DJAN.L Regulatory News (DJAN)

27 November 2019

DAEJAN HOLDINGS PLC

INTERIM RESULTS ANNOUNCEMENT for the half year ended

30 September 2019

The Board is pleased to present the Interim Statement for the half year ended30 September 2019.

·; The loss before tax for the period was £18.3 million (2018: Profit £61.1 million) after accounting for the net valuation loss on investment properties of £43.3 million (2018: Gain £32.5 million).

·; The property portfolio has been valued by the Directors based on the recommendations of the Group's external advisers.

·; Before the impact of valuation movements both our UK and US businesses generated profits. Whilst the UK revaluation produced a surplus of £2.8m (2018: £32.5m), in the USA new rent regulations affecting our properties in New York state produced a downward movement which resulted in a reduction in the valuation of our US portfolio of £46.1m (2018: nil)

·; We continued to see strong increases in rental income in the UK and USA, primarily driven by the letting of completed development projects in the UK and property acquisitions in the USA.

·; Until there is greater clarity on the timing and terms of the UK's departure from the EU and the outcome of the UK general election in December, the high levels of political and economic uncertainty in the UK are expected to continue. The economic outlook for the USA remains more promising.

·; 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, movements in the sterling/dollar exchange rate, incidence of voids and bad debts and adverse changes to the regulatory environment.

·; An interim dividend of 35p per share will be paid on 6 March 2020 to shareholders on the register on 7 February 2020.

B S E Freshwater

Chairman

27 November 2019

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All other comprehensive income may be reclassified as profit and loss in the future.

Notes to the Consolidated Interim Financial Statements for the six months ended 30 September 2019

1. Basis of preparation 

This interim financial information has been prepared in accordance with International Accounting Standard (IAS) 34 Interim Financial Reporting as adopted by the European Union. The accounting policies, methods of computation and presentation are consistent with those that were applied in the preparation of the Company's published consolidated financial statements for the year ended 31 March 2019 with the exception of the accounting policy for leases.

The Group has adopted IFRS 16 Leases for the first time. There have been no changes to the accounting policies where the Group is a lessor. Where the Group is a lessee, a right of use asset and lease liability have been recognised. Prior year figures have not been restated. The Group has recognised as liabilities amounts payable under the leases. The lease liability and corresponding right of use asset, which is included in investment property, of £6,903,000 recognised at 30 September 2019 represents the present value of the remaining minimum lease payments. In calculating the present value of lease payments, the Group uses the incremental borrowing rate at the lease commencement date where the interest rate implicit in the lease is not readily determinable.

The Directors have considered the result of the endorsement by the EU of all other 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 ended 31 March 2020 and concluded that they have no material effect on either the current or prior periods.

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 2019 was unqualified and did not contain a statement under section 498 of the Companies Act 2006. Statutory accounts for the year ended 31 March 2019 have been delivered to the Registrar of Companies. The interim financial statements were approved by the Board of Directors on 26 November 2019. 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

4. Taxation

The tax charge in the interim statement is in line with the current UK and US statutory rates after removing prior year items. The Group reached an agreement with HMRC to settle their enquiry into historical financing arrangements in November 2019. The Group made a payment of tax and associated interest on settlement in line with the accruals made at 31 March 2019.

5. Dividends 

No dividends were paid in the six months ended 30 September 2019 (six months ended 30 September 2018: £Nil).

6. Investment properties

The Directors have estimated the value of the investment properties at 30 September 2019 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 2020. Post period end we completed our sale of the Middlesex Street site to Unite which was shown in Properties held for sale at period end.

7. 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:

In both 2019 and 2018 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.

 8. 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 CB Freshwater and Mr RE Freshwater have 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 2019, the aggregate net amounts due to Highdorn Co. Limited and Freshwater Property Management Limited from the Group in relation to such agency receipts and payments was £1.7 million (2018: Due from Highdorn/FPM £9.4 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 amounts charged by the Group during the period for the provision of property and other management services by Highdorn Co. Limited and Freshwater Property Management Limited were £1.9 million (six months ended 30 September 2018: £2.6 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 2019.

9. 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 for31 March 2019. A list of current Directors is maintained on the Daejan Holdings PLC website www.daejanholdings.com.

B S E Freshwater

Chairman

27 November 2019