174753 Daejan Holdings R&A 2021 COVER 5mm_174753 Daejan Holdings R&A 2021 COVER 5mm 02/09/2021 11:00 Page 1
174753 Daejan Holdings R&A 2021 COVER 5mm_174753 Daejan Holdings R&A 2021 COVER 5mm 02/09/2021 11:00 Page 2
174753 Daejan Holdings R&A 2021 Pt1_174753 Daejan Holdings R&A 2021 Pt1 02/09/2021 12:06 Page 1
(formerly Daejan Holdings PLC)
CONTENTS
Chairman’s Introduction 2
Financial Highlights 3
Strategic Report 5
Directors’ Report 34
Corporate Governance Report 38
Directors’ Remuneration Report 41
Directors’ Responsibilities Statement 45
Independent Auditor’s Report to the Members of Daejan Holdings Limited 47
Consolidated Income Statement 50
Consolidated Statement of Comprehensive Income 51
Consolidated Statement of Changes in Equity 51
Consolidated Balance Sheet 52
Consolidated Statement of Cash Flows 53
Notes to the Consolidated Financial Statements 54
Company Balance Sheet 83
Company Statement of Changes in Equity 84
Notes to the Company Financial Statements 85
Group Five-Year Record 88
Directors and Advisers 89
PAGE 1
174753 Daejan Holdings R&A 2021 Pt1_174753 Daejan Holdings R&A 2021 Pt1 02/09/2021 12:06 Page 2
DAEJAN HOLDINGS LTD Annual Report & Accounts 2021
CHAIRMAN’S INTRODUCTION
I am pleased to report on the year in which our transition to private company status was successfully
accomplished. The shares were delisted in May 2020, the administrative burden of maintaining the
listing had grown progressively in recent years and was out of all proportion to any benefit being
derived therefrom.
All aspects of the operations and results for the year have been impacted by the Covid-19 pandemic
and the measures taken by government in response.
The net profit before tax for the year was £72.0 million (2020 – £33.2 million loss). Shareholders’
funds increased by 0.3% to £1,901.2 million (2020 – 2.3% decrease to £1,896.0 million).
Although our gross rental income is down somewhat I am pleased to report that our rent collections
have held up well with 95% of billed rents collected in the UK and 97% in the USA.
In the UK the overall value of our portfolio has remained flat with falling values in commercial, retail
and office property offset by an uplift in residential and a significant uplift on a hotel property
resulting from marriage value following a merger of interests and expected improved commercial
terms as an old lease approaches its end.
In the USA we have seen an overall uplift in values of 4.1% arising principally on our properties in
Florida. There continued to be some small downward movements on our Manhattan properties
following the rent controls introduced last year.
Although the circumstances of the year have limited the scope for the identification and completion
of value enhancing developments within our portfolio or elsewhere we remain alert to new
opportunities. In March this year we completed the acquisition for $87.6 million of Newport Colony,
a 476 unit garden apartment complex in Casselberry, Florida.
In June 2020 a new £225 million facility was obtained from Barclays and NatWest banks as part of
the financing for the new group structure.
Outlook
Both the immediate and the long term future hold considerable uncertainty. It is less than clear that
the UK Government is succeeding in bringing the Covid-19 pandemic under some form of control
so that the economy can grow back to pre-pandemic levels and beyond. Although the formalities of
the UK’s exit from the EEC have been completed, much work remains to be done in establishing new
and efficient trading relationships. In particular this is having an adverse effect on the price and
supply of building materials.
In the USA the significant Government stimulus is having a positive impact on the economy but
Covid-19 infections are on an upward trajectory once again.
It will take some time to establish the extent to which habits acquired during lockdown will
continue into the future. In particular a reluctance to visit retail, leisure and hospitality venues and a
movement to working from home will all feed through to the future demand for property.
We will continue to follow our tried and trusted approach which has served us well over good times
and bad by focussing on achieving long term, low risk growth in asset value and rental income.
As ever my thanks must go to the staff who have dealt so well with the extra challenges which have
arisen this year.
B S E Freshwater
Chairman
Cover and inside front
cover: Oakwood Court,
Holland Park, London W14.
Contents page, above and
opposite page: the recently
completed Piano
Apartments, St John’s Hill,
London SW11.
PAGE 2
174753 Daejan Holdings R&A 2021 Pt1_174753 Daejan Holdings R&A 2021 Pt1 02/09/2021 12:06 Page 3
DAEJAN HOLDINGS LTD Annual Report & Accounts 2021
FINANCIAL HIGHLIGHTS
NET VALUATION GAIN
£33.8 million
2020: loss of £90.5 million
£72.0 million2020: loss of £33.2 million
PROFIT BEFORE TAX
EARNINGS PER SHARE
£3.35
2020: loss of £2.92
SHAREHOLDERS’ FUNDS
£1,901.2 million
2020: £1,896.0 million
SHAREHOLDERS’ FUNDS PER SHARE
£116.67*
2020: £116.35*
*Definitions of these alternative performance measures are included on pages 81 and 82.
GEARING
24.3%*
2020: 17.8%*
PAGE 3
174753 Daejan Holdings R&A 2021 Pt1_174753 Daejan Holdings R&A 2021 Pt1 02/09/2021 12:07 Page 4
174753 Daejan Holdings R&A 2021 Pt1_174753 Daejan Holdings R&A 2021 Pt1 02/09/2021 12:07 Page 5
DAEJAN HOLDINGS LTD Annual Report & Accounts 2021
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
125
120
115
110
105
100
95
90
Strategy
s
n
o
i
l
l
i
m
£
180
160
140
120
100
80
60
40
20
0
2017
2018 2019 2020
2021
2017
2018 2019 2020
2021
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 and emerging 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 Piano
Apartments, St John’s Hill,
London SW11.
PAGE 5
174753 Daejan Holdings R&A 2021 Pt1_174753 Daejan Holdings R&A 2021 Pt1 02/09/2021 12:07 Page 6
DAEJAN HOLDINGS LTD Annual Report & Accounts 2021
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 24.3% (2020 –
17.8%).
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 the Covid-19 pandemic. The UK Government has recently
started to dismantle various restrictions which had been put in place to prevent the spread of the
disease and which had resulted in a dramatic slowdown in economic activity. It is too soon to tell if
and when these steps will return the economy to pre-pandemic levels.
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 UK is now fully detached from the European Economic Union (EEU) although trade relations
have yet to get onto an even keel which creates an ongoing layer of uncertainty for UK business.
The Covid-19 pandemic in the USA had seemed largely to be under control with the economy
benefiting from the substantial stimulus programme introduced following the election of President
Biden. However infection rates are now rising once again.
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.
This page and opposite
page: The Strand Palace
Hotel, The Strand,
London WC2.
PAGE 6
174753 Daejan Holdings R&A 2021 Pt1_174753 Daejan Holdings R&A 2021 Pt1 02/09/2021 12:08 Page 7
174753 Daejan Holdings R&A 2021 Pt1_174753 Daejan Holdings R&A 2021 Pt1 02/09/2021 12:08 Page 8
174753 Daejan Holdings R&A 2021 Pt1_174753 Daejan Holdings R&A 2021 Pt1 02/09/2021 12:08 Page 9
DAEJAN HOLDINGS LTD Annual Report & Accounts 2021
STRATEGIC REPORT continued
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
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.
This page and opposite
page: Africa House,
Kingsway, London WC2.
PAGE 9
174753 Daejan Holdings R&A 2021 Pt1_174753 Daejan Holdings R&A 2021 Pt1 02/09/2021 12:08 Page 10
DAEJAN HOLDINGS LTD Annual Report & Accounts 2021
STRATEGIC REPORT continued
The rise in the value of sterling relative to the US dollar in the financial year was 10% (2020 – 5% fall).
This has had the effect of reducing the reported value of our USA net assets. The average exchange
rate for the year rose by 3% (2020 – 3% fall) 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 loss of £31.7 million (2020 – gain of £20.6 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. If regulations
introduced in the UK during the year as temporary measures which restrict the ability of landlords
to recover unpaid rent by legal process remain in place then bad debt expense is likely to increase.
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
This page and opposite
page: Africa House,
Kingsway, London WC2.
PAGE 10
174753 Daejan Holdings R&A 2021 Pt1_174753 Daejan Holdings R&A 2021 Pt1 02/09/2021 12:08 Page 11
174753 Daejan Holdings R&A 2021 Pt1_174753 Daejan Holdings R&A 2021 Pt1 02/09/2021 12:09 Page 12
174753 Daejan Holdings R&A 2021 Pt1_174753 Daejan Holdings R&A 2021 Pt1 02/09/2021 12:09 Page 13
DAEJAN HOLDINGS LTD Annual Report & Accounts 2021
STRATEGIC REPORT continued
■ 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
■ 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 many 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 shops, an important part of our portfolio, have not suffered to
the same extent. 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
This page and opposite
page: the recently
completed Starlite Lodge,
Greenford, Middlesex.
PAGE 13
174753 Daejan Holdings R&A 2021 Pt1_174753 Daejan Holdings R&A 2021 Pt1 02/09/2021 12:09 Page 14
DAEJAN HOLDINGS LTD Annual Report & Accounts 2021
STRATEGIC REPORT continued
Analysis by property type
PROPERTY UK
Residential
£861.4m
Commercial
£995.0m
PROPERTY USA
Residential
£629.4m
Commercial
£96.8m
COMMERCIAL PROPERTY UK
COMMERCIAL PROPERTY USA
Land &
Development
£1.4m
Industrial
£54.7m
Offices
£337.4m
Retail
£2.4m
Offices
£94.4m
Leisure &
Services
£239.1m
Retail
£362.4m
Analysis by location
UK VALUATIONS
USA VALUATIONS
Wales &
West
£50.4m
North &
Scotland
£48.6m
Midlands &
East Anglia
£93.8m
South East
£138.9m
Pennsylvania
£49.5m
Baltimore
£25.1m
New York
£240.9m
Greater
London
£1,524.7m
New Jersey
£48.5m
Boston
£90.0m
Florida
£272.2m
PAGE 14
174753 Daejan Holdings R&A 2021 Pt1_174753 Daejan Holdings R&A 2021 Pt1 02/09/2021 12:09 Page 15
DAEJAN HOLDINGS LTD Annual Report & Accounts 2021
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; last year the impact of additional rent controls and restrictions
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
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
This page and opposite
page: Park West,
London W2.
PAGE 15
174753 Daejan Holdings R&A 2021 Pt1_174753 Daejan Holdings R&A 2021 Pt1 02/09/2021 12:10 Page 16
DAEJAN HOLDINGS LTD Annual Report & Accounts 2021
STRATEGIC REPORT continued
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 to ensure continued tenant demand
■ 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 2021. 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.
Properties in Manhattan,
New York, USA. Above:
515-535 East 89th Street,
right: The Franconia,
20 West 72nd Street,
far right: 677 West End
Avenue, opposite page:
611 West 158th Street.
PAGE 16
174753 Daejan Holdings R&A 2021 Pt1_174753 Daejan Holdings R&A 2021 Pt1 02/09/2021 12:10 Page 17
174753 Daejan Holdings R&A 2021 Pt1_174753 Daejan Holdings R&A 2021 Pt1 02/09/2021 12:10 Page 18
174753 Daejan Holdings R&A 2021 Pt1_174753 Daejan Holdings R&A 2021 Pt1 02/09/2021 12:11 Page 19
DAEJAN HOLDINGS LTD Annual Report & Accounts 2021
STRATEGIC REPORT continued
The table below shows a summary of the valuation of our investment property at 31 March 2021:
Valuation Valuation
March 2021 March 2020
£m £m
Commercial property
UK 995.0 1,011.1
USA 96.8 107.8
Residential property
UK 861.4 832.7
USA 629.4 593.9
Less lease incentives (18.2) (21.2)
Total 2,564.4 2,524.3
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 gain 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:
2021 2020
£m £m
Opening valuation 2,524.3 2,532.5
Gross up of head lease liability – 8.4
Opening valuation (restated) 2,524.3 2,540.9
New acquisitions 68.1 29.8
Additions to existing properties 10.0 18.1
Disposals (1.3) (4.7)
2,601.1 2,584.1
Revaluation gain/(loss) 33.8 (90.5)
Foreign exchange (loss)/gain (70.5) 39.1
Transfer to properties held for sale – (8.5)
Closing valuation 2,564.4 2,524.3
The overall valuation of our UK portfolio has remained flat with losses arising on retail and office
property offset by a significant uplift on a property arising from expected improved commercial terms
as an old lease approaches its end. Residential properties have shown a modest increase in values.
We continue to obtain significant uplifts in value upon the completion of successful developments
and rent reviews.
The overall increase in valuation of USA properties is 4.1% (2020 – 11.9% reduction). The increase
mainly arises on our Florida properties offset by some small downward adjustments on our Manhattan
properties following the rent controls introduced last year.
Acquisitions and Developments
In the UK the impact of the Covid-19 pandemic has restricted our ability to undertake development
work. Our largest potential development project at Oxford Street, London W1 has been put on hold
at the preparatory stage until the outlook clears.
The Piano Apartments, London SW11 were completed which created 35 flats. Work was commenced
to create a new 24 flat block on the site of Baillie and Strathcona House which is due to complete in
late 2021.
Opposite page and above:
30 Kensington Church
Street, London W8.
PAGE 19
174753 Daejan Holdings R&A 2021 Pt1_174753 Daejan Holdings R&A 2021 Pt1 02/09/2021 12:11 Page 20
174753 Daejan Holdings R&A 2021 Pt1_174753 Daejan Holdings R&A 2021 Pt1 02/09/2021 12:11 Page 21
DAEJAN HOLDINGS LTD Annual Report & Accounts 2021
STRATEGIC REPORT continued
Refurbishment work was completed on an office building in Great Marlborough Street, London and
on the offices in Salusbury Road, London NW6 which were acquired last year.
In March 2021 we acquired an apartment complex in Casselberry, Florida for $87.6 comprising
476 units spread over 41 garden acres.
In the USA we undertook the refurbishment of our office property on St Paul’s Street, Baltimore.
Results for the year
The Group recorded a profit before taxation for the year ended 31 March 2021 of £72.0 million
(2020 – loss of £33.2 million). The result includes a net valuation gain of £33.8 million arising on
investment properties (2020 – loss of £90.5 million).
The table below shows the performance of the Group before and after valuation movements:
2021 2020
£m £m
Total rental and related income from investment property 162.5 166.1
Property operating expenses (91.7) (91.1)
Net rental and related income from investment property 70.8 75.0
Profit on disposals of investment property 3.2 15.8
Administrative expenses:
Recurring (14.9) (14.3)
Non-recurring arising from scheme of arrangement (3.3) –
Net operating profit before net valuation movements 55.8 76.5
Net valuation gains/(losses) on investment property 33.8 (90.5)
Net financing expense (17.6) (19.2)
Profit/(loss) before taxation 72.0 (33.2)
More properties in the
USA. Left: 77 North
Washington, Boston,
Massachusetts, above and
opposite page: 11, East
Chase Street, Baltimore,
Maryland.
PAGE 21
174753 Daejan Holdings R&A 2021 Pt1_174753 Daejan Holdings R&A 2021 Pt1 02/09/2021 12:12 Page 22
DAEJAN HOLDINGS LTD Annual Report & Accounts 2021
STRATEGIC REPORT continued
Overall this year has seen a reduction of £2.9 million in rental income equivalent to 1.9% (2020 –
6.5% increase).
In the UK rental income has shown a small net decrease with income from new developments and
tenants offset by lost tenants and income reductions.
In the USA the reduction in rental income mainly arose from our Washington Street, Baltimore
property where a tenant gave up three floors.
Service charge income has decreased reflecting a reduced level of activity on major works in the
year.
There was no significant change in the overall level of property operating expenses with reduced
expenditure on letting commissions and repairs offset by an increase in the provision for bad debts.
Administrative expenses include costs of £3.3 million relating to the Scheme of Arrangement which
will not recur in future years.
Profit on disposals largely derive from the sale of lease extensions in the UK. When long leaseholders
extend the length of their lease a premium is paid; the Group has no control over when these
extensions may occur. In 2020 profit on disposals also included the surplus on the sale of part of our
Middlesex Street site in Aldgate.
The new bank borrowings in the UK have had the effect of increasing both interest paid and
received by equivalent amounts with no impact on net finance costs. The increase in net finance
costs results from the reduction in interest on cash balances due to deposit interest rates falling to
near zero.
This year’s fair value movement on financial instruments was a gain of £1.4 million (2020 –
£1.4 million loss).
As shown in Note 6 to the financial statements, the Group tax charge of £17.5 million (2020 –
£13.4 million) represents an effective tax rate of 24% which is consistent with the weighted average
standard tax rate of both countries. The announced increase to the UK corporate tax rate from
1 April 2023 had not been enacted by the 31 March 2021 but will affect current and deferred tax
charges in the future.
This page and opposite
page: Travelodge,
Middlesex Street,
Aldgate, London E1.
PAGE 22
174753 Daejan Holdings R&A 2021 Pt1_174753 Daejan Holdings R&A 2021 Pt1 02/09/2021 12:12 Page 23
174753 Daejan Holdings R&A 2021 Pt1_174753 Daejan Holdings R&A 2021 Pt1 02/09/2021 12:13 Page 24
DAEJAN HOLDINGS LTD Annual Report & Accounts 2021
STRATEGIC REPORT continued
Earnings per share
The Group recorded earnings per share of £3.35 (2020 – loss of £2.92) an increase of £6.40
(2020 – £10.28 decrease).
£
14
12
10
8
6
4
2
0
-2
-4
2017
2018
2019
2020
2021
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:
2021 2020
£m £m
Profit/(loss) before tax per the income statement 72.0 (33.2)
Property valuation (surplus)/deficit (33.8) 90.5
Financial instruments fair value adjustments (1.5) 1.4
Adjustment to measurement of disposal profits 1.1 59.9
Underlying profit before tax 37.8 118.6
This year’s underlying profit before tax of £37.8 million is a reduction of £80.8 million on
the previous year (2020 – £118.6 million). The prior year benefitted from the one-off 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.
This page and opposite
page: Grove Hall Court,
London NW8.
PAGE 24
174753 Daejan Holdings R&A 2021 Pt1_174753 Daejan Holdings R&A 2021 Pt1 02/09/2021 12:13 Page 25
174753 Daejan Holdings R&A 2021 Pt1_174753 Daejan Holdings R&A 2021 Pt1 02/09/2021 12:14 Page 26
174753 Daejan Holdings R&A 2021 Pt1_174753 Daejan Holdings R&A 2021 Pt1 02/09/2021 12:14 Page 27
DAEJAN HOLDINGS LTD Annual Report & Accounts 2021
STRATEGIC REPORT continued
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
Gearing, the ratio between our loans and borrowings and the value of our total assets, is 24.3%
(2020 – 17.8%) for the Group as a whole. In the UK the ratio is 16.9% (2020 – 7.8%) whilst in the
USA, where each property is financed separately on a ring-fenced basis, it is 43.8% (2020 – 42.0%).
Shareholders’ funds
At 31 March 2021 shareholders’ funds amounted to £1,901.2 million, an increase of 0.3% on last
year’s figure of £1,896.0 million (2020 decrease of 2.3%). Shareholders’ funds in recent years have
been as follows:
n
o
i
l
l
i
m
£
2,000
1,950
1,900
1,850
1,800
1,750
1,700
1,650
1,600
1,550
1,500
2017
2018
2019
2020
2021
Outlook
The Chairman’s Introduction on page 2 describes the economic and political factors which will
affect the Group in the coming year.
This page and opposite
page: Central Park,
Brighton, East Sussex.
PAGE 27
174753 Daejan Holdings R&A 2021 Pt1_174753 Daejan Holdings R&A 2021 Pt1 02/09/2021 12:14 Page 28
174753 Daejan Holdings R&A 2021 Pt1_174753 Daejan Holdings R&A 2021 Pt1 02/09/2021 12:15 Page 29
DAEJAN HOLDINGS LTD Annual Report & Accounts 2021
STRATEGIC REPORT continued
In the UK we have seen the economy rebound after emerging from the winter lockdown with some
economists projecting that GDP will return to pre-pandemic levels by the end of 2021. However the
recovery is fragile and heavily dependent on the successful management of Covid-19 infections.
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.
The USA is currently enjoying significant growth in GDP although it is also experiencing an increase
in Covid-19 infections which may threaten the recovery.
Inflationary pressure has re-emerged in both the UK and the USA with current rates running ahead
of target although monetary authorities in both territories regard this as a transitory phenomenon.
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.
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.
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.
Employees
The day-to-day activities are outsourced to management companies which are responsible for the
provision of the services of the staff on whom 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 and Covid-19 risk assessments have been completed.
Opposite page and
above: 90 Hills Road,
Cambridge.
PAGE 29
174753 Daejan Holdings R&A 2021 Pt1_174753 Daejan Holdings R&A 2021 Pt1 02/09/2021 12:15 Page 30
174753 Daejan Holdings R&A 2021 Pt1_174753 Daejan Holdings R&A 2021 Pt1 02/09/2021 12:16 Page 31
DAEJAN HOLDINGS LTD Annual Report & Accounts 2021
STRATEGIC REPORT continued
■ 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.
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 £183,335 (2020 –
£115,500).
■ 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
£1,113,786 (2020 – £1,083,131) 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
scheme being undertaken.
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 aim to meet with most of the Group’s
Opposite page and above:
49 & 50 Great
Marlborough Street W1.
PAGE 31
174753 Daejan Holdings R&A 2021 Pt1_174753 Daejan Holdings R&A 2021 Pt1 02/09/2021 12:16 Page 32
174753 Daejan Holdings R&A 2021 Pt1_174753 Daejan Holdings R&A 2021 Pt1 02/09/2021 12:17 Page 33
DAEJAN HOLDINGS LTD Annual Report & Accounts 2021
STRATEGIC REPORT continued
key stakeholders each 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 review
The Directors have 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 16 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 and notwithstanding the impact
of the Covid–19 pandemic, 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 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 2024. Discussions regarding the
renewal or replacement of facilities occur in advance of their maturity. Current discussions
with incumbent lenders give the Board confidence that the Group will be able to renew or
replace existing facilities on comparable or improved terms.
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.Testing included assuming the
proportion of UK rent and service charges collected for the following four quarters is the same as
had been collected by 10 August 2021 for rent due in the quarter ended 31 July 2021. This amounts
to approximately 15% not being collected, which itself is around ten percentage points lower than
the actual collection of UK rental income that the Group has achieved to date for the year ended
31 March 2021. Notwithstanding the reduction in cash collected, administration and operating costs
were assumed to remain 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.
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
J S Southgate
Company Secretary
1 September 2021
Opposite page and above:
25 Worship Street,
London EC2.
PAGE 33
174753 Daejan Holdings R&A 2021 Pt2_174753 Daejan Holdings R&A 2021 Pt2 02/09/2021 11:51 Page 34
DAEJAN HOLDINGS LTD Annual Report & Accounts 2021
DIRECTORS’ REPORT
Change of company name and status
An offer, to be implemented by a scheme of arrangement, by Dock Newco Limited, a company
controlled by the Freshwater family, was announced on 21 February 2020 for the Company’s shares
not already held by the Freshwater family. At a Court meeting in April 2020, over 99% of the shares
that voted accepted the offer. The scheme was sanctioned by the Court on 5 May 2020 and became
effective on 7 May 2020. The Company changed its name from Daejan Holdings plc to Daejan
Holdings Limited on 28 May 2020 and approved modifications to its 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 2021 is set out on pages 5 to 33 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 profit for the year amounted to £54.5 million (2020 – loss of £46.6 million). A first interim
dividend of 74p per share was paid on 22 December 2020 and a second interim dividend of 35p per
share was paid on 19 March 2021. The Directors do not recommend the payment of a final dividend
and expect to continue the current practice of paying two interim dividends each year.
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 73 – 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 71 – 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.
PAGE 34
174753 Daejan Holdings R&A 2021 Pt2_174753 Daejan Holdings R&A 2021 Pt2 02/09/2021 11:51 Page 35
DAEJAN HOLDINGS LTD Annual Report & Accounts 2021
Mr D Davis. Aged 86 – 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.
Mr A M Freshwater. Aged 50 – He is resident in the UK and sits as an Arbitrator in complex
commercial disputes. He is an actual and 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 49 – 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 51 – 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.
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.
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. The Company has 16,295,357 shares in issue
and, with the exception of the 763 shares beneficially owned by Mr D Davis, all shares are controlled
by or held in trusts on behalf of members of the Freshwater family.
Directors’ interests in the share capital of the Company are as follows:
B S E Freshwater
S I Freshwater
D Davis
A M Freshwater
C B Freshwater
R E Freshwater
Beneficial interest
Non-beneficial
interest
31 March
2021
457,683
206,920
763
2,591,294
2,591,294
2,591,294
31 March
2020
31 March
2021
457,683 12,245,617
206,920
8,332,941
763
–
2,591,294
962,323
2,591,294
–
2,591,294
1,034,566
31 March
2020
8,898,253
4,985,577
–
962,323
–
1,034,566
PAGE 35
174753 Daejan Holdings R&A 2021 Pt2_174753 Daejan Holdings R&A 2021 Pt2 02/09/2021 11:51 Page 36
DAEJAN HOLDINGS LTD Annual Report & Accounts 2021
DIRECTORS’ REPORT continued
Notes:
1
2
3
Beneficial interests of B S E Freshwater and S I Freshwater includes shares held by: (i) a company owned
50% by B S E Freshwater and 50% by S I Freshwater; and (ii) B S E Freshwater and S I Freshwater joint
pension scheme.
Beneficial interests of A M Freshwater, C B Freshwater and R E Freshwater include shares held by trusts in
which they are each one of a large class of beneficiaries.
Non-beneficial interests relate to shares held by trusts, charities and bodies corporate owned by family trusts
where the director is a trustee or director.
Included in the directors’ holdings shown in the table on the previous page are the following
holdings at 31 March 2021, each amounting to 3% or more of the Company’s issued share capital:
Dock Newco Limited
Henry Davies (Holborn) Limited
Trustees of the S I Freshwater Settlement
Distinctive Investments Limited
Quoted Securities Limited
Centremanor Limited
Valand Investments Limited
Silda 2 Limited
Mayfair Charities Limited
Tabard Property Investment Company Limited
Shares
3,347,364
1,934,090
1,560,000
1,464,550
1,305,631
1,000,000
1,000,000
705,000
565,000
500,000
%
20.5
11.9
9.6
9.0
8.0
6.1
6.1
4.3
3.5
3.1
There have been no changes to any of the above interests from 31 March 2021 up to the date of
signing this report.
Corporate Governance
This report combines by reference the Corporate Governance Report on pages 38 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 seven 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 other two facilities would similarly constitute an
event of default but no provision is made for the prior written consent of the lender. At 31 March
2021, these facilities represented £109.1 million (2020 – £110.2 million) of the loans and borrowings
in the financial statements and undrawn facilities of £30.0 million (2020 – £30.0 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 33, 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.
PAGE 36
174753 Daejan Holdings R&A 2021 Pt2_174753 Daejan Holdings R&A 2021 Pt2 02/09/2021 11:51 Page 37
DAEJAN HOLDINGS LTD Annual Report & Accounts 2021
The Group generated cash from operating activities of £66.9 million during the year (2020 –
£58.4 million). Gearing, on the basis of gross debt to total assets, was 24.3% (2020 – 17.8%) and net
debt (total loans and borrowings less cash and cash equivalents) increased to £599.1 million (2020 –
£344.7 million) as the Group entered into a new £225 million loan following the scheme of
arrangement and new mortgages including one to part fund the acquisition of a large property in the
USA. The Group had undrawn committed facilities of £55.0 million at the balance sheet date (2020 –
£55.0 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 consequences 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.
The plausible worst-case downside scenario included assuming the proportion of UK rent and
service charges collected for the following four quarters is the same as had been collected by
10 August 2021 for rent due in the quarter ended 31 July 2021. This amounts to approximately 15%
not being collected, which itself is around ten percentage points lower than the actual collection of
UK rental income that the Group has achieved to date for the year ended 31 March 2021.
Notwithstanding the reduction in cash collected, administration and operating costs were assumed
to remain 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 and pursuant
to Section 487 of the Companies Act 2006, the auditor will be deemed to be reappointed as the
Company’s auditor.
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
J S Southgate
Secretary
1 September 2021
PAGE 37
174753 Daejan Holdings R&A 2021 Pt2_174753 Daejan Holdings R&A 2021 Pt2 02/09/2021 11:51 Page 38
DAEJAN HOLDINGS LTD Annual Report & Accounts 2021
CORPORATE GOVERNANCE REPORT
Overview
The Board has long recognised the benefits of strong corporate governance and its link to enhanced
business performance. Strong corporate governance supports high levels of accountability and
robust, informed and transparent decision-making which benefits the Group’s major stakeholders. It
also gives confidence and reassurance to our stakeholders that we operate with honesty, integrity
and in a socially responsible way.
Each year, the Board reviews the Group’s approach to corporate governance and considers any
changes which might be necessary in light of developments in best practice and in the context of
the needs of the Group’s business. The Board’s assessment of the Group’s governance framework
included consideration of the Wates Corporate Governance Principles for Large Private Companies
issued in December 2018 and endorsed by the Financial Reporting Council. As it is now privately-
owned, the Group is not required to apply the 2018 UK Corporate Governance Code, but has
considered the principles included in this Code.
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
Secretaries who are 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.
Directors and Directors’ Independence
During the year the Board comprised the Chairman, who acts in an executive capacity, one further
executive Director and non-executive directors. Four non-executive directors served throughout the
year and two other non-executives resigned during the year following completion of the scheme of
arrangement, having represented the interests of the independent shareholders during the offer
process. The names of the Directors together with their biographical details are set out on pages 34
and 35. The directors are all members of the Freshwater family with the exception of Mr D Davis
who, due to his length of service, is not considered to be independent. Given the Freshwater family
are the shareholders of the Company, the Board reflects this.
PAGE 38
174753 Daejan Holdings R&A 2021 Pt2_174753 Daejan Holdings R&A 2021 Pt2 02/09/2021 11:51 Page 39
DAEJAN HOLDINGS LTD Annual Report & Accounts 2021
Financial Reporting
The Board has ultimate responsibility for all aspects of the Group’s financial reporting obligations.
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 is updated by management 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 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.
Whilst there are no legal restrictions on the length of time an auditor can continue as the auditor of
a private company, in line with good corporate governance the Board are considering tender options
for the Group’s audit.
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 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 Board at regular intervals.
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.
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.
PAGE 39
174753 Daejan Holdings R&A 2021 Pt2_174753 Daejan Holdings R&A 2021 Pt2 02/09/2021 11:51 Page 40
DAEJAN HOLDINGS LTD Annual Report & Accounts 2021
CORPORATE GOVERNANCE REPORT continued
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 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.
PAGE 40
174753 Daejan Holdings R&A 2021 Pt2_174753 Daejan Holdings R&A 2021 Pt2 02/09/2021 11:51 Page 41
DAEJAN HOLDINGS LTD Annual Report & Accounts 2021
DIRECTORS’ REMUNERATION REPOR T
Directors’ Remuneration Policy
Included in this report is the remuneration strategy and policy together with other relevant
information about the terms and conditions applicable to executive directors of the Group:
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
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 a contractual entitlement to compensation for
loss of office
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 virtue of all shares in issue, with the exception of the 763 shares beneficially owned
by Mr D Davis, being held by or on behalf of themselves, other members of their families and their
charitable interests.
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.
Benefits
There are no additional benefits granted to any director over and above basic pay.
PAGE 41
174753 Daejan Holdings R&A 2021 Pt2_174753 Daejan Holdings R&A 2021 Pt2 02/09/2021 11:51 Page 42
DAEJAN HOLDINGS LTD Annual Report & Accounts 2021
DIRECTORS’ REMUNERATION REPOR T continued
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.
Recruitment of executive directors
No new appointments of executive directors have been made for many 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.
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 A M Freshwater and Mr R E Freshwater were appointed in
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.
Total directors’ remuneration
Details of each individual director’s remuneration are set out below on an accruals basis:
2021
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*
Base
Salary
£
Additional
fee
£
Compensation
for loss
of office
£
1,350,000
1,350,000
5,833
20,000
20,000
20,000
20,000
5,000
2,790,833
–
–
50,000
–
–
–
–
40,000
90,000
–
–
50,000
–
–
–
–
–
50,000
Total
£
1,350,000
1,350,000
105,833
20,000
20,000
20,000
20,000
45,000
2,930,833
* Mr S B Benaim resigned on 31 May 2020 and Mr S Srulowitz resigned on 30 June 2020.
PAGE 42
174753 Daejan Holdings R&A 2021 Pt2_174753 Daejan Holdings R&A 2021 Pt2 02/09/2021 11:51 Page 43
DAEJAN HOLDINGS LTD Annual Report & Accounts 2021
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
Base
Salary
£
Additional
fee
£
Compensation
for loss
of office
£
1,300,000
1,300,000
35,000
20,000
20,000
20,000
20,000
20,000
2,735,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
£
1,300,000
1,300,000
35,000
20,000
20,000
20,000
20,000
20,000
2,735,000
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.
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 (2020 – £50,000), equivalent to 3.8% (2020 – 4.0%). The increases were
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
and the salary costs of directors of subsidiaries in the UK increased by 5.1% (2020 – decrease
of 0.3%) reflecting the cost of annual salary increases, appointment of additional directors to
subsidiary companies and additional funding of the deficit in a pension scheme. 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 to be adopted in the future.
Non-executive directors’ remuneration
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.
During the current year, Mr S B Benaim and Mr S Srulowitz received one-off payments amounting to
£50,000 and £40,000 respectively, in recognition of the additional time commitments in connection
with the scheme of arrangement. The amounts were determined with reference to arms-length
hourly fee rates for their professions. Mr Benaim received a further £50,000 as compensation for loss
of office.
PAGE 43
174753 Daejan Holdings R&A 2021 Pt2_174753 Daejan Holdings R&A 2021 Pt2 02/09/2021 11:51 Page 44
DAEJAN HOLDINGS LTD Annual Report & Accounts 2021
DIRECTORS’ REMUNERATION REPORT continued
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
7,900
7,516
% of total
27.6
27.3
Directors’
remuneration
Dividends to
shareholders
£000
2,931
2,735
% of total
£000
% of total
10.3
9.9
17,762
17,273
62.1
62.8
2021
2020
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 the Directors’ Report on pages 35 and 36.
The basic pay of the Chairman and Managing Director who is also the highest paid director over the
past ten years is shown as a single figure in the table below:
Mr B S E Freshwater
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
£
770,000
820,000
870,000
1,000,000
1,100,000
1,150,000
1,200,000
1,250,000
1,300,000
1,350,000
PAGE 44
174753 Daejan Holdings R&A 2021 Pt2_174753 Daejan Holdings R&A 2021 Pt2 02/09/2021 11:51 Page 45
DAEJAN HOLDINGS LTD Annual Report & Accounts 2021
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 accounting standards in conformity with the requirements of the
Companies Act 2006 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 and applicable law.
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 and reliable;
for the Group financial statements state whether they have been prepared in accordance with
international accounting standards in conformity with the requirements of the Companies Act
2006;
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 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 45
174753 Daejan Holdings R&A 2021 Pt2_174753 Daejan Holdings R&A 2021 Pt2 02/09/2021 11:51 Page 46
DAEJAN HOLDINGS LTD Annual Report & Accounts 2021
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
1 September 2021
PAGE 46
174753 Daejan Holdings R&A 2021 Pt2_174753 Daejan Holdings R&A 2021 Pt2 02/09/2021 11:51 Page 47
DAEJAN HOLDINGS LTD Annual Report & Accounts 2021
INDEPENDENT AUDITOR’S REPORT
To the members of Daejan Holdings Ltd
Opinion
We have audited the financial statements of Daejan Holdings Ltd (“the company”) for the year ended 31 March 2021 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 2021 and of the group’s profit for the year then ended;
the group financial statements have been properly prepared in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006;
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.
Going concern
The directors have prepared the financial statements on the going concern basis as they do not intend to liquidate the group
or the company or to cease their operations, and as they have concluded that the group and the company’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”).
In our evaluation of the directors’ conclusions, we considered the inherent risks to the group’s business model and analysed
how those risks might affect the group and company’s financial resources or ability to continue operations over the going
concern period.
Our conclusions based on this work:
■
■
we consider that the directors’ use of the going concern basis of accounting in the preparation of the financial statements
is appropriate;
we have not identified, and concur with the directors’ assessment that there is not, a material uncertainty related to
events or conditions that, individually or collectively, may cast significant doubt on the group or the company’s ability to
continue as a going concern for the going concern period.
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 above conclusions are not a guarantee that
the group or the company will continue in operation.
Fraud and breaches of laws and regulations – ability to detect
Identifying and responding to risks of material misstatement due to fraud
To identify risks of material misstatement due to fraud (“fraud risks”) we assessed events or conditions that could indicate an
incentive or pressure to commit fraud or provide an opportunity to commit fraud. Our risk assessment procedures included:
■
■
Enquiring of the directors of whether they are aware of fraud and of the company’s high-level policies and procedures
to prevent and detect fraud; and
Reading minutes of the meetings of the board of directors;
PAGE 47
174753 Daejan Holdings R&A 2021 Pt2_174753 Daejan Holdings R&A 2021 Pt2 02/09/2021 11:51 Page 48
DAEJAN HOLDINGS LTD Annual Report & Accounts 2021
INDEPENDENT AUDITOR’S REPORT continued
We communicated identified fraud risks throughout the audit team and remained alert to any indications of fraud throughout
the audit.
As required by auditing standards, we perform procedures to address the risk of management override of controls, in particular
the risk that management may be in a position to make inappropriate accounting entries and the risk of bias in accounting
estimates and judgements such as investment property valuations.
We did not identify any additional fraud risks.
On this audit we do not believe there is a fraud risk related to revenue recognition because the company’s income primarily
arises from operating lease contracts with fixed, or highly predictable, periodic payments.
In determining the audit procedures, we took into account the results of our evaluation and testing of the operating
effectiveness of the company fraud risk management controls.
We also performed procedures including:
■
■
identifying journal entries to test based on a risk criteria and comparing the identified entries to supporting
documentation. These included those containing certain key words, and those posted with unexpected account
combinations,.
evaluating the business purpose of significant unusual transactions.
Identifying and responding to risks of material misstatement due to non-compliance with laws and regulations
We identified areas of laws and regulations that could reasonably be expected to have a material effect on the financial
statements from our general commercial and sector experience and through discussion with the directors (as required by
auditing standards) and discussed with the directors the policies and procedures regarding compliance with laws and
regulations.
We communicated identified laws and regulations throughout our team and remained alert to any indications of non-
compliance throughout the audit.
The potential effect of these laws and regulations on the financial statements varies considerably.
Firstly, the company is subject to laws and regulations that directly affect the financial statements including financial reporting
legislation (including related companies’ legislation), distributable profits and taxation legislation. We assessed the extent of
compliance with these laws and regulations as part of our procedures on the related financial statement items.
Secondly, the company is subject to many other laws and regulations where the consequences of non-compliance could have
a material effect on amounts or disclosures in the financial statements, for instance through the imposition of fines or litigation.
We identified the following areas as those most likely to have such an effect: landlord and tenant legislation, property laws and
building legislation, recognising the nature of the company’s activities.
Auditing standards limit the required audit procedures to identify non-compliance with these laws and regulations to enquiry
of the directors and other management and inspection of regulatory and legal correspondence, if any. Therefore, if a breach of
operational regulations is not disclosed to us or evident from relevant correspondence, an audit will not detect that breach.
Context of the ability of the audit to detect fraud or breaches of law or regulation
Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material
misstatements in the financial statements, even though we have properly planned and performed our audit in accordance with
auditing standards. For example, the further removed non-compliance with laws and regulations is from the events and
transactions reflected in the financial statements, the less likely the inherently limited procedures required by auditing
standards would identify it.
In addition, as with any audit, there remained a higher risk of non-detection of fraud, as these may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of internal controls. Our audit procedures are designed to detect
material misstatement. We are not responsible for preventing non-compliance or fraud and cannot be expected to detect non-
compliance with all laws or regulation.
PAGE 48
174753 Daejan Holdings R&A 2021 Pt2_174753 Daejan Holdings R&A 2021 Pt2 02/09/2021 11:51 Page 49
DAEJAN HOLDINGS LTD Annual Report & Accounts 2021
Other information
The directors are responsible for the other information, which comprises the strategic report, the directors’ report, the
corporate governance report and the directors’ remuneration report. 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;
in our opinion the information given in the strategic report and the directors’ report 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.
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 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.
Directors’ responsibilities
As explained more fully in their statement set out on page 45, the directors are responsible for: the preparation of the financial
statements and for 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.
A fuller description of our responsibilities is provided on the FRC’s website at www.frc.org.uk/auditorsresponsibilities.
The purpose of our audit work and to whom we owe our responsibilities
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
1 September 2021
PAGE 49
174753 Daejan Holdings R&A 2021 Pt3_174753 Daejan Holdings R&A 2021 Pt3 02/09/2021 11:54 Page 50
DAEJAN HOLDINGS LTD Annual Report & Accounts 2021
CONSOLIDATED INCOME STATEMENT
for the year ended 31 March 2021
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 gains/(losses) on investment property
Administrative expenses:
Recurring
Non-recurring arising from scheme of arrangement
Total Administrative expenses
Net operating profit/(loss) before net financing costs
Fair value gains/(losses) on derivative financial instruments
Fair value losses on current investments
Other finance income
Finance expenses
Net financing costs
Profit before taxation
Income tax charge
Year ended
31 March
2021
£000
Year ended
31 March
2020
£000
148,703
13,754
151,641
14,502
2
3
9
4
5
5
162,457
(91,659)
166,143
(91,094)
70,798
3,248
33,817
75,049
15,775
(90,494)
(14,984)
(3,259)
(14,254)
–
(18,243)
(14,254)
89,620
(13,924)
1,434
–
4,971
(1,335)
(21)
1,929
(24,051)
(19,800)
(17,646)
(19,227)
71,974
6
(17,518)
(33,151)
(13,441)
Profit/(loss) for the year
54,456
(46,592)
Attributable to:
Equity holders of the parent
Non-controlling interest
Profit/(loss) for the year
54,598
(142)
(47,626)
1,034
54,456
(46,592)
Basic and diluted earnings/(loss) per share
7
£3.35
£(2.92)
The accompanying notes form an integral part of the financial statements.
PAGE 50
174753 Daejan Holdings R&A 2021 Pt3_174753 Daejan Holdings R&A 2021 Pt3 02/09/2021 11:54 Page 51
DAEJAN HOLDINGS LTD Annual Report & Accounts 2021
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 March 2021
Profit/(loss) for the year
Foreign exchange translation differences
Year ended
31 March
2021
£000
Year ended
31 March
2020
£000
54,456
(31,732)
(46,592)
20,568
Total comprehensive income/(loss) for the year
22,724
(26,024)
Attributable to:
Equity holders of the parent
Non-controlling interest
22,975
(251)
(27,118)
1,094
Total comprehensive income/(loss) for the year
22,724
(26,024)
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 2021
Balance at 1 April 2019
(Loss)/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
–
–
–
–
Profit/(loss) for the period
Foreign exchange translation
differences
Distributions to minority
interest
Dividends to equity shareholders
–
–
–
–
–
–
–
–
Share
Equity
Non-
premium Translation
Retained
shareholders’ controlling
account
reserve
earnings
£000
£000
funds
£000
interest
£000
Total
equity
£000
55,727
1,879,998
1,940,354
167
1,940,521
–
(47,626)
(47,626)
1,034
(46,592)
20,508
60
20,568
(17,273)
(17,273)
(56)
–
(56)
(17,273)
20,508
–
–
(31,623)
–
–
–
–
–
–
–
–
(31,623)
(109)
(31,732)
(17,762)
(17,762)
(28)
–
(28)
(17,762)
Balance at 1 April 2020
4,074
555
76,235
1,815,099
1,895,963
1,205
1,897,168
–
54.598
54,598
(142)
54,456
Balance at 31 March 2021
4,074
555
44,612 1,851,935
1,901,176
926 1,902,102
The accompanying notes form an integral part of the financial statements.
PAGE 51
174753 Daejan Holdings R&A 2021 Pt3_174753 Daejan Holdings R&A 2021 Pt3 02/09/2021 11:54 Page 52
DAEJAN HOLDINGS LTD Annual Report & Accounts 2021
CONSOLIDATED BALANCE SHEET
as at 31 March 2021
Assets
Investment property
Deferred tax assets
Loan to a related party
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
Taxation
Total current liabilities
Total liabilities
Total equity and liabilities
Notes
31 March
2021
£000
31 March
2020
£000
9
10
11
11
12
13
14
16
10
16
15
2,564,445
234
222,693
2,524,260
506
–
2,787,372
2,524,766
83,143
131
132,120
8,450
76,976
130
146,275
8,450
223,844
231,831
3,011,216
2,756,597
4,074
555
44,612
1,851,935
4,074
555
76,235
1,815,099
1,901,176
926
1,895,963
1,205
1,902,102
1,897,168
725,793
300,717
8,267
469,188
297,642
8,328
1,034,777
775,158
5,384
67,326
1,627
21,739
61,332
1,200
74,337
84,271
1,109,114
859,429
3,011,216
2,756,597
The financial statements on pages 50 to 82 were approved by the Board of Directors on 1 September
2021 and were signed on its behalf by:
B S E Freshwater
Director
The accompanying notes form an integral part of the financial statements.
PAGE 52
174753 Daejan Holdings R&A 2021 Pt3_174753 Daejan Holdings R&A 2021 Pt3 02/09/2021 11:54 Page 53
DAEJAN HOLDINGS LTD Annual Report & Accounts 2021
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 March 2021
Cash flows from operating activities
Cash generated from operations (Note 21)
Interest received
Interest paid
Tax paid
Net cash generated from/(used in)
operating activities
Cash flows from investing activities
Acquisition and development of
Year ended
31 March
2020
£000
Year ended
31 March
2021
£000
£000
59,195
1,941
(26,646)
(5,304)
£000
58,435
1,929
(26,024)
(58,563)
29,186
(24,223)
investment property
(79,038)
(47,636)
Proceeds from sale of investment
property
Net cash (absorbed by)/generated from
investing activities
3,102
91,899
(75,936)
44,263
Cash flows from financing activities
Loan to related party
Repayment of loan to related party received
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
(225,000)
2,307
(1,505)
225,000
(40,024)
92,816
(11,876)
(28)
–
–
(2,135)
30,000
(36,150)
52,469
(17,273)
(56)
Net cash generated from financing activities
41,690
26,855
Net (decrease)/increase in cash and
cash equivalents
Cash and cash equivalents brought forward
Effect of exchange rate fluctuations on
cash held
(5,060)
146,275
(9,095)
46,895
95,895
3,485
Cash and cash equivalents (Note 12)
132,120
146,275
The accompanying notes form an integral part of the financial statements.
PAGE 53
174753 Daejan Holdings R&A 2021 Pt4_174753 Daejan Holdings R&A 2021 Pt4 02/09/2021 12:02 Page 54
DAEJAN HOLDINGS LTD Annual Report & Accounts 2021
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 2021
comprise the Company and its subsidiaries (together referred to as “the Group”).
The consolidated financial statements were authorised for issuance on 1 September 2021.
(a)
Statement of compliance
The consolidated Financial Statements have been prepared in accordance with international
accounting standards (“IFRS”) in conformity with the requirements of the Companies Act 2006.
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 83 to 87.
(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 consequences 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.
The plausible worst-case downside scenario included assuming the proportion of UK rent and
service charges collected for the following four quarters is the same as had been collected by
10 August 2021 for rent due in the quarter ended 31 July 2021. This amounts to approximately 15%
not being collected, which itself is around ten percentage points lower than the actual collection of
UK rental income that the Group has achieved to date for the year ended 31 March 2021.
Notwithstanding the reduction in cash collected, administration and operating costs were assumed
to remain 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 59.
PAGE 54
174753 Daejan Holdings R&A 2021 Pt4_174753 Daejan Holdings R&A 2021 Pt4 02/09/2021 12:02 Page 55
DAEJAN HOLDINGS LTD Annual Report & Accounts 2021
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:
(cid:129)
(cid:129)
(cid:129)
Definition of Material – Amendments to IAS 1 and IAS 8
Definition of a Business – Amendments to IFRS 3
Amendments to the Conceptual Framework for Financial Reporting
The adoption of these new accounting standards and interpretations has not had an impact on the
consolidated financial statements.
The following 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:
(cid:129)
(cid:129)
(cid:129)
Annual improvements to IFRS Standards 2018-2020
Classification of liabilities as current or non-current – Amendments to IAS 1
Disclosure of accounting policies – Amendments to IAS 1
(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.
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
Year end
Average
2021
1.37
2020
1.24
2021
1.31
2020
1.27
PAGE 55
174753 Daejan Holdings R&A 2021 Pt4_174753 Daejan Holdings R&A 2021 Pt4 02/09/2021 12:02 Page 56
DAEJAN HOLDINGS LTD Annual Report & Accounts 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
(g) Derivative financial instruments
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 and caps is
the estimated amount that the Group would recover or pay to terminate the swap or cap at the
balance sheet date, taking into account current interest rates and the credit worthiness of the swap
or cap 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.
(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.
PAGE 56
174753 Daejan Holdings R&A 2021 Pt4_174753 Daejan Holdings R&A 2021 Pt4 02/09/2021 12:02 Page 57
DAEJAN HOLDINGS LTD Annual Report & Accounts 2021
(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
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.
PAGE 57
174753 Daejan Holdings R&A 2021 Pt4_174753 Daejan Holdings R&A 2021 Pt4 02/09/2021 12:02 Page 58
DAEJAN HOLDINGS LTD Annual Report & Accounts 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
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, informed credit assessments and
forward looking information.
The Group makes provisions of an amount equal to lifetime expected credit loss (“ECL”), except for
debt securities and bank balances for which credit risk has not increased significantly since initial
recognition which are measured as 12-month ECL. When determining whether the credit risk of a
financial asset has increased significantly since initial recognition and when estimating ECL, the
Company considers reasonable and supportable information that is relevant and available without
undue cost or effort. Lifetime ECLs are the ECLs that result from all possible default events over the
expected life of a financial instrument. Credit losses are measured as the present value of all cash
shortfalls and are discounted at the effective interest rate of the financial asset.
(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 58
174753 Daejan Holdings R&A 2021 Pt4_174753 Daejan Holdings R&A 2021 Pt4 02/09/2021 12:02 Page 59
DAEJAN HOLDINGS LTD Annual Report & Accounts 2021
(u)
Significant judgements, key assumptions and estimates
The Group’s significant accounting policies are set out in 1(a) to 1(t) on pages 54 to 58. 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 59
174753 Daejan Holdings R&A 2021 Pt4_174753 Daejan Holdings R&A 2021 Pt4 02/09/2021 12:02 Page 60
DAEJAN HOLDINGS LTD Annual Report & Accounts 2021
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 2021
Rental and related income
Property operating expenses
Profit/(loss) on disposal of property
Net valuation movements on property
Administrative expenses
Recurring
Non-recurring arising from scheme of
arrangement
Total administrative expenses
Profit before finance costs
Fair value gains
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
USA Eliminations
£000
£000
UK
£000
101,796
(56,853)
4,327
8,210
60,661
(34,806)
(1,079)
25,607
(13,898)
(1,086)
(3,259)
(17,157)
40,323
1,434
4,409
(9,893)
36,273
(6,477)
29,796
6,786
–
(1,086)
49,297
–
746
(14,342)
35,701
(11,041)
24,660
71,322
Total
£000
162,457
(91,659)
3,248
33,817
(14,984)
(3,259)
(18,243)
89,620
1,434
4,971
(24,051)
71,974
(17,518)
54,456
78,108
–
–
–
–
–
–
–
–
–
(184)
184
–
–
–
–
1,841,368
346,878
2,188,246
(630,798)
723,077
111,443
834,520
(489,866)
–
(11,550)
(11,550)
11,550
2,564,445
446,771
3,011,216
(1,109,114)
Capital employed
1,557,448
344,654
–
1,902,102
PAGE 60
174753 Daejan Holdings R&A 2021 Pt4_174753 Daejan Holdings R&A 2021 Pt4 02/09/2021 12:02 Page 61
DAEJAN HOLDINGS LTD Annual Report & Accounts 2021
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
Investment property
Other assets
Total segment assets
Total segment liabilities
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
£000
63,130
(35,223)
(478)
(93,499)
(1,623)
(67,693)
–
1,419
(13,694)
(79,968)
13,613
(66,355)
6,303
–
–
–
–
–
–
–
(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
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
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
2021
£000
39,570
6,503
23,972
21,614
2020
£000
41,552
5,909
25,057
18,576
91,659
91,094
Of the property operating expenses shown above, an amount of £940,000 (2020 – £1,256,000)
related to properties which generated no income during the year.
4.
Administrative Expenses
Staff costs
Directors’ remuneration
Audit and accountancy
Legal and other administrative expenses
2021
£000
7,900
2,931
985
3,168
2020
£000
7,516
2,735
950
3,053
Total administrative expenses from recurring activities
Non-recurring administrative expenses arising from scheme of arrangement
14,984
3,259
14,254
–
18,243
14,254
PAGE 61
174753 Daejan Holdings R&A 2021 Pt4_174753 Daejan Holdings R&A 2021 Pt4 02/09/2021 12:02 Page 62
DAEJAN HOLDINGS LTD Annual Report & Accounts 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
Non-recurring administrative expenses:
During the year the company incurred expenses of £3,259,000 (2020 – £Nil) relating to the scheme
of arrangement, the majority of these expenses were professional fees for advice received. More
details of the scheme of arrangement are provided on page 34.
Auditor’s remuneration:
For the year, the fees payable to KPMG LLP were £50,000 (2020 – £31,000) for the audit of the
Company and £800,000 (2020 – £499,000) for the audit of the Group’s subsidiaries, together with
£Nil (2020 – £Nil) for audit related assurance services and £Nil (2020 – £Nil) for other services. The
increase in the cost of the audit for the Group’s subsidiary companies is mainly due to certain
subsidiaries of the Company that were audited by a component auditor in previous years now being
audited by KPMG LLP.
In the UK, the average number of staff provided by the property and administrative management
companies who performed roles for the Group totalled 183 (2020 – 203). The average number of full
time equivalents whose staff costs were borne by the Group during the year was 129 (2020 – 146).
The aggregate staff cost of these persons is shown above and can be analysed as follows:
Salaries
NI contributions
Pensions
2021
£000
6,011
645
1,244
2020
£000
6,066
650
800
7,900
7,516
In addition the property and administrative management companies provide, under agency
arrangements, staff to perform various caretaking roles. Those costs totalling £976,000
(2020 – £1,063,000) are included within property operating expenses (Note 3) under porterage,
cleaning and repairs.
Details of Directors’ remuneration are set out in the Directors’ Remuneration Report.
5.
Finance Income and Expenses
Finance income:
Bank interest receivable
Other finance income
Finance expenses:
Interest payable on bank loans
Interest payable on mortgages
Interest on overdue tax
Interest on lease obligation payable
Other interest payable
2021
£000
2020
£000
56
4,915
59
1,870
4,971
1,929
7,484
15,572
–
502
493
3,744
15,483
563
–
10
24,051
19,800
PAGE 62
174753 Daejan Holdings R&A 2021 Pt4_174753 Daejan Holdings R&A 2021 Pt4 02/09/2021 12:02 Page 63
DAEJAN HOLDINGS LTD Annual Report & Accounts 2021
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 – (reduction)/increase 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% (2020 – 19%)
(Reduction)/increase in future tax rate
Prior year items
Impact of different tax rates
Indexation and non-taxable items
Non-allowable expenses
Other
Total tax charge
2021
£000
2020
£000
2,923
(1,029)
14,821
(243)
1,894
14,578
1,303
1,316
3,197
15,894
14,774
(453)
(30,095)
27,642
14,321
(2,453)
17,518
13,441
71,974
(33,151)
13,675
(493)
(229)
3,578
(793)
1,579
201
(6,299)
27,642
(243)
(6,926)
(1,716)
681
302
17,518
13,441
Current and deferred tax in the UK have been calculated at 19%, the enacted UK corporation tax rate
at 31 March 2021 and 2020. The announced increase to 25% was not enacted into UK law until the
summer of 2021 but will affect future charges. In the USA changes to certain USA state taxes meant
that the rate of tax our USA results are subject to decreased slightly to 27.6% (2020 – 27.7%) leading
to a small overall reduction in our tax charge of £493,000.
The Group’s effective tax rate for the current year was 24% (2020 – 41%) a rate consistent with the
UK and USA statutory rates. In the prior year as shown above, the recalculation of the deferred tax
liabilities due to tax rate changes increased the tax charge by £27,642,000. Removing this amount
and prior year tax credits of £243,000 our prior year effective tax rate in the UK was 15% and in the
USA was 26%, consistent with the statutory rates in each country.
7.
Earnings per Share
Earnings per share is calculated on the profit, after taxation and non-controlling interests, of
£54,598,000 (2020 loss of – £47,626,000) and the weighted average shares in issue during the year
of 16,295,357 (2020 – 16,295,357).
PAGE 63
174753 Daejan Holdings R&A 2021 Pt4_174753 Daejan Holdings R&A 2021 Pt4 02/09/2021 12:02 Page 64
DAEJAN HOLDINGS LTD Annual Report & Accounts 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
8.
Dividends
Amounts recognised as distributions to equity holders in the year:
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
First interim dividend for the year ended 31 March 2021,
approved 22 December 2020 @ 74p per share
Second interim dividend for the year ended 31 March 2021,
approved 19 March 2021 @ 35p per share
9.
Investment Property
Long
Short
Freehold leasehold leasehold
£000
£000
£000
2021
£000
2020
£000
–
–
11,570
5,703
12,059
5,703
–
–
17,762
17,273
Total
2021
£000
Total
2020
£000
Balance at 1 April
Gross up of head lease liability
2,081,315
–
416,239
–
26,706 2,524,260 2,532,518
8,401
–
–
Adjusted opening balance
Disposals
New acquisitions
Additions to existing properties
Revaluation (recognised in
profit)
Transfer to properties held for sale
Foreign exchange movements
(recognised in other
comprehensive income)
2,081,315
(269)
68,061
8,139
416,239
(980)
–
1,908
26,706 2,524,260 2,540,919
(4,677)
(1,249)
29,818
68,061
18,071
10,047
–
–
–
(2,900)
–
35,465
–
1,252
–
33,817
–
(90,494)
(8,450)
(61,289)
(9,202)
–
(70,491)
39,073
Balance at 31 March
2,093,057
443,430
27,958 2,564,445 2,524,260
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 2021.The aggregate amount of £1,848.3 million (2020 – £1,843.8 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
independently professionally valued at 31 March 2021 by Metropolitan Valuation Services, Inc., USA
Certified General Real Estate Appraisers. The aggregate amount of £726.0 million (2020 –
£701.6 million) is based on open market values, assessed in accordance with the Standards of
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 £18.2 million (2020 – £21.2 million), relating to lease incentives included in Trade and other
receivables and increased by an amount of £8.3 million (2020 – £8.4 million) relating to lease
obligations.
PAGE 64
174753 Daejan Holdings R&A 2021 Pt4_174753 Daejan Holdings R&A 2021 Pt4 02/09/2021 12:02 Page 65
DAEJAN HOLDINGS LTD Annual Report & Accounts 2021
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.
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 the 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 2021 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
£9.1 million (2020 – £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.
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.
PAGE 65
174753 Daejan Holdings R&A 2021 Pt4_174753 Daejan Holdings R&A 2021 Pt4 02/09/2021 12:02 Page 66
DAEJAN HOLDINGS LTD Annual Report & Accounts 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
2021
Fair Value
Rental value £ per sq ft
Equivalent Yield %
£000
Low Average
High
Low Average
High
UK Commercial
Office Units
Greater London
UK – South
UK – North
Retail Units
Greater London
UK – South
UK – North
Industrial Units
All UK
293,536
35,386
8,454
231,773
111,756
18,851
7.8
2.0
3.4
6.4
0.2
2.6
56.9
13.7
11.0
25,3
14.1
9.5
76.7
47.2
17.0
66.0
37.2
26.0
5.0% 12.9%
3.8%
2.6%
7.7% 19.9%
7.3% 11.1% 14.0%
6.8% 35.6%
1.0%
2.2%
8.4% 20.7%
7.5% 11.6% 15.7%
54,735
2.0
10.0
33.1
4.3%
7.5% 27.3%
Leisure and Service Units
All UK
239,082
4.4
19.2
46.2
5.3%
6.7% 14.9%
Land and Development
All UK
1,401
–
–
–
–
–
–
Total UK Commercial
994,974
UK Residential
Greater London
UK – South
UK – North
Total UK Residential
Total UK
USA Commercial
Massachusetts, Philadelphia
768,903
88,538
3,979
861,420
1,856,394
Sales value £ per sq ft
1,499
794
311
541
331
133
246
187
112
Rental value £ per sq ft
Capitalisation rate %
and New Jersey
96,793
9.4
27.8
32.1
5.0%
5.3%
7.5%
Total USA Commercial
96,793
USA Residential Apartments
New York City
Florida
Other States
154,300
272,213
116,254
Rental value £ per sq ft
25.0
10.7
8.3
11.8
10.1
7.8
13.5
11.4
10.6
Capitalisation rate %
5.5%
6.3%
5.5%
5.2%
5.6%
5.3%
4.0%
4.3%
4.8%
New York City – unsold
co-operative
Total USA Residential
Total USA
Total Group
Less lease incentives
86,644
3.1
13.1
78.7
8.0%
Discount rate %
9.5% 12.0%
629,411
726,204
2,582,598
(18,153)
2,564,445
PAGE 66
174753 Daejan Holdings R&A 2021 Pt4_174753 Daejan Holdings R&A 2021 Pt4 02/09/2021 12:02 Page 67
DAEJAN HOLDINGS LTD Annual Report & Accounts 2021
2020
Fair Value
Rental value £ per sq ft
Equivalent Yield %
£000
Low Average
High
Low Average
High
UK Commercial
Office Units
Greater London
UK – South
UK – North
Retail Units
Greater London
UK – South
UK – North
Industrial Units
All UK
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
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 67
174753 Daejan Holdings R&A 2021 Pt4_174753 Daejan Holdings R&A 2021 Pt4 02/09/2021 12:02 Page 68
DAEJAN HOLDINGS LTD Annual Report & Accounts 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
The present value of future minimum lease payments in relation to leasehold investment properties
is £8.3 million at 31 March 2021 (2020 – £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, a right of use asset has been recognised in the property valuation.
Reconciliation between the total of future minimum lease payments and their present
capital values
2021
Present
Minimum
Interest
lease
on lease
value Minimum
lease
of lease
2020
Interest
Present
value
on lease
of lease
payments
payments liabilities
£000
£000
£000
payments payments
£000
£000
liabilities
£000
Due within one year
537
Due within two to five years
2,147
Due after more than five years 42,646
(498)
(1,969)
(34,557)
39
178
8,089
539
2,157
43,205
(501)
(1,983)
(35,051)
38
174
8,154
45,330
(37,024)
8,306
45,901 (37,535)
8,366
Capital commitments, arising from contractual obligations not yet invoiced or paid, for the purchase,
construction, development or enhancement of investment properties, amounted to £9.8 million at
31 March 2021 (2020 – £7.9 million).
10. Deferred Tax Assets and Liabilities
2021
2020
Assets
Liabilities
£000
£000
Net
£000
Assets Liabilities
£000
£000
Net
£000
Investment property
Accelerated tax depreciation
Financial instruments
–
–
234
(267,638) (267,638)
(33,079) (33,079)
234
–
– (265,918) (265,918)
(31,724)
–
506
506
(31,724)
–
234
(300,717) (300,483)
506 (297,642) (297,136)
The movement in deferred tax is as follows:
Accelerated
tax Financial
Investment
depreci-
instru-
property
£000
ation
£000
ments
£000
Total
2021
£000
Total
2020
£000
Balance at 1 April
Recognised in income
Foreign exchange movements
(265,918) (31,724)
(3,821)
2,466
(10,228)
8,508
506 (297,136)
(272) (14,321)
10,974
–
(293,205)
2,453
(6,384)
Balance at 31 March
(267,638) (33,079)
234 (300,483)
(297,136)
PAGE 68
174753 Daejan Holdings R&A 2021 Pt4_174753 Daejan Holdings R&A 2021 Pt4 02/09/2021 12:02 Page 69
DAEJAN HOLDINGS LTD Annual Report & Accounts 2021
11.
Trade and Other Receivables
Non-current assets
Loan to a rental party
Further detail is provided in Note 18.
Current assets
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
2021
£000
2020
£000
222,693
–
2021
£000
2020
£000
40,149
2,961
34,407
622
5,004
42,592
3,915
27,836
468
2,165
83,143
76,976
2021
£000
26,171
7,877
2,221
4,355
14,663
2020
£000
31,679
9,059
2,362
3,720
7,531
55,287
(12,177)
54,351
(7,844)
43,110
46,507
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 back/(loss)
Movement in allowance for impairment
Balance at 31 March
2021
£000
7,844
621
3,712
2020
£000
7,672
(1,319)
1,491
12,177
7,844
PAGE 69
174753 Daejan Holdings R&A 2021 Pt4_174753 Daejan Holdings R&A 2021 Pt4 02/09/2021 12:02 Page 70
DAEJAN HOLDINGS LTD Annual Report & Accounts 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
12.
Cash and Cash Equivalents
Bank balances
Short term deposits
2021
£000
2020
£000
131,901
219
146,056
219
Cash and cash equivalents in the balance sheet and cash flow statement
132,120
146,275
Included within bank balances are tenants’ deposits of £4,184,000 (2020 – £4,489,000) in the UK and
£2,754,000 (2020 – £3,109,000) in the USA, which cannot be used in the ordinary course of business.
13.
Properties held for sale
Properties held for sale are recorded at their fair value of £8.45 million (2020 – £8.45 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. Subsequent to the year end, the Group completed the sale of the properties
concerned and has received the consideration.
14.
Share Capital
Allotted, called up and fully paid:
Ordinary shares of 25 pence per share
Number
2021
£000
2020
£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
Lease obligations payable
2021
£000
25,394
40,664
1,229
39
2020
£000
26,080
32,551
2,663
38
67,326
61,332
PAGE 70
174753 Daejan Holdings R&A 2021 Pt4_174753 Daejan Holdings R&A 2021 Pt4 02/09/2021 12:02 Page 71
DAEJAN HOLDINGS LTD Annual Report & Accounts 2021
16.
Loans and Borrowings
Non-current liabilities
Mortgages
Bank loans
Current liabilities
Mortgages
Bank loans
Total loans and borrowings
Mortgages
Bank loans
2021
£000
2020
£000
385,196
340,597
349,635
119,553
725,793
469,188
4,786
598
20,312
1,427
5,384
21,739
389,982
341,195
369,947
120,980
731,177
490,927
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
2021
Bank loans
£000
Mortgages
£000
598
598
339,999
–
4,786
5,516
50,791
328,889
Total
£000
5,384
6,114
390,790
328,889
2020
Total
£000
21,739
13,066
137,268
318,854
341,195
389,982
731,177
490,927
The risk profile of the Group’s loans and borrowings, after taking account of interest rate swaps, was
as follows:
2021
Fixed Floating
£000
£000
Total
£000
Fixed
£000
2020
Floating
£000
Total
£000
Sterling
US Dollar
59,154 311,195 370,349
– 360,828
360,828
60,245
339,702
90,980
–
151,225
339,702
419,982 311,195 731,177
399,947
90,980
490,927
PAGE 71
174753 Daejan Holdings R&A 2021 Pt4_174753 Daejan Holdings R&A 2021 Pt4 02/09/2021 12:02 Page 72
DAEJAN HOLDINGS LTD Annual Report & Accounts 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
Floating rate bank loans bear rates based on LIBOR. The Group’s interest rate swaps are set out in
Note 17 on page 75. The interest rate profile of the Group’s fixed rate mortgages was as follows:
Per cent.
2.5-3.0
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
2021
£000
2020
£000
43,776
92,093
139,667
42,659
42,632
13,132
6,925
9,098
–
129,924
111,859
50,794
47,125
13,403
7,042
9,800
389,982
369,947
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
2021
%
3.65
3.70
2020
%
3.69
3.83
2021
Years
9.1
8.3
2020
Years
10.1
8.4
17.
Financial Assets and Liabilities
The Group’s financial instruments are analysed into categories as follows:
2021
2020
Carrying
amount
£000
131
131
(1,229)
(1,229)
305,836
132,120
437,956
(66,058)
(8,306)
(341,195)
(389,982)
Financing
income/
(expense)
£000
–
–
1,434
1,434
4,915
56
4,971
(493)
(502)
(7,484)
(15,572)
Carrying
amount
£000
130
130
(2,663)
(2,663)
76,976
146,275
223,251
(58,669)
(8,328)
(120,980)
(369,947)
Financing
income/
(expense)
£000
(21)
(21)
(1,335)
(1,335)
1,870
59
1,929
(10)
(21)
(3,744)
(15,462)
Current asset investments
Current assets at fair value through
profit or loss
Derivative financial instruments
Current liabilities at fair value
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
amortised cost
(805,541)
(24,051)
(557,924)
(19,237)
Total financial instruments
(368,683)
(17,646)
(337,206)
(18,664)
PAGE 72
174753 Daejan Holdings R&A 2021 Pt4_174753 Daejan Holdings R&A 2021 Pt4 02/09/2021 12:02 Page 73
DAEJAN HOLDINGS LTD Annual Report & Accounts 2021
The finance income of £1,434,000 (2020 – finance expense £1,335,000) relating to derivative
financial instruments is stated net of £70,000 expense (2020 – £66,000 income) 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 £429,286,000 (2020 – £425,101,000). 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 and caps 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, caps 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.
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 and from a loan made during the year to a connected company.
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, although the Group did agree to some temporary variations to this for a small
number of commercial tenants during the height of the Covid-19 pandemic. 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.
PAGE 73
174753 Daejan Holdings R&A 2021 Pt4_174753 Daejan Holdings R&A 2021 Pt4 02/09/2021 12:02 Page 74
DAEJAN HOLDINGS LTD Annual Report & Accounts 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
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.
Other receivables
Included in other debtors and prepayments in Note 11 is a material loan made to a connected
company which is wholly controlled by the Freshwater family. The risk of default is considered
remote.
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.
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 2021, gearing was
24.3% (2020 – 17.8%) (see note 23). Cash and short-term deposits at 31 March 2021 were
£132.1 million (2020 – £146.3 million) and £5.4 million of loans and borrowings were repayable
within one year (2020 – £21.7 million). In addition, at the same date, the Group had undrawn
committed facilities of £55.0 million (2020 – £55.0 million), which expire in 2024.
The maturity analysis of the undiscounted cash flows arising from the Group’s financial liabilities at
31 March 2021 was as follows:
Bank loans
Mortgages
Interest
Interest rate swaps
Lease obligations payable
Trade and other payables
Carrying
amount
£000
341,195
389,982
–
1,815
8,306
66,058
2021
Aggregate
undiscounted
Due
within
Due
within
cash flows one year 1-2 years 2-5 years
£000
£000
598 339,999
£000
341,195
389,982
142,825
3,387
45,330
66,058
£000
598
4,786
22,148
466
537
66,058
5,516
21,598
466
537
–
Due Due after
within more than
5 years
£000
–
50,791 328,889
46,162
52,917
1,093
1,362
42,646
1,610
–
–
807,356
988,777
94,593
28,715 446,679 418,790
PAGE 74
174753 Daejan Holdings R&A 2021 Pt4_174753 Daejan Holdings R&A 2021 Pt4 02/09/2021 12:02 Page 75
DAEJAN HOLDINGS LTD Annual Report & Accounts 2021
Aggregate
undiscounted
cash flows
£000
120,980
369,947
125,756
2,254
45,901
58,669
2020
Due
within
one year
£000
1,427
20,312
17,687
268
539
58,669
Due
within
1-2 years
£000
1,629
11,437
16,827
268
539
–
Due Due after
within more than
5 years
£000
–
318,854
48,155
915
43,205
–
2-5 years
£000
117,924
19,344
43,087
803
1,618
–
723,507
98,902
30,700
182,776
411,129
Carrying
amount
£000
120,980
369,947
–
2,663
8,328
58,669
560,587
Bank loans
Mortgages
Interest
Interest rate swaps
Lease obligations payable
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. On the new £225 million borrowing, the Group capped its exposure
to interest rate movements by entering into £225 million of 0.5% interest caps. The Group does not
speculate in treasury products but uses these 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 £3.1 million per annum, on the basis of the floating
rate debt outstanding at 31 March 2021, after taking account of the interest swaps and caps 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
2021 of £2.2 million, together with a corresponding increase in the Group’s profit before taxation.
Derivative financial instruments
The derivative financial instruments held by the Group at the year end were as follows:
Class
Maturing within 2 – 5 years Cap
Maturing after 5 years
Swap
2021
%
0.5
1.6
Contracted rate
Notional principal
2021
2020
2020
£000
%
£000
–
– 225,000
30,000
30,000
1.6
Fair value
2021
£000
(586)
1,815
2020
£000
–
2,663
255,000
30,000
1,229
2,663
Foreign exchange rates
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.
PAGE 75
174753 Daejan Holdings R&A 2021 Pt4_174753 Daejan Holdings R&A 2021 Pt4 02/09/2021 12:02 Page 76
DAEJAN HOLDINGS LTD Annual Report & Accounts 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
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 £47.4 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.
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 (“Highdorn”) and by Freshwater Property Management Limited (“FPM”).
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. Mr B S E Freshwater, Mr S I Freshwater and Mr D Davis are
Directors of the parent company of FPM 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.
In their capacity as property managing agents, Highdorn and FPM collect rents and incur direct
property expenses on behalf of the Group. At 31 March 2021, the aggregate net amounts due to the
Group from Highdorn and FPM was £5.4 million (2020 – £4.0 million due to the Group from
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 and FPM, 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
2021
£000
2020
£000
2,510
4,424
(4,805)
2,285
4,537
(4,312)
2,129
2,510
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
£1,113,786 (2020 – £1,083,131). The Directors’ interests in the Company and the principal
shareholders are described on pages 35 and 36. The Board considers that the Directors are the key
management personnel of the Group and their remuneration is disclosed on page 42.
In June 2020 the Group lent £225,000,000 to Dock Newco Limited at a commercial arms’ length
interest rate of LIBOR plus 1.85%. The loan is due for repayment on 21 February 2025.
Mr B S E Freshwater and Mr S I Freshwater are directors of Dock Newco Limited but have no
beneficial interest in the share capital of the company or of its ultimate holding company.
Mr C B Freshwater and Mr R E Freshwater are included within a wide class of potential beneficiaries
PAGE 76
174753 Daejan Holdings R&A 2021 Pt4_174753 Daejan Holdings R&A 2021 Pt4 02/09/2021 12:02 Page 77
DAEJAN HOLDINGS LTD Annual Report & Accounts 2021
of trusts that hold shares in the ultimate parent of Dock Newco Limited. Dock Newco Limited owns
20.5% of the share capital of Daejan Holdings Limited. During the year the Group charged Dock
Newco Limited £4,473,000 in interest and associated fees (included in other finance income, note 5)
and as at the end of the year Dock Newco Limited owed the Group £222,693,000 (included in other
debtors, note 11).
Certain of the first and second declared interim dividends remain outstanding at year end amounting
to £5,886,000 (included in other creditors, note 15) and are due to a number of shareholding
companies that are related parties as Mr B S E Freshwater and Mr S I Freshwater are directors of these
companies. The ultimate controlling shareholders of these companies are trusts that
Mr A M Freshwater, Mr C B Freshwater and Mr R E Freshwater have beneficial interests in.
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 (2020 – £Nil).
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
2021
£000
2020
£000
89,411
60,223
133,406
359,763
66,682
57,186
145,741
377,516
642,803
647,125
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.
PAGE 77
174753 Daejan Holdings R&A 2021 Pt4_174753 Daejan Holdings R&A 2021 Pt4 02/09/2021 12:02 Page 78
DAEJAN HOLDINGS LTD Annual Report & Accounts 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
21. Notes to the Consolidated Statement of Cash Flows
Cash generated from operations
Net operating profit/(loss) before net financing costs
Adjusted for:
Net valuation (gain)/loss on investment property (Note 9)
Net gain on sale of investment property
2021
£000
2020
£000
89,620
(13,924)
(33,817)
(3,248)
90,494
(15,775)
Cash flows from operations before changes in working capital
52,555
60,795
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)
3,476
3,164
(8,907)
6,547
6,640
(2,360)
59,195
58,435
2021
£000
2020
£000
490,927
(1,505)
221,720
(40,024)
92,816
(32,757)
430,754
(2,135)
30,000
(36,150)
52,469
15,989
731,177
490,927
PAGE 78
174753 Daejan Holdings R&A 2021 Pt4_174753 Daejan Holdings R&A 2021 Pt4 02/09/2021 12:02 Page 79
DAEJAN HOLDINGS LTD Annual Report & Accounts 2021
22.
Subsidiary Undertakings
At 31 March 2021, 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 79
174753 Daejan Holdings R&A 2021 Pt4_174753 Daejan Holdings R&A 2021 Pt4 02/09/2021 12:02 Page 80
DAEJAN HOLDINGS LTD Annual Report & Accounts 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
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 80
174753 Daejan Holdings R&A 2021 Pt4_174753 Daejan Holdings R&A 2021 Pt4 02/09/2021 12:02 Page 81
DAEJAN HOLDINGS LTD Annual Report & Accounts 2021
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
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***
Newport Colony Apartment Homes LLC(ii)
Sevens G.C. Realty Corp.
Tampa Sunscape Inc.
Waterford Park Apartment Homes LLC(ii)
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.
* 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.
Profit/(loss) before tax per the income statement
(Deduct)/add back property valuation losses/(gains)
(Deduct)/add back financial instruments fair value (gains)/losses
Add back realised valuation gains on property disposals
Underlying profit before tax
2021
£000
2020
£000
71,974
(33,817)
(1,434)
1,118
(33,151)
90,494
1,356
59,901
37,841
118,600
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
1,901,176 1,895,963
16,295,357 16,295,357
Shareholders funds per share (£)
116.67
116.35
2021
2020
PAGE 81
174753 Daejan Holdings R&A 2021 Pt4_174753 Daejan Holdings R&A 2021 Pt4 02/09/2021 12:02 Page 82
DAEJAN HOLDINGS LTD Annual Report & Accounts 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
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.
2021
UK
£000
2021
USA
£000
2021
Total
£000
2020
UK
£000
2020
USA
£000
2020
Total
£000
Loans and borrowing
(Note 16)
Total assets
Gearing
370,349
2,188,246
151,225
360,828
731,177
822,970 3,011,216 1,947,833
339,702
490,927
808,764 2,756,597
16.9%
43.8%
24.3%
7.8%
42.0%
17.8%
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.
2021
UK
£000
2021
USA
£000
2021
Total
£000
2020
UK
£000
2020
USA
£000
2020
Total
£000
Carrying value at 1 April
(Note 9)
Gross up of head lease liability
Foreign exchange movements
1,826,641
–
–
697,619 2,524,260 1,785,746
8,159
–
–
(70,491)
–
(70,491)
746,772 2,532,518
8,401
39,073
242
39,073
Value at 1 April at year end
exchange rate
Acquisitions
Additions to existing properties
Disposals
Revaluation
Transfer to properties held
1,826,641
581
6,205
(269)
8,210
627,128 2,453,769 1,793,905
68,061
29,818
10,047
11,768
(1,249)
(3,405)
33,817
3,005
67,480
3,842
(980)
25,607
786,087 2,579,992
29,818
18,071
(4,677)
(90,494)
–
6,303
(1,272)
(93,499)
for sale
–
–
–
(8,450)
–
(8,450)
Carrying value at 31 March
(Note 9)
1,841,368
723,077 2,564,445 1,826,641
697,619 2,524,260
Valuation gain percentage
0.4%
4.1%
1.4%
0.2%
(11.9)%
(3.5)%
24. Ultimate controlling party
The Freshwater Family are considered to be the ultimate controlling party by virtue of all shares in
issue, with the exception of the 763 shares beneficially owned by Mr D Davis, being held by or on behalf
of themselves, other members of their families and their charitable interests.
25.
Events after the reporting period
On 30 June 2021, the Group completed the sale of a property included in Properties held for sale with
a carrying value of £8.45 million. There were no other significant events occurring after the reporting
period, but before the financial statements were authorised for issue.
PAGE 82
174753 Daejan Holdings R&A 2021 Pt4_174753 Daejan Holdings R&A 2021 Pt4 02/09/2021 12:02 Page 83
DAEJAN HOLDINGS LTD Annual Report & Accounts 2021
COMPANY BALANCE SHEET
as at 31 March 2021
Fixed assets
Investment in subsidiary
undertakings
Deferred tax assets
Loan to a related party
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
Notes
£000
2021
£000
£000
2020
£000
4
1,198,266
345
222,693
1,421,304
1,243,319
506
–
1,243,825
10,912
40,107
51,019
19,283
29,167
48,450
5
(229,658)
(317,896)
(178,639)
(269,446)
6
7
1,242,665
(62,585)
1,180,080
4,074
555
893
1,174,558
1,180,080
974,379
(62,826)
911,553
4,074
555
893
906,031
911,553
The financial statements of Daejan Holdings Limited (Company number 305105) on pages 83 to 87
were approved by the Board of Directors on 1 September 2021 and were signed on its behalf by:
B S E Freshwater
Director
PAGE 83
174753 Daejan Holdings R&A 2021 Pt4_174753 Daejan Holdings R&A 2021 Pt4 02/09/2021 12:02 Page 84
DAEJAN HOLDINGS LTD Annual Report & Accounts 2021
COMPANY STATEMENT OF CHANGES IN EQUITY
for the year ended 31 March 2021
Balance at 1 April 2019
Loss for the year
Dividends to equity shareholders
Balance at 1 April 2020
Profit for the year
Dividends to equity shareholders
Issued
share
capital
£000
4,074
–
–
4,074
–
–
Balance at 31 March 2021
4,074
Share
premium
account
£000
555
–
–
555
–
–
555
Equity
Other
Retained shareholders’
reserves
£000
earnings
£000
funds
£000
893
931,701
937,223
–
–
893
–
–
(8,397)
(8,397)
(17,273)
(17,273)
906,031
286,289
911,553
286,289
(17,762)
(17,762)
893
1,174,558
1,180,080
PAGE 84
174753 Daejan Holdings R&A 2021 Pt5_174753 Daejan Holdings R&A 2021 Pt5 02/09/2021 11:56 Page 85
DAEJAN HOLDINGS LTD Annual Report & Accounts 2021
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 profit for the year after
taxation was £286,289,000 (2020 – loss of £8,397,000).
(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 85
174753 Daejan Holdings R&A 2021 Pt5_174753 Daejan Holdings R&A 2021 Pt5 02/09/2021 11:56 Page 86
DAEJAN HOLDINGS LTD Annual Report & Accounts 2021
NOTES TO THE COMPANY FINANCIAL STATEMENTS continued
(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 42 of
the Group accounts. The parent company audit fee is disclosed on page 62 of the Group accounts.
3.
Dividends
Amounts recognised as distributions to equity holders in the year:
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
First interim dividend for the year ended 31 March 2021,
paid 22 December 2020 @ 74p per share
Second interim dividend for the year ended 31 March 2021,
paid 19 March 2021 @ 35p per share
4.
Investments in Subsidiary Undertakings
2021
£000
2020
£000
–
–
11,570
5,703
12,059
5,703
–
–
17,762
17,273
At 1 April 2020
Additions
Loans
At 31 March 2021
PAGE 86
Shares at
cost
£000
992,205
–
–
Loans
£000
251,114
–
(45,053)
Total
£000
1,243,319
–
(45,053)
992,205
206,061
1,198,266
174753 Daejan Holdings R&A 2021 Pt5_174753 Daejan Holdings R&A 2021 Pt5 02/09/2021 11:56 Page 87
DAEJAN HOLDINGS LTD Annual Report & Accounts 2021
5.
Creditors: Amounts falling due within one year
Bank loans and overdrafts
Amounts owed to subsidiary undertakings
Other creditors and accruals
Derivative financial instruments
2021
£000
162
220,574
7,107
1,815
2020
£000
148
314,238
847
2,663
229,658
317,896
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
2021
£000
2020
£000
62,585
62,826
Number
2021
£000
2020
£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.
PAGE 87
174753 Daejan Holdings R&A 2021 Pt5_174753 Daejan Holdings R&A 2021 Pt5 02/09/2021 11:56 Page 88
DAEJAN HOLDINGS LTD Annual Report & Accounts 2021
GROUP FIVE-YEAR RECORD (UNAUDITED)
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
2017
£000
140,738
(75,938)
2018
£000
142,885
(76,407)
2019
£000
156,161
(79,580)
2020
£000
166,143
(91,094)
2021
£000
162,457
(91,659)
64,800
14,594
66,478
11,893
76,581
12,203
75,049
15,775
70,798
3,248
properties
144,508
146,438
83,928
(90,494)
33,817
Administrative expenses
Recurring
Non-recurring arising from Scheme
of Arrangement
(12,559)
(13,263)
(13,904)
(14,254)
(14,984)
–
–
–
–
(3,259)
Total administrative expenses
(12,559)
(13,263)
(13,904)
(14,254)
(18,243)
Net operating profit/(loss) before net
financing costs
Net financing expense
Profit/(loss) before taxation
Income tax
211,343
(12,947)
211,546
(10,284)
158,808
(20,976)
(13,924)
(19,227)
89,620
(17,646)
198,396
(36,266)
201,262
1,696
137,832
(17,853)
(33,151)
(13,441)
71,974
(17,518)
Profit/(loss) for the year
162,130
202,958
119,979
(46,592)
54,456
£9.93
£7.36
£12.45
£3.35
2,406,831 2,535,005 2,766,503 2,756,597 3,011,216
1,655,955 1,812,993 1,940,521 1,897,168 1,902,102
£119.07
£116.67
£116.35
£111.25
£101.61
£(2.92)
Earnings/(loss) per share
Total assets
Equity shareholders’ funds
Equity shareholders’ funds per share
PAGE 88
174753 Daejan Holdings R&A 2021 Pt5_174753 Daejan Holdings R&A 2021 Pt5 02/09/2021 11:56 Page 89
DAEJAN HOLDINGS LTD Annual Report & Accounts 2021
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,
Secretaries
M D E Bale
J S Southgate
1075 Finchley Road,
London NW11 0PJ
Principal Bankers
Barclays Bank PLC
Registered & Head Office
Lloyds Banking Group PLC
Freshwater House,
NatWest Group PLC
158-162 Shaftesbury Avenue,
London WC2H 8HR
Registered in England
Co. No. 305105
PAGE 89
174753 Daejan Holdings R&A 2021 Pt5_174753 Daejan Holdings R&A 2021 Pt5 02/09/2021 11:56 Page 90
DAEJAN HOLDINGS LTD Annual Report & Accounts 2021
NOTES
PAGE 90
174753 Daejan Holdings R&A 2021 Pt5_174753 Daejan Holdings R&A 2021 Pt5 02/09/2021 11:56 Page 91
DAEJAN HOLDINGS LTD Annual Report & Accounts 2021
NOTES
PAGE 91
174753 Daejan Holdings R&A 2021 Pt5_174753 Daejan Holdings R&A 2021 Pt5 02/09/2021 11:56 Page 92
Opposite page: The St Paul Court, 3120 St Paul Street, Baltimore, Maryland, USA.
sterling 174753
Design, art direction and photography by Roger Watt.
174753 Daejan Holdings R&A 2021 COVER 5mm_174753 Daejan Holdings R&A 2021 COVER 5mm 02/09/2021 11:00 Page 2
174753 Daejan Holdings R&A 2021 COVER 5mm_174753 Daejan Holdings R&A 2021 COVER 5mm 02/09/2021 11:00 Page 1