Interim Results
Derwent Valley Holdings PLC
10 September 2003
DERWENT VALLEY HOLDINGS PLC
Interim results for the six months ended 30th June 2003
Derwent Valley, a specialist investor and refurbisher of Central London
commercial property, reports its results for the half year ended 30th June 2003.
Half year Half year Year to Change
30.6.03 30.6.02 31.12.02 (%)
Adjusted net asset value per share(p) 906 1033 982 (7.7)*
Net rental income (£m) 21.3 20.9 41.9 1.9
Adjusted profit before tax (£m) 8.7 9.0 17.4 (3.3)
FRS3 profit before tax (£m) 9.5 9.1 15.4 4.4
Adjusted earnings per share (p) 14.29 12.02 25.50 18.9
Dividend per share (p) 3.30 3.05 10.40 8.2
* Change based on 31st December
2002
• 14,000 m(2) of vacant space let since the year end.
• FRS 3 profit increased by 4.4% to £9.5 million.
• Interim dividend raised 8.2% to 3.30p.
• £56.4 million of disposals in the first half realising in excess of
book value.
• Reversionary portfolio of income producing properties acquired for
£39.4 million with opportunities for value enhancement through active
management.
John Ivey, Chairman, commented
"Good progress has been made with the letting of vacant space. These recent
lettings and the current level of tenant interest supports agents' research
which suggests that rents in the West End are levelling. The group's well
designed contemporary space continues to attract tenants and once market
conditions stabilise and then improve, the board is confident that its active
management of the portfolio will generate good returns for shareholders."
10 September 2003
For further information, contact:
John Burns, Managing Director 020 7659 3000
Derwent Valley Holdings plc 07:30 to 09:00 a.m. & p.m.
Gareth David
College Hill 020 7457 2020
DERWENT VALLEY HOLDINGS PLC
Interim results for the six months ended 30th June 2003
CHAIRMAN'S STATEMENT
Half year review
In the first half of the year, the Central London letting market remained weak.
Consequently rental levels fell and incentives offered to tenants increased.
Against this background, it is pleasing to report that the group has made good
progress with one of its main priorities, the letting of vacant space. Since the
last year end, 14,000m(2) has been let which is equivalent to 25% of the total
space which was then vacant.
The sole acquisition completed in the first half was that of a portfolio of 39
properties in the Islington and Kings Cross areas at a cost of £39.4 million.
Further details of this are given in the property review.
Despite the letting successes, and recent indications that rents in the West End
are stabilising, it was the conditions in the letting market during the half
year that were the main reason for the 7.7% decline in adjusted net asset value
from 982p at the year end to 906p in June.
Valuation
In valuation terms, the Central London investment market currently splits into
two categories: properties with medium to long leases which remain in strong
demand and are valued accordingly, and those properties that are vacant or with
shorter leases that are viewed more cautiously by valuers, despite offering
greater growth opportunities over the longer term. The group's portfolio mainly
consists of multi-let properties with a mixture of lease lengths which provide a
balance between active management opportunities and secure income. At the half
year, the value of the portfolio was £784.6 million which, before the UITF28
adjustment, resulted in a deficit of £41.2 million, equivalent to an underlying
valuation fall of 5.3%. Following practical completion, the Davidson Building,
Southampton Street, WC2 was revalued for the first time and produced an up-lift
of £1.9 million. The valuation was also affected by the abolition of stamp duty
on properties in locations defined as Disadvantaged Areas. This benefited 21% of
the group's properties by value, mainly those concentrated around the City
borders including Clerkenwell, Holborn and Shoreditch. Properties in the West
End and its surrounding areas declined in value by 3.5% whilst those in the City
and its borders fell by 10.5%. This illustrates the defensive qualities of the
West End compared to the City which, with its dependence on financial tenants
and its more flexible planning regime, has much higher vacancy rates. Therefore,
we expect the City will take longer to recover. Despite the decline in rental
levels referred to above, the reversionary element of the portfolio, at £18
million of additional rental income, is still substantial although its effect on
the profit and loss account will be spread over a number of years.
DERWENT VALLEY HOLDINGS PLC
Interim results for the six months ended 30th June 2003
Chairman's statement (cont'd)
Results
Profit before tax, and before that from investment property disposals, was £8.7
million against £9.0 million for the equivalent period last year. The demand for
investment property remained strong, and the group took the opportunity to
realise £56.4 million through the disposal of a number of properties at a level
in excess of book value. This produced an FRS3 profit of £9.5 million compared
with £9.1 million in the period to June 2002. Gross rental income increased from
£22.8 million to £23.8 million but the effect of voids reduced this increase to
£0.4 million at the net rental income level. A rise in interest payable of £0.5
million produced a marginally lower adjusted profit than reported last June.
Dividend
The board has declared a dividend of 3.30p per share, an increase of over 8% on
the 3.05p paid at this stage last year.
Financing
Net borrowings fell £8.9 million to £287.9 million during the half year. This
was due in part to property disposal proceeds of £56.4 million exceeding the
combined cost of acquisitions, £39.4 million, and capital expenditure, £12.6
million. Capital expenditure is now forecast at £26 million for 2003, a rise of
£10 million from that anticipated at the 2002 year end. This increase is spread
over a number of existing schemes, rather than any new projects, and even at
these increased levels expenditure still remains below the £35 million spent in
2002.
Notwithstanding a reduction in borrowings, the valuation deficit has caused
balance sheet gearing to rise to 61% from 58% at the year end. Interest cover,
while down from the 2002 half year figure of 2.01, remains a comfortable 1.94.
Approximately 57% of net debt is either at fixed rates of interest or hedged.
The current weighted average cost of borrowing is 6.1%.
Two adjustments are required to asset value to produce the triple net figure.
These are the fair value adjustment to financial instruments and the unprovided
capital gains tax on the valuation surplus. The former figure was a negative
£18.3 million at the half year (31st December 2002 : negative £17.0 million)
which, after tax, is equivalent to a reduction in the group's net asset value
per share of 24p (31st December 2002 : 22p). The latter amounts to £50.6 million
(31st December 2002 : £62.8 million), equivalent to 95p per share (31st December
2002 : 118p). Together these adjustments result in an adjusted triple net asset
value of 787p (31st December 2002 : 842p).
Prospects
The board is encouraged by the recent letting successes, and by the current
level of tenant interest being shown in the vacant accommodation. This emphasis
on the letting of vacant space will continue. However, for an actively managed
business, such as Derwent Valley's, it is essential to have a portfolio from
which future refurbishment and redevelopment projects can be created and,
therefore, the group will continue to seek and add such opportunities to the
portfolio.
DERWENT VALLEY HOLDINGS PLC
Interim results for the six months ended 30th June 2003
Chairman's statement (cont'd)
Agents' research suggests that rents in the West End are levelling. This is the
effect not only of the tight planning regulations, and consequent limited supply
of new buildings, but also of demand being driven by an eclectic mix of tenants
and their businesses. As market conditions stabilise and then improve, the board
is confident that its active management of the portfolio will generate good
returns for shareholders in the future.
John C. Ivey
10 September 2003
DERWENT VALLEY HOLDINGS PLC
Interim results for the six months ended 30th June 2003
INTERIM PROPERTY REVIEW
Lettings
Despite the economic uncertainty, the group had an active first half with 25
lettings concluded which totalled 12,000m(2). These will ultimately produce a
rental income of £3.2 million per annum. Reflecting the market conditions,
typical negotiated lease terms were for ten years with tenants' break options at
the fifth year. Such leases were granted with between 15 and 18 months' rent
free periods, but often included a penalty payment equivalent to six months'
rent if the break options are exercised. It is encouraging that the activity,
which has continued since the half year with a further 2,000m(2) of lettings,
extended across the portfolio. This has reinforced our view that well designed
contemporary space in interesting buildings will attract tenants. To capitalise
on this, DerwentXtra was launched as a marketing initiative. This service offers
tenants a coordinated fit-out by designated professional teams and suppliers,
thus saving the occupier time and costs. Presentation areas have been introduced
at a number of the group's buildings.
The principal lettings in the period were:
• Tower House, Southampton Street, WC2 - following the 3,400m(2) office
refurbishment to this Covent Garden property, building consultancy practice
Dearle & Henderson has taken 1,416m(2) at £377 per m(2) and since the half year a
further 557m(2) has been let, at a similar rental level, on a ten year unbroken
term.
• The Courtyard, Charing Cross Road, WC2 - following completion last
year of this Soho office and retail project, set around a new courtyard
entrance, 1,356m(2) of offices were let to Google, the internet search operator,
at a rental of £377 per m(2). Two floors, totalling 1,000m(2), remain to be let.
The whole of the 800m(2) of reconfigured retail space has been let, and
following this success, work is underway to enlarge the adjacent retail space.
Three units, totalling 900m(2), will be provided of which 475m(2) has been
pre-let to Sainsbury's on a twenty year unbroken term at an initial rent of
£390 per m(2) with five yearly reviews.
• Tea Building, Shoreditch High Street, E1 - formerly known as Centric
House, this 19,500m(2) building, which is undergoing a phased low cost
refurbishment, has attracted, for their headquarters, advertising agency Mother.
The tenant has pre-let 4,088m(2) at an initial rental of £108 per m(2) which
ultimately rises through stepped increases to £216 per m(2), subject to a break
option at the fifth year not being exercised.
• 25 Savile Row, W1 - this Mayfair property is at the higher end of the
rental market. A refurbishment of 1,327m(2) is nearing completion and 877m(2)
has been pre-let on a ten year lease without breaks to Bank Hapoalim BM, at an
initial rent of £484 per m(2), rising to £511 per m(2).
DERWENT VALLEY HOLDINGS PLC
Interim results for the six months ended 30th June 2003
INTERIM PROPERTY REVIEW (cont'd)
At the last year end, vacant space available for letting was 23,100m(2), of
which 5,600m(2) was let in the first half. The balance includes 10,800m(2) at 1
Oliver's Yard, EC2, the group's 17,400m(2) refurbished, air conditioned office
building on the City's northern border. Whilst letting progress here has been
slow, recent interest is encouraging, with terms now agreed on 6,300m(2) of the
amount available. Space under refurbishment or identified for potential
refurbishment has substantially decreased from 33,600m(2) at the year end to
21,800m(2) at half year. This is mainly due to 6,400m(2) of pre-lettings in the
first half and the completion of the development to create 3,000m(2) of striking
new offices at the Davidson Building in Covent Garden. Overall, total vacant
space has reduced from 56,700m(2) to 49,200m(2) during the first half. As
planned, this will increase by 16,000m(2) when the Gresse Street Estate, W1 and
New Garden House, EC1 become
vacant in the second half.
Current and future projects
• Tea Building, Shoreditch High Street, E1 - to adapt to the change in
market conditions, this former warehouse building has been re-branded, and is
being transformed in phases to provide 19,500m(2) of economic accommodation. The
letting to Mother endorses both this interesting space, and the improving
location on the edge of the City as one of London's new villages. Further space
will be refurbished to provide a range of units for letting on flexible terms.
• Berkshire House, High Holborn, WC1 - work is progressing on a 2,600m(2)
refurbishment of this 4,900m(2) landmark building. The entrance is being
modernised to give the building a new identity, and the offices refurbished to
provide air conditioned space.
• New Garden House, Hatton Garden, EC1 - following acquisition in 2000,
the opportunity to extend this 8,700m(2) office building has been studied, and
planning permission for a 15,400m(2) scheme has recently been obtained, thus
potentially increasing the floor area by 6,700m(2). The design includes new
offices in the extensive under-utilised courtyard, and provision of a
self-contained 1,700m(2) residential building. A decision on the timing of this
project will be made later this year, but the earliest date for completion is
2006.
• 55-65 North Wharf Road, W2 - this 7,800m(2) multi-let building, in the
heart of the Paddington regeneration area, offers exciting medium term
development opportunities. Following extensive studies, a planning application
has been submitted for a substantially larger office and residential development
of approximately 34,000m(2). This building is located close to the group's other
Paddington property, Telstar House. This 8,300m(2) building which is let to
London Underground until 2018 was recently damaged by fire. The building is
fully insured and the rent continues to be receivable. While the extent of the
damage is being assessed, a number of options for the building are under review.
DERWENT VALLEY HOLDINGS PLC
Interim results for the six months ended 30th June 2003
INTERIM PROPERTY REVIEW (cont'd)
Acquisitions and disposals
In the first half of the year, the group acquired a portfolio of 39 properties
from the London Borough of Islington for £39.4 million. Let at low rents, with a
total area of 37,600m(2), this offered a rare opportunity to purchase a highly
reversionary portfolio of income producing properties where the group's lease
management skills could be applied. In addition, a number of interesting
developments and change of use opportunities have been identified, and several
planning studies have been initiated which ultimately will enhance value. Four
buildings from this portfolio have been sold for £3.1 million, to take disposals
during the half year to £56.4 million, net of costs. The other sales were of
Exmouth House, Exmouth Market, EC1, 20 Red Lion Street, WC1 and 21 Grosvenor
Place, SW1. Substantial refurbishments had been carried out over the years at
all of these properties, and the group decided to take advantage of the strong
investment market to realise proceeds which were in excess of book value.
DERWENT VALLEY HOLDINGS PLC
Interim results for the six months ended 30th June 2003
GROUP PROFIT AND LOSS ACCOUNT
Half year Half year Year
to to to
30.6.03 30.6.02 31.12.02
Note £m £m £m
------- ------- -------
Gross rental income
Group and share of joint ventures 24.0 23.0 46.8
Less share of joint ventures (0.2) (0.2) (0.3)
------- ------- -------
Group gross rental income 23.8 22.8 46.5
Property outgoings net of recoveries 2 (2.5) (1.9) (4.6)
------- ------- -------
Net revenue from properties 21.3 20.9 41.9
Administrative costs (3.4) (3.1) (6.3)
------- ------- -------
Operating profit 17.9 17.8 35.6
Share of operating results of joint 0.2 0.2 0.3
ventures
Profit/(loss) on disposal of 3 0.8 0.1 (2.0)
investments ------- ------- -------
18.9 18.1 33.9
Interest receivable 0.1 - -
Interest payable 4 (9.5) (9.0) (18.5)
------- ------- -------
Profit on ordinary activities before 9.5 9.1 15.4
taxation
Taxation on profit on ordinary 5 (1.2) (2.6) (3.9)
activities ------- ------- -------
Profit on ordinary activities after 8.3 6.5 11.5
taxation
Dividend (1.7) (1.6) (5.5)
------- ------- -------
Retained profit 11 6.6 4.9 6.0
------- ------- -------
Adjusted earnings per share 6 14.29p 12.02p 25.50p
Adjustment for disposal of investments 1.40p 0.27p (3.82p)
------- ------- -------
Basic earnings per share 6 15.69p 12.29p 21.68p
Adjustment for dilutive share options (0.02p) (0.03p) (0.04p)
------- ------- -------
Diluted earnings per share 6 15.67p 12.26p 21.64p
------- ------- -------
Dividend per share 7 3.30p 3.05p 10.40p
------- ------- -------
Total return 8 (7.4%) 1.5% (2.7%)
------- ------- -------
DERWENT VALLEY HOLDINGS PLC
Interim results for the six months ended 30th June 2003
GROUP BALANCE SHEET
30.6.03 31.12.02
Note £m £m
------- -------
Fixed assets
Tangible assets 9 782.1 832.7
------- -------
Investments in joint ventures
Share of gross assets 3.1 3.1
Share of gross liabilities (2.9) (2.9)
------- -------
0.2 0.2
------- -------
782.3 832.9
------- -------
Current assets
Properties held for resale 6.6 6.6
Debtors 11.2 14.1
Cash at bank and in hand 6.0 -
------- -------
23.8 20.7
Creditors falling due within one year
Bank loans and overdrafts (36.0) (1.4)
Other current liabilities (27.6) (32.0)
------- -------
Net current liabilities (39.8) (12.7)
------- -------
Total assets less current liabilities 742.5 820.2
Creditors falling due after more than one
year
Bank loans (223.5) (261.0)
10 1/8% First Mortgage Debenture Stock (34.4) (34.4)
2019
Other creditors (1.6) (1.6)
Provisions for liabilities and charges
Deferred tax 10 (10.1) (10.2)
Other provisions (1.1) (1.0)
------- -------
471.8 512.0
------- -------
Capital and reserves - equity 11
Called up share capital 2.6 2.6
Share premium account 153.7 153.7
Revaluation reserve 208.2 262.9
Profit and loss account 107.3 92.8
------- -------
471.8 512.0
------- -------
Adjusted net asset value per share 12 906p 982p
------- -------
Net asset value per share 12 887p 963p
------- -------
DERWENT VALLEY HOLDINGS PLC
Interim results for the six months ended 30th June 2003
GROUP CASH FLOW STATEMENT
Half year Half year Year
to to to
30.6.03 30.6.02 31.12.02
Note £m £m £m
------- ------- -------
Net cash inflow from operating 13 19.5 30.0 41.6
activities
Net cash outflow from return
on investments and servicing
of finance (9.7) (9.7) (18.1)
Corporation tax paid (1.6) (6.3) (9.8)
Net cash inflow/(outflow) from
capital expenditure and financial
investment 4.6 (10.4) (34.3)
Equity dividends paid (3.9) (3.5) (5.2)
------- ------- -------
Cash inflow/(outflow) before
management of liquid resources and
financing 8.9 0.1 (25.8)
Financing
Movement in bank loans 14 (1.5) 1.0 26.0
------- ------- -------
Increase in cash in the period 14 7.4 1.1 0.2
------- ------- -------
GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
Half year Half year Year
to to to
30.6.03 30.6.02 31.12.02
£m £m £m
------- ------- -------
Profit for financial period 8.3 6.5 11.5
Unrealised (deficit) / surplus on
revaluation of
investment properties (44.4) 1.9 (27.1)
Taxation on realisation of property
revaluation
gains of previous years (2.4) (0.7) (0.6)
------- ------- -------
(38.5) 7.7 (16.2)
------- ------- -------
Notes
1. The results for the six months ended 30th June 2003 include those for the
holding company and all of its subsidiary undertakings together with the group's
share of the results of its joint ventures. The results are prepared on the
basis of the accounting policies set out in the 2002 annual report and accounts.
2. Property outgoings net of recoveries
Half year Half year Year
to to to
30.6.03 30.6.02 31.12.02
£m £m £m
------- ------- -------
Ground rents 0.6 0.6 1.1
Other property outgoings net of 1.9 1.3 3.5
recoveries ------- ------- -------
2.5 1.9 4.6
------- ------- -------
3. Profit/(loss) on disposal of investments
Half year Half year Year
to to to
30.6.03 30.6.02 31.12.02
£m £m £m
------- ------- -------
Investment properties
Disposals 56.4 14.4 16.9
Cost/valuation (55.6) (14.3) (16.7)
------- ------- -------
Profit on disposal of investment 0.8 0.1 0.2
properties
Permanent diminution in value of
investment properties - - (2.2)
------- ------- -------
0.8 0.1 (2.0)
------- ------- -------
4. Interest payable
Half year Half year Year
to 30.6.03 to 30.6.02 to 31.12.02
£m £m £m
------- ------- -------
Group 9.3 8.8 18.2
Share of joint ventures 0.2 0.2 0.3
------- ------- -------
9.5 9.0 18.5
------- ------- -------
5. Taxation on profit on ordinary activities
Half year Half year Year
to to to
30.6.03 30.6.02 31.12.02
£m £m £m
------- ------- -------
UK corporation tax on profit, adjusted
for the
disposal of investments, at 30% (2002 -
30%) 2.6 2.7 5.2
Capital allowances (0.9) (0.8) (2.5)
Tax on disposal of investments 2.5 0.7 0.6
Other reconciling items (0.5) - 0.1
------- ------- -------
Corporation tax payable on current 3.7 2.6 3.4
period's profit
Less amount allocated to the statement
of total
recognised gains and losses (2.4) (0.7) (0.6)
------- ------- -------
Corporation tax charge in respect of
current
period's profit 1.3 1.9 2.8
Adjustment in respect of prior
periods'
corporation tax - - (0.3)
------- ------- -------
Corporation tax charge 1.3 1.9 2.5
Deferred tax charge (0.1) 0.7 1.4
------- ------- -------
1.2 2.6 3.9
------- ------- -------
6. Earnings per share
Earnings per ordinary share have been calculated on the basis of a profit
after tax of £8,339,000 (2002 interim - £6,535,000; 2002 full year -
£11,525,000) and the weighted average number of ordinary shares in issue during
the period of 53,164,000 (2002 interim - 53,157,000; 2002 full year -
53,158,000).
An adjusted earnings per share has been calculated using a profit of
£7,597,000 (2002 interim - £6,390,000; 2002 full year - £13,557,000). This
figure excludes the profit after tax arising from the disposal of investments in
order to show the recurring element of the group's profit.
The diluted earnings per share has been calculated using 53,216,000 (2002
interim - 53,289,000; 2002 full year - 53,268,000) ordinary shares which
includes the number of dilutive share options outstanding at the end of the
period.
7. Dividend per share
The interim dividend will be paid on 3rd November 2003 to those
shareholders on the register at the close of business on 17th October 2003.
8. Total return
Total return is the movement in adjusted net asset value per share plus dividend
per share expressed as a percentage of the adjusted net asset value per share at
the beginning of the year.
9. Tangible assets
Freehold Other
land and Leasehold fixed
buildings property assets Total
£m £m £m £m
------- ------- ------- -------
Cost or valuation:
At 1st January 2003 548.5 283.4 1.2 833.1
Additions 45.4 4.1 0.1 49.6
Disposals (2.8) (52.8) (0.1) (55.7)
Revaluation (32.9) (11.5) - (44.4)
------- ------- ------- -------
At 30th June 2003 558.2 223.2 1.2 782.6
------- ------- ------- -------
Amortisation and
depreciation:
At 1st January 2003 - - 0.4 0.4
Provision for period - - 0.2 0.2
Disposals - - (0.1) (0.1)
------- ------- ------- -------
At 30th June 2003 - - 0.5 0.5
------- ------- ------- -------
Net book value:
At 30th June 2003 558.2 223.2 0.7 782.1
At 31st December 2002 548.5 283.4 0.8 832.7
------- ------- ------- -------
Assets stated at cost or
valuation:
30th June 2003 valuation 556.9 223.6 - 780.5
Prior years' valuation plus 4.1 - - 4.1
subsequent costs
Cost - - 0.7 0.7
------- ------- ------- -------
561.0 223.6 0.7 785.3
Adjustment for UITF28 - lease (2.8) (0.4) - (3.2)
incentive debtors ------- ------- ------- -------
558.2 223.2 0.7 782.1
------- ------- ------- -------
Short leasehold property with a carrying value of £36.7 million (December 2002 -
£16.5 million) is included in leasehold property above. Investment property in
the course of development with a carrying value of £4.1 million (December 2002 -
£24.7 million) is included in freehold land and buildings above.
The freehold land and buildings and leasehold property, other than those in the
course of development, were revalued at 30th June 2003 by either Keith Cardale
Groves (Commercial) Limited or CB Richard Ellis Limited, as external valuers, on
the basis of market value as defined by the Appraisal and Valuation Manual
published by the Royal Institution of Chartered Surveyors.
At 30th June 2003, the historical cost of the freehold land and buildings and
leasehold property owned by the group was £573.9 million (December 2002 - £572.0
million).
10. Deferred tax
£m
-------
At 1st January 2003 10.2
Movement during the period (0.1)
-------
At 30th June 2003 10.1
-------
The provision for deferred tax relates to timing differences on accelerated
capital allowances and other reversing timing differences.
A taxation liability of approximately £50.6 million (December 2002 - £62.8
million) would arise on the disposal of land and buildings at the valuation
shown in the balance sheet. This is equivalent to 95p per share (December 2002 -
118p). In accordance with FRS19, no provision has been made for this.
11. Capital and reserves
Share Profit
Share premium Revaluation and loss
capital account reserve account
£m £m £m £m
------- ------- ------- -------
At 1st January 2003 2.6 153.7 262.9 92.8
Deficit on property - - (44.4) -
revaluation
Profit realised on
disposal of
investment properties - - (10.3) 10.3
Tax attributable to
revaluation
surplus realised on
disposal
of investment properties - - - (2.4)
Retained profit for the - - - 6.6
period ------- ------- ------- -------
At 30th June 2003 2.6 153.7 208.2 107.3
------- ------- ------- -------
12. Net asset value per share
Net asset value per share has been calculated on the basis of net assets at 30th
June 2003 of £471,833,000 (December 2002 - £512,003,000) and the number of
shares in issue at 30th June 2003 of 53,167,000 (December 2002 - 53,161,000).
An adjusted net asset value per share figure has been calculated using net
assets of £481,862,000 (December 2002 - £522,138,000). This figure excludes the
deferred tax provided in accordance with FRS19 on the basis that it is unlikely
that this liability will crystallise.
13. Reconciliation of operating profit to net cash inflow from operating
activities
Half year Half year Year
to to to
30.6.03 30.6.02 31.12.02
£m £m £m
------- ------- -------
Operating profit 17.9 17.8 35.6
Depreciation charge 0.2 0.1 0.1
Decrease/(increase) in debtors 2.9 0.6 (4.1)
(Decrease)/increase in creditors (4.2) 10.7 4.8
Increase in properties held for - (1.0) (1.2)
resale
Effect of other deferrals and
accruals
on operating activity cash flow 2.7 1.8 6.4
------- ------- -------
Net cash inflow from operating 19.5 30.0 41.6
activities ------- ------- -------
14. Reconciliation of net cash flow to movement in net debt
Half year Half year Year
to to to
30.6.03 30.6.02 31.12.02
£m £m £m
------- ------- -------
Increase in cash in the period (7.4) (1.1) (0.2)
Cash (outflow)/inflow from
movement
in bank loans (1.5) 1.0 26.0
------- ------- -------
Movement in net debt in the (8.9) (0.1) 25.8
period
Opening net debt 296.8 271.0 271.0
------- ------- -------
Closing net debt 287.9 270.9 296.8
------- ------- -------
15. Valuation of financial instruments
The group's fixed rate debt and interest rate hedging instruments were revalued
at 30th June 2003. The fair value adjustment, arising as a result of this
revaluation, which is not reflected in the financial statements, was a negative
£18.3 million (December 2002 - negative £17.0 million). After tax relief this
would reduce the group's net asset value per share by 24p (December 2002 - 22p).
16. This statement does not comprise statutory accounts as defined in Section
240 of the Companies Act 1985. The financial information for the year ended 31st
December 2002 is an extract from the latest group accounts. The accounts
received an unqualified auditor's report and have been filed with the Registrar
of Companies. The results for the half years ended 30th June 2002 and 2003 are
unaudited.
17. Copies of this announcement are being posted to shareholders on 15th
September 2003 and are available from the Company Secretary, Derwent Valley
Holdings plc, 25 Savile Row, London, W1S 2ER.
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