28 November 2018

 

DAEJAN HOLDINGS PLC

INTERIM RESULTS ANNOUNCEMENT for the half year ended 30 September 2018

 

The Board is pleased to present the Interim Statement for the half year ended 30 September 2018.

 

 

	30 Sep 2018		30 Sep 2017		31 Mar 2018
	£000		£000		£000
Profit before tax	61,100		56,643		201,262
Profit after tax	48,858		45,474		202,958
Basic and diluted earnings per share	£2.99		£2.79		£12.45
Equity shareholders' funds per share	£115.77		£103.28		£111.25

 

·    The profit before tax for the period was £61.1 million (2017: £56.6 million) after accounting for the net valuation gain on investment properties of £32.5 million (2017: £29.5 million).

·    The property portfolio has been valued by the Directors based on the recommendations of the Group's external advisers and in the UK continues to show modest growth whilst the USA has been flat following increases in local interest rates.

·    We continue to see some increase in rental income in the UK and USA, primarily driven by the letting of completed development projects.

·    Brexit continues to provide political and economic uncertainty which has led to reduced forecasts for economic growth. This combination of factors will provide a challenging environment for our UK business. In the USA the economic outlook is more encouraging and should provide a positive environment to grow our business.

·    The principal risk factors affecting the remainder of the financial year continue to be exposure to movements in the valuation of the Group's investment properties, movements in the sterling/dollar exchange rate and the incidence of voids and bad debts.

·    An interim dividend of 35p per share will be paid on 8 March 2019 to shareholders on the register on 8 February 2019.

 

B S E Freshwater

Chairman

28 November 2018

 

For further information please contact:

 

Mark Jenner	Nick Oborne
Company Secretary	Weber Shandwick Financial
Daejan Holdings PLC
Tel: 020 7836 1555	Tel: 020 7067 0700

 

 

Consolidated Income Statement for the six months ended 30 September 2018
								Unaudited		Unaudited		Audited
								Six months		Six months		Year
								ended		ended		ended
								30 Sep 2018		30 Sep 2017		31 Mar 2018
								£000		£000		£000
Total rental & related income from investment property								73,966		71,270		142,885
Property operating expenses								(37,015)		(38,923)		(76,407)
Net rental & related income from investment property								36,951		32,347		66,478
Profit on disposal of investment property								4,929		6,720		11,893
Net valuation gains on investment property								32,521		29,536		146,438
Administrative expenses								(6,940)		(6,395)		(13,263)
Net operating profit before net financing costs								67,461		62,208		211,546
Fair value gains on derivative financial instruments								840		1,309		1,923
Fair value gains on current investments								-		-		6
Other financial income								482		266		581
Financial expenses								(7,683)		(7,140)		(12,794)
Net financing expense								(6,361)		(5,565)		(10,284)
Profit before taxation								61,100		56,643		201,262
Income tax								(12,242)		(11,169)		1,696
Profit for the period								48,858		45,474		202,958
Attributable to:
Equity holders of the parent								48,789		45,423		202,889
Non-controlling interest								69		51		69
Profit for the period								48,858		45,474		202,958
Basic and diluted earnings per share								£2.99		£2.79		£12.45

 

 

 

Consolidated Statement of Comprehensive Income for the six months ended 30 September 2018
						Unaudited		Unaudited		Audited
						Six Months		Six Months		Year
						ended		ended		ended
						30 Sep 2018		30 Sep 2017		31 Mar 2018
						£000		£000		£000
Profit for the period						48,858		45,474		202,958
Foreign exchange translation differences						24,830		(18,101)		(29,759)
Total comprehensive income for the period						73,688		27,373		173,199
Attributable to:
Equity holders of the parent						73,612		27,338		173,156
Non-controlling interest						76		35		43
Total comprehensive income for the period						73,688		27,373		173,199

 

All other comprehensive income may be reclassified as profit and loss in the future.

 

 

 

Consolidated Statement of Changes in Equity for the six months ended 30 September 2018
					Equity	Non-
	Share	Share	Translation	Retained	shareholders'	controlling	Total
	capital	premium	reserve	earnings	funds	interest	equity
	£000	£000	£000	£000	£000	£000	£000
Balance at 1 April 2017	4,074	555	61,117	1,589,969	1,655,715	240	1,655,955
Profit for the period	-	-	-	202,889	202,889	69	202,958
Foreign exchange translation differences	-	-	(29,733)	-	(29,733)	(26)	(29,759)
Payments to non-controlling interest	-	-	-	-	-	(192)	(192)
Dividends to equity shareholders	-	-	-	(15,969)	(15,969)	-	(15,969)
Balance at 1 April 2018	4,074	555	31,384	1,776,889	1,812,902	91	1,812,993
Profit for the period	-	-	-	48,789	48,789	69	48,858
Foreign exchange translation differences	-	-	24,823	-	24,823	7	24,830
Payments to non-controlling interest	-	-	-	-	-	(11)	(11)
Dividends to equity shareholders	-	-	-	-	-	-	-
Balance at 30 September 2018	4,074	555	56,207	1,825,678	1,886,514	156	1,886,670

 

 

 

Consolidated Balance Sheet as at 30 September 2018
							Unaudited		Unaudited		Audited
							30 Sep 2018		30 Sep 2017		31 Mar 2018
							£000		£000		£000
Assets
Investment property							2,468,822		2,262,773		2,373,184
Deferred tax assets							54		302		197
Total non-current assets							2,468,876		2,263,075		2,373,381
Trade and other receivables							81,398		70,639		62,714
Current investments							154		161		158
Cash and cash equivalents							92,794		79,917		98,752
Total current assets							174,346		150,717		161,624
Total assets							2,643,222		2,413,792		2,535,005
Equity
Share capital							4,074		4,074		4,074
Share premium							555		555		555
Translation reserve							56,207		43,032		31,384
Retained earnings							1,825,678		1,635,392		1,776,889
Total equity attributable to equity
holders of the parent							1,886,514		1,683,053		1,812,902
Non-controlling interest							156		81		91
Total equity							1,886,670		1,683,134		1,812,993
Liabilities
Loans and borrowings							308,746		297,535		296,501
Deferred tax liabilities							287,981		295,713		271,807
Total non-current liabilities							596,727		593,248		568,308
Loans and borrowings							58,035		35,669		53,958
Trade and other payables							54,572		54,734		52,489
Current taxation							47,218		47,007		47,257
Total current liabilities							159,825		137,410		153,704
Total liabilities							756,552		730,658		722,012
Total equity and liabilities							2,643,222		2,413,792		2,535,005
Equity shareholders' funds per share							£115.77		£103.28		£111.25

 

 

 

Consolidated Statement of Cash Flows for the six months ended 30 September 2018
							Unaudited			Unaudited			Audited
							Six months			Six months			Year
							ended			ended			ended
							30 Sep 2018			30 Sep 2017			31 Mar 2018
						£000	£000		£000	£000		£000	£000
Cash flows from operating activities
Net cash generated from operations						17,186			25,417			56,480
Interest received						481			266			581
Interest paid						(7,559)			(7,134)			(12,592)
Tax paid						(4,553)			(4,841)			(8,967)
Net cash from operating activities							5,555			13,708			35,502
Cash flows from investing activities
Acquisition and development of investment property						(21,725)			(18,205)			(39,424)
Proceeds from sale of investment property						6,286			7,079			16,085
Net cash absorbed by investing activities							(15,439)			(11,126)			(23,339)
Cash flows from financing activities
Repayment of bank loans						(1,049)			(1,362)			(2,509)
New bank loans and overdrafts						-			-			15,000
Repayment of mortgages						(9,775)			(13,819)			(58,398)
New mortgages						9,737			12,005			70,216
Dividends paid						-			-			(15,969)
Payments to non-controlling interest						(11)			(194)			(192)
Net cash (absorbed by) / generated from financing activities							(1,098)			(3,370)			8,148
Net (decrease) / increase in cash and cash equivalents							(10,982)			(788)			20,311
Cash and cash equivalents brought forward							98,752			84,283			84,283
Effect of exchange rate fluctuations on cash held							5,024			(3,578)			(5,842)
Cash and cash equivalents							92,794			79,917			98,752

 

 

Notes to the Consolidated Interim Financial Statements for the six months ended 30 September 2018

1.   Basis of preparation 

This interim financial information has been prepared in accordance with International Accounting Standard (IAS) 34 Interim Financial Reporting, applying the accounting policies and presentation that were applied in the preparation of the Company's published consolidated financial statements for the year ended 31 March 2018. The Directors have considered the result of the endorsement by the EU of new or changed International Financial Reporting Standards that are applicable or available for early adoption in the preparation of the Company's next consolidated financial statements for the year ending 31 March 2019 and concluded that they have no material effect on either the current or prior periods.

The Directors have reviewed the current and projected financial position of the Group and are satisfied that the Group has adequate resources to cover current liabilities.  Therefore, the Directors continue to adopt the going concern basis in preparing the half year report.

2.   Status of the interim financial information

The interim financial information in this statement has not been audited or reviewed by auditors pursuant to the Auditing Practices Board guidance on review of interim financial information and does not constitute statutory accounts, as defined in section 435 of the Companies Act 2006. The auditors' report on the statutory accounts for the year ended 31 March 2018 was unqualified and did not contain a statement under section 498 of the Companies Act 2006.  Statutory accounts for the year ended 31 March 2018 have been delivered to the Registrar of Companies.  The interim financial statements were approved by the Board of Directors on 27 November 2018. The preparation of the interim financial information requires management to make assumptions and estimates about future events which are uncertain, the actual outcome of which may result in a materially different outcome from that anticipated.

 

 

3.   Segmental Analysis

 

	UK	USA	Eliminations	Total
For the six months ended 30 September 2018	£000	£000	£000	£000
Rental and related income	47,822	26,144	-	73,966
Property operating expenses	(22,923)	(14,092)	-	(37,015)
Profit/(loss) on disposal of property	5,620	(691)	-	4,929
Net valuation movements on property	32,521	-	-	32,521
Administrative expenses	(6,468)	(472)	-	(6,940)
Profit before finance costs	56,572	10,889	-	67,461
Net financing expense	(2,876)	(3,485)	-	(6,361)
Profit before taxation	53,696	7,404	-	61,100
Income tax charge	(10,362)	(1,880)	-	(12,242)
Profit for the period	43,334	5,524	-	48,858
Capital expenditure	15,856	3,057	-	18,913
As at 30 September 2018
Investment property	1,831,882	636,940	-	2,468,822
Other assets	83,476	102,618	(11,694)	174,400
Total segment assets	1,915,358	739,558	(11,694)	2,643,222
Total segment liabilities	(389,979)	(378,267)	11,694	(756,552)
Capital employed	1,525,379	361,291	-	1,886,670

 

 

	UK	USA	Eliminations	Total
For the six months ended 30 September 2017	£000	£000	£000	£000
Rental and related income	45,602	25,668	-	71,270
Property operating expenses	(25,051)	(13,872)	-	(38,923)
Profit on disposal of property	6,527	193	-	6,720
Net valuation movements on property	24,103	5,433	-	29,536
Administrative expenses	(6,085)	(310)	-	(6,395)
Profit before finance costs	45,096	17,112	-	62,208
Net financing expense	(1,296)	(4,269)	-	(5,565)
Profit before taxation	43,800	12,843	-	56,643
Income tax charge	(6,032)	(5,137)	-	(11,169)
Profit for the period	37,768	7,706	-	45,474
Capital expenditure	15,086	2,866	-	17,952
As at 30 September 2017
Investment property	1,694,357	568,416	-	2,262,773
Other assets	84,627	77,588	(11,196)	151,019
Total segment assets	1,778,984	646,004	(11,196)	2,413,792
Total segment liabilities	(360,768)	(381,086)	11,196	(730,658)
Capital employed	1,418,216	264,918	-	1,683,134

4.   Taxation

The tax charge in the interim statement is in line with the current UK statutory rate. The higher rate on our US generated profits is offset by a lower future tax rate on our UK deferred property valuation gains.

5.   Dividends 

No dividends were paid in the six months ended 30 September 2018 (six months ended 30 September 2017: £Nil).

6.   Investment properties

The Directors have estimated the value of the investment properties at 30 September 2018 after consultation with the Group's advisers.  A full valuation of the Group's properties will be carried out by independent professional valuers at 31 March 2019.

7.   Financial Instruments - fair value disclosure

 

The Group seeks to reduce interest rate risk by fixing rates on the majority of its loans and borrowings, either through the use of fixed rate mortgage finance or through interest rate swaps.  The Group does not speculate in treasury products.

 

The Group does not hedge account and all its mortgages and interest rate swaps are initially recognised at fair value. Mortgages are subsequently recorded at amortised cost whilst interest rate swaps are subsequently recorded at fair value, with any movement being recorded in the consolidated income statement.  The fair values of all these financial instruments are determined by reference to observable inputs that are classified as Level 2 in the fair value hierarchy set out in International Financial Reporting Standard 13 Fair Value Measurement. Fair values have been determined by discounting expected future cash flows using market interest rates and yield curves over the remaining term of the instrument, as adjusted to reflect the credit risk attributable to the Group and, where relevant, its counterparty.

 

Fair value measurements are as follows:

 

	Unaudited 30 Sep 2018		Unaudited 30 Sep 2017		Audited 31 Mar 2018
	Book Value	Fair Value	Book Value	Fair Value	Book Value	Fair Value
	£000	£000	£000	£000	£000	£000
Loans and borrowings	366,781	371,328	333,204	345,403	350,459	358,199
Interest rate swaps	321	321	1,775	1,775	1,161	1,161
	367,102	371,649	334,979	347,178	351,620	359,360
Current	58,356	58,639	37,444	38,992	55,119	55,898
Non-current	308,746	313,010	297,535	308,186	296,501	303,462
	367,102	371,649	334,979	347,178	351,620	359,360

 

In both 2018 and 2017 there were no non-recurring fair value measurements and there were no material differences between the fair value and carrying amounts of all the other financial assets of the Group.

8.   Related party transactions

Day-to-day management of the Group's properties in the UK is mainly carried out by Highdorn Co. Limited and by Freshwater Property Management Limited.  Mr BSE Freshwater and Mr SI Freshwater are directors of both companies.  They have no beneficial interest in the share capital of Highdorn Co. Limited.  Mr BSE Freshwater, Mr SI Freshwater and Mr D Davis are directors of the parent company of Freshwater Property Management Limited but have no beneficial interest in either company.  Mr CB Freshwater and Mr RE Freshwater have a beneficial interest in a trust holding interests in shares in Highdorn Co. Limited.

In their capacity as managing agents, Highdorn Co. Limited and Freshwater Property Management Limited collect rents and incur direct property expenses on behalf of the Group.  At 30 September 2018, the aggregate net amounts due to the Group from Highdorn Co. Limited and Freshwater Property Management Limited in relation to such agency receipts and payments was £9.4 million (2017: £3.9 million). These amounts are not secured and are payable on demand.  No guarantees have been given or received and the amounts are settled in cash.

The amounts charged by the Group during the period for the provision of property and other management services by Highdorn Co. Limited and Freshwater Property Management Limited were £2.6 million (six months ended 30 September 2017: £3.0 million).

The Board considers that the Directors are the key management personnel of the Group and their remuneration is disclosed in the Daejan Holdings PLC Annual Report for 31 March 2018.

9.   Statement of Directors' responsibilities

The Directors confirm that this condensed set of financial statements has been prepared in accordance with IAS 34 as adopted by the European Union, and that the interim management report herein includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8.

The Directors of Daejan Holdings PLC are listed in the Daejan Holdings PLC Annual Report for
31 March 2018. A list of current Directors is maintained on the Daejan Holdings PLC website www.daejanholdings.com.

 

B S E Freshwater

Chairman

28 November 2018