Daejan Hldgs PLC – Final Results

The financial highlights for the year ended 31 March 2018 are as follows:

                                                                                                                                               

 

2018

 

2017

 

 

£000

 

£000

 

Investment property

2,373,184

 

2,256,800

 

Net rental and related income from investment property

66,478

 

64,800

     

Profit before taxation

201,262

 

198,396

 

Income tax

Profit for the year

Total equity

1,696

202,958

1,812,993

 

(36,266)

162,130

1,655,955

 

 

 

 

 

 

Equity shareholders' funds per share

£111.25

 

£101.61

 

Earnings per share

£12.45

 

£9.93

 

 

 

The revaluation of the investment property portfolio at the year end has resulted in a net valuation surplus for the year of £146,438,000 (2017 – £144,508,000). As a result of the reduction in the USA corporation tax rate from 35% to 21%, the Group has benefitted from a release of £39.9m from the provision for deferred tax. The Board has recommended a final dividend of 68p per share in respect of the year ended 31 March 2018 payable on 2 November 2018 to shareholders on the register on 5 October 2018.  This will make a total dividend for the year of 103p (2017 – 98p).

 

Earnings per share is calculated by reference to profit on ordinary activities after taxation attributable to equity holders of the parent of £202,889,000 (2017 – £161,779,000) and 16,295,357 (2017 – 16,295,357) ordinary shares being the weighted average number of ordinary shares in issue during the year. Equity shareholders' funds per share is calculated by reference to total equity attributable to equity holders of the parent of £1,812,902,000 (2017 – £1,655,715,000) and the ordinary shares detailed above.

 

 

DAEJAN HOLDINGS PLC

CONSOLIDATED INCOME STATEMENT

FOR THE YEAR ENDED 31 MARCH 2018

 

 

Year

 

Year

 

ended

 

ended

 

31 March

 

31 March

 

2018

 

2017

 

£000

 

£000

 

 

 

 

Gross rental income

131,323

 

125,522

Service charge income

11,562

 

15,216

Total rental and related income from investment property

142,885

 

140,738

 

 

 

 

Property operating expenses

(76,407)

 

(75,938)

Net rental and related income from investment property

66,478

 

64,800

 

 

 

 

Profit on disposal of investment property

11,893

 

14,594

Net valuation gains on investment property

146,438

 

144,508

Administrative expenses

(13,263)

 

(12,559)

Net operating profit before net financing costs

211,546

 

211,343

 

 

 

 

Fair value gains on derivative financial instruments

1,923

 

 86

Fair value gains on current investments

6

 

      –      

Other financial income

581

 

499

Financial expenses

(12,794)

 

(13,532)

Net financing expense

(10,284)

 

(12,947)

 

 

 

 

Profit before taxation

201,262

 

198,396

Income tax

1,696

 

(36,266)

Profit for the year

202,958

 

162,130

 

 

 

 

Attributable to:-

 

 

 

Equity holders of the parent

202,889

 

161,779

Non-controlling interest

69

 

351

Profit for the year

202,958

 

162,130

 

 

 

 

Basic and diluted earnings per share

£12.45

 

£9.93

 

 

DAEJAN HOLDINGS PLC

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 MARCH 2018

 

 

Year ended

Year ended

 

31 March

31 March

 

2018

2017

 

£000

£000

 

 

 

Profit for the year

202,958

162,130

Foreign exchange translation differences

(29,759)

29,076

Total comprehensive income for the year

173,199

191,206

 

 

 

Attributable to:

 

 

Equity holders of the parent

173,156

190,845

Non-controlling interest

43

361

Total comprehensive income for the year

173,199

191,206

 

 

 

DAEJAN HOLDINGS PLC

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 MARCH 2018

 

 

Issued share capital

Share premium

Translation reserve

  Retained earnings

Equity shareholders' funds

Minority interest

Total equity

 

£000

£000

£000

£000

£000

£000

£000

 

 

 

 

 

 

 

 

Balance at 1 April 2016

4,074

555

32,051

1,443,345 

1,480,025

69

1,480,094

Profit for the year

161,779

161,779

351

162,130

Foreign exchange translation differences

 29,066

29,066

10

29,076

Distributions to non-controlling interest

 (190)

(190)

Dividends to equity shareholders

(15,155)

(15,155)

(15,155)

Balance at 31 March 2017

     4,074

555

61,117

1,589,969

1,655,715

240

1,655,955

Profit for the year

202,889

202,889

69

202,958

Foreign exchange translation differences

(29,733)

(29,733)

(26)

(29,759)

Distributions to non-controlling interest

(192)

(192)

Dividends to equity shareholders

(15,969)

(15,969)

(15,969)

Balance at 31 March 2018

     4,074

555

31,384

1,776,889

1,812,902

91

1,812,993

 

 

DAEJAN HOLDINGS PLC

CONSOLIDATED BALANCE SHEET AS AT 31 MARCH 2018

 

 

31 March

 

31 March

 

2018

 

2017

 

£000

 

£000

 

 

 

 

Assets

 

 

 

Investment property

2,373,184

 

2,256,800

Deferred tax assets

197

 

524

Total non-current assets

2,373,381

 

2,257,324

 

 

 

 

Trade and other receivables

62,714

 

65,062

Current investments

158

 

162

Cash and cash equivalents

98,752

 

84,283

Total current assets

161,624

 

149,507

Total assets

2,535,005

 

2,406,831

 

 

 

 

Equity

 

 

 

Share capital

4,074

 

4,074

Share premium

555

 

        555

Translation reserve

31,384

 

61,117

Retained earnings

1,776,889

 

1,589,969

Total equity attributable to equity holders of the parent

1,812,902

 

1,655,715

Non-controlling interest

91

 

     240        

Total equity

1,812,993

 

1,655,955

 

 

 

 

Liabilities

 

 

 

Loans and borrowings

296,501

 

303,242

Deferred tax liabilities

271,807

 

299,756

Total non-current liabilities

568,308

 

602,998

 

 

 

 

 

 

 

 

Loans and borrowings

53,958

 

49,297

Trade and other payables

52,489

 

51,360

Current taxation

47,257

 

47,221

Total current liabilities

153,704

 

147,878

Total liabilities

722,012

 

750,876

Total equity and liabilities

2,535,005

 

2,406,831

 

 

DAEJAN HOLDINGS PLC

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 MARCH 2018

 

 

Year

Year

 

ended

ended

 

31 March

31 March

 

2018

2017

 

 

£000

£000

£000

£000

Cash flows from operating activities

 

 

 

 

Cash generated from operations

56,480

 

39,150

 

Interest received

581

 

500

 

Interest paid

(12,592)

 

(13,529)

 

Tax paid

(8,967)

 

(7,132)

 

Net cash from operating activities

 

35,502

  

18,989

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

Acquisition and development of investment property

(39,424)

 

(27,726)

 

Proceeds from sale of investment property

16,085

 

18,242

 

Net cash absorbed by investing activities

 

(23,339)

 

(9,484)

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

Repayment of bank loans                                     

(2,509)

 

(1,871)

 

New bank loans                                                                                                  

15,000

       

 

Repayment of mortgages

(58,398)

 

(6,899)

 

New mortgages

70,216

 

8,057

 

Dividends paid to equity holders of the parent

Payments to non-controlling interest

(15,969)

(192)

 

(15,155)

(190)

 

Net cash generated from/(absorbed by) financing activities

 

8,148

 

(16,058)

 

 

 

 

 

Net increase/(decrease) in cash and cash equivalents

 

20,311

 

(6,553)

Cash and cash equivalents brought forward

 

84,283

 

84,863

Effect of exchange rate fluctuations on cash held

 

 

(5,842)

 

 

 

5,973

Cash and cash equivalents

 

98,752

 

84,283

 

 

DAEJAN HOLDINGS PLC

 

Notes

1.   The financial information set out in this Preliminary Announcement does not constitute the Company's statutory accounts for the years ended 31 March 2018 or 2017.  The financial information for 2017 is derived from the statutory accounts for 2017 which have been delivered to the Registrar of Companies. The Auditors have reported on the 2017 accounts; their report was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under Section 498(2) or (3) of the Companies Act 2006.  The statutory accounts for 2018 will be finalised on the basis of the financial information presented by the Directors in this Preliminary Announcement and using policies consistent in all material respects with the policies applied in the Company's statutory accounts for 2017, as set out in those accounts as delivered to the Registrar of Companies. The statutory accounts for 2018 will be delivered to the Registrar of Companies following the Company's next Annual General Meeting.

 

To facilitate comparisons with most other major UK listed property groups, the consolidated statement of cash flows has been presented using the indirect method; no restatement of prior year numbers was required.

 

 

2.   Significant judgements and estimates

 

In preparing the financial information the Group must make a number of judgements and estimates. Management consider the following estimates to be particularly significant because of the level of complexity and estimation involved in their application and their impact on the financial information.

 

i.    Property valuations

The valuation of the Group's property portfolio is inherently subjective, depending on many factors, including the individual nature of each property, its location and expected future net rental values, market yields and comparable market transactions. Therefore the valuations are subject to a degree of uncertainty and are made on the basis of assumptions which may not prove to be accurate, particularly in periods of difficult market or economic conditions. All the Group's properties are valued by external valuers with appropriate qualifications and experience.

 

In the UK the aggregate amount of the valuation is £1,799,333,000 at 31 March 2018 (2017 – £1,668,630,000) and in the US the aggregate amount of the valuation is £592,405,000 at 31 March 2018 (2017 – £602,466,000). Both are based on the open market values assessed in accordance with professional standards. The aggregate professional valuations included in the balance sheet have been reduced by an amount of £18,554,000 at 31 March 2018 (2017 – £14,296,000) relating to lease incentives included in Trade and other receivables.

 

ii.    Income taxes

The tax treatment of some transactions and calculations cannot be determined until a formal resolution has been reached with the relevant tax authorities. In particular, the Group is discussing the treatment of historical financing arrangements with tax authorities. In such cases, a best estimate of the relevant tax charge or credit is made, having regard to the extent of uncertainties associated with it. Where the final outcome of such matters is different from amounts initially recorded, those differences will be reflected in the income and deferred tax amounts at the time of the formal resolution.

 

 

3.   Segmental Analysis

 

 

UK

USA

Eliminations

Total

For the year ended 31 March 2018

£000

£000

£000

£000

Rental and related income

92,395

50,490

142,885

 

 

 

 

 

Property operating expenses

(47,278)

(29,129)

(76,407)

 

 

 

 

 

Profit/(loss) on disposal of property

12,900

(1,007)

11,893

 

 

 

 

 

Net valuation movements on property

97,504

48,934

146,438

 

 

 

 

 

Administrative expenses

(12,600)

(663)

(13,263)

 

 

 

 

 

Profit before finance costs

142,921

68,625

211,546

 

 

 

 

 

Net financing expense

(3,352)

(6,932)

(10,284)

 

 

 

 

 

Profit before taxation

139,569

61,693

201,262

 

 

 

 

 

Income tax (charge)/credit

(21,883)

23,579

1,696

 

 

 

 

 

Profit for the year

117,686

85,272

202,958

 

 

 

 

 

Capital expenditure

32,057

8,580

40,637

As at 31 March 2018

 

 

 

 

Investment property

1,783,506

589,678

2,373,184

Other assets

84,777

87,821

(10,777)

161,821

Total segment assets

1,868,283

677,499

(10,777)

2,535,005

Total segment liabilities

(385,452)

(347,337)

          10,777       

(722,012)

Capital employed

1,482,831

330,162

1,812,993

 

 

UK

USA

Eliminations

Total

For the year ended 31 March 2017

£000

£000

£000

£000

Rental and related income

91,859

48,879

140,738

 

 

 

 

 

Property operating expenses

(48,334)

(27,604)

(75,938)

 

 

 

 

 

Profit on disposal of property

14,204

390

14,594

 

 

 

 

 

Net valuation movements on property

109,987

34,521

144,508

 

 

 

 

 

Administrative expenses

(11,782)

(777)

(12,559)

 

 

 

 

 

Profit before finance costs

155,934

55,409

211,343

 

 

 

 

 

Net financing expense

(4,952)

(7,995)

(12,947)

 

 

 

 

 

Profit before taxation

150,982

47,414

198,396

 

 

 

 

 

Income tax charge

(17,028)

(19,238)

(36,266)

 

 

 

 

 

Profit for the year

133,954

28,176

162,130

 

 

 

 

 

Capital expenditure

23,322

6,856

30,178

As at 31 March 2017

 

 

 

 

Investment property

1,655,922

600,878

2,256,800

Other assets

82,730

79,205

(11,904)

150,031

Total segment assets

1,738,652

680,083

(11,904)

2,406,831

Total segment liabilities

(359,078)

(403,702)

11,904

(750,876)

Capital employed

1,379,574

276,381

1,655,955

 

 

 

 

 

 

 

 

4.   Taxation

 

The Group's overall effective tax rate was 0.8% credit (2017 – 18.3% charge). In the UK, the effective tax rate was 15.7% (2017 – 11.3%); 2017 benefited from a reduction in the rate of future deferred tax from 18% to 17%. In the USA, the effective rate was 38.2% credit (2017 – 40.6% charge). In the USA we have a tax credit in the current year due to the Trump administration change in the USA corporate tax rate from 35% to 21% which has led us to recalculate our USA deferred tax liabilities.

 

Tax liabilities are recognised when it is considered probable that there will be a future outflow of funds to a tax authority.  In assessing the amount of tax due the Group uses professional advisers in both the UK and the USA to assist in assessing tax due on open tax computations.  The principal uncertain tax item relates to enquiries opened by HMRC relating to the interpretation of tax legislation regarding historical financing arrangements that had been entered into over several years in the ordinary course of business but have now ceased.  On advice of leading Counsel, we continue actively to dispute the assessments from HMRC but at present we estimate the probable range of outcomes of the tax which may become due is £23 to £52 million.  The directors have made an accrual for tax which is within this range, included within the current tax liability and which is in their view an adequate estimate of potential tax that might arise.  An accrual has also been made for potential interest.  Due to the uncertainty associated with such items, it is possible that at a future date, on reaching a conclusion on these open tax matters, the final outcome may vary significantly.

 

 

5.   Dividends

 

Dividends of £16.0m (2017 – £15.2m) were paid in the year ended 31 March 2018.

 

 

6.   Investment Properties

 

A full valuation of the Group's properties has been carried out by individual professional valuers at 31 March 2018.

 

 

2018

 

2017

 

£000

 

£000

Opening valuation

2,256,800

 

2,009,361

New acquisitions

1,069

 

472

Additions to existing properties

39,568

 

29,706

Disposals

(4,134)

 

(1,192)

 

2,293,303

 

2,038,347

Revaluation gain

146,438

 

144,508

Foreign exchange (loss)/gain

(66,557)

 

73,945

Closing valuation

2,373,184

 

2,256,800

 

 

7.   Cash generated from operations

 

 

2018

 

2017

 

£000

 

£000

Net operating profit before net financing costs

211,546

 

211,343

Adjusted for:

 

 

 

Net valuation gain on investment property

(146,438)

 

(144,508)

Net gain on sale of investment property

Net valuation loss/(gain) on listed investments

(11,893)

10

 

(14,594)

(3)

Cash flows from operations before changes

in working capital

 

Changes in working capital:

 

53,225

 

 

52,238

 

Change in trade and other receivables

366

 

(5,040)

Change in trade and other payables

2,889

 

(8,048)

Working capital movement

3,255

 

(13,088)

Cash generated from continuing operations

56,480

 

39,150

 

 

8.   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 the 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 interest rate swaps are initially recognised and subsequently recorded at fair value, with any movement being recorded in the consolidated income statement. The fair values of all interest rate swaps and fixed rate loans 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, it's counterparty.

 

 

31 March 2018

 

31 March 2017

 

Book Value

Fair Value

 

Book Value

Fair Value

 

£000

£000

 

£000

£000

Loans and borrowings

350,459

358,199

 

352,539

366,968

Interest rate swaps

1,161

1,161

 

3,084

3,084

 

351,620

359,360

 

355,623

370,052

 

 

 

 

 

 

Current

55,119

55,898

 

52,381

54,551

Non-current

296,501

303,462

 

303,242

315,501

 

351,620

359,360

 

355,623

370,052

 

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 instruments of the Group.

 

 

9.   Related party transactions

 

Day-to-day management of the Group's properties in the UK is mainly carried out by Highdorn Co. Limited (“Highdorn”) and by Freshwater Property Management Limited (“FPM”). Mr BSE Freshwater and Mr SI Freshwater are directors of both companies. They have no beneficial interest in the share capital of Highdorn. Mr BSE Freshwater, Mr SI Freshwater and Mr D Davis are directors of the parent company of FPM 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.

 

In their capacity as property managing agents, Highdorn and FPM collect rents and incur direct property expenses on behalf of the Group. At 31 March 2018, the aggregate net amount due to the Group from Highdorn and FPM was £2.7 million (2017 – £6.6 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 amount charged to the Group for the provision of property and other management services by Highdorn and FPM for the year ended 31 March 2018 was £6.2 million (2017 – £4.5 million).

 

 

10. The Annual General Meeting will be held at 2.30 pm on Wednesday 29 August 2018 in The Connaught Rooms, 61-65 Great Queen Street, London WC2B 5DA.

Back to All News All Market News

Sign up for our Stock News Highlights

Delivered to your inbox every Friday