DJAN.L Regulatory News (DJAN)

26 November 2013

DAEJAN HOLDINGS PLC

INTERIM RESULTS ANNOUNCEMENT for the half year ended 30 September 2013

The Board is pleased to present the Interim Statement for the half year ended 30 September 2013.

* See Note 1

· The profit before tax for the period was £76.5 million (2012: £23.3 million) after accounting for the net valuation gain on investment properties of £47.7 million (2012: £11.4 million) and valuation gains on financial instruments of £8.5 million (2012: £3.0 million losses). There was an increase of 4.1% in gross rental income and the underlying net profit before tax, i.e. excluding net valuation movements, was £20.4 million (2012: £14.8 million).

· The property portfolio has been valued by the Directors based on the recommendations of the Group's external advisors. The overall net valuation gain of £47.7 million (2012: £11.4 million) reflects net gains in both the UK and USA portfolios. In the UK, London residential property continues to perform strongly and there is now beginning to be some evidence of improvement in the wider Home Counties residential market and further afield. London commercial property has shown signs of yield and rental improvement, though there continues to be pressure on provincial office property, particularly in the secondary market. In the USA, our New York properties continue to perform well and our Boston properties have also seen encouraging growth.

· The redevelopment of Africa House, WC2 was completed in the period and was formally launched to the market in November, generating an encouraging level of letting interest.

· 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 and financial instruments and the incidence of voids or bad debts.

· During this period, the UK has joined the USA with early signs of returning confidence and growth. However, the recovery remains fragile and the commercial lettings market continues to be challenging. We believe that our long term, prudent approach of maintaining a strong balance sheet with relatively low gearing continues to be appropriate in present times and in this context we remain confident that the Group will continue to progress.

· Whilst for many years we have pursued a policy of steady increases in the total annual dividend, the interim payment has remained constant. The Directors now consider that it is appropriate to increase the proportion of the total dividend paid as an interim distribution. This should not, however, be taken as any indication of an increase in the total dividend in respect of the current financial year. Accordingly an interim dividend of 35p per share will be paid on 7 March 2014 to shareholders on the register on 7 February 2014.

B S E Freshwater

Chairman

26 November 2013

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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 2013

1. Basis of preparation 

This interim financial information has been prepared in accordance with International Accounting Standard (IAS) 34 Interim Financial Reporting, applying the accounting policies and presentation that were applied in the preparation of the Company's published consolidated financial statements for the year ended 31 March 2013. As required by the Listing Rules of the Financial Services Authority, the Directors have considered the result of the endorsement by the EU of 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 ending 31 March 2014 and concluded that they have no material effect on either the current or prior periods.

With effect from 1 April 2012, the Group adopted Deferred Tax: Recovery of Underlying Assets (Amendments to IAS 12) and changed its accounting policy on measuring deferred tax arising from investment property that is measured using the fair value model in IAS 40 Investment Property. This change in accounting policy was applied retrospectively and full details of the change and its effect on the consolidated balance sheet as at 1 April 2011 and the subsequent annual consolidated statements of comprehensive income and consolidated balance sheets were set out in the Group's Annual Report for the year ended 31 March 2013. The effect on the consolidated statement of comprehensive income for the six months ended 30 September 2012 has been to recognise a tax expense of £0.6 million and the effect of this change on basic and diluted earnings per share in the same period has been a decrease of £0.04. The effect on the consolidated balance sheet at 30 September 2012 has been an increase in retained earnings and a corresponding decrease in deferred tax liabilities of £41.1 million.

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 2013 was unqualified and did not contain a statement under section 498 of the Companies Act 2006. Statutory accounts for the year ended 31 March 2013 have been delivered to the Registrar of Companies. The interim financial statements were approved by the Board of Directors on 25 November 2013. 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. Dividends 

No dividends were paid in the six months ended 30 September 2013 (six months ended 30 September 2012: £Nil).

5. Investment properties

The Directors have estimated the value of the investment properties at 30 September 2013 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 2014.

6. 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, and 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 2013 and 2012 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.

7. 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 RE Freshwater has 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 2013, the aggregate net amounts due to the Group from Highdorn Co. Limited and Freshwater Property Management Limited in relation to such agency receipts and payments was £5.5 million (2012: £3.0 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 paid by the Group during the period for the provision of property and other management services by Highdorn Co. Limited and Freshwater Property Management Limited, not included above, were £2.1 million (six months ended 30 September 2012: £1.7 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 2013.

8. 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 for 31 March 2013. A list of current Directors is maintained on the Daejan Holdings PLC website www.daejanholdings.com.

B S E Freshwater

Chairman

26 November 2013