SIRIUS REAL ESTATE LIMITED

(Incorporated in Guernsey)

Company Number: 46442

JSE Share Code: SRE

LSE (GBP) Share Code: SRE

LEI: 213800NURUF5W8QSK566

ISIN Code: GG00B1W3VF54

3 June 2024

Sirius Real Estate Limited

("Sirius Real Estate", "Sirius", the "Group" or the "Company")

Results for the year ended 31 March 2024

Continued sustainable FFO growth with strong operational performance driving tenth year of increasing dividends

Sirius Real Estate, the leading owner and operator of branded business and industrial parks providing conventional space and flexible workspace in Germany and the UK, announces its consolidated financial results for the year to 31 March 2024.

Operating platform continues to drive rental and FFO growth

·      7.9% increase in Funds from Operations ("FFO") to €110.2m (2023: €102.1m and a 14.6% increase in adjusted profit before tax to €110.0m (2023: €96.0m).

·      7.2%* like for like rent roll growth to €188.7m* (2023: €176.0m*) driven by continued strong organic growth and occupier demand in Germany and the UK

·      Profit before tax increased 32.4% to €115.2m (2023: €87.0m) primarily as a result of €12.4m valuation gain in 2024 compared to a €9.8m deficit in the previous financial year.

·      2.4% increase in FFO per share to 8.95c  (2023: 8.74c)

·      8.7% increase of EPRA EPS to 8.21c (2023: 7.55c)

Sustainable FFO growth supports 20^th progressive dividend payout

·     Progressive H2 dividend of 3.05c per share (2023: 2.98c per share), amounting to a 6.5% uplift in the total dividend for the financial year to 6.05c (2023: 5.68c)

Income driven valuation gains

·      Investment properties valued** at €2,210.6m (2023: €2,123.0m)

·      €12.4m net portfolio valuation increase in spite of valuation yield expansion

·      Portfolio gross yield of 7.5% in Germany (2023: 7.3%) with a net yield of 6.8% (2023: 6.5%) alongside a 14.1% gross yield (2023: 13.2%) and a net yield of 9.9% (2023: 9.3%) in the UK, on a like for like basis

·      EPRA NTA per share increasing by 1.6% to 109.82c (2023: 108.11c) demonstrating the resilience of the portfolio

·      Adjusted NAV per share increased by 1.8% to 111.12c (2023: 109.21c)

Significant market opportunity captured with €157.8m of acquisitions and €59.7m of disposals, at a premium to book value, supported by €165.3m equity raise

·      Net of costs, the Company notarised or completed six UK acquisitions amounting to £90.0m (€104.2m) contributing an annualised NOI of £8.7m (€10.1m) at an average gross yield of 9.5% and 81.1% occupancy. In Germany, the Company notarised or completed €53.6m of acquisitions across three transactions at an average gross yield of 10.2% and 91% occupancy, fuelling future rental growth

·     €56.2m of disposals in Germany with annualised NOI of €3.4m and limited further growth opportunity completed across three transactions and one £3.0m (€3.5m) disposal in the UK with an annualised NOI of £0.2m (€0.2m), all at premium to book value

Strong balance sheet with capacity for acquisitions and only 2.9% of total debt expiring within next 2 years

·      Cash at bank of €214.5m, providing capacity for further acquisitions and investment (2023: €99.2m)

·      33.9% net LTV (March 2023: 41.6%) and Net Debt to EBITDA of 5.6x

·      Successful issuance of €59.9m bonds post balance sheet, via a tap issue of its €300m 1.75% notes due in 2028

·    €170.0m facility with Berlin Hyp AG and €58.3m Deutsche Pfandbriefbank facility have been refinanced to 2030 at 4.26% and 4.25% respectively

Outlook

·      The Company is trading in line with management expectations in the new financial year

·     Sirius continues to assess further growth options in both Germany and the UK on an opportunistic basis, including recycling of mature assets and reinvesting in value-add opportunities

·      Organic growth opportunities remain strong in both markets

Commenting on the results, Andrew Coombs, Chief Executive Officer of Sirius Real Estate, said:

"Sirius has delivered another very positive set of annual results, with a strong operational performance driving FFO, valuation and dividend growth in what represents our tenth year of annualised rental growth above 5% and dividend increases. This is testament to our platform's ability to drive substantial organic growth, which is underpinned by continued occupier demand for our high-quality and affordable products despite macro headwinds.

"Following our oversubscribed equity fundraising of €165.3 million in November 2023, we have rapidly executed on our pipeline of attractive asset acquisitions in both Germany and the UK, taking advantage of market conditions with c. €160 million of assets bought in the past six months. At the same time, we have maintained a healthy net LTV ratio and have recycled capital with c. €60 million of disposals completed at a premium to book value, highlighting the business' ability to crystallise returns from our mature assets and to drive value where we see strategic market opportunities. 

"Looking ahead, our outlook remains positive: our active asset recycling programme, strong cash position and post balance sheet issuance of €59.9 million of debt means our balance sheet is in rude health. There remain many levers we can pull to unlock value and grow occupancy and rental income within our current portfolio through our successful asset management programme, and we remain well positioned to fuel our accretive pipeline, supporting our next phase of growth and deliver attractive returns for shareholders."

Notes:

*Group rent roll and rental income KPI's have been translated utilising a constant foreign currency exchange rate of GBP:EUR 1.1695, being the closing exchange rate as at 31 March 2024.

** Including leased investment properties

WEBCAST

There will be an in-person presentation for analysts/investors at 09:00 BST (10:00 CET/ SAST) today, hosted by Andrew Coombs, Chief Executive Officer, and Chris Bowman, Chief Financial Officer, at Berenberg's offices Located at 60 Threadneedle St, London, EC2R 8HP

There will also be a live webcast available, which can be accessed via the following link:

Webcast link:

https://stream.brrmedia.co.uk/broadcast/6613b3c40ca2a2be77897aff

For further information:

Sirius Real Estate

Andrew Coombs, CEO / Chris Bowman, CFO

+49 (0) 30 285 010 110

FTI Consulting (Financial PR)

Richard Sunderland / Ellie Sweeney / James McEwan / Talia Shirion

+44 (0) 20 3727 1000

[email protected] 

NOTES TO EDITORS

About Sirius Real Estate

Sirius is a property company listed on the main and premium market of the London Stock Exchange and the main board of the JSE Limited. It is a leading owner and operator of branded business and industrial parks providing conventional space and flexible workspace in Germany and the U.K. As of 30 September 2023, the Group's portfolio comprised 139 assets let to 9,248 tenants with a total book value of over €2 billion, generating a total annualised rent roll of €184.2 million. Sirius also holds a 35% stake in Titanium, its €350+ million German-focused joint venture with clients of AXA IM Alts.

The Company's strategy centres on acquiring business parks at attractive yields and integrating them into its network of sites - both under the Sirius and BizSpace names and alongside a range of branded products. The business then seeks to reconfigure and upgrade existing and vacant space to appeal to the local market via intensive asset management and investment and may then choose to refinance or dispose of assets selectively once they meet maturity, to release capital for new investment. This active approach allows the Company to generate attractive returns for shareholders through growing rental income, improving cost recoveries and capital values, and enhancing returns through securing efficient financing terms.

For more information, please visit: www.sirius-real-estate.com

Follow us on LinkedIn at https://www.linkedin.com/company/siriusrealestate/

Follow us on Twitter at @SiriusRE

LEI: 213800NURUF5W8QSK566

JSE Sponsor: PSG Capital

Chairman's Statement

Continued growth in challenging conditions

I am pleased to be writing this as part of my sixth Annual Report as Chairman, and doubly pleased to be able to share another year of strong financial and operational performance despite a backdrop of continuing macroeconomic and geopolitical volatility.

Sirius would like to thank shareholders for their continued support, highlighted by our €165.3m capital raise in November 2023 to enable the Company to take advantage of a pipeline of compelling opportunities both in Germany and in the UK. The Company has invested the capital raise proceeds in a range of assets in Germany and the UK which we are excited about the future prospects for, we believe such acquisitions will contribute to our growth in future years. In the UK, we have acquired our largest asset since acquiring BizSpace in November 2021, the £50.1m (€58.6m) Vantage Point business park in Gloucestershire, UK. We believe further compelling acquisition opportunities will arise in the coming year.

The asset recycling programme continued on pace, with the Company recycling €60 million of non-core or mature assets in the period, demonstrating the power of our operating platform to transform these assets into attractive sale opportunities.

As the Group sets its sights on our next FFO milestone of €150m, the Group continues to deliver on its ambition by capturing rent roll growth in both Germany and the United Kingdom whilst maintaining a robust balance sheet. The Board has authorised a progressive dividend of 3.05c per share for the second half of the financial year, increasing on the 2.98c per share dividend for the equivalent period in the prior year. This brings the total dividend for the year to 6.05c, an increase of 6.5% on the 5.68c dividend for the year ended 31 March 2023.

Our sustainability agenda

We are proud of the progress we continue to make in our work to build a sustainable future. Challenges remain in our sector and our Chief Executive Officer, Andrew Coombs, continues to be responsible for chairing the Sirius Real Estate Sustainability and Ethics Committee. We are also pleased to have launched a dedicated team, based in Berlin to work with our Chief Impact Officer, Kremena Wissel as additional operational resource, to help manage and execute our sustainability agenda across the Group. We have set out in our ESG report a roadmap for the future and look forward to updating shareholders on our progress in this area.

Looking ahead

There are a number of headwinds on the horizon that will challenge Sirius in the coming years, most notably the higher interest rate environment, continuing broader geopolitical uncertainty and the uncertainty over German and UK future economic growth. We remain alert in assessing these risks, and the impact they will have on our business, and take confidence from our strong track record of adapting and thriving in the face of other significant external challenges in recent years.

Overall, we are confident that the strength of our operating platform, balance sheet, our experienced management team and our long-term strategic view will enable our business to continue its growth journey in the years ahead. Sirius is well run and adaptive and continues to be a highly investible proposition.

Thank you

On behalf of the Board, I would like to express my gratitude to everyone across Sirius for their contributions to our successes in this financial year. I look forward to the coming financial year with confidence in our team, our business model and our ambition as we build on our strong foundations.

Daniel Kitchen

Chairman

31 May 2024

Asset management review

Introduction

After a period of modest investment activity in the prior year in which the Company focused almost entirely on organic growth, the Company returned to acquisitive growth after its oversubscribed equity fundraising of €165.3m in November 2023. €157.8m of assets (excluding acquisition costs) have been notarised or acquired since the capital raise, capturing buying opportunity in the market. In addition to filling its acquisition pipeline, the Company has been successful in recycling some of its mature or non-core assets at or above book value in the period.

The rent roll growth achieved demonstrates that even with the Company's acquisition activity it has the management bandwidth to also deliver strong organic growth, focused on capturing rate, occupancy and targeted capex. Success has been achieved on all fronts with substantial like-for-like rental income increases in both the UK and Germany, as well as total shareholder returns including NAV growth, which has seen modest improvement over the previous period. Through its extensive asset management activities, opportunistic acquisitions and continued success in its asset recycling, the Company maintains a solid foundation to provide excellent risk-adjusted returns for its stakeholders. 

Asset Management - Group Highlights

Key Highlights:

*The Company has chosen to disclose certain Group rental income figures utilising a constant foreign currency exchange rate of GBP:EUR 1.1695, being the closing exchange rate as at 31 March 2024.

Platform drives occupancy growth across both markets

A key focus over the past twelve months has been to drive occupancy across both markets, with success noted in both Germany and the UK, albeit with Germany improving slightly better than the UK. Rates continued to capture inflation; however, due to inflation falling significantly off its recent highs, this increase has been less pronounced than in the prior period. Nevertheless, like-for-like annualised rent roll increased by 7.1% (31 March 2023: 7.3%) in Germany and 7.5% (31 March 2023: 8.7%) in the UK, which blends to 7.2*% (31 March 2023: 7.7*%) at Group level. This represents the tenth consecutive year of like-for-like rent roll growth in excess of 5%. These increases were supported by the Group growing its like-for-like occupancy by 1.6% to 85.5% (31 March 2023: 83.9%).

Cash collection across the Group remained robust at 98.2% (31 March 2023: 98.6%), with cash on hand at the end of the year of €214.5m. The Company repaid debt of €20m in the year, resulting in a total debt balance of €955.3m and a net LTV of 33.9%, ensuring the Company is well within its 40% net LTV target. With a weighted average debt expiry of four years, the Company remains poised to capture further opportunity from its cash on hand but also from the vacancy within its existing portfolio.

Asset Management - Germany

Key Highlights:

Lettings and rental growth

The German portfolio recorded a like-for-like increase in its annualised rent roll of 7.1% to €128.0m (31 March 2023: €119.5m) whilst the total annualised rent roll increased in the year end by 5.4% to €129.7m (31 March 2023: €123.1m).  Of this growth, €8.5m related to organic growth, €3.6m was lost from disposals and €1.7m represented the impact from acquisitions.

The €8.5m organic growth was made up of €4.2m coming from uplifts from existing tenants, either through contractual lease indexation or increases upon renewal, as well as €4.3m from the net of move-ins over move-outs, an increase of €2.4m over the prior period.  The latter can be further broken down into move-outs of 137,992 sqm that were generating €13.6m of annualised rent roll at an average rate of €8.20 per sqm being offset by move-ins of 169,176 sqm generating €17.9m of annualised rent roll at an average rate of €8.81 per sqm.  The combination of the above has resulted in like-for-like rate per sqm increasing by 4.8% to €7.23 (31 March 2023: €6.90), demonstrating the ability of the Company's operating platform to manage the product mix and occupancy carefully alongside rates, to optimise the returns from our lettable space.

Through the Company's continued investment in its sub-optimal vacant space through its capex investment programme and its ability to let this space, like-for-like occupancy in Germany has increased by 1.9% to 85.2% (31 March 2023: 83.3%).

The movement in annualised rent roll is illustrated in the table below:

The ability to organically grow and generate net positive move-ins at higher rates is supported by the Company's in-house marketing platform, which permits the Company to strategically target the markets in which it operates and react to changing market dynamics rapidly. Enquires for the year of 15,880 were comparable to the 15,412 generated in the period ended 31 March 2023. These enquiries were converted at a rate of 14% (31 March 2023: 12%) to 164,629 sqm in sales, which has been a consistent year-on-year performance across the German portfolio.

The ability to sell space is key to success, yet tenant retention is also a major contributing factor to maintaining strong rent roll performance. The Company notes large move-outs in the normal course of business, yet the retention rate has improved to 79% (31 March 2023: 75%). Overall, the continued positive performance in marketing, lettings and renewals provides a clear demonstration of the ability of the Company to grow against the backdrop of evolving market dynamics, which included the ongoing conflict in Ukraine, the energy crisis in Germany and resulting inflationary pressures, which have eased off their peaks back to more manageable levels.

Cash collection

The Company continued its trend of strong cash collection performance in the period. Sirius is very focused on cash collection and the advantage of its substantial operating platform is very evident here. The experienced cash collection team, combined with the on-site staff who have established strong relationships with our top tenants, has been key to keeping cash collection rates steady at 98.0% (31 March 2023: 98.4%), even though total billings (net of VAT) increased by 7.5% to €196.3m from €182.6m in 31 March 2023.  This demonstrates the resilience of Sirius' tenant base and strength of the Company's cash collection initiatives.

As at year end, uncollected debt amounted to €3.9m (31 March 2023: 2.9m) which mainly related to recently billed service charge and repair and maintenance balancing for prior years.  The outstanding rent and service charge prepayments were €3.1m and €0.8m respectively. During the period, the Company wrote off €0.2m (31 March 2023: €0.1m). The Company expects to collect most of the outstanding debt for the period over the next twelve months through its regular debt collection activities.

Asset recycling

Recycling equity from mature assets into new value-add acquisitions has always been a significant part of the Sirius business model. It benefits the Company in many ways, including: a) proving that valuations can be crystallised; b) replenishing the growth opportunity within the vacancy and the capex investment programme; and c) being accretive to FFO per share (and therefore dividend per share), with a consequent contribution to NAV per share growth. This is an element of the Company's strategy which Sirius is able to execute effectively throughout the property cycle and this has been evidenced by the Company's continued asset recycling initiatives.

On the back of the equity raised in November 2023, the Company executed on an acquisition pipeline comprising three industrial assets in Germany in the first half of the 2024 calendar year, whilst also continuing its asset recycling programme with the sale of its principal Maintal I asset.

A summary of the acquisitions and disposals that completed or were notarised in the year is detailed in the table below:

Acquisitions

*     Includes purchaser costs.

A summary of the opportunities and characteristics of each asset acquired in the period is detailed below.

·      The business park in Köln, Germany's fourth largest city, in Nord-Rhein Westphalia, comprises 19,114 sqm of principally light industrial space. The property has been acquired at a price of €20.0m (net of costs) and currently generates total rental income of €1.67m and an annualised net operating income of €1.56m, representing a gross yield at acquisition of 7.8% and an EPRA net initial yield of 7.3%. The site has an occupancy rate of just over 89%, with a weighted average unexpired lease term ("WAULT ") of 2.4 years and a well-diversified, stable tenant structure. The park offers a number of strong value-add opportunities to drive rental growth, including accessible under-renting which Sirius has identified. The Company is well established with its three additional parks in the area, expecting to leverage its deep market knowledge into the latest addition.

·      Göppingen, a city in the state of Baden-Württemberg, south-east of Stuttgart in southern Germany, is a multi-tenanted business park with a total lettable area of approximately 35,132 sqm comprised of 31,700 sqm of industrial space, 3,100 sqm of office space and 332 sqm of space defined as "other" which in aggregate will initially generate around €1.8m of annualised rental income at 87% occupancy. The acquisition has been notarised at €19.8m (net of costs) and generates an annualised net operating income of €1.5m, reflecting a gross yield of 8.3% and an EPRA net initial yield of 6.9%.  With occupancy at around 87% and a WAULT of 2.8 years, the property offers the opportunity for Sirius to use its platform to improve occupancy, income and service charge recovery. The Göppingen asset will be the tenth asset the Company owns in the desirable Stuttgart area.

·      Klipphausen, built in 2009 and located near Dresden, the capital of Saxony known as "Silicon Saxony", is a highly desirable economic micro-location. The Company expects to benefit from some operational synergies due to the proximity of the site to its existing Dresden assets.  The site has been purchased from a owner occupier who plans to vacate the building approximately six months after completion. The plan is to convert the site, which currently comprises approximately 17,700 sqm of modern primarily light industrial and production space, into a multi-tenanted business park. Sirius' asset management platform has identified multiple parties interested in leasing space at the site, which in aggregate are already in excess of the site's entire leasable area. Longer term, the plan is also to expand the park through the development of the adjacent 10,000 sqm land parcel which forms part of the acquisition.

In addition to the above, the Company purchased an adjacent building in its existing Dresden asset for €1.0m under its "Buy Your Neighbour" campaign, to strategically expand its existing footprint on the site.

The marketing and sales capabilities within the operating platform are part of several asset management disciplines that provide the Company with a significant competitive advantage over other owners of light industrial and business park assets in Germany. This allows Sirius to be more flexible with how it configures and offers its vacant space which should result in the Company being able to more easily fill up and transform these newly acquired sites and hence make the high returns at the asset level which underpins the Company's significant organic growth it generates each year.

Disposals

Over the last twelve months, the Group sold three assets in Germany for a total sales price of €56.2 m representing a 6.4% gross yield. The Maintal asset was sold at 6% above book value to a data centre developer whilst the Kassel and Wuppertal assets were sold at a premium to book value of 5%, at the time of notarisation. These disposals of mature and non-core assets a consistent premium to book value demonstrate the Company's ability to continue to recycle its assets well, underpinning the effectiveness of its business model.

Capex investment programmes

The Group's capex investment programme on the German assets has historically been focused on the transformation of poor-quality vacant space that is typically acquired at very low cost due to it being considered as structural vacancy by former owners. The transformation and take up of this space has not only resulted in significant income and valuation improvements for the Company but have also yielded significant improvements in service charge cost recovery and therefore further increased net operating income. The programme started in 2015 and to date 445,864 sqm of space has been fully transformed for an investment of €70.9m. As at 31 March 2024, this space was generating €29.4m in annualised rent roll (at 73% occupancy). This transformed space has also been a major contributor towards the large valuation increases seen on the portfolio over the last eight years.

In addition to the space that has been completed and let or is currently being marketed, a total of approximately 19,773 sqm of space is either in progress of being transformed or is awaiting approval to commence transformation. A further €4.6m is expected to be invested into this space, and, based on achieving budgeted occupancy, is expected to generate incremental annualised rent roll in the region of €1.9m.

The details of the capex investment programme on this vacant space is detailed below:

*     See the Glossary section of the Annual Report and Accounts 2024.

**    As at 31 March 2024 one project in process which has been 100% recharged to tenant.

In addition to the capex investment programme on acquired "structural" vacant space, Sirius continually identifies and looks for opportunities to upgrade the space that is vacated each year as a result of move-outs. Within the existing vacancy at 31 March 2024, the Company has identified approximately 38,214 sqm of recently vacated space that has potential to be significantly upgraded before it is re-let. This space will require an investment of approximately €7.5m and has an estimated rental value of €3.3m when fully re-let. Upgrading this vacated space allows the Company to enhance the reversionary potential of the portfolio whilst significantly improving the quality, desirability and hence value of not only the space that is invested into but the whole site.

The analysis below details the sub-optimal space and vacancy at 31 March 2024 and highlights the opportunity from developing this space.

*     See the Glossary section of the Annual Report and Accounts 2024.

The German portfolio's headline 85% occupancy rate means that in total 258,543 sqm of space is vacant as at 31 March 2024. When excluding the vacancy which is subject to investment (3% of total space), and the structural vacancy which is not economically viable to develop (2% of total space), the Company's occupancy rate based on space that is readily lettable is approximately 90%.

Whilst the capex investment programmes are a key part of Sirius' strategy, they represent one of several ways in which the Company can organically grow income and capital values. A wide range of asset management capabilities including the capturing of contractual rent increases (especially whilst inflation is high), uplifts on renewals and the re-letting of space at higher rates are also expected to contribute to the Company's annualised rent roll growth going forward.

Whilst the Company will continue to look to asset recycling to replenish the vacancy which is let up after transformation, the Company maintains a risk-adjusted strategy and expects to continue to hold a significant amount of core mature assets in order to maintain a balanced portfolio that provides a combination of stable, long-term financeable income with value-add assets with growth potential.

Well-diversified income and tenant base

Against the backdrop of continued market disruption, be it ongoing geopolitical conflict or sticky inflationary environment, the importance of a well-diversified tenant base and wide range of products is evident. Sirius' portfolio includes production, storage and out of town office space that caters to multiple uses and a range of sizes and types of tenants. The Company's business model is underpinned by its tenant mix which provides stability through its large, long-term anchor tenants and opportunity through the SME and flexible individual tenants.

The Group's large anchor tenants are typically multinational corporations occupying production, storage and related office space whereas the SMEs and individual tenants occupy space on both a conventional and a flexible basis including space marketed under the Company's popular Smartspace brand which provides tenants with a fixed cost and maximum flexibility. The Company's wide range of diverse tenants results in not having to rely on a single tenant, with its largest single tenant contributes 2.1% of total annualised rent roll whilst 7.9% of its annualised rent roll comes from stable Government tenants.

SMEs in Germany, the Mittelstand, are typically defined as companies with revenues of up to €50.0m and up to 500 employees. This demographic remains a key target group due to its significant contribution to Germany's economy as a whole, and is a key contributor to the Company's rent roll. The wide range of tenants that the Sirius marketing and sales team is able to attract is a key competitive advantage for the Company and results in a significantly de-risked business model when compared to other owners of multi-tenanted light industrial and business park assets.

The table below illustrates the diverse nature of tenant mix within the Sirius portfolio at the end of the reporting period:

(1)   Mainly large national/international private and public tenants.

(2)   Mainly small and medium-sized private and public tenants.

(3)   Mainly small and medium-sized private and individual tenants.

*     See the Glossary section of the Annual Report and Accounts 2024.

Smartspace and First Choice

Sirius' Smartspace products are designed with flexibility in mind, allowing tenants to benefit from a fixed cost which continues to be desirable even in challenging market conditions. The majority of Smartspace has been developed from space that is either sub-optimal or considered to be structurally void by most light industrial real estate operators. Following conversion, the area is transformed into space that can be let at significantly higher rents than the rest of the business park and, as a result, is highly accretive to both income and value. The Company was able to add 4,400 sqm of Smartspace offering from 101,277 sqm in the prior year (reduced by the disposals) to 105,677 sqm which is an increase of more than 4%. Total Smartspace occupancy increased to 70% (31 March 2023: 65%), which led to 4.2% increase of the annualised Smartspace rent roll.

The most significant growth occurred in the Smartspace storage product. The Company's market research through its marketing and sales platforms indicated strong demand in this sector and Sirius was able to act accordingly to capture some of this. The addition of 3,383 sqm of Smartspace storage helped grow this product line's rental income contribution by €0.3m.

Additionally a further 3,125 sqm of Smartspace office space were created in the period which contributed to rental growth of €0.3m.

The total amount of Smartspace in the portfolio at the year-end was 105,677 sqm (31 March 2023: 107,396 sqm), generating €8.7m (31 March 2023: €8.4m) of annualised rent roll which equates to 6.7% of the Company's total annualised rent roll. Average rate per sqm decreased by 1.4% from €9.92 per sqm to €9.78 per sqm, reflecting the addition of the storage space which is typically lower yielding than office.

The table below illustrates the contribution of each of the Smartspace products:

*     See the Glossary section of the Annual Report and Accounts 2024.

Asset management review - UK

Active asset management

Lettings and rental growth

The UK recorded a like-for-like increase in its annualised rent roll of 7.7% to £51.9m (31 March 2023: £48.2m), equating in euro terms to €60.0m (31 March 2023: €54.9m) . The total annualised rent roll increase in the year was £7.1m (€8.2m), with £4.0m (€4.6m) organic growth offset by asset disposals totalling £0.3m (€0.4m) and net move-outs of £0.3m (€0.4m). Acquisitions accounted for £3.7m (€4.4m) of rent roll uplift in the period.

Like-for-like average rate per sq ft increased by 6.7% to £14.39 (31 March 2023: £13.49), equating to an increase in euro terms to €15.10 per sqm (31 March 2023: €13.76 per sqm), reflecting management's ability to capture rental growth in the current inflationary environment. Through its asset management initiatives, the Company was able to grow not only its like-for-like rental growth in the period, but also noted a modest improvement in its like-for-like occupancy, contributing positively to its top-line growth. 

The increase in annualised rent roll over the period can be broken down into move-ins of 921,825 sq ft (85,640 sqm) that were generating £16.4 million (€19.0m) of annualised rent roll at an average rate of £17.80 per sq ft (€18.49 per sqm), being offset by move-outs of 895,428 sq ft (83,187 sqm) generating £16.8m (€19.4m) of annualised rent roll at an average rate of £18.72 per sq ft (€19.45 per sqm). The lower move-in rate is predominantly driven by re-lets of office space at a lower rate to drive occupancy. Additionally, rental uplifts on existing tenants added a further £4.0m (€4.4m) to the annualised rent roll during the period. Furthermore, the disposal of one property during the period accounted for a £0.3m (€0.3m) reduction in annualised rent roll. As mentioned below in the asset recycling overview, one asset was disposed of during the period which accounted for a £0.3 m (€0.4m) reduction in annualised rent roll.

The movement in annualised rent roll is illustrated in the table below:

Despite a challenging market, driven by market uncertainty over inflation, the UK operating platform generated a healthy number of enquiries for the year, totalling 17,108 for the period (31 March 2023: 15,511), signing 1,165 deals (31 March 2023: 963) totalling 586,773 sq ft (54,513 sqm) (31 March 2023: 420,647 sq ft (39,079 sqm)) with an average deal per sqm of 504 sq ft (47 sqm) (31 March 2023: 437 sq ft (40 sqm)). These developments have made a positive impact on rental growth and contributed to the Company's occupancy growth in the year.  During the second half of the year the Company averaged over 90 deals per month during the year at a sales conversion rate of 6.8% which has seen an improvement from 6.2% in the previous period.

Cash collection

Cash collection rates marginally reduced to 98.8% (31 March 2023: 99.3%) as total billings increased by 9.9% year on year. The 98.8% cash collection rate can be analysed as total net of VAT billing amounting to £53.1m (€61.6m), total uncollected debt at year end amounting to £0.6 m (€0.7m) with negligible write-offs during the period, comparing to net of VAT billings of £48.3m (€56.0m) and uncollected debt of £0.3m (€0.4m) with negligible write offs in the prior comparative period. There are no deferred payment plans in place and the Company expects to collect the majority of the outstanding debt at year end through its regular debt collection activities.

Asset recycling

Similar to Germany, the Company realised its identified pipeline of targets through the acquisition of five assets in the period, with its major Gloucestershire acquisition notarised in the second half of the year, completing in April 2024 and the disposal of one non-core asset in Stoke.

A summary of the acquisitions and disposals that completed or were notarised in the year is detailed in the table below:

Acquisitions

*     Includes purchaser costs.

**    Completed 5 April 2024

A summary of the opportunities and characteristics of each asset acquired in the period is detailed below.

·      The Liverpool and Barnsley acquisition of £10.1m (€11.7m), which completed on 2 October 2023, comprised two mixed-use industrial assets with a combined area of 71,957 sq ft (6,685 sqm) of predominantly workshop space. The purchase price represented a NIY of 9.6% (total acquisition costs).

·      The £35.7m (€41.2m) purchase of three multi-let studio sites (Islington, Spectrum House and Finsbury Park) located in Islington and Camden in North London represents a 7.3% net initial yield after costs. The assets, with a combined area of 103,962 sq ft (9,658 sqm) are just under 70% let, providing opportunity for the Company to implement its asset management initiatives.

·      The Vantage Point Business Park in Gloucestershire is situated in a highly desirable location on the edge of The Forest of Dean, and close to a number of major cities including Bristol to the South, Gloucester to the East and Cardiff to the Southwest, and the park benefits from good transport networks and connectivity to the national motorway network via the A40 and M50. The 60-acre (136,071 sqm) business park at Mitcheldean was renowned first for manufacturing Rank projection equipment then as Rank Xerox's manufacturing hub between 1961 and 2003. It is 81% occupied and offers a mixture of warehouse, production, storage, conventional and serviced office space to over 70 companies across 119 units. Sirius has identified a number of opportunities to drive value by utilising its asset management platform to improve occupancy, income and service charge recovery. Proximity to other Sirius sites, including Gloucester Barnwood and Gloucester Morelands, will enable the Company to leverage operational synergies alongside its local market expertise.

Disposals

*     Calculated on net purchase price.

The asset, which comprises just over 55,097 sq ft (c. 5,118 sqm) of industrial space, was sold at a 1% premium to the last reported book value and was deemed non-core to the business going forward.

Site Investment

BizSpace has historically invested in its sites in order to maintain and upgrade its spaces which allows it to adapt to changes in tenant demand. In the period under review, the Company invested a total of £9.6m (€11.1m) (31 March 2023: £4.8m (€5.6m)) into its sites focused primarily on improving the condition of spaces to drive occupancy and price. The Company expects to identify further opportunities to invest into its assets in the new financial year whilst continuing to progress its ESG-related investment in order to align itself with the wider Group.

Well-diversified income and tenant base

BizSpace's portfolio includes light industrial, studio, out of town office space and storage that caters to multiple usages and a range of sizes and types of tenants. As a result, the Company's business model is underpinned by a well-diversified tenant base.

The Company's top 100 tenants, which are typically large corporates, account for 21.2% of the annualised rent roll with the next 900 tenants accounting for 44.8% of annualised rent roll. The remaining 34.0% of annualised rent roll relates to nearly 3,000 SME and micro-SME tenants which occupy 39.6% of the overall estate.

The table below illustrates the diverse nature of tenant mix within the Sirius portfolio at the end of the reporting period:

SMEs in the UK are typically defined as companies with revenues of up to £50.0m and up to 250 employees. The Company's internal operating platform and product offering have a strong track record of attracting and retaining tenants in this segment of the market which is expected to continue to grow as a result of structural trends impacting the UK market.

Financial review    

Continued sustainable FFO growth

Chris Bowman

Chief Financial Officer

"Sirius is pleased with the continued support from its shareholders as demonstrated in the recent €165.3m equity raise to fuel an accretive pipeline to position the Company for its next phase of growth."

Continued FFO growth

Sirius recorded FFO of €110.2m which represents a 7.9% increase over the €102.1m FFO reported last year. The Group has benefited from continued substantial organic growth and excellent asset recycling despite facing headwinds in the form of increasing interest rates and utility costs as well as the challenging markets which are continuing to be affected by instability from the Ukraine conflict and the cost of living crisis in both Germany and the UK. The main driver of organic growth was the 7.2%⁽¹⁾ increase in like-for-like rent roll which underpinned the 8.2%⁽¹⁾ total rent roll growth when incorporating the effect of asset recycling and acquisitions.

Trading performance and earnings

The Company has reported a profit before tax in the year ended 31 March 2024 of €115.2m (31 March 2023: €87.0m), representing an increase of 32.4% from the prior year. This increase in profit is mainly due to the FFO growth mentioned above including a net valuation gain of €12.4m (€50.1m valuation gain less €37.7m capex) being reported in the period, whereas in the prior year a net valuation deficit of €7.7m (€21.4 m valuation increase less €29.9m capex) was reported.  The €8.1m increase in FFO to €110.2m (31 March 2023: €102.1m) included BizSpace contributing €28.5m to the Group (31 March 2023: €26.7m), increasing its FFO contribution by €1.8 million year over year. The organic growth within our UK business came mainly from the 7.5%⁽¹⁾ increases in like-for-like annualised rental income, with acquisitions in the second half of the year contributing to the total annualised rent roll increase of 14.5%⁽¹⁾. The UK has a loss after tax due to a revaluation deficit noted in the period, as outlined in "Portfolio valuation - Group" in greater detail.

The Company entered into acquisitive growth in the second half of the financial year as it saw significant opportunity in the market off the back of its €165.3m financing in November 2023, with the vast majority of capital either spent or committed to attractive assets in both Germany and the UK. The effects of the acquisitive growth are expected to be flowing through in FY2025, as the assets are integrated into the platform and contribute to the Group's FFO.

(1) The Company has chosen to disclose certain Group rental income figures utilising a constant foreign currency exchange rate of GBP:EUR 1.1695, being the closing exchange rate as at 31 March 2024.

On a per share basis, the impact of valuations stabilising resulted in a 28.3% increase in basic EPS for the period to 8.75c per share. Adjusted EPS, basic EPRA EPS and diluted EPRA EPS, which exclude the impact of valuations described above, increased by approximately 8.4%, 8.7% and 8.6% respectively reflecting the strong operational performance in the year.

*     See note 12 and the Business analysis section of the Annual Report and Accounts 2024.

Income

Total revenue reported in the period, which comprises rent, fee income relating to Titanium, other ancillary income from investment properties, and service charge income, increased from €270.1m for the 31 March 2023 year to €288.8m this year. The detail of the €18.7m increase in income is shown in the following table.

Annualised rent roll in Germany increased by 5.4% from €123.1m to €129.7m with organic growth contributing €8.5m respectively whilst disposals exceeded acquisitions by €1.9m  BizSpace's annualised rent roll increased 14.4%⁽¹⁾ from €56.8⁽¹⁾ m to €65.0⁽¹⁾m in the period, with the impact of organic growth of €4.1m being supported by net acquisitions of €4.1m. This is shown in more detail in the following table:

(1)    The Company has chosen to disclose certain Group rental income figures utilising a constant foreign currency exchange rate of GBP:EUR 1.1695, being the closing exchange rate as at 31 March 2024.

The rental growth in the period remains strong year on year, achieved through increasing rates whilst also modestly reducing vacancy rates. The vacancy remaining in the like-for-like portfolio, coupled with that acquired through our acquisitions, means that the opportunity that remains within this vacancy for further organic growth over the next few years has been preserved. As inflationary levels recede from their recent highs, the key to unlocking this in the most effective way is through the continuation of Sirius' capex investment programmes combined with a wide range of other intensive asset management initiatives.

Portfolio valuation - Group

The portfolio of owned assets was independently valued at €2,186.7m by Cushman & Wakefield LLP at 31 March 2024 (31 March 2023: €2,103.2), which converts to a book value of €2,210.6m after the adjustments in relation to lease incentives and inclusion of leased investment property. A breakdown of the movement in owned and leased investment property, excluding assets held for sale, is detailed in the table below.

*     Excluding assets held for sale.

The increase in value of the German portfolio of €44.4m was made up of €21.4m of asset acquisitions, less €45.5m of disposals, plus a €67.6m valuation increase on the existing portfolio and finally a €0.7m positive adjustment in respect of lease incentives. The €67.6m valuation increase was higher than the €26.6m of capex spent on that portfolio; hence, the net of these resulted in a €41.0m gain being booked through the Company's profit.

In the UK, the value of the BizSpace portfolio increased by €43.9m due to €3.4m of disposals offset by €52.7m of additions, a valuation deficit of €17.5m on the existing portfolio and a €12.5m foreign currency reduction due to the strengthening of GBP against EUR for the year. The €17.5m valuation deficit was further increased by €11.1m capex spent on that portfolio, resulting in a €28.6m deficit being reported through the Company's profit.

The Company recognised a gain on revaluation of investment properties of €12.4m for the year which compares to a €7.7m deficit recognised in the comparative prior period.

Portfolio valuation - Germany

The book value of the existing German portfolio that was owned for the full period increased by €68.0m or 4.2% from €1,636.1m to €1,704.1m. This was driven by an increase in annualised rent roll of €8.5m in the year which more than compensated for a gross yield expansion of approximately 20 bps.

The German portfolio at 31 March 2024 comprises 68 assets with a book value of €1,725.0m generating €127.6m of rental income and €125.3m of net operating income based on an occupancy of 85.2%.  This represents an average gross yield of 7.5% (31 March 2023: 7.3%), which translates to a net yield of 6.8% (31 March 2023: 6.5%) and an EPRA net yield (including estimated purchaser costs) of 6.3% (31 March 2023: 6.2%).

Yields have expanded within the German portfolio valuation by a further 20 bps in the period to 7.5% (31 March 2023:7.3%). The average capital value per sqm of the portfolio of €950 (31 March 2023: €912) also remains below replacement cost and, when considered with the level of vacancy that remains within the portfolio, illustrates the excellent opportunity for further growth, particularly from upgrading and letting up the sub-optimal vacant space through the Company's capex investment programmes.

The acquisitions made over recent years have replenished a lot of the vacancy that was transformed and let up through Sirius' capex investment programmes.  As a result, at 31 March 2024, 61% of the German portfolio are considered value-add assets (31 March 2023: 65%)  which, with average occupancy of 81.2% and valued at a gross yield of 8.0%, provide significant opportunity for further earnings and value growth. The mature assets which make up about 39% of the German portfolio have reached an occupancy level of 94.4% and, at a gross yield of 6.8%, are valued at a yield that is 120 bps lower than the value-add assets. As the transformation of the value-add assets continues, the yield gap between the mature and value-add assets is expected to reduce. The full details of the capex investment programmes are provided in the Asset management review - Germany section of this report.  The specifics of the value-add and mature portfolios are detailed in the table below:

*     Expressed as averages.

**    Including assets held for sale.

The reconciliation of book value to the independent Cushman & Wakefield LLP valuation excluding assets held for sale is as follows:

Portfolio valuation - UK

At 31 March 2024, the value of the UK portfolio was £394.7m (€461.6m), compared to a £367.2m (€417.7 m) valuation at 31 March 2023. Of the change in valuation, £41.6m is attributed to the acquisition of 5 assets (£44.9 m) offset by the disposal of Stoke (£3.3m) and yield expansion (£14.1m) during the period.

The like-for-like value of the UK portfolio was £349.8 m (€409.8m), which was lower than the 31 March 2023 valuation of £363.9m (€413.9m). The £14.1m decrease was driven by yield expansion of approximately 60 bps to a 9.9% like-for-like portfolio net yield, which fully offset a £3.6m increase in annualized rent roll during the period. On a euro basis, the like-for-like portfolio also benefited from the appreciation of GBP compared to the euro year on year, and the impact of yield expansion was reduced to €4.1m. The EPRA net yield (including estimated purchaser costs) stands at 8.7% (31 March 2023: 7.6%.

The average capital value per sq ft of the total portfolio of £91 per sq ft (€1,150 per sqm) (31 March 2023: £88 per sq ft (€1,072 per sqm)) also remains below replacement cost and further supports the sentiment that there remains value-add potential within the portfolio.

The UK does not have material lease incentives adjusting the investment property values.

Net asset value

The valuation movements mentioned above, together with retained profits after payment of dividends, resulted in an increase in net asset value per share to 104.96c at 31 March 2024, an uplift of 2.4% from 102.46c as at 31 March 2023. The adjusted net asset value per share increased to 111.12c at 31 March 2024, an uplift of 1.8% from 109.21c as at 31 March 2023. The Company paid out 5.98c per share of dividends during the financial year which contributed to a total shareholder accounting return (adjusted NAV growth plus dividends paid) of 7.2% (31 March 2023: 5.3%). The movement in NAV per share is explained in the following table:

(1) Adjusting items includes non-recurring items including restructuring costs, minorities, share of profit in associates, gains and losses on investments, share-based payments including vesting and foreign currency effects.

(2) See Annex of 2024 Annual accounts for further details.

(3) Adjusted for the potential impact of shares issued in relation to the Company's long-term incentive programmes, intangible assets, provisions for deferred tax and derivative financial instruments.

The EPRA NTA per share, which, like adjusted NAV per share, excludes the provisions for deferred tax and fair value of derivative financial instruments but also includes the potential impact of shares issued in relation to the Company's long-term incentive programmes and excludes intangible assets, was 109.82c, an increase of 1.6% from 108.11c as at 31 March 2023.

Financing

In November 2023, the Company saw significant opportunity in the acquisitions market and raised €165.3m via an equity placing of new shares to fund a pipeline of attractive asset acquisitions in both Germany and the UK. The Company has delivered on this pipeline, completing or notarising €157.8m (before costs) in acquisitions since.

In May 2023 the Company refinanced its €57.3m Deutsche Pfandbriefbank ("PBB") loan facility, seven months in advance of it falling due on 31 December 2023. The new facility amounting to €58.3m has a term of seven years at a fixed interest rate of 4.25%. In addition to this early refinancing, in August 2022 the Company secured a refinancing with Berlin Hyp AG, one year in advance, of its €170m facility due in October 2023, agreeing a new seven-year €170m facility commencing on 1 November 2023 with a fixed interest rate of 4.26%.

Of the €955.3m of total debt, the Company has €28.5m of debt coming due in the next twelve months which is made up of two tranches of the HSBC Schuldschein totalling €15m and €13.5m Saarbrücken Sparkasse. These loans come due in the fourth fiscal quarter and negotiations regarding extensions shall commence in due course.

The debt structure of the Company remains such that 75% of its debt is unsecured (31 March 2023: 75%) allowing the Company to maintain flexibility over its financing structure. As at 31 March 2024, the Company had a weighted average debt expiry of 4.0 years, net LTV was 33.9% (31 March 2023: 41.6%) and interest cover at EBITDA level was 8.3x (31 March 2023: 8.6x). All covenants were complied with in full during the period.

Fitch confirmed its BBB investment grade rating with "Stable Outlook" in October 2023.

Post balance sheet, the Company increased its €300.0m Corporate Bond due in November 2028 by 19.9%, issuing €59.9m in additional debt. The Company intends to utilise the proceeds for fuelling its acquisition pipeline and corporate purposes.

The Company's weighted average cost of debt is 2.10% whilst the weighted average debt expiry remains at 4.0 years following the above financing activity.

A summary of the movement in the Group's debt is set out below:

Movement in debt

Dividend

The Board has authorised a dividend in respect of the second half of the financial year ended 31 March 2024 of 3.05c per share, which together with the first half dividend of 3.00c per share, represents an increase of 6.5% on the 5.68c total dividend declared in respect of the financial year ended 31 March 2023.

The table below shows the dividends paid and pay-out ratios over the last five years, demonstrating the excellent progression the Company has made in the period as well as the ability of the Board to increase the dividend pay-out ratio whilst the proceeds of asset disposals are invested.

*     First half 67%, second half 65% of FFO.

**    First half 66%, second half 69% of FFO

Details of the dividend distribution and announcement are detailed in note 28 of the Annual Report and Accounts.

Summary

As inflation came off its peaks experienced in 2022 and acquisition opportunities in the market crystalized, the Company was able to grow its occupancy and capture organic growth whilst setting itself up for further growth through transacting on its acquisition pipeline in the second half of the year, purchasing in total five properties, three of which completed in April 2024.

The Company's balance sheet remains strong as demonstrated through its recent equity and debt financings in the year, permitting it to continue to grow through acquisitions whilst maintaining a healthy net LTV ratio. This has been confirmed by Fitch in October 2023 through its BBB investment grade rating with a stable outlook. The Company continues to deliver on its growth objectives and continues to be well positioned to take advantage of opportunities as they arise.

The Company's strong financial profile, along with its proven internal operating platform, means the Company is fully capable of adapting to changing market conditions. With acquisition firepower available, further vacancy to develop and reversion potential to capture, as well as a defensively positioned portfolio, the Company is well set to meet the challenges ahead and looks forward to continuing to deliver attractive and sustainable returns for shareholders in the future.

Chris Bowman

Chief Financial Officer

31 May 2024

DIRECTORS' RESPONSIBILITIES STATEMENT

The directors confirm that, to the best of their knowledge the preliminary consolidated financial statements have been prepared in accordance with international financial reporting standards, and give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group and that this announcement includes a fair summary of the development and performance of the business and the position of the Group. After making enquiries, the directors considered it appropriate to adopt the going concern basis in preparing the financial statements. The names and functions of the Company's directors are listed on the Company's website.

Daniel Kitchen

Chairman

Principal Risks and Uncertainties

The principal risks and uncertainties faced by the Group are included on pages 66 to 71 of the Group's Annual Report and Accounts 2023 available on the website at: www.sirius-real-estate.com

CONSOLIDATED INCOME STATEMENT

for the year ended 31 March 2024

All operations of the Group have been classified as continuing.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the year ended 31 March 2024

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

as at 31 March 2024

The financial statements on pages 139 to 188 were approved by the Board of Directors on 31 May 2024 and were signed on its behalf by:

Daniel Kitchen

Chair

Company number: 46442

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the year ended 31 March 2024

CONSOLIDATED STATEMENT OF CASH FLOWS

for the year ended 31 March 2024

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 March 2024

1. General information

Sirius Real Estate Limited (the "Company") is a company incorporated in Guernsey and resident in the United Kingdom for tax purposes, whose shares are publicly traded on the Main Market of the London Stock Exchange ("LSE") (primary listing) and the Main Board of the Johannesburg Stock Exchange ("JSE") (primary listing).

The consolidated financial information of the Company comprises that of the Company and its subsidiaries (together referred to as the "Group" or "Sirius") for the year ended 31 March 2024.

The principal activity of the Group is the investment in, and development of, commercial and industrial property to provide conventional and flexible workspace in Germany and the United Kingdom ("UK").

2. Accounting policies

(a) Basis of preparation and statement of compliance

The consolidated financial statements have been prepared on a historical cost basis, except for investment properties, investment properties held for sale and derivative financial instruments, which have been measured at fair value. The consolidated financial information is presented in euros and all values are rounded to the nearest hundred thousand shown in millions (€m), except where otherwise indicated.

The Company has prepared its annual consolidated financial statements in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") as a result of the primary listing on the JSE, the Disclosure and Transparency Rules of the United Kingdom Financial Conduct Authority, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee, Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council, the Listings Requirements of JSE Limited and The Companies (Guernsey) Law, 2008. The consolidated financial statements have been prepared on the same basis as the accounting policies set out in the Group's annual financial statements for the year ended 31 March 2023, except for the changes in accounting policies as shown in note 2(b). All forward-looking information is the responsibility of the Board of Directors and has not been reviewed or reported on by the Group's auditor.

(b) Changes in accounting policies

New and amended standards and interpretations

The Group applied for the first-time certain standards and amendments, which are effective for annual periods beginning on or after 1 January 2023 (unless otherwise stated).

IFRS 17 Insurance Contracts ("IFRS 17")

IFRS 17 is a comprehensive new accounting standard for insurance contracts covering recognition and measurement, presentation and disclosure. IFRS 17 replaces IFRS 4 Insurance Contracts. IFRS 17 applies to all types of insurance contracts (i.e., life, non-life, direct insurance and re-insurance), regardless of the type of entities that issue them as well as to certain guarantees and financial instruments with discretionary participation features; a few scope exceptions will apply. The overall objective of IFRS 17 is to provide a comprehensive accounting model for insurance contracts that is more useful and consistent for insurers, covering all relevant accounting aspects. IFRS 17 is based on a general model, supplemented by:

•     a specific adaptation for contracts with direct participation features (the variable fee approach)

•     a simplified approach (the premium allocation approach) mainly for short-duration contracts

The new standard had no impact on the Group's consolidated financial statements.

Definition of Accounting Estimates - Amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors ("IAS 8")

The amendments to IAS 8 clarify the distinction between changes in accounting estimates, changes in accounting policies and the correction of errors. They also clarify how entities use measurement techniques and inputs to develop accounting estimates.

The amendments had no impact on the Group's consolidated financial statements.

Disclosure of Accounting Policies - Amendments to IAS 1 Presentation of Financial Statements ("IAS 1") and IFRS Practice Statement 2: Making Materiality Judgements ("IFRS Practice Statement 2")

The amendments to IAS 1 and IFRS Practice Statement 2 provide guidance and examples to help entities apply materiality judgements to accounting policy disclosures. The amendments aim to help entities provide accounting policy disclosures that are more useful by replacing the requirement for entities to disclose their 'significant' accounting policies with a requirement to disclose their 'material' accounting policies and adding guidance on how entities apply the concept of materiality in making decisions about accounting policy disclosures.

The Group adopted the amendments to IAS 1 and IFRS Practice Statement 2 in the current year in relation to the Group's disclosures of accounting policies.

International Tax Reform-Pillar Two Model Rules - Amendments to IAS 12 Income Taxes ("IAS 12")

The amendments to IAS 12 have been introduced in response to the OECD's BEPS Pillar Two rules and include:

•    mandatory temporary exception to the recognition and disclosure of deferred taxes arising from the jurisdictional implementation of the Pillar Two model rules; and

•    disclosure requirements for affected entities to help users of the financial statements better understand an entity's exposure to Pillar Two income taxes arising from that legislation, particularly before its effective date.

The mandatory temporary exception - the use of which is required to be disclosed - applies immediately. The remaining disclosure requirements apply for annual reporting periods beginning on or after 1 January 2023.

The amendments had no impact on the Group's consolidated financial statements as the Group is not in scope of the Pillar Two model rules as its revenue is less than €750m per year.

A number of new other standards and amendments to standards have been issued but are not yet effective for the Group and have not been early adopted. The application of these new standards and amendments is not expected to have a material impact on the Group's consolidated financial statements.

(c) Going concern

The Group has prepared its going concern assessment for the period to 31 October 2025 (the "going concern period"), a period greater than twelve months from the approval of the Group financial statements, to align with the expected timing of the approval of the Company's subsidiary entities financial statements where a letter of support is expected to be required from the Company.

The Group's going concern assessment is based on a forecast of the Group's future cash flows. Management prepares a base case scenario and a severe but plausible downside scenario where sensitivities are applied to model the outcome on the occurrence of downside assumptions explained below. It considers the Group's principal risks and uncertainties and is dependent on a number of factors including financial performance, continued access to lending facilities (see note 23) and the ability to continue to operate the Group's secured and unsecured debt structure within its financial covenants. Within the going concern period, three of the Group's debt facilities mature, with a €5.0m tranche of the Schuldschein loan falling due in January 2025 and a €10.0m tranche falling due in March 2025 and the €12.8m Saarbrücken Sparkasse facility falling due in February 2025. No further debt of the Group matures until June 2026.

The severe but plausible scenario models a potential downturn in the Group's performance, including the potential impact of downside macro-factors such as geopolitical instability, future energy shortages, further cost increases due to inflation, pressures from increasing interest rates and outward yield movements on the Group's financial position and future prospects. The cash flow projections incorporate assumptions on future trading performance and potential valuation movements in order to estimate the level of headroom on the Group's debt facilities and covenants for loan to value, debt service cover, EPRA net asset value, unencumbered assets ratios, fixed charge ratios and occupancy ratios set out within the relevant finance agreements.

The impact of the macro-factors above has placed further pressure on the costs of the business, however this did not result in any deterioration in the Group's income streams in the year ended 31 March 2023 or in the year ended 31 March 2024 and asset values remained relatively stable throughout. However, the Directors continue to be mindful of the challenging macro-factors present in the market and have assessed the potential severity of the falls in valuations in the severe but plausible downside scenario in the going concern period.

The base case and severe but plausible downside scenarios include the following assumptions applied to both the German and UK portfolios:

Base case:

»     5.5% growth per annum in rent roll at 31 March 2024, principally from contractual increases in rents and organic growth through lease renewals;

»     increasing cost levels in line with forecast inflation of 3% per annum throughout the going concern period;

»     continuation of forecast capex investment;

»     continuation of forecast dividend payments in line with historic dividend payouts;

»     payment of contractual loan interest and loan amortisation amounts refinancing of €27.8m of debt facilities as they fall due; and

»     only acquisitions and disposals which are contractually committed are made, which includes three post balance sheet acquisitions amounting to £50.1m (€58.6m) in Gloucestershire, UK and the €21.4m acquisition in Klipphausen and the €21.5m acquisition in Cologne, Germany. These acquisitions completed in April 2024.

Severe but plausible downside scenario:

»     reduction in occupancy and rental income of 10% per annum from the base case assumptions;

»     reduction in service charge recovery of 10% per annum from the base case assumptions;

»     reduction in property valuations of 10% per annum;

»     continuation of forecast capex investment;

»     continuation of forecast dividend payments in line with historic dividend payouts; and

»     payment of contractual loan interest and loan amortisation amounts, repayment of €27.8m of debt facilities as they fall due; and

»     only acquisitions and disposals which are contractually committed are made, which includes three post balance sheet acquisitions amounting to £50.1m (€58.6m) in Gloucestershire, UK, the €21.4m acquisition in Klipphausen and the €21.5m acquisition in Cologne, both in Germany. These acquisitions completed in April 2024.

The Directors are of the view that there is a remote possibility of a more severe scenario arising than the above severe but plausible downside scenario based upon the Group's track record of performance in challenging scenarios, most recently through the high inflationary environment in both Germany and the UK, the Covid-19 pandemic and post-pandemic period. In addition, the Group tapped its €300.0m corporate bond in May 2024 raising an additional €51.3m in corporate debt which is included in both base case and severe but plausible downside scenarios, raised €165.3m in capital in November 2023 and had secured the refinancing of the €58.3m Deutsche Pfandbriefbank AG and €170.0m Berlin Hyp AG facilities in advance of their maturity dates.

The severe but plausible downside results in cash trap events occurring on the Group's occupancy covenant. The cash trap event does not have a material impact to the Group's cash flows. The Group is not forecasting any further cash trap or defaulting events in the severe but plausible downside scenario.

In the severe but plausible downside scenario, the Group assumes full repayment of the maturing loan obligations as they fall due, amounting to €27.8m in the going concern period. The Group forecasts indicate sufficient free cash would be available to repay these funds in full and maintain sufficient liquidity to not require the additional mitigating actions as outlined below available to it, should the severe but plausible downside scenario come to pass.

The Group also performed a reverse stress test over the impact of a fall in its property valuations and income reductions during the going concern period. This showed that the Group could withstand a fall in valuations of 24%, before there was a loan to value covenant breach and a reduction of 24% of net operating income before any income related covenants would breach, levels which the Group has not seen before. These events are considered to be remote due to the Company's strong performance throughout the most recent economic headwinds, with the macroeconomic environment pointing towards stability. The reductions required for the reverse stress test have never been seen by the Group.

In each of the scenarios considered for going concern, the Group forecasts having sufficient free cash available and if required, could utilise available mitigating actions which would be available to the Group in the going concern review period, which include restricting non-REIT relating dividends, reducing capital expenditure or the disposal of assets. The restriction of dividends or reducing capital expenditure are within the control of the Directors and there is sufficient time to implement these restrictions, if required. The use of such mitigating factors are not anticipated to be required.

The Directors have not identified any material uncertainties which may cast significant doubt on the Group's ability to continue as a going concern for the duration of the going concern period.

The Directors also evaluated potential events and conditions beyond the going concern period that may cast significant doubt on the Group's ability to continue as a going concern, with no significant transactions or events of material uncertainty identified.

After due consideration of the going concern assessment for the period to 31 October 2025, the Board believes it is appropriate to adopt the going concern basis in preparing its financial statements.

(d) Basis of consolidation

The consolidated financial information comprises the financial information of the Group as at 31 March 2024. The financial information of the subsidiaries is prepared for the same reporting period as the Company, using consistent accounting policies.

All intra-group balances and transactions and any unrealised income and expenses arising from intra-group transactions are eliminated in preparing the consolidated financial statements.

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.

Non-controlling interests represent the portion of profit or loss and net assets not held by the Group and are presented separately in the consolidated income statement and the consolidated statement of comprehensive income and within equity in the consolidated statement of financial position, separately from the Company's shareholders' equity.

(e) Acquisitions

Where a property is acquired through the acquisition of corporate interests, management considers the substance of the assets and activities of the acquired entity in determining whether the acquisition represents the acquisition of a business.

The Group accounts for an acquisition as a business combination where an integrated set of activities is acquired in addition to the property (see policy in note 2(z)). More specifically, consideration is made of the extent to which substantive processes are acquired and, in particular, the extent of services provided by the subsidiary. IFRS 3 Business Combinations ("IFRS 3") sets out an optional concentration test designed to simplify the evaluation of whether an acquired set of activities and assets is not a business. An acquired set of activities and assets is not a business if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets.

Where such acquisitions are not deemed to be an acquisition of a business, they are not treated as business combinations. Instead, they are treated as asset acquisitions, with the cost to acquire the corporate entity being allocated between the identifiable assets and liabilities of the entity based on their relative fair values on the acquisition date. Accordingly, no goodwill arises.

(f) Foreign currency translation

The consolidated financial information is presented in euros, which is the functional and presentational currency of the Parent Company. For each entity, the Group determines the functional currency and items included in the financial statements of each entity are measured using the functional currency.

Transactions in foreign currencies are initially recorded in the functional currency at the exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated into the functional currency at the exchange rate ruling at the statement of financial position date. All differences are taken to the statement of profit and loss. Non‑monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. 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. The gain or loss arising on translation of non-monetary items measured at fair value is treated in line with the recognition of the gain or loss on the change in fair value of the item (i.e. translation differences on items whose fair value gain or loss is recognised in other comprehensive income ("OCI") or profit or loss are also recognised in OCI or profit or loss, respectively).

On consolidation, the assets and liabilities of foreign operations are translated into euros at the rate of exchange prevailing at the reporting date and their statements of profit or loss are translated at the exchange rates at the dates of the transactions, or where appropriate, the average exchange rates for the period. The foreign exchange differences arising on translation for consolidation are recognised in OCI. On disposal of a foreign operation, the component of OCI relating to that particular foreign operation is reclassified to profit or loss.

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 spot rate of exchange at the reporting date.

(g) Revenue recognition

Rental income

Rental income from operating leases and licence agreements containing leases is recognised on a straight-line basis over the term of the relevant lease unless another systematic basis is more representative of the time pattern in which the benefit derived from the leased asset is diminished. Fixed or determinable rental increases, which can take the form of actual amounts or agreed percentages, are recognised on a straight-line basis over the term of material leases. If the increases are related to a price index to cover inflationary cost increases, then the policy is to apply the price index from the date it is effective on a straight-line basis.

The value of all lease incentives (including rent free periods, stepped rents, indexation clauses and other types of incentive)are spread on a straight-line basis over the lease term. Where there is a reasonable expectation that the tenant will exercise break options, the value of rent free periods and all similar lease incentives is booked up to the break date. The above applies to both revenues generated from investment properties and managed properties.

Revenue from contracts with customers

Revenue from contracts with customers is recognised when control of the goods or services is transferred to the customer at an amount that reflects the consideration to which the Group expects to be entitled in exchange for those goods or services.

(i) Service charge income

The Group mainly generates revenue from contracts with customers for services rendered to tenants including management charges and other expenses recoverable from tenants based on the Group's right to recharge tenants for costs incurred (with or without markup) on a day-to-day basis ("service charge income"). These services are specified in the lease agreements and separately invoiced. Service charge income is recognised as revenue when the performance obligations of the services specified in the lease agreements are met.

The individual activities vary significantly throughout the day and from day to day; however, the nature of the overall promise of providing property management service remains the same each day. Accordingly, the service performed each day is distinct and substantially the same. These services represent a series of daily services that are individually satisfied over time because the tenants simultaneously receive and consume the benefits provided by the Group. The actual service provided during each reporting period is determined using cost incurred as the input method.

Transaction prices are regularly updated and are estimated at the beginning of each year based on previous costs and estimated spend. Service charge budgets are prepared carefully to make sure that they are realistic and reasonable. Variable consideration is only included in the transaction price to the extent it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur. Performance obligations related to service charge revenue is discharged by the Company continuously and on a daily basis, through the provision of utilities and other services to tenants. Changes in service charge revenue are linked to changes in the cost of fulfilling the obligation or the value to a tenant at a given period of time. Accordingly, the variable consideration is allocated to each distinct period of service (i.e. each day) as it meets the variable consideration allocation exception criteria.

Service charge expenses are based on actual costs incurred and invoiced together with an estimate of costs to be invoiced in future periods as receipt of final invoices from suppliers can take up to twelve months after the end of the financial period. The estimates are based on expected consumption rates and historical trends and take into account market conditions at the time of recording.

Service charge income is based on service charge expense and takes into account recovery rates which are largely derived from estimated occupancy levels. Service charge costs related to vacant space are irrecoverable.

The Group acts as a principal in relation to these services, and records revenue on a gross basis, as it controls the specified goods or services before transferring them to tenants.

Where amounts invoiced to tenants are greater than the revenue recognised at the period end date, the difference is recognised as unearned revenue when the Group has unconditional right to consideration, even if the payments are non-refundable. Where amounts invoiced are less than the revenue recognised at the period end date, the difference is recognised as contract assets or, when the Group has a present right to payment, as receivables albeit unbilled.

In addition to the above, the Group has entered into leases and licensing arrangements (which meet the definition of a lease under IFRS 16 Leases ("IFRS 16")) where the revenue due from the tenant is an all-inclusive price, representing lease income (recognised in accordance with IFRS 16) and service charge income (recognised in accordance with IFRS 15 Revenue from Contracts with Customers ("IFRS 15")). Management has estimated the allocation of the revenues using the relevant service charge costs incurred and the occupancy of the properties where all-inclusive lease and licence arrangements are in place. The allocation resulted in €25.9m (2023: €24.0m) being recorded as service charge income.

(ii) Other income

(ii) (a) Fee income

The Group has contractual agreements with its investment in associate for the management of its properties. This generates fee income which is recognised when the services are provided to the investment in associate at an amount that reflects the consideration to which the Group expects to be entitled in exchange for those services. Income relating to managed properties is accounted for according to revenue recognition accounting policies set out above. The Group identifies itself as a principal in this arrangement as it controls and manages the services provided to its customers.

(ii) (b) Conferencing and catering

The group lets vacant spaces to existing tenants for conferencing & catering activities under separate agreements to the lease arrangements. This Income is recognised when control of the goods or services is transferred to the customer at an amount that reflects the consideration to which the Group expects to be entitled in exchange for those goods or services.

Interest income

Interest income is recognised as it accrues (using the effective interest method, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial instrument).

(h) Leases

Group as lessor

Leases where the Group does not transfer substantially all the risks and benefits of ownership of the asset are classified as operating leases.

Group as lessee

All contracts that give the Group the right to control the use of an identified asset over a certain period of time in return for consideration are considered leases within the meaning of IFRS 16.

For all contracts that meet the definition of leases according to IFRS 16, the Group, at the commencement date of the lease (i.e. the date the underlying asset is available for use), recognises lease liabilities equal to the present value of the future lease payments, discounted to reflect the term-specific incremental borrowing rate if the interest rate implicit in the lease is not readily determinable. Lease liabilities are subsequently increased by the periodic interest expenses and reduced by the lease payments made during the financial year.

Correspondingly, right of use assets are initially recognised at cost under IFRS 16 which is the amount of the lease liabilities (plus any advance payments that have already been made or any initial direct costs). Subsequently, the right of use assets are generally measured at cost, taking depreciation (calculated straight-line over the lease term) and impairments into account and are presented separately in the statement of financial position except for right of use assets that meet the definition of IAS 40 Investment Property ("IAS 40") which are presented as investment property and subsequently measured at fair value in line with the measurement rules set out in IAS 40.

Periods resulting from extension or termination options granted on a unilateral basis are assessed on a case-by-case basis and are only taken into account if their use is sufficiently probable.

The Group utilises the recognition exemptions provided by IFRS 16 and does not apply IFRS 16 to leases with a contractual term of twelve months or less or to leases in which the underlying asset is of low value (on a case-by-case basis).

Lease payments associated with short-term leases and with leases of low-value assets are recognised as expenses on a straight-line basis over the lease term.

Right of use assets relating to office spaces are depreciated on a straight-line basis over the shorter of the lease term and the estimated useful lives of the assets.

(i) Income tax

Certain subsidiaries may be subject to foreign taxes in respect of foreign sources of income. Sirius Real Estate Limited is a UK resident for tax purposes. The Group's UK property business is a UK Real Estate Investment Trust ("REIT"). As a result, the Group's UK property business does not pay UK corporation tax on its profits and gains from the qualifying rental business in the UK. Non-qualifying UK profits and gains continue to be subject to corporation tax as normal.

Current income tax

Current income tax assets and liabilities are measured at the reporting date at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the reporting date.

Deferred income tax

Deferred income tax is recognised on all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements, with the following exceptions:

•    where the temporary difference arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination that, at the time of the transaction, does not give rise to equal taxable and deductible temporary differences and affects neither accounting nor taxable profit or loss;

•    in respect of taxable temporary differences associated with investments in subsidiaries and associates, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future; and

•    deferred tax assets are only recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, carried forward tax credits or tax losses can be utilised.

Deferred tax assets and liabilities are only offset if there is a legally enforceable right to set off, they are levied by the same taxation authority and the realisation period is the same. In accordance with IAS 12, deferred tax assets and liabilities are not discounted, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date. The Group has applied the exception in IAS 12 to recognising and disclosing information about deferred tax assets and liabilities related to Pillar Two income taxes.

For accounting periods beginning on or after 1 January 2023 IASB ED/2019/5 amended the application of the initial recognition exemption for transactions giving rise to offsetting deferred tax assets and deferred tax liabilities. In respect of IFRS 16, the Group adopted the amendments to the initial recognition exemption under IAS 12 already in the year ended 31 March 2022 and recognises a deferred tax asset in respect of the IFRS 16 lease liabilities and a deferred tax liability in respect of IFRS 16 right of use, resulting in a net deferred tax asset for the year ended 31 March 2023.

The Group has applied the exception in IAS 12 to recognising and disclosing information about deferred tax assets and liabilities related to Pillar Two income taxes.

(j) Sales tax

Revenues, expenses, assets and liabilities are recognised net of the amount of sales tax except:

•    where the sales tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case the sales tax is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and

•    receivables and payables that are stated with the amount of sales tax included.

The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position.

(k) Investment properties

Investment properties are properties that are either owned by the Group or held under a lease which are held for long-term rental income and/or capital appreciation.

Investment properties owned by the Group are initially recognised at cost, including transaction costs when the control of the property is transferred. Where recognition criteria are met, the carrying amount includes subsequent costs to add to or replace part of an investment property. Subsequent to initial recognition, investment properties are stated at fair value, which reflects market conditions at the reporting date as determined by professional external valuer. Gains or losses arising from changes in the fair values of investment properties are included in the income statement in the period in which they arise.

The German properties are valued on the basis of a ten to fourteen year discounted cash flow model supported by comparable evidence. The discounted cash flow calculation is a valuation of rental income considering non-recoverable costs and applying a discount rate for the current income risk over a ten to fourteen year period. After ten to fourteen years, a determining residual value (exit scenario) is calculated, discounted to present value.

The UK properties are valued in accordance with the RICS Traditional Red Book valuation methodology, where the income being generated is capitalised by an appropriate yield. Yields are based on comparable evidence of similar quality assets which have traded in the open market. The yield applied reflects the age, location, ownership, customer base and agreement type.

Investment properties relating to leased assets are recognised in accordance with IFRS 16 (see policy in note 2(h)). Subsequent to initial recognition, investment properties relating to leased assets are stated at fair value, which reflects market conditions at the reporting date. Gains or losses arising from changes in the fair values of investment properties are included in the income statement in the period in which they arise.

The fair value of investment properties relating to leased assets as at 31 March 2024 and 31 March 2023 have been arrived at on the basis of a valuation carried out at that date by management. The valuation is based upon assumptions including future rental income and expenditure in accordance with the conditions of the related lease agreements. The properties are valued on the basis of a discounted cash flow model with the measurement period equal to the term of the lease agreements.

(l) Disposals of investment property

Investment property disposals are recognised when control of the property transfers to the buyer, which typically occurs on the date of completion. Profit or loss arising on disposal of investment properties is calculated by reference to the most recent carrying value of the asset adjusted for subsequent capital expenditure.

(m) Assets held for sale and disposal groups

(i) Investment properties held for sale

Investment properties held for sale are separately disclosed at the asset's fair value. In order for an investment property held for sale to be recognised, the following conditions must be met:

•     the asset must be available for immediate sale in its present condition and location;

•     the asset is being actively marketed;

•     the asset's sale is expected to be completed within twelve months of classification as held for sale;

•     there must be no expectation that the plan for selling the asset will be withdrawn or changed significantly; and

•     the successful sale of the asset must be highly probable.

(ii) Disposal groups

The Group classifies non-current assets and disposal groups as held for sale if their carrying amounts will be recovered principally through a sale transaction rather than through continuing use. Non-current assets and disposal groups classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell. Costs to sell are the incremental costs directly attributable to the disposal of a disposal group, excluding finance costs and income tax expense.

The criteria for held for sale classification is regarded as met only when the sale is highly probable and the disposal group is available for immediate sale in its present condition. Actions required to complete the sale should indicate that it is unlikely that significant changes to the sale will be made or that the decision to sell will be withdrawn. Management must be committed to the plan to sell the asset with the sale expected to be completed within one year from the date of the classification.

Property, plant and equipment and intangible assets are not depreciated or amortised once classified as held for sale.

Assets and liabilities classified as held for sale are presented separately in the statement of financial position.

Additional disclosures are provided in note 14.

(n) Plant and equipment

Recognition and measurement

Items of plant and equipment are stated at historical cost less accumulated depreciation and any impairment loss.

Depreciation

Where parts of an item of plant and equipment have different useful lives, they are accounted for as separate items of plant and equipment.

Depreciation is charged in the income statement on a straight-line basis over the estimated useful lives of an item of the fixed assets. The estimated useful lives are as follows:

Plant and equipment          three to ten years

Fixtures and fittings            three to fifteen years

Depreciation methods, useful lives and residual values are reviewed at each reporting date.

(o) Intangible assets

The Group recognises only acquired intangible assets. These intangibles are valued at cost.

The Group recognises both internally developed and acquired intangible assets. These intangibles are valued at cost.

Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses. Intangible assets with a definite useful life are amortised on a straight-line basis over their respective useful lives. Their useful lives are between three and five years. Any amortisation of these assets is recognised as such under administrative expenses in the consolidated income statement.

Intangible assets with an indefinite useful life, including goodwill, are not amortised.

Development expenditures on an individual project are recognised as an intangible asset when the Group can demonstrate:

•     the technical feasibility of completing the intangible asset so that the asset will be available for use or sale;

•     its intention to complete and its ability and intention to use or sell the asset;

•     how the asset will generate future economic benefits;

•     the availability of resources to complete the asset; and

•     the ability to measure reliably the expenditure during development.

Following initial recognition of the development expenditure as an asset, the asset is carried at cost less any accumulated amortisation and accumulated impairment losses. Amortisation of the asset begins when development is complete, and the asset is available for use. It is amortised over the period of expected future benefit. Amortisation is recorded in cost of sales. During the period of development, the asset is tested for impairment annually.

(p) Trade and other receivables

Rent and service charge receivables and any contract assets do not contain significant financing components and are measured at the transaction price. Other receivables are initially measured at fair value plus transaction costs. Subsequently, trade and other receivables are measured at amortised cost and are subject to impairment (see note 2(x)). The Group applies the simplified impairment model of IFRS 9 Financial Instruments in order to determine expected credit losses in trade and other receivables, including lease incentives.

The Group assesses on a forward-looking basis the expected credit losses associated with its trade and other receivables. A provision for impairment is made for the lifetime expected credit losses on initial recognition of the receivable. If collection is expected in more than one year, the balance is presented within non-current assets.

(q) Treasury Shares and shares issued to the Employee Benefit Trust

Own equity instruments are deducted from equity. No gain or loss is recognised in the income statement on the purchase, sale, issue or cancellation of the Group's equity instruments.

(r) Share-based payments

The grant date fair value of share-based payment awards granted to employees is recognised as an employee expense, with a corresponding increase in equity, over the period that the employees unconditionally become entitled to the awards.

The amount recognised as an expense is adjusted to reflect the number of awards for which the related service and non-market vesting conditions are expected to be met, such that the amount ultimately recognised as an expense is based on the number of awards that meet the related service and non-market performance conditions at the vesting date.

(s) Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and in hand, demand deposits and other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to a known amount of cash and are subject to an insignificant risk of change in value. Cash is measured at amortised cost.

(t) Bank borrowings

Interest-bearing bank loans and borrowings are initially recorded at fair value net of directly attributable transaction costs.

Subsequent to initial recognition, interest-bearing loans and borrowings are measured at amortised cost using the effective interest rate method.

When debt refinancing exercises are carried out, existing liabilities will be treated as being extinguished when the new liability is substantially different from the existing liability. In making this assessment, the Group will consider the transaction as a whole, taking into account both qualitative and quantitative characteristics in order to make the assessment.

(u) Trade payables

Trade payables are initially measured at fair value and are subsequently measured at amortised cost, using the effective interest rate method.

(v) Equity instruments

Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.

(w) Dividends

Interim dividend distributions to shareholders are recognised in the financial statements when paid. Final dividend distributions to the Company's shareholders are recognised as a liability in the consolidated financial information in the period in which the dividends are approved by the shareholders. The final dividend relating to the year ended 31 March 2024 will be approved and recognised in the financial year ending 31 March 2025.

(x) Impairment excluding investment properties

(i) Financial assets

A financial asset (excluding financial assets at fair value through profit and loss) is assessed at each reporting date to determine whether there is any impairment. The Group recognises an allowance for expected credit losses ("ECLs") for all receivables and contract assets held by the Group. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted at an approximation of the original effective interest rate. The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms and that are not recognised separately by the Group.

For rent and service charge receivables and any contract assets, the Group applies a simplified approach in calculating ECLs. The Group does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date (i.e. a loss allowance for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default). In determining the ECLs the Group takes into account any recent payment behaviours and future expectations of likely default events (i.e. not making payment on the due date) based on individual customer credit ratings, actual or expected insolvency filings or Company voluntary arrangements and market expectations and trends in the wider macroeconomic environment in which our customers operate.

Impairment losses are recognised in the income statement. For more information refer to note 6. Trade and other receivables are written off once all avenues to recover the balances are exhausted and there is no expectation of recovery.

(ii) Non-financial assets

The carrying amounts of the Group's non-financial assets, other than investment property, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset's recoverable amount is estimated.

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generate cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the "cash-generating unit").

An impairment loss is recognised if the carrying amount of an asset or cash-generating unit exceeds its estimated recoverable amount. Impairment losses are recognised in the income statement. Impairment losses recognised in profit or loss in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit (or group of units) on a pro rata basis.

(y) Current versus non-current classification

The Group presents assets and liabilities in the statement of financial position based on current/non-current classification, except for deferred tax assets and liabilities which are classified as non-current assets and liabilities. An asset is current when it is:

•    expected to be realised or intended to be sold or consumed in the normal operating cycle;

•    held primarily for the purpose of trading;

•    expected to be realised within twelve months after the reporting period; or

•    cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve  months after the reporting period.

All other assets are classified as non-current.

A liability is current when:

•    it is expected to be settled in the normal operating cycle;

•    it is held primarily for the purpose of trading;

•    it is due to be settled within twelve months after the reporting period; or

•    there is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.

The Group classifies all other liabilities as non-current.