DJAN.L Regulatory News (DJAN)

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:

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

DAEJAN HOLDINGS PLC

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 MARCH 2018

DAEJAN HOLDINGS PLC

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 MARCH 2018

DAEJAN HOLDINGS PLC

CONSOLIDATED BALANCE SHEET AS AT 31 MARCH 2018

DAEJAN HOLDINGS PLC

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 MARCH 2018

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

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.

7. Cash generated from operations

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.

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