis. A financial liability is
derecognised when the obligation under the liability is discharged, cancelled or
expires.
j. Revenue recognition:
Revenue is recognised to the extent that it is probable that the economic
benefits will flow to the Group and the revenue can be reliably measured.
Rental income arising on investment properties, including scheduled rent
increases, are accounted for on a straight-line basis over the lease term.
The cost of incentives provided by the Group to lessees in order to enter into
leasing agreements, are recognised as a reduction of rental income over the
lease term on a straight-line basis.
Dividend income from available-for-sale investments is recognised when the
Group's right to receive the payment is established.
k. Taxation:
Current tax:
Current tax assets and liabilities for the current and prior periods are measur
d at the amount expected to be
recovered from or paid to the taxation authorities. The tax rates and tax laws
sed to compute the amount are
those that are enacted or substantively enacted by the balance sheet date.
NOTE 2:- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont.)
Deferred tax:
Deferred income tax is provided using the liability method on temporary differe
ces at the balance sheet date
between the tax bases of assets and liabilities and their carrying amounts for
inancial reporting purposes.
Deferred tax liabilities are
recognised for all taxable temporary differences, except:
?where the deferred tax liability arises from the initial recognition of goodwi
l or of an asset or liability in
a transaction that is not a business combination and, at the time of the transa
tion, affects neither the accounting profit nor taxable profit or loss; and
?in respect of taxable temporary differences associated with investments in sub
idiaries, associates and
interests in joint ventures, where the timing of the reversal of the temporary
ifferences can be
controlled and it is probable that the temporary differences will not reverse i
the foreseeable future.
Deferred tax assets are
recognised for all deductible temporary differences, carry-forward of unused tax
credits and unused tax losses, to the extent that it is probable that taxable p
ofit will be available against which
the deductible temporary differences, and the carry-forward of unused tax credi
s and unused tax losses can be recognised except:
?where the deferred tax asset relating to the deductible temporary difference a
ises from the
initial recognition of an asset or liability in a transaction that is not a bus
ness combination and, at the
time of the transaction, affects neither the accounting profit nor taxable prof
t or loss; and
?in respect of deductible temporary differences associated with investments in
ubsidiaries, associates and
interests in joint ventures, deferred tax assets are recognised only to the ext
nt that it is probable that
the temporary differences will reverse in the foreseeable future and taxable pr
fit will be available against which the temporary differences can be recognised.
NOTE 2:- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont.)
The carrying amount of deferred tax assets is reviewed at each balance sheet da
e and reduced to the
extent that it is no longer probable that sufficient taxable profit will be ava
lable to allow all or part of the
deferred income tax asset to be recognised. Unrecognised deferred income tax as
ets are reassessed at each
balance sheet date and are recognised to the extent that it has become probable
that future taxable profit will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expe
ted to apply to the year
when the asset is recognised or the liability is settled, based on tax rates (a
d tax laws) that have been enacted or
substantively enacted at the balance sheet date.
Income tax relating to items recognised directly in equity is recognised in equ
ty and not in the income statement.
Deferred tax assets and deferred tax liabilities are offset, if a legally enfor
eable right exists to set off current
tax assets against current tax liabilities and the deferred taxes relate to the
same taxable entity and the same taxation authority.
l. Derivative financial instruments and hedge accounting:
The Group uses derivative financial instruments such as interest rate swaps to
hedge its risks associated with interest rate fluctuations. Such derivative fin
ncial
instruments are initially recognised at fair value on the date on which a deriv
tive contract is entered into and
are subsequently remeasured at fair value. Derivatives are carried as assets wh
n the fair value is positive and as liabilities when the fair value is negative.
Any gains or losses arising from changes in fair value on derivatives that do n
t qualify for hedge accounting are taken directly to the income statement.
For financial instruments not listed in an active market, the fair value is
determined by using appropriate valuation techniques. Valuation techniques
include net present value techniques, comparison to similar instruments for
which market observable prices exist, options pricing models and other relevant
valuation models.
For the purpose of hedge accounting, hedges are classified as
cash flow hedges when hedging exposure to variability in cash flows that is eit
er attributable to a
particular risk associated with a recognised asset or liability or a forecast
transaction.
NOTE 2:- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont.)
At the inception of a hedge relationship, the Group formally designates and doc
ments the hedge
relationship to which the Group wishes to apply hedge accounting and the risk m
nagement objective and
strategy for undertaking the hedge. The documentation includes identification o
the hedging instrument, the
hedged item or transaction, the nature of the risk being hedged and how the ent
ty will assess the hedging
instrument's effectiveness in offsetting the exposure to changes in the cash fl
ws
attributable to the hedged risk. Such hedges are expected to be highly effectiv
in achieving offsetting changes
in cash flows and are assessed on an ongoing basis to determine that they actua
ly have been
highly effective throughout the financial reporting periods for which they were
designated.
The effective portion of the gain or loss on the hedging instrument is
recognised directly in equity, while the ineffective portion is recognised in
the income statement. Amounts taken to equity are transferred to the income
statement when the hedged transaction affects profit or loss, such as when
hedged financial income or financial expense is recognised.
m. Share-based payment transactions:
Employees (including senior executives) and others providing services to the
Group receive remuneration in the form of share-based payment transactions from
a parent entity, whereby employees render services as consideration for equity
instruments ("equity settled transactions") and share options, which are to be
settled only in cash ("cash-settled transactions").
NOTE 2:- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont.)
Equity-settled transactions:
The cost of equity-settled transactions with employees is measured by reference
to the fair value at the date on which they are granted.
The cost of equity-settled transactions is recognised, together with a
corresponding increase in equity, over the period in which the performance
and/or service conditions are fulfilled, ending on the date on which the
relevant employees become fully entitled to the award ('the vesting date'). The
cumulative expense recognised for equity-settled transactions at each reporting
date until the vesting date reflects the extent to which the vesting period has
expired and the Group's best estimate of the number of equity instruments that
will ultimately vest. The income statement charge or credit for a period
represents the movement in cumulative expense recognised as at the beginning and
end of that period.
No expense is recognised for awards that do not ultimately vest, except for
awards where vesting is conditional upon a market condition, which are treated
as vesting irrespective of whether or not the market condition is satisfied,
provided that all other performance conditions are satisfied.
Cash-settled transactions:
The cost of cash-settled transactions is measured initially at fair value at the
grant date taking into account the terms and conditions upon which the
instruments were granted. This fair value is expensed over the period until
vesting with recognition of a corresponding liability.
The liability is re-measured at each balance sheet date up to and including the
settlement date with changes in fair value recognised in the income statement.
* Non-current assets held for sale
Non-current assets classified as held for sale are measured at the lower of the
carrying amount and fair value less costs to sell. Non-current assets are
classified as held for sale if their carrying amounts will be recovered through
a sale transaction rather than through continuing use. This condition is
regarded as met only when the sale is highly probable and the asset is available
for immediate sale within one year from the date of classification.
NOTE 2:- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont.)
* Property, plant and equipment
Property, plant and equipment are stated at cost, net of accumulated
depreciation and/or accumulated impairment losses, if any. The capitalised cost
of property, plant and equipment includes only those costs that are directly
attributable to bringing an asset to its working condition for its intended use.
Depreciation is calculated on a straight-line basis over the useful life of the
asset as follows:
+------------------------------------------------------------------------------------------------+
| Office |
| equipment |
| & |
| furniture |
| 33% |
| straight |
| line |
+------------------------------------------------------------------------------------------------+
| Computer & software 33% straight line |
+------------------------------------------------------------------------------------------------+
| Leasehold improvements 3 years |
+------------------------------------------------------------------------------------------------+
An item of property, plant and equipment is derecognised upon disposal or when
no future economic benefits are expected from its use or disposal. Any gain or
loss on derecognition of the asset (calculated as the difference between the net
disposal proceeds and the carrying amount of the asset) is included in the
income statement in the year the asset is derecognised.
The assets residual values, useful lives and methods of depreciation are
reviewed at each financial year end, and adjusted prospectively if appropriate.
p.Restatement of comparatives
The non-current loans from banks presented in the financial statements for the
year ended 31 December 2007 included a loan received from a non bank third party
amounting to Euro 35 million (GBP25.7 million). This has been reclassified to
loans from others to conform with current period classification (see Note 11).
In 2007 the total amount of GBP3.4 million relating to incentives to Lessees
was included in intangible assets. This has been reclassified to non-current
receivables to conform with current accounting standards.
NOTE 2:- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont.)
q. Future changes in accounting policies
Standards issued but not yet effective Improvements to IFRS's
In May 2008 the Board issued its first omnibus of amendments to its standards,
primarily with a view to removing inconsistencies and clarifying wording. The
Group is reviewing the impact of these changes.
IAS 1 (Revised), "Presentation of Financial Statements":
IAS 1 (Revised) requires entities to present a separate statement of
comprehensive income disclosing, other than the net income as stated in the
income statement, all the items carried in the reported period directly to
equity that do not derive from transactions with the shareholders in their
capacity as shareholders such as foreign currency translation adjustments of
foreign operations, reclassification of fair value to available-for-sale
financial assets, adjustments to revaluation reserve of fixed assets and such,
while properly allocated between the Company and the minority interests.
Alternatively, the items of other comprehensive income may be disclosed along
with the items of the income statement in one single statement entitled
statement of comprehensive income. Only the items carried to equity deriving
from transactions with the shareholders in their capacity as shareholders (such
as capital issuances, dividend distribution etc.) will be disclosed in the
statement of changes in equity as will the summary line carried forward from the
statement of comprehensive income, while properly allocated between the Company
and the minority interests.
IAS 1 (Revised) is effective for annual financial statements for periods
commencing on January 1, 2009 with early adoption permitted.
The effect of the adoption of IAS 1 (Revised) will require the Company to
disclose the above items in the financial statements.
IFRS 8 Operating Segments
This standard was issued in November 2006 and is effective for annual periods
beginning on or after 1 January 2009. IFRS 8 requires entities to disclose
segment information based on the information reviewed by the entity's chief
operating decision maker. The Group has determined that the operating segments
disclosed in IFRS 8 will be the same as the geographical segments disclosed
under IAS 14. The impact of this standard on the other segment disclosures is
still to be determined. As this is a disclosure standard, it will have no impact
on the financial position or financial performance of the Group when implemented
in 2009.
NOTE 2:- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont.)
IFRS 3R Business Combinations and IAS 27R Consolidated and Separate Financial
Statements
The revised standards were issued on January 2008 and become effective for
financial years beginning after 1 July 2009. IFRS 3R introduces a number of
changes in the accounting for business combinations occurring after this date
that will impact the amount of goodwill recognised, the reported results in the
period that the acquisition occurs, and the future reported results. The
standard may be early applied, however, the Group does not intend to take
advantage of this possibility.
IAS 32 Financial Instruments: Presentation and IAS 1 Presentation of Financial
Statements - Puttable Financial Instruments and Obligations Arising on
Liquidation
These amendments to IAS 39 were issued in August 2008 and become effective for
the financial years beginning on or after 1 January 2009. The revisions provide
a limited scope exemption for puttable instruments to be classified as equity if
they fulfil a number of specified features. The amendments to the standards will
have no impact on the financial position or financial performance of the Group,
as the Group has not issued such instruments.
IAS 39 Financial Instruments: Recognition and Measurement - Eligible Hedged
Items
The amendments to IAS 39 were issued in August 2008 and become effective for
financial years beginning on or after 1 July 2009. The amendment addresses the
designation of a one-sided risk in a hedged item, and the designation of
inflation as a hedged risk or portion in particular situations. It clarifies
that an entity is permitted to designate a portion of the fair value changes or
cash flow variability of a financial instrument as hedged item. The Group has
concluded that amendment will have no effect on the financial position or
financial performance of the Group, as the Group has not entered into any such
hedges.
NOTE 2:- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont.)
IFRIC 15 Agreement for Construction Real Estate
IFRIC 15 was issued in July 2008 and becomes effective for financial years
beginning on or after 1 January 2009. The interpretation is to be applied
retrospectively. It clarifies when and how revenue and related expenses from the
sale of a real estate unit should be recognised if an agreement between a
developer and a buyer is reached before the construction of the real estate is
completed. Furthermore, the interpretation provides guidance on how to determine
whether an arrangement is within the scope of IAS 11 or IAS 18. IFRIC 15 will
not have an impact on the consolidated financial statements because the Group
does not conduct such activities.
IFRIC 16 Hedge of a Net Investment in Foreign Operation
IFRIC 16 was issued in July 2008 and becomes effective for financial years
beginning on or after 1 October 2008. The interpretation is to be applied
prospectively. IFRIC 16 provides guidance on the accounting for a hedge of a net
investment. As such it provides guidance on indentifying the foreign currency
risks that qualify for hedge accounting in the hedge of a net investment, where
within the Group the hedging instruments can be held in the hedge of a net
investment and how the entity should determine the amount of foreign currency
gain or loss, relating to both the net investment and the hedging instrument, to
be recycled on disposal of the net investment. The Group is currently assessing
the impact of this interpretation.
NOTE 3: PROPERTY PLANT AND EQUIPMENT
+------------------+----+----------+-----+-----------+------+--------------+---+-------------+
| | | Computer | | Office | | Leasehold | | Total |
| | | & | | equipment | | improvements | | |
| | | Software | | & | | | | |
| | | | | furniture | | | | |
+------------------+----+----------+-----+-----------+------+--------------+---+-------------+
| Cost: | | | | | | | | |
+------------------+----+----------+-----+-----------+------+--------------+---+-------------+
| At 1 January | | - | | - | | - | | - |
| 2008 | | | | | | | | |
+------------------+----+----------+-----+-----------+------+--------------+---+-------------+
| Additions | | 30 | | 90 | | 101 | | 221 |
+------------------+----+----------+-----+-----------+------+--------------+---+-------------+
| At 31 December | | 30 | | 90 | | 101 | | 221 |
| 2008 | | | | | | | | |
+------------------+----+----------+-----+-----------+------+--------------+---+-------------+
| | | | | | | | | |
+------------------+----+----------+-----+-----------+------+--------------+---+-------------+
| Depreciation: | | | | | | | | |
+------------------+----+----------+-----+-----------+------+--------------+---+-------------+
| | | | | | | | | |
+------------------+----+----------+-----+-----------+------+--------------+---+-------------+
| At 1 January | | - | | - | | - | | - |
| 2008 | | | | | | | | |
+------------------+----+----------+-----+-----------+------+--------------+---+-------------+
| Charge for the | | 9 | | 23 | | 29 | | 61 |
| year | | | | | | | | |
+------------------+----+----------+-----+-----------+------+--------------+---+-------------+
| At 31 December | | 9 | | 23 | | 29 | | 61 |
| 2008 | | | | | | | | |
+------------------+----+----------+-----+-----------+------+--------------+---+-------------+
| | | | | | | | | |
+------------------+----+----------+-----+-----------+------+--------------+---+-------------+
| Net book value: | | | | | | | | |
+------------------+----+----------+-----+-----------+------+--------------+---+-------------+
| At 31 December | | 21 | | 67 | | 72 | | 160 |
| 2008 | | | | | | | | |
+------------------+----+----------+-----+-----------+------+--------------+---+-------------+
| At 31 December | | - | | - | | - | | - |
| 2007 | | | | | | | | |
+------------------+----+----------+-----+-----------+------+--------------+---+-------------+
| | | | | | | | | |
+------------------+----+----------+-----+-----------+------+--------------+---+-------------+
NOTE 4:- INVESTMENTS IN ASSOCIATES
(a) Summary financial information of the Group's investments in associates:
+-----------------------------------------+--+------------+--+------------+
| | | 31 December |
+-----------------------------------------+--+----------------------------+
| | | 2008 | | 2007 |
+-----------------------------------------+--+------------+--+------------+
| Share of the associates' | | | | |
| balance sheets: | | | | |
+-----------------------------------------+--+------------+--+------------+
| Current assets | | 9,541 | | 9,235 |
+-----------------------------------------+--+------------+--+------------+
| Non-current assets | | 235,125 | | 263,753 |
+-----------------------------------------+--+------------+--+------------+
| Current liabilities | | (8,569) | | (8,064) |
+-----------------------------------------+--+------------+--+------------+
| Non-current | | (218,411) | | (211,348) |
| liabilities | | | | |
+-----------------------------------------+--+------------+--+------------+
| | | | | |
+-----------------------------------------+--+------------+--+------------+
| Net assets | | 17,686 | | 53,576 |
+-----------------------------------------+--+------------+--+------------+
| Long-term loans with | | 23,383 | | 23,968 |
| related parties (c) | | | | |
+-----------------------------------------+--+------------+--+------------+
| | | 41,069 | | 77,544 |
+-----------------------------------------+--+------------+--+------------+
| Share of the associate's | | | | |
| revenues and profit: | | | | |
+-----------------------------------------+--+------------+--+------------+
| Revenues (excluding | | 16,934 | | 27,594 |
| fair value | | | | |
| adjustments) | | | | |
+-----------------------------------------+--+------------+--+------------+
| | | | | |
+-----------------------------------------+--+------------+--+------------+
| (Loss)/ profit (b) | | (35,407) | | 11,952 |
+-----------------------------------------+--+------------+--+------------+
(b) (Loss)/ profit Includes:
+------------------------------------+--+------------+--+------------+
| | | 31 December |
+------------------------------------+--+----------------------------+
| | | 2008 | | 2007 |
+------------------------------------+--+------------+--+------------+
| | | | | |
+------------------------------------+--+------------+--+------------+
| Fair value adjustments, | | (39,550) | | 6,443 |
| net | | | | |
+------------------------------------+--+------------+--+------------+
NOTE 4:- INVESTMENTS IN ASSOCIATES (Cont.)
(c) Loans:
+-----------------------------------------+--+------------+--+------------+
| | | 31 December |
+-----------------------------------------+--+----------------------------+
| | | 2008 | | 2007 |
+-----------------------------------------+--+------------+--+------------+
| | | | | |
+-----------------------------------------+--+------------+--+------------+
| In British Pounds (1) | | 2,199 | | 2,828 |
+-----------------------------------------+--+------------+--+------------+
| In Canadian Dollars (1) | | 6,399 | | 6,234 |
+-----------------------------------------+--+------------+--+------------+
| In Swiss Francs (1) | | 8,997 | | 7,991 |
+-----------------------------------------+--+------------+--+------------+
| In Euro (2) | | 5,788 | | 6,915 |
+-----------------------------------------+--+------------+--+------------+
| | | | | |
+-----------------------------------------+--+------------+--+------------+
| | | 23,383 | | 23,968 |
+-----------------------------------------+--+------------+--+------------+
(1) The loans do not bear interest.
(2) Euro loans of GBP5.8 million bear interest at an annual average rate of
6.33% (2007: 6.33%).
The repayment dates of all the loans have not yet been determined.
(d) Acquisition of additional holdings in associates:
1. In January 2007, Blenheim Properties Group ("BPG"), which holds associates
that own real estate properties and are also held by the Company, exercised a
put option granted to it by the Company in December 2006 and obligated the
Company to acquire more holdings in its associates. Consequently, the Company's
stake in certain associates increased by 2.0%-2.6% . In consideration for the
acquisition of said holdings, the Company paid a total of approximately GBP10.5
million, part of which was paid by offsetting a loan of GBP9.1 million extended
to a related company of BPG in December 2006 and the balance was paid in cash.
Pursuant to a memorandum of understandings signed on 5 December 2006 with BPG,
in April 2007, the Company acquired from BPG additional holdings in the
associates in consideration of the issuance of shares to BPG (see Note 14),
representing 4.9% of the Company's share capital and in consideration for cash.
The total cost of the acquisition of the Company's additional holdings in the
associates (including the acquisition carried out in January 2007) amounted to
GBP90 million.
Following the said acquisition, the Group became the controlling shareholder in
most of the associates, thereby, as of the second quarter of 2007, the Company
consolidated the assets and liabilities of the associates in which it has gained
control.
As at 31 December 2008 there remains very few share transfers which were
acquired from BPG which have not been registered in the Group's name. These
shares are being held on trust by the seller until they are registered in the
Company's name. Some of the transfers are contingent on the consent of third
parties, but as the management considers this consent highly probable these
transfers have been recognised in the financial statements as having been
effected.
NOTE 4:- INVESTMENTS IN ASSOCIATES (Cont.)
In March 2007, the Company granted BPG a put option upon whose exercise the
Company will be required to acquire BPG's entire holdings in certain associates,
including associates included in the above mentioned memorandum of
understandings. The options were in effect until 1 October 2007 for a price
reflecting the value of the associates' real estate properties net of certain
liabilities on the date of exercise. In April 2007, BPG exercised a put option
in relation to one of the associates (for a consideration of GBP4.6 million)
and, therefore, as of the second quarter of 2007, the Company consolidated the
assets and liabilities of the associates. On 1 October, 2007 the option expired.
2. Acquisition of Linchfield Limited ("Linchfield") - business combination:
On 17 November 2003, a transaction was completed between a 40.0% owned investee
(Linchfield) and Royal Bank of Scotland according to which the investee acquired
the entire rights in a U.K. company (Powerfocal Limited) that owns parking lots
throughout the U.K., in consideration (including related expenses) of GBP56
million. The investment was mainly financed by shareholders' loans. The
Company's share in the investment amounts to GBP22 million and was effected by
shareholders' loans. The U.K. company owned on the date of the acquisition 138
parking lots valued at GBP642 million and had outstanding loans to the Royal
Bank of Scotland of GBP543million. The loans are for 15 years and bear annual
interest rate of 6.7%-8.5%. For part of the loans the interest actually paid in
the first ten years is 6.1% per year and the remaining unpaid interest is added
to the principal of the loans. Most of the principal is to be repaid upon final
maturity in 2017. The parking lots are leased over various terms with leases in
place for car parks to 2037 to National Car Park Limited, which is one of the
largest parking lot operating companies in the U.K., for annual lease fees (on
cash basis) of approximately GBP41 million (in 2007). One half of the lease fees
increase every year by 3.0% and the other half increases by the increase of the
CPI in the U.K., which increase has been fixed by a swap transaction to about
2.4% per year.
In January 2006, the Company purchased an additional 2.4% of the shares of
Linchfield in consideration of approximately GBP3 million, such that following
the acquisition, the Company held 42.4% of Linchfield.
As part of the transaction described in (1) above, the Company acquired
additional shares of Linchfield, an unlisted company based in Gibraltar. After
the acquisition of the additional shares, the Company has 59.0% of the ownership
and control of Linchfield, however as at 31 December 2008 only 2.4% of the
shares transferred have been registered in the Company's name, with additional
40% registered after 31 December 2008 for the same reason as described in Note 4
d(1). The acquisition has been accounted for using the purchase method of
accounting. The consolidated financial statements include the results of
Linchfield from the date of control.
NOTE 4:- INVESTMENTS IN ASSOCIATES (Cont.)
The fair value of the identifiable assets, liabilities and contingent
liabilities of Linchfield as at the date of acquisition were:
+-----------------------------------------+--+---------------+--+
| | | Fair | |
| | | value | |
| | | recognised | |
| | | on control | |
+-----------------------------------------+--+---------------+--+
| | | | |
+-----------------------------------------+--+---------------+--+
| Investment properties | | 763,523 | |
+-----------------------------------------+--+---------------+--+
| Long-term receivables | | 56,477 | |
+-----------------------------------------+--+---------------+--+
| Trade receivables | | 1,190 | |
+-----------------------------------------+--+---------------+--+
| Cash | | 19,182 | |
+-----------------------------------------+--+---------------+--+
| | | | |
+-----------------------------------------+--+---------------+--+
| | | 840,372 | |
+-----------------------------------------+--+---------------+--+
| | | | |
+-----------------------------------------+--+---------------+--+
| Loans from bank | | 544,748 | |
+-----------------------------------------+--+---------------+--+
| Loans from minority | | 8,440 | |
| shareholders | | | |
+-----------------------------------------+--+---------------+--+
| Deferred tax liability | | 145,953 | |
+-----------------------------------------+--+---------------+--+
| Derivative financial | | 78,287 | |
| instrument *) | | | |
+-----------------------------------------+--+---------------+--+
| Liability in respect of bank | | 17,770 | |
| agreement | | | |
+-----------------------------------------+--+---------------+--+
| Trade payables | | 24,677 | |
+-----------------------------------------+--+---------------+--+
| | | | |
+-----------------------------------------+--+---------------+--+
| | | 819,875 | |
+-----------------------------------------+--+---------------+--+
| | | | |
+-----------------------------------------+--+---------------+--+
| Net assets | | 20,497 | |
+-----------------------------------------+--+---------------+--+
| Less - Company's share in | | (13,413) | |
| shareholders' loans | | | |
+-----------------------------------------+--+---------------+--+
| | | | |
+-----------------------------------------+--+---------------+--+
| | | 7,084 | |
+-----------------------------------------+--+---------------+--+
| Additional shares acquired | | 16.6% | |
+-----------------------------------------+--+---------------+--+
| | | | |
+-----------------------------------------+--+---------------+--+
| | | 1,176 | |
+-----------------------------------------+--+---------------+--+
| Goodwill arising on | | 47,030 | |
| acquisition | | | |
+-----------------------------------------+--+---------------+--+
| | | | |
+-----------------------------------------+--+---------------+--+
| Total acquisition cost | | 48,206 | |
+-----------------------------------------+--+---------------+--+
| | | | |
+-----------------------------------------+--+---------------+--+
| Total goodwill | | | |
+-----------------------------------------+--+---------------+--+
| Goodwill arising on original | | 48,166 | |
| acquisition | | | |
+-----------------------------------------+--+---------------+--+
| Goodwill arising on current | | 47,030 | |
| acquisition (as above) | | | |
+-----------------------------------------+--+---------------+--+
| | | | |
+-----------------------------------------+--+---------------+--+
| | | 95,196 | |
+-----------------------------------------+--+---------------+--+
| | | | |
+-----------------------------------------+--+---------------+--+
In the year ended 31 December 2007 from the date of acquisition, Linchfield
contributed GBP50.9 million to the profit after tax of the Group. If the
combination had taken place at the beginning of the year, the profit after tax
for the Group would have been GBP103.5 million and total revenues from rental
income would have been GBP126.7 million.
The goodwill recognised arose from the deferred tax liabilities being recorded
gross in the financial statements in accordance with IAS 12.
The fair value of net assets recognised was equal to the carrying value at the
date of acquisition.
NOTE 4:- INVESTMENTS IN ASSOCIATES (Cont.)
*) Derivative financial instruments
Linchfield has entered into an Interest Rate Swap (IRS) agreement with the Royal
Bank of Scotland under which it pays a fixed rate of interest and receives
interest at a rate linked to three month Libor on all of its loans from banks.
Linchfield has also entered into a Limited Price Index (LPI) swap under which it
pays amounts linked to the movements in the annual LPI and receives fixed
amounts. The LPI is the Retail Price Index (RPI) with a cap at 5.0% and a floor
at 1.5%. The LPI swap is in connection with lease agreements with rental income
which is linked to the RPI. These derivatives do not qualify as hedges under
IFRS and consequently, all changes in their fair values are recorded directly in
the income statement.
e. List of principal associates
+--------------------------------------------------+----------+-------------+----+----+
| | | Ownership |
+--------------------------------------------------+----------+-----------------------+
| Name of associate | | 31December |
| | | 2008 and |
| | | 2007 |
+--------------------------------------------------+----------+-------------+
| | | |
+--------------------------------------------------+----------+------------------+
| Shalati Investments Limited | | 35.47% |
+--------------------------------------------------+----------+------------------+
| Old Forge Investments Limited | | 45.00% |
+--------------------------------------------------+----------+------------------+
| Monnaie Limited | | 45.00% |
+--------------------------------------------------+----------+------------------+
| Lochsley Properties Limited | | 50.00% |
+--------------------------------------------------+----------+------------------+
| Major Belle Limited | | 45.00% |
+--------------------------------------------------+----------+------------------+
| Shatto Holdings Limited | | 45.00% |
+--------------------------------------------------+----------+------------------+
| Kristwood Properties Limited | | 49.00% |
+--------------------------------------------------+----------+------------------+
| Synergy Holdings Sarl | | 50.00% |
+--------------------------------------------------+----------+------------------+
| Tredegar Holdings Ltd | | 50.00% |
+--------------------------------------------------+----------+------------------+
| Tower Properties AG | | 50.00% |
+--------------------------------------------------+----------+------------------+
| The Explorer Trust | | 45.00% |
+--------------------------------------------------+----------+------------------+
| Stiana Developments Sarl | | 50.00% |
+--------------------------------------------------+----------+-------------+----+----+
NOTE 5:- INVESTMENT PROPERTIES
+---------------------------------------------+--+--------------+--+--------------+
| | | 31 December |
+---------------------------------------------+--+--------------------------------+
| | | 2008 | | 2007 |
+---------------------------------------------+--+--------------+--+--------------+
| | | | | |
+---------------------------------------------+--+--------------+--+--------------+
| Opening balance | | 2,187,401 | | 383,259 |
+---------------------------------------------+--+--------------+--+--------------+
| Additions from newly consolidated | | - | | 1,303,699 |
| subsidiaries and new business combinations | | | | |
+---------------------------------------------+--+--------------+--+--------------+
| Additions | | 11,480 | | 321,670 |
+---------------------------------------------+--+--------------+--+--------------+
| Disposals | | (2,988) | | (10,054) |
+---------------------------------------------+--+--------------+--+--------------+
| Classified to assets held for sale | | (198,743) | | - |
+---------------------------------------------+--+--------------+--+--------------+
| Foreign currency translation adjustments | | 310,090 | | 74,708 |
+---------------------------------------------+--+--------------+--+--------------+
| Net fair value adjustment | | (124,388) | | 114,119 |
+---------------------------------------------+--+--------------+--+--------------+
| | | | | |
+---------------------------------------------+--+--------------+--+--------------+
| Closing balance | | 2,182,852 | | 2,187,401 |
+---------------------------------------------+--+--------------+--+--------------+
Investment properties are stated at fair value, which has been determined based
on valuations performed by DTZ Debenham Tie Leung, CBRE PI performance and ALTUS
Group Ltd.
DTZ Debenham Tie Leung Ltd and CBRE PI performance are external valuers for
the UK and European portfolios and the valuation of each property was on the
basis of market value (which equals the fair value) in accordance with RICS
Valuation Standards, sixth edition and the International Valuation Standards.
ALTUS Group Limited are external valuers of the Canadian portfolio and their
valuation follows the generally accepted Standards of Professional Practice
(CUSPAP) and code of Ethics of the Ordre des evaluateurs agrees du Quebec and
the Appraisal Institute of Canada. These firms are accredited independent
valuers and industry specialists in valuing these types of investment
properties. The effective date of the valuations was 31 December 2008. The fair
value represents the amount at which the assets could be exchanged between a
knowledgeable, willing buyer and a knowledgeable, willing seller in an arm's
length transaction at the date of valuation, in accordance with locally
recognised valuation standards.
In determining the fair value of the investment properties, the valuers took
into account comparable arm's length market transactions for similar properties
as well as discounted cash flow (DCF) projections, due to the very specific
characteristics of several of the properties within the portfolio, such as the
current tenant and lease agreement and the location and infrastructure of the
buildings, as well as certain market conditions which existed at the valuation
date, such as reduced liquidity available to purchasers coupled with an increase
in the cost of financing, a scarcity of comparables in certain countries, and an
overall lack of market place activity, which significantly increased
the subjectivity of the valuation process.
NOTE 5:- INVESTMENT PROPERTIES (Cont.)
Car parks subject to compulsory purchase order
During 2007 three car parks owned by Bishopsgate Parking Limited ("BPL"), a
company within the Linchfield Group, were subject to Compulsory Purchase Order.
Head of terms have been signed between the Council and a contractor, whereby the
contractor will construct a new shopping centre together with a new car park and
BPL will be granted a new lease to mirror the lease terms of the existing three
car parks. The rent previously payable by NCP will continue to be paid by the
contractor and will be subject to 3.0% per annum compound increases. For
technical reasons the new lease between the contractor and BLP has not yet been
signed. If, in the unlikely event, the lease is not signed BPL will be entitled
to full Statutory Compensation which is likely to be same or higher value than
the current valuation included in the financial statements at 31 December 2008.
On this basis the properties are currently included in the investment
properties.
NOTE 6:- NON CURRENT ASSET HELD FOR SALE
+---------------------------------------------------------------+---+----------------+---+---------------+
| | | 31 December |
+---------------------------------------------------------------+---+------------------------------------+
| | | 2008 | | 2007 |
+---------------------------------------------------------------+---+----------------+---+---------------+
| | | | | |
+---------------------------------------------------------------+---+----------------+---+---------------+
| Non-current assets held for sale | | 206,402 | | - |
+---------------------------------------------------------------+---+----------------+---+---------------+
| | | | | |
+---------------------------------------------------------------+---+----------------+---+---------------+
| | | 154,225 | | - |
| Liabilities | | 11,800 | | - |
| related to | | | | |
| non-current | | | | |
| assets held | | | | |
| for sale | | | | |
| Foreign | | | | |
| currency | | | | |
| translation | | | | |
| reserve | | | | |
| relating to | | | | |
| non-current | | | | |
| assets held | | | | |
| for sale | | | | |
+---------------------------------------------------------------+---+----------------+---+---------------+
| | | | | |
+---------------------------------------------------------------+---+----------------+---+---------------+
Subsequent to the year end, the Company's subsidiaries entered into sale and
purchase agreement ('SPA') for one of its Canadian assets and one Swedish asset
for which the measurement continues to be accounted for under IAS 40 "Investment
properties" and presentation and disclosure has been made according to IFRS 5 "
Non-current assets held for sale and discontinued operations".
The SPA for sale of the Canadian asset which is within the residential
sector stated a purchase price of CAD 37.5 million and the assumption of the
existing mortgage. This transaction is expected to close during the first
quarter of 2009.
The SPA for sale of the Swedish asset which is included within Scandinavian
segment and office business segment stated a purchase price of SEK 217million
and the transaction completed in January 2009.
A further four assets have been designated as held for sale and the
management is committed to a plan to sell these assets. As at 31 December 2008
the details of these assets are as follows:
+-------------------+-------------------+-------------------+-------------------+
| Geographical | Business Segment | Number of assets | Investment |
| Segment | | | property fair |
| | | | value |
| | | | |
+-------------------+-------------------+-------------------+-------------------+
| | | | In thousands |
+-------------------+-------------------+-------------------+-------------------+
| Germany | Retail | 1 | Euro 38,290 |
+-------------------+-------------------+-------------------+-------------------+
| UK | Office | 1 | GBP 36,100 |
+-------------------+-------------------+-------------------+-------------------+
| Switzerland | Office | 1 | CHF 114,940 |
+-------------------+-------------------+-------------------+-------------------+
| Finland | Office | 1 | Euro 50,530 |
+-------------------+-------------------+-------------------+-------------------+
+-------------------------------------------------------------------------------+
| NOTE 7:- INTANGIBLE ASSETS |
| Goodwill |
| Cost: |
| At 1 January 2007 - |
| Additions - |
| Addition from newly 95,196 |
| consolidated |
| subsidiaries |
| Impairment of goodwill (9,446) |
| Foreign currency - |
| translation adjustments |
| At 31 December 2007 85,750 |
| Additions - |
| Impairment of goodwill - |
| Foreign currency - |
| translation adjustments |
| At 31 December 2008 85,750 |
| |
| |
+-------------------------------------------------------------------------------+
NOTE 8:- NON-CURRENT RECEIVABLES
Composition:
+---------------------------------------------+--+------------+--+------------+
| | | 31 December |
+---------------------------------------------+--+----------------------------+
| | | 2008 | | 2007 |
+---------------------------------------------+--+------------+--+------------+
| | | | | |
+---------------------------------------------+--+------------+--+------------+
| Rental income receivable (1) | | 89,337 | | 73,974 |
+---------------------------------------------+--+------------+--+------------+
| Loans to minority shareholders | | 6,050 | | 6,015 |
| (2) | | | | |
+---------------------------------------------+--+------------+--+------------+
| Restricted deposits (3) | | 2,570 | | 1,774 |
+---------------------------------------------+--+------------+--+------------+
| Incentives to lessees (4) | | 3,425 | | 3,349 |
+---------------------------------------------+--+------------+--+------------+
| Other | | 147 | | 100 |
+---------------------------------------------+--+------------+--+------------+
| | | | | |
+---------------------------------------------+--+------------+--+------------+
| | | 101,529 | | 85,212 |
+---------------------------------------------+--+------------+--+------------+
(1) This comprises scheduled rental income including contractual rent
increases and other minimum fees receivable over the term of leases of various
properties in Canada, Germany and the United Kingdom (mostly in regard to the
car park leases).
(2)As a result of excess cash arising from a refinancing, subsidiaries granted
loans pro-rata to the shareholders of the subsidiary. The loans bear no interest
and will be repaid on disposal of the asset.
(3) The balance represents cash held in account charged to the bank as a
condition of the mortgage at the time of acquisition of an investment property
in Switzerland. The deposit will remain with the bank until the property is
re-let.
(4) The cost of incentives provided by the Group to lessees in order to enter
into leasing agreements are capitalised and recognised as a reduction of rental
income over the lease term on a straight-line basis.
NOTE 9:- CASH AND CASH EQUIVALENTS
+---------------------------------------------+--+------------+--+------------+
| | | 31 December |
+---------------------------------------------+--+----------------------------+
| | | 2008 | | 2007 |
+---------------------------------------------+--+------------+--+------------+
| | | | | |
+---------------------------------------------+--+------------+--+------------+
| In British Pounds | | 23,942 | | 60,865 |
+---------------------------------------------+--+------------+--+------------+
| In Euros | | 15,653 | | 18,254 |
+---------------------------------------------+--+------------+--+------------+
| In Canadian Dollars | | 3,342 | | 2,224 |
+---------------------------------------------+--+------------+--+------------+
| In Swiss Francs | | 3,055 | | 1,903 |
+---------------------------------------------+--+------------+--+------------+
| Other | | 134 | | 44 |
+---------------------------------------------+--+------------+--+------------+
| | | | | |
+---------------------------------------------+--+------------+--+------------+
| | | 46,126 | | 83,290 |
+---------------------------------------------+--+------------+--+------------+
NOTE 10:- AVAILABLE-FOR-SALE INVESTMENTS
+---------------------------------------------+--+------------+--+------------+
| | | 31 December |
+---------------------------------------------+--+----------------------------+
| | | 2008 | | 2007 |
+---------------------------------------------+--+------------+--+------------+
| | | | | |
+---------------------------------------------+--+------------+--+------------+
| The Hilton Hotels (1) | | 14,680 | | 24,509 |
+---------------------------------------------+--+------------+--+------------+
| The Marriott Hotels (2) | | 37,400 | | 38,350 |
+---------------------------------------------+--+------------+--+------------+
| | | | | |
+---------------------------------------------+--+------------+--+------------+
| | | 52,080 | | 62,859 |
+---------------------------------------------+--+------------+--+------------+
The investments have been re-valued as described in Note 2d). These available
for sale assets represent minority investments in Hilton and Marriott. As
minority shareholders, the Group has no access to management information for
both entities. At 31 December 2008 no reliable information is available on which
to establish the fair value of the minority stakes and as a result they have
been recorded at cost less impairment. The Directors have concluded that the
value is not impaired.
(1)In December 2005, a subsidiary of the Company completed the indirect
acquisition of 17.0% of the participating units in a fund ("the Fund")
registered in Jersey. Concurrently, the Fund completed the acquisition of 16
hotels in the U.K. ("the hotels"), managed by the Hilton Group. The cost of the
acquisition of the hotels by the Fund amounted to approximately GBP417.0
million, including transaction costs.
In order to finance the acquisition of the hotels, the Fund received a
non-recourse bank loan amounting to approximately GBP331.0 million. The loan is
for a period of 10 years and bears interest at an annual rate of 5.8%. The
remaining cost of the acquisition, amounting to approximately GBP87.0 million,
was financed by the unit holders in the Fund pro rata.
The Group's cost of investment in the Fund amounted to GBP14.7 million. The fair
value of this investment amounts to GBP14.7 million as of 31 December 2008
(2007:GBP24.5 million). The decrease in the fair value in 2008 of GBP9.8 million
(2007: GBP1.8 million) was recorded in the statement of changes in equity.
In the year ended 31 December 2008, the Company received a dividend of GBP298
thousand (2007: GBP1.1 million) which is included in dividend from
available-for-sale investments in the income statement.
(2) On 30 March 2007, the Group and other investors completed the acquisition of
rights representing the entire share capital of foreign companies that own 47
hotels located across England, Scotland and Wales ("the Marriott Hotels"), which
are managed by the Marriott chain under a management agreement for a period of
30 years with an option for Marriott to renew the agreement by 10 additional
years.
As of balance sheet date, the Company's share of the Marriot portfolio is 17.0%.
The Marriott Hotels were acquired from the Royal Bank of Scotland ("RBS") for a
total consideration of approximately GBP1.06 billion. The investors were
required to place
NOTE 10:- AVAILABLE-FOR-SALE INVESTMENTS (Cont.)
approximately GBP0.22 billion in shareholders' equity to complete the
transaction. The remaining cost of the acquisition was financed by a
non-recourse loan extended by RBS totalling approximately GBP0.85 billion for a
period of about seven years with fixed interest of 6.16%. During 2007 5 hotels
were sold.
In the year ended 31 December 2008, the Company received a dividend of GBP1.6
million (2007: GBP4.3 million) from this investment, which is included in
dividend from available-for-sale investments in the income statement.
The fair value of this investment amounts to GBP37.4 million as of 31 December
2008 (2007: GBP38.4 million). The decrease in the fair value during 2008
amounting GBP950 thousand (2007: increase GBP950 thousand) was recorded in the
statement of changes in equity.
NOTE 11:- LOANS FROM OTHERS
Loans from others relate to finance provided by Metro Finance B.V for the
acquisition of a number of properties located within Germany. The loan is
interest bearing at 5.0% and expires in December 2010 with an option of a 24
month extension. The loan is denominated in Euros, not repayable by instalments
and will be repaid in full on expiry.
NOTE 12:- TRADE AND OTHER RECEIVABLES
+---------------------------------------------+--+------------+--+------------+
| | | 31 December |
+---------------------------------------------+--+----------------------------+
| | | 2008 | | 2007 |
+---------------------------------------------+--+------------+--+------------+
| | | | | |
+---------------------------------------------+--+------------+--+------------+
| Tenant receivables (1) | | 7,494 | | 4,186 |
+---------------------------------------------+--+------------+--+------------+
| Deposits (2) | | 8,402 | | 6,805 |
+---------------------------------------------+--+------------+--+------------+
| Due from related parties (3) | | 292 | | 292 |
+---------------------------------------------+--+------------+--+------------+
| Prepaid expenses | | 906 | | 639 |
+---------------------------------------------+--+------------+--+------------+
| Receivable due to financial | | 887 | | 821 |
| instruments | | | | |
+---------------------------------------------+--+------------+--+------------+
| Other | | 1,657 | | 1,930 |
+---------------------------------------------+--+------------+--+------------+
| | | | | |
+---------------------------------------------+--+------------+--+------------+
| | | 19,638 | | 14,673 |
+---------------------------------------------+--+------------+--+------------+
| | | | | |
+---------------------------------------------+--+------------+--+------------+
1. Included within this balance is rent receivable from the three car parks
under Compulsory Purchase Order (see Note 5) amounting to GBP5.6 million payable
when the exchange process is completed. Other tenant receivables are not
interest bearing and payable between 30 to 90 days. They are all current with
the exception of GBP37 thousand which is over 90 days.
2. Deposits provided by Group companies as collateral for performance
regarding the properties. The deposits bear no interest and are held by
trustees.
3. For terms and conditions relating to related party receivables refer to
Note 17b.
The credit quality of trade receivables that are neither past due nor impaired
is considered good. Receivable balances are monitored on an ongoing basis with
the result that the Group's exposure to bad debts is not significant.
Receivables are due from diverse government and large corporate organisations.
NOTE 13:- OTHER LIABILITIES
Linchfield, a subsidiary, has an agreement with a bank to pay the bank certain
fees upon the sale of investment properties. The fee is determined as a
percentage of the "gain" resulting from the sale, as defined in the agreement.
The liability was recorded in Linchfield's accounts based on the estimated fair
value of the aforementioned obligation.
NOTE 14:- SHARE CAPITAL
a. Composition:
+---------------------+-+----------------+-+----------------+-+----------------+-+----------------+
| | | 31 December 2008 | | 31 December 2007 |
+---------------------+-+-----------------------------------+-+-----------------------------------+
| | | Authorised | | Issued | | Authorised | | Issued |
| | | | | and | | | | and |
| | | | | fully | | | | fully |
| | | | | paid | | | | paid |
+---------------------+-+----------------+-+----------------+-+----------------+-+----------------+
| | | Number of shares |
+---------------------+-+-------------------------------------------------------------------------+
| | | | | | | | | |
+---------------------+-+----------------+-+----------------+-+----------------+-+----------------+
| Ordinary | | 500,000,000 | | 265,115,168 | | 500,000,000 | | 265,115,168 |
| shares | | | | | | | | |
| of GBP | | | | | | | | |
| 0.50 par | | | | | | | | |
| value | | | | | | | | |
| each | | | | | | | | |
+---------------------+-+----------------+-+----------------+-+----------------+-+----------------+
*) In March 2007, the issued share capital (2 Ordinary shares of GBP1 par value
each) was split into 4 Ordinary shares of GBP0.50 par value each.
b. In April 2007, in connection with the admission of its Ordinary shares to
trading on the AIM, the Company issued 50,000,000 Ordinary shares of GBP0.50 par
value each in consideration of GBP2 per share. The total proceeds from the
offering amounted to GBP100 million. Of said issuance, the parent company (DBI)
purchased 6,250,000 Ordinary shares.
In May 2007, the underwriters for the offering exercised an over-allotment
option granted to them in connection with the public offering according to
which, the Company issued to the underwriters 5,294,555 Ordinary shares at the
public offering price of GBP2 per share.
The Company's total expenses in connection with the above issuances amounted to
approximately GBP10 million and have been deducted from the share premium
account.
c. Immediately prior to the public offering, the parent company converted
shareholders' loans totalling approximately GBP101.6 million to equity. In
addition, and as described in Note 4d(1) above, concurrent with the IPO, the
Company acquired several investments in real estate companies that were
controlled by DBI. In return the Company issued to DBI 197,089,399 Ordinary
shares.
In addition, immediately prior to the offering, the Company issued 12,731,210
Ordinary shares to Blenheim Properties Group ("BPG") as part of the Company's
payment for the acquisition from BPG of additional interests in associates (see
Note 4). On 8 July, 2007, BPG exercised a put option that was granted to BPG by
DBI prior to the IPO. As a result, all of BPG's shares (12,731,210) were sold to
DBI at the share market price as at the date of exercise.
NOTE 14:- SHARE CAPITAL (Cont.)
d. Dividend policy:
The Company's aim is to pay an annual dividend of up to 75.0% of the
Distributable Profit Pool. There can be no guarantee as to the amount of any
dividend payable by the Company. The Company may reinvest the proceeds from any
disposals of assets if the Board of Directors considers these appropriate and
suitable opportunities arise.
Because DBI, the controlling shareholder, has indicated that it would oppose the
payment of any final dividend, the Board has decided not to propose such
payment.
e.Dividends distributed
The information below provides details of dividends distributed by the Company
during the year ended 31 December 2008 and 2007.
+------------------+------------------+----------------+---------------------------+
| | | | Total |
+------------------+------------------+----------------+---------------------------+
| Date Declared | Date Distributed | Pence per | British Pounds Thousands |
| | | share | |
+------------------+------------------+----------------+---------------------------+
| | | | |
+------------------+------------------+----------------+---------------------------+
| 02/08/2007 | 01/10/2007 | 4 | 10,605 |
+------------------+------------------+----------------+---------------------------+
| 02/05/2008 | 07/05/2008 | 7 | 18,558 |
+------------------+------------------+----------------+---------------------------+
| 27/08/2008 | 23/09/2008 | 5.5 | 14,581 |
+------------------+------------------+----------------+---------------------------+
f. Nature and purpose of reserves
The foreign currency translation reserve is used to record exchange differences
arising from the translation of the financial statements of foreign
subsidiaries.
The hedging reserve is used to record the effective portion of gains and losses
arising from the revaluation of financial instruments designated as a cash flow
hedge.
The other reserve is used to record the revaluation of the available for sale
investments.
The capital contribution reserve represents premium gained from the transfer of
holdings in subsidiaries held by DBI on IPO (see Note 1a) and movement in share
options
NOTE 15:- COMMITMENTS
a. Lease agreements in England:
The Group owns real estate comprising office properties in the U.K. that are
leased under long-term lease agreements. Most of the lease agreements include
the following principal conditions:
1. The lease agreements are FRI (Full Repair and Insurance) agreements which
obligate the tenants to implement repairs and periodic renovations of the
exterior and the interior of the property during the term of the lease.
2. Rent review every five years according to which the rent is adjusted to
the higher of the annual rent at the date of the rent review or the rental fees
according to prevailing market conditions (as determined by an authorized
appraiser).
3. The tenant is obligated to pay, in addition to the rent, property taxes,
insurance, water, electricity and maintenance expenses.
b. Lease agreements in Canada, Germany, Switzerland and Finland:
The Group owns real estate comprising office properties, commercial areas and
residential properties.
The lease agreements for the office and commercial properties are for various
periods of up to 20 years (mainly 7 to 15 years).
The lease agreements for the residential properties in Canada are for periods of
one year. The rental fees are government-controlled. Rental fees may be
increased to market prices upon the entry of a new tenant.
c.Operating lease - Group as lesser:
Future minimum rentals receivable under non-cancellable operating leases as at
31 December 2008 are as follows:
+-----------------------------------------+-------------+------------+
| | 31 December |
+-----------------------------------------+--------------------------+
| | 2008 | 2007 |
+-----------------------------------------+-------------+------------+
| Within one year | 867 | 1,347 |
+-----------------------------------------+-------------+------------+
| After one year but not more than five | 29,110 | 21,450 |
| years | | |
+-----------------------------------------+-------------+------------+
| More than five years | 105,864 | 112,593 |
+-----------------------------------------+-------------+------------+
| | 135,841 | 135,390 |
+-----------------------------------------+-------------+------------+
| | | |
+-----------------------------------------+-------------+------------+
d. Operating lease commitments - Group as lessee:
As at 31 December 2008 there is an annual operating lease rental commitment
amounting to GBP282 thousand (2007: nil) for a period of 3 years.
NOTE 16:- LOANS FROM BANKS
a. Composition:
+------------------------+-+----------+---------+------------+--+--------------+
| | | Weighted | 31 December |
| | | average | |
| | | interest | |
| | | rate (1) % | |
+------------------------+-+ + +
| | | | |
+------------------------+-+--------------------+------------------------------+
| | | 2008 | 2007 | 2008 | | 2007 |
| | | | | | | Restated* |
+------------------------+-+----------+---------+------------+--+--------------+
| | | | | | | |
+------------------------+-+----------+---------+------------+--+--------------+
| | | | | | | |
+------------------------+-+----------+---------+------------+--+--------------+
| In British | | 6.7% | 6.4% | 666,066 | | 656,265 |
| Pounds | | | | | | |
+------------------------+-+----------+---------+------------+--+--------------+
| In Canadian | | 5.6% | 6.1% | 140,275 | | 130,846 |
| Dollars | | | | | | |
+------------------------+-+----------+---------+------------+--+--------------+
| In Euros | | 5.1% | 5.2% | 659,591 | | 512,905 |
+------------------------+-+----------+---------+------------+--+--------------+
| In Swiss | | 3.5% | 3.6% | 196,011 | | 135,711 |
| Francs | | | | | | |
+------------------------+-+----------+---------+------------+--+--------------+
| In Swedish | | 5.6% | 5.6% | 12,743 | | 11,587 |
| Krona | | | | | | |
+------------------------+-+----------+---------+------------+--+--------------+
| | | | | | | |
+------------------------+-+----------+---------+------------+--+--------------+
| | | | | 1,674,686 | | 1,447,314 |
+------------------------+-+----------+---------+------------+--+--------------+
| Less - held | | | | 145,837 | | - |
| for sale | | | | | | |
+------------------------+-+----------+---------+------------+--+--------------+
| | | | | | | |
+------------------------+-+----------+---------+------------+--+--------------+
| | | | | 1,528,849 | | 1,447,314 |
+------------------------+-+----------+---------+------------+--+--------------+
| Less - | | | | 12,701 | | 74,546 |
| current | | | | | | |
| maturities | | | | | | |
+------------------------+-+----------+---------+------------+--+--------------+
| | | | | | | |
+------------------------+-+----------+---------+------------+--+--------------+
| | | | | 1,516,148 | | 1,372,768 |
+------------------------+-+----------+---------+------------+--+--------------+
(1) Fixed interest rate as of 31 December 2007 and 2008.
(2) The fair value of the loans as of 31 December 2008 is approximately
GBP1,891 million (31 December 2007 - GBP 1,565 million). The fair value has been
calculated by discounting the expected future cash flows at market interest
rates.
b. Repayment dates subsequent to balance sheet date:
+-----------------------------------------+--+------------+--------------+
| | | 31 December |
+-----------------------------------------+--+---------------------------+
| | | 2008 | 2007 |
| | | | Restated* |
+-----------------------------------------+--+------------+--------------+
| | | | |
+-----------------------------------------+--+------------+--------------+
| First year - current | | 12,701 | 74,546 |
| maturities | | | |
+-----------------------------------------+--+------------+--------------+
| Second year | | 170,034 | 77,436 |
+-----------------------------------------+--+------------+--------------+
| Third year | | 300,017 | 83,220 |
+-----------------------------------------+--+------------+--------------+
| Fourth year | | 67,884 | 178,074 |
+-----------------------------------------+--+------------+--------------+
| Fifth year | | 127,156 | 137,183 |
+-----------------------------------------+--+------------+--------------+
| Sixth year and thereafter | | 851,057 | 896,855 |
+-----------------------------------------+--+------------+--------------+
| | | | |
+-----------------------------------------+--+------------+--------------+
| | | 1,528,849 | 1,447,314 |
+-----------------------------------------+--+------------+--------------+
The repayments exclude loans related to assets held for sale.
NOTE 17:- BALANCES AND TRANSACTIONS WITH RELATED PARTIES
a. Transactions with related parties:
1. All properties in Canada are managed by a company (Societe de Gestion Cogir
S.E.N.C.) which is owned (50%) by the controlling shareholder of the Group. The
management agreement for all assets except Bell Tower were entered into between
2001 and 2006, were for a period between one to two years and are renewable for
additional period unless cancelled by one of the parties. The management
agreement for Bell Tower was entered into in July 2007 and is for period of five
years. All transactions were on arms length basis.
The German portfolio of properties (Metro) is managed by a company (Cogir
Germany Management Gmbh) which is owned (55%) by the controlling shareholder of
the Group. All transactions were on arms length basis.
2. A company (El-Ad Group (Canada) Inc.) owned by the controlling shareholder
of the Group leases offices in Canada from a subsidiary of the Company. The
leases are for periods of up to five years, with automatic renewal options and
are on arms length basis - (see c below).
3. Share-based payment:
In meetings held on 25 January 2006 and 16 February 2006, the board of
directors and the shareholders, respectively, of the parent company of DBI,
Delek Real Estate Ltd. ("DRE"), approved an agreement between DBI and RG Naor
Management Services Ltd. ("Naor").
Naor is wholly-owned by the son-in-law of the Company's controlling
shareholder. Pursuant to the agreement, Naor was granted 416,818 share
appreciation rights ("SARS") whereby Naor will become entitled to an annual cash
payment by DBI over a period of five years commencing from 1 June 2006, based on
the increase in the
market price of DRE's shares over the prices specified in the agreement. The
agreement specifies a price for each of the five years and these prices are
subject to adjustments under certain circumstances. The SARS are granted on
condition that Naor continues providing consulting services in respect of real
estate activities of the Group over the five-year period.
The SARS are exercisable from the date of vesting and until 31 December 2010.
The fair value of the SARS granted to Naor is calculated each period based on
the Black-Scholes option pricing model. As at 31 December 2008 the total value
of the SARS was NIS 5.4 million (2007 - NIS 18 million).
During 2006 Naor received NIS 5 million with respect to the first portion of the
SARS and during 2007 Naor received NIS 5.5 million with respect to the second
portion of the SARS. No payments were made during 2008.
NOTE 17:- BALANCES AND TRANSACTIONS WITH RELATED PARTIES (Cont.)
As the services are provided by Naor in respect of the Company's activities, the
Company records an expense in the income statement equal to the fair value of
the SARS until the liability is settled by DBI with a corresponding increase
recognised in equity as a contribution from DBI.
In meetings held on 30 May 2006 of the board of directors and the shareholders
of the parent company of DBI, DRE has granted the CFO of the Company 741,018
share options. The options are exercisable from the date of vesting until 31
December 2010. The options are exercisable in 5 equal portions. The exercise
price of each option is calculated as the difference between the exercise price
at the date of the grant and the aggregate dividend per share distributed
between the date of the grant and the date of vesting. Between the grant date
and 31 December 2008 none of the options were exercised. The exercise price
range for vested options as at 31 December 2008 was between NIS 21.0 and NIS
22.1 per option before deduction of the dividend.
During 2008, the Company recorded a total income resulting from all options of
GBP278 thousand (2007 - expense GBP274 thousand).
Phantom option plan:
The Phantom Option Plan as outlined in the Admission Document was not
effected.
4. Regarding acquisition of investments from DBI - see Note 1b.
5. On 29 September 2008 the company gave a short term loan of GBP6 million (the
"loan") to Delek Belron International Ltd. The loan is repayable at the latest
by 31 March 2009 and carries an interest rate of 10.0% per annum, payable when
the loan itself is repaid.
The loan, interest and cost are secured by the bank guarantee up to GBP6.5
million.
b. Balances:
+------------------------------------------+-+------------+--+------------+
| | | 31 December |
+------------------------------------------+-+----------------------------+
| | | 2008 | | 2007 |
+------------------------------------------+-+------------+--+------------+
| | | | | |
+------------------------------------------+-+------------+--+------------+
| Current assets - accounts | | 292 | | 292 |
| receivable (1) | | | | |
+------------------------------------------+-+------------+--+------------+
| | | | | |
+------------------------------------------+-+------------+--+------------+
| Current assets - Loan to | | 6,302 | | - |
| parent company (2) | | | | |
+------------------------------------------+-+------------+--+------------+
| | | | | |
+------------------------------------------+-+------------+--+------------+
| Loans made to associates (3) | | 23,383 | | 23,968 |
+------------------------------------------+-+------------+--+------------+
| | | | | |
+------------------------------------------+-+------------+--+------------+
| Loans from associates and | | 12,161 | | 13,287 |
| related parties (4) | | | | |
+------------------------------------------+-+------------+--+------------+
| | | | | |
+------------------------------------------+-+------------+--+------------+
| Current liabilities - | | - | | 380 |
| accounts payable (3) | | | | |
+------------------------------------------+-+------------+--+------------+
| | | | | |
+------------------------------------------+-+------------+--+------------+
| Current liabilities - amounts | | 848 | | 3,416 |
| payable to parent company | | | | |
| and related parties (1) | | | | |
+------------------------------------------+-+------------+--+------------+
| | | | | |
+------------------------------------------+-+------------+--+------------+
NOTE 17:- BALANCES AND TRANSACTIONS WITH RELATED PARTIES (Cont.)
1. The balances are with DBI and subsidiaries of DBI and they do not bear interest.
All amounts are repayable within the next 12 months.
(2) For terms and conditions in relation to the loan to parent company refer to
Note 17a5
(3) For terms in conditions relating to loans made to associates refer to
Note 4c.
(4) The balances do not bear interest and repayment dates have not yet been
determined.
On admission of the company to AIM, DBI converted all of the outstanding
intra-group loans made by it to the company to equity (Note 14c).
c. Transactions:
+-----------------------------------------+--+------------+--+------------+
| | | Year ended 31 December |
+-----------------------------------------+--+----------------------------+
| | | 2008 | | 2007 |
+-----------------------------------------+--+------------+--+------------+
| | | | | |
+-----------------------------------------+--+------------+--+------------+
| Rental income (17a(2)) | | 63 | | 59 |
+-----------------------------------------+--+------------+--+------------+
| | | | | |
+-----------------------------------------+--+------------+--+------------+
| Management fees (17a(1)) | | 910 | | 583 |
+-----------------------------------------+--+------------+--+------------+
| | | | | |
+-----------------------------------------+--+------------+--+------------+
| Share-based compensation | | (278) | | 274 |
| (17a(3)) | | | | |
+-----------------------------------------+--+------------+--+------------+
| | | | | |
+-----------------------------------------+--+------------+--+------------+
| Finance expenses | | 151 | | - |
+-----------------------------------------+--+------------+--+------------+
d. Key management personnel
In 2008, the company paid short term benefits to key management personnel
including the CFO, COO and CEO an amount of GBP960 thousand (2007: since IPO
only GBP721thousand)
Non-executive directors.
During the year the non executive directors received an annual fixed fee of
GBP40 thousand which increased from 2007 entitlement of GBP3 thousand per
meeting with a minimum of GBP25 thousand each.
The Chairman received remuneration during the year ended 31 December 2007 of
GBP85 thousand per annum and GBP110 thousand per annum for the year ended 31
December 2008.
Key management personnel receive no post employment, other long term or
termination benefits
NOTE 18:- LOANS FROM MINORITY SHAREHOLDERS
The loans were received from minority shareholders of subsidiaries, with no
fixed maturities. Long term loans equivalent to GBP9.5 million (2007: GBP11.8
million) are non-interest bearing and long term loans equivalent to GBP10.9
million (2007: GBP10.3 million) are interest bearing at interest rates ranging
between 4.0% and 10.0% (2007: 6.0% and 10.0%).
NOTE 19:- LIENS AND CONTINGENT LIABILITIES
Liens
Liabilities to banks are secured by fixed first priority liens on
income-producing real estate properties, on rental income derived there from and
on bank accounts, and floating charges on all other assets and rights of
subsidiaries and associates.
+--------------------------------------------+--+-----------+--------+--------------+
| | | 31 December |
+--------------------------------------------+--+-----------------------------------+
| Following are details of the | | 2008 | | 2007 |
| secured liabilities | | | | |
| | | | | |
+--------------------------------------------+--+-----------+--------+--------------+
| Loans from banks (including | | GBP | | GBP1,473,001 |
| short-term credit) | | 1,686,172 | | |
+--------------------------------------------+--+-----------+--------+--------------+
NOTE 20:- FINANCIAL INSTRUMENTS
The Group's principal financial liabilities, other than derivatives, comprise
bank loans, trade payables and loans given by related parties. The main purpose
of these financial liabilities is to raise finance for the Group's acquisitions
of assets and investments in associates. The Group has various financial assets
such as cash and cash equivalents, bank deposits, receivables, investment
properties, available-for-sale investments and loans to related parties.
The Group also enters into derivative transactions, primarily interest rate
swaps. The purpose is to manage the interest rate and currency risks arising
from the Group's operations and its sources of finance.
In all of the Group's assets and liabilities the carrying value is the same as
fair value with the exception of fixed rate loans, where the fair value is
disclosed in Note 16a.
The main risks arising from the Group's financial instruments are interest rate
risk, liquidity risk, foreign currency risk and credit risk. The Board of
Directors reviews and agrees policies for managing each of these risks which are
summarised below.
a. Interest rate risk:
The Group's exposure to the risk of changes in market interest rates relates
primarily to the Group's medium and long-term debt obligations which are
borrowed either at variable or fixed rates of interest. These loans are
denominated in British Pounds, Euro, Swiss Francs, Swedish Krona and Canadian
dollars.
NOTE 20:- FINANCIAL INSTRUMENTS (Cont.)
The Group's policy is to hedge a high proportion of its variable rate
borrowings at fixed rates of interest. To achieve this, the Group enters into
interest rate swap contracts, in which the Group agrees to exchange its variable
rate obligations for fixed rate obligations.
The hedge statistics set out below refer to the interest rate protection
undertaken in subsidiaries of the Group without adjustment to reflect the
Group's holding in those subsidiaries.
At 31 December 2008, after taking into account the effect of interest rate
swaps, 95% (2007: 97%) of the Group's borrowings were at fixed rates of
interest. A further 4% (2007: 3%) of the variable rate obligations were
protected by the purchase of interest rate caps which have the effect of
establishing a maximum rate of finance. In addition 1% was not hedged (2007: 0%)
At 31 December 2008, the Group had interest rate swap agreements in place with a
notional amount of GBP1,136 million (2007: GBP1,011 million), whereby it pays
fixed annual rates of interest averaging 4.87% (2007: 4.96%) and receives a
variable rate equal to three month Euribor or the relevant Libor according to
the currency of the liability.
These swaps are defined as cash flow hedges and the fair values are determined
by discounting the future cash flows using the mid point of the relevant yield
curves prevailing on 31st December 2008. The fair values are disclosed below.
The swaps are held for hedging purposes and provide full protection against the
effects of rising short term interest rates. However, it is recognised that, of
the total, swaps aggregating GBP592 million (2007: GBP563 million), at an
average rate of 5.53% (2007: 5.61%), do not meet
the stringent requirements to establish hedge effectiveness for accounting
purposes under IAS 39. All other Swaps are effective for accounting purposes.
The Group's interest rate profile as at 31st December 2008 is summarised below:
+--------------------+-------------+-------------+-------------+-------------+-------------+-------------+
| | Total | Derivatives | Fixed |
+--------------------+-------------+-------------------------------------------------------+-------------+
| | | Interest | Interest | Interest | Interest | Rate |
+--------------------+-------------+-------------+-------------+-------------+-------------+-------------+
| | | Rate | Rate | Rate | Rate | Loans |
| | | Swaps | Swaps | Swaps | Caps | |
+--------------------+-------------+-------------+-------------+-------------+-------------+-------------+
| | | Effective |Ineffective | Total | | |
+--------------------+-------------+-------------+-------------+-------------+-------------+-------------+
| |GBPmillions |GBPmillions |GBPmillions |GBPmillions |GBPmillions |GBPmillions |
+--------------------+-------------+-------------+-------------+-------------+-------------+-------------+
| Up to 1 year | 84.4 | 4.8 | 0.4 | 5.2 | 68.9 | 10.3 |
+--------------------+-------------+-------------+-------------+-------------+-------------+-------------+
| 1-2 years | 235.0 | 5.3 | 0.4 | 5.7 | 0.0 | 229.3 |
+--------------------+-------------+-------------+-------------+-------------+-------------+-------------+
| 2 to 5 years | 623.6 | 407.9 | 22.5 | 430.4 | 0.0 | 193.2 |
+--------------------+-------------+-------------+-------------+-------------+-------------+-------------+
| Over 5 years | 748.3 | 126.2 | 568.6 | 694.8 | 0.0 | 53.5 |
+--------------------+-------------+-------------+-------------+-------------+-------------+-------------+
| Total | 1,691.3 | 544.2 | 591.9 | 1,136.1 | 68.9 | 486.3 |
+--------------------+-------------+-------------+-------------+-------------+-------------+-------------+
| Average rate | 4.44% | 4.15% | 5.53% | 4.87% | 2.11% | 3.79% |
+--------------------+-------------+-------------+-------------+-------------+-------------+-------------+
| Fair value | (205.2) | (25.4) | (155.6) | (181.0) | 0.0 | (24.2) |
+--------------------+-------------+-------------+-------------+-------------+-------------+-------------+
| 50 basis point | 54.7 | 8.8 | 38.3 | 47.1 | 0.0 | 7.6 |
| change | | | | | | |
+--------------------+-------------+-------------+-------------+-------------+-------------+-------------+
NOTE 20:- FINANCIAL INSTRUMENTS (Cont.)
The Group's interest rate profile as at 31st December 2007 is summarised below:
+--------------------+-------------+-------------+-------------+-------------+-------------+-------------+
| | Total | Derivatives | Fixed |
+--------------------+-------------+-------------------------------------------------------+-------------+
| | | Interest | Interest | Interest | Interest | Rate |
+--------------------+-------------+-------------+-------------+-------------+-------------+-------------+
| | | Rate | Rate | Rate | Rate | Loans |
| | | Swaps | Swaps | Swaps | Caps | |
+--------------------+-------------+-------------+-------------+-------------+-------------+-------------+
| | | Effective |Ineffective | Total | | |
+--------------------+-------------+-------------+-------------+-------------+-------------+-------------+
| |GBPmillions |GBPmillions |GBPmillions |GBPmillions |GBPmillions |GBPmillions |
+--------------------+-------------+-------------+-------------+-------------+-------------+-------------+
| Up to 1 year | 77.0 | 3.3 | 0.0 | 3.3 | 1.1 | 72.6 |
+--------------------+-------------+-------------+-------------+-------------+-------------+-------------+
| 1-2 years | 59.4 | 4.0 | 0.0 | 4.0 | 48.8 | 6.6 |
+--------------------+-------------+-------------+-------------+-------------+-------------+-------------+
| 2 to 5 years | 529.0 | 301.2 | 0.0 | 301.2 | 0.0 | 227.8 |
+--------------------+-------------+-------------+-------------+-------------+-------------+-------------+
| Over 5 years | 808.0 | 139.4 | 563.3 | 702.7 | 0.0 | 105.3 |
+--------------------+-------------+-------------+-------------+-------------+-------------+-------------+
| Total | 1,473.4 | 447.9 | 563.3 | 1,011.2 | 49.9 | 412.3 |
+--------------------+-------------+-------------+-------------+-------------+-------------+-------------+
| Average rate | 4.64% | 4.15% | 5.61% | 4.96% | 2.16% | 4.16% |
+--------------------+-------------+-------------+-------------+-------------+-------------+-------------+
| Fair value | (51.0) | 3.0 | (54.7) | (51.7) | 0.7 | 0.0 |
+--------------------+-------------+-------------+-------------+-------------+-------------+-------------+
| 50 basis point | 52.0 | 9.6 | 34.9 | 44.5 | 0.4 | 7.1 |
| change | | | | | | |
+--------------------+-------------+-------------+-------------+-------------+-------------+-------------+
Changes in the fair value of those swaps that are effective for accounting
purposes are taken to equity whereas changes in the fair value of those which
are ineffective for accounting purposes are taken to earnings as are changes in
the fair value of option contracts.
The fair values of the interest rate swaps aggregate (GBP181 million) (2007 -
(GBP51.7 million)). Of this (GBP25.4 million) is attributable to equity reserves
(2007: GBP3.0 million) and (GBP155.6 million) to earnings (2007: GBP54.7
million). Had medium to long term interest rates been 50 basis points higher or
lower these figures would have been changed by GBP8.8 million (2007: GBP9.6
million) in the case of equity reserves and GBP38.3 million (2007: GBP34.9
million) in the case of earnings.
Fixed rate loans account for 29.0% (2007: 28.0%) of the total and therefore
represent a significant portion of the Group's interest rate management. Changes
in the fair value are a disclosure item and have no impact on the accounts of
the Group.
At 31st December 2008, the group had floating rate loans aggregating GBP9.5
million. If three month Libor/Euribor were to be 1.0% per annum higher or lower
for the whole year, the effect on earnings would be plus or minus GBP0.095
million.
NOTE 20:- FINANCIAL INSTRUMENTS (Cont.)
* Foreign currency risks:
The Group's subsidiaries finance the acquisition of property assets in the
currency in which the asset is denominated so that the Group's exposure to
changes in the British Pound's value of its assets is minimised. The information
below only reflects the financial assets and liabilities and does not reflect
non-financial assets and liabilities. As at 31st December 2008 the Group had
liabilities denominated in the following foreign currencies:
+---------------------+---------------------+---------------------+
| | 31 December |
+---------------------+-------------------------------------------+
| | 2008 | 2007 |
+---------------------+---------------------+---------------------+
| Euro | 698,484 | 538,592 |
+---------------------+---------------------+---------------------+
| Swiss Francs | 196,982 | 135,711 |
+---------------------+---------------------+---------------------+
| Canadian Dollars | 140,696 | 130,848 |
+---------------------+---------------------+---------------------+
| Swedish Krona | 12,743 | 11,587 |
+---------------------+---------------------+---------------------+
| | 1,048,905 | 816,738 |
+---------------------+---------------------+---------------------+
The Group's income from income-producing rental properties is denominated in the
same currencies as the loans that are financing those properties.
Loans have been made by the Group to associate companies in foreign currencies
as set out below:
+---------------------+---------------------+---------------------+
| | 31 December |
+---------------------+-------------------------------------------+
| | 2008 | 2007 |
+---------------------+---------------------+---------------------+
| Euro | 5,788 | 6,915 |
+---------------------+---------------------+---------------------+
| Swiss Francs | 8,997 | 7,991 |
+---------------------+---------------------+---------------------+
| Canadian Dollars | 6,399 | 6,234 |
+---------------------+---------------------+---------------------+
The following table demonstrates the sensitivity to a 5.0% change in the British
Pound value the Canadian dollar, Euro and Swiss Franc exchange rates, with all
other variables held constant, of the Group's profit before tax (due to changes
in the fair value of monetary assets and liabilities) and the Group's equity.
NOTE 20:- FINANCIAL INSTRUMENTS (Cont.)
+-----------------------------------+--+-----------+--+----------+--+----------+
| | |Increase/ | | Effect | | Effect |
| | | decrease | | on | | on |
| | | in euro | | profit | | equity |
| | | rate | | before | | |
| | | | | tax | | |
+-----------------------------------+--+-----------+--+----------+--+----------+
| | | | | | | |
+-----------------------------------+--+-----------+--+----------+--+----------+
| 2008 | | 5.0% | | - | | GBP289 |
+-----------------------------------+--+-----------+--+----------+--+----------+
| | | | | | | |
+-----------------------------------+--+-----------+--+----------+--+----------+
| 2007 | | 5.0% | | - | | GBP346 |
+-----------------------------------+--+-----------+--+----------+--+----------+
| | | | | | | |
+-----------------------------------+--+-----------+--+----------+--+----------+
+-----------------------------------+--+-----------+--+----------+--+----------+
| | |Increase/ | | Effect | | Effect |
| | | decrease | | on | | on |
| | | in Swiss | | profit | | Equity |
| | | franc | | before | | |
| | | rate | | tax | | |
+-----------------------------------+--+-----------+--+----------+--+----------+
| | | | | | | |
+-----------------------------------+--+-----------+--+----------+--+----------+
| 2008 | | 5.0% | | - | | GBP450 |
+-----------------------------------+--+-----------+--+----------+--+----------+
| | | | | | | |
+-----------------------------------+--+-----------+--+----------+--+----------+
| 2007 | | 5.0% | | - | | GBP400 |
+-----------------------------------+--+-----------+--+----------+--+----------+
| | | | | | | |
+-----------------------------------+--+-----------+--+----------+--+----------+
+-----------------------------------+--+-----------+--+----------+--+----------+
| | |Increase/ | | Effect | | Effect |
| | | decrease | | on | | on |
| | | in | | profit | | Equity |
| | | Canadian | | before | | |
| | | dollar | | tax | | |
| | | rate | | | | |
+-----------------------------------+--+-----------+--+----------+--+----------+
| | | | | | | |
+-----------------------------------+--+-----------+--+----------+--+----------+
| 2008 | | 5.0% | | - | | GBP320 |
+-----------------------------------+--+-----------+--+----------+--+----------+
| | | | | | | |
+-----------------------------------+--+-----------+--+----------+--+----------+
| 2007 | | 5.0% | | - | | GBP313 |
+-----------------------------------+--+-----------+--+----------+--+----------+
| | | | | | | |
+-----------------------------------+--+-----------+--+----------+--+----------+
c. Credit risk:
Cash, cash equivalents and bank deposits are invested with banks in the U.K. and
in other countries. The directors believe that credit risk with respect to these
investments is not significant.
Derivative instruments held for hedging purposes have been undertaken with the
financial institutions providing the debt finance. The directors believe that,
credit risk in respect of these contracts is not significant.
Receivables are due from diverse government and corporate tenants and low rates
of turnover. Accordingly, the directors do not anticipate losses in respect of
these receivables.
Loans to related parties are to companies that own investment properties leased
to tenants with strong credit ratings and, accordingly, minimal credit risk
exists with respect to these loans.
NOTE 20:- FINANCIAL INSTRUMENTS (Cont.)
d. Liquidity risk
The Group's objective is to maintain a balance between continuity of funding
and flexibility through the use of bank overdrafts, bank loans and loans from
related parties.
The table below summarises the maturity profile of the Group's financial
liabilities at 31 December 2008 based on contractual undiscounted payments.
Loans from subsidiaries and associates have been excluded from this table as
there is no fixed repayment date.
+------------------------+--+----+---------+--+--------+-+-----------+-+---------+-+--------+--------+
| | Year ended 31 December 2008 |
+------------------------+------------------------------------------------------------------+
| | | | Less | | 6 to | | 1 to 5 | | > 5 | | Total |
| | | | than 6 | | 12 | | years | | years | | |
| | | | months | |months | | | | | | |
+------------------------+--+----+---------+--+--------+-+-----------+-+---------+-+-----------------+
| | | | | | | | | | | | |
+------------------------+--+----+---------+--+--------+-+-----------+-+---------+-+-----------------+
| Interest | | | 141,099 | | 52,125 | | 1,198,819 | | 939,903 | | 2,331,946 |
| bearing | | | | | | | | | | | |
| loans | | | | | | | | | | | |
| and | | | | | | | | | | | |
| borrowings | | | | | | | | | | | |
+------------------------+--+----+---------+--+--------+-+-----------+-+---------+-+-----------------+
| Other | | | 448 | | - | | - | | - | | 448 |
| liabilities | | | | | | | | | | | |
+------------------------+--+----+---------+--+--------+-+-----------+-+---------+-+-----------------+
| Trade | | | 49,457 | | - | | - | | - | | 49,457 |
| and | | | | | | | | | | | |
| other | | | | | | | | | | | |
| payables | | | | | | | | | | | |
+------------------------+--+----+---------+--+--------+-+-----------+-+---------+-+-----------------+
| | | | | | | | | | | | |
+------------------------+--+----+---------+--+--------+-+-----------+-+---------+-+-----------------+
| | | | 191,004 | | 52,125 | | 1,198,819 | | 939,903 | | 2,381,851 |
+------------------------+--+----+---------+--+--------+-+-----------+-+---------+-+--------+--------+
+-------------------------+----------+-+---------+-+--------+-+---------+-+-----------+-+------+----+
| | Year ended 31 December 2007 |
+-------------------------+--------------------------------------------------------------------+
| | | | Less | | 6 to | | 1 to 5 | | > 5 | | Total |
| | | | than 6 | | 12 | | years | | years | | |
| | | | months | |months | | | | | | |
+-------------------------+----------+-+---------+-+--------+-+---------+-+-----------+-+-----------+
| | | | | | | | | | | | |
+-------------------------+----------+-+---------+-+--------+-+---------+-+-----------+-+-----------+
| Interest | | | 48,383 | | 48,383 | | 961,158 | | 1,093,819 | | 2,151,743 |
| bearing | | | | | | | | | | | |
| loans and | | | | | | | | | | | |
| borrowings | | | | | | | | | | | |
+-------------------------+----------+-+---------+-+--------+-+---------+-+-----------+-+-----------+
| Trade and other | | | 52,575 | | - | | | | | | 52,575 |
| payables | | | | | | | - | | | | |
+-------------------------+----------+-+---------+-+--------+-+---------+-+-----------+-+-----------+
| | | | 100,958 | | 48,383 | | 961,158 | | 1,093,819 | | 2,204,318 |
+-------------------------+----------+-+---------+-+--------+-+---------+-+-----------+-+-----------+
| | | | | | | | | | | | |
+-------------------------+----------+-+---------+-+--------+-+---------+-+-----------+-+------+----+
e. Capital management
The primary objective of the Group's capital management is to ensure that it
maintains a strong credit rating and healthy capital ratios in order to support
its business and maximize shareholder value.
The Group manages its capital structure and makes adjustments to it, in
light of changes in economic conditions. To maintain or adjust the capital
structure, the Group may adjust the dividend payment to shareholders, return
capital to shareholders or issue new shares. Besides the Initial Public
Offering, as described in Note 1a, no changes were made in the objectives,
policies or processes during the years end 31 December 2008 and 31 December
2007.
NOTE 20:- FINANCIAL INSTRUMENTS (Cont.)
f. Other risks
At 31st December 2008 some of the Group's rental income was linked to CPI
and the Group has entered into derivative instruments known as Limited Price
Index Swaps exchanging future inflation linked rental increases for fixed rental
increases. As a consequence the Group is exposed to rising inflation in the
United Kingdom.
At 31st December 2008 these contracts had a negative fair value of GBP32.4
million (2007: GBP39.9 million). These contracts are not regarded as being hedge
effective for accounting purposes and therefore changes in fair value are taken
to the income statement.
A change in the rate of inflation by plus or minus 50 basis points would
affect earnings by GBP31.7 million (2007: GBP24.9 million).
The Group monitors capital using a gearing ratio, which is net debt divided
by total capital plus net debt. The Group has a policy of optimising the capital
structure of each asset and the property portfolio as a whole by raising
non-recourse loans for the acquisition of assets and for refinancing existing
investments. The performance is monitored by using loan to value ratio, which is
calculated as total balances on non-recourse loans divided by the fair value of
the property. At 31st December 2008 the loan to value ratio of the Group for
consolidated subsidiaries was only 70.2% (2007: 64.9%) and for the whole group
(DGRE's share) 73.8% (2007: 67.8%)
g. Price risks:
Most of the lease agreements for the commercial real estate assets have
provisions for rent review or other rent adjustments and, therefore, the Group
does not have material exposure to changes in market prices of rental fees. As
of the balance sheet date, the lease agreements for the residential real estate
assets, which are for a period of one year, constitute approximately 3.0% of the
Group's rental income (2007: 3.0%).
NOTE 21:- SEGMENT INFORMATION
a. General:
The Group's subsidiaries and associates have investments in income-producing
real estate properties in the United Kingdom, Canada, Germany, Switzerland and
Scandinavia (Finland and Sweden). The substantial majority of rental income and
fair value adjustments of the Group are derived from office properties and car
parks. Management has determined that its predominant source of risks and
returns is related to the geographical areas in which it operates and,
accordingly, geographical segments are the Company's primary segment reporting
format.
The company's secondary segment is business segment which is split into office,
retail, car parks, hotels and residential.
b. Geographical segments:
1. Revenues and other income:
+----------------+----------------+-------+-------+-------+----------+-------+-------+-------+----------+-------+
| | | Year ended 31December |
+-----------------------------------------+---------------+---------------------------------------------+
| | | 2008 | | 2007 |
+-----------------------------------------+---------------+------------------+---------------+----------+
| | | | | |
+-----------------------------------------+---------------+------------------+---------------+----------+
| U.K. | | 32,642 | | 127,973 |
| (1) | | | | |
+-----------------------------------------+---------------+------------------+---------------+----------+
| Germany | | 12,016 | | 24,062 |
| (2) | | | | |
+-----------------------------------------+---------------+------------------+---------------+----------+
| Switzerland | | (18,145) | | 9,409 |
| (3) | | | | |
+-----------------------------------------+---------------+------------------+---------------+----------+
| Scandinavia | | (71) | | 19,987 |
| (4) | | | | |
+-----------------------------------------+---------------+------------------+---------------+----------+
| Canada | | 4,125 | | 36,077 |
| (5) | | | | |
+-----------------------------------------+---------------+------------------+---------------+----------+
| | | | | |
+-----------------------------------------+---------------+------------------+---------------+----------+
| Total | | 30,567 | | 217,508 |
| revenues | | | | |
| and | | | | |
| other | | | | |
| income, | | | | |
| excluding | | | | |
| finance | | | | |
| income | | | | |
| (6) | | | | |
+-----------------------------------------+---------------+------------------+---------------+----------+
| | | | | |
+-----------------------------------------+---------------+------------------+---------------+----------+
| (6) | | | | |
| Includes | | | | |
| fair | | | | |
| value | | | | |
| adjustments | | | | |
| of rental | | | | |
| properties: | | | | |
+-----------------------------------------+---------------+------------------+---------------+----------+
| | | | | | |
+----------------+------------------------+---------------+----------+---------------+------------------+
| (1) | U.K. | | (42,504) | | 62,804 |
+----------------+------------------------+---------------+----------+---------------+------------------+
| (2) | Germany | | (25,113) | | 10,401 |
+----------------+------------------------+---------------+----------+---------------+------------------+
| (3) | Switzerland | | (29,816) | | 5,044 |
+----------------+------------------------+---------------+----------+---------------+------------------+
| (4) | Scandinavia | | (16,752) | | 8,642 |
+----------------+------------------------+---------------+----------+---------------+------------------+
| (5) | Canada | | (29,069) | | 6,705 |
+----------------+------------------------+---------------+----------+---------------+------------------+
| | | | | |
+---------------------------------+---------------+------------------+---------------+--------------------------+
| Total | | (143,254) | | 93,596 |
| fair | | | | |
| value | | | | |
| adjustments | | | | |
| of rental | | | | |
| properties | | | | |
| (*) | | | | |
+----------------+----------------+-------+-------+-------+----------+-------+-------+-------+----------+-------+
NOTE 21:- SEGMENT INFORMATION (Cont.)
+----------------+-------------------------------------+-+----------+--+----------+
| | | | Year ended 31 |
| | | | December |
+----------------+-------------------------------------+-+------------------------+
| | | | 2008 | | 2007 |
+----------------+-------------------------------------+-+----------+--+----------+
| | | | | | |
+----------------+-------------------------------------+-+----------+--+----------+
| (*) | Includes share of fair | | | | |
| | value adjustments of | | | | |
| | rental properties in | | | | |
| | associates: | | | | |
+----------------+-------------------------------------+-+----------+--+----------+
| | U.K. | | (28,161) | | (4,593) |
+----------------+-------------------------------------+-+----------+--+----------+
| | Germany | | (1,231) | | 6,662 |
+----------------+-------------------------------------+-+----------+--+----------+
| | Switzerland | | (6,976) | | 3,765 |
+----------------+-------------------------------------+-+----------+--+----------+
| | Scandinavia | | - | | - |
+----------------+-------------------------------------+-+----------+--+----------+
| | Canada | | (3,182) | | 609 |
+----------------+-------------------------------------+-+----------+--+----------+
| | | | | | |
+----------------+-------------------------------------+-+----------+--+----------+
| | | | (39,550) | | 6,443 |
+----------------+-------------------------------------+-+----------+--+----------+
| | | | | | |
+----------------+-------------------------------------+-+----------+--+----------+
| (6) | Includes share of profit | | | | |
| | of associates: | | | | |
+----------------+-------------------------------------+-+----------+--+----------+
| | U.K. | | (25,344) | | 3,022 |
+----------------+-------------------------------------+-+----------+--+----------+
| | Germany | | (1,646) | | 5,311 |
+----------------+-------------------------------------+-+----------+--+----------+
| | Switzerland | | (6,239) | | 1,927 |
+----------------+-------------------------------------+-+----------+--+----------+
| | Scandinavia | | - | | 78 |
+----------------+-------------------------------------+-+----------+--+----------+
| | Canada | | (2,178) | | 1,614 |
+----------------+-------------------------------------+-+----------+--+----------+
| | | | | | |
+----------------+-------------------------------------+-+----------+--+----------+
| | | | (35,407) | | 11,952 |
+----------------+-------------------------------------+-+----------+--+----------+
| | | | | | |
+----------------+-------------------------------------+-+----------+--+----------+
2. Segment results:
+----------------------------------------+-+-----------+--+----------+
| | | Year ended 31 |
| | | December |
+----------------------------------------+-+-------------------------+
| | | 2008 | | 2007 |
+----------------------------------------+-+-----------+--+----------+
| | | | | |
+----------------------------------------+-+-----------+--+----------+
| U.K. (*) | | (109,858) | | 63,460 |
+----------------------------------------+-+-----------+--+----------+
| Germany | | (19,413) | | 10,867 |
+----------------------------------------+-+-----------+--+----------+
| Switzerland | | (26,774) | | 5,022 |
+----------------------------------------+-+-----------+--+----------+
| Scandinavia | | (14,241) | | 10,246 |
+----------------------------------------+-+-----------+--+----------+
| Canada | | (17,629) | | 15,201 |
+----------------------------------------+-+-----------+--+----------+
| Unallocated results | | (2,242) | | 2,331 |
+----------------------------------------+-+-----------+--+----------+
| | | | | |
+----------------------------------------+-+-----------+--+----------+
| (Loss)/ profit before | | (190,157) | | 107,127 |
| income taxes | | | | |
+----------------------------------------+-+-----------+--+----------+
(*) Includes impairment of goodwill in 2008 GBPNil (2007 - GBP9,446).
3. Segment assets:
+----------------------------------------+-+-----------+--+-----------+
| | | | | |
+----------------------------------------+-+-----------+--+-----------+
| U.K. | | 1,268,002 | | 1,313,966 |
+----------------------------------------+-+-----------+--+-----------+
| Germany | | 665,613 | | 543,369 |
+----------------------------------------+-+-----------+--+-----------+
| Switzerland | | 251,843 | | 201,194 |
+----------------------------------------+-+-----------+--+-----------+
| Scandinavia | | 248,519 | | 205,202 |
+----------------------------------------+-+-----------+--+-----------+
| Canada | | 285,287 | | 283,443 |
+----------------------------------------+-+-----------+--+-----------+
| | | | | |
+----------------------------------------+-+-----------+--+-----------+
| Allocated assets (*) | | 2,719,264 | | 2,547,174 |
+----------------------------------------+-+-----------+--+-----------+
| Unallocated assets | | 26,959 | | 54,413 |
+----------------------------------------+-+-----------+--+-----------+
| | | | | |
+----------------------------------------+-+-----------+--+-----------+
| | | 2,746,223 | | 2,601,587 |
+----------------------------------------+-+-----------+--+-----------+
NOTE 21:- SEGMENT INFORMATION (Cont.)
+----------------+-------------------------------------+----+----+----+----+----+----+----+----+----+
| | | | Year ended 31 December |
+----------------+------------------------------------------+---------+-----------------------------+
| | | | 2008 | | 2007 |
+----------------+------------------------------------------+---------+---------+---------+---------+
| | Includes investments in | | | | |
| (*) | associates: | | | | |
+----------------+-------------------------------------+---------+---------+---------+---------+
| | U.K. | | 12,638 | | 40,617 |
+----------------+-------------------------------------+---------+---------+---------+---------+
| | Germany | | 14,262 | | 13,149 |
+----------------+-------------------------------------+---------+---------+---------+---------+
| | Switzerland | | 5,722 | | 13,640 |
+----------------+-------------------------------------+---------+---------+---------+---------+
| | Scandinavia | | - | | - |
+----------------+-------------------------------------+---------+---------+---------+---------+
| | Canada | | 8,447 | | 10,138 |
+----------------+-------------------------------------+---------+---------+---------+---------+
| | | | | | |
+----------------+-------------------------------------+---------+---------+---------+---------+
| | | | 41,069 | | 77,544 |
+----------------+-------------------------------------+----+----+----+----+----+----+----+----+----+
4. Segment liabilities:
+----------------------------------------+-+-----------+--+-----------+
| | | | | |
+----------------------------------------+-+-----------+--+-----------+
| U.K. | | 721,336 | | 747,385 |
+----------------------------------------+-+-----------+--+-----------+
| Germany | | 532,674 | | 436,412 |
+----------------------------------------+-+-----------+--+-----------+
| Switzerland | | 202,007 | | 139,390 |
+----------------------------------------+-+-----------+--+-----------+
| Scandinavia | | 207,820 | | 147,604 |
+----------------------------------------+-+-----------+--+-----------+
| Canada | | 146,516 | | 134,084 |
+----------------------------------------+-+-----------+--+-----------+
| | | | | |
+----------------------------------------+-+-----------+--+-----------+
| | | 1,810,353 | | 1,604,875 |
+----------------------------------------+-+-----------+--+-----------+
| Unallocated liabilities | | 388,797 | | 316,092 |
+----------------------------------------+-+-----------+--+-----------+
| | | | | |
+----------------------------------------+-+-----------+--+-----------+
| | | 2,199,150 | | 1,920,967 |
+----------------------------------------+-+-----------+--+-----------+
5. Additions to long-lived assets:
+----------------------------------------+-+----------+--+-----------+
| | | | | |
+----------------------------------------+-+----------+--+-----------+
| U.K. | | 4,764 | | 825,440 |
+----------------------------------------+-+----------+--+-----------+
| Germany | | 14,573 | | 468,021 |
+----------------------------------------+-+----------+--+-----------+
| Switzerland | | - | | 175,081 |
+----------------------------------------+-+----------+--+-----------+
| Scandinavia | | 4,826 | | 95,928 |
+----------------------------------------+-+----------+--+-----------+
| Canada | | 1,466 | | 23,449 |
+----------------------------------------+-+----------+--+-----------+
| | | | | |
+----------------------------------------+-+----------+--+-----------+
| | | 25,629 | | 1,587,919 |
+----------------------------------------+-+----------+--+-----------+
c. Business segments:
1. Revenues and other income:
+----------------------------------------+-----+-+-----+-----+-----+-----+-----+-----+-----+
| | | Year ended 31December |
+----------------------------------------+-------------+-----------------------------------+
| | | 2008 | | 2007 |
+----------------------------------------+-------------+-----------+-----------+-----------+
| | | | | |
+----------------------------------------+-------------+-----------+-----------+-----------+
| Office | | (77,634) | | 70,519 |
+----------------------------------------+-------------+-----------+-----------+-----------+
| Retail | | 21,200 | | 17,373 |
+----------------------------------------+-------------+-----------+-----------+-----------+
| Car parks | | 83,241 | | 122,216 |
+----------------------------------------+-------------+-----------+-----------+-----------+
| Hotels | | 1,913 | | 4,277 |
+----------------------------------------+-------------+-----------+-----------+-----------+
| Residential | | (405) | | 5,310 |
+----------------------------------------+-------------+-----------+-----------+-----------+
| | | | | |
+----------------------------------------------+-+-----------+-----------+-----------+
| | | 28,315 | | 219,695 |
+----------------------------------------------+-+-----------+-----------+-----------+
| Unallocated liabilities | | 2,252 | | (2,187) |
+----------------------------------------------+-+-----------+-----------+-----------+
| | | | | |
+----------------------------------------+-------------+-----------+-----------+-----------+
| Total revenues and other | | 30,567 | | 217,508 |
| income, excluding finance | | | | |
| income | | | | |
+----------------------------------------+-----+-+-----+-----+-----+-----+-----+-----+-----+
NOTE 21:- SEGMENT INFORMATION (Cont.)
+----+-------------------------------------+-+----------+--+----------+
| | | | Year ended 31 |
| | | | December |
+----+-------------------------------------+-+------------------------+
| | | | 2008 | | 2007 |
+----+-------------------------------------+-+----------+--+----------+
2. Segment assets:
+----------------------------------------+-+-----------+--+-----------+
| | | | | |
+----------------------------------------+-+-----------+--+-----------+
| | | | | |
+----------------------------------------+-+-----------+--+-----------+
| Office | | 954,590 | | 936,196 |
+----------------------------------------+-+-----------+--+-----------+
| Retail | | 585,063 | | 480,072 |
+----------------------------------------+-+-----------+--+-----------+
| Car parks | | 1,047,941 | | 1,021,699 |
+----------------------------------------+-+-----------+--+-----------+
| Hotels | | 52,080 | | 62,859 |
+----------------------------------------+-+-----------+--+-----------+
| Residential | | 35,366 | | 44,486 |
+----------------------------------------+-+-----------+--+-----------+
| | | | | |
+----------------------------------------+-+-----------+--+-----------+
| Allocated assets | | 2,675,040 | | 2,545,312 |
+----------------------------------------+-+-----------+--+-----------+
| Unallocated assets | | 71,183 | | 56,275 |
+----------------------------------------+-+-----------+--+-----------+
| | | | | |
+----------------------------------------+-+-----------+--+-----------+
| | | 2,746,223 | | 2,601,587 |
+----------------------------------------+-+-----------+--+-----------+
3. Additions to long-lived assets:
+----------------------------------------+-+----------+--+-----------+
| | | | | |
+----------------------------------------+-+----------+--+-----------+
| Office | | 1,896 | | 515,962 |
+----------------------------------------+-+----------+--+-----------+
| Retail | | 18,969 | | 343,317 |
+----------------------------------------+-+----------+--+-----------+
| Car parks | | 4,764 | | 728,640 |
+----------------------------------------+-+----------+--+-----------+
| Hotels | | - | | - |
+----------------------------------------+-+----------+--+-----------+
| Residential | | - | | - |
+----------------------------------------+-+----------+--+-----------+
| | | | | |
+----------------------------------------+-+----------+--+-----------+
| | | 25,629 | | 1,587,919 |
+----------------------------------------+-+----------+--+-----------+
NOTE 22:- INCOME TAXES
a. Tax laws applicable to the Company and its subsidiaries:
Net rental income from real estate properties located in the U.K., which
properties are owned by foreign companies, is taxed at a rate of 20.0%
(2007:22.0%). Sales of such real estate properties are exempt from capital gains
tax.
Net rental income from the portfolio of car parks located throughout the UK (see
Note 4c(2)) is subject to income tax at a rate of 28.0%.
Rental properties in Canada are held in trusts for the benefit of the Company.
Net rental income of those trusts is subject to income tax at a rate of between
39.0% and 42.9%, according to the property's physical location and location of
the registered trust. Sales of such real estate properties are subject to
capital gains tax at rates between 19.5% - 21.5%.
NOTE 22:- INCOME TAXES (Cont.)
Net rental income from real estate properties located in Germany Finland, Sweden
and Switzerland is taxed at the rate of 26.4%, 26.0%, 26.3% and 26.5%-26.9%
respectively. Sales of such real estate properties are subject to capital gains
tax at the rate of 26.4%, 26.0%, 28.0% and 28.5% respectively.
Jersey income tax
Under Article 123A of the income Tax (Jersey) law 1961, as amended, the company
has obtained Jersey exempt company status for the year and is therefore exempt
from Jersey income tax on non Jersey source income and bank interest (by
concession). A GBP600 annual exempt company fee is payable by the company.
As from 1 January 2009 the exempt company regime will no longer apply. The
general rate of corporation tax for companies resident in Jersey will be 0% from
this date.
b. Reduction in tax rate:
The Group reduced the deferred tax liability in 2007 by GBP14.6 million to
reflect the new effective tax rate which will apply when the unrealised gains
are crystallised.
During the year there has been a change in management's strategy as to the
disposal date of 5 investment properties located in the United Kingdom, four
investment properties located in Germany, one investment property located in
Switzerland and one investment property located in Finland (with a value
presented in financial statements at 31 December 2008 of GBP454.2 million, Euro
311 million, CHF 114.9 million and Euro 50.5 million respectively). Management
presently intends to dispose of some of these investment properties in the next
twelve months and these have been classified as held for sale (see note 6), with
the remaining investment properties being disposed of within the next two
years.
Based on the Company's intentions, future sales of certain of the above
investment properties will be implemented through a sale of the shares of the
company owning the assets, rather than a direct sale of the investment property.
In such instances, for the purposes of calculating deferred taxes, the tax rate
applicable to the sale of shares was used. Where the company's intentions are
that the future sale of certain investment properties will be implemented
through a direct sale of the investment property, the tax rate applicable to the
sale of investment property was used.
The change in management's estimate has resulted in a release of GBP19.9 million
in deferred tax and an increase in the share of profit of associates of GBP2.2
million during the year.
NOTE 22:- INCOME TAXES (Cont.)
c. Taxes on income and capital gains included in the income statement:
+---------------------------------+-+----------+--+----------+--+----------+
| | | | | Year ended 31 |
| | | | | December |
+---------------------------------+-+----------+--+------------------------+
| | | | | 2008 | | 2007 |
+---------------------------------+-+----------+--+----------+--+----------+
| | | | | | | |
+---------------------------------+-+----------+--+----------+--+----------+
| Current taxes | | | | 3,483 | | 1,741 |
+---------------------------------+-+----------+--+----------+--+----------+
| Prior year over | | | | - | | (218) |
| provision | | | | | | |
+---------------------------------+-+----------+--+----------+--+----------+
| Release of deferred | | | | (19,918) | | (14,572) |
| tax liability (Note | | | | | | |
| 22b) | | | | | | |
+---------------------------------+-+----------+--+----------+--+----------+
| Deferred taxes | | | | (38,020) | | 24,209 |
+---------------------------------+-+----------+--+----------+--+----------+
| | | | | | | |
+---------------------------------+-+----------+--+----------+--+----------+
| | | | | (54,455) | | 11,160 |
+---------------------------------+-+----------+--+----------+--+----------+
d. Consolidated statement of changes in equity:
During 2008 tax income of GBP5.2 million (2007 - expense GBP324 thousand) from
cash flow hedges was reported directly in equity.
e. Deferred taxes:
The deferred tax balances below are reflected in the consolidated balance
sheet as deferred tax asset GBP4.3 million (2007: GBP0.3million) and deferred
tax liability of GBP163.3 million (2007: GBP216.5 million).
Following is the composition of deferred tax liabilities (assets):
+-----------------------------------------+--+------------+--+------------+
| | | 31 December |
+-----------------------------------------+--+----------------------------+
| | | 2008 | | 2007 |
+-----------------------------------------+--+------------+--+------------+
| | | | | |
+-----------------------------------------+--+------------+--+------------+
| Investment properties | | 198,218 | | 234,546 |
+-----------------------------------------+--+------------+--+------------+
| Rental income receivable | | 24,939 | | 21,010 |
+-----------------------------------------+--+------------+--+------------+
| Other assets-cost of incentives | | 2,516 | | 2,196 |
+-----------------------------------------+--+------------+--+------------+
| Losses carried forward | | (3,587) | | (3,527) |
+-----------------------------------------+--+------------+--+------------+
| Financial instruments | | (56,704) | | (25,986) |
+-----------------------------------------+--+------------+--+------------+
| Bank Liability | | (6,735) | | (12,524) |
+-----------------------------------------+--+------------+--+------------+
| Other | | 354 | | 455 |
+-----------------------------------------+--+------------+--+------------+
| | | | | |
+-----------------------------------------+--+------------+--+------------+
| | | 159,001 | | 216,170 |
+-----------------------------------------+--+------------+--+------------+
Deferred taxes are calculated according to a tax rate of 20.0%-28.0% (2007 -
22.0%-28.0%) in the U.K., 39.0%-42.9% in Canada, 15.8%-28.4% in Germany, 26.0%
in Finland, 26.3% in Sweden and 26.5%-28.5% in Switzerland and are presented in
the consolidated balance sheet as non-current assets and liabilities.
NOTE 22:- INCOME TAXES (Cont.)
Following is the change in deferred taxes:
+-----------------------------------------+--+------------+--+------------+
| | | 31 December |
+-----------------------------------------+--+----------------------------+
| | | 2008 | | 2007 |
+-----------------------------------------+--+------------+--+------------+
| | | | | |
+-----------------------------------------+--+------------+--+------------+
| Balance as of beginning of | | 216,170 | | 28,106 |
| year | | | | |
+-----------------------------------------+--+------------+--+------------+
| Additions from newly | | - | | 172,224 |
| consolidated subsidiaries | | | | |
+-----------------------------------------+--+------------+--+------------+
| Amounts charged to: | | | | |
+-----------------------------------------+--+------------+--+------------+
| Tax expense (*) | | (57,938) | | 9,637 |
+-----------------------------------------+--+------------+--+------------+
| Cumulative translation | | 6,321 | | 5,879 |
| differences | | | | |
+-----------------------------------------+--+------------+--+------------+
| Net unrealised gains on | | (5,190) | | 324 |
| hedging instruments | | | | |
+-----------------------------------------+--+------------+--+------------+
| Classified to assets held | | (362) | | - |
| for sale | | | | |
+-----------------------------------------+--+------------+--+------------+
| | | | | |
+-----------------------------------------+--+------------+--+------------+
| Balance as of end of year | | 159,001 | | 216,170 |
+-----------------------------------------+--+------------+--+------------+
(*) Relates principally to temporary differences in respect of revaluations
of investment properties to fair value.
f. Final assessments:
Most of the subsidiaries have received tax assessments which are deemed to be
final through to the following tax years:
UK 2008, Canada 2007, Sweden 2007, Germany 2006, Finland 2007 and Switzerland
2007.
g. Losses for tax purposes carried forward to future years:
Carry forward tax losses amounted to approximately GBP16.4 million at 31
December 2008 (2007: GBP14.1 million). The losses can be carried forward
indefinitely.
Deferred income tax assets are recognised for carry forward tax losses to the
extent that the realisation of the related tax benefit through future taxable
profits is probable.
NOTE 22:- INCOME TAXES (Cont.)
h. Effective tax:
The difference between the tax calculated on the income before tax according to
the regular tax rate and the amount of the tax included in the consolidated
financial statements is reconciled as follows:
+----------------------------------------+-+-------------+--+-------------+
| | | Year ended 31 December |
+----------------------------------------+-+------------------------------+
| | | 2008 | | 2007 |
+----------------------------------------+-+-------------+--+-------------+
| | | | | |
+----------------------------------------+-+-------------+--+-------------+
| Income before taxes | | (190,157) | | 107,127 |
+----------------------------------------+-+-------------+--+-------------+
| Less - share of net loss / | | 35,407 | | (11,952) |
| (profits) of associates | | | | |
+----------------------------------------+-+-------------+--+-------------+
| | | | | |
+----------------------------------------+-+-------------+--+-------------+
| | | (154,750) | | 95,175 |
+----------------------------------------+-+-------------+--+-------------+
| | | | | |
+----------------------------------------+-+-------------+--+-------------+
| Theoretical tax according | | (30,950) | | 20,938 |
| to statutory tax rate in | | | | |
| the U.K. 20% (2007: 22%) | | | | |
+----------------------------------------+-+-------------+--+-------------+
| Increase/ (decrease) in tax | | | | |
| for: | | | | |
+----------------------------------------+-+-------------+--+-------------+
| Losses in respect of which | | 7,331 | | (271) |
| deferred taxes were not | | | | |
| recorded | | | | |
+----------------------------------------+-+-------------+--+-------------+
| Release of deferred tax on investment | | (19,918) | | - |
| property | | | | |
+----------------------------------------+-+-------------+--+-------------+
| Deferred taxes in respect of share of | | - | | (55) |
| profits of associates held by trustees | | | | |
+----------------------------------------+-+-------------+--+-------------+
| Expenses not deductible for tax | | 2,065 | | - |
+----------------------------------------+-+-------------+--+-------------+
| Exempt revenues | | (556) | | (2,266) |
+----------------------------------------+-+-------------+--+-------------+
| Prior taxes | | - | | (218) |
+----------------------------------------+-+-------------+--+-------------+
| Differences in tax rates | | (11,990) | | (6,766) |
+----------------------------------------+-+-------------+--+-------------+
| Other | | (437) | | (202) |
+----------------------------------------+-+-------------+--+-------------+
| | | | | |
+----------------------------------------+-+-------------+--+-------------+
| | | (54,455) | | 11,160 |
+----------------------------------------+-+-------------+--+-------------+
NOTE 23:- TRADE AND OTHER PAYABLES
+---------------------------------------------+--+------------+--+------------+
| | | 31 December |
+---------------------------------------------+--+----------------------------+
| | | 2008 | | 2007 |
+---------------------------------------------+--+------------+--+------------+
| | | | | |
+---------------------------------------------+--+------------+--+------------+
| Trade payables | | 2,230 | | 2,133 |
+---------------------------------------------+--+------------+--+------------+
| Accrued expenses | | 5,582 | | 6,184 |
+---------------------------------------------+--+------------+--+------------+
| Interest payable | | 15,853 | | 15,079 |
+---------------------------------------------+--+------------+--+------------+
| Income received in advance (1) | | 19,867 | | 13,805 |
+---------------------------------------------+--+------------+--+------------+
| Accrued acquisition costs (2) | | 420 | | 11,199 |
+---------------------------------------------+--+------------+--+------------+
| Due to government authorities | | 5,505 | | 3,795 |
+---------------------------------------------+--+------------+--+------------+
| Due to affiliated companies | | - | | 380 |
+---------------------------------------------+--+------------+--+------------+
| | | | | |
+---------------------------------------------+--+------------+--+------------+
| | | 49,457 | | 52,575 |
+---------------------------------------------+--+------------+--+------------+
(1) Principally relates to rental income.
(2) Accrued expenses relating acquisition of assets in Germany in December
2007.
NOTE 24:- EARNINGS PER SHARE
Basic earnings per share amounts are calculated by dividing net profit for the
year attributable to ordinary equity holders of the parent by the weighted
average number of ordinary shares outstanding during the year.
The following reflects the income and share data used in the basic and diluted
earnings per share computations:
+----------------------------------------------------+-+-----------+-+-----------+
| | | 2008 | | 2007 |
+----------------------------------------------------+-+-----------+-+-----------+
| | | In thousands |
+----------------------------------------------------+-+-------------------------+
| | | | | |
+----------------------------------------------------+-+-----------+-+-----------+
| Net (loss) profit attributable to | | (104,349) | | 70,736 |
| ordinary equity holders of the parent | | | | |
| for basic earnings | | | | |
+----------------------------------------------------+-+-----------+-+-----------+
| | | | | |
+----------------------------------------------------+-+-----------+-+-----------+
| Weighted average number of ordinary | | 265,115 | | 234,969 |
| shares for basic earnings per share | | | | |
+----------------------------------------------------+-+-----------+-+-----------+
There have been no other transactions involving ordinary shares or potential
ordinary shares between the reporting date and the date of completion of these
financial statements.
NOTE 25:- SUPPLEMENTARY INFORMATION TO THE INCOME STATEMENT
a. Operating expenses:
+-----------------------------------------+--+------------+--+------------+
| | | Year ended 31 December |
+-----------------------------------------+--+----------------------------+
| | | 2008 | | 2007 |
+-----------------------------------------+--+------------+--+------------+
| | | | | |
+-----------------------------------------+--+------------+--+------------+
| Rent | | 1,662 | | 1,971 |
+-----------------------------------------+--+------------+--+------------+
| Property taxes | | 6,842 | | 5,504 |
+-----------------------------------------+--+------------+--+------------+
| Energy | | 2,483 | | 1,847 |
+-----------------------------------------+--+------------+--+------------+
| Repairs and maintenance | | 8,264 | | 6,570 |
+-----------------------------------------+--+------------+--+------------+
| Professional fees | | 442 | | 311 |
+-----------------------------------------+--+------------+--+------------+
| Salaries and related | | 1,064 | | 843 |
| expenses | | | | |
+-----------------------------------------+--+------------+--+------------+
| Other | | 266 | | 317 |
+-----------------------------------------+--+------------+--+------------+
| | | | | |
+-----------------------------------------+--+------------+--+------------+
| | | 21,023 | | 17,363 |
+-----------------------------------------+--+------------+--+------------+
b. General and administrative expenses:
+----------------------------------------+--+------------+--+------------+
| Management fees | | 1,080 | | 785 |
+----------------------------------------+--+------------+--+------------+
| Professional and | | 6,424 | | 3,822 |
| administration fees | | | | |
+----------------------------------------+--+------------+--+------------+
| Share-based compensation | | (278) | | 274 |
| (Note 17a(3)) | | | | |
+----------------------------------------+--+------------+--+------------+
| Social Security | | 144 | | - |
+----------------------------------------+--+------------+--+------------+
| Salaries and related | | 2,725 | | 1,154 |
| expenses | | | | |
+----------------------------------------+--+------------+--+------------+
| Other | | 719 | | 202 |
+----------------------------------------+--+------------+--+------------+
| | | | | |
+----------------------------------------+--+------------+--+------------+
| | | 10,814 | | 6,237 |
+----------------------------------------+--+------------+--+------------+
| | | | | |
+----------------------------------------+--+------------+--+------------+
| | | | | |
+----------------------------------------+--+------------+--+------------+
c. Other expenses:
+----------------------------------------+--+------------+--+------------+
| Impairment of goodwill | | - | | 9,446 |
+----------------------------------------+--+------------+--+------------+
| Cancellation fee (see | | 4,853 | | 2,815 |
| Jelmoli below) | | | | |
+----------------------------------------+--+------------+--+------------+
| Other | | 48 | | 205 |
+----------------------------------------+--+------------+--+------------+
| | | | | |
+----------------------------------------+--+------------+--+------------+
| | | 4,901 | | 12,466 |
+----------------------------------------+--+------------+--+------------+
JELMOLI HOLDINGS AG ("Jelmoli")
On 24 June 2008 the Company announced that after conducting negotiations with
Jelmoli it was agreed that as a final settlement of their mutual claim relating
to the Agreement the Company, Delek Belron International Ltd and Blenheim
Properties Ltd, shall together pay Jelmoli CHF 21.5 million (the "Settlement
amount") and shall together waive the repayment of the down payment of CHF 10
million made to Jelmoli in accordance with the terms of the Agreement. The final
settlement agreement has now been signed.
Consequently, during the year the Company has paid Jelmoli a sum of CHF 8
million in respect of the settlement, which is included within the cancellation
fee above, together with other costs incurred relating to this transaction.
NOTE 25:- SUPPLEMENTARY INFORMATION TO THE INCOME STATEMENT (Cont.)
d. Finance expenses and income:
+-----------------------------------------+-+------------+--+------------+
| | | Year ended 31 December |
+-----------------------------------------+-+----------------------------+
| | | 2008 | | 2007 |
+-----------------------------------------+-+------------+--+------------+
+----------------------------------------+-+-------------+-+------------+
| Expenses: | | | | |
+----------------------------------------+-+-------------+-+------------+
| Interest on bank | | 94,385 | | 61,504 |
| loans | | | | |
+----------------------------------------+-+-------------+-+------------+
| Interest to | | - | | 567 |
| minority | | | | |
+----------------------------------------+-+-------------+-+------------+
| Finance cost amortisation | | 3,344 | | 1,268 |
+----------------------------------------+-+-------------+-+------------+
| Financial instruments | | 95,283 | | 18,470 |
+----------------------------------------+-+-------------+-+------------+
| Other | | 193 | | 674 |
+----------------------------------------+-+-------------+-+------------+
| | | | | |
+----------------------------------------+-+-------------+-+------------+
| | | 193,205 | | 82,483 |
+----------------------------------------+-+-------------+-+------------+
| | | | | |
+----------------------------------------+-+-------------+-+------------+
| Income: | | | | |
+----------------------------------------+-+-------------+-+------------+
| Interest | | 7,197 | | 5,912 |
+----------------------------------------+-+-------------+-+------------+
| Exchange gain | | 843 | | 734 |
+----------------------------------------+-+-------------+-+------------+
| Financial instruments | | 992 | | 1,439 |
+----------------------------------------+-+-------------+-+------------+
| Other | | 187 | | 83 |
+----------------------------------------+-+-------------+-+------------+
| | | | | |
+----------------------------------------+-+-------------+-+------------+
| | | 9,219 | | 8,168 |
+----------------------------------------+-+-------------+-+------------+
e.Other income
+---------------------------------------+--+----------+------------+
| Loans written off | | 2,247 | - |
| Income from services provided to | | 536 | - |
| tenants | | 816 | 352 |
| Other | | | |
+---------------------------------------+--+----------+------------+
| | | 3,599 | 352 |
+---------------------------------------+--+----------+------------+
| | | | |
+---------------------------------------+--+----------+------------+
| | | | |
+---------------------------------------+--+----------+------------+
| | | | |
+---------------------------------------+--+----------+------------+
NOTE 26:- LIST OF SUBSIDIARIES
+--------------------------------------------------------------+------------+----------+------------+------------+------------+------------+
| | | | |
+---------------------------------------------------------------------------+----------+-------------------------+-------------------------+
| Company Name Country of % share | | |
| Incorporation | | |
| 1375071 Alberta Limited Canada 100.00% | | |
| Acapela Holdings Limited Gibraltar 90.00% | | |
| Admiralty Holdings Limited Gibraltar 62.50% | | |
| Anchor Falls Limited Gibraltar 80.00% | | |
| Anglo Properties Limited Gibraltar 100.00% | | |
| Anthus Partnership S.e.c.s Luxembourg 94.90% | | |
| Anthus S.a.r.l. Luxembourg 100.00% | | |
| BC Real Estate OY Finland 90.00% | | |
| Bel Finance (BVI) Limited British Virgin Island 100.00% | | |
| Bezina Limited British Virgin Island 100.00% | | |
| BHM Stockholm Rep AB Sweden 75.00% | | |
| Blue Gate Property GmbH Germany 60.00% | | |
| Blackfield Property GmbH Germany 60.00% | | |
| Botley Properties Limited Gibraltar 70.00% | | |
| Branta S.a.r.l. Luxembourg 94.90% | | |
| Brigand S.a.r.l. Luxembourg 100.00% | | |
| Brilliant 240 GmbH Germany 60.00% | | |
| Broomstead Investment Limited Gibraltar 60.00% | | |
| Chainmill Investments Limited British Virgin Island 70.00% | | |
| Confer Partnership S.e.c.s Luxembourg 94.90% | | |
| Confer S.a.r.l Luxembourg 100.00% | | |
| Daleham Holdings Limited Gibraltar 100.00% | | |
| Dalriada Holdings S.a.r.l. Luxembourg 90.00% | | |
| Delek Belron Luxembourg Luxembourg 100.00% | | |
| Limited | | |
| Delek Global Advisory Company United Kingdom 100.00% | | |
| Limited | | |
| DGRE Finance Company Limited Jersey 100.00% | | |
| Draycott Properties Limited Gibraltar 100.00% | | |
| Dubendorf Property AG Switzerland 100.00% | | |
| Farena Investments Limited British Virgin Island 60.00% | | |
| Gracewood Limited Gibraltar 85.00% | | |
| Greenfield GmbH Germany 60.00% | | |
| High Tide Properties Limited Gibraltar 100.00% | | |
| Kato S.a.r.l. Luxembourg 100.00% | | |
| Kiwi Holdings OY Finland 95.50% | | |
| La Fidducie Orion Trust Canada 100.00% | | |
| Lanus S.a.r.l. Luxembourg 100.00% | | |
| Linchfield Limited Gibraltar 59.00% | | |
| Napier S.a.r.l. Luxembourg 100.00% | | |
| Oceanna Properties Limited Gibraltar 100.00% | | |
| Odofera OY Finland 72.50% | | |
| Paxos Holdings S.a.r.l. Luxembourg 60.00% | | |
| Pomiratum OY Finland 72.50% | | |
| Powerfocal Limited United Kingdom 59.00% | | |
| Quadrant S.a.r.l. Luxembourg 100.00% | | |
| Quarry Town Limited Gibraltar 57.50% | | |
| Regents Properties Limited Gibraltar 60.00% | | |
| Regents Properties Germany 60.00% | | |
| Ltd&Co.Wesserstrasse 54KG | | |
| Right Angle Properties Limited Gibraltar 100.00% | | |
| Riparia S.a.r.l. Luxembourg 100.00% | | |
| Riva Holdings S.a.r.l. Luxembourg 100.00% | | |
| Romaine Holdings Limited Gibraltar 100.00% | | |
| Rosemore Limited Gibraltar 70.00% | | |
| Rotherwood Properties Limited Gibraltar 60.00% | | |
| Sabra S.a.r.l. Luxembourg 100.00% | | |
| Sea Jewel Investments Limited Gibraltar 100.00% | | |
| Stevemarie Holdings Limited Gibraltar 62.50% | | |
| Takeley Holdings Limited Gibraltar 73.53% | | |
| Talbo S.a.r.l. Luxembourg 100.00% | | |
| Tatra S.a.r.l. Luxembourg 100.00% | | |
| Telba S.a.r.l. Luxembourg 94.90% | | |
| Tenride Limited Gibraltar 60.00% | | |
| The Corsa Trust Canada 100.00% | | |
| The Expedition Trust Gibraltar 51.00% | | |
| The Mondego Trust Canada 100.00% | | |
| The Navigator Trust Canada 100.00% | | |
| Tower Green Properties GmbH Germany 60.00% | | |
| Trafalgar Property AG Switzerland 85.00% | | |
| Upton S.a.r.l. Luxembourg 100.00% | | |
| Wilcox S.a.r.l. Luxembourg 100.00% | | |
| Wood Retail Holdings S.a.r.l. Luxembourg 95.50% | | |
| WTCL Services SA Switzerland 100.00% | | |
| Xiali S.a.r.l. Luxembourg 100.00% | | |
| Yunque S.a.r.l. Luxembourg 100.00% | | |
| Zagato S.a.r.l. Luxembourg 100.00% | | |
| Zender S.a.r.l. Luxembourg 100.00% | | |
| | | |
+---------------------------------------------------------------------------+------------------------------------+-------------------------+
| Shares | | |
| in few | | |
| companies | | |
| acquired | | |
| as a part | | |
| of the | | |
| BPG | | |
| transaction | | |
| in 2007 | | |
| have not | | |
| yet been | | |
| transferred (see | | |
| note 4 d). | | |
| | | |
+---------------------------------------------------------------------------+------------------------------------+-------------------------+
| | | |
+---------------------------------------------------------------------------+------------------------------------+-------------------------+
| | | |
+---------------------------------------------------------------------------+------------------------------------+-------------------------+
| | | |
+--------------------------------------------------------------+------------+----------+------------+------------+------------+------------+
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR JLMBTMMABTAL
Grafico Azioni Delek Glbl (LSE:DGRE)
Storico
Da Mag 2024 a Giu 2024
Grafico Azioni Delek Glbl (LSE:DGRE)
Storico
Da Giu 2023 a Giu 2024
