Financial position
Principles and objectives of financial management
For the purposes of financing its investments, Deutsche EuroShop uses the stock exchange for procuring equity and loans, as well as the credit markets for procuring loans. Within the Group, both individual property companies and Deutsche EuroShop borrow from banks. Deutsche EuroShop’s credit standing has been shown to be advantageous when negotiating loan conditions. The Group can also arrange its financing independently and flexibly.
Loans are taken out in euros for all Group companies. In general, the use of equity and loans for investments should be equally weighted and the equity ratio within the Group (including minority interests) should not fall below 45%.
Financing of our real estate projects is done on a long-term basis. For this purpose, derivative financial instruments are also used which serve to hedge against rising capital market interest rates. Available credit lines enable Deutsche EuroShop to react quickly to investment opportunities. Until used for investment, cash not needed is invested in the short term as term deposits to finance ongoing costs or pay dividends.
Financing analysis
As of 31 December 2009, the Deutsche EuroShop Group reported the following key financial data:
| € million | 2009 | 2008 | Change |
|---|---|---|---|
| Total assets | 2,112.1 | 2,006.9 | +105.2 |
| Equity (incl. minority interests) | 1,044.4 | 977.8 | +66.6 |
| Equity ratio (%) | 49.4 | 48.7 | +0.7 |
| Bank loans and overdrafts | 934.2 | 899.8 | +34.4 |
| Loan to value ratio (%) | 46.0 | 46.0 | 0 |
At €1,044.4 million, the Group’s economic equity capital, which comprises the equity of the Group shareholders (€921.3 million) and the equity of the minority shareholders (€123.1 million), was €66.6 million higher than in the previous year. The equity ratio improved slightly by 0.7% to 49.4%.
Current and non-current bank loans and overdrafts rose from €899.8 million to €934.2 million in the year under review, an increase of €34.4 million. Of this amount, €8.3 million was used to finance the expansion of Altmarkt-Galerie Dresden and €41.4 million resulted from the first-time full consolidation of City-Point Kassel. Meanwhile, a net amount of €15.3 million in loans was repaid.
In addition, non-current loans totalling €77.0 million were raised in the year under review; these were used to replace expiring loans for the Rhein-Neckar-Zentrum and the Allee-Center Hamm.
The bank loans and overdrafts in place at the end of the year are used exclusively to finance non-current assets. 46% of non-current assets were therefore financed by loans.
As in previous years, in the 2009 financial year Deutsche EuroShop had €100 million available in credit lines which were not taken up after July 2009. The average utilisation of credit lines in the first half of the financial year amounted to €30.1 million.
Overall, the debt finance terms as of 31 December 2009 remained fixed at 5.27% p.a. (previous year: 5.33% p.a.) for an average period of 7.1 years (previous year: 7.0 years). Deutsche EuroShop maintains credit facilities with 17 banks which – with the exception of one in Austria – are all German banks.
| OVERVIEW OF THE LOAN STRUCTURE | as of 31 December 2009 | |||
|---|---|---|---|---|
| Interest lockin | Duration (years) |
Principal amounts (€ thousand) |
% of total loans |
Average interest rate |
| Up to 1 year: | 1 | 13,399 | 1.4 | 5.27% |
| 1 to 5 years: | 4.3 | 424,071 | 45.7 | 5.48% |
| 5 to 10 years: | 7.8 | 382,151 | 41.1 | 5.10% |
| Over 10 years: | 16.8 | 109,400 | 11.8 | 5.06% |
| Total | 7.1 | 929,022 | 100.0 | 5.27% |
Nine of the 33 loan agreements currently contain arrangements regarding covenants. These involve conditions relating to the capacity to repay, the level of debt and, in one case, a condition concerning the loan-to-market value ratio. All conditions were met.
The interest lock-in for a loan of €82 million used to finance the Rhein-Neckar-Zentrum will expire in 2010. A new loan to replace it, with a ten-year interest lock-in, was agreed in 2009. The credit line is also up for renewal in 2010. In addition, scheduled repayments amounting to €13.4 million will be made from operating cash flow during the 2010 financial year. From 2011 to 2014, loans will be repaid at an average rate of €15.1 million per year. Interest lock-ins for loans in the amount of €26.9 million will expire in 2012, while those for loans amounting to €179.5 million will expire in 2013, and those for loans of €155.7 million will expire in 2014.
Bank loans and overdrafts totalling €934.2 million were recognised in the balance sheet as of the reporting date. The difference compared with the amounts given here of €929.0 million relates to deferred interest and repayment obligations that were settled at the beginning of 2010.
Investment analysis
The investment budget for the expansion of the Altmarkt-Galerie in Dresden was increased from €150 million to €165 million after the concept was amended so that a hotel, for which there is already a long-term lease in place, could also be sited there as part of the expansion. The share attributable to the Group amounts to €82.5 million. Following investment of €21.2 million in 2008, a further investment of €14.0 million was made in the 2009 financial year. Completion is scheduled for spring 2011.
Deutsche EuroShop increased its stake in City-Point Kassel from 40% to 90% in January 2009. The purchase price for the shares was €16.4 million. A further €2.5 million was invested in subsequent alteration work during the year under review.
An investment of €72 million is budgeted for the expansion of the Main-Taunus-Zentrum. Building work began in October 2009. The share of the investment budget attributable to the Group amounts to €31 million, of which €2.4 million was invested in the year under review. Completion is scheduled for late autumn 2011.
Spending on investments for the other portfolio properties amounted to €2.2 million.
Liquidity analysis
The Group’s operating cash flow of €63.2 million (2008: €55.1 million) is the amount that has been generated for the shareholders following the deduction of all costs from the leasing of the shopping center floor space. It serves to finance the dividends of Deutsche EuroShop AG and payments to minority shareholders. The rise of €8.1 million compared with the previous year is chiefly due to the shopping centers in Hameln and Passau, which were opened during the previous year.
In addition to operating cash flow, cash flow from operating activities contains changes in receivables and other assets as well as other liabilities and provisions. At €62.1 million, cash flow from operating activities was down €17.7 million on the previous year (€79.8 million).
Investments in the year under review amounted to €35.9 million and were thus considerably lower than in the previous year, in which €91.2 million was invested.
The inflow of funds from financing activities totalled €15.5 million. A €7.2 million repayment of bank loans and overdrafts, and payments to Group shareholders and minority shareholders of our property companies amounting to around €43.8 million, were offset by receipts of €66.5 million from the capital increase conducted in July 2009.
Cash and cash equivalents therefore increased by €40.2 million in the year under review and amounted to €81.9 million on the reporting date.