DJAN.L Regulatory News (DJAN)

26 November 2014---------------------------------------------------------------------------------

DAEJAN HOLDINGS PLC

INTERIM RESULTS ANNOUNCEMENT for the half year ended 30 September 2014

The Board is pleased to present the Interim Statement for the half year ended 30 September 2014.

· The profit before tax for the period was £134.5 million (2013: £76.5 million) after accounting for the net valuation gain on investment properties of £107.9 million (2013: £47.7 million) and fair value losses on financial instruments of £0.6 million (2013: £8.5 million gains). There was an increase of £10.6 million (21.6%) in gross rental income and the underlying net profit before tax, i.e. excluding net valuation movements, was £27.3 million (2013: £20.4 million). Gross rental income and underlying profit before tax both benefited from the one-off impact of the settlement of a significant contested rent review, referred to below.

· 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 £107.9 million (2013: £47.7 million) reflects net gains in both the UK and USA portfolios. In the UK, there has been further strong growth in Central London and Home Counties residential property; growth in residential values in the rest of the UK is also now well established. Central London commercial property continues to strengthen, but demand and values in the provincial markets remain difficult. In the USA, the rate of increase in values observed during the initial recovery from the financial crisis has slowed, but values in Boston have benefited from continued strong demand.

· As previously announced, the settlement of the contested rent review on the Strand Palace Hotel gave rise to a one-off benefit to rental income in the period of £7.9 million. This has also given rise to a significant uplift in the value of the Group's interest in the hotel.

· Also as previously announced, the Group secured a tenant for the whole of the refurbished Africa House in Kingsway, London WC2 in July 2014. As anticipated at the time of the Annual Report & Accounts, this has contributed to a further substantial increase in the value of the property.

· The half year results have benefited materially from the confluence of the timing of the new letting of Africa House and the resolution of the rent review at the Strand Palace Hotel. The rental benefit of these positive events will continue to accrue in future years but future increases in the capital values of these properties are likely to be more modest, in line with the market as a whole.

· In the USA the economy continues to grow. The general UK outlook continues to show improvement but this has largely been confined to the London area. Uncertainty created by the upcoming General Election and issues such as the UK's future relationship with the EU combine to make the immediate future particularly hard to predict with any certainty. Nevertheless, we believe that our tried and tested strategy, based on the prudent long term pursuit of growth in asset values, will enable us to make continued progress in challenging times.

· 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.

· In November 2013 we made a periodic adjustment to the level of the interim dividend to reflect the effect of increases in the aggregate annual dividend in recent years on the proportion of total dividend paid at the interim stage. In line with this, an interim dividend of 35p per share will be paid on 6 March 2015 to shareholders on the register on 6 February 2015.

· Mr Aaron "Mendy" Bude was appointed to the Board on 25 November 2014 as a non-executive director. Mr Bude is a founding partner of Bude Nathan Iwanier, a firm of solicitors specialising in property matters.

B S E Freshwater

Chairman

26 November 2014

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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 2014

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 2014. 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 2015 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 2014 was unqualified and did not contain a statement under section 498 of the Companies Act 2006. Statutory accounts for the year ended 31 March 2014 have been delivered to the Registrar of Companies. The interim financial statements were approved by the Board of Directors on 25 November 2014. 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 2014 (six months ended 30 September 2013: £Nil).

5. Investment properties

The Directors have estimated the value of the investment properties at 30 September 2014 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 2015.

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 2014 and 2013 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 2014, 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 £18.5 million (2013: £5.5 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 2013: £2.1 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 2014.

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 2014. A list of current Directors is maintained on the Daejan Holdings PLC website www.daejanholdings.com.

B S E Freshwater

Chairman

26 November 2014