HOLDI
(formerly Daejan Holdings PLC)
HOLDI
CONTENTS
Chairman’s Introduction 2
Financial Highlights 3
Strategic Report 5
Directors’ Report 32
Corporate Governance Report 37
Audit Committee Report 41
Nominations Committee Report 43
Remuneration Committee Report 44
Directors’ Responsibilities Statement 49
Independent Auditor’s Report to the Members of Daejan Holdings Limited 51
Consolidated Income Statement 60
Consolidated Statement of Comprehensive Income 61
Consolidated Statement of Changes in Equity 61
Consolidated Balance Sheet 62
Consolidated Statement of Cash Flows 63
Notes to the Consolidated Financial Statements 64
Company Balance Sheet 92
Company Statement of Changes in Equity 93
Notes to the Company Financial Statements 94
Group Five-Year Record 97
Directors and Advisers 98
Page 1
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
CHAIRMAN’S INTRODUCTION
Before discussing the results for the year I must mention a major event in the life of the Company.
In February 2020 a cash offer was made by the Freshwater Group for all Daejan shares not already
controlled. The offer was effected by way of a Scheme of Arrangement which was approved by
holders of over 99% of the relevant shares on 27th April; the shares were delisted on 11th May. The
administrative burden of maintaining our listing had grown progressively in recent years and given
that there were no intentions to use the listing to raise finance it became clear that delisting was in
the best interests of the Company. So ended a successful period of 61 years as a listed property
company and I must thank shareholders for their loyal support over this time.
Following our transition to a private company two of our non-executive directors, Mr S B Benaim and
Mr S Srulowitz, expressed a desire to retire from the Board. I would like to thank them for their wise
counsel during their periods of office and wish them well for the future.
Daejan will continue to operate as before in pursuit of long term, low risk growth in net asset value
and rental income albeit in future as a wholly owned company within the Freshwater Group.
This has been a year of challenges with continuing uncertainty throughout from Brexit and latterly
from the impact of the Covid-19 pandemic. There have also been material adverse changes to rent
regulation in New York. In the circumstances the reduction in shareholders’ funds of 2.3% to
£1,896 million (2019 – 7% increase to £1,940 million) was not a surprise.
In the UK, the overall value of our portfolio has remained flat with some downward adjustments in
retail and office property offset by gains from a number of improved leases and from the completion
and letting of new developments.
In July 2019 new and punitive rent regulation laws were introduced in New York which have had the
effect of reducing the value of the affected buildings by approximately one third; elsewhere in the
USA our properties have shown modest gains. The total deficit arising on the revaluation of the USA
portfolio is £93.5 million, equivalent to 11.9% (2019 – £32.1 million gain, equivalent to 5.1%).
Our overall gross rental income has increased by 6.5% (2019 – 8.5%). In the UK this has derived from
the letting of new developments and a significant improvement in our Care Home portfolio. Similarly
in the USA new property acquisitions in the second half of last year have now contributed a full
year’s rent.
Outlook
I have for some years reported my concern at the uncertainty arising from the Brexit issue. This
remains as we near the end of the transitional period with, as yet, no clear idea of the arrangements
for trade which will apply from 1st January 2021. However the immediate future will be dominated
by the fallout from the actions taken to stop the spread of the Covid-19 pandemic. Whilst constraints
on the economy are being progressively removed the speed with which activity will return towards
normal is by no means clear. Indeed doubt remains whether patterns of behaviour adopted during
the “lockdown” such as working from home, avoiding public transport, shops, restaurants and other
leisure facilities will persist in the longer term. A deepening of the UK recession is widely predicted
for when the temporary measures taken to sustain the economy are discontinued later this year;
opinions differ as to its likely depth and duration.
In the USA the Covid-19 pandemic still appears to be spreading and is likely to result in an overall
fall in GDP in 2020. A trade war continues to develop with China and we are entering a period of
political uncertainty ahead of the Presidential election in November.
These issues constitute the environment within which we will have to operate for the coming year.
I firmly believe that our tried and tested approach of prudence and risk minimisation together with
the careful conservation of financial resources that has served us well in good times and bad will see
us safely through.
My thanks as ever must go to those whose loyal efforts sustain the Company.
B S E Freshwater
Chairman
Cover: Central Park,
Brighton, East Sussex.
Inside cover: Clare
Court, London WC1.
Above and opposite
page: recently completed
Starlite Lodge,
Greenford, Middx.
Contents page:
interior of
164 Shaftesbury
Avenue, London WC2.
Page 2
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
FINANCIAL HIGHLIGHTS
NET VALUATION LOSS
£90.5 million
(2019: gain of £83.9 million)
£33.2 million
(2019: profit of £137.8 million)
LOSS BEFORE TAX
LOSS PER SHARE
£2.92
(2019: Earnings of £7.36)
SHAREHOLDERS’ FUNDS
£1,896.0 million
(2019: £1,940.4 million)
SHAREHOLDERS’ FUNDS PER SHARE
£116.35*
(2019: £119.07)*
*Definitions of these alternative performance measures are included on pages 90 and 91.
GEARING
17.8%*
(2019: 15.6%)*
Page 3
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
STRATEGIC REPORT
Objectives
For many years we have focussed on the pursuit of the Group’s objective of achieving long term, low
risk growth in net asset value and rental income, and in prudently growing our dividends.
Net asset value per share (£)
Gross rental income
120
110
100
90
80
70
60
50
s
n
o
i
l
l
i
m
£
170
160
150
140
130
120
110
100
2016
2017
2018
2019
2020
2016
2017
2018
2019
2020
Strategy
The strategy for achieving our objectives has three principal elements:
■ Management of our property portfolio to maximise net rental income and thereby enhance
capital values
■ Identification and completion of value enhancing development opportunities within our
portfolio
■ Identification and completion of new property acquisitions which have the potential, through
development or otherwise, for long term enhancement to net asset value
In pursuing this strategy we take the view that property is a long term business which does not
always fit conveniently into the annual reporting cycle. Development opportunities, in particular, can
take many years from first idea to first letting and will often involve substantial investment over a
period of years before any gain is achieved. We carefully monitor our exposure to ensure that the
impact on our resources remains manageable.
Business model
The main activity of the Group, as carried on through its subsidiary companies, is investment in
commercial, industrial and residential property in the UK and also on the eastern seaboard of the USA.
The Group generally holds its properties for the long term in order to generate rental income and
capital appreciation although in the right circumstances any property could be available for sale.
The Group operates a substantially outsourced business model. Day-to-day management of the
Group’s properties in the UK is carried out by Highdorn Co. Limited and Freshwater Property
Management Limited. These companies also provide the staff who carry out all of the UK functions
of the Group. Further details of the relationship with these companies are set out in Note 18 to the
financial statements.
Similar arrangements with local managing agents operate in the USA.
Managing risk
Whilst retaining an entrepreneurial culture, the Group has a low appetite for risk. This underpins
our approach to all aspects of the business and is appropriate to our strategic objective of delivering
long term, low risk growth in net asset value per share.
The Board has undertaken a robust assessment of the principal risks facing the Group, by reviewing
detailed risk reports, including those risks threatening its business model, future performance,
solvency and liquidity.
In relation to financial instrument risk, the Group operates a cautious financial policy on a non-
speculative and long term basis in order to enable the Group to carry on its business in confidence
and with strength. The Group aims to ensure that the cost of capital is kept to a minimum through
the maintenance of its many long standing relationships with leading banks and other financial
institutions. The Group seeks to minimise the risk of sudden or unexpected rises in finance costs by
way of fixed rate debt and financial derivative instruments whilst retaining some flexibility in relation
Opposite page and
above: the recently
completed Starlite
Lodge, Greenford,
Middx.
Page 5
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
STRATEGIC REPORT continued
to short term interest rates. As explained in Note 1(g) to the financial statements, the Group does not
hedge account. Note 17 to the financial statements details the Group’s exposure to the various
financial instrument risks.
Managing risk has been central to the success of the Group over many years and in particular gearing
has been kept at a relatively low level for the property industry; currently gearing is 17.8% (2019 –
15.6%).
The Board recognises that, in common with all companies, it can only have limited control over many
of the external risks which it faces. The largest of such “uncontrollable” factors is the economic cycle
which has a major impact on the demand for and price of property and the ability of the Group to
achieve its strategic objectives.
The principal risks facing the Group are described in the following paragraphs together with the
steps which are taken to mitigate and manage them.
External risks
Economic outlook
The economic outlook is dominated by two major issues: the Covid-19 pandemic and Brexit. Both
issues have the capacity to have a meaningful impact on the business.
The Covid-19 pandemic is currently underway in the UK and the possibility exists for a “second
wave” of infection this coming winter.
The Government actions to prevent the spread of the disease have resulted in a dramatic slowdown
in economic activity. Although restrictions are now being progressively released a deep recession is
widely predicted with uncertainty as to the speed of recovery. Within the general downturn there
have been particularly sharp impacts on retail, leisure and travel sectors. It remains to be seen
whether the current reluctance of people to visit shops and leisure premises is a temporary or a
longer term trend. Many organisations have successfully introduced systems of home working with
little or no loss of efficiency. If “working from home” becomes an established feature of business
life, demand for office accommodation may reduce.
The uncertainty surrounding the impact of the end of the transition period as the UK fully detaches
its self from the European Economic Union (EEU) has to an extent been masked by the impact of
Covid-19. Negotiations have yet to produce an agreement to govern the future relationship between
the UK and the EEU thus creating a further layer of uncertainty for UK business.
The Covid-19 pandemic in the USA is not yet under control and its longer term economic impact is
not yet clear. The trade war with China and the US Presidential election which will be held later in
the year add further uncertainty.
This is the background which provides the risks and opportunities for our residential tenants and for
the businesses of our commercial tenants and their demand for space.
We seek to mitigate and manage such risk by:
■ Continuous monitoring of the economic outlook
■ Continued maintenance of low gearing and the conservation of cash and bank facilities
■ Rigorous tenant covenant checks including independent assessments for major lettings; in the
case of smaller properties we undertake such checking as is appropriate
■ Enhanced rent collection effort to minimise the possibility of bad debts
Availability of finance on acceptable terms
In order to undertake significant acquisitions or projects of development and value enhancement
within our portfolio, the Group relies in part on funding from the UK and USA property finance
market. At present our experience shows that suitable finance can be obtained on acceptable terms.
Nevertheless any reduction in the availability of finance for property at an acceptable cost and for an
Above and opposite
page: Baddeley Court,
Newport, Shropshire.
Page 6
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
STRATEGIC REPORT continued
appropriate period would adversely affect the Group’s ability to undertake acquisitions and major
schemes of redevelopment and refurbishment.
We seek to mitigate and manage this risk by:
■ Monitoring funding trends and the development of banking regulations
■ Sustaining relationships with our principal financing partners, both banks and other lending
institutions
■ Securing term finance facilities to meet our foreseeable requirements
■ Ensuring that the maturities of major loan arrangements are spread over a period of years
Movements in currency rates of exchange
With 28% by value of the Group’s property portfolio located in the USA, any significant movement
in the US dollar/sterling rate of exchange will impact our reported results.
The period since the decision to leave the EEU has seen significant movement in the US dollar/sterling
rate of exchange. The fall in the value of sterling relative to the US dollar in the financial year was 5%
(2019 – 7% fall). This has had the effect of increasing the reported value of our USA net assets. The
average exchange rate for the year fell by 3% and its impact on the reported USA results is not
material.
We mitigate and manage this risk by:
■ Funding US assets by US dollar borrowings and local retained earnings. This means that the
impact of movements in the exchange rate is limited to accounting adjustments in the Group’s
consolidated accounts.An accounting gain of £20.6 million (2019 – gain of £24.4 million) arises
in reserves mainly on the re-translation of the opening net book value of assets in the USA
■ Incurring all costs used to generate US dollar rental income in US dollars
Regulation
As commented in previous years, regulations aimed at the control of residential rental levels or
shorthold tenancy arrangements could have an adverse impact on the Group. Following the
significant tightening in 2019 of rent controls by the Mayor of New York, our properties in the city
have suffered significant reductions in value.
Above and right:
Clissold Court,
London N4.
Opposite page:
Wyfold Road,
London SW6.
Page 8
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
STRATEGIC REPORT continued
Similarly, increased regulation on building or environmental standards, health and safety or planning
matters could impose additional costs.
We seek to mitigate and manage this risk by:
■ Careful monitoring of developments in legislation with the help of our professional advisers
Catastrophic events
The operations of the Group have been affected by the impact of the Covid-19 pandemic and could
in future be adversely affected by the impact of a significant catastrophe such as extreme weather,
fire, cyber-attack, civil disturbance or terrorism which could result in the loss of any of our principal
buildings or offices and the records stored in them.
We seek to mitigate and manage this risk by:
■ Developing a system of home working to ensure that the Group can continue to function
despite the need for office closures
■ Insuring buildings with third parties
■ Physical building security
■ Fireproof storage of leases and other documents of title
■ Dispersal of business critical IT systems and enhanced data security measures
Tenant default
Tenant default constitutes a risk to income and, ultimately, to capital value. Notwithstanding well
publicised reports in the media of tenants defaulting on rental arrangements or unilaterally seeking
material rent reductions, we continue to receive the substantial majority of rentals due under
contractual arrangements.
The multi-tenanted nature of the portfolio, with rental income derived from numerous properties,
provides a natural measure of protection against the risk of individual default.
In addition, we seek to mitigate and manage this risk by:
■ Seeking tenants with strong covenants
■ Credit checks on new tenants including independent assessments for major lettings
Above, left and
opposite page:
30 Kensington Church
Street, London W8.
Page 11
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
STRATEGIC REPORT continued
■ Careful monitoring of tenants showing signs of financial stress
■ Actively using recovery mechanisms for overdue debts
Retail Sector
In recent times we have seen the contraction or collapse of several high profile retail chains. The
change in shopping patterns and in particular the move to on-line shopping which has accelerated
during the Covid-19 pandemic means that the downward pressure on UK high street rental and
capital values will continue. Parades of local shops, an important part of our portfolio, have not
suffered in the same way. Our portfolio is not significantly exposed to the risk of any single retail
tenant.
We seek to mitigate and manage this risk by:
■ Close monitoring of developments in the retail sector
■ Careful monitoring of tenants showing signs of financial stress
■ Avoiding concentration on any one tenant or retail sector
Internal risks
Regional concentration in UK and US portfolios
Within the UK,the majority of our properties are situated in and around the London area. In past years
the increase in value of our UK portfolio has been almost entirely derived from the London area which
has enjoyed a period of well publicised growth. A slowdown in the London market such as has
occurred more recently will significantly reduce the net annual revaluation uplifts in the UK portfolio.
In the USA, a substantial part of our portfolio is situated in New York which has in the past produced
significant growth in capital values; this year the impact of additional rent controls and restrictions has
reversed this pattern.
Changes in aggregate property value have a direct impact on the net worth of the Group.
We seek to mitigate and manage this risk by:
■ Continuing to invest in the USA, principally in Florida and other locations outside New York
■ Regular monitoring of the property market for opportunities, not just in London but
throughout the UK
■ Regular professional revaluations by our independent surveyors in the UK and USA
Acquisitions
The Group seeks well priced acquisitions which will meet the strategic objective of adding long term,
low risk growth in net asset value. The Group’s oft stated aversion to undue risk means that in a period
of economic and political uncertainty, such as we presently face, opportunities for acquisition will be
Below left: the
recently developed
Eden Parade,
Beckenham, Kent.
Below right: the
recently developed
Carlton Close, Esher,
Surrey. Above and
opposite page
bottom: Wimbledon
Close, Wimbledon,
London SW20.
Opposite page top:
Trinity Place,
Eastbourne, East
Sussex.
Page 12
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
STRATEGIC REPORT continued
Analysis by property type
Property UK
Residential
£832.7m
Commercial
£1,011.1m
Property USA
Residential
£593.8m
Commercial
£107.8m
This page: Central
Park, Brighton, East
Sussex.
Commercial Property UK
Commercial Property USA
Land &
Development
£1.6m
Industrial
£47.5m
Offices
£343.5m
Retail
£2.7m
Offices
£105.1m
Leisure &
Services
£213.6m
Retail
£404.9m
Analysis by location
UK Valuations
USA Valuations
North &
Scotland
£50.0m
Wales &
West
£54.7m
Greater
London
£1,499.6m
Midlands &
East Anglia
£87.7m
South East
£151.8m
Pennsylvania
£50.2m
Baltimore
£28.2m
New Jersey
£47.7m
New York
£261.5m
Boston
£101.6m
Florida
£212.4m
Page 14
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
approached with extreme caution. There is nevertheless a risk that an inappropriate or ill-judged
acquisition could destroy value.
We seek to mitigate and manage this risk by:
■ Rigorous pre-acquisition screening of all buying opportunities and appropriate due diligence
Development
The Group continues to seek development opportunities, principally from within the portfolio but
also elsewhere. Development provides an opportunity to enhance income and net asset values but
carries risk as to planning, construction timing, costs and letting.
We seek to mitigate and manage these risks by:
■ Rigorous screening of all development opportunities including external professional advice
and, where appropriate, market research
■ Seeking fixed price contracts with building contractors
■ Focusing on a limited number of developments at any one time
■ Close monitoring, together with our external advisers, of active developments
People
The Group relies heavily on the involvement of key executive directors in both strategic and day-to-
day affairs. Loss of this involvement would be disruptive to business.
We have sought to mitigate and manage this risk by:
■ The establishment of a strong Group management team to support the executive directors
■ The appointment of new directors from the next generation of the Freshwater family
Investment properties
A professional valuation of all of the Group’s properties was carried out at 31 March 2020. The UK
properties were valued by Colliers International Property Advisers UK LLP, Chartered Surveyors. In
the USA, all properties were valued by Metropolitan Valuation Services, Inc., Certified General Real
Estate Appraisers.
Above and left:
Southgate Lodge,
South Croydon,
Greater London.
Page 15
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
STRATEGIC REPORT continued
The table below shows a summary of the valuation of our investment property at 31 March 2020:
Valuation Valuation
March 2020 March 2019
£m £m
Commercial property
UK 1,011.1 986.4
USA 107.8 103.0
Residential property
UK 832.7 817.8
USA 593.9 647.4
Less lease incentives (21.2) (22.1)
Total 2,524.3 2,532.5
A more detailed analysis of the investment property portfolio is set out in Note 9 to the consolidated
financial statements.
The changes shown above are attributable to the net loss arising on revaluation and movements
resulting from purchases, capital expenditure, disposals and changes in currency rates of exchange.
This is shown in the analysis below:
2020 2019
£m £m
Opening valuation 2,532.5 2,373.2
Gross up of head lease liability 8.4 –
Opening valuation (restated) 2,540.9 2,373.2
New acquisitions 29.8 77.5
Additions to existing properties 18.1 28.0
Disposals (4.7) (4.3)
2,584.1 2,474.4
Revaluation (loss)/gain (90.5) 83.9
Foreign exchange gain 39.1 45.2
Transfer to properties held for sale (8.5) (71.0)
Closing valuation 2,524.3 2,532.5
The overall valuation of our UK portfolio has remained flat with losses arising on retail and office
property offset by a small number of special situation uplifts. Residential property values have not
Above, right and
opposite page:
10 Temple Street
Birmingham.
Page 16
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
STRATEGIC REPORT continued
shown any significant movement. Following the change of operators of our care home properties in
the previous year we have seen an improvement in performance and this has been reflected in a
valuation uplift. We continue to obtain significant uplifts in value upon the completion of successful
developments and rent reviews.
In the USA we have seen significant falls in the value of our regulated properties in New York partially
offset by modest gains in Florida and elsewhere. The new regulation introduced in 2019 has had the
effect of removing property developers from the market and returning the average capitalisation rate
on buildings to a more normal 5.2% from a low position of 3.4%. This downward movement comes
after a 10 year period of growth.
Acquisitions and Developments
In the UK our development efforts have been concentrated in the following areas:
Starlite Lodge (formerly part of Odeon Parade), Greenford, Middlesex
Work was completed on this project to create 39 flats on the site of an existing property. This
includes 14 “affordable” units which are in course of being sold to a housing association. The
remaining 25 flats have all been let on assured shorthold tenancies.
Piano Apartments (formerly 7-11 St John’s Hill), London SW11
During the year we completed the bulk of the work on the conversion of this former office building
into 35 flats .
Salusbury Road, London NW6
This mixed use building with office, retail and leisure space was acquired during the year at a cost
of £17.3 million. Following refurbishment approximately 25% of the office space will be retained for
company use and the remainder let to third parties. This acquisition will enable the combination of
three area offices in a Covid-19 compliant manner under a new management structure.
Oxford Street, London W1
Preparatory work has continued throughout the year on the planning of our Oxford Street site.
A revised plan which has been enlarged by the acquisition of an adjacent property in Wardour Street
has been approved by the local authority.
USA
In the USA there were no new acquisitions, with efforts concentrated on refurbishment work on
properties in the Bronx and the continued modernisation of properties acquired in recent years.
Above, left and
opposite page:
164 Shaftesbury
Avenue, London WC2.
Page 19
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
STRATEGIC REPORT continued
Results for the year
The Group recorded a loss before taxation for the year ended 31 March 2020 of £33.2 million (2019 –
profit of £137.8 million). The result includes a net valuation loss of £90.5 million arising on
investment properties (2019 – gain of £83.9 million).
The table below shows the performance of the Group before and after valuation movements:
2020 2019
£m £m
Total rental and related income from investment property 166.1 156.2
Property operating expenses (91.1) (79.6)
Net rental and related income from investment property 75.0 76.6
Profit on disposals of investment property 15.8 12.2
Administrative expenses (14.3) (13.9)
Net operating profit before net valuation movements 76.5 74.9
Net valuation (losses)/gains on investment property (90.5) 83.9
Net financing expense (19.2) (21.0)
(Loss)/profit before taxation (33.2) 137.8
Overall we have seen an increase of £9.2 million in rental income, equivalent to 6.5% (2019 – 8.4%).
The increase in the UK has been derived from the completion and letting of new developments, rent
renewal negotiations and a significant improvement in our Care Home portfolio. Similarly in the USA
new property acquisitions in the second half of last year have now contributed a full year’s rent.
Service charge income increased slightly during the year to £14.5 million from £13.8 million in 2019
due principally to the timing of major works programmes.
Property operating expenses increased by 14.4% (2019 – 4.2%) with the Group incurring local
authority charges on properties newly vacated to permit development or refurbishment, increased legal
fees in collecting arrears and an increase in repair costs as the Group continued its programme of
property refurbishment.
The profit on disposal is largely derived from the sale of the southern portion of our Middlesex Street
site in Aldgate for the development of student accommodation. Profit also arises from the sale of lease
extensions in the UK. On certain buildings where we own the freehold, long leaseholds on some flats
were previously sold. When the long leaseholders extend the length of their lease a premium is paid;
the Group has no control over when these extensions may occur.
Financing costs in 2019 included £6.4 million accrued interest in respect of the settlement of prior
year tax liabilities which has not recurred in 2020. In the current year interest payable on mortgages
and bank loans has increased by £3.9 million due to extra borrowings drawn in the current and
second half of the prior year, mainly to fund property acquisitions.
This year’s fair value movement on financial instruments was a loss of £1.4 million (2019 – £172,000
loss).
Above and opposite
page bottom: Queen’s
Mansions, Muswell
Hill, London N10.
Opposite page top:
Upper Wimpole Street,
London W1.
As shown in Note 6 to the Financial Statements, the Group tax charge of £13.4 million (2019 – £17.9
million) has been impacted by the cancellation of the planned reduction in the UK corporation tax
rate from 19% to 17% and by increases in certain USA state tax rates. The combined effect of these
changes on our deferred tax balances has been an increase of £27.6 million. Adjusting for these
items, the settlement of historic tax liabilities and prior year tax credits the effective tax rate in the
UK was 15% and in the USA was 26% which is consistent with the statutory rates in each country.
Page 20
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
STRATEGIC REPORT continued
Loss per share
The Group recorded a loss per share of £2.92 (2019 – earnings of £7.36) a decrease of £10.28
(2019 – £5.09 decrease).
£
14
12
10
8
6
4
2
0
-2
-4
2016
2017
2018
2019
2020
The loss per share in the current year principally arose due to the revaluation losses on the Group’s
properties in New York which reduced earnings by £5.74 per share.
Underlying profit before tax
The profit reported in the financial statements has for some years included property revaluation
movements and fair value adjustments to financial instruments. In addition to this measure of
performance we also focus on “underlying profit before tax” which does not include these valuation
items. Underlying profit before tax for the last two years is set out below:
2020 2019
£m £m
(Loss)/profit before tax per the income statement (33.2) 137.8
Property valuation deficit/(surplus) 90.5 (83.9)
Financial instruments fair value adjustments 1.4 0.2
Adjustment to measurement of disposal profits 59.9 –
Underlying profit before tax 118.6 54.1
This year’s underlying profit before tax of £118.6 million is an increase of £64.5 million or 119% on
the previous year (2019 – £54.1 million, representing a 1.4% decrease). This strong increase is largely
attributable to the realised gain arising on the sale of the southern part of the Middlesex Street site.
Underlying profit before tax represents that element of our reported results which has actually been
realised and is not dependent on valuation judgements. It represents the performance of our core
rental business together with disposal profits which tend to fluctuate from year to year.
It is our underlying profit before tax which generates the cash we use to re-invest in the business and
to pay dividends and taxes.
Gearing
Above and opposite
page: Newton Aycliffe
Town Centre, County
Durham.
Gearing, the ratio between our loans and borrowings and the value of our total assets, is 17.8%
(2019 – 15.6%) for the Group as a whole. In the UK the ratio is 7.8% (2019 – 6.4%) whilst in the USA,
where each property is financed separately on a ring-fenced basis, it is 42.0% (2019 – 37.0%). The
increase in the USA mainly arose due to the reduction in value of our investment properties in
New York.
Page 22
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
STRATEGIC REPORT continued
Shareholders’ funds
At 31 March 2020 shareholders’ funds amounted to £1,896.0 million, a decrease of 2.3% on last year’s
figure of £1,940.4 million (2019 increase of 7.0%). Shareholders’ funds in recent years have been as
follows:
n
o
i
l
l
i
m
£
2,500
2,000
1,500
1,000
500
0
2016
2017
2018
2019
2020
Outlook
The Chairman’s Introduction on page 2 describes the economic and political factors which will
affect the Group in the coming year.
In the UK we are facing a deepening economic recession in the coming months as the steps taken
by Government to mitigate the impact of the Covid-19 pandemic are unwound. It is by no means
clear that the behaviour of the public, so far as concerns the use of retail, leisure and office premises,
will fully return to previous patterns. This may impact on the future demand for and valuation of such
properties.
Until these issues have become clearer we will carefully conserve our financial resources so that we
are well placed to take advantage of opportunities as they arise.
The Covid-19 pandemic seems to be at an earlier stage of development in the USA with increased
numbers of infections reported daily. US GDP is forecast to contract over the course of 2020 and it
is not clear as to the extent that this trend will continue into 2021.
It is the nature of programmes of development and enhancement that they tend to span more than
one accounting period and may take some time to bring to fruition; we are comfortable taking a long
term, low risk approach to growing net asset value. We will continue to explore development
opportunities within our existing portfolio; the timing and speed with which these are pursued will
be influenced by general economic and market conditions.
In the USA we continue to seek acquisition opportunities in favourable locations mainly outside New
York and, whenever possible, to refinance existing properties at more advantageous rates. There is
strong competition for worthwhile opportunities but we stick to our rigorous selection criteria and
are prepared to wait for the right transaction.
Above and opposite
page: Park West,
London W2.
In the immediate future we are unlikely to experience the rate of growth in net asset value that we
have enjoyed in recent years although a return to growth is anticipated in the longer term.
Page 24
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
STRATEGIC REPORT continued
Employees
The day-to-day activities are outsourced to management companies which are responsible for the
provision of the services of the staff on which we rely to run the business. As part of the
arrangements with the management companies in the UK, those individuals engaged on the Group’s
affairs hold joint employment contracts but the management companies retain sole responsibility for
setting recruitment, employment, training, health and safety, diversity and human rights policies for
their staff. Whilst the Group supports and encourages good practice in all of these areas, detailed
responsibility for the establishment and execution of such policies lies with the management
companies. As a result, this report does not contain the kind of information mentioned in the
Companies Act 2006 s414C (7)(b)(ii) and (iii).
So far as health and safety is concerned, the Board recognises the importance of ensuring that our
properties provide a safe and healthy environment for all users. With this in mind the Board has
requested that the management companies ensure that:
■ All their employees receive appropriate training in the identification and management of
health and safety risks. Every employee is required to be familiar with health and safety policies
and has responsibility for ensuring that they are followed in their area of work
■ Covid-19 secure workplaces and practices are established for all employees. This has involved
enabling working from home where appropriate as well as deep cleaning of offices and the
provision of sanitising materials. Working practices have been modified to maintain social
distancing wherever possible.
■ Regular cyclical risk assessments are undertaken by external consultants on all properties for
which the Group has responsibility. A dedicated team is tasked with resolving issues raised by
such assessments and with monitoring policy compliance
To ensure that an awareness of the importance of this issue continues at the highest level within the
Group, health and safety reviews are periodically presented at Board level.
Opposite page top:
54 Marsh Wall, Isle of
Dogs, London; middle:
Aldi Supermarket, Diss,
Norfolk; bottom:
Sainsbury’s
Supermarket, Watford,
Herts. Above and left:
Penhaligon House,
Truro, Cornwall.
Page 27
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
STRATEGIC REPORT continued
All Directors of the Company are male and no new recruitment to the Board is presently planned
which would cause this to change. When the need for recruitment does arise equal consideration
will be given to all candidates, regardless of gender, religion or ethnicity.
Community
The Group has long recognised the importance of supporting the communities in which we operate.
Many companies encourage and facilitate their employees to donate their time and efforts to
community projects; because our staffing is outsourced this route is not available to us. Our support
therefore takes the following forms:
■ Donations, largely to educational charities, which this year amounted to £115,500 (2019 –
£158,000)
■ Dividends on donated shares following the donation some years ago to charities of shares
representing 6.3% of the capital of the Company with dividend payments in the year of
£1,083,131 (2019 – £1,052,477) being passed to charitable companies
Environment
As mentioned above, all the staff engaged in the business and who control our buildings are provided
by management companies. We do not have responsibility for the greenhouse gas emissions related
to the employment of those people. The greenhouse gas emissions arising from our let properties
are the responsibility of our tenants.
In consequence, we have no disclosures to make in relation to greenhouse gas emissions and
therefore this report does not contain information of the kind mentioned in Part 7 of the Companies
Act 2006 (Strategic Report and Directors’ Report) Regulations 2013.
The scope for enhancing the environmental standards across the majority of our properties is
limited. In the main they were constructed before the advent of modern standards and it would be
neither practically nor economically feasible to undertake a complete upgrade to meet modern
requirements. However, we do take the opportunities which arise each year as part of programmes
of repair and refurbishment to improve the energy efficiency of our buildings and the plant therein.
When we undertake new developments or major schemes of refurbishment we strive to achieve the
highest environmental and sustainability standards consistent with the nature of the building and the
Above, below and
opposite page: Clare
Court, Bloomsbury,
London WC1.
Page 29
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
STRATEGIC REPORT continued
scheme being undertaken. A programme was started during the year of installing solar panels on
suitable buildings.
Section 172(1) statement
The Directors have acted in the way that they considered, in good faith, would be most likely to
promote the success of the Company for the benefit of its members as a whole and in doing so had
regard to the matters set out in Section 172 (1) (a) to (f) of the Companies Act 2006.
The Board considers the Group’s key stakeholders to be the Group’s: lenders, shareholders, staff
provided by management companies, suppliers and tenants. The Board impress the need for an open,
fair, honest and respectful workplace culture on senior management who ensure that all who work
for the Group are aligned to these values. This enables the Group to forge strong and mutually
beneficial long term relationships with its key stakeholders, which is critical to the success of the
business and its stated objective of the pursuit of long term, low risk growth in net asset value and
rental income as explained on page 5. The executive directors personally meet with many of the
Group’s key stakeholders during the year and it is an important part of the role of senior
management to meet with and foster business relationships with lenders, suppliers, tenants and other
stakeholders. High standards of business conduct are demanded from all those who represent the
Group whether they are members of the Board, staff provided by management companies or third
party advisers, agents or other representatives.
Viability statement
In accordance with Provision 31 of the 2018 UK Corporate Governance Code, the Directors
appointed a team led by senior management to assist the Board in undertaking a viability assessment.
A thorough review has been undertaken of the Group’s current financial, strategic and operational
position, the Board’s future plans for the business and the principal risks faced by the Group,
described on pages 6 to 15 of the Strategic Report.
The Directors consider that five years remains an appropriate time horizon for assessing the longer-
term viability of the business and this is consistent with the period which has been used for strategic
planning.
■ The Group has a low risk, balanced portfolio of properties, with many commercial properties
occupied by tenants with long leases. Based on current trends, the Directors continue to
believe that the Group will be able to grant short term leases on residential properties and new
leases on commercial properties at comparable rents for at least five more years.
■ The Group utilises external funding and has available and committed facilities which are
spread over a period of years. Most bank finance is available for an initial term of five years and
all of the Group’s current facilities mature during or beyond March 2024. Discussions regarding
the renewal or replacement of facilities occur in advance of their maturity.
Assessment of the Group’s viability over the next five years included stress testing key business
metrics with what is considered the plausible worst-case potential impact of the principal risks.
Whilst carrying out this assessment, the strength and effectiveness of the controls in place to mitigate
risks were considered.
In determining what should be regarded as the plausible worst-case impact, the Board and senior
management team have considered in detail and sought advice on the potential impact to UK
property prices, demand for UK property and the associated impact on rents and yields, and the
willingness of financial institutions to lend to UK property companies. Particular attention was given
to the potential impact of an unfavourable or no Brexit agreement and the possible economic and
social consequences of the current Covid-19 pandemic. Testing included assuming quarterly rent
cash collection for the following four quarters is the same as has been collected from June 2020 to
August 2020 with administration and operating costs remaining the same in real terms. Headroom on
loan covenants has been stress-tested, the maturities of loan agreements reviewed and a five-year cash
flow forecast produced.
Page 30
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
The Directors confirm that, based on the analysis, they have a reasonable expectation that the Group
can continue to operate and meet its liabilities as they fall due over the five-year period of their
assessment.
By order of the Board
M R M Jenner
Company Secretary
3 September 2020
Left and opposite
page: Windsor Court,
Bayswater, London W2.
Page 31
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
DIRECTORS’ REPORT
Change of company name
The Company changed its name from Daejan Holdings plc to Daejan Holdings Limited on 28 May
2020, following the scheme of arrangement and the subsequent delisting of its shares from the
London Stock Exchange on 11 May 2020 and approved modifications to constitutional documents
changing the company from a public limited company to a private limited company.
Strategic Report
The Company’s Strategic Report for the year ended 31 March 2020 is set out on pages 5 to 31 and
contains the following information:
■
■
■
■
■
The principal activities of the Group
The business review of the Group
An indication of the future developments of the Group
The principal risks and uncertainties facing the business, including those relating to financial
instruments
Employee and environmental disclosures including those related to greenhouse gas emissions
Results and Dividend
The loss for the year amounted to £46.6 million (2019 – profit of £120.0 million). An interim
dividend of 35p per share was paid on 6 March 2020.
Directors
The Directors who served throughout the year and up to the date of this report, except as noted
were:
Mr B S E Freshwater
Mr S I Freshwater
Mr S B Benaim (resigned 31 May 2020)
Mr D Davis
Mr A M Freshwater
Mr C B Freshwater
Mr R E Freshwater
Mr S Srulowitz (resigned 30 June 2020)
Brief biographies of the Directors are as follows:
Mr B S E Freshwater. Aged 72 – Joined the Board in December 1971 with primary responsibility for
the Group’s finances. In July 1976 he was appointed Managing Director and, additionally, became
Chairman in July 1980.
Mr S I Freshwater. Aged 70 – Directs the Group’s operations in the USA and also has responsibility
for the Group’s UK sales division. He has been a Director of the Company since January 1986.
Mr D Davis. Aged 85 – Previously a partner in Cohen Arnold, the Group’s consulting accountants. He
relinquished his partnership in 1971 in order to devote more time to his numerous business and
other interests. He has been a non-executive Director of the Company since December 1971.
Page 32
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
Mr A M Freshwater. Aged 49 – He is resident in the UK and sits as an Arbitrator in complex
commercial disputes. He is a potential beneficiary of trusts and a trustee of certain other trusts with
substantial holdings of the Company’s equity. He was appointed to the Board as a non-executive
director in July 2010.
Mr C B Freshwater. Aged 48 – Was appointed to the Board as a non-executive Director in July
2017. He currently lectures at a London college. He is an actual and a potential beneficiary of
trusts and a trustee of certain other trusts with substantial holdings of the Company’s equity.
Mr R E Freshwater. Aged 50 – He is currently pursuing an academic career and lectures to graduate
students. He is an actual and a potential beneficiary of trusts and a trustee of certain other trusts with
substantial holdings of the Company’s equity. He was appointed to the Board as a non-executive
director in July 2010.
Two other directors served throughout the year:
Mr S B Benaim. Aged 64 – Was appointed to the Board in January 2017 and resigned in May 2020.
He was an independent non-executive director. He was formerly Global Head of Real Estate at
accountancy firm BDO.
Mr S Srulowitz. Aged 68 – Was appointed to the Board in July 2017 and resigned in June 2020. He was
an independent non-executive director. He is currently the Managing Partner of Sonnenschein,
Sherman & Deutsch in New York, a member of the American Bar Association and the New York State
Bar Association.
The rules governing the election and re-election of Directors are set out in the Corporate
Governance Report on page 37. The powers of Directors of the Company are as set out in the
Company’s articles of association. During the year, the Company did not purchase any shares.
Directors’ Interests in Transactions
Day-to-day management of the Group’s properties and its operations in the UK is mainly carried out
by Highdorn Co. Limited and by Freshwater Property Management Limited. Mr B S E Freshwater and
Mr S I Freshwater are Directors of both companies. They have no direct beneficial interest in the
share capital of Highdorn Co. Limited. Mr B S E Freshwater, Mr S I Freshwater and Mr D Davis are also
Directors of the parent company of Freshwater Property Management Limited but have no beneficial
interest in either company. Mr C B Freshwater and Mr R E Freshwater have a beneficial interest in a
trust holding interests in shares in Highdorn Co. Limited.
Details of the amounts paid for the provision of these services are set out in Note 18 to the financial
statements.
Page 33
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
DIRECTORS’ REPORT continued
Share Capital and Substantial Directors’ and other Shareholdings
The structure of the Company’s share capital, including the rights and obligations attaching to the
shares, is given in Note 14 to the financial statements.
Directors’ interests in the share capital of the Company are as follows:
(Notes 1, 2, 3 & 4)
(Notes 2, 3 & 4)
(Notes 2 & 3)
(Notes 2 & 3)
(Notes 2 & 3)
(Notes 2 & 3)
B S E Freshwater
S I Freshwater
S B Benaim
D Davis
A M Freshwater
C B Freshwater
R E Freshwater
S Srulowitz
Notes:
Daejan Holdings PLC Ordinary Shares
31 March
31 March
2019
2020
340,033
89,270
–
763
–
–
–
–
340,033
89,270
–
763
–
–
–
–
1.
2.
3.
All the holdings shown in the table above were beneficially owned. Mr B S E Freshwater’s shareholding
represents 2.1% of the issued share capital of the Company.
A further 2,908,116 shares (2019 – 2,908,116) representing 17.8% of the issued share capital of the
Company were held by Freshwater family trusts and by charitable companies in which Mr B S E Freshwater,
Mr S I Freshwater, Mr D Davis and Mr A M Freshwater have no beneficial interest. Mr S I Freshwater and
Mr A M Freshwater are trustees of a trust which owns 250,000 shares representing 1.5% of the issued share
capital of the Company. Mr C B Freshwater and Mr R E Freshwater have a beneficial interest in certain trusts
referred to in this Note 2 which together hold 326,294 shares, representing 2.0% of the issued share capital
of the Company.
In addition to the holdings shown in the table and in Note 2 above, companies owned and controlled by
Mr B SE Freshwater, Mr S I Freshwater, their families and family trusts, held at 31 March 2020 a total of
7,876,431 shares (2019 – 7,876,431) representing 48.3% of the issued share capital of the Company.
Mr D Davis and Mr A M Freshwater have a non-beneficial interest in some of these shares, either as a
Director of the companies concerned, or as a trustee. Mr C B Freshwater and Mr R E Freshwater have a
beneficial interest in certain trusts included in this Note 3 which indirectly have interests in 3,774,853
shares, representing 23.2% of the issued share capital of the Company.
4. Of these shares 89,270 are held by a company owned jointly by Mr B S E Freshwater and Mr S I Freshwater.
Included in Notes 2 and 3 above are the following holdings at 31 March 2020, each amounting to
3% or more of the Company’s issued share capital:
Henry Davies (Holborn) Limited
Trustees of the S I Freshwater Settlement
Distinctive Investments Limited
Quoted Securities Limited
Centremanor Limited
Mayfair Charities Limited
Tabard Property Investment Company Limited
Shares
1,934,090
1,560,000
1,464,550
1,305,631
1,000,000
565,000
500,000
%
11.9
9.6
9.0
8.0
6.1
3.5
3.1
Page 34
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
In addition, the Company has been notified of the following substantial interests in its issued share
capital at 31 March 2020:
Valand Investments Limited
Silda 2 Limited
Shares
1,000,000
705,000
%
6.1
4.3
On 7 May 2020, the Scheme of Arrangement became effective and Dock Newco Limited, a wholly
owned subsidiary of Centremanor Limited which is controlled by the Freshwater family, acquired
3,346,964 shares in the Company. Dock Newco Limited subsequently acquired a further 400 shares,
taking its total holding to 3,347,364 (20.5% of the issued share capital). The Company is not aware
of any other changes to any of the above interests from 31 March 2020 up to the date of signing this
report.
Corporate Governance
This report combines by reference the Corporate Governance Report on pages 37 to 40.
Change of Control
Part 6 of Schedule 7 of the Large and Medium-sized Companies and Groups (Accounts and Reports)
Regulations 2008 requires the Company to identify those significant agreements to which the
Company is party that take effect, alter or terminate upon a change of control of the Company
following a takeover bid and the effects of any such agreements.
The Group has six bank loan and mortgage facilities which contain change-of-control clauses. Five
of these facilities in certain circumstances require the prior written consent of the lender to a
change of control over the parent company, without which such change of control would constitute
an event of default. A change of control under the remaining facility would similarly constitute an
event of default but no provision is made for the prior written consent of the lender. At 31 March
2020, these facilities represented £110.2 million (2019 – £111.3 million) of the loans and borrowings
in the financial statements and undrawn facilities of £30.0 million (2019 – £45.0 million).
Going Concern
The Group’s business activities, together with the factors likely to affect its future development,
performance and position are set out in the Strategic Report on pages 5 to 31, which also refers to
the financial position of the Group, its cash flows, liquidity position and borrowing facilities. In
addition, Note 17 to the financial statements includes the Group’s objectives, policies and processes
for managing its financial risks, together with details of its financial instruments, hedging activities
and exposures to credit, liquidity and market risks.
The Group generated cash from operating activities of £58.4 million during the year (2019 –
£61.5 million). Gearing, on the basis of gross debt to total assets, was 17.8% (2019 – 15.6%) and net
debt (total loans and borrowings less cash and cash equivalents) increased slightly to £344.7 million
(2019 – £334.9 million). The Group had undrawn committed facilities of £55.5 million at the balance
sheet date (2019 – £85.0 million). Subsequent to the year end and following the Scheme of
Arrangement, the Group borrowed an additional £225 million.
The Group has undertaken a detailed and robust assessment of its projected future financial position
including assessing what the Board considers a plausible worst-case downside scenario which
incorporates the expected potential impact on the Group of the Covid-19 pandemic. The Board
considered the potential impact to UK property prices, demand for UK property and the associated
impact on rents and yields. Particular attention was given to the potential impact of an unfavourable
Page 35
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
DIRECTORS’ REPORT continued
or no Brexit agreement and the possible economic and social consequences of the current Covid-19
pandemic.
The plausible worst-case downside scenario included assuming quarterly rent cash collected for the
following four quarters is the same as has been collected for the quarter ending 30 June 2020 with
administration and operating costs remaining the same in real terms. Development costs and
dividends were included at the current expected level, although as discretionary costs the Board
have the scope to delay or cancel these if necessary.
The Board is satisfied that even in the plausible worst-case scenario, the Group will have sufficient
resources to be able to continue to operate and there are no breaches of any of its loan covenants.
Consequently, the Directors have a reasonable expectation that the Group has adequate resources to
continue in operational existence for at least twelve months from the date of approving this Annual
Report & Accounts. Thus they continue to adopt the going concern basis of accounting in preparing
the financial statements.
Auditor
The Company’s auditor, KPMG LLP, has expressed its willingness to continue in office. In accordance
with Section 489 of the Companies Act, a resolution for the appointment of KPMG LLP as auditor of
the Company, and to authorise the Directors to determine its remuneration, is to be proposed at the
forthcoming Annual General Meeting.
Statement of Disclosure of Information to the Auditor
The Directors who held office at the date of approval of this Directors’ Report confirm that, so far as
they each are aware there is no relevant audit information of which the Company’s auditor is
unaware, and each Director has taken all the steps he ought to have taken as a Director to make
himself aware of any relevant audit information and to establish that the Company’s auditor is aware
of that information.
By order of the Board
M R M Jenner
Secretary
3 September 2020
Page 36
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
CORPORATE GOVERNANCE REPORT
Overview
The 2018 UK Corporate Governance Code (“the 2018 Code”) was applicable to the Group for the
period from 1 April 2019 to 11 May 2020. The Board uses the Corporate Governance Report to report
on the application of the Principles and of its compliance with the Provisions contained in the 2018
Code.
The Board has long recognised the benefits of strong corporate governance and its link to enhanced
business performance. Each year, the Board reviews the extent to which it is compliant with the
Code and considers any changes which might be necessary in light of developments in the Code and
in the context of the needs of the Group’s business. The Provisions of the 2018 Code that we do not
comply with and the reasons for these are set out in our compliance statement on pages 39 to 40.
The Board
The Group is controlled through the Company’s Board of Directors. The Board’s main roles are to
create value for shareholders, to provide entrepreneurial leadership of the Group, to approve the
Group’s strategic objectives and to ensure that the necessary financial and other resources are made
available to enable those objectives to be met.
The Board meets regularly throughout the year on both a formal and an informal basis.
Comprehensive management information covering all aspects of the Group’s business is supplied to
the Board in a timely manner and in a form and quality which enables it to discharge its duties. The
Board’s principal focus, in accordance with the formal schedule of matters referred to it for decision,
is on the formation of strategy and the monitoring and control of operations and financial
performance. The performance of the Board, its committees and individual directors is kept under
constant review by the Chairman and therefore it is not considered necessary to undertake a more
formal process of evaluation, either internally or externally. All directors have access to the Company
Secretary who is responsible for ensuring compliance with the Board procedures. The Board has
agreed a procedure for directors in the furtherance of their duties to take independent professional
advice, if necessary, at the Company’s expense. All directors are briefed by the Chairman of the
views, and any changes to them, of the major shareholders.
During the year and up until the 31 May 2020 the Audit, Nominations and Remuneration Committees
formally reported to the Board on matters discussed at, decisions made at and any recommended
actions arising from, meetings of these sub-committees. From 1 June 2020, the principle of a unitary
Board was readopted and the whole Board took responsibility for matters that were previously the
responsibility of these sub-committees.
During the year there were four full formal board meetings each attended by all directors except one
which A M Freshwater was unable to attend.
Directors and Directors’ Independence
During the year the Board comprised the Chairman, who acts in an executive capacity, one further
executive Director and six non-executive Directors. The names of the Directors together with their
biographical details are set out on pages 32 and 33. Mr A M Freshwater, Mr C B Freshwater and
Mr R E Freshwater are not independent by virtue of their membership of the Freshwater family.
The Board acknowledges that, in view of his length of service, Mr D Davis is technically not
independent.
Page 37
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
CORPORATE GOVERNANCE REPORT continued
Financial Reporting
The Board has ultimate responsibility for all aspects of the Group’s financial reporting obligations
and was assisted during the year by the Audit Committee in discharging that responsibility. The key
aspects of these obligations are as follows:
Accounting and significant areas of judgement
It is essential to the standard of the Group’s financial reporting that appropriate accounting policies
are adopted and applied on a consistent basis. The Board was updated by the Chairman of the Audit
Committee of the impact of new and emerging accounting standards and keeps under careful review
those areas of its accounting policies requiring subjective or complex judgements or
estimates. These areas, particularly in relation to fair value measurements of investment property are
set out in Note 1(u) to the financial statements. As part of their review of the accounts, the Board also
considers the valuation reports and discusses these with its valuers.
External auditor
KPMG LLP and its predecessor entities have been the Group’s statutory auditor since the Group in
its current form was created by reverse takeover in 1959. The Board and previously the Audit
Committee keep under careful review the independence of the auditor and the quality of its services
to the Group and is satisfied that KPMG LLP and Richard Kelly who has been the Senior Statutory
Auditor since 2015 provide a high quality, objective and cost effective service, from the sound base
of their understanding of the Group’s business.
As the Company is no longer listed, it is not bound by the 2018 Code and so is no longer required to
appoint an alternative auditor for the year commencing 1 April 2021. Nevertheless, in line with good
corporate governance, the Board are actively considering tender options and expects to make a
decision by no later than mid-2021.
The Board has a policy of using KPMG LLP to provide non-audit services to the Group only in relation
to matters closely associated with the audit and maintains close scrutiny of its non-audit services and
fees in order to safeguard objectivity and independence.
Internal Controls
The Board is ultimately responsible for the Group’s system of internal control and for reviewing its
effectiveness. However, such a system is designed to manage rather than eliminate the risk of failure
to achieve business objectives and can provide only reasonable and not absolute assurance against
material misstatement or loss.
The Code requires that the Directors review the effectiveness of the Group’s system of internal
controls, covering financial, operational and compliance controls and risk management. The Board
confirms that there is an ongoing process for identifying, evaluating and managing the significant
business risks faced by the Group and the internal control systems, and that this process has been in
place for the year under review and up to the date of approval of the Annual Report & Accounts.
This process was considered by the Audit Committee in detail and reviewed by the Board at regular
intervals.
The Audit Committee and the Board has considered the benefits likely to arise from the appointment
of an internal audit function and has concluded that this is not currently necessary having regard to
other controls which operate within the Group.
Page 38
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
Key elements of the Group’s system of internal controls
These are as follows:
Control environment: The Group is committed to the highest standards of business conduct and
seeks to maintain these standards across all its operations. The Group has a clear organisational
structure for planning, executing and monitoring business operations in order to achieve the Group’s
objectives. Lines of responsibility and delegation of authority are well defined.
Risk identification and evaluation: Management is responsible for the identification and evaluation
of key risks applicable to the areas of the property market which impact its objectives. These risks
are assessed on a continual basis, are subject to a robust annual assessment and may be associated
with a variety of internal and external sources. The Board considers the risk implications of business
decisions including those affecting all major transactions.
Information and communication: Periodic strategic reviews are carried out which include the
consideration of long term financial projections. Financial performance is actively monitored at
Board level. Through these mechanisms group performance is monitored, risks identified in a timely
manner, their implications assessed, control procedures re-evaluated and corrective actions agreed
and implemented.
Control procedures: The Group has implemented control procedures designed to ensure complete
and accurate accounting for financial transactions and to limit the potential exposure to loss of assets
or fraud. Measures include physical controls, segregation of duties, use of external experts and
advisers where beneficial, reviews by management and reviews by the Company’s external auditor
to the extent necessary to arrive at their audit opinion.
Monitoring and corrective action: The Board and the Audit Committee met regularly, formally and
informally, throughout the year to review the internal controls. This process includes a detailed
annual review of the significant business risks and formal consideration of the scope and
effectiveness of the Group’s system of internal control. In addition, the executive Directors and
senior management have a close involvement in the day-to-day operations of the Group and as such,
the controls are subject to ongoing monitoring. The Board is satisfied with the scope and
effectiveness of the internal controls.
Compliance Statement
The 2018 UK Corporate Governance Code (“the 2018 Code”) became applicable to the Group from
1 April 2019 replacing the 2016 Corporate Governance Code. The Board considers the Company has
complied throughout the year ended 31 March 2020 with all the provisions of the 2018 Code except
as set out below:
Mr B S E Freshwater performs the role of Chairman and Chief Executive. The Board recognises that
this is not compliant with Provision 9 of the Code which requires these two roles not to be exercised
by the same person, but given the nature, strategy and ownership structure of the Company the
Board remains of the view that this is in the best interest of shareholders as a whole.
Mr B S EFreshwater was not considered independent when he was appointed Chairman in 1980, as
also required by Provision 9 of the 2018 Code and due to his length of service exceeding nine years
the Company is not compliant with Provision 19.
The Board does not consider an external review of the Board every three years, as required by
Provision 21 would be of much value and so has not commissioned a review. The Nominations
Committee considered the composition of the Board during the year and concluded the make-up of
the Board remained appropriate; the directors have substantial property experience and knowledge
and are representative of the shareholder base. The Company further recognises that it is not
Page 39
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
CORPORATE GOVERNANCE REPORT continued
compliant with Provision 13 as the whole Board has responsibility for scrutinising the performance
of management and executive directors.
The Company is not compliant with Provision 12 which requires Mr D Davis who is the senior
independent director to be independent or with Provision 11 which requires at least half of the
Board, excluding the Chairman, to be independent non-executive directors. Similarly, as Mr S Benaim
and Mr S Srulowitz were the only two independent directors during the year and the subsequent
period during which the 2018 Code applied to the Company, the Company was not compliant with
Provision 24 which requires the three members of the Audit Committee to be independent or with
Provision 32 which requires the three members of the Remuneration Committee to be independent.
The Remuneration Committee does not monitor the remuneration of senior management which
resulted in the Company not being compliant with Provision 33.
The Board is satisfied that non-compliance with the Provisions described above do not jeopardise
the interests of the Company or its principal stakeholders and that the benefits of the current set-up
enhance business performance and remain appropriate for the foreseeable future.
Page 40
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
AUDIT COMMITTEE REPORT
Period of Operation
The Audit Committee operated throughout the year and up until 31 May 2020. Following the Scheme
of Arrangement and the delisting of the Company’s shares from the London Stock Exchange on
11 May 2020, the provisions of the 2018 UK Corporate Governance Code no longer applied to the
Company and there is now no requirement to have an Audit Committee. Instead, from 1 June 2020,
the responsibilities of the Audit Committee have reverted to the Board. In light of the new ownership
structure of the Company, the Board considers it vital that the principle of a unitary Board of
Directors is not undermined by reserving areas of decision-making solely for non-executive directors
or sub-committees.
Primary role and key responsibilities
The Audit Committee operated within its written terms of reference which detail its duties and
responsibilities. The primary role of the Committee was to assist the Board by reviewing and
monitoring the integrity of the Group’s financial reporting, the Group’s internal controls and risk
management framework, the arrangements for whistleblowing and the external audit process.
Membership, meetings and attendance
The members of the Audit Committee during the year and up to 31 May 2020, together with their
attendance at meetings held during the year, were as follows:
Director name
Directorship
Mr S B Benaim – Chairman Non-executive
Non-executive
Mr D Davis
Non-executive
Mr S Srulowitz
Member since
November 2017
November 2017
November 2017
Attendance
4 of 4
3 of 4
4 of 4
Mr Benaim is a Chartered Accountant and was formerly a partner in, and Global Head of Real Estate
at, the accountancy firm BDO. Mr Davis is a Chartered Accountant and was formerly a partner in the
accountancy firm Cohen Arnold. Mr Srulowitz is a practising lawyer in the USA, specialising in
property matters. Pursuant to Provision 24 of the 2018 UK Corporate Governance Code (“the 2018
Code”), the Board considers Mr Benaim to have significant, recent and relevant financial experience
and additionally that each member of the Audit Committee possesses relevant sectoral competence
and appropriate levels of independence and experience. As noted on page 37, in view of his length
of service, Mr Davis is not technically independent and therefore whilst the composition of the Audit
Committee was consistent with the law which requires the majority of members to be independent,
it was not strictly compliant with the 2018 Code which requires all members to be independent.
Main activities during the year
The main activities of the Committee during the year included the planning, monitoring, reviewing
and approval of:
Financial reporting
The Committee undertook a detailed review of the draft 2019 full year and
2020 half year announcements and the 2019 Annual Report and Accounts
which the Committee concluded when taken as a whole, presented a fair,
balanced and understandable assessment of the Group’s position and
prospects at that time. This included a thorough review of a report on their
audit from the external auditors.
The Committee considered the areas in which significant judgements or a
high degree of estimation are applied by the Group’s management,
including in relation to property valuations and the current tax liability.
Page 41
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
AUDIT COMMITTEE REPORT continued
The Committee reviewed the timing and impact of adoption of new
accounting standards, in particular IFRS 16 (Leases).
Fraud reporting and
whistleblowing
The Committee considered the current arrangements for individuals to raise
concerns about potential wrongdoing in financial reporting or other
matters and were satisfied that they remain appropriate.
Risk management and
internal controls
External auditor
The Group’s register of risks (including emerging risks) and the specific
controls in place designed to mitigate them, together with the broader
internal control framework were reviewed in detail. As part of their robust
assessment, the Committee undertook an extensive evaluation of the
probable impact on the Group caused by the uncertainty surrounding the
timing and nature of the UK’s departure from the European Union.
Management were also challenged by
the
appropriateness and completeness of both the register and the internal
controls framework.
the Committee on
Particular attention was paid to the value of investment properties and the
corporate tax creditor and the risk that either of these amounts might be
materially misstated. The Committee considered relevant professional advice
received by the Group. The Committee were satisfied that the carrying
values of both investment properties and the corporate tax creditor shown
in the financial statements are appropriate.
Further details of the principal risks faced by the Group are included in the
Strategic Report on pages 6 to 15. The key elements of the Group’s internal
control framework are included in the Corporate Governance report on
page 39.
The Committee reviewed the independence and effectiveness of the
external auditor including by meeting with them, both with and without
management present, by scrutinising their external audit plan and by
considering observations from the Group’s Finance team. The Audit
Committee was satisfied with their review.
Further details of the Group’s policies towards and relationship with the
external auditor are included on page 38.
Page 42
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
NOMINATIONS COMMITTEE REPORT
Period of Operation
The Nominations Committee operated throughout the year and up until 31 May 2020. Following the
Scheme of Arrangement and the delisting of the Company’s shares from the London Stock Exchange
on 11 May 2020, the provisions of the 2018 UK Corporate Governance Code no longer applied to
the Company and there is now no requirement to have a Nominations Committee. Instead, from
1 June 2020, the responsibilities of the Nominations Committee have reverted to the Board. In light
of the new ownership structure of the Company, the Board considers it vital that the principle of a
unitary Board of Directors is not undermined by reserving areas of decision-making solely for non-
executive directors or sub-committees.
Primary role and key responsibilities
The Nominations Committee operated within its written terms of reference which detail its duties
and responsibilities. The primary role of the Committee was to develop and maintain a formal
procedure for making recommendations on Board appointments.
The Board believe that appointments to the Board should be made on the basis of broad and
balanced criteria which are considered to be relevant to the good and proper management of the
Group. The Board do not believe in setting targets or quotas for gender or other diversity measures
but equally do not set any restrictions on appointments to the Board based on religion, ethnicity or
any other grounds.
Membership, meetings and attendance
The members of the Nominations Committee during the year and up to 31 May 2020, together with
their attendance at meetings held during the year were as follows:
Director name
Directorship
Member since
Attendance
Mr B S E Freshwater – Chairman
Mr S B Benaim
Mr S Srulowitz
Executive
Non-executive
Non-executive
November 2017
November 2017
November 2017
1 of 1
1 of 1
1 of 1
Main activities during the year
The Committee considered the composition of the Board and concluded that the directors have the
requisite skills, knowledge and experience to deliver the Group’s strategy and deal with changes in
the business environment. The Committee concluded that the size of the Board, the balance between
executive and non-executive directors and the balance between independent and non-independent
directors remains appropriate. No new appointments were made to the Board during the year or
during the subsequent period to the date of approval of this report.
Page 43
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
REMUNERATION COMMITTEE REPOR T
Period of Operation
The Remuneration Committee operated throughout the year and up until 31 May 2020. Following the
Scheme of Arrangement and the delisting of the Company’s shares from the London Stock Exchange
on 11 May 2020, the provisions of the 2018 UK Corporate Governance Code no longer applied to the
Company and there is now no requirement to have a Remuneration Committee. Instead, from 1 June
2020, the responsibilities of the Remuneration Committee have reverted to the Board with Mr DDavis,
who was Chairman of the Committee, having responsibility for recommending executive directors’
remuneration. In light of the new ownership structure of the Company, the Board considers it vital that
the principle of a unitary Board of Directors is not undermined by reserving areas of decision-making
solely for non-executive directors or sub-committees.
Primary role and key responsibilities
The primary role of the Remuneration Committee was to determine an appropriate remuneration
package for executive directors.
Membership, meetings and attendance
The members of the Remuneration Committee during the year and up to 31 May 2020, together with
their attendance at meetings held during the year, were as follows:
Director name
Directorship
Member since
Attendance
Mr D Davis – Chairman
Mr S B Benaim
Mr S Srulowitz
Non-executive
Non-executive
Non-executive
November 2017
November 2017
November 2017
1 of 1
1 of 1
1 of 1
Main activities during the year
The main activities of the Committee during the year included:
Appropriateness of
remuneration policy
The Committee considered the Company’s remuneration strategy and
policy described below to ensure it remains appropriate. The Committee
determined that no changes should be made to the remuneration policy.
Remuneration
benchmarking
The Committee reviewed the remuneration paid by selected other
companies of comparable size and complexity operating within the
property sector to ensure that the recommended increases in remuneration
are sufficient to ensure the total remuneration package remains
competitive. Further details are provided below and on the following pages.
Directors’ Remuneration Policy
Set out below and on pages 45 to 47 is the remuneration strategy and policy together with other
relevant information about the terms and conditions applicable to executive Directors of the Group:
1.
Overview
The remuneration strategy is designed to be simple and transparent. In setting levels of remuneration
it is important to:
■
■
■
Reflect the interests and expectations of shareholders and other stakeholders
Take account of pay and employment conditions of employees in the Group
Reward the sustained growth and profitability of the business
Page 44
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
■
■
Encourage management to adopt a level of risk which is in line with the risk profile of the
business as approved by the Board
Ensure there is no reward for failure by having no entitlement to compensation for loss of
office
2.
Executive Directors’ potential remuneration
Executive Directors receive basic pay only. There are no bonus or incentive schemes in operation or
any form of share option scheme or long term incentive plan. The executive Directors are
incentivised by their substantial interests in family shareholdings which directly aligned their
interests with other shareholders.
3.
Strategy
Purpose
The salary is set to be competitive, relative to other companies operating in the same sector.
Annual review
A review of executive Directors’ salaries is carried out each year once the results for the year are
known and with reference to a comprehensive peer group of similar companies.
The annual review takes into consideration:
■
■
■
■
■
Individual responsibilities, experience and performance
Salary levels for similar positions in comparable businesses
The level of pay increases awarded to staff whose services are provided by management
companies
Economic and market conditions
Overall performance of the business
There is no overall limit to maximum increases save as to comply with the strategy outlined above.
4.
Benefits
There are no additional benefits granted to any Director over and above basic pay.
5.
Pension
The Group does not operate a pension scheme for the Directors and therefore they do not receive
either pension contributions or entitlement to pension benefits as part of their remuneration by the
Group.
6.
Recruitment of executive Directors
No new appointments of executive Directors have been made for a number of years but if an
appointment were made, salary would take into account market data for the relevant role, the
individual’s experience and the responsibilities expected of them.
7.
Service contracts
No Director has a service contract. Company policy is to employ executive Directors at will, with no
contractual entitlement to compensation for loss of office. Mr B S E Freshwater has served as a
Director since 1971 and Mr S I Freshwater has served as a Director since 1986.
The non-executive Directors are not appointed for a fixed term but are subject to periodic reviews.
Mr D Davis was appointed in 1971, Mr R E Freshwater and Mr A M Freshwater were appointed in
Page 45
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
REMUNERATION COMMITTEE REPORT continued
2010. Mr S B Benaim and Mr S Srulowitz were appointed in 2017 and resigned on 31 May 2020 and
30 June 2020 respectively. Mr C B Freshwater was also appointed in 2017. They are all remunerated
by a fixed Director’s fee. Mr S B Benaim received an additional fee as Chairman of the Audit
Committee.
Annual Report on Remuneration
This section describes all payments to Directors in connection with the year under review and how
the Remuneration Policy will be applied over the next three years. KPMG LLP have audited this
section of the report to the extent required by legislation.
Total directors’ remuneration
Details of each individual director’s remuneration are set out below on an accruals basis:
Long
term
perfor-
mance
pay
£
Perfor-
mance
pay
£
Pension
contri-
butions
£
Total
£
Salary
£
Benefits
£
1,300,000
1,300,000
35,000
20,000
20,000
20,000
20,000
20,000
2,735,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
– 1,300,000
– 1,300,000
35,000
–
20,000
–
20,000
–
20,000
–
20,000
–
20,000
–
– 2,735,000
Long
term
perfor-
mance
pay
£
Perfor-
mance
pay
£
Pension
contri-
butions
£
Total
£
Salary
£
Benefits
£
1,250,000
1,250,000
25,000
20,000
20,000
20,000
20,000
20,000
2,625,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
– 1,250,000
– 1,250,000
25,000
–
20,000
–
20,000
–
20,000
–
–
20,000
20,000
–
– 2,625,000
2020
Mr B S E Freshwater
Mr S I Freshwater
Mr S B Benaim
Mr D Davis
Mr A M Freshwater
Mr C B Freshwater
Mr R E Freshwater
Mr S Srulowitz
Comparative table
2019
Mr B S E Freshwater
Mr S I Freshwater
Mr S B Benaim
Mr D Davis
Mr A M Freshwater
Mr C B Freshwater
Mr R E Freshwater
Mr S Srulowitz
Changes in the year
Mr D Davis is the senior non-executive Director and has responsibility for recommending executive
Directors’ remuneration which is subsequently approved by the full Board.
Page 46
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
Mr B S E Freshwater and Mr S I Freshwater each received an increase in basic salary of £50,000 per
annum during the year (2019 – £50,000), equivalent to 4% (2019 – 4.2%). The increases in 2019 was
agreed at a meeting of the Remuneration Committee and the current year increase was agreed by
the Board following a recommendation from Mr D Davis.
The total staff costs borne by the Group under its arrangements with its management companies in
the UK decreased by 0.3% (2019 – increase of 3.1%) with the cost of annual salary increases being
more than offset by a reduction in average staff numbers and lower pension contributions. Since
such staff are employed under these arrangements, no consultations regarding directors’
remuneration policy or implementation have been held.
It is intended that the current practice of annual reviews and the method in which they are carried
out will continue unchanged during the current and following years.
Non-executive directors’ remuneration
The non-executive directors each receive a base fee of £20,000 per annum which is reviewed
periodically, pro-rated for his or her period of service in any one year. This entitlement has not
changed in recent years.
The Chairman of the Audit Committee received an additional fee, pro-rated for his or her period of
service in any one year. This additional fee was increased from £5,000 to £15,000, with effect from
1 April 2019.
Relative importance of spend on pay
The table below demonstrates the relative amounts expended by the Group on staff costs, Directors’
remuneration and dividends to shareholders. The Company did not buy back any shares during the
year.
Staff costs
£000
7,516
7,538
% of total
27.3
28.0
Directors’
remuneration
Dividends to
shareholders
£000
2,735
2,625
% of total
£000
% of total
9.9
9.7
17,273
16,784
62.8
62.3
2020
2019
Statement of directors’ shareholdings and share interests
There is no minimum shareholding requirement for executive or non-executive directors. The
directors’ share interests are complex and are set out in detail in the Directors’ Report on page 34.
Approval of Directors’ Remuneration Report
At the last Annual General Meeting of the Company, votes cast by shareholders on the resolution to
approve the Directors’ Remuneration Report were as follows:
For
Against
13,254,988
895,621
93.7%
6.3%
Page 47
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
REMUNERATION COMMITTEE REPOR T continued
Total shareholder return
The following graph shows the total shareholder returns for the Company (based on an investment
of £100 at 1 April 2010) for each of the last ten financial years compared to the FTSE All Share Real
Estate Investment and Services Index and the FTSE 350 Index. The Company was a constituent of
both these indices until its delisting on 11 May 2020 and the Board considers these to be the most
appropriate broad market equity indices for illustrating the Company’s relative performance.
450
400
350
300
250
200
150
100
50
0
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
FTSE 350
FTSE ALL SHARE R/E IVST SVS E
DAEJAN HOLDINGS
The basic pay of the Chairman and Managing Director during the same period as the graph above is
shown as a single figure in the table below:
Mr B S E Freshwater
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
By order of the Board
D Davis
3 September 2020
Page 48
£
740,000
770,000
820,000
870,000
1,000,000
1,100,000
1,150,000
1,200,000
1,250,000
1,300,000
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
DIRECTORS’ RESPONSIBILITIES STATEMENT
The directors are responsible for preparing the Annual Report and the Group and parent Company
financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare Group and parent Company financial statements for
each financial year. Under that law they have elected to prepare the Group financial statements in
accordance with International Financial Reporting Standards as adopted by the European Union
(IFRSs as adopted by the EU) and applicable law and have elected to prepare the parent Company
financial statements in accordance with the UK accounting standards, including FRS 102 The
Financial Reporting Standard applicable in the UK and Republic of Ireland.
Under company law the directors must not approve the financial statements unless they are satisfied
that they give a true and fair view of the state of affairs of the Group and parent Company and of
their profit or loss for that period. In preparing each of the Group and parent Company financial
statements, the directors are required to:
■
■
■
■
■
■
select suitable accounting policies and then apply them consistently;
make judgements and estimates that are reasonable, relevant, reliable and prudent;
for the Group financial statements state whether they have been prepared in accordance with
IFRSs as adopted by the EU;
for the parent Company financial statements, state whether applicable UK accounting
standards have been followed, subject to any material departures disclosed and explained in
the parent company financial statements;
assess the Group and parent Company’s ability to continue as a going concern, disclosing, as
applicable, matters related to going concern; and
use the going concern basis of accounting unless they either intend to liquidate the Group or
the parent Company or to cease operations, or have no realistic alternative but to do so.
The directors are responsible for keeping adequate accounting records that are sufficient to show
and explain the parent Company’s transactions and disclose with reasonable accuracy at any time the
financial position of the parent Company and enable them to ensure that its financial statements
comply with the Companies Act 2006. They are responsible for such internal control as they
determine is necessary to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error, and have general responsibility for taking such steps as
are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud
and other irregularities.
The directors have decided to prepare voluntarily a Corporate Governance Statement as if the
company were required to comply with the Listing Rules and the Disclosure Guidance and
Transparency Rules of the Financial Conduct Authority in relation to those matters.
Under applicable law and regulations, the directors are also responsible for preparing a Strategic
Report, a Directors’ Report and a Directors’ Remuneration Report that complies with that law and
those regulations.
The directors are responsible for the maintenance and integrity of the corporate and financial
information included on the company’s website. Legislation in the UK governing the preparation and
dissemination of financial statements may differ from legislation in other jurisdictions.
Page 49
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
DIRECTORS’ RESPONSIBILITIES STATEMENT continued
Responsibility statement of the directors in respect of the annual financial report
We confirm that to the best of our knowledge:
■
■
the financial statements, prepared in accordance with the applicable set of accounting
standards, give a true and fair view of the assets, liabilities, financial position and profit or loss
of the company and the undertakings included in the consolidation taken as a whole; and
the strategic report includes a fair review of the development and performance of the business
and the position of the issuer and the undertakings included in the consolidation taken as a
whole, together with a description of the principal risks and uncertainties that they face.
We consider the annual report and accounts, taken as a whole, is fair, balanced and understandable
and provides the information necessary for shareholders to assess the group’s position and
performance, business model and strategy.
B S E Freshwater
Chairman
3 September 2020
Page 50
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
INDEPENDENT AUDITOR’S REPORT
To the members of Daejan Holdings Plc
Our opinion is unmodified
1.
We have audited the financial statements of Daejan Holdings Ltd (“the Company”) for the year ended
31 March 2020, which comprise the Consolidated Income Statement, Consolidated Statement of
Comprehensive Income, Consolidated Statement of Changes in Equity, Company Statement of
Changes in Equity, Consolidated Balance Sheet, Company Balance Sheet, Consolidated Statement of
Cash Flows, and the related notes, including the accounting policies in note 1.
In our opinion:
■
■
■
■
the financial statements give a true and fair view of the state of the Group’s and of the parent
Company’s affairs as at 31 March 2020 and of the Group’s loss for the year then ended;
the Group financial statements have been properly prepared in accordance with International
Financial Reporting Standards as adopted by the European Union (IFRSs as adopted by the EU);
the parent Company financial statements have been properly prepared in accordance with UK
accounting standards, including FRS 102 The Financial Reporting Standard applicable in the
UK and Republic of Ireland; and
the financial statements have been prepared in accordance with the requirements of the
Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”)
and applicable law. Our responsibilities are described below. We have fulfilled our ethical
responsibilities under, and are independent of the Group in accordance with, UK ethical
requirements including the FRC Ethical Standard. We believe that the audit evidence we have
obtained is a sufficient and appropriate basis for our opinion.
Emphasis of matter – uncertain valuation of UK investment property
2.
We draw attention to note 9 to the financial statements which states that the independent external
valuations of the UK investment properties at the reporting date are reported on the basis of ‘material
valuation uncertainty’ due to the potential economic effect of the coronavirus pandemic.
Consequently, more subjectivity is associated with the valuation of UK investment property than
would normally be the case. Our opinion is not modified in respect of this matter.
We identified the valuation of investment property as a key audit matter (see section 3 of this report).
Key audit matters: our assessment of risks of material misstatement
3.
Key audit matters are those matters that, in our professional judgment, were of most significance in
the audit of the financial statements and include the most significant assessed risks of material
misstatement (whether or not due to fraud) identified by us, including those which had the greatest
effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts
of the engagement team. These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion
on these matters. In arriving at our audit opinion above, the key audit matters, in decreasing order of
audit significance, were as follows:
Page 51
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
INDEPENDENT AUDITOR’S REPORT continued
The Risk
Our Response
Subjective valuation
Our procedures included:
Investment properties represent 91.6% (2019:
91.5%) of gross assets of the Group.
The property portfolios are externally valued by
qualified independent valuers and held at fair
value at the balance sheet date.
fair value of
Determination of
the
the
investment properties is considered a significant
audit risk due to the magnitude of the balance
and the subjective nature of the valuation
methodology and inputs which depend on the
individual nature of each property, its location
and expected future net rental values, market
yields and comparable market transactions.
Included in the independent external valuation
of the UK investment properties as at 31 March
2020 is a “material valuation uncertainty” due to
Novel Coronavirus (COVID-19) as per VPGA 10
of the RICS Valuation - Global Standards.
The effect of these matters is that, as part of our
risk assessment, we determined that the
valuation of investment properties has a high
degree of estimation uncertainty, with a
potential range of reasonable outcomes greater
than our materiality for the financial statements
as a whole, and possibly many times that
amount.
and
valuers’
objectivity,
capabilities
Assessing valuers’ credentials: we assessed
professional
the
qualifications
through
discussions with the valuers, reading their
valuation reports, and reviewing their terms of
engagement with the Group to determine
whether there were any matters that might have
affected their objectivity or may have imposed
scope limitations upon their work.
Methodology choice: we held discussions
with the Group’s external property valuers to
determine the valuation methodology used. With
the assistance of our own property valuation
specialists, we critically assessed whether the
valuations were in accordance with the RICS
Valuation Professional Standards ‘the Red Book’
for the valuers of the UK portfolio, and the
Standards of Professional Appraisal Practice of
the Appraisal Institute for the valuers of the US
portfolio, and whether the methodologies
adopted were appropriate by reference to
acceptable valuation practice.
Benchmarking assumptions: With
the
assistance of our own property valuation
specialists we selected a sample of properties
using various criteria including analysis of
capital movements by comparison to industry
indices or published market trends. We held
discussions with the Group’s external property
valuers to critically assess movements in
property values for the sample selected. We
evaluated and challenged as appropriate the key
assumptions upon which these valuations were
based, including forecast rents, yields, discount
rates, vacant periods and
irrecoverable
expenditure and comparable transactions by
making a comparison to our own understanding
of the market and to industry benchmarks.
Assessing transparency: we considered the
adequacy of the Group’s disclosures on the
significant
valuation
unobservable inputs employed in the valuation.
techniques
and
Valuation of
investment
property (Group)
(Group:
£2,524.3 million;
2019:
£2,532.5 million)
Refer to page 66
(Significant
accounting policies)
and pages 74-78
(Notes to the
consolidated
financial
statements).
Page 52
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
Going concern
Disclosure quality
Our procedures included:
Refer to pages 30-31
(Going concern and
Viability Statement)
and page 64
(Significant
accounting policies).
The financial statements explain how the Board
has formed a judgement that it is appropriate to
adopt the going concern basis of preparation for
the Group and parent Company.
Funding assessment: We analysed the Group’s
financing terms and considering directors’
forecasts and assumptions for ongoing covenant
compliance and available headroom;
That judgement is based on an evaluation of the
inherent risks to the Group’s and Company’s
business model and how those risks might affect
the Group’s and Company’s financial resources
or ability to continue operations over a period of
at least a year from the date of approval of the
financial statements.
Given the significant impact of the coronavirus
pandemic, the risks most likely to adversely
affect
financial
resources over this period were:
the Company’s available
■ tenant default and significant reduction in
rent collections impacting cash flow and
earnings;
■ availability of borrowings and compliance
with loan covenants; and
■ significant reduction in property values.
The risk for our audit was whether or not those
risks were such that they amounted to a material
uncertainty that may have cast significant doubt
about the ability to continue as a going concern.
Had they been such, then that fact would have
been required to have been disclosed.
Historical comparisons: We assessed the
reasonableness of the directors’ cash flow
projections by considering the historical
accuracy of the previous forecasts;
considered
analysis: We
Sensitivity
sensitivities over the level of available financial
resources indicated by the Group’s financial
forecasts taking account of severe but adverse
effects that could arise from these risks
individually and collectively such as increase in
interest rates of borrowings, decrease
in
occupancy rates and fall in real estate prices and
a gradual recovery in relation to these factors
following
the
coronavirus pandemic;
lockdown as a result of
COVID-19 knowledge: Considering
the
Director’s assessment of COVID-19 related
sources of risk for the Group’s business and
financial resources compared with our own
understanding of the risks. This included
assessing the possibility of tenant default and
the impact on rent collections for cash flow
purposes, the ability of the Group to comply
with the loan covenants and the significant
reduction in property values;
Assessing transparency: We considered the
completeness and accuracy of the matters
covered in the Annual Report and assessed that
they reflect the position of the Group’s
financing and the risks associated with the
Group‘s ability to continue as a going concern.
Page 53
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
INDEPENDENT AUDITOR’S REPORT continued
Unprecedented levels of uncertainty
and
assess
audits
challenge
the
All
reasonableness of estimates, in particular as
described in the key audit matters on the
valuation of investment property, and related
disclosures and the appropriateness of the going
concern basis of preparation of the financial
statements (see below). All of these depend on
assessments
economic
the
environment and the Group’s future prospects
and performance.
future
of
In addition, we are required to consider the
other information presented in the Annual
Report including the principal risks disclosure
and the viability statement and to consider the
directors’ statement that the annual report and
financial statements taken as a whole is fair,
balanced and understandable and provides the
information necessary for shareholders to assess
the Group’s position and performance, business
model and strategy.
Brexit is one of the most significant economic
events for the UK and at the date of this report
its effects are subject to unprecedented levels of
uncertainty of outcomes, with the full range of
possible effects unknown.
to
the consideration of
firm-wide
We developed a standardised
approach
the
uncertainties arising from Brexit in planning and
performing our audits. Our procedures
included:
Our Brexit knowledge: We considered the
directors’ assessment of Brexit-related sources of
risk for the Group’s business and financial
resources
own
compared with
understanding of the risks. We considered the
directors’ plans to take action to mitigate the
risks.
our
forecasts, we compared
Sensitivity analysis: When addressing
valuation of investment property, disclosures in
relation to going concern and other areas that
depend on
the
directors’ analysis to our assessment of the full
range of reasonably possible scenarios resulting
from Brexit uncertainty and, where forecast cash
flows are required to be discounted, considered
adjustments to discount rates for the level of
remaining uncertainty.
Assessing transparency: As well as assessing
individual disclosures as part of our procedures
on valuation of investment property and
disclosures in relation to going concern we
considered all of the Brexit related disclosures
together, including those in the strategic report,
comparing the overall picture against our
understanding of the risks.
The impact of
uncertainties due
to the UK exiting
the European
Union on our audit
Refer to page 2 (the
Chairman’s
Introduction), page 6
(Viability Statement)
and page 30
(Principal Risks and
Uncertainties).
Page 54
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
Recoverability of
investment in
subsidiary
undertakings
(Company)
(Parent:
£1,243.6 million;
2019:
£1,279.9 million)
Refer to page 94
(Accounting policies).
Low risk, high value
Our procedures included:
The carrying amount of the parent Company’s
investments in subsidiaries (including both
equity investments and loans to subsidiary
undertakings) represents 96.2% (2019: 99.7%) of
the Company’s total assets. Their recoverability
is not at a high risk of significant misstatement
or subject to significant judgement. However,
due to their materiality in the context of the
parent Company financial statements, this is
considered to be the area that had the greatest
effect on our overall parent Company audit.
Tests of detail: Comparing the carrying
amount of 100% of investments with the
relevant subsidiaries’ draft balance sheet to
identify whether their net assets, being an
approximation of their minimum recoverable
amount, were in excess of their carrying amount
and assessing whether those subsidiaries have
historically been profit-making or whether they
have a positive net asset value and therefore
coverage of the debt owed.
Assessing subsidiary audits: Assessing the
work performed by the Group or subsidiary
audit team on all of those subsidiaries and
considering the results of that work, on those
subsidiaries’ profits and net assets.
Comparing valuations: For the investments
where the carrying amount exceeded the net
asset value, comparing the carrying amount of
the investment with the expected value of the
business based on a suitable multiple of the
subsidiaries’ profit.
Page 55
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
INDEPENDENT AUDITOR’S REPORT continued
Our application of materiality and an overview of the scope of our audit
4.
Materiality for the Group financial statements as a whole was set at £55.1 million (2019:
£26.4 million), determined with reference to a benchmark of total assets, of which it represents 2.0%
(2019: 1.0%).
Materiality for the parent Company financial statements as a whole was set at £27.0 million (2019:
£13.5 million), determined with reference to a benchmark of Company gross assets, of which it
represents 2.0% (2019: 1.0%).
We agreed to report to those charged with governance any corrected or uncorrected identified
misstatements exceeding £2.8 million (Group) (2019: £1.3 million) or £1.4 million (parent Company)
(2019: £0.7 million), in addition to other identified misstatements that warranted reporting on
qualitative grounds.
As the Company delisted from the London Stock Exchange on 11 May 2020, and all public shares
were purchased by the exisitng majority shareholder, the materiality levels set were revised from
those set at the planning stage (from representing 1.0% of total assets, as in 2019) to reflect the
concentration in ownership.
Group total assets
£2,756.6 million (2019: £2,766.5 million)
Group materiality
£55.1 million (2019: £26.4 million)
£55.1 million
Whole financial statements materiality
(2019: £26.4 million)
£37 million
Range of materiality at 50 components
(£37 million to £2,090)
(2019: £1.9 million to £2,816)
Group total assets
Group materiality
£2.8 million
Misstatements reported to those charged
with governance (2019: £1.3 million)
Of the group’s 50 (2019: 50) reporting components, we subjected 50 (2019: 50) to full scope audits
for group purposes.
The components within the scope of our work accounted for the percentages illustrated below.
Group revenue
Group profit before tax
Group total assets
100%
(2019 100%)
100
100
100%
(2019 100%)
100
100
100%
(2019 100%)
100
100
Full scope for group audit purposes 2020
Full scope for group audit purposes 2019
Page 56
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
The Group team approved the component materialities, which ranged from £2,090 to £37m (2019:
£2,816 to £1.9m), having regard to the mix of size and risk profile of the Group across the
components.
The work on 1 of the 50 components (2019: 1 of the 50 components) was performed by a
component auditor and the rest, including the audit of the parent Company, was performed by the
Group team.
The Group team instructed the component auditor as to the significant areas to be covered,
including the relevant risks detailed above and the information to be reported back.
The Group team obtained an understanding of the component audited by the component auditor to
assess the audit risk and strategy. On completion of the component auditor’s procedures, the findings
reported to the Group audit team were discussed in more detail, and any further work required by
the Group audit team was then performed by the component auditor.
4. We have nothing to report on going concern
The Directors have prepared the financial statements on the going concern basis as they do not
intend to liquidate the Company or the Group or to cease their operations, and as they have
concluded that the Company’s and the Group’s financial position means that this is realistic. They
have also concluded that there are no material uncertainties that could have cast significant doubt
over their ability to continue as a going concern for at least a year from the date of approval of the
financial statements (“the going concern period”).
Our responsibility is to conclude on the appropriateness of the Directors’ conclusions and, had there
been a material uncertainty related to going concern, to make reference to that in this audit report.
However, as we cannot predict all future events or conditions and as subsequent events may result
in outcomes that are inconsistent with judgements that were reasonable at the time they were made,
the absence of reference to a material uncertainty in this auditor’s report is not a guarantee that the
Group and the Company will continue in operation.
We identified going concern as a key audit matter (see section 3 of this report). Based on the work
described in our response to that key audit matter, we are required to report to you if we have
anything material to add or draw attention to in relation to the directors’ statement in Note 1 to the
financial statements on the use of the going concern basis of accounting with no material
uncertainties that may cast significant doubt over the Group and Company’s use of that basis for a
period of at least twelve months from the date of approval of the financial statements.
We have nothing to report in these respects.
5. We have nothing to report on the other information in the Annual Report
The directors are responsible for the other information presented in the Annual Report together with
the financial statements. Our opinion on the financial statements does not cover the other
information and, accordingly, we do not express an audit opinion or, except as explicitly stated below,
any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether, based on our
financial statements audit work, the information therein is materially misstated or inconsistent with
the financial statements or our audit knowledge. Based solely on that work we have not identified
material misstatements in the other information.
Page 57
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
INDEPENDENT AUDITOR’S REPORT continued
Strategic report and directors’ report
Based solely on our work on the other information:
■
■
■
we have not identified material misstatements in the strategic report and the directors’ report;
in our opinion the information given in those reports for the financial year is consistent with
the financial statements; and
in our opinion those reports have been prepared in accordance with the Companies Act 2006.
Directors’ remuneration report
In our opinion the part of the Directors’ Remuneration Report to be audited has been properly
prepared in accordance with the Companies Act 2006.
Disclosures of emerging and principal risks and longer-term viability
Based on the knowledge we acquired during our financial statements audit, we have nothing material
to add or draw attention to in relation to:
■
■
■
the directors’ confirmation within the Viability Statement that they have carried out a robust
assessment of the emerging and principal risks facing the Group, including those that would
threaten its business model, future performance, solvency and liquidity;
the Principal Risks and Uncertainties disclosures describing these risks and explaining how
they are being managed and mitigated; and
the directors’ explanation in the Viability Statement of how they have assessed the prospects
of the Group, over what period they have done so and why they considered that period to be
appropriate, and their statement as to whether they have a reasonable expectation that the
Group will be able to continue in operation and meet its liabilities as they fall due over the
period of their assessment, including any related disclosures drawing attention to any
necessary qualifications or assumptions.
Our work is limited to assessing these matters in the context of only the knowledge acquired during
our financial statements audit. As we cannot predict all future events or conditions and as subsequent
events may result in outcomes that are inconsistent with judgments that were reasonable at the time
they were made, the absence of anything to report on these statements is not a guarantee as to the
Group’s and Company’s longer-term viability.
Corporate governance disclosures
We are required to report to you if:
■
■
we have identified material inconsistencies between the knowledge we acquired during our
financial statements audit and the directors’ statement that they consider that the annual report
and financial statements taken as a whole is fair, balanced and understandable and provides the
information necessary for shareholders to assess the Group’s position and performance,
business model and strategy; or
the section of the annual report describing the work of the Audit Committee does not
appropriately address matters communicated by us to the Audit Committee.
We have nothing to report in these respects.
Page 58
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
6. We have nothing to report on the other matters on which we are required to report
by exception
Under the Companies Act 2006, we are required to report to you if, in our opinion:
■
■
■
■
adequate accounting records have not been kept by the parent Company, or returns adequate
for our audit have not been received from branches not visited by us; or
the parent Company financial statements and the part of the Directors’ Remuneration Report
to be audited are not in agreement with the accounting records and returns; or
certain disclosures of directors’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
We have nothing to report in these respects.
Respective responsibilities
7.
Directors’ responsibilities
As explained more fully in their statement set out on page 49, the Directors are responsible for: the
preparation of the financial statements including being satisfied that they give a true and fair view;
such internal control as they determine is necessary to enable the preparation of financial statements
that are free from material misstatement, whether due to fraud or error; assessing the Group and
parent Company’s ability to continue as a going concern, disclosing, as applicable, matters related to
going concern; and using the going concern basis of accounting unless they either intend to liquidate
the Group or the parent Company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue our opinion in an
auditor’s report. Reasonable assurance is a high level of assurance, but does not guarantee that an
audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are considered material if, individually or in
aggregate, they could reasonably be expected to influence the economic decisions of users taken on
the basis of the financial statements.
fuller description of our responsibilities
A
www.frc.org.uk/auditorsresponsibilities.
is provided on
the FRC’s website at
The purpose of our audit work and to whom we owe our responsibilities
8.
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of
Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to
the Company’s members those matters we are required to state to them in an auditor’s report and
for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the Company’s members, as a body, for our
audit work, for this report, or for the opinions we have formed.
Richard Kelly (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
15 Canada Square
London, E14 5GL
3 September 2020
Page 59
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
CONSOLIDATED INCOME STATEMENT
for the year ended 31 March 2020
Notes
Gross rental income
Service charge income
Total rental and related income from investment
property
Property operating expenses
Net rental and related income from investment
property
Profit on disposal of investment property
Net valuation (losses)/gains on investment property
Administrative expenses
Net operating (loss)/profit before net financing costs
Fair value losses on derivative financial instruments
Fair value losses on current investments
Other financial income
Financial expenses
Net financing expense
(Loss)/profit before taxation
Income tax
(Loss)/profit for the year
Attributable to:
Equity holders of the parent
Non-controlling interest
(Loss)/profit for the year
2
3
9
4
5
5
6
Year ended
31 March
2020
£000
Year ended
31 March
2019
£000
151,641
14,502
142,364
13,797
166,143
(91,094)
156,161
(79,580)
75,049
15,775
(90,494)
(14,254)
76,581
12,203
83,928
(13,904)
(13,924)
158,808
(1,335)
(21)
1,929
(167)
(5)
1,048
(19,800)
(21,852)
(19,227)
(20,976)
(33,151)
(13,441)
137,832
(17,853)
(46,592)
119,979
(47,626)
119,893
1,034
86
(46,592)
119,979
Basic and diluted (loss)/earnings per share
7
£(2.92)
£7.36
The accompanying notes form an integral part of the financial statements.
Page 60
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 March 2020
(Loss)/profit for the year
Foreign exchange translation differences
Year ended
31 March
2020
£000
(46,592)
20,568
Year ended
31 March
2019
£000
119,979
24,350
Total comprehensive (loss)/income for the year
(26,024)
144,329
Attributable to:
Equity holders of the parent
Non-controlling interest
(27,118)
144,236
1,094
93
Total comprehensive (loss)/income for the year
(26,024)
144,329
All comprehensive income may be reclassified as profit and loss when realised in the future.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended
31 March 2020
Balance at 1 April 2018
Profit for the year
Foreign exchange translation
differences
Distributions to non-controlling
interest
Dividends to equity shareholders
Issued
share
capital
£000
4,074
–
–
–
–
£000
555
–
–
–
–
Share
Equity
Non-
premium Translation
Retained
shareholders’ controlling
account
reserve
earnings
£000
£000
funds
£000
interest
£000
Total
equity
£000
31,384
1,776,889
1,812,902
–
119,893
119,893
24,343
–
–
–
–
24,343
–
(16,784)
(16,784)
91
86
7
1,812,993
119,979
24,350
(17)
–
(17)
(16,784)
Balance at 1 April 2019
4,074
555
55,727
1,879,998
1,940,354
167
1,940,521
(Loss)/profit for the year
Foreign exchange translation
differences
Distributions to non-controlling
interests
Dividends to Equity Shareholders
–
–
–
–
–
–
–
–
–
(47,626)
(47,626)
1,034
(46,592)
20,508
60
20,568
20,508
–
–
–
–
(17,273)
(17,273)
–
(56)
–
(56)
(17,273)
Balance at 31 March 2020
4,074
555
76,235 1,815,099
1,895,963
1,205 1,897,168
The accompanying notes form an integral part of the financial statements.
Page 61
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
CONSOLIDATED BALANCE SHEET
as at 31 March 2020
Assets
Investment property
Deferred tax assets
Total non-current assets
Trade and other receivables
Current investments
Cash and cash equivalents
Properties held for sale
Total current assets
Total assets
Equity
Share capital
Share premium
Translation reserve
Retained earnings
Total equity attributable to equity holders
of the parent
Non-controlling interest
Total equity
Liabilities
Loans and borrowings
Deferred tax liabilities
Lease obligations payable
Total non-current liabilities
Loans and borrowings
Trade and other payables
Current taxation
Total current liabilities
Total liabilities
Notes
31 March
2020
£000
31 March
2019
£000
9
10
2,524,260
506
2,532,518
226
11
12
13
14
16
10
16
15
2,524,766
2,532,744
76,976
130
146,275
8,450
66,716
151
95,895
70,997
231,831
233,759
2,756,597
2,766,503
4,074
555
76,235
1,815,099
4,074
555
55,727
1,879,998
1,895,963
1,205
1,940,354
167
1,897,168
1,940,521
469,188
297,642
8,328
418,069
293,431
–
775,158
711,500
21,739
61,332
1,200
12,685
58,677
43,120
84,271
114,482
859,429
825,982
Total equity and liabilities
2,756,597
2,766,503
The financial statements on pages 60 to 91 were approved by the Board of Directors on 3 September
2020 and were signed on its behalf by:
B S EFreshwater
Director
The accompanying notes form an integral part of the financial statements.
Page 62
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 March 2020
Cash flows from operating activities
Cash generated from operations (Note 21)
Interest received
Interest paid
Tax paid
Net cash (used in)/generated from
operating activities
Cash flows from investing activities
Acquisition and development of
Year ended
31 March
2019
£000
Year ended
31 March
2020
£000
£000
58,435
1,929
(26,024)
(58,563)
£000
61,506
1,048
(15,486)
(8,855)
(24,223)
38,213
investment property
(47,636)
(108,463)
Proceeds from sale of investment
property
91,899
16,098
Net cash generated from/(absorbed by)
investing activities
Cash flows from financing activities
Repayment of bank loans
New bank loans
Repayment of mortgages
New mortgages
Dividends paid to equity holders of
the parent
Payments to non-controlling interest
44,263
(92,365)
(2,135)
30,000
(36,150)
52,469
(17,273)
(56)
(59,603)
60,000
(40,063)
102,814
(16,784)
(17)
Net cash generated from financing activities
26,855
46,347
Net increase/(decrease) in cash and
cash equivalents
Cash and cash equivalents brought forward
Effect of exchange rate fluctuations on
cash held
46,895
95,895
3,485
Cash and cash equivalents (Note 12)
146,275
(7,805)
98,752
4,948
95,895
The accompanying notes form an integral part of the financial statements.
Page 63
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1.
Significant Accounting Policies
Daejan Holdings Limited (formerly Daejan Holdings PLC) is a company domiciled in the United
Kingdom. The consolidated financial statements of the Company for the year ended 31 March 2020
comprise the Company and its subsidiaries (together referred to as “the Group”).
The consolidated financial statements were authorised for issuance on 3September 2020.
(a)
Statement of compliance
The consolidated financial statements have been prepared in accordance with International
Financial Reporting Standards as adopted by the EU (“IFRS”) and those parts of the Companies Act
2006 applicable to companies reporting under IFRS.
The Company has elected to prepare its parent company financial statements in accordance with
Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and
Republic of Ireland and these are presented on pages 92 to 96.
(b)
Basis of preparation
The consolidated financial statements are presented in sterling, the Company’s functional currency
and the Group’s presentational currency, rounded to the nearest thousand. They are prepared on the
historical cost basis except that the following assets and liabilities are stated at their fair value:
investment property, derivative financial instruments, current asset investments and properties held
for sale.
The Group has undertaken a detailed and robust assessment of its projected future financial position
including assessing what the Board considers a plausible worst-case downside scenario which
incorporates the expected potential impact on the Group of the Covid-19 pandemic. The Board
considered the potential impact to UK property prices, demand for UK property and the associated
impact on rents and yields. Particular attention was given to the potential impact of an unfavourable
or no Brexit agreement and the possible economic and social consequences of the current Covid-19
pandemic.
The plausible worst-case downside scenario included assuming quarterly rent cash collected for the
following four quarters is the same as has been collected from June 2020 to August 2020 with
administration and operating costs remaining the same in real terms. Development costs and
dividends were included at the current expected level, although as discretionary costs the Board
have the scope to delay or cancel these if necessary.
The Board is satisfied that even in the plausible worst-case scenario, the Group will have sufficient
resources to be able to continue to operate and there are no breaches of any of its loan covenants.
Consequently, the Directors have a reasonable expectation that the Group has adequate resources to
continue in operational existence for at least twelve months from the date of approving this Annual
Report & Accounts. Thus they continue to adopt the going concern basis of accounting in preparing
the financial statements.
The preparation of financial statements in conformity with IFRS requires management to make
judgements, estimates and assumptions that affect the application of policies and reported amounts
of assets and liabilities, income and expenses. Although these estimates are based on management’s
best knowledge of the events or amounts involved, actual results ultimately may differ from those
estimates. The areas involving a higher degree of complexity, judgement or estimation are set out in
Note 1(u) on page 71.
Page 64
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
The accounting policies set out in this Note 1 have been applied consistently throughout the Group
to all periods presented in the consolidated financial statements, except as described below.
Accounting standard changes
The Group has applied the following new accounting standards and interpretations during the year:
•
•
•
•
IFRS 16 Leases
IFRIC 23 Uncertainty over income tax treatments
Amendments to IFRS 9 Prepayment Features with Negative Compensation
Annual Improvements to IFRS Standards 2015-2017 Cycle
The Group adopted IFRS 16 Leases on 1 April 2019 using the modified retrospective approach. 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 are recognised. The lease liability and corresponding
right of use asset, which is included in investment property, of £8,401,000 recognised at 1 April 2019
represents the present value of the remaining minimum lease payments. Prior year figures presented
under IAS 17 Leases have not been restated. Further detail and analysis of the amount recognised is
shown in Note 9 on page 74.
The adoption of the other new accounting standards and interpretations did not have an impact on
the consolidated financial statements.
The following standards, amendments to standards and interpretations relevant to the Group have
been issued but are not yet effective. None of these have been early-adopted by the Group and, based
on the Group’s ongoing assessment of each of them, none are expected to have a material impact on
the Group’s financial statements:
•
•
•
•
Amendments to IAS 1 and IAS 8 Definition of Material
Amendments to IAS 1 Classification of liabilities as current or non-current
Amendments to IFRS 3 Definition of a Business
Amendments to References to the Conceptual Framework in IFRS Standards
The adoption of the above Amendments are not expected to lead to any changes to the Group’s
accounting policies or have any other material impact on the financial position or performance of
the Group.
(c)
Subsidiaries
Subsidiaries are those entities controlled by the Company. Control exists when the Company has the
power, directly or indirectly, to direct relevant activities of an entity and an exposure to variable
returns so as to obtain benefits from its activities. In assessing control, potential voting rights that
presently are exercisable are taken into account.
(d)
Transactions eliminated on consolidation
Intra-group balances and any unrealised gains and losses arising from intra-group transactions are
eliminated in preparing the consolidated financial statements.
(e)
Income available for distribution
Under the articles of association of certain Group investment undertakings, realised capital surpluses
are not available for distribution as dividends.
(f)
Foreign currency translation
The assets and liabilities of foreign operations are translated to sterling at the foreign exchange rate
ruling at the balance sheet date. The revenues and expenses of foreign operations are translated to
sterling at rates approximating to the foreign exchange rates ruling at the dates of the transactions.
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DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
Foreign exchange differences arising on re-translation are recognised directly in a separate
component of equity. The cumulative translation difference for all foreign operations was deemed to
be zero as at the date of transition to IFRS. The year end and average rates used for these purposes
were as follows:
US Dollar
(g) Derivative financial instruments
Year end
Average
2020
1.24
2019
1.30
2020
1.27
2019
1.31
The Group uses derivative financial instruments to hedge its exposure to interest rate risk arising
from operational and financing activities. As these derivatives do not qualify for hedge accounting,
they are accounted for as trading instruments. Derivative financial instruments are initially
recognised, and subsequently recorded, at fair value. The fair value of interest rate swaps is the
estimated amount that the Group would recover or pay to terminate the swap at the balance sheet
date, taking into account current interest rates and the credit worthiness of the swap counterparties.
The gain or loss on re-measurement to fair value is recognised immediately in the income statement.
(h)
Investment property and properties held for sale
IFRS defines investment properties as those which are held either to earn rental income or for capital
appreciation or both. All of the Group’s property falls within this definition apart from one property
which is classified as a current asset held for sale. Investment property is initially recognised at cost
and subsequently recorded at fair value. Properties held for sale are recorded at fair value.
External, independent valuation firms having appropriate recognised professional qualifications and
recent relevant experience in the location and category of property being valued, value the portfolio
annually at the Company’s year end. The fair values are based on market values, being the estimated
amount for which a property could be exchanged on the date of valuation between a willing buyer
and a willing seller in an arm’s length transaction after proper marketing wherein the parties had
each acted knowledgeably, prudently and without compulsion. The valuations are prepared either by
considering the aggregate of the net annual operating income from the properties using a market
yield/capitalisation rate which reflects the risks inherent in the net cash flow which is then applied
to the net annual operating income, or on a sales comparison basis. Any gains or losses arising from
a change in fair value are recognised in the income statement.
When the Group begins to redevelop an existing investment property for continued future use as an
investment property, the property continues to be treated as an investment property, and is measured
based on the fair value model. Interest is capitalised on such developments to the extent that such
interest is directly attributable to the cost of redevelopment.
The Group’s interest in some of its investment properties are in the form of a long lease as opposed
to freehold ownership. Following the adoption of IFRS 16 Leases, the Group recognises as liabilities
amounts payable under head leases and a corresponding right of use asset, which is included in
investment property. These leased investment properties are initially recorded at the present value
of the remaining lease payments and are then subsequently carried at fair value. In calculating the
present value of lease payments, the Group uses the incremental borrowing rate at the lease
commencement date if the interest rate implicit in the lease is not readily determinable. Leases held
at the date of transition were discounted using the Group’s incremental borrowing cost at that date.
Properties are classified as being held for sale when it is considered highly probable that a sale will
be completed within one year of the classification date.
Acquisitions and disposals are recognised on the date that the significant risks and rewards of
ownership have been transferred. Any resulting gain or loss based on the difference between sale
proceeds and valuation is included in the income statement and taxation applicable thereto is shown
as part of the taxation charge.
Page 66
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
(i)
Current investments
Investments comprise equity securities and other investments held for trading and classified as
current assets stated at fair value, with any resultant gain or loss recognised in the income statement.
(j)
Trade and other receivables
Trade and other receivables are initially stated at fair value and subsequently carried at cost less an
allowance for impairment. These assets are not discounted as the effect is deemed immaterial.
(k) Cash and cash equivalents
Cash and cash equivalents comprise cash balances and short term deposits. These short term deposits
are highly liquid investments that are readily convertible to known amounts of cash and which are
subject to an insignificant risk of changes in value. Bank overdrafts are repayable on demand and form
an integral part of the Group’s cash management. Bank overdrafts when utilised are therefore included
as a component of cash and cash equivalents for the purpose of the statement of cash flows.
(l)
Dividends
Dividends are recognised as a liability in the period in which they are approved.
(m) Trade and other payables
Trade and other payables are initially stated at fair value and subsequently carried at amortised cost.
(n) Net rental income
Net rental income comprises rent, service charges and other property related income receivable less
applicable provisions and costs associated with the properties. Rental income from investment
property leased out under operating leases is recognised in the income statement on a straight-line
basis over the certain term of the lease. Lease incentives granted are recognised as an integral part of
the total rental income. If a rent review is due but not yet agreed with the tenant any expected rent
increase is only recognised when receipt is highly probable. Service charge income is recognised as
the services are provided. Net rental income is stated net of recoverable VAT.
The cost of repairs is written off to the income statement in the year in which the expenditure was
incurred. Lease payments under operating leases are recognised in the income statement on a
straight-line basis over the term of the lease.
(o) Dividend income
Dividend income is recognised in the income statement on the date the entity’s right to receive
payments is established which, in the case of quoted securities, is the ex-dividend date.
(p)
Taxation
Income tax on the profit or loss for the year comprises current and deferred tax. The tax charge for
the year is recognised in the income statement, the statement of comprehensive income or directly
in equity, depending on the accounting treatment of the related transaction.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted
or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of
previous years.
Deferred tax is provided using the balance sheet liability method, providing for temporary
differences between the carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for taxation purposes. The amount of deferred tax provided is based on the
Page 67
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
expected manner of realisation or settlement of the carrying amount of assets and liabilities (which,
in the case of investment property, is assumed to be through sale), using tax rates enacted or
substantively enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will
be available against which the asset can be utilised.
(q)
Segmental reporting
The Company has identified its operating segments on the basis of those components of the Group
which engage in business activities from which they may earn revenues and incur expenses and for
which discrete financial information is available and regularly reviewed by the Chief Operating
Decision Maker in order to allocate resources and assess performance. The Group has determined
the Chief Operating Decision Maker to be the Board of Directors.
(r)
Impairment
The carrying amounts of the Group’s assets, other than investment property and properties held for
sale (see Note 1(h)) and deferred tax assets (see Note 1(p)), are reviewed at each balance sheet date
to determine whether there is any indication of impairment. If any such indication exists the asset’s
recoverable amount is estimated and an impairment loss recognised whenever the carrying amount
of the asset exceeds its recoverable amount.
The recoverable amount of an asset is the greater of its fair value less costs to sell and its value-in-
use. The value-in-use is determined as the net present value of the future cash flows expected to be
derived from the asset, discounted using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset.
The Group makes a provision for impairment for the expected credit losses associated with its trade
and other receivables reflecting historic credit loss experience and the specific circumstances of the
debtor.
(s)
Provisions
A provision is recognised in the balance sheet when the Group has a legal or constructive obligation
as a result of a past event, and it is probable that an outflow of economic benefits will be required
to settle the obligation. If the effect is material, provisions are determined by discounting the
expected future cash flows at a pre-tax rate that reflects current market assessments of the time
value of money and, where appropriate, the risks specific to the liability.
(t)
Loans and borrowings
Floating rate and fixed rate loans and borrowings are initially recognised at fair value and are
subsequently recorded at amortised cost. Transaction costs are deducted from the fair value at
recognition and any differences between the amount initially recognised and the redemption value
is recognised in the income statement over the period of the borrowings on an effective interest rate
basis. When mortgages are refinanced, any redemption costs are immediately recognised in the
income statement.
Page 68
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
(u)
Significant judgements, key assumptions and estimates
The Group’s significant accounting policies are set out in 1(a) to 1(t) on pages 64 to68. Not all of
these policies require management to make subjective or complex judgements or estimates. The
following is intended to provide further detail relating to the accounting policy that management
considers particularly significant because of the level of complexity and estimation involved in its
application and its impact on the consolidated financial statements.
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 (as set out in Note 9). 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. As noted in
Note 1(h), all the Group’s properties are valued by external valuers with appropriate qualifications
and experience.
Page 69
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
2.
Segmental Analysis
The Group is managed through two discrete geographical divisions and has only one product or
service, being investment in property for the generation of rental income and/or capital
appreciation. This is reflected in the Group’s structure and in the segment information reviewed by
the Board.
for the year ended 31 March 2020
Rental and related income
Property operating expenses
Profit/(loss) on disposal of property
Net valuation movements on property
Administrative expenses
Profit/(loss) before finance costs
Fair value losses
Other financial income
Financial expenses
Profit/(loss) before taxation
Income tax (charge)/credit
Profit/(loss) for the year
Capital expenditure
UK
£000
103,013
(55,871)
16,253
3,005
(12,631)
53,769
(1,356)
699
(6,295)
46,817
(27,054)
19,763
41,586
USA Eliminations
£000
63,130
(35,223)
(478)
(93,499)
(1,623)
(67,693)
–
1,419
(13,694)
(79,968)
13,613
(66,355)
6,303
£000
–
–
–
–
–
–
–
(189)
189
–
–
–
–
Total
£000
166,143
(91,094)
15,775
(90,494)
(14,254)
(13,924)
(1,356)
1,929
(19,800)
(33,151)
(13,441)
(46,592)
47,889
Investment property
Other assets
Total segment assets
Total segment liabilities
1,826,641
121,192
1,947,833
(403,569)
697,619
123,722
821,341
(468,437)
–
(12,577)
(12,577)
12,577
2,524,260
232,337
2,756,597
(859,429)
Capital employed
1,544,264
352,904
–
1,897,168
Page 70
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
for the year ended 31 March 2019
Rental and related income
Property operating expenses
Profit/(loss) on disposal of property
Net valuation movements on property
Administrative expenses
Profit before finance costs
Fair value losses
Other financial income
Financial expenses
Profit before taxation
Income tax charge
Profit for the year
Capital expenditure
Investment property
Other assets
Total segment assets
Total segment liabilities
UK
£000
100,364
(48,831)
12,728
51,845
(13,085)
103,021
(172)
178
(12,218)
90,809
(13,725)
77,084
23,644
USA Eliminations
£000
£000
55,797
(30,749)
(525)
32,083
(819)
55,787
–
1,053
(9,817)
47,023
(4,128)
42,895
81,858
–
–
–
–
–
–
–
(183)
183
–
–
–
–
Total
£000
156,161
(79,580)
12,203
83,928
(13,904)
158,808
(172)
1,048
(21,852)
137,832
(17,853)
119,979
105,502
1,785,746
152,777
1,938,523
(396,165)
746,772
92,979
839,751
(441,588)
–
(11,771)
(11,771)
11,771
2,532,518
233,985
2,766,503
(825,982)
Capital employed
1,542,358
398,163
–
1,940,521
No single lessee accounted for more than 5% of the Group’s rental and related income in either year.
3.
Property Operating Expenses
Porterage, cleaning and repairs
Insurance
Building services
Other management costs
2020
£000
41,552
5,909
25,057
18,576
2019
£000
36,336
5,663
21,653
15,928
91,094
79,580
Of the property operating expenses shown above, an amount of £1,256,000 (2019 – £871,000)
related to properties which generated no income during the year.
Page 71
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
4.
Administrative Expenses
Staff costs
Directors’ remuneration
Audit and accountancy
Legal and other administrative expenses
2020
£000
7,516
2,735
950
3,053
2019
£000
7,538
2,625
888
2,853
14,254
13,904
Auditor’s remuneration:
For the year, the fees payable to KPMG LLP were £31,000 (2019 – £31,000) for the audit of the
Company and £499,000 (2019 – £442,000) for the audit of the Group’s subsidiaries, together with
£Nil (2019 – £Nil) for audit related assurance services and £Nil (2019 – £Nil) for other services.
In the UK, the average number of staff provided by the property and administrative management
companies who performed roles for the Group totalled 203 (2019 – 207). The average number of full
time equivalents whose staff costs were borne by the Group during the year was 146 (2019 – 149).
The aggregate staff cost of these persons is shown above and can be analysed as follows:
Salaries
NI contributions
Pensions
2020
£000
6,066
650
800
2019
£000
5,950
640
948
7,516
7,538
In addition the property and administrative management companies provide, under agency
arrangements, staff to perform various caretaking roles. Those costs totalling £1,063,000
(2019 – £1,053,000) are included within property operating expenses (Note 3) under porterage,
cleaning and repairs.
Details of Directors’ remuneration are set out in the Remuneration Committee Report.
5.
Financial Income and Expenses
Financial income:
Bank interest receivable
Other financial income
Financial expenses:
Interest payable on bank loans
Interest payable on mortgages
Interest on overdue tax (see Note 6)
Other interest payable
Page 72
2020
£000
59
1,870
2019
£000
73
975
1,929
1,048
3,744
15,483
563
10
4,529
10,784
6,400
139
19,800
21,852
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
6.
Taxation
Taxation based on the profit for the year of the Company and its subsidiaries:
UK corporation tax
UK prior year items
Overseas taxation
Total current tax
Deferred tax
Deferred tax – increase/(reduction) in future tax rate
Total deferred tax
Total tax charge
Reconciliation of tax expense
Profit before taxation
Corporation tax at the standard UK rate of 19% (2019 – 19%)
Increase/(reduction) in future tax rate
Prior year items
Impact of different tax rates
Indexation and non-taxable items
Non-allowable expenses
Other
Total tax charge
2020
£000
2019
£000
14,821
(243)
8,336
(5,118)
14,578
3,218
1,316
1,500
15,894
4,718
(30,095)
27,642
21,878
(8,743)
(2,453)
13,135
13,441
17,853
(33,151) 137,832
(6,299)
27,642
(243)
(6,926)
(1,716)
681
302
26,188
(8,743)
(5,118)
2,851
(149)
2,601
223
13,441
17,853
In March 2020 it was announced that the planned reduction in the UK corporation tax rate from 19%
to 17% on 1 April 2020 would not take place. In the USA changes to certain USA state taxes meant
the rate of tax our USA results are subject to increased to 28% (2019 – 26%). Both these increases in
tax rates have meant we have had to recalculate our deferred tax balances which has increased these
liabilities by £20,102,000 in the UK and £7,540,000 in the USA.
The Group’s effective tax rate for the current year was 41% (2019 – 13%). As detailed above the
recalculation of the deferred tax liabilities due to tax rate changes has increased the tax charge by
£27,642,000 (2019 – reduced by £8,743,000). Removing these amounts and prior year tax credits
(2020 – £243,000; 2019 – £5,118,000) our effective tax rate in the UK was 15% and in the USA was
26% consistent with the statutory rates in each country.
In November 2019 the Group signed a settlement agreement with HMRC relating to the
interpretation of tax legislation regarding historical financing arrangements. An amount of
£36,438,000 plus interest was paid to HMRC to settle these historic tax liabilities. The amount paid
was in line with the provision made in the prior year.
Page 73
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
7.
Earnings per Share
Earnings per share is calculated on the loss, after taxation and non-controlling interests, of
£47,626,000 (2019 – earnings of £119,893,000) and the weighted average shares in issue during the
year of 16,295,357 (2019 – 16,295,357).
8.
Dividends
Amounts recognised as distributions to equity holders in the year:
Final dividend for the year ended 31 March 2018,
paid 2 November 2018 @ 68p per share
Interim dividend for the year ended 31 March 2019,
paid 8 March 2019 @ 35p per share
Final dividend for the year ended 31 March 2019,
paid 1 November 2019 @ 71p per share
Interim dividend for the year ended 31 March 2020,
paid 6 March 2020 @ 35p per share
9.
Investment Property
Long
Short
Freehold leasehold leasehold
£000
£000
£000
2020
£000
2019
£000
–
–
11,081
5,703
11,570
5,703
–
–
17,273
16,784
Total
2020
£000
Total
2019
£000
Balance at 1 April
Gross up of head lease liability
2,134,789 372,830
4,752
–
24,899 2,532,518 2,373,184
–
8,401
3,649
Adjusted opening balance
Disposals
New acquisitions
Additions to existing properties
Revaluation (recognised in
profit)
Transfer to properties held for sale
Reclassification
Foreign exchange movements
(recognised in other
comprehensive income)
2,134,789 377,582
(2,272)
990
971
(2,405)
28,828
17,100
28,548 2,540,919 2,373,184
(4,339)
(4,677)
77,477
29,818
28,025
18,071
–
–
–
(129,366) 40,301
(8,450)
2,510
–
(2,097)
(1,429)
–
(413)
(90,494)
(8,450)
–
83,928
(70,997)
–
34,466
4,607
–
39,073
45,240
Balance at 31 March
2,081,315 416,239
26,706 2,524,260 2,532,518
External, independent professional valuations of all the Group’s UK investment properties were
carried out by Colliers International Property Advisers UK LLP, RICS Registered Valuers at
31 March 2020.The aggregate amount of £1,843.8 million (2019 – £1,804.2 million) is based on open
market values, assessed in accordance with the RICS Valuation – Current Global Standards
(incorporating the International Valuation Standards). The Group’s USA investment properties were
also independently professionally valued at 31 March 2020 by Metropolitan Valuation Services, Inc.,
a USA Certified General Real Estate Appraisers. The aggregate amount of £701.6 million (2019 –
£750.5 million) is based on open market values, assessed in accordance with the Standards of
Page 74
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
Professional Appraisal Practice of the Appraisal Institute. Both valuers have recent experience in the
location and category of the property being valued.
The aggregate professional valuations included in the above table have been reduced by an amount
of £21.2 million (2019 – £22.1 million), relating to lease incentives included in Trade and other
receivables and increased by an amount of £8.4 million (2019 – £Nil) relating to lease obligations.
As explained in Note1(u), property valuations are 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. These fair value measurements are unrealised and
classified as Level 3 as defined by IFRS 13 Fair Value Measurement. There have been no transfers
between the levels of fair value hierarchy during the year.
The report of the UK valuer on property valuations as at 31 March 2020 included the following
material valuation uncertainty clause due to the Covid-19 pandemic:
“The outbreak of Novel Coronavirus (Covid-19), declared by the World Health Organisation as a
“Global Pandemic” on 11 March 2020 has impacted global financial markets.Travel restrictions have
been implemented by many countries. Market activity is being impacted in many sectors. At the
valuation date, we consider that we can attach less weight to previous market evidence for
comparison purposes to inform opinions of value.The current response to Covid-19 means that we
are faced with an unprecedented set of circumstances on which to base a judgement. Our valuation
is therefore reported on the basis of ‘material valuation uncertainty’ as per VPS 3 and VPGA 10 of the
RICS Red Book Global. Consequently, less certainty – and a higher degree of caution – should be
attached to our valuation than would normally be the case. Given the unknown future impact that
Covid-19 might have on the real estate market, we recommend that you keep the valuation of the
properties in this portfolio under frequent review.”
Valuation techniques and key inputs
We set out the valuation techniques used below and the key inputs used in these valuation
techniques are set out in the tables over the page.
UK commercial property was valued using the income capitalisation method, requiring the
application of the appropriate market based yield to net operating income. Adjustments are made
to allow for voids when less than five years are left under the current tenancy and to reflect market
rent at the point of lease expiry or rent review. Estimated fair value is sensitive to and would increase
if either net operating income increased or estimated yield decreased.
UK residential property was valued using a sales valuation approach, derived from recent comparable
transactions in the market, adjusted by applying discounts to reflect status of occupation and
condition. The largest discounts for the status of occupation were applied to those properties subject
to registered tenancies, reflecting the relative difference in security of tenure, whilst the smallest
discounts were applied to those properties subject to assured shorthold tenancies. The base discount
for condition was maintained at 10% in 2020 reflecting current estimates of costs being incurred. It is
estimated that an increase of one percentage point in this discount would result in a decrease of
£8.8 million (2019 – £8.8 million) in the value of investment property. Estimated fair value is sensitive
to and would increase if the sales values increased.
USA commercial and residential properties (excluding co-operative apartments) have been valued
using the application of a capitalisation rate, based on recent arm’s length transactions, to an
assessment of stabilised net income, and for residential properties the values are cross-checked to
recent comparative sales evidence. USA commercial and residential estimated fair value is sensitive
to and would increase if either capitalisation rates decreased or estimated rental values increased.
Rent regulation laws in New York state came into effect on 1 July 2019 depressing New York
residential values substantially. Average capitalisation rates increased from 3.4% to 5.2%.
Page 75
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
USA co-operative residential apartments have been valued using the application of a discount rate,
based on recent arm’s length transactions, to an assessment of net income over the period to full
reversion, cross-checked to recent comparative sales evidence. USA unsold co-operative residential
apartments estimated fair value is sensitive to and would increase if either discount rates decreased,
estimated rental values increased or estimated sales values increased.
2020
UK Commercial
Office Units
Greater London
UK – South
UK – North
Retail Units
Greater London
UK – South
UK – North
Industrial Units
All UK
Fair Value
£000
Rental value £ per sq ft
High
Low Average
Equivalent Yield %
High
Low Average
297,195
36,556
9,797
254,988
129,197
20,728
7.8
2.0
3.2
6.4
0.2
2.1
59.2
13.6
11.2
26.2
20.0
9.5
81.2
47.2
17.0
75.1
60.1
26.0
4.8% 12.4%
3.3%
2.6%
8.6% 48.1%
7.5% 11.7% 18.1%
6.8% 15.4%
1.0%
2.2%
8.2% 21.4%
6.0% 11.0% 16.2%
47,513
2.0
9.3
29.5
5.3% 10.9% 27.3%
Leisure and Service Units
All UK
213,560
4.4
20.2
42.4
4.8%
6.2% 14.5%
Land and Development
All UK
1,563
–
–
–
Total UK Commercial
1,011,097
UK Residential
Greater London
UK – South
UK – North
Total UK Residential
Total UK
USA Commercial
Massachusetts, Philadelphia
741,498
87,343
3,847
832,688
1,843,785
Sales value £ per sq ft
1,543
831
316
505
315
133
241
182
105
–
–
–
–
–
–
–
–
–
–
–
–
Rental value £ per sq ft
Capitalisation rate %
and New Jersey
107,768
9.0
29.6
34.1
5.0%
5.2%
6.5%
Total USA Commercial
107,768
USA Residential Apartments
New York City
Florida
Other States
165,202
212,390
120,029
Rental value £ per sq ft
28.6
11.9
8.8
13.2
10.6
7.7
15.3
12.3
10.7
Capitalisation rate %
5.5%
6.0%
5.5%
5.2%
5.5%
5.3%
3.8%
5.3%
4.8%
New York City – unsold
co-operative
Total USA Residential
Total USA
Total Group
Less lease incentives
96,249
3.5
13.9
63.5
8.0%
Discount rate %
9.5% 12.0%
593,870
701,638
2,545,423
(21,163)
2,524,260
Page 76
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
2019
UK Commercial
Office Units
Greater London
UK – South
UK – North
Retail Units
Greater London
UK – South
UK – North
Industrial Units
All UK
Fair Value
£000
Rental value £ per sq ft
High
Low Average
Equivalent Yield %
High
Low Average
296,790
42,994
9,492
252,971
130,921
22,522
7.0
2.7
3.2
5.4
0.2
1.0
55.1
11.6
8.0
33.6
17.8
8.6
77.3
42.4
14.5
81.3
55.7
26.0
3.2%
4.7% 11.8%
4.9% 10.4% 36.1%
7.2% 10.4% 18.1%
6.4% 13.3%
1.0%
2.2%
7.9% 22.3%
6.2% 11.2% 16.2%
47,684
1.2
8.7
61.1
5.3%
8.4% 27.4%
Leisure and Service Units
All UK
181,385
3.0
19.6
36.9
4.7%
6.3% 14.7%
Land and Development
All UK
1,636
–
–
–
–
–
–
Total UK Commercial
986,395
UK Residential
Greater London
UK – South
UK – North
Total UK Residential
Total UK
USA Commercial
Massachusetts, Philadelphia
729,924
84,433
3,446
817,803
1,804,198
Sales value £ per sq ft
1,753
886
337
542
325
115
234
170
106
–
–
–
–
–
–
–
–
–
Rental value £ per sq ft
Capitalisation rate %
and New Jersey
103,036
6.0
26.8
33.0
5.0%
5.1%
6.5%
Total USA Commercial
103,036
USA Residential Apartments
New York City
Florida
Other States
246,857
195,569
115,685
Rental value £ per sq ft
28.0
11.1
8.2
10.7
8.5
6.6
15.4
11.7
9.9
Capitalisation rate %
5.2%
5.8%
5.5%
3.4%
5.6%
5.2%
2.5%
5.3%
4.5%
New York City – unsold
co-operative
Total USA Residential
Total USA
Total Group
Less lease incentives
89,321
3.5
12.7
64.6
9.0%
Discount rate %
9.7% 15.0%
647,432
750,468
2,554,666
(22,148)
2,532,518
There are inter-relationships between the groups of inputs as they are determined by market
conditions. Movements in more than one input having the effect of increasing fair value could give
rise to a magnifying effect on the valuation. Due to the number of properties included in the Group’s
valuations, it is impracticable to disclose the extent of the possible effects of each assumption and it
is possible that outcomes that are different from the current assumptions could result in a material
adjustment to the valuation.
Page 77
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
The present value of future minimum lease payments in relation to leasehold investment properties
is £8.4 million at 31 March 2020 (2019 restated – £8.4 million). In determining the present value, the
Group used the estimated incremental borrowing cost at the date of transition as the discount rate.
In accordance with the accounting policy described in Note 1(h) following the introduction of IFRS
16 Leases, this has been recognised in the current year. Prior year figures have not been adjusted.
Reconciliation between the total of future minimum lease payments and their present
capital values
2020
2019 (restated)
Present
Minimum
Interest
lease
on lease
value Minimum
lease
of lease
Interest
Present
value
on lease
of lease
payments
payments liabilities
£000
£000
£000
payments payments
£000
£000
liabilities
£000
Due within one year
539
Due within two to five years
2,157
Due after more than five years 43,205
(501)
(1,983)
(35,051)
38
174
8,154
541
2,158
43,744
(504)
(1,994)
(35,544)
37
164
8,200
45,901
(37,535)
8,366
46,443
(38,042)
8,401
Capital commitments, arising from contractual obligations not yet invoiced or paid, for the purchase,
construction, development or enhancement of investment properties, amounted to £7.9 million at
31 March 2020 (2019 – £8.9 million).
10. Deferred Tax Assets and Liabilities
2020
2019
Assets
Liabilities
£000
£000
Net
£000
Assets Liabilities
£000
£000
Net
£000
Investment property
Accelerated tax depreciation
Financial instruments
–
–
506
(265,918) (265,918)
(31,724) (31,724)
506
–
– (269,037) (269,037)
(24,394)
–
226
226
(24,394)
–
506
(297,642) (297,136)
226 (293,431) (293,205)
The movement in deferred tax is as follows:
Accelerated
tax Financial
Investment
depreci-
instru-
property
£000
ation
£000
ments
£000
Total
2020
£000
Total
2019
£000
Balance at 1 April
Recognised in income
Foreign exchange movements
(269,037) (24,394)
(6,314)
(1,016)
8,487
(5,368)
226 (293,205)
2,453
280
(6,384)
–
(271,610)
(13,135)
(8,460)
Balance at 31 March
(265,918) (31,724)
506 (297,136)
(293,205)
Page 78
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
11.
Trade and Other Receivables
Rent and service charges debtor
Rent and service charges accrued
Other debtors and prepayments
Mortgages granted repayable within one year
Corporation tax recoverable
The ageing of rent and service charge receivables was as follows:
Not past due
Past due by less than one month
Past due by one to three months
Past due by three to six months
Past due by more than six months
Impairment
Net
2020
£000
42,592
3,915
27,836
468
2,165
2019
£000
37,927
4,722
23,574
493
–
76,976
66,716
2020
£000
31,679
9,059
2,362
3,720
7,531
2019
£000
31,941
5,940
1,257
2,227
8,956
54,351
(7,844)
50,321
(7,672)
46,507
42,649
The movement in the allowance for impairment in respect of trade and other receivables during the
year was as follows:
Balance at 1 April
Amounts written off
Movement in allowance for impairment
Balance at 31 March
12.
Cash and Cash Equivalents
Bank balances
Short term deposits
2020
£000
2019
£000
7,672
(1,319)
1,491
8,228
(1,144)
588
7,844
7,672
2020
£000
2019
£000
146,056
219
80,477
15,418
Cash and cash equivalents in the balance sheet and cash flow statement
146,275
95,895
Included within bank balances are tenants’ deposits of £4,489,000 (2019 – £4,989,000) in the UK and
£3,109,000 (2019 – £2,803,000) in the USA, which cannot be used in the ordinary course of business.
Page 79
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
13.
Properties held for sale
During the year, the Group entered into an unconditional contract to sell a property in Birmingham.
The sale is due to complete before the end of the calendar year and so, in accordance with IFRS 5
Non-current assets held for sale and discontinued operations, the property is treated as held for
sale at 31 March 2020. Properties treated as held for sale at 31 March 2019 were duly sold during the
current year.
Properties held for sale are recorded at their fair value of £8.45 million (2019 – £71.0 million). The
fair value is a Level 3 valuation as defined by IFRS 13 and is based on offers received discounted for
risks of completion.
14.
Share Capital
Allotted, called up and fully paid:
Ordinary shares of 25 pence per share
Number
2020
£000
2019
£000
16,295,357
4,074
4,074
The Company has one class of share, which carries no special rights or rights to fixed income. There
are no restrictions on the transfer of these shares or restrictions on voting rights.
15.
Trade and Other Payables
Rent and service charges charged in advance
Other creditors and accruals
Derivative financial instruments
16.
Loans and Borrowings
Non-current liabilities
Mortgages
Bank loans
Current liabilities
Mortgages
Bank loans
Total loans and borrowings
Mortgages
Bank loans
2020
£000
26,080
32,589
2,663
2019
£000
22,233
35,116
1,328
61,332
58,677
2020
£000
2019
£000
349,635
119,553
326,627
91,442
469,188
418,069
20,312
1,427
11,011
1,674
21,739
12,685
369,947
120,980
337,638
93,116
490,927
430,754
Page 80
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
All mortgages and bank loans are secured on specific investment properties owned by subsidiary
undertakings.
The maturity profile of the Group’s loans and borrowings was as follows:
Due within one year
Due within one to two years
Due within two to five years
Due after more than five years
2020
Bank loans
£000
Mortgages
£000
1,427
1,629
117,924
–
20,312
11,437
19,344
318,854
Total
£000
21,739
13,066
137,268
318,854
2019
Total
£000
12,685
29,814
113,169
275,086
120,980
369,947
490,927
430,754
The risk profile of the Group’s loans and borrowings, after taking account of interest rate swaps, was
as follows:
2020
Fixed Floating
£000
£000
Total
£000
Fixed
£000
2019
Floating
£000
Total
£000
Sterling
US Dollar
60,245
339,702
90,980 151,225
– 339,702
61,278
297,587
63,115
8,774
124,393
306,361
399,947
90,980 490,927
358,865
71,889
430,754
Floating rate bank loans bear rates based on LIBOR. The Group’s interest rate swaps are set out in
Note 17 on page 85. The interest rate profile of the Group’s fixed rate mortgages was as follows:
Per cent.
3.0-3.5
3.5-4.0
4.0-4.5
4.5-5.0
5.0-5.5
5.5-6.0
6.0-6.5
2020
£000
2019
£000
129,924
111,859
50,794
47,125
13,403
7,042
9,800
121,701
89,641
41,461
44,784
13,658
7,159
10,461
369,947
328,865
The weighted average rate and the weighted average term of the Group’s fixed rate loans and
borrowings (after taking account of interest rate swaps) were as follows:
Sterling
US Dollar
2020
%
3.69
3.83
2019
%
3.72
3.87
2020
Years
10.1
8.4
2019
Years
11.1
8.6
Page 81
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
17.
Financial Assets and Liabilities
The Group’s financial instruments are analysed into categories as follows:
2020
2019
Current asset investments
Current assets at fair value through
profit or loss
Carrying
amount
£000
130
130
Financing
income/
(expense)
£000
(21)
(21)
Derivative financial instruments
(2,663)
(1,335)
Current liabilities at fair value
(2,663)
(1,335)
Trade and other receivables
Cash and cash equivalents
Current assets at amortised cost
Trade and other payables
Lease obligations payable
Floating rate loans and borrowings
Fixed rate loans and borrowings
Current and non-current liabilities at
76,976
146,275
223,251
(58,669)
(8,328)
(120,980)
(369,947)
1,870
59
1,929
Carrying
amount
£000
151
151
(1,328)
(1,328)
66,716
95,895
Financing
income/
(expense)
£000
(5)
(5)
(167)
(167)
975
73
162,611
1,048
(10)
(21)
(3,744)
(15,462)
(57,349)
–
(101,889)
(328,865)
(139)
–
(4,263)
(11,050)
amortised cost
(557,924)
(19,237)
(488,103)
(15,452)
Total financial instruments
(337,206)
(18,664)
(326,669)
(14,576)
The finance expense of £1,335,000 (2019 – £167,000) relating to derivative financial instruments is
stated net of £66,000 income (2019 – £23,000) relating to credit risk movements.
Fair values of financial instruments
With the exception of fixed rate loans and borrowings, the Group’s financial instruments are shown
in the table above at fair value. Fixed rate loans and borrowings are stated at amortised cost as shown
in the table above and as explained in Note 1(t). The fair value of fixed rate loans and borrowings
was £425,101,000 (2019 – £353,976,000). At both the current and preceding year end there were
no non-recurring fair value measurements.
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 and borrowings are
determined by reference to observable inputs that are classified as Level 2 in the fair value hierarchy
set out in IFRS 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.
Page 82
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
Financial instrument risk management
In common with all businesses, the Group is exposed to the following types of risk which arise from
its use of financial instruments:
Credit risk
Liquidity risk
Market risk
This note presents information about the nature of the Group’s exposure to such risks, its objectives,
policies and processes for measuring and managing risk and the Group’s management of capital.
Reference to disclosures given elsewhere in the financial statements is included as appropriate.
The Board has overall responsibility for determining the Group’s risk management objectives and
policies and, whilst retaining ultimate responsibility for them, has delegated to the finance function
the authority for designing and operating processes that ensure the effective implementation of
those objectives. The overall objectives of the Board are to set policies that seek to reduce risk as far
as possible without unduly affecting the Group’s competitiveness and flexibility.
Credit risk
The Group’s exposure to credit risk arises from the potential financial loss if a tenant or counterparty
to a financial instrument fails to meet its contractual obligations and arises principally from the
Group’s trade receivables from tenants.
Trade receivables
The majority of the Group’s rental income is demanded quarterly in advance and demands are sent
out prior to the due date. Management monitors arrears continually and prompt action is taken to
address potential defaults as appropriate. The credit worthiness of each tenant is assessed prior to
the agreement of the lease. Where appropriate, collateral is required by the Group to support lease
obligations. In many cases this takes the form of a tenant security deposit but also includes parent
company guarantees, bank or other guarantees where appropriate. Provision is made based upon an
expected credit loss model, with full provision for impairment usually being made where a tenant is
in arrears for more than a year. Details of the Group’s trade receivables and the extent of impairment
provisions against them are set out in Note 11.
Due to the large number of tenants across various sectors and geographical locations, the Board does
not consider there to be a significant concentration of credit risk.
Cash and derivative financial instruments
The credit rating of counterparties to financial instruments is kept under review. The Group’s
interest rate swaps are currently out-of-the-money; consequently, counterparty risk on swaps does
not represent a major risk at the current time. The counterparty risk on cash and short-term deposits
is managed by limiting the aggregate exposure to any institution by reference to their credit rating.
Such balances are generally placed with major financial institutions where credit risk is not
considered significant.
Maximum exposure
The aggregate carrying amounts of the Group’s financial assets, which are stated net of impairment
provisions, represents the Group’s maximum exposure to credit risk, before taking into account the
value of the tenant security deposits held and other collateral.
Page 83
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting its financial obligations
as they fall due and arises from the Group’s management of its working capital and the finance
charges and amortisation of its loans and borrowings.
The Group’s policy is to seek to maintain cash balances to meet all short and medium term
requirements. The Group has a low level of gearing relative to the property investment sector as a
whole and has long standing relationships with many leading banks and financial institutions from
which the Board expect to be able to raise further funds if required. At 31 March 2020, gearing was
17.8% (2019 – 15.6%) (see note 23). Cash and short-term deposits at 31 March 2020 were
£146.3 million (2019 – £95.9 million) and £21.7 million of loans and borrowings were repayable
within one year (2019 – £12.7 million). In addition, at the same date, the Group had undrawn
committed facilities of £55.0 million (2019 – £85.0 million), which expire between 2022 and 2023.
The maturity analysis of the undiscounted cash flows arising from the Group’s financial liabilities at
31 March 2020 was as follows:
Bank loans
Mortgages
Interest
Interest rate swaps
Trade and other payables
Carrying
amount
£000
120,980
369,947
–
2,663
58,669
2020
Aggregate
undiscounted
Due
within
Due
within
cash flows one year 1-2 years 2-5 years
£000
1,629 117,924
£000
£000
120,980
369,947
125,756
2,254
58,669
£000
1,427
20,312
17,687
268
58,669
11,437
16,827
268
–
Due Due after
within more than
5 years
£000
–
19,344 318,854
48,155
43,087
915
803
–
–
552,259
677,606
98,363
30,161 181,158 367,924
Aggregate
undiscounted
cash flows
£000
93,116
337,638
121,032
2,165
57,349
2019
Due
within
one year
£000
1,674
11,011
15,829
229
57,349
Due
within
1-2 years
£000
1,674
28,140
15,276
229
–
Due Due after
within more than
5 years
£000
–
275,086
49,239
1,020
–
2-5 years
£000
89,768
23,401
40,688
687
–
611,300
86,092
45,319
154,544
325,345
Carrying
amount
£000
93,116
337,638
–
1,328
57,349
489,431
Bank loans
Mortgages
Interest
Interest rate swaps
Trade and other payables
Market risk
Market risk arises mainly from the impact that changes in interest rates might have on the cost of
Group borrowing and the impact that changes in the US dollar/sterling rate of exchange might have
on the Group’s recognition of its USA net assets.
Interest rates
The Group seeks to reduce the interest rate risk by fixing rates on a majority of its loans and
borrowings, whilst maintaining some loans at floating rates in order to retain flexibility in relation to
short term interest rates. Interest rates are fixed either through the use of fixed rate mortgage finance
or through interest rate swaps. The Group does not speculate in treasury products but uses these
Page 84
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
only to limit exposure to potential interest rate fluctuations. The interest rate profile of the Group’s
loans and borrowings is set out in Note 16.
It is estimated that a general increase of one percentage point in interest rates would decrease the
Group’s profit before taxation by approximately £0.9 million per annum, on the basis of the floating
rate debt outstanding at 31 March 2020, after taking account of the interest swaps in place.
There also exists a risk to the income statement arising from the recognition and re-measurement of
interest rate swaps at fair value. It is estimated that a general increase of one percentage point in
interest rates would give rise to a reduction in fair value of interest rate swaps outstanding at 31 March
2020 of £2.5 million, together with a corresponding increase in the Group’s profit before taxation.
Interest rate swaps
The interest rate swaps held by the Group at the year end were as follows:
Contracted rate
2020
%
–
1.6
2019
%
–
1.6
Maturing within one year
Maturing after five years
Foreign exchange rates
Notional principal
2020
£000
–
30,000
2019
£000
–
30,000
Fair value
2020
£000
–
2,663
2019
£000
–
1,328
30,000
30,000
2,663
1,328
The Group seeks to reduce its exposure to foreign currency risk in relation to its USA net assets by
funding its USA investment property with US dollar denominated loans and borrowings. As the
Group’s investment in USA assets are held for the long term and funds are not usually returned to
the UK, the Group’s policy is not to hedge its residual exposure. Management monitors exchange
rates on a regular basis and elects to transfer funds only when the rate is favourable to do so.
It is estimated that a ten percentage point decrease in the value of the US dollar against sterling
would result in a decrease in the sterling value of the Group’s USA net assets of £32.3 million.
Capital management
The capital structure of the Group consists of equity attributable to equity holders of the parent
together with net debt. This is kept under constant review to ensure the Group has sufficient capital
to fund its operations and that the Group’s strategy of low gearing is maintained. The Group seeks to
maintain a balance between longer-term finance appropriate to fund its long-term investment
property holding strategy and medium-term finance which provides a more cost effective source of
finance. Equity comprises issued share capital, reserves and retained earnings as set out in the
consolidated statement of changes in equity. Net debt comprises a mix of fixed rate mortgages and
shorter-term bank loans as set out in Note 16 and cash and short term deposits as set out in Note 12.
All loans and borrowings are secured against investment property and the bank loans are drawn
against committed facilities.
Page 85
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
18. Related Party Transactions
Day-to-day management of the Group’s properties and its operations in the UK is mainly carried out
by Highdorn Co. Limited and by Freshwater Property Management Limited. Mr B S E Freshwater and
Mr S I Freshwater are Directors of both companies. They have no beneficial interest in the share
capital of Highdorn Co. Limited. Mr B S E Freshwater, Mr S I 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 C B Freshwater and Mr R E Freshwater have a beneficial interest in a trust
holding interests in shares in Highdorn Co. Limited.
In their capacity as property managing agents, Highdorn Co. Limited (“Highdorn”) and Freshwater
Property Management Limited (“FPM”) collect rents and incur direct property expenses on behalf of
the Group. At 31 March 2020, the aggregate net amounts due to the Group from Highdorn and FPM
was £4.0 million (2019 – £0.5 million due from the Group to Highdorn and FPM). These amounts are
not secured and are payable on demand. No guarantees have been given or received and the amounts
are settled in cash.
Included in the balance above are amounts paid and payable by the Group for the provision of
property and other management services to Highdorn Co. Limited and Freshwater Property
Management Limited, which were as follows:
Balance due to related party managing agents at 1 April
Charged during the year
Paid during the year
Balance due to related party managing agents at 31 March
2020
£000
2019
£000
2,285
4,537
(4,312)
2,511
4,898
(5,124)
2,510
2,285
Mr B S E Freshwater, Mr S I Freshwater and Mr D Davis are trustees of two charities that own 6.3% of
the share capital of the Company. These charities have received dividend payments in the year of
£1,083,131 (2019 – £1,052,477). The Directors’ interests in the Company and the principal
shareholders are described on pages 34 and 35. The Board considers that the Directors are the key
management personnel of the Group and their remuneration is disclosed on page 46.
19.
Contingent Liabilities
The Group is from time to time party to legal actions arising in the ordinary course of business. The
Directors are not aware of any current actions which could have a material adverse effect on the
financial position of the Group.
20. Operating Lease Agreements
The Group earns rental income by leasing its investment properties to tenants under operating leases
which vary in terms and provisions between type of property and type of tenure. Leases providing
for contingent rents are rare within the Group’s property portfolio and no amounts for contingent
rents are included in rental income for the year (2019 – £Nil).
Page 86
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
At the balance sheet date, future minimum lease payments receivable by the Group under operating
leases were as follows:
Due within one year
Due within one to two years
Due within two to five years
Due after more than five years
2020
£000
2019
£000
66,682
57,186
145,741
377,516
84,751
53,992
114,717
351,134
647,125
604,594
Many of the Group’s residential properties are let under assured shorthold tenancies which typically
are for initial terms of 12 months or less, whereafter they are cancellable at short notice. The Group’s
experience is that a significant proportion of such tenancies are held over after the expiry of their
initial term.
21. Notes to the Consolidated Statement of Cash Flows
Cash generated from operations
Net operating (loss)/profit before net financing costs
Adjusted for:
Net valuation loss/(gain) on investment property (Note 9)
Net gain on sale of investment property
Net valuation loss on listed investments
2020
£000
2019
£000
(13,924) 158,808
90,494
(15,775)
–
(83,928)
(12,203)
2
Cash flows from operations before changes in working capital
60,795
62,679
Changes in working capital:
Change in trade and other receivables
Change in trade and other payables
Working capital movement
Cash generated from continuing operations
Change in liabilities during the year relating to financing activities
Total loans and borrowings at 1 April (Note 16)
Repayment of bank loans
New bank loans in year
Repayment of mortgages
New mortgages
Foreign exchange impact
Total loans and borrowings at 31 March (Note 16)
(8,907)
6,547
(2,982)
1,809
(2,360)
(1,173)
58,435
61,506
2020
£000
2019
£000
430,754
(2,135)
30,000
(36,150)
52,469
15,989
350,459
(59,603)
60,000
(40,063)
102,814
17,147
490,927
430,754
Page 87
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
22.
Subsidiary Undertakings
At 31 March 2020, except where indicated, the following were indirect subsidiaries of the Company,
where the Company’s direct and indirect interest is in ordinary shares. All were wholly owned,
except as indicated and are included in the consolidated financial statements.
Incorporated in Great Britain and registered in England and Wales
Registered office: Freshwater House, 158 – 162 Shaftesbury Avenue, London WC2H 8HR
Agecroft Estates Limited
Alsam Limited
Astral Estates (London) Limited
Bagnight Limited*
Bampton (B&B) Limited
Bampton (Redbridge) Limited
Bampton Holdings Limited
Bampton Homes Limited
Bampton Management Limited
Bampton Property Group Limited (The)
Brickfield Properties Limited
Chilon Investment Co. Limited
City and Country (Londonderry House) Limited
City and Country Properties (Birmingham)
Limited
City and Country Properties (Camberley)
Limited
City and Country Properties (Estates) Limited
City and Country Properties (Gillingham)
Limited
City and Country Properties (Leeds) Limited
City and Country Properties (Midlands) Limited
City and Country Properties Limited
Coindragon Limited*
Coineagle Limited*
Coinface Limited*
Coinmad Limited*
Coinmoat Limited*
Coinorbit Limited*
Coinpilot Limited*
Coinreach Limited*
Coinsmart Limited*
Coinspear Limited*
Coinsun Limited
Consbrix Developments Limited
Cromlech Property Co. Limited (The)
Crozera Limited
Daejan (Brentford) Limited*
Daejan (Brighton) Limited
Daejan (Cambridge) Limited
Daejan (Cardiff) Limited
Daejan (Care Homes) Limited*
* Directly owned
Daejan (Dartford) Limited
Daejan (Design & Build) Limited*
Daejan (Durham) Limited
Daejan (FH 1998) Limited
Daejan (FHNV 1998) Limited
Daejan (Hanger Hill) Limited*
Daejan (High Wycombe) Limited
Daejan (Kingston) Limited
Daejan (Lauderdale) Limited
Daejan (Norwich) Limited
Daejan (NUNV) Limited
Daejan (NUV) Limited
Daejan (PF) Limited
Daejan (Reading) Limited
Daejan (Taunton) Limited
Daejan (UK) Limited*
Daejan (US) Limited*
Daejan (Warwick) Limited
Daejan (Watford) Limited
Daejan (Wimbledon) Limited*
Daejan (Worcester) Limited
Daejan Commercial Properties Limited
Daejan Developments Limited
Daejan Enterprises Limited
Daejan Estates Limited
Daejan Investments (Grove Hall) Limited
Daejan Investments (Harrow) Limited
Daejan Investments (Park) Limited
Daejan Investments Limited
Daejan Metropolitan Investments Limited*
Daejan Properties Limited
Daejan Retail Properties Limited
Daejan Securities Limited*
Daejan Services Limited*
Daejan Traders Limited*
Daneryn Limited*
Derlingrange Limited*
Ealux Limited
Endell Developments Limited*
Endell Properties Limited*
Endell Real Estate Limited*
Esslock Limited
Page 88
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
Fifth Charles Investments Limited*
First Charles Investments Limited*
Foredale Limited*
Gertsbrix Developments Limited
Grapeseal Limited*
Halliard Property Co. Limited (The)
Hampstead Way Investments Limited
Inputstock Limited
Inputstripe Limited
Insworth Investments Limited*
Johnsbrix Developments Limited
Kingforge Limited*
Kintsilk Investments Limited
Lawnstamp Limited
Lesbrix Developments Limited
Limebridge Co. Limited
Lookstate Limited
* Directly owned
Lyme & Farrar Limited
Marfred Limited
Mineral and General Investments Limited
Modboon Limited*
Mont Investments Limited
Offerworld Limited
Pegasus Investment Company Limited
Ronend Properties Limited*
Rosebel Holdings Limited
Seaglen Investments Limited
Semlark Limited*
Simlock Limited
St. Leonards Properties Limited
Strand Palace Hotel Limited*
Summerseas Investment Co. Limited
Wisebourne Limited*
Workvideo Limited *
Incorporated in Guernsey
Registered office: Bordage House, Le Bordage, St Peter Port, Guernsey GY1 1BU
Daejan Financing Limited
Three Dials Limited
Four Dials Limited
Eight Dials Limited
Nine Dials Limited
Ten Dials Limited
Incorporated in the Isle of Man
Registered office: 8 St George’s Street Douglas IM1 1AH
Temple Investments Limited
Incorporated in Curaçao
Registered office: Schottegatweg Oost 44, Curaçao
Daejan Holdings N.V.
Incorporated in the USA
Registered office, except as noted in (i) to (vii) below: 1651 Coney Island Avenue,
Brooklyn, NY 11230
22-04 Collier Avenue LLC
77NW LLC
200 Portland LLC
260 Realty Associates**
427 West 51st Street Owners Corp.
611 West 158th Street Corp.
670 River Realty Corp.
730 GC Realty Corp.
1750 GC LLC
3380 Nostrand LLC
Ace 2160 Wallace LLC
Ace 2180 Wallace LLC
Ace 2181 Barnes LLC
Ace 2181 Wallace LLC
CM Bucks Landing 120 LLC
Daejan 1010 Regency LLC(i)
Daejan 11 E Chase LLC(i)
Daejan 77 Inc.(vii)
Daejan 3120 Court LLC(i)
Daejan Astoria LLC
Daejan Baltimore Inc.
Daejan Chesterfield LLC(ii)
Daejan Crossroads LLC
Daejan Enterprises Inc.
Page 89
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
Daejan Fisherman’s Landing LLC(iii)
Daejan Greenwich Commons LLC(iv)
Daejan Hidden Palms LLC(iii)
Daejan Holdings (U.S.) Inc.*(vi)
Daejan Inverrary LLC
Daejan Lauderhill Inc.
Daejan Lycoming LLC, Inc.
Daejan N.Y. Ltd.
Daejan Oak Manor, Inc.(v)
Daejan Portland, Inc.
DJN Crossroad, Inc.
DJN Greenwich Inc.
DJN Raritan LLC
Registered offices: (i) 6800 Liberty Road, Baltimore, MD 21207; (ii) 4200 Inverrary Blvd, Lauderhill, FL 33319;
(iii) 14555 Bruce D. Downs Blvd, Tampa, FL 33613; (iv) 14608 43rd Street, Tampa, FL 33813; (v) 5105 Mission Hills Ave, Tampa,
FL 33617; (vi) 1105 North Market Street, Wilmington, NY 19899; (vii) 65 Franklin Street, Suite 401, Boston, MA 02110.
Ivory 1150 Concourse Corp.
Ivory 1166 G.C. Realty Corp.
Ivory 3045 Grand Concourse Corp.
Ivory 3591 Bainbridge Corp.
Ivory 3780 Bronx Blvd. Corp.
Ivory 3908 Bronx Realty Corp.
Ivory 780 Grand Corp.
Ivory 790 G.C. Corp.
Madison Oaks Apartment Homes LLC(ii)
New Franconia Associates***
Sevens G.C. Realty Corp.
Tampa Sunscape Inc.
Waterford Park Apartment Homes LLC(ii)
* Directly owned
** 75% owned
*** 70% owned
23.
Alternative Performance Measures
The directors use a number of alternative performance measures within this Annual Report to
provide more relevant explanations of the Group’s financial position and performance. Provided
below are explanations for each such measure and reconciliations to relevant IFRS balances.
Underlying profit before tax
The directors consider “underlying profit before tax” which excludes unrealised changes in the
valuation of property and certain financial instruments to be a useful measure as it represents the
element of our results that has actually been realised. It represents the performance of our core rental
business together with disposal profits which tend to fluctuate from year to year. It is our underlying
profit before tax which generates the cash we use to re-invest in the business and to pay dividends
and taxes.
(Loss)/profit before tax per the income statement
Add back/(deduct) property valuation losses/(gains)
Add back financial instruments fair value losses
Add back realised valuation gains on property disposals
Underlying profit before tax
2020
£000
2019
£000
(33,151) 137,832
(83,928)
90,494
172
1,356
–
59,901
118,600
54,076
Shareholders’ funds per share
The directors consider that shareholders’ funds per share is a useful measure as it reflects the fair
value of the investment property we hold and is a common measure used across the property
industry. It is calculated by dividing the total equity attributable to equity holders of the parent by
the weighted average number of shares in issue during the period.
Total equity attributable to equity holders of the parent (£000)
Weighted average number of shares in issue during the year
1,895,963 1,940,354
16,295,357 16,295,357
Shareholders funds per share (£)
116.35
119.07
2020
2019
Page 90
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
Gearing
The Group considers gearing to be the ratio of our loans and borrowings to the value of our total
assets. As the majority of our loans and borrowings are secured on our investment property assets,
our gearing ratio is useful as it indicates our capacity to borrow further to invest in our business and
also shows the level of headroom we have in case of adverse property valuation movements.
2020
UK
£000
2020
USA
£000
2020
Total
£000
2019
UK
£000
2019
USA
£000
2019
Total
£000
Loans and borrowing
(Note 16)
Total assets
Gearing
151,225
1,947,833
124,393
339,702
490,927
808,764 2,756,597 1,938,523
306,361
430,754
827,980 2,766,503
7.8%
42.0%
17.8%
6.4%
37.0%
15.6%
Valuation of investment properties
Valuation gains or losses on investment properties is a key metric for property companies and is presented
on the face of the income statement. To assist a reader’s understanding, we also express the net revaluation
gains or losses recognised during the year as a percentage of the value of investment property at the start
of the year. Where a property’s value is not denominated in sterling, such as those in the USA, the opening
value is first adjusted for the impact of movements in exchange rates during the year.
2020
UK
£000
2020
USA
£000
2020
Total
£000
2019
UK
£000
2019
USA
£000
2019
Total
£000
Carrying value at 1 April
(Note 9)
Gross up of head lease liability
Foreign exchange movements
1,785,746
8,159
–
Value at 1 April at year end
exchange rate
1,793,905
Acquisitions
29,818
Additions to existing properties 11,768
Disposals
(3,405)
Revaluation
3,005
Transfer to properties held
746,772 2,532,518 1,783,506
–
–
242
39,073
8,401
39,073
589,678 2,373,184
–
45,240
–
45,240
786,087 2,579,992 1,783,506
2,815
29,818
20,829
18,071
(2,252)
(4,677)
51,845
(90,494)
–
6,303
(1,272)
(93,499)
634,918 2,418,424
77,477
28,025
(4,339)
83,928
74,662
7,196
(2,087)
32,083
for sale
(8,450)
–
(8,450)
(70,997)
–
(70,997)
Carrying value at 31 March
(Note 9)
1,826,641
697,619 2,524,260 1,785,746
746,772
2,532,518
Valuation gain percentage
0.2%
(11.9)%
(3.5)%
2.9%
5.1%
3.5%
24.
Events after the reporting period
An offer made on 21 February 2020 for the entire share capital of the Company not already owned by
the Freshwater Concert party by Dock Newco Limited by means of a scheme of arrangement was
sanctioned by the Court on 5 May 2020 and became effective on 7 May 2020. The listing of the
Company’s shares on the premium listing segment of the Official List of the FCA was cancelled and the
Company’s shares ceased to be admitted to trading on the Main Market for listed securities of the
London Stock Exchange on 11 May 2020.
In June 2020, the Group entered into a new loan agreement with two leading banks, borrowing an
additional £225 million on standard commercial terms.
Neither of these events have been included in the financial statements for the year ended 31 March
2020 as they represent non-adjusting events after the reporting period.
Page 91
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
COMPANY BALANCE SHEET
as at 31 March 2020
Notes
£000
2020
£000
£000
2019
£000
Fixed assets
Investment in subsidiary
undertakings
Deferred tax assets
4
1,243,319
506
1,243,825
1,279,894
226
1,280,120
Current assets
Debtors
Cash at bank
Creditors: amounts falling
due within one year
Net current liabilities
Total assets less current
liabilities
Creditors: amounts falling due
after more than one year
Net assets
Capital and reserves
Called up share capital
Share premium account
Other reserves
Profit and loss account
Equity shareholders’ funds
19,283
29,167
48,450
1,791
1,961
3,752
5
(317,896)
(298,592)
(269,446)
(294,840)
6
7
974,379
(62,826)
911,553
4,074
555
893
906,031
911,553
985,280
(48,057)
937,223
4,074
555
893
931,701
937,223
The financial statements of Daejan Holdings Limited (Company number 305105) on pages 92 to 96
were approved by the Board of Directors on 3September 2020 and were signed on its behalf by:
B S EFreshwater
Director
Page 92
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
COMPANY STATEMENT OF CHANGES IN EQUITY
for the year ended 31 March 2020
Balance at 1 April 2018
Loss for the year
Dividends to equity shareholders
Balance at 1 April 2019
Loss for the year
Dividends to equity shareholders
Issued
share
capital
£000
4,074
–
–
4,074
–
–
Balance at 31 March 2020
4,074
Share
premium
account
£000
Equity
Other
Retained shareholders’
reserves
£000
earnings
£000
funds
£000
555
–
–
555
–
–
555
893
953,738
959,260
–
–
(5,253)
(5,253)
(16,784)
(16,784)
893
931,701
937,223
–
–
(8,397)
(8,397)
(17,273)
(17,273)
893
906,031
911,553
Page 93
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
NOTES TO THE COMPANY FINANCIAL STATEMENTS
1.
Accounting Policies
The following accounting policies have been applied consistently in dealing with items which are
considered material in relation to the Company’s financial statements.
(a)
Basis of preparation
The Company financial statements have been prepared in accordance with Financial Reporting
Standard 102, The Financial Reporting Standard applicable in the UK and Republic of Ireland
(“FRS 102”). The Company has adopted the following disclosure exemptions permitted by FRS 102
1.12 (b), (c) and (e): The requirement to present a statement of cash flows; the requirement to
disclose the terms and conditions of long term debt; and the requirement to disclose key
management personnel compensation in total.
As permitted by Section 408 of the Companies Act 2006, a separate profit and loss account dealing
with the results of the Company has not been presented. The Company’s loss for the year after
taxation was £8,397,000 (2019 – £5,253,000).
(b)
Investments in subsidiary undertakings
Investments in subsidiary undertakings comprise shares in, and loans to, those undertakings and are
stated at cost less any provision for impairment.
(c)
Financial instruments
Financial liabilities and equity instruments are classified according to the substance of the
contractual arrangements entered into. An equity instrument is any contract that evidences a residual
interest in the assets of the entity after deducting all financial liabilities.
Basic financial instruments
(i) Trade and other debtors and trade and other creditors
Trade and other debtors are recognised initially at transaction price plus attributable transaction
costs. Trade and other creditors are recognised initially at transaction price less attributable
transaction costs. Subsequent to initial recognition they are measured at amortised cost using the
effective interest method less any impairment losses in the case of trade and other debtors. If the
arrangement constitutes a financing transaction, for example if payment is deferred beyond normal
business terms, then it is measured at the present value of future payments discounted at a market
rate for a similar debt instrument.
(ii) Loans and borrowings
Loans and borrowings are initially recognised at fair value and are subsequently recorded at
amortised cost. Transaction costs are deducted from the fair value at recognition and any differences
between the amount initially recognised and the redemption value is recognised in the income
statement over the period of the borrowings on an effective interest rate basis.
Derivative financial instruments
The Company uses derivative financial instruments to hedge its exposure to interest rate risk arising
from operational and financing activities. As these derivatives do not qualify for hedge accounting,
they are accounted for as trading instruments. Derivative financial instruments are initially
recognised, and subsequently recorded, at fair value. The fair value of interest rate swaps is the
estimated amount that the Company would recover or pay to terminate the swap at the balance
sheet date, taking into account current interest rates and the credit worthiness of the swap
counterparties. The gain or loss on re-measurement to fair value is recognised immediately in the
income statement.
Page 94
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
(d) Deferred tax
Deferred tax is provided on timing differences which arise from the inclusion of income and
expenses in tax assessments in periods different from those in which they are recognised in the
financial statements. Deferred tax is not recognised on permanent differences arising because certain
types of income or expenses are non-taxable or are disallowable for tax or because certain tax
charges or allowances are greater or smaller than the corresponding income or expense.
Deferred tax is measured at the tax rate that is expected to apply to the reversal of the related
difference, using tax rates enacted or substantively enacted at the balance sheet date.
Unrelieved tax losses and other deferred tax assets are recognised only to the extent that it is
probable that they will be recovered against the reversal of deferred tax liabilities or other future
taxable profits.
(e)
Foreign currencies
Transactions in foreign currencies are recorded using the rate of exchange ruling at the date of the
transaction and gains and losses on translation are included in the profit and loss account. Debtors
and creditors are retranslated using the rate of exchange at the balance sheet date.
2.
Profit on Ordinary Activities before Taxation
The Company has no staff other than its Directors and their remuneration is set out on page 46of
the Group accounts. The parent company audit fee is disclosed on page 72of the Group accounts.
3.
Dividends
Amounts recognised as distributions to equity holders in the year:
Final dividend for the year ended 31 March 2018,
paid 2 November 2018 @ 68p per share
Interim dividend for the year ended 31 March 2019,
paid 8 March 2019 @ 35p per share
Final dividend for the year ended 31 March 2019,
paid 1 November 2019 @ 71p per share
Interim dividend for the year ended 31 March 2020,
paid 6 March 2020 @ 35p per share
4.
Investments in Subsidiary Undertakings
2020
£000
2019
£000
–
–
11,081
5,703
11,570
5,703
–
–
17,273
16,784
At 1 April 2019
Additions
Loans
At 31 March 2020
Shares at
cost
£000
991,933
106
–
Loans
£000
287,961
–
(36,681)
Total
£000
1,279,894
106
(36,681)
992,205
251,114
1,243,319
Page 95
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
NOTES TO THE COMPANY FINANCIAL STATEMENTS continued
5.
Creditors: Amounts falling due within one year
Bank loans and overdrafts
Amounts owed to subsidiary undertakings
Other creditors and accruals
Derivative financial instruments
2020
£000
148
314,238
847
2,663
2019
£000
129
296,540
595
1,328
317,896
298,592
6.
Creditors: Amounts falling due after more than one year
Secured bank loans
7.
Share Capital
Allotted, called up and fully paid:
Ordinary shares of 25 pence per share
8.
Profit and Loss Reserve
2020
£000
2019
£000
62,826
48,057
Number
2020
£000
2019
£000
16,295,357
4,074
4,074
Some years ago, the Company sold its shareholdings in certain subsidiary undertakings to
intermediate holding companies. As a result of that transaction, the parent company transferred
£645.1 million of revaluation gains relating to these investments to the profit and loss reserve. As
the transfer of these revaluation gains arose as a result of a sale of assets within the Group, it is
unlikely that the Company will seek to treat the profit and loss reserve thus arising as distributable.
Under the articles of association of certain Group investment undertakings, realised capital surpluses
are not available for distribution as dividends.
9.
Events after the reporting period
An offer made on 21 February 2020 for the entire share capital of the Company not already owned
by the Freshwater Concert party by Dock Newco Limited by means of a scheme of arrangement was
sanctioned by the Court on 5 May 2020 and became effective on 7 May 2020. The listing of the
Company’s shares on the premium listing segment of the Official List of the FCA was cancelled and
the Company’s shares ceased to be admitted to trading on the Main Market for listed securities of
the London Stock Exchange on 11 May 2020.
Page 96
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
GROUP FIVE-YEAR RECORD
Total rental and related income
Property operating expenses
Net rental and related income
Profit on disposal of investment properties
Net valuation gains/(losses) on investment
2016
£000
138,197
(70,008)
2017
£000
140,738
(75,938)
2018
£000
142,885
(76,407)
2019
£000
156,161
(79,580)
2020
£000
166,143
(91,094)
68,189
11,725
64,800
14,594
66,478
11,893
76,581
12,203
75,049
15,775
properties
Administrative expenses
117,947
(13,041)
144,508
(12,559)
146,438
(13,263)
83,928
(13,904)
(90,494)
(14,254)
Net operating profit/(loss) before net
financing costs
Net financing expense
Profit/(loss) before taxation
Income tax
184,820
(11,578)
211,343
(12,947)
211,546
(10,284)
158,808
(20,976)
(13,924)
(19,227)
173,242
(30,237)
198,396
(36,266)
201,262
1,696
137,832
(17,853)
(33,151)
(13,441)
Profit/(loss) for the year
143,005
162,130
202,958
119,979
(46,592)
Earnings/(loss) per share
Total assets
Equity shareholders’ funds
Equity shareholders’ funds per share
£9.93
£8.77
£12.45
£(2.92)
2,158,073 2,406,831 2,535,005 2,766,503 2,756,597
1,480,094 1,655,955 1,812,993 1,940,521 1,897,168
£111.25
£116.35
£101.61
£119.07
£90.82
£7.36
Page 97
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
DIRECTORS AND ADVISERS
Directors
B S E Freshwater
Auditor
KPMG LLP
(Chairman and Managing Director)
15 Canada Square,
S I Freshwater
D Davis (non-executive)
London E14 5GL
A M Freshwater (non-executive)
Consulting Accountants
C B Freshwater (non-executive)
Cohen Arnold
R E Freshwater (non-executive)
New Burlington House,
Secretary
M R M Jenner F.C.I.S.
Registered & Head Office
1075 Finchley Road,
London NW11 0PJ
Principal Bankers
Barclays Bank PLC
Freshwater House,
Lloyds Banking Group PLC
158-162 Shaftesbury Avenue,
NatWest Group PLC
London WC2H 8HR
Registered in England
Co. No. 305105
Page 98
DAEJAN HOLDINGS LTD Annual Report & Accounts 2020
NOTES
Page 99
Opposite page: Wyfold Road, London SW6..
sterling 173744
Design, art direction and photography by Roger Watt.
HOLDI