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Daejan Hldgs PLC (DJAN)

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Tuesday 17 July, 2018

Daejan Hldgs PLC

Final Results

RNS Number : 8048U
Daejan Holdings PLC
17 July 2018
 

                                                                                                                       

17 July 2018                                                            

 

 

DAEJAN HOLDINGS PLC

UNAUDITED PRELIMINARY RESULTS ANNOUNCEMENT for the year ended 31 March 2018

 

The Chairman, Mr B S E Freshwater, today announced Preliminary Results for the year to 31 March 2018.

 

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.

 

 

 

For further information call:

 

Mark Jenner

Company Secretary

Daejan Holdings PLC

020 7836 1555

 

Nick Oborne

Weber Shandwick Financial

020 7067 0700


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