Annual Report 2006
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ANNUAL REPORT 2006 feel estate feel INTERVIEW IN DETAIL: FACE TO FACE WITH THE EXECUTIVE BOARD 16 CENTER, + 16 StyleTest CITIES ARE YOU WELL DRESSED? THE VALUE OF A SHOPPING CENTER SHOPPINGSHOPPING WHY WE LOVE IT SO MUCH editorial Dear Shareholders and Friends, we have taken a radical approach to our Annual Report for 2006: the design and layout are as lively and fresh as a lifestyle magazine. Our aim is not just to tell you about our succes- ses, but to give you an insight into the ever-changing world of our business with articles, features and interviews on all aspects of shopping and real estate. Claus-Matthias Böge, CEO A magazine also needs attractive advertising. As a sign of the importance we attach to good partner- ships, we have given our tenants free advertising space in this report as a thank you – undoubtedly a first for a German annual report. Our tenants make a significant contribution to the success of our shop- ping centers and therefore of Deutsche EuroShop. Of course we also want to inform you of our results for financial year 2006. After all, we achieved an increase in our earnings for the fifth year running. Deutsche EuroShop is a successful company. Our shareholders have also profited from our success, with the share price scaling new record heights. I hope that you will find reading the report a pleasurable experi- ence, rather like a shopping trip. Not for nothing have we given the magazine the title “Feel Estate”. Shopping centers are not just properties, they also embody emotions. „Feel Estate” in this With best wishes Annual Report. Tour in Gdansk The Phoenix-Center in Hamburg at night 1 welcome! 72 Demographic Change and Retailing contents 01 Editorial 04 Key data and highlights 06 Interview with the Executive Board 14 Report of the Supervisory Board Shopping 20 Shopping – why we love it so much 48 26 The typical visitor to Travelling Europe: a DES shoppingcenter 16 centers, 16 cities, 28 What I brought in 2006 so many sights 30 Hollywood goes shopping 32 Top ten 2006: books and perfumes Lifestyle 34 Style Test: Are you well dressed? 66 What’s hot, what’s not? 76 Travel guide for Gdansk 82 Style Ticker 2007 The centers 36 The centers – an overview 44 Shop opening hours 46 Increase in VAT 48 Portrait of the centers 68 What is the key to success in the retail sector? 72 Demographic Change and Retailing 80 Clear potential for innovative shopping centers Reads well, smells good: 32 Best of 2006 THE DES ANNUAL REPORT 2006 Covermodel Nicolette Maurer wears Style Ticker: trousers and jacket by H&M, bag and headband This year’s best fashion by New Yorker, ring by Jette Joop/Christ. 82 backside: jacket by s.Oliver, T-shirt by H&M, necklace by Bijou Brigitte, jeans by New Yorker. Investor Relations Style Test: 84 The Shopping Center Share Are you 88 Stock market in 2006 well dressed? 90 Chart analysis 91 Advantages and disadvantages of REITs 34 92 Roadshows and conferences 183 94 Annual report – trend scouting Photo - competition: Your favourite 95 Marketing shopping theme 97 Events 98 Trends in IR 100 The value of a shopping center 104 Corporate governance Group management report 109 Makroeconomic Enviroment 113 Report of Economic Position 122 Risk Report 126 Remuneration Report 127 Report on Expected Developments Consolidated financial statements 20 130 Consolidated balance sheet Shopping – Why we love 132 IFRS consolidated income statement it so much 133 IFRS consolidated cash flow statement 134 Statement of changes in equity 136 Consolidated Statement of Changes innon-current assets 140 notes to the financial statements enjoy for financial year 2006 171 Auditor’s Report it! Service 172 Legal Acknowledgements & Sudoku 174 Glossary 177 Investment Structure 178 Readers’ letters 84 The Shopping 180 Index Center Share 182 Multi-Year-Overview 183 Photo - competition 184 Financial calendar 03 DEUTSCHE EUROSHOP AG ANOVERVIEW EARNINGS PER SHARE THE CENTERS IN EUROPE AS OF 2006 + ¤5.84 89% KEY DATA 2005–2006 HIGHLIGHTS IN 2006 ¤ million 2006 2005 CHANGE March City Arkaden Klagenfurt opens Revenue 92.9 72.1 29% April EBIT 86.3 57.5 50% Sale of the center Shopping Etrembières, Income from investments 1.9 5.0 -62% Annemasse Net finance costs -41.0 -39.3 -4% June EBT 117.7 68.1 73% Annual General Meeting on 22 June 2006 and Consolidated profit 100.3 48.7 106% distribution of a dividend of ¤2.00 per share. Earnings per share (¤)1 5.84 3.09 89% Deutsche EuroShop wins the Capital Investor Relations Prize 2006 in the MDAX category Equity 796.3 724.7 10% Minority interest 101.6 62.8 62% July Liabilities 797.3 677.1 18% Laying of the foundation stone for the Stadt-Galerie Hameln Total assets 1,796.2 1,543.6 16% Equity ratio (%)2 50.0 51.0 August Acquisition of a 74% interest Gearing (%) 100 96 in the Galeria Baltycka, Gdansk Net asset value 877.4 794.5 10% September Net asset value per share (¤) 51.05 46.22 10% Laying of the foundation stone Number shares 17,187,499 17,187,499 for the Galeria Baltycka, Gdansk Cash and cash equivalents 96.9 197.2 -51% 3 December Dividend per share (¤) 2.10 2.00 5% Acquisition of a 75% interest in the Stadtgalerie Passau 1undiluted 2 incl. minority interest 3 proposal Sale of the Centro Commerciale Tuscia, Viterbo AT A GLANCE Revenue ¤ million EBIT ¤ million Consolidated profit ¤ million 61.4 72.1 92.9 49.8 57.5 86.3 27.7 48.7 100.3 2004 2005 2006 2004 2005 2006 2004 2005 2006 Our values, our goals Values We are the only public company in Germany that invests solely in shopping centers in prime locations. We invest only in carefully chosen properties. High quality standards and a high degree of flexibility are just as important to us as sustained earnings growth from index- and turnover-linked rental contracts. In addition, we boast a higher than average occupancy rate of around 99% and professional center management – these are the pillars of our success. Goals Deutsche EuroShop does not seek short-term success, but rather long-term growth and the resulting stable increase in the value of our portfolio. Our objective is to distribute an attractive dividend to our shareholders every year from secure long-term income. In order to achieve this, we shall acquire further prime properties and hence establish ourselves as one of the largest companies in Europe focusing on retail properties. 05 Interview with the Executive Board 06 DES | Annual Report 2006 “Investors’ interest in shopping centers remains high” Deutsche EuroShop has put yet another highly successful financial year under its belt, and shareholders are benefiting from this. However, it is becoming increasingly difficult to keep up the pace. We spoke to Claus-Matthias Böge, Chief Executive Officer, and Olaf G. Borkers, Chief Financial Officer. Interview: Patrick Kiss / Photos: Werner Bartsch Claus-Matthias Böge (left side): Olaf G. Borkers (right side): Suit, shirt and tie: Karl Lagerfeld (SinnLeffers) Suit: s.Oliver Selection (SinnLeffers) Shirt and tie: Karl Lagerfeld (SinnLeffers) 07 Interview with the Executive Board Mr Böge, what kind of year was 2006 for Deutsche What was the reason for this impressive 29% EuroShop? increase? Böge: It was an excellent year. Once again, we had set Böge: There are a number of different reasons. The Rathaus- ourselves a large number of targets – and met them too. We Center in Dessau made its first contribution to consolidated expected revenue to increase from ¤72.1 million revenue at the beginning of 2006, as did City Arkaden to between ¤91 and ¤94 million. The final Klagenfurt, which opened at the end of March. In addition, figure of ¤92.9 million was almost exactly the Main-Taunus-Zentrum was included proportionately in in the middle of this range. the consolidated financial statements for the first time. What were your bottom line earnings in 2006? Böge: Consolidated profit was approximately ¤100 million, more than twice as high as last year’s, due in part to measurement gains on our shopping center portfolio. Borkers: This figure contains gains from disposals. In April 2006, we sold the Shopping Etrembières center in France for ¤41 million. This was followed at the end of the year by the sale of the Centro Commerciale Tuscia in Viterbo, Italy, for ¤57.6 million – a figure that was far higher than we had origi- nally expected. Taken together, these two transactions gener- ated a profit of ¤14.8 million. This corresponded to a premium of approximately 18% or so on the most recent market values of the properties recognised in the financial statements. “We had set ourselves a large number of targets – and met them too.” Blazer and shirt: Smog (New Yorker) Trousers: Giorgio (Sinn Leffers) Scarf: New Yorker Watch: Emporio Armani (Christ) Shoes: Geox (Görtz) 08 DES | Annual Report 2006 Could you elaborate a little on Böge: Put in figures, measurement gains increased by the measurement gains? ¤49.9 million to ¤72.3 million. All portfolio properties Borkers: Yes, certainly. The fair increased in value; taken together, the centers in Klagenfurt value of the properties was and Dessau, which were included for the first time, recorded determined by independ- measurement gains of ¤22.7 million. ent appraisers as at 31 December 2006 using a What are the earnings figures broken down per discounted cash flow proce- share? dure. With this procedure, the Böge: Undiluted earnings per share rose from ¤3.09 to fair value corresponds to the ¤5.84.