Daejan Holdings (DJAN)

 

LSE:DJAN: Half Yearly Report

Daejan Holdings

25 Nov 2015 07:00:06

Daejan Hldgs PLC

RNS Number : 8489G
Daejan Holdings PLC
25 November 2015
 

25 November 2015

 

 

DAEJAN HOLDINGS PLC

INTERIM RESULTS ANNOUNCEMENT for the half year ended 30 September 2015

 

 

The Board is pleased to present the Interim Statement for the half year ended 30 September 2015.

 

 

 

30 Sep 2015

 

 

30 Sep 2014

 

 

31 Mar 2015

 

 

£000

 

£000

(Restated*)

 

£000

(Restated*)

 

 

 

 

 

 

Profit before tax

58,863

 

135,503

 

277,539

 

 

 

 

 

 

Profit after tax

45,820

 

110,460

 

227,560

 

 

 

 

 

 

Basic and diluted earnings per share

£2.81

 

£6.77

 

£13.95

 

 

 

 

 

 

Equity shareholders' funds per share

£85.17

 

£75.54

 

£82.59

* As explained in note 1 to the attached financial information, comparative figures have been restated to reflect the impact of a change in accounting policy for fixed rate loans and borrowings.

                  

 

·     The profit before tax for the period was £58.9 million (2014: £135.5 million) after accounting for the net valuation gain on investment properties of £35.5 million (2014: £107.9 million).

·     The property portfolio has been valued by the Directors based on the recommendations of the Group's external advisers. The overall net valuation gain of £35.5 million (2014: £107.9 million) reflects the anticipated slowdown in the rates of growth in property values in both the UK and USA and the absence of the one-off benefit to capital values of the letting of Africa House and the Strand Palace rent review which arose last year.

·     Although there appears to have been little movement in gross rental income, once the one-off benefit of £7.9 million arising on the settlement last year of a major rent review is eliminated from the comparative figures it can be seen that there has been an underlying increase (before foreign exchange translation gains) of 6.75%.

·     The underlying profit for the period is £23.5 million, down £5.6 million on the previous period largely as a result of a lower level of realised disposal profits.

·     In my last annual report I took a cautious view of the outlook and this remains my stance. Whilst economic circumstances at present are relatively benign in both the UK and USA, it seems likely that before long we will see the start of the rise in USA interest rates to be followed in due course by the UK. Nevertheless the business should in the short term continue to benefit from the current favourable combination of low interest rates, low inflation and positive economic growth. We will continue with our proven strategy based on the prudent long term pursuit of growth in asset values.

·     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 and financial instruments and the incidence of voids or bad debts.

·     An interim dividend of 35p per share will be paid on 4 March 2016 to shareholders on the register on 5 February 2016.

 

 

 

 

 

B S E Freshwater

Chairman

25 November 2015

 

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 2015























Unaudited


Unaudited


Audited









Six months


Six months


Year









ended


ended


ended









30 Sep 2015


30 Sep 2014


31 Mar 2015






















£000


£000


£000











(Restated*)


(Restated*)


Total rental & related income from investment property


66,220


66,463


128,976















Property operating expenses




(35,282)


(33,966)


(70,041)















Net rental & related income from investment property




30,938


32,497


58,935









Profit on disposal of investment property

3,879


5,962


12,036















Net valuation gains on investment property


35,513


107,882


229,722













Administrative expenses





(6,185)


(5,871)


(11,821)















Net operating profit before net financing costs


64,145


140,470


288,872










Fair value gains on derivative financial instruments


496


320


137


Fair value (losses)/gains on current investments


(10)


1


7


 

Other financial income





151


160


286













Financial expenses





(5,919)


(5,448)


(11,763)















Net financing expense





(5,282)


(4,967)


(11,333)


























Profit before taxation


58,863


135,503


277,539















Income tax





(13,043)


(25,043)


(49,979)















Profit for the period





45,820


110,460


       227,560


Attributable to:












Equity holders of the parent




45,727


110,318


227,395


Non-controlling interest





93


142


165















Profit for the period





45,820


110,460


227,560




























Basic and diluted earnings per share


£2.81


£6.77


£13.95















* See Note 1











 

Consolidated Statement of Comprehensive Income for the six months ended 30 September 2015


















Unaudited


Unaudited


Audited







Six Months


Six Months


Year







ended


ended


ended







30 Sep 2015


30 Sep 2014


31 Mar 2015


















£000


£000


£000









(Restated*)


(Restated*)








Profit for the period

45,820


110,460


227,560

 

Foreign exchange translation differences

(3,651)


3,124


14,273







Total comprehensive income for the period

42,169


113,584


241,833






















Attributable to:







Equity holders of the parent

42,077


113,438


241,647

Non-controlling interest

92


146


186












Total comprehensive income for the period

42,169


113,584


241,833











* See Note 1

 



 

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 2015






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 2014

4,074

555

12,796

1,093,043

1,110,468

169

1,110,637









Restatement*

-

-

(644)

7,709

7,065

-

7,065

















Restated Balance at 1 April 2014

4,074

555

12,152

1,100,752

1,117,533

169

1,117,702









Profit for the year

-

-

-

227,395

227,395

165

227,560









Foreign exchange translation differences

-

-

14,252

-

14,252

21

14,273









Payments to non-controlling interest

-

-

-

-

-

(299)

(299)









Dividends to equity shareholders

-

-

-

(13,362)

(13,362)

-

(13,362)

















Balance at 1 April 2015

4,074

555

26,404

1,314,785

1,345,818

56

1,345,874









Profit for the period

-

-

-

45,727

45,727

93

45,820









Foreign exchange translation differences

-

-

(3,650)

-

(3,650)

(1)

(3,651)









Payments to non-controlling interest

-

-

-

-

-

(87)

(87)









Balance at 30 September 2015

4,074

555

22,754

1,360,512

1,387,895

61

1,387,956









* See Note 1








 








 



 

 

Consolidated Balance Sheet as at 30 September 2015
























Unaudited


Unaudited


Audited








30 Sep 2015


30 Sep 2014


31 Mar 2015




















£000


£000


£000










(Restated*)


(Restated*)

Assets












Investment property





1,887,248


1,682,323


1,855,230

Deferred tax assets





692


755


792













Total non-current assets





1,887,940


1,683,078


1,856,022

Trade and other receivables




58,192


67,811


55,586

Current investments






165


2,077


187

Cash and cash equivalents






68,454


53,299


52,293













Total current assets





126,811


123,187


108,066













Total assets






2,014,751


1,806,265


1,964,088

Equity












Share capital






4,074


4,074


4,074

Share premium





555


555


555

Translation reserve





22,754


15,273


26,404

Retained earnings





1,360,512


1,211,070


1,314,785













Total equity attributable to equity









holders of the parent





1,387,895


1,230,972


1,345,818

Non-controlling interest





61


47


56













Total equity






1,387,956


1,231,019


1,345,874

Liabilities











Loans and borrowings



282,161


281,654


285,747

Deferred tax liabilities





239,135


203,622


232,210













Total non-current liabilities




521,296


485,276


517,957












Loans and borrowings



18,449


5,370


18,663

Trade and other payables





45,601


49,069


45,879

Current taxation





41,449


                 35,531


35,715











Total current liabilities





105,499


89,970


100,257












Total liabilities






626,795


575,246


618,214











Total equity and liabilities





2,014,751


1,806,265


1,964,088











Equity shareholders' funds per share





£85.17


£75.54


£82.59











* See Note 1










  










 



 

 

Consolidated Statement of Cash Flows for the six months ended 30 September 2015























Unaudited



Unaudited



Audited








Six months



Six months



Year








ended



ended



ended








30 Sep 2015



30 Sep 2014



31 Mar 2015





















£000

£000


£000

£000


£000

£000

Cash flows from operating activities









Net cash generated from operations

21,897



9,786



41,205


Interest received

151



163



289


Interest paid





(5,817)



(5,227)



(11,731)


Payments to non-controlling interest

(87)



(268)



(299)


Tax refund/(paid)

1,684



(257)



(3,383)
















Net cash from operating activities


17,828



4,197



26,081










Cash flows from investing activities









Acquisition and development of investment property

(6,891)



(21,762)



(43,460)


Proceeds from sale of investment property

5,465



8,111



16,772
















Net cash absorbed by investing activities


(1,426)



(13,651)



(26,688)











Cash flows from financing activities










Repayment of bank loans

(651)



(687)



(33,353)


New bank loans and overdrafts

-



5,000



36,611


Repayment of mortgages

(4,669)



(4,389)



(23,793)


New mortgages

5,694



3,161



25,085


Dividends paid

-



-



(13,362)
















Net cash generated from/(absorbed by) financing activities


374



  3,085



(8,812)










Net increase/(decrease) in cash and cash equivalents


16,776



(6,369)



(9,419)









Cash and cash equivalents brought forward

52,293



59,149



59,149









Effect of exchange rate fluctuations on cash held

(615)



519



2,563









Cash and cash equivalents

68,454



53,299



52,293

 



 

 

Notes to the Consolidated Interim Financial Statements for the six months ended 30 September 2015

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 2015 except as detailed below.  As required by the Listing Rules of the Financial Services Authority, 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 2016 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.

During the six month period to 30 September 2015 the Group changed its accounting policy for loans and borrowings. Prior to the change, the Group initially recognised and subsequently recorded fixed rate loans and borrowings at fair value. Following the change, the Group will continue to initially recognise loans and borrowings at fair value, but will subsequently record them at amortised cost.

The Directors believe that the change in accounting policy will be beneficial to users of the financial statements as most, if not all, other large property investment companies in the United Kingdom have adopted this policy. This will provide more reliable and relevant comparisons between the Group's financial position and results with that of other property investment companies.

To maintain consistency between reporting periods, the Group has applied this change retrospectively. The Group has therefore adjusted the comparative figures for the year ended 31 March 2015 and the six months ended 30 September 2014 so that these figures are presented as if the change in accounting policy had always applied.

The impact of the change in policy affects the carrying value of loans and borrowings, the fair value of gains and losses recognised and the associated deferred tax credits and assets.

Loans and borrowings cumulatively decreased by £17,347,000 at 30 September 2015, by £18,380,000 at 31 March 2015, by £12,860,000 at 30 September 2014 and by £11,679,000 at 1 April 2014. Deferred tax assets cumulatively decreased by £5,652,000 at 30 September 2015, by £6,155,000 at 31 March 2015, by £4,666,000 at 30 September 2014 and by £4,614,000 at 1 April 2014. The translation reserve cumulatively decreased by £183,000 at 30 September 2015, by £39,000 at 31 March 2015, by £521,000 at 30 September 2014 and by £644,000 at 1 April 2014. Retained earnings cumulatively increased by £11,879,000 at 30 September 2015, by £12,264,000 at 31 March 2015, by £8,715,000 at 30 September 2014 and by £7,709,000 at 1 April 2014.

The fair value losses on fixed rate loans and borrowings recognised in the consolidated income statement were eliminated in each period. The impact was a loss of £788,000 for the six months ended 30 September 2015, a gain of £5,599,000 for the year ended 31 March 2015 and a gain of £957,000 for the six months ended 30 September 2014. The income tax charge decreased by £403,000 for the six months ended 30 September 2015, increased by £1,045,000 for the year ended 31 March 2015 and decreased by £48,000 for the six months ended 30 September 2014.

Basic and diluted earnings per share decreased due to the change in the accounting policy by 2 pence for the six months ended 30 September 2015, increased by 27 pence for the year ended 31 March 2015 and by 6 pence for the six months ended 30 September 2014.

 

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 2015 was unqualified and did not contain a statement under section 498 of the Companies Act 2006.  Statutory accounts for the year ended 31 March 2015 have been delivered to the Registrar of Companies.  The interim financial statements were approved by the Board of Directors on 24 November 2015. 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 2015

£000

£000

£000

£000

Rental and related income

46,465

19,755

-

66,220






Property operating expenses

(23,556)

(11,726)

-

(35,282)






Profit/(loss) on disposal of property

4,126

(247)

-

3,879






Net valuation movements on property

35,513

-

-

35,513






Administrative expenses

(5,807)

(378)

-

(6,185)






Profit before finance costs

56,741

7,404

-

64,145






Net financing expense

(2,058)

(3,224)

-

(5,282)






Profit before taxation

54,683

4,180

-

58,863






Income tax charge

(10,197)

(2,846)

-

(13,043)






Profit for the period

44,486

1,334

-

45,820






Capital expenditure

3,840

3,051

-

6,891

As at 30 September 2015





Investment property

1,476,441

410,807

-

1,887,248

Other assets

85,336

51,748

(9,581)

127,503

Total segment assets

1,561,777

462,555

(9,581)

2,014,751

Total segment liabilities

(351,740)

(284,636)

9,581

(626,795)

Capital employed

1,210,037

177,919

-

1,387,956

 


UK

USA

Eliminations

Total

For the six months ended 30 September 2014

£000

(Restated*)

£000

(Restated*)

£000

£000

(Restated*)

Rental and related income

48,763

17,700

-

66,463






Property operating expenses

(23,090)

(10,876)

-

(33,966)






Profit/(loss) on disposal of property

6,761

(799)

-

5,962






Net valuation movements on property

102,465

5,417

-

107,882






Administrative expenses

(5,528)

(343)

-

(5,871)






Profit before finance costs

129,371

11,099

-

140,470






Net financing expense

(2,058)

(2,909)

-

(4,967)






Profit before taxation

127,313

8,190

-

135,503






Income tax charge

(21,706)

(3,337)

-

(25,043)






Profit for the period

105,607

4,853

-

110,460






Capital expenditure

20,252

1,510

-

21,762

As at 30 September 2014





Investment property

1,338,933

343,390

-

1,682,323

Other assets

87,785

44,097

(7,940)

123,942

Total segment assets

1,426,718

387,487

(7,940)

1,806,265

Total segment liabilities

(330,991)

(252,195)

7,940

(575,246)

Capital employed

1,095,727

135,292

-

1,231,019






 

* See Note 1

 

 





4.   Dividends  

No dividends were paid in the six months ended 30 September 2015 (six months ended 30 September 2014: £Nil).

5.   Investment properties

The Directors have estimated the value of the investment properties at 30 September 2015 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 2016.

6.   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 2015

Unaudited

30 Sep 2014

Audited

31 Mar 2015



Book Value

Fair Value

Book Value

Fair Value

Book Value

Fair Value


£000

£000

£000

£000

£000

£000








Loans and borrowings

300,610

317,957

287,024

299,884

304,410

322,790

Interest rate swaps

3,462

3,462

3,775

3,775

3,958

3,958









304,072

321,419

290,799

303,659

308,368

326,748








Current

21,911

25,243

9,145

11,961

22,621

25,796

Non-current

282,161

296,176

281,654

291,698

285,747

300,952









304,072

321,419

290,799

303,659

308,368

326,748






















 

In both 2015 and 2014 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.

7.   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 RE Freshwater has 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 2015, the aggregate net amounts due from the Group to Highdorn Co. Limited and Freshwater Property Management Limited in relation to such agency receipts and payments was £0.2 million (2014: £18.5 million due to the Group). 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 paid by the Group during the period for the provision of property and other management services by Highdorn Co. Limited and Freshwater Property Management Limited, not included above, were £2.6 million (six months ended 30 September 2014: £2.1 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 2015.

8.   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 2015. A list of current Directors is maintained on the Daejan Holdings PLC website www.daejanholdings.com.

 

B S E Freshwater

Chairman

25 November 2015

 

 


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