PAGE 1
CONTENTS
Chairman’s Introduction 2
Financial Highlights 3
Strategic Report 4
Directors’ Report 36
Corporate Governance Report 40
Directors’ Remuneration Report 43
Directors’ Responsibilities Statement 47
Independent Auditor’s Report to the Members of Daejan Holdings Limited 49
Consolidated Income Statement 52
Consolidated Statement of Comprehensive Income 53
Consolidated Statement of Changes in Equity 53
Consolidated Balance Sheet 54
Consolidated Statement of Cash Flows 55
Notes to the Consolidated Financial Statements 56
Company Balance Sheet 87
Company Statement of Changes in Equity 88
Notes to the Company Financial Statements 89
Group Five-Year Record 93
Directors and Advisers 94
PAGE 1
DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
CHAIRMAN’S INTRODUCTION
I am pleased to present the results for the year ended 31st March 2023.
This has been a challenging year with the Group facing the combined headwinds of sluggish
economic growth, record levels of inflation and rapidly rising interest rates. These factors have
resulted in a loss before tax for the year of £41.0 million (2022 – £159.7 million profit). Shareholders’
funds have reduced by 1.4% to £1,928.8 million (2022 – 2.9% increase).
We believe that “underlying profit”, which removes fluctuations in unrealised fair value movements,
presents a better view of the year on year performance of the business. As set out on page 27 and
in note 23 to the accounts on page 85, the underlying profit for the year was £47.2 million compared
to £53.9 million in 2022.
In the UK we saw growth of 2.4% in overall rental income (2022 – 0.1% reduction). This arose
particularly on residential properties where sustained demand has enabled rent increases and
reduced vacancies. The results for commercial properties have been more mixed.
In the USA we have achieved overall rental growth of 6.0%. This arose on most properties except for
those in New York City where the market is restricted by rent controls. Growth in rental income
from our Florida properties has been particularly encouraging.
In both the UK and USA rising interest rates during the period have increased yields and depressed
capital values. The one bright spot was Florida, where the general downward pressure on capital
values was offset by continuing strong demand.
Now that the uncertainty of the Covid-19 pandemic is largely behind us we have recommenced our
programmes of refurbishment and development of residential units in the UK. In the USA we have
concentrated our improvement expenditure on the newer purchases in Florida.
Outlook
The immediate outlook for the UK is for little or no growth in GDP and the possibility of further rises
in interest rates; inflation seems to be on a downward path albeit slowly. Background conditions do
seem to be more favourable in the USA.
The Covid-19 pandemic is likely to leave a lasting impact on the demand for commercial property.
Working from home has become established and shows every sign of continuing to be widespread.
This will inevitably reduce the need which office tenants have for space.
We will continue to be cautious in managing the risks which we face while standing ready to seize
the opportunities that present themselves. Our focus will remain the achievement of long term, low
risk growth in asset value and rental income.
As ever, my thanks go to our hard working staff for their efforts during the year.
B S E Freshwater
Chairman
Front cover: Ashworth
Mansions, London W9.
Inside front cover and
page 1: 30 Kensington
Church Street,
London W8. Above and
right: Strand Palace Hotel,
London WC2.
PAGE 2
DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
FINANCIAL HIGHLIGHTS
NET VALUATION LOSS
£90.2 million
2022: gain of £101.1 million
£41.0 million
2022: profit of £159.7 million
LOSS BEFORE TAX
LOSS PER SHARE
£1.92
2022: earnings of £3.53
SHAREHOLDERS’ FUNDS
£1,928.8 million
2022: £1,955.6 million
SHAREHOLDERS’ FUNDS PER SHARE
£118.36*
2022: £120.01*
GEARING
24.5%*
2022: 23.6%*
*Definitions of these alternative performance measures are included on pages 85 and 86.
PAGE 3
DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
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
s
n
o
i
l
l
i
m
£
180
170
160
150
140
130
120
2019
2020 2021 2022
2023
2019
2020 2021 2022
2023
125
120
115
110
105
100
Strategy
The strategy for achieving our objectives has three principal elements:
■ Management of our property portfolio to maximise net rental income and thereby enhance
capital values
■ Identification and completion of value enhancing development opportunities within our
portfolio
■ Identification and completion of new property acquisitions which have the potential, through
development or otherwise, for long term enhancement to net asset value
In pursuing this strategy we take the view that property is a long term business which does not
always fit conveniently into the annual reporting cycle. Development opportunities, in particular,
can take many years from first idea to first letting and will often involve substantial investment over
a period of years before any gain is achieved. We carefully monitor our exposure to ensure that the
impact on our resources remains manageable.
Business model
The main activity of the Group, as carried on through its subsidiary companies, is investment in
commercial, industrial and residential property in the UK and also on the eastern seaboard of the USA.
Above and
opposite page:
Ashworth Mansions,
London W9. Right:
Beaumont Court,
London W4.
PAGE 4
DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
STRATEGIC REPORT continued
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 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 24.5% (2022 –
23.6%).
This page and opposite
page: 30 Kensington
Church Street,
London W8.
PAGE 7
DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
STRATEGIC REPORT continued
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
In the UK the economic outlook is for weak growth at best with interest rates continuing to rise as
the Bank of England struggles to control the rate of inflation which is on a slow downward path. In
the USA it is predicted that GDP growth will decelerate with a risk of recession in late 2023 or 2024.
Although the restrictions put in place during the Covid-19 pandemic have now ceased, “working
from home” has now become an established feature of business life which will clearly have an impact
on the future demand for office space.
We also face political uncertainty at both the international and UK levels as a consequence of the
Russian invasion of Ukraine and the prospect of a general election in both the UK and the USA.
The decision by the United Kingdom to leave the European Union continues to have a negative
impact on the business.
This is the background which provides the risks and opportunities both for our residential tenants
and also for the businesses of our commercial tenants and their demand for space.
We seek to mitigate and manage such risk by:
■ Continuous monitoring of the economic outlook and asset allocation
■ 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
This page and
opposite page: The
Mount, 76 Bedford
Gardens, London W8.
PAGE 8
DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
STRATEGIC REPORT continued
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 are at an advanced stage of negotiating new
facilities which will enable us to repay existing facilities totalling £275 million which expire in the
first quarter of 2024.
We seek to mitigate and manage this risk by:
■ Ensuring that the properties which we invest in are, in our opinion, likely to maintain their
value
■ Monitoring funding trends and the development of banking regulations
■ Sustaining relationships with our principal financing partners, both banks and also 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
■ Continuing to seek to use financial instruments to fix or cap interest rates
Movements in currency rates of exchange
With 31% by value of the Group’s property portfolio located in the USA, any significant movement
in the US dollar/sterling rate of exchange will impact our reported results. The fall in the value of
sterling relative to the US dollar in the financial year was 6% (2022 – fall of 4%). This has had the effect
of increasing the reported value of our USA net assets. The average exchange rate for the year fell by
12% (2022 – 5% rise) 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 profit of £23.5 million (2022 – £15.2 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
This page and opposite
page: Strand Palace Hotel,
London WC2.
PAGE 10
DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
STRATEGIC REPORT continued
Regulation
The present UK Government has announced its intention to tackle leasehold reform through two
pieces of legislation. The Leasehold Reform (Ground Rent) Act 2022 came into force on 30 June 2022
but is unlikely to have a material impact on our business model. Although the government is yet to
publish any significant detail, it is thought that the second piece of legislation will be enacted in the
near future and may adversely affect the pricing and sale of leasehold extensions.
Rent controls in New York City are constraining the rental and capital value growth of our properties
in that city.
Increased regulation on building or environmental standards, health and safety or planning matters
could impose additional costs which we assess to be immaterial. In particular new energy
performance standards will become obligatory in 2028 for all new residential lettings in the UK.
We seek to mitigate and manage this risk by:
■ Careful monitoring of developments in legislation with the help of our professional advisers
■ Concentrating new acquisitions in areas which are not subject to rent control or other adverse
regulation
Catastrophic events
The operations of the Group were affected by the impact of the Covid-19 pandemic and could in
future be adversely affected by the impact of further such events or 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:
■ Maintaining a system of home working to ensure that the Group can continue to function
despite the need for office closures
■ Insuring buildings with third parties
■ Physical building security
■ Fireproof storage of leases and other documents of title
■ Dispersal of business critical IT systems and enhanced data security measures
This page and opposite
page: Ashley Gardens,
London SW1.
PAGE 13
DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
STRATEGIC REPORT continued
Analysis by property type
PROPERTY UK
Residential
£872.9m
Commercial
£994.4m
PROPERTY USA
Residential
£722.1m
Commercial
£110.4m
COMMERCIAL PROPERTY UK
COMMERCIAL PROPERTY USA
Land &
Development
£2.9m
Industrial
£71.5m
Offices
£320.5m
Retail
£2.3m
Offices
£108.1m
Leisure &
Services
£272.5m
Retail
£327.0m
Analysis by location
UK VALUATIONS
USA VALUATIONS
Wales &
West
£57.5m
North &
Scotland
£52.9m
Midlands &
East Anglia
£90.5m
South East
£138.3m
Pennsylvania
£56.7m
Baltimore
£28.8m
New York
£244.0m
Greater
London
£1,528.1m
New Jersey
£52.3m
Boston
£102.4m
Florida
£348.3m
PAGE 14
DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
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
The contraction or collapse of high profile retail chains continued in the year. The change in
shopping patterns and in particular the move to online shopping which has accelerated during the
Covid-19 pandemic means that the downward pressure on UK shopping centres’ tenant demand and
capital values is likely to continue. Parades of shops, an important part of our portfolio, have not so
far 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: Witley Court,
London WC2.
PAGE 15
DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
STRATEGIC REPORT continued
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. Our portfolio
is therefore significantly impacted by valuation trends in that area. Historically, our USA portfolio has
been mainly located in New York where in recent years capital values have been impaired by the
introduction of severe rent controls and restrictions. However following recent acquisitions, the
greater part of the portfolio is now located in Florida where property values have benefitted from the
movement of population into the state.
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
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.
This page: Clissold Court,
Greenway Close,
London N4. Opposite
page: Zeeta House.
Putney, London SW15.
PAGE 16
DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
STRATEGIC REPORT continued
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 directors from the next generation of the Freshwater family both in the
holding and subsidiary companies
Investment properties
A professional valuation of all of the Group’s properties was carried out at 31 March 2023. The UK
properties were valued by Colliers International Property Advisers UK LLP, Chartered Surveyors. In
the USA, all properties were valued by Jones Lang Lasalle, Certified General Real Estate Appraisers.
The table below shows a summary of the valuation of our investment property at 31 March 2023:
Valuation Valuation
March 2023 March 2022
£m £m
Commercial property
UK 994.4 1,053.0
USA 110.4 104.3
Residential property
UK 872.9 881.4
USA 722.1 683.7
Less lease incentives (17.0) (17.0)
Total 2,682.8 2,705.4
This page and opposite
page: properties in Florida
USA. Above and right:
Fairways of Inverrary.
Lauderhill.
PAGE 18
DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
Top row: Waterford Park,
Lauderhill. Centre row:
Fairways of Inverrary.
Lauderhill. Bottom row:
Greenwich Commons,
Tampa.
PAGE 19
DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
STRATEGIC REPORT continued
A more detailed analysis of the investment property portfolio is set out in Note 9 to the consolidated
financial statements.
The changes in value shown in the table on page 18 are attributable to the net gains and losses 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:
2023 2022
£m £m
Opening valuation 2,705.4 2,564.4
New acquisitions 4.0 0.1
Additions to existing properties 19.4 14.8
Disposals (5.9) (7.1)
2,722.9 2,572.2
Revaluation (loss)/gain (90.2) 101.1
Foreign exchange gain 50.1 32.1
Closing valuation 2,682.8 2,705.4
Our property portfolio values in the UK fell overall by 4.1%. Property values in the USA fell by 0.7%
in dollar terms. Within the UK, our residential properties fell by 1.1% overall whilst our commercial
properties fell by 6.8% overall, with falls of 11.4% in the value of offices and 10.4% in retail properties
being partially offset by a rise of 2.4% in leisure and services properties. Our values of our industrial
properties remained broadly flat.
In the USA, we continued to see value growth in Florida with prices up 6.6% although these gains
were more than offset by falls in New York of 7.6% and losses of 3.0% in other locations.
Acquisitions and Developments
During the year we acquired the headlease of Zeeta House, Putney. Since the year end we have
acquired the freehold of the Strand Palace Hotel.
In the UK development work was concentrated on the creation of new penthouse apartments at our
Bentinck Close, London NW8 property and a new block of flats at Goulston Street, London E1. In the
USA our expenditure has been on the recently acquired properties in Florida.
This page and opposite
page: Aldgate Travelodge,
Middlesex Street,
London E1.
PAGE 20
DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
STRATEGIC REPORT continued
Results for the year
The Group recorded a loss before taxation for the year ended 31 March 2023 of £41.0 million (2022
– profit of £159.7 million). The result includes a net valuation loss of £90.2 million arising on
investment properties (2022 – gain of £101.1 million).
The table below shows the performance of the Group before and after valuation movements:
2023 2022
£m £m
Total rental and related income from investment property 185.0 168.4
Property operating expenses (104.8) (89.8)
Net rental and related income from investment property 80.2 78.6
Profit on disposals of investment property 9.4 15.3
Administrative expenses (18.6) (17.9)
Net operating profit before net valuation movements 71.0 76.0
Net valuation (losses)/gains on investment property (90.2) 101.1
Net financing expense (21.8) (17.4)
(Loss)/profit before taxation (41.0) 159.7
Overall this year has seen an increase of £16.6 million in rental income equivalent to 9.9% (2022 –
3.6%).
In the UK demand for residential property has been strong which has resulted in increases in rental
levels and a reduction in the number of vacant units. Commercial property income has increased
following the completion of various schemes of refurbishment. However this increase has been
more than offset by tenant losses as a result of sluggish economic conditions and changes in working
practices. Overall UK rental income increased by 2.4% (2022 – 0.1% decrease).
In the USA our properties in Florida have enjoyed strong rental growth particularly those which we
have purchased in the last few years. The rent control regime in New York City has limited growth
in rental income from our properties in that area. Overall USA rental income increased by 6%
(2022 – 13%).
This page and opposite
page: Coleherne Court,
Old Brompton Road,
London SW5.
PAGE 22
DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
STRATEGIC REPORT continued
Service charge income represents the recovery of costs incurred on relevant leases. The increase in
the year was mainly attributable to the commencement of new programmes of major works.
Property operating expenses have increased by 11.3% (2022 – 0.5% reduction) at constant exchange
rates. This reflects increased spending on repairs together with the impact of high inflation in both
the UK and USA. These upward pressures were partially offset by the recovery in the UK of past year
overcharging by various local authorities.
Profit on disposals derive in the main from the sale of lease extensions in the UK. When long
leaseholders extend their lease a premium is paid; the Group has no control over when these
extensions may occur.
This has been a period of rising interest rates and net financing costs have increased in both the UK
and the USA.
This year’s fair value movement on financial instruments was a gain of £4.3 million (2022 –
£5.3 million).
Our realised profits are subject to tax in the UK at 19% and in the USA at 28.3%. Provision for
deferred tax is then made for items recognised in the accounts but not realised for tax purposes,
principally property revaluation surpluses. This provision is calculated at the rates which are
expected to apply in the future. In the UK, the future tax rate has been increased to 25% and a small
increase applies in the USA. Our overall effective tax rate is 24% which is consistent with the
statutory tax rates.
Earnings per share
The Group recorded a loss per share of £1.92 (2022 – earnings £3.53), which represents a fall of
£5.45 per share (2022 – 18 pence increase).
£
8
6
4
2
0
-2
-4
2019
2020
2021
2022
2023
This page and opposite
page: Chatsworth Court,
London W8.
PAGE 25
DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
STRATEGIC REPORT continued
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:
2023 2022
£m £m
(Loss)/profit before tax per the income statement (41.0) 159.7
Property valuation deficit/(surplus) 90.2 (101.1)
Financial instruments fair value adjustments (4.3) (5.3)
Adjustment to measurement of disposal profits 2.3 0.6
Underlying profit before tax 47.2 53.9
This year’s underlying profit before tax of £47.2 million represents a decrease of £6.7 million on the
underlying profit of £53.9 million in the previous year. The decrease is mainly due to the reduction
of profit on disposal of properties as last year two large buildings were sold.
Underlying profit before tax represents that element of our reported results which has actually been
realised and is not dependent on valuation judgements. It represents the performance of our core
rental business together with disposal profits which tend to fluctuate from year to year.
It is our underlying profit before tax which generates the cash we use to re-invest in the business
and to pay dividends and taxes.
Gearing
Gearing, the ratio between our loans and borrowings and the value of our total assets, is 24.5% (2022
– 23.6%) for the Group as a whole. In the UK the ratio is 16.6% (2022 – 16.2%) whilst in the USA,
where each property is financed separately on a ring-fenced basis, it is 42.4% (2022 – 42.3%).
Shareholders’ funds
At 31 March 2023 shareholders’ funds amounted to £1,928.8 million, a fall of 1.4% on last year’s figure
of £1,955.6 million (2022 – increase of 2.9%). Shareholders’ funds in recent years have been as follows:
n
o
i
l
l
i
m
£
1960
1950
1940
1930
1920
1910
1900
1890
1880
1870
1860
2019
2020
2021
2022
2023
This page and opposite
page: Lawrence Mansions,
Lordship Place, Chelsea,
London SW3.
PAGE 27
DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
STRATEGIC REPORT continued
Outlook
The Chairman’s Introduction on page 2 and the section dealing with external risks on page 8
describe the economic and political factors which will affect the Group in the coming year.
In the UK the immediate future will be dominated by high rates of interest and inflation. The Bank
of England is determined to bring inflation under control and has forecast that the annual rate will
not return to the long term target of 2% until 2025. In consequence, for the short term, interest rates
are likely to continue to rise. The economic outlook is for weak growth at best and the risk of
slipping into recession.
The outlook in the USA is somewhat more positive with inflation much reduced however interest
rates remain high and there is concern that economic growth may come to a halt.
An element of political uncertainty arises from the fact that General Elections will be held in both
the UK and USA in 2024.
Against this background we will continue to conserve and enhance our financial resources so that
we remain 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 continue to explore development
opportunities within our existing portfolio; the timing and speed with which these are pursued will
be influenced by general economic, political 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.
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
This page and opposite
page: Vincent Court,
London NW4.
PAGE 28
DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
STRATEGIC REPORT continued
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).
All Directors of the Company are male and no new recruitment to the Board is presently planned. In
addition, there are 20 other directors of the Company’s UK subsidiaries, of whom 12 or 60% are
female and 8 or 40% are male. When the need for recruitment arises equal consideration is given to
all candidates, regardless of gender, religion or ethnicity.
Health and Safety
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.
■ 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.
■ During the Covid-19 pandemic secure workplaces and practices were 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.
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.
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 £173,487 (2022 –
£75,522).
This page and opposite
page: 1-2 Cadogan
Square, Glasgow C2.
PAGE 30
DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
STRATEGIC REPORT continued
■ 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
£1,198,242 (2022 – £1,156,923) being passed to charitable companies.
Environment
As mentioned on page 28, 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.
Pursuant to Part 7A 20E (3) of Large and Medium-sized Companies and Groups (Accounts and
Reports) Regulations 2008, the Company is exempt from the disclosures required in Part 7 regarding
greenhouse gas emissions, energy consumption and energy efficiency action.
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.
Where appropriate we also seek to take into account the likelihood of future tightening of
environmental standards.
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 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 4. The executive directors aim to meet with many of the Group’s 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 and
emerging risks faced by the Group, described on pages 7 to 20 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.
This page and opposite
page: 1 Cameford Court,
New Park Road,
Streatham, London SW2.
■ 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 high
inflationary environment and the challenging economic outlook in the UK and USA, the
Directors continue to believe that the Group will be able to grant short term leases on
PAGE 32
DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
STRATEGIC REPORT continued
residential properties and new leases on commercial properties at comparable rents overall for
at least five years.
■ The Group utilises external funding and its policy is to have available and committed facilities
which are spread over a period of years. Most bank finance is available for a term of five years.
As explained further in Note 16, whilst the Group has some £275 million of bank loans which
are repayable within one year, at the date of signing this report the Group had received heads
of terms or were in advanced discussions with lenders for new loans totalling £325 million. In
addition, other potential funding options are available including an extension to 2025 on a
£225 million loan and major new loans from other financial institutions. The Group has
ongoing discussions with incumbent and potential lenders regarding the renewal or
replacement of facilities well in advance of their maturity. Based on these discussions the
Board remains confident that the Group will be able to replace existing facilities when they
mature on competitive and affordable 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 and
emerging risks. Particular attention was paid to the availability and expected cost of loan finance,
interest rate caps and swaps. 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 forecasts for 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 that one of the
three lenders with whom we are in advanced negotiations regarding new and replacement loans
decides against lending to the Group and that the proportion of UK rent collected falls to 80%, down
from 98.9% which is the percentage of UK rent for the year ended 31 March 2023 that had been
collected at the date of signing this report. Notwithstanding the reduction in forecast 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
29 September 2023
This page and opposite
page: Oslo Court,
London NW8.
PAGE 34
DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
DIRECTORS’ REPORT
Strategic Report
The Company’s Strategic Report for the year ended 31 March 2023 is set out on pages 4 to 34 and
contains the following information:
■ The principal activities of the Group
■ The business review of the Group
■ An indication of the future developments of the Group
■ The principal risks and uncertainties facing the business, including those relating to financial
instruments
■ Employee and environmental disclosures including those related to greenhouse gas emissions
Results and Dividend
The loss for the year amounted to £31.1 million (2022 – profit of £57.6 million). A first interim
dividend of 58p per share was approved on 3 August 2022 and a second interim dividend on both
A Shares and B Shares of 58p per share was approved on 28 March 2023. The Directors do not
recommend the payment of a final dividend.
Directors
The Directors who served throughout the year and up to the date of this report were:
Mr B S E Freshwater
Mr S I Freshwater
Mr D Davis
Mr A M Freshwater
Mr C B Freshwater
Mr R E Freshwater
Brief biographies of the Directors are as follows:
Mr B S E Freshwater. Aged 75 – 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 73 – Directs the Group’s operations in the USA and also has responsibility
for the Group’s UK sales division. He has been a Director of the Company since January 1986.
Mr D Davis. Aged 88 – 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 52 – 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 51 – 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.
PAGE 36
DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
Mr R E Freshwater. Aged 53 – 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 the 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. At 31 March 2023, the Company had 3,347,364
A shares and 12,947,993 B shares (2022 – 16,295,357 ordinary shares) in issue and, with the
exception of 763 B shares (2022 – 763 ordinary shares) beneficially owned by Mr D Davis, all shares
were controlled by or held in trusts on behalf of members of the Freshwater family. On 19 June 2023
the Company completed a scheme of reconstruction following which the Company is wholly owned
by Daejan Group Holdings Limited. Further details are provided in Note 25 on page 86.
Directors’ interests in the share capital of the Company are as follows:
Beneficial interest
Non-beneficial
interest
31 March 31 March 31 March 31 March
2023 2022 2023 2022
B S E Freshwater 457,683 457,683 12,245,617 12,245,617
S I Freshwater 206,920 206,920 8,332,941 8,332,941
D Davis 763 763 – –
A M Freshwater 2,591,294 2,591,294 962,323 962,323
C B Freshwater 2,591,294 2,591,294 – –
R E Freshwater 2,591,294 2,591,294 1,034,566 1,034,566
Notes:
1 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.
2 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.
3 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.
PAGE 37
DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
DIRECTORS’ REPORT continued
Included in the directors’ holdings shown in the table on the previous page are the following
holdings at 31 March 2023, each amounting to 3% or more of the Company’s issued share capital:
Number
of shares %
Dock Newco Limited A Shares 3,347,364 20.5
Henry Davies (Holborn) Limited B Shares 1,934,090 11.9
Trustees of the S I Freshwater Settlement B Shares 1,560,000 9.6
Distinctive Investments Limited B Shares 1,464,550 9.0
Quoted Securities Limited B Shares 1,305,631 8.0
Centremanor Limited B Shares 1,000,000 6.1
Valand Investments Limited B Shares 1,000,000 6.1
Silda 2 Limited B Shares 705,000 4.3
Mayfair Charities Limited B Shares 565,000 3.5
Tabard Property Investment Company Limited B Shares 500,000 3.1
As explained in Note 25 on page 86, on 19 June 2023 all B shares were cancelled and simultaneously
reissued to Dock Newco Limited as part of a scheme of reconstruction. There have been no further
changes to the shareholder’s interests from 31 March 2023 up to the date of signing this report.
Corporate Governance
This report combines by reference the Corporate Governance Report on pages 40 to 42.
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
2023, these facilities represented £106.9 million (2022 – £108.0 million) of the loans and borrowings
in the financial statements and undrawn facilities of £30.0 million (2022 – £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 4 to 34, 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 38
DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
The Group generated cash from operating activities of £60.3 million during the year (2022 –
£46.6 million). Gearing, on the basis of gross debt to total assets, was 24.5% (2022 – 23.6%). Reported
net debt (total loans and borrowings less cash and cash equivalents) increased to £609.0 million (2022
– £592.5 million) but fell by £1.7 million in constant currency terms. The Group had undrawn
committed facilities of £55.0 million at the balance sheet date (2022 – £55.0 million).
The Group has undertaken a detailed and robust assessment of its projected future financial
position. As the Group has some £275 million of bank loans that mature within one year, the Board
carefully considered the latest status of the negotiations with lenders regarding new and
replacement loans. The assessment also considered the Group’s ability to meet its debts, the
potential impact on property prices, demand for property and the associated impact on rents and
yields of the current macroeconomic and political climate in the UK and USA.
The Group is now close to signing new loan agreements with three major banks in the UK for new
or replacement loans and continues to have discussions with other lenders. In the unexpected
event that one of these three banks decided against lending, the Group would still have sufficient
cash resources to meet its liabilities as they fall due and the discussions with other potential lenders
would be accelerated. The Board is confident that the borrowing options that the Group currently
has are more than adequate. During the year, the Group generated over £60 million of cash from
operations before tax and interest. If rent collection in the UK fell to 80% of rent demanded, down
from 98.9% which is the percentage of UK rent for the year ended 31 March 2023 that had been
collected at the date of signing this report, the Group would still have sufficient cash to operate. The
ability to reduce expenditure quickly on development costs and dividends provide further security.
The net current liability position of the Group is not considered to be a matter of concern.
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
29 September 2023
PAGE 39
DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
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 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 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 four non-executive directors. The names of the directors together with their
biographical details are set out on pages 36 and 37. 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 40
DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
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 an objective
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 41
DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
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 42
DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
DIRECTORS’ REMUNERATION REPORT
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 normally receive basic pay only. There are no formal bonus or incentive schemes
in operation or any form of share option scheme or long term incentive plan, although the executive
directors were each paid an additional fee in both the current and prior financial year in recognition
of their exceptional contribution to the Group. 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 and additional fee
for their services to the Company. Mr A M Freshwater and Mr R E Freshwater received medical
insurance for themselves and their family as part of their remuneration for their directorship of
subsidiary companies.
PAGE 43
DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
DIRECTORS’ REMUNERATION REPORT 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 C B Freshwater was appointed in 2017. They are all remunerated by a fixed director’s fee.
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:
Base Additional Other
Salary fee benefits Total
2023 £ £ £ £
Mr B S E Freshwater 1,500,000 750,000 – 2,250,000
Mr S I Freshwater 1,500,000 750,000 – 2,250,000
Mr D Davis 20,000 – – 20,000
Mr A M Freshwater 100,000 – 7,051 107,051
Mr C B Freshwater 20,000 – – 20,000
Mr R E Freshwater 100,000 – 7,686 107,686
3,240,000 1,500,000 14,737 4,754,737
PAGE 44
DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
Base Additional
Salary fee Total
2022 £ £ £
Mr B S E Freshwater 1,400,000 1,500,000 2,900,000
Mr S I Freshwater 1,400,000 1,500,000 2,900,000
Mr D Davis 20,000 – 20,000
Mr A M Freshwater 85,000 – 85,000
Mr C B Freshwater 20,000 – 20,000
Mr R E Freshwater 85,000 – 85,000
3,010,000 3,000,000 6,010,000
In addition to the amounts included in the tables on page 44 and above were the following payments
from USA based subsidiaries under a consultancy agreement: Mr B S E Freshwater US$830,000
(equivalent to £688,454) (2022 – US$Nil) and Mr S I Freshwater US$165,000 (equivalent to
£136,861) (2022 – US$Nil).
The Group maintains comprehensive liability insurance for its directors and officers.
Changes in the year
Mr D Davis is the senior non-executive Director and has responsibility for changes to the executive
directors’ remuneration.
Mr B S E Freshwater and Mr S I Freshwater each received an increase in basic salary of £100,000 per
annum during the year (2022 – £50,000), equivalent to 7.1% (2022 – 3.7%). The increases were
approved by the Board.
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 12.9% (2022 – decrease of 3.7%).
The increase in total staff costs for the year reflects: pay rises for employees given by the
management companies, which for the final quarter of the year included many high single digit
percentage increases; an increase in staff numbers reversing the reduction reported in 2022; a full
year’s charge of the fee increases awarded in January 2022 to the directors of subsidiary companies;
and other benefits payable for the directors of subsidiary companies. Since such staff are employed
under these arrangements, no consultations regarding directors’ remuneration policy or
implementation have been held.
Non-executive directors’ remuneration
Non-executive directors of the Company 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.
Included in the tables on page 44 and above for both Mr A M Freshwater and R E Freshwater are
director’s fees of £80,000 (2022 – £65,000) and other benefits of £7,051 (2022 – £nil) and £7,686
(2022 – £nil) respectively from subsidiary companies. Additionally, other directors of subsidiary
companies received fees of £1,600,000 (2022 – £1,270,000) and other benefits of £59,461 (2022 –
£Nil); these amounts are not included in the tables on pages 44 and above as the recipients are not
directors of the Company.
PAGE 45
DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
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
Directors’
remuneration
Dividends to
shareholders
£000 % of total £000 % of total £000 % of total
2023 9,175 27.9 4,755 14.5 18,903 57.6
2022 8,126 25.1 6,010 18.6 18,251 56.3
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 37 and 38.
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 £
2014 870,000
2015 1,000,000
2016 1,100,000
2017 1,150,000
2018 1,200,000
2019 1,250,000
2020 1,300,000
2021 1,350,000
2022 2,900,000
2023 2,250,000
PAGE 46
DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
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 UK-adopted international accounting standards and applicable law and have
elected to prepare the parent Company financial statements in accordance with the UK accounting
standards, and applicable law (UK Generally Accepted Accounting Practice), including FRS 102 The
Financial Reporting Standard applicable in the UK and Republic of Ireland.
Under company law the directors must not approve the financial statements unless they are satisfied
that they give a true and fair view of the state of affairs of the Group and parent Company and of
their profit or loss for that period. In preparing each of the Group and parent Company financial
statements, the directors are required to:
■ select suitable accounting policies and then apply them consistently;
■ make judgements and estimates that are reasonable, relevant and reliable;
■ for the Group financial statements state whether they have been prepared in accordance with
UK adopted international accounting standards;
■ 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 47
DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
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
29 September 2023
PAGE 48
DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
INDEPENDENT AUDITOR’S REPORT
To the members of Daejan Holdings Limited
Opinion
We have audited the financial statements of Daejan Holdings Limited (“the Company”) for the year ended 31 March 2023 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 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 2023 and of the Group’s loss for the year then ended;
■ the Group financial statements have been properly prepared in accordance with UK-adopted international accounting
standards;
■ 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;
■ Reading Board minutes; and
■ Considering remuneration incentive schemes and performance targets for management.
PAGE 49
DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
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.
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, posted by unauthorized users, posted with
unexpected account combination and those posted to unusual accounts.
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
noncompliance 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, recognizing the nature of the Group’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
noncompliance with all laws or regulation.
Other information
The directors are responsible for the other information, which comprises the strategic report, directors’ report, the corporate
governance report, and the director’s remuneration report. Our opinion on the financial statements does not cover the other
information and we do not express an audit opinion thereon.
PAGE 50
DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
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 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 47, 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, E14 5GL
29 September 2023
PAGE 51
DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
CONSOLIDATED INCOME STATEMENT
Year ended Year ended
31 March 31 March
for the year ended 31 March 2023 Notes 2023 2022
£000 £000
Gross rental income 168,908 153,632
Service charge income 16,069 14,754
Total rental and related income from investment property 2 184,977 168,386
Property operating expenses 3 (104,847) (89,840)
Net rental and related income from investment property 80,130 78,546
Profit on disposal of investment property 9,352 15,344
Net valuation (losses)/gains on investment property 9 (90,169) 101,072
Administrative expenses 4 (18,610) (17,871)
Net operating (loss)/profit before net financing costs (19,297) 177,091
Fair value gains on derivative financial instruments 4,271 5,298
Other finance income 5 6,508 3,677
Finance expenses 5 (32,520) (26,407)
Net financing costs (21,741) (17,432)
(Loss)/profit before taxation (41,038) 159,659
Income tax credit/(charge) 6 9,944 (102,011)
(Loss)/profit for the year (31,094) 57,648
Attributable to:
Equity holders of the parent (31,308) 57,510
Minority interest 214 138
(Loss)/profit for the year (31,094) 57,648
Basic diluted (loss)/earnings per share 7 £(1.92) £3.53
The accompanying notes form an integral part of the financial statements.
PAGE 52
DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Year ended Year ended
31 March 31 March
for the year ended 31 March 2023 2023 2022
£000 £000
(Loss)/profit for the year (31,094) 57,648
Foreign exchange translation differences 23,495 15,171
Total comprehensive (loss)/income for the year (7,599) 72,819
Attributable to:
Equity holders of the parent (7,869) 72,635
Minority interest 270 184
Total comprehensive (loss)/income for the year (7,599) 72,819
All comprehensive income may be reclassified as profit and loss when realised in the future.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Issued Share Equity
for the year ended share premium Translation Retained shareholders’ Minority Total
31 March 2023 capital account reserve earnings funds interest equity
£000 £000 £000 £000 £000 £000 £000
Balance at 1 April 2021 4,074 555 44,612 1,851,935 1,901,176 926 1,902,102
Profit for the year – – – 57,510 57,510 138 57,648
Foreign exchange translation
differences – – 15,125 – 15,125 46 15,171
Distributions to minority interest – – – – – (171) (171)
Dividends to equity shareholders – – – (18,251) (18,251) – (18,251)
Balance at 31 March 2022 4,074 555 59,737 1,891,194 1,955,560 939 1,956,499
Balance at 1 April 2022 4,074 555 59,737 1,891,194 1,955,560 939 1,956,499
(Loss)/profit for the year – – – (31,308) (31,308) 214 (31,094)
Foreign exchange translation
differences – – 23,439 – 23,439 56 23,495
Dividends to equity shareholders – – – (18,903) (18,903) – (18,903)
Balance at 31 March 2023 4,074 555 83,176 1,840,983 1,928,788 1,209 1,929,997
The accompanying notes form an integral part of the financial statements.
PAGE 53
DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
CONSOLIDATED BALANCE SHEET
31 March 31 March
as at 31 March 2023 Notes 2023 2022
£000 £000
Assets
Investment property 9 2,682,837 2,705,444
Deferred tax assets 10 – 118
Loan to a related party 11 225,000 225,000
Total non-current assets 2,907,837 2,930,562
Trade and other receivables 11 101,039 90,814
Current investments 131 132
Cash and cash equivalents 12 167,746 157,505
Total current assets 268,916 248,451
Total assets 3,176,753 3,179,013
Equity
Share capital 14 4,074 4,074
Share premium 555 555
Translation reserve 83,176 59,737
Retained earnings 1,840,983 1,891,194
Total equity attributable to equity holders
of the parent 1,928,788 1,955,560
Non-controlling interest 1,209 939
Total equity 1,929,997 1,956,499
Liabilities
Loans and borrowings 16 496,675 744,109
Deferred tax liabilities 10 391,442 399,225
Lease obligations payable 9 8,185 8,234
Total non-current liabilities 896,302 1,151,568
Loans and borrowings 16 280,113 5,929
Trade and other payables 15 70,341 63,770
Taxation – 1,247
Total current liabilities 350,454 70,946
Total liabilities 1,246,756 1,222,514
Total equity and liabilities 3,176,753 3,179,013
The financial statements on pages 52 to 86 were approved by the Board of Directors on
29 September 2023 and were signed on its behalf by:
B S E Freshwater Director
The accompanying notes form an integral part of the financial statements.
PAGE 54
DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
CONSOLIDATED STATEMENT OF CASH FLOWS
31 March 31 March
for the year ended 2023 2022
31 March 2023 £000 £000 £000 £000
Cash flows from operating
activities
Net cash generated from
operations (Note 21) 60,250 46,613
Interest received 6,441 7,976
Interest paid (31,456) (26,163)
Tax paid (8,437) (3,750)
Net cash generated from
operating activities 26,798 24,676
Cash flows from investing activities
Acquisition and development of
investment property (23,405) (14,715)
Proceeds from sale of investment
property 17,202 29,658
Net cash (absorbed by)/generated
from investing activities (6,203) 14,943
Cash flows from financing
activities
Loan to related party – (2,307)
Repayment of bank loans (508) (758)
Repayment of mortgages (36,328) (53,433)
New mortgages 39,109 57,096
Dividends paid to equity holders of
the parent (18,903) (18,251)
Payments to non-controlling interest – (171)
Net cash absorbed by financing
activities (16,630) (17,824)
Net increase in cash and cash
equivalents 3,965 21,795
Cash and cash equivalents brought
forward 157,505 132,120
Effect of exchange rate fluctuations
on cash held 6,276 3,590
Cash and cash equivalents (Note 12) 167,746 157,505
The accompanying notes form an integral part of the financial statements.
PAGE 55
DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Significant Accounting Policies
Daejan Holdings Limited is a company domiciled in the United Kingdom. The consolidated financial
statements of the Company for the year ended 31 March 2023 comprise the Company and its
subsidiaries (together referred to as “the Group”).
The consolidated financial statements were authorised for issuance on 29 September 2023.
(a) Statement of compliance
The consolidated Financial Statements have been prepared in accordance with UK-adopted
international accounting standards (“IFRS”).
The Company has elected to prepare its parent company financial statements in accordance with
Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and
Republic of Ireland and these are presented on pages 87 to 92.
(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.
As the Group has some £275 million of bank loans that mature within one year, the Board carefully
considered the latest status of the negotiations with lenders regarding new and replacement loans.
The assessment also considered the Group’s ability to meet its debts, the potential impact on
property prices, demand for property and the associated impact on rents and yields of the current
macroeconomic and political climate in the UK and USA.
The Group is now close to signing new loan agreements with three major banks in the UK for new
or replacement loans and continues to have discussions with other lenders. In the unexpected event
that one of these three banks decided against lending, the Group would still have sufficient cash
resources to meet its liabilities as they fall due and the discussions with other potential lenders
would be accelerated. The Board is confident that the borrowing options that the Group currently
has are more than adequate. During the year, the Group generated over £60 million of cash from
operations before tax and interest. If rent collection in the UK fell to 80% of rent demanded, down
from 98.9% which is the percentage of UK rent for the year ended 31 March 2023 that had been
collected at the date of signing this report, the Group would still have sufficient cash to operate. The
ability to reduce expenditure quickly on development costs and dividends provide further security.
The net current liability position of the Group is not considered to be a matter of concern.
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 would be no material 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
PAGE 56
DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
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 61.
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 amendments to IFRSs during the year:
(cid:129)
(cid:129)
(cid:129)
Annual improvements to IFRS standards 2018-2020
Property, plant and equipment proceeds before intended use – Amendments to IFRS 16
References to the conceptual framework – Amendments to IFRS 3
The adoption of these amendments has not had a material 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)
(cid:129)
Classification of liabilities as current or non-current – Amendments to IAS 1
Disclosure of accounting policies – Amendments to IAS 1
Definition of accounting estimates – Amendments to IAS 8
Deferred tax related to assets and liabilities arising from a single transaction – Amendments
to IAS 12
(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:
Year end
Average
2023 2022 2023 2022
US Dollar 1.23 1.32 1.21 1.37
PAGE 57
DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
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. 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 58
DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
(j) Trade and other receivables
Trade and other receivables are initially stated at fair value and subsequently carried at amortised 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 and investments. These
short term deposits and investments 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 59
DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
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.
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DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
(u) Significant judgements, key assumptions and estimates
The Group’s significant accounting policies are set out in 1(a) to 1(t) on pages 56 to 60. 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 61
DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
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.
UK USA Eliminations Total
for the year ended 31 March 2023 £000 £000 £000 £000
Rental and related income 106,116 78,861 – 184,977
Property operating expenses (57,622) (47,225) – (104,847)
Profit on disposal of investment property 9,321 31 – 9,352
Net valuation movements on property (78,307) (11,862) – (90,169)
Administrative expenses (15,688) (2,922) – (18,610)
Profit before finance costs (36,180) 16,883 – (19,297)
Fair value gains 4,271 – – 4,271
Other finance income 4,777 1,930 (199) 6,508
Finance expenses (15,322) (17,397) 199 (32,520)
(Loss)/profit before taxation (42,454) 1,416 – (41,038)
Income tax credit/(charge) 10,873 (929) – 9,944
(Loss)/profit for the year (31,581) 487 – (31,094)
Capital expenditure 16,069 7,308 – 23,377
Investment property 1,853,960 828,877 – 2,682,837
Other assets 356,724 150,404 (13,212) 493,916
Total segment assets 2,210,684 979,281 (13,212) 3,176,753
Total segment liabilities (689,504) (570,464) 13,212 (1,246,756)
Capital employed 1,521,180 408,817 – 1,929,997
PAGE 62
DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
UK USA Eliminations Total
for the year ended 31 March 2022 £000 £000 £000 £000
Rental and related income 102,623 65,763 – 168,386
Property operating expenses (52,516) (37,324) – (89,840)
Profit on disposal of property 15,941 (597) – 15,344
Net valuation movements on property 74,124 26,948 – 101,072
Administrative expenses (16,394) (1,477) – (17,871)
Profit before finance costs 123,778 53,313 – 177,091
Fair value gains 5,298 – – 5,298
Other finance income 3,392 461 (176) 3,677
Finance expenses (11,436) (15,147) 176 (26,407)
Profit before taxation 121,032 38,627 – 159,659
Income tax charge (87,352) (14,659) – (102,011)
Profit for the year 33,680 23,968 – 57,648
Capital expenditure 9,935 5,052 – 14,987
Investment property 1,920,620 784,824 – 2,705,444
Other assets 355,697 130,109 (12,237) 473,569
Total segment assets 2,276,317 914,933 (12,237) 3,179,013
Total segment liabilities (703,925) (530,826) 12,237 (1,222,514)
Capital employed 1,572,392 384,107 – 1,956,499
No single lessee accounted for more than 5% of the Group’s rental and related income in either year.
3. Property Operating Expenses
2023 2022
£000 £000
Movement in bad debt provision (178) 540
Porterage, cleaning and repairs 50,208 39,710
Insurance 8,541 7,009
Building services 29,199 26,941
Other management costs 17,077 15,640
104,847 89,840
Of the property operating expenses shown above, an amount of £1,150,000 (2022 – £1,238,000)
related to properties which generated no income during the year.
PAGE 63
DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
4. Administrative Expenses
2023 2022
£000 £000
Staff costs 7,516 6,856
Remuneration of directors of Daejan Holdings Limited 4,755 6,010
Remuneration of directors of subsidiary companies 1,659 1,270
Audit and accountancy 995 986
Legal and other administrative expenses 3,685 2,749
18,610 17,871
Auditor’s remuneration:
For the year, the fees payable to KPMG LLP were £50,000 (2022 – £50,000) for the audit of the
Company and £800,000 (2022 – £850,000) for the audit of Group subsidiary companies, together
with £Nil (2022 – £Nil) for audit related assurance services and £Nil (2022 – £Nil) for other services.
In the UK, the average number of staff provided by the property and administrative management
companies who performed roles for the Group totalled 178 (2022 – 172). The average number of
full time equivalents whose staff costs were borne by the Group during the year was 126 (2022 –
120). The aggregate staff cost of these persons is shown above and can be analysed as follows:
2023 2022
£000 £000
Salaries 5,840 5,400
NI contributions 633 559
Pensions 1,043 897
7,516 6,856
In addition the property and administrative management companies provide, under agency
arrangements, staff to perform various caretaking roles. Those costs totalling £895,000
(2022 – £892,000) 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
2023 2022
£000 £000
Finance income:
Bank interest receivable 2,033 –
Other finance income 4,475 3,677
6,508 3,677
Finance expenses:
Interest payable on bank loans 13,049 9,099
Interest payable on mortgages 18,974 16,529
Interest on lease obligation payable 496 499
Other interest payable 1 280
32,520 26,407
PAGE 64
DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
6. Taxation
Taxation based on the profit for the year of the Company and its subsidiaries:
2023 2022
£000 £000
UK corporation tax 5,937 7,973
UK prior year items (663) (399)
5,274 7,574
Overseas taxation 875 792
Total current tax 6,149 8,366
Deferred tax (16,093) 31,050
Deferred tax – increase in future tax rate – 62,595
Total deferred tax (16,093) 93,645
Total tax (credit)/charge (9,944) 102,011
Reconciliation of tax expense
(Loss)/profit before taxation (41,038) 159,659
Corporation tax at the standard UK rate of 19% (2022 – 19%) (7,797) 30,335
Increase in future tax rate – 62,595
Prior year items (663) (509)
Impact of different tax rates (3,988) 8,572
Indexation and non-taxable items 1,738 –
Non-allowable expenses 766 666
Other – 352
Total tax (credit)/charge (9,944) 102,011
The rate of UK corporation tax throughout the current and prior year was 19%. The rate increased
to 25% from 1 April 2023, a change that was enacted in the summer of 2021. Last year we therefore
recalculated our UK deferred tax balances at 25%, the rate expected to apply when profits are
realised and this resulted last year in a one-off tax charge of £59,345,000. In the USA, our USA results
are subject to Federal and State taxes at a rate of 28.3%. This USA rate increased last year and the
recalculation of our USA deferred tax balances last year resulted in a one-off deferred tax charge of
£3,250,000.
The Group’s effective tax rate for the current year was 24% (2022 – 64%). Last year, removing the
recalculation of the deferred tax liabilities due to tax rate changes (£62,595,000) and prior tax
credits of £509,000 our effective tax rate in the UK was 23.5% and in the USA 29.8%.
7. (Loss)/Earnings per Share
Earnings per share is calculated on the loss, after taxation and non-controlling interests, of
£31,308,000 (2022 – profit of £57,510,000) and the weighted average shares in issue during the year
of 16,295,357 (2022 – 16,295,357).
PAGE 65
DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
8. Dividends
2023 2022
£000 £000
Amounts recognised as distributions to equity holders in the year:
First interim dividend for the year ended 31 March 2022,
approved 18 August 2021 @ 56p per share – 9,125
Second interim dividend for the year ended 31 March 2022,
approved 7 March 2022 @ 56p per share – 9,126
First interim dividend for the year ended 31 March 2023,
approved 3 August 2022 @ 58p per share 9,451 –
Second interim dividend for the year ended 31 March 2023,
approved 28 March 2023 @ 58p per A share and 58p per B share 9,452 –
18,903 18,251
9. Investment Property
Long Short Total Total
Freehold leasehold leasehold 2023 2022
£000 £000 £000 £000 £000
Balance at 1 April 2,189,900 487,221 28,323 2,705,444 2,564,445
Disposals (3,331) (2,580) – (5,911) (7,133)
New acquisitions 3,893 62 – 3,955 138
Additions to existing properties 13,884 5,538 – 19,422 14,849
Revaluation (recognised in profit) (83,811) (4,748) (1,610) (90,169) 101,072
Foreign exchange movements 44,661 5,435 – 50,096 32,073
Balance at 31 March 2,165,196 490,928 26,713 2,682,837 2,705,444
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 2023. The aggregate amount of £1,859.2 million (2022 – £1,926.4 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 2023 by Jones Lang Lasalle, USA Certified Real
Estate Appraisers (“JLL”). JLL acquired Metropolitan Valuation Services, Inc., which valued the
Group’s USA investment properties at 31 March 2022, on 6 July 2022. The aggregate amount of
£832.4 million (2022 – £787.7 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 properties being valued.
The aggregate professional valuations included in the above table have been reduced by an amount
of £17.0 million (2022 – £17.0 million), relating to lease incentives included in Trade and other
receivables and increased by an amount of £8.2 million (2022 – £8.3 million) relating to lease
obligations.
PAGE 66
DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
Valuation techniques and key inputs
The valuation techniques used are set out below and the key inputs used in these valuation
techniques are set out in the tables over the page.
Most 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. The valuation of hotels
incorporates the reversionary value subsequent to the expiry of the existing lease. Development
schemes, where planning consent has been obtained, are valued on a residual basis.
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 2023 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
£10.0 million (2022 – £9.5 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 67
DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
2023
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
Leisure and service units
All UK
Land and development
All UK
285,174
27,404
7,977
197,706
109,787
19,470
7.5
2.0
3.4
5.8
0.2
2.1
53.9
16.0
11.0
27.8
14.8
10.0
75.0
53.2
18.7
78.2
37.5
28.6
5.7% 14.9%
4.7%
9.4% 22.6%
6.0%
7.5% 11.1% 14.9%
7.1% 15.2%
1.0%
2.2%
8.8% 25.8%
8.0% 10.9% 14.5%
71,458
2.0
9.5
33.1
4.5%
7.2% 10.0%
272,490
4.4
18.1
46.2
5.9%
6.9% 15.0%
2,910
–
–
–
Total UK commercial
994,376
UK residential
Greater London
UK – South
UK – North
Total UK residential
Total UK
779,110
89,268
4,520
872,898
1,867,274
Sales value £ per sq ft
1,788
629
586
338
320
203
381
137
164
–
–
–
–
–
–
–
–
–
–
–
–
USA commercial
Massachusetts, Philadelphia
and New Jersey
Rental value £ per sq ft
Capitalisation rate %
110,391
8.9
33.0
38.6
5.5%
5.6%
6.8%
Total USA commercial
110,391
USA residential apartments
New York City
Florida
Other States
158,743
348,263
129,910
Rental value £ per sq ft
28.0
12.1
8.9
13.7
12.2
9.1
15.1
13.0
11.6
Capitalisation rate %
6.0%
6.8%
6.0%
5.7%
5.8%
5.6%
4.5%
5.5%
4.5%
New York City – unsold
co-operative
Total USA residential
Total USA
Total Group
Less lease incentives
85,221
3.7
15.6
70.1
Discount rate %
9.0% 10.6% 13.0%
722,137
832,528
2,699,802
(16,965)
2,682,837
PAGE 68
DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
2022
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
310,407
34,723
8,917
232,592
108,904
19,238
8.0
2.0
3.4
5.8
0.2
2.1
54.1
16.5
11.3
26.3
14.4
9.9
68.5
52.7
17.5
66.0
37.2
28.6
5.0% 12.8%
4.6%
9.4% 20.1%
5.0%
7.0% 10.7% 14.0%
6.7% 45.0%
1.0%
2.2%
8.4% 20.7%
7.6% 11.4% 14.6%
70,727
2.0
9.9
33.1
3.5%
6.1% 10.1%
Leisure and service units
All UK
Land and development
All UK
266,001
4.4
19.2
46.2
5.1%
6.6% 15.0%
1,510
–
–
–
–
–
–
Total UK commercial
1,053,019
UK residential
Greater London
UK – South
UK – North
Total UK residential
Total UK
785,382
91,502
4,564
881,448
1,934,467
Sales value £ per sq ft
1,541
803
337
505
334
133
241
189
116
USA commercial
Massachusetts, Philadelphia
and New Jersey
Rental value £ per sq ft
Capitalisation rate %
104,270
8.4
30.1
35.6
5.0%
5.1%
6.8%
Total USA commercial
104,270
USA residential apartments
New York City
Florida
Other States
163,026
307,025
128,625
Rental value £ per sq ft
26.3
11.4
8.4
12.8
11.4
8.6
14.2
12.2
10.9
Capitalisation rate %
5.3%
6.0%
5.5%
5.0%
5.4%
5.1%
3.8%
5.3%
4.3%
New York City – unsold
co-operative
Total USA residential
Total USA
Total Group
Less lease incentives
85,051
3.5
14.4
79.1
8.0%
Discount rate %
9.6% 12.0%
683,727
787,997
2,722,464
(17,020)
2,705,444
PAGE 69
DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
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.
As explained in Note 1(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
investment property is 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.
Future minimum lease payments
The present value of future minimum lease payments in relation to leasehold investment properties
is £8.2 million at 31 March 2023 (2022 – £8.3 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
2023 2022
Present Present
Minimum Interest value Minimum Interest value
lease on lease of lease lease on lease of lease
payments payments liabilities payments payments liabilities
£000 £000 £000 £000 £000 £000
Due within one year 539 (494) 45 538 (496) 42
Due within two to five years 2,153 (1,947) 206 2,151 (1,960) 191
Due after more than five years 41,466 (33,487) 7,979 42,116 (34,073) 8,043
44,158 (35,928) 8,230 44,805 (36,529) 8,276
Capital commitments, arising from contractual obligations not yet invoiced or paid, for the purchase,
construction, development or enhancement of investment properties, amounted to £3.8 million at
31 March 2023 (2022 – £3.7 million).
PAGE 70
DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
10. Deferred Tax Assets and Liabilities
2023 2022
Assets Liabilities Net Assets Liabilities Net
£000 £000 £000 £000 £000 £000
Investment property – (342,739) (342,739) – (357,081) (357,081)
Accelerated tax depreciation – (46,618) (46,618) – (41,009) (41,009)
Financial instruments – (2,085) (2,085) 118 (1,135) (1,017)
– (391,442) (391,442) 118 (399,225) (399,107)
The movement in deferred tax is as follows:
Accelerated
tax Financial
Investment depreci- instru- Total Total
property ation ments 2023 2022
£000 £000 £000 £000 £000
Balance at 1 April (357,081) (41,009) (1,017) (399,107) (300,483)
Recognised in income 20,716 (3,555) (1,068) 16,093 (93,645)
Foreign exchange movements (6,374) (2,054) – (8,428) (4,979)
Balance at 31 March (342,739) (46,618) (2,085) (391,442) (399,107)
PAGE 71
DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
11. Trade and Other Receivables
2023 2022
£000 £000
Non-current assets
Loan to a related party 225,000 225,000
Further detail is provided in Note 18 and Note 25.
2023 2022
£000 £000
Current assets
Rent and service charges debtor 40,657 41,914
Rent and service charges accrued 3,053 3,237
Other debtors and prepayments 47,010 40,204
Derivative financial instruments 8,340 4,539
Mortgages granted repayable within one year 633 615
Corporation tax recoverable 1,346 305
101,039 90,814
The ageing of rent and service charge receivables was as follows:
2023 2022
£000 £000
Not past due 23,704 25,615
Past due by less than one month 4,228 5,932
Past due by one to three months 2,059 3,631
Past due by three to six months 1,571 1,698
Past due by more than six months 21,610 19,912
53,172 56,788
Impairment (9,462) (11,637)
Net 43,710 45,151
The movement in the allowance for impairment in respect of trade and other receivables during the
year was as follows:
2023 2022
£000 £000
Balance at 1 April 11,637 12,177
Amounts written off (1,997) (1,080)
Movement in allowance for impairment (178) 540
Balance at 31 March 9,462 11,637
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DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
12. Cash and Cash Equivalents
2023 2022
£000 £000
Bank balances 64,603 157,286
Short term deposits and investments 103,143 219
Cash and cash equivalents 167,746 157,505
Included within bank balances are tenants’ deposits of £4,809,000 (2022 – £4,608,000) in the UK and
£3,359,000 (2022 – £3,202,000) in the USA, which cannot be used in the ordinary course of business.
Included within short term deposits and investments are £72,924,000 (2022 – £nil) of USA Treasury
Bills.
13. Properties held for sale
Properties held for sale are recorded at their fair value. The fair value is a Level 3 valuation as defined
by IFRS 13 and is based on offers received discounted for risks of completion. There were no
properties held for sale at the end of the current or previous financial year.
14. Share Capital
2023 2023 2022 2022
Number £000 Number £000
Allotted, called up and fully paid:
Ordinary shares of 25 pence per share – – 16,295,357 4,074
Ordinary A shares of 25 pence per share 3,347,364 837 – –
Ordinary B shares of 25 pence per share 12,947,993 3,237 – –
Ordinary shares of 25 pence per share 16,295,357 4,074 16,295,357 4,074
In November 2022, the Company reclassified the 3,347,364 ordinary shares that were owned by
Dock Newco Limited to Ordinary A shares. The remaining 12,947,993 ordinary shares were
reclassified to Ordinary B shares.
None of the shares have or had any special rights or rights to fixed income in the current or previous
year. There are and have been no restrictions on the transfer of these shares or restrictions on voting
rights in either the current or previous year.
15. Trade and Other Payables
2023 2022
£000 £000
Rent and service charges charged in advance 28,822 26,859
Other creditors and accruals 41,474 36,399
Derivative financial instruments – 470
Lease obligations payable 45 42
70,341 63,770
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DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
16. Loans and Borrowings
2023 2022
£000 £000
Non-current liabilities
Mortgages 432,175 405,208
Bank loans 64,500 338,901
496,675 744,109
Current liabilities
Mortgages 4,683 4,393
Bank loans 275,430 1,536
280,113 5,929
Total loans and borrowings
Mortgages 436,858 409,601
Bank loans 339,930 340,437
776,788 750,038
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:
2023 2022
Bank loans Mortgages Total Total
£000 £000 £000 £000
Due within one year 275,430 4,683 280,113 5,929
Due within one to two years 64,500 5,246 69,746 57,373
Due within two to five years – 41,039 41,039 321,629
Due after more than five years – 385,890 385,890 365,107
339,930 436,858 776,788 750,038
The risk profile of the Group’s loans and borrowings, after taking account of interest rate swaps, was
as follows:
Fixed Floating Total Fixed Floating Total
£000 £000 £000 £000 £000 £000
2023
2022
Sterling 56,792 309,930 366,722 58,005 310,437 368,442
US Dollar 410,066 – 410,066 381,596 – 381,596
466,858 309,930 776,788 439,601 310,437 750,038
Included in the bank loans due within one year in the table above is £225 million which is due for
repayment in late February 2024 and £50 million which is due for repayment at the end of March 2024.
At the date of signing this report, the Group had signed heads of terms for a new £100 million five
year loan from a major global bank. The Group also had draft heads of terms from two other banks
for five year loans of £125 million and £100 million. Additionally, the loan agreement for the £225
million allows for the Group to request a one year extension. Less advanced discussions continue
with other financial institutions.
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DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
The Group therefore has multiple funding options with the aggregate amount well in excess of
expected needs. Whilst the recent rises in interest rates will inevitably increase the cost of the
interest rate caps and swaps, the Board considers the overall expected cost of available finance to be
entirely affordable. During the year ended 31 March 2022, the reference rate on UK floating rate
bank loans transitioned from LIBOR to an equivalent SONIA plus a credit adjustment spread. The
Group’s interest rate cap and swaps are set out in Note 17 on page 78. The interest rate profile of
the Group’s fixed rate mortgages was as follows:
2023 2022
£000 £000
Per cent.
2.5-3.0 48,717 45,729
3.0-3.5 99,301 127,974
3.5-4.0 115,984 119,074
4.0-4.5 69,422 44,283
4.5-5.0 67,656 44,535
5.0-5.5 12,544 12,846
5.5-6.0 15,677 6,809
6.0-6.5 7,557 8,351
436,858 409,601
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:
2023 2022 2023 2022
% % Years Years
Sterling 5.71 3.60 9.4 8.1
US Dollar 3.81 3.65 7.2 7.7
17. Financial Assets and Liabilities
The Group’s financial instruments are analysed into categories as follows:
Financing Financing
Carrying income/ Carrying income/
amount (expense) amount (expense)
£000 £000 £000 £000
Current asset investments 131 – 132 –
2023
2022
Derivative financial instruments 8,340 4,271 4,069 5,298
Current assets at fair value through
profit or loss 8,471 4,271 4,671 3,953
Current liabilities at fair value – – (470) 1,345
Trade and other receivables 317,699 4,475 311,275 3,677
Cash and cash equivalents 167,746 2,033 157,505 –
Assets at amortised cost 485,445 6,508 468,780 3,677
Trade and other payables (70,296) (1) (63,258) (280)
Lease obligations payable (8,230) (496) (8,276) (499)
Floating rate loans and borrowings (339,930) (13,049) (340,437) (9,099)
Fixed rate loans and borrowings (436,858) (18,974) (409,601) (16,529)
Current and non-current liabilities at
amortised cost (855,314) (32,520) (821,572) (26,407)
Total financial instruments (369,869) (21,741) (348,591) (17,432)
PAGE 75
DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
The finance income of £4,271,000 (2022 – £5,298,000) relating to derivative financial instruments is
stated net of £110,000 expenses (2022 – £113,000) relating to credit risk movements.
Fair values of financial instruments
With the exception of fixed rate loans and borrowings, the Group’s financial instruments are shown
in the table on page 75 at fair value. Fixed rate loans and borrowings are stated at amortised cost as
shown in the table on page 75 and as explained in Note 1(t). The fair value of fixed rate loans and
borrowings was £387,462,000 (2022 – £401,982,000). 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:
(cid:129) Credit risk
(cid:129) Liquidity risk
(cid:129) 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 to a connected company.
Trade receivables
The majority of the Group’s commercial rental income is demanded quarterly in advance and its
residential rental income is demanded monthly in advance. 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.
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DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
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 receivables 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 with major financial institutions and the Group does not consider
counterparty risk on swaps to represent a major risk at the current time. The Group’s interest rate
caps are also with major financial institutions and are linked to borrowings provided to the Group
by the same financial institutions. 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 2023, gearing was
24.5% (2022 – 23.6%) (see note 23). Cash and short-term deposits and investments at 31 March 2023
were £167.7 million (2022 – £157.5 million) and £280.1 million of loans and borrowings were
repayable within one year (2022 – £5.9 million). In addition, at the same date, the Group had
undrawn committed facilities of £55.0 million (2022 – £55.0 million), which expire in 2024. As
explained in Note 16 on pages 74 and 75, the Group has multiple funding options available to enable
it to meet its financial obligations as they fall due.
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DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
The maturity analysis of the undiscounted cash flows arising from the Group’s financial liabilities at
31 March 2023 was as follows:
2023
Aggregate Due Due Due Due after
Carrying undiscounted within within within more than
amount cash flows one year 1-2 years 2-5 years 5 years
£000 £000 £000 £000 £000 £000
Bank loans 339,930 339,930 275,430 64,500 – –
Mortgages 436,858 436,858 4,683 5,246 41,039 385,890
Interest – 154,130 34,381 17,731 51,461 50,557
Lease obligations payable 8,230 44,157 538 538 1,615 41,466
Trade and other payables 70,341 70,341 70,341 – – –
855,359 1,045,416 385,373 88,015 94,115 477,913
2022
Aggregate Due Due Due Due after
Carrying undiscounted within within within more than
amount cash flows one year 1-2 years 2-5 years 5 years
£000 £000 £000 £000 £000 £000
Bank loans 340,437 340,437 1,536 49,609 289,292 –
Mortgages 409,601 409,601 4,393 7,764 32,337 365,107
Interest – 113,241 23,760 23,494 50,807 15,180
Interest rate swaps 470 2,855 455 455 1,278 667
Lease obligations payable 8,276 44,805 538 538 1,613 42,116
Trade and other payables 63,258 63,258 63,258 – – –
822,042 974,197 93,940 81,860 375,327 423,070
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 £225 million borrowing, the Group capped its
exposure to interest rate movements by entering into £225 million of 0.5% interest caps with a
reducing notional. 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 £1.5 million per annum, on the basis of the floating
rate debt outstanding at 31 March 2023, 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 an increase in the fair value of interest rate swaps outstanding at
31 March 2023 of £1.4 million, together with a corresponding reduction in the Group’s loss before
taxation.
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DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
Derivative financial instruments
The derivative financial instruments held by the Group at the year end were as follows:
Contracted rate
Notional principal
Fair value
2023 2022 2023 2022 2023 2022
Class % % £000 £000 £000 £000
Cap 0.5 0.5 150,000 175,000 5,342 4,539
Swap 1.2 – 5,000 – 2,619 –
Swap 1.7 1.6 25,000 30,000 379 (470)
180,000 205,000 8,340 4,069
Maturing within one year
Maturing within 2 – 5 years
Maturing after 5 years
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.
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 £37.3 million.
Capital management
The capital structure of the Group consists of equity attributable to equity holders of the parent
together with net debt. This is kept under constant review to ensure the Group has sufficient capital
to fund its operations and that the Group’s strategy of low gearing is maintained. The Group seeks to
maintain a balance between longer-term finance appropriate to fund its long-term investment
property holding strategy and medium-term finance which provides a more cost effective source of
finance. Equity comprises issued share capital, reserves and retained earnings as set out in the
consolidated statement of changes in equity. Net debt comprises a mix of fixed rate mortgages and
shorter-term bank loans as set out in Note 16 and cash and short term deposits and investments 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. Additionally Highdorn leases offices, from which it
operates, from the Group. At 31 March 2023, the aggregate net amounts due to the Group from
Highdorn and FPM was £14.7 million (2022 – £12.2 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.
PAGE 79
DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
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:
2023 2022
£000 £000
Balance due to related party managing agents at 1 April 3,156 2,129
Charged during the year 6,070 5,089
Paid during the year (7,468) (4,062)
Balance due to related party managing agents at 31 March 1,758 3,156
Mr B S E Freshwater, Mr S I Freshwater and Mr D Davis are trustees of two charities that owned 6.3%
of the share capital of the Company throughout the year. These charities have received dividend
payments in the year of £1,198,242 (2022 – £1,156,923). The Directors’ interests in the Company and
the principal shareholders are described on pages 37 and 38. The Board considers that the Directors
are the key management personnel of the Group and their remuneration is disclosed on pages 44 and
45.
At 31 March 2023, the Group was owed £4,690,000 (2022 – £4,559,000) by Centremanor Limited, a
company that Mr B S E Freshwater and Mr D Davis are directors of. The balance is repayable on
demand.
In June 2020 the Group lent £225,000,000 to Daejan Group Holdings Limited (formerly Dock Newco
Limited) at a commercial arm’s length interest rate of LIBOR plus 1.85%. Following the transition from
LIBOR to SONIA on UK floating rate bank loans during the prior year, the interest rate is now
calculated with reference to SONIA plus a credit adjustment spread. There has been no material gain
or loss of this change to the Group. The loan is due for repayment on 21 February 2025. Mr B S E
Freshwater and Mr S I Freshwater were directors of Daejan Group Holdings Limited throughout the
year. They had no beneficial interest in the share capital of the company or of its ultimate holding
companies during the year. Linnet Limited, which was the ultimate parent of Daejan Group Holdings
Limited for part of the year disposed of Daejan Group Holdings Limited in November 2022 and it was
acquired by two companies whose directors include Mr A M Freshwater, Mr B S E Freshwater, Mr C B
Freshwater and Mr R E Freshwater. Mr A M Freshwater, Mr C B Freshwater and Mr R E Freshwater are
beneficiaries of trusts that ultimately own these two companies. At 31 March 2023 Daejan Group
Holdings Limited owned 20.5% of the share capital of Daejan Holdings Limited. During the year the
Group charged Daejan Group Holdings Limited £4,347,855 (2022 – £3,325,000) in interest and
associated fees (included in other finance income, note 5) and as at the end of both the current and
preceding year Daejan Group Holdings Limited owed the Group £225 million (included in non-
current assets, note 11). As explained in Note 25, Daejan Group Holdings Limited became the sole
shareholder of the Company in June 2023.
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 (2022 – £Nil).
PAGE 80
DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
At the balance sheet date, future minimum lease payments receivable by the Group under operating
leases were as follows:
2023 2022
£000 £000
Due within one year 117,363 61,726
Due within one to two years 62,916 51,066
Due within two to five years 119,706 111,432
Due after more than five years 293,003 313,959
592,988 538,183
Many of the Group’s residential properties are let under assured shorthold tenancies which typically
are for initial terms of 12 months or less, whereafter they are cancellable at short notice. The Group’s
experience is that a significant proportion of such tenancies are held over after the expiry of their
initial term.
21. Notes to the Consolidated Statement of Cash Flows
Cash generated from operations
2023 2022
£000 £000
Net operating (loss)/profit before net financing costs (19,297) 177,091
Adjusted for:
Net valuation loss/(gain) on investment property (Note 9) 90,169 (101,072)
Net gain on sale of investment property (9,352) (15,344)
Cash flows from operations before changes in working capital 61,520 60,675
Changes in working capital:
Change in trade and other receivables (6,083) (6,787)
Change in trade and other payables 4,813 (7,275)
Working capital movement (1,270) (14,062)
Cash generated from continuing operations 60,250 46,613
Change in liabilities during the year relating to financing activities
2023 2022
£000 £000
Total loans and borrowings at 1 April (Note 16) 750,038 731,177
Repayment of bank loans (508) (758)
Repayment of mortgages (36,328) (53,433)
New mortgages 39,109 57,096
Foreign exchange impact 24,477 15,956
Total loans and borrowings at 31 March (Note 16) 776,788 750,038
PAGE 81
DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
22. Subsidiary Undertakings
At 31 March 2023, 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.
Daejan Holdings Limited has guaranteed the liabilities of certain subsidiaries under Sections 479A
and 479C of the Companies Act (2006).
Those companies on pages 82 and 83 marked by a will take advantage of the audit exemption set
out within Section 479A of the Companies Act (2006) for the year ended 31 March 2023. The assets,
liabilities and results for the year of these companies have been audited as part of the group audit
however these companies are exempt from having their own financial statements audited.
Incorporated in Great Britain and registered in England and Wales
Registered office: Freshwater House, 158 – 162 Shaftesbury Avenue, London WC2H 8HR
Company number
Agecroft Estates Ltd 457090
Alsam Limited 461238
Astral Estates (London) Limited 427644
Bagnight Limited* 1409963
Bampton (B&B) Limited 2798348
Bampton (Redbridge) Limiteda 852156
Bampton Holdings Limiteda 898794
Bampton Homes Limited 849161
Bampton Management Limited 944562
Bampton Property Group Limited (The) 647924
Brickfield Properties Limited 741218
Chilon Investment Co. Limited 617017
City and Country (Londonderry House)
Limited 836356
City and Country Properties
(Birmingham) Limiteda 730135
City and Country Properties
(Camberley) Limiteda 876266
City and Country Properties (Estates)
Limited 351303
City and Country Properties (Gillingham)
Limited 922908
City and Country Properties (Leeds)
Limited 514483
City and Country Properties (Midlands)
Limited 458951
City and Country Properties Limited 632613
Coindragon Limited*a 6750083
Coineagle Limited* 6750177
Coinface Limited 7644669
Coinmad Limited* 7644633
Coinmoat Limited* 6750062
Coinorbit Limited* 6750156
Coinpilot Limited* 6750137
Coinreach Limited* 7644736
Coinsmart Limited* 7644663
Company number
Coinspear Limited* 6750057
Coinsun Limiteda 4204282
Consbrix Developments Limited 813110
Cromlech Property Co. Limited (The)a 613900
Crozera Limited 1269708
Daejan (Brentford) Limited* 3666085
Daejan (Brighton) Limited(a 2565357
Daejan (Cambridge) Limiteda 5439513
Daejan (Cardiff) Limiteda 2887383
Daejan (Care Homes) Limited* 6665981
Daejan (Dartford) Limited 2620091
Daejan (Design & Build) Limited*a 7645186
Daejan (Durham) Limited 2552073
Daejan (FH 1998) Limited 3605328
Daejan (FHNV 1998) Limited 3613818
Daejan (Hanger Hill) Limited* 3679742
Daejan (High Wycombe) Limiteda 2684725
Daejan (Kingston) Limited(a 2622396
Daejan (Lauderdale) Limited 2347187
Daejan (Norwich) Limited 3487190
Daejan (NUNV) Limited 3375782
Daejan (NUV) Limiteda 3381643
Daejan (PF) Limited 4896862
Daejan (Reading) Limiteda 2620506
Daejan (Taunton) Limiteda 2663494
Daejan (UK) Limited* 4203384
Daejan (US) Limited* 4204270
Daejan (Warwick) Limiteda 2550013
Daejan (Watford) Limited 7080518
Daejan (Wimbledon) Limited* 7644764
Daejan (Worcester) Limiteda 2683045
Daejan Commercial Properties
Limited 3135225
Daejan Developments Limiteda 691876
Daejan Enterprises Limited 3346239
Daejan Estates Limited 741217
* Directly owned a Company exempted from audit
PAGE 82
DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
Company number
Daejan Investments (Grove Hall)
Limited 631208
Daejan Investments (Harrow) Limiteda 658151
Daejan Investments (Park) Limiteda 853824
Daejan Investments Limited 629395
Daejan Metropolitan Investments
Limited* 741216
Daejan Properties Limited 629396
Daejan Retail Properties Limited 3087160
Daejan Securities Limited*a 1340920
Daejan Services Limited*a 1710219
Daejan Traders Limited* 4204201
Daneryn Limited* 1355633
Derlingrange Limited* 1268416
Ealux Limited 329109
Endell Developments Limited* 6434585
Endell Properties Limited*a 6434799
Endell Real Estate Limited* 6434801
Esslock Limited 460091
Fifth Charles Investments Limited* 1295017
First Charles Investments Limited* 1293651
Foredale Limited* 1124135
Gertsbrix Developments Limited 683494
Grapeseal Limited* 1077074
Halliard Property Co. Limited (The) 613836
Hampstead Way Investments Limiteda 751683
Inputstock Limited 4497638
* Directly owned
a Company exempted from audit
Company number
Inputstripe Limited 4497556
Insworth Investments Limited* 1375136
Johnsbrix Developments Limited 812765
Kingforge Limited* 1273663
Kintsilk Investments Limiteda 789249
Lawnstamp Limiteda 5315719
Lesbrix Developments Limited 789658
Limebridge Co. Limiteda 868817
Lookstate Limiteda 1993941
Lyme & Farrar Limited 462783
Marfred Limited 486536
Mineral and General Investments
Limited 391604
Modboon Limited* 1366107
Mont Investments Limited 525225
Offerworld Limited 2476200
Pegasus Investment Company Limiteda 515280
Ronend Properties Limited* 1147295
Rosebel Holdings Limiteda 693831
Seaglen Investments Limiteda 616559
Semlark Limited*a 6853866
Simlock Limited 445959
St. Leonards Properties Limited 766864
Strand Palace Hotel Limited* 3676473
Summerseas Investment Co. Limiteda 616969
Wisebourne Limited* 949842
Workvideo Limited* 4204199
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.
PAGE 83
DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
Incorporated in the USA
Registered office, except as noted in (i) to (vii) at end of this note: 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.
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
PAGE 84
DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
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.
2023 2022
£000 £000
(Loss)/profit before tax per the income statement (41,038) 159,659
Property valuation losses/(gains) 90,169 (101,072)
Financial instruments fair value gains (4,271) (5,298)
Realised valuation losses on property disposals 2,308 569
Underlying profit before tax 47,168 53,858
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.
2023 2022
Total equity attributable to equity holders of the parent (£000) 1,928,788 1,955,560
Weighted average number of shares in issue during the year 16,295,357 16,295,357
Shareholders funds per share (£) 118.36 120.01
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.
2023 2023 2023 2022 2022 2022
UK USA Total UK USA Total
£000 £000 £000 £000 £000 £000
Loans and borrowing
(Note 16) 366,722 410,066 776,788 368,442 381,596 750,038
Total assets 2,210,684 966,069 3,176,753 2,276,317 902,696 3,179,013
Gearing 16.6% 42.4% 24.5% 16.2% 42.3% 23.6%
PAGE 85
DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
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.
2023 2023 2023 2022 2022 2022
UK USA Total UK USA Total
£000 £000 £000 £000 £000 £000
Carrying value at 1 April
(Note 9) 1,920,620 784,824 2,705,444 1,841,368 723,077 2,564,445
Foreign exchange movements – 50,096 50,096 – 32,073 32,073
Value at 1 April at year end
exchange rate 1,920,620 834,920 2,755,540 1,841,368 755,150 2,596,518
Acquisitions 3,955 – 3,955 138 – 138
Additions to existing
properties 12,115 7,307 19,422 9,797 5,052 14,849
Disposals (4,423) (1,488) (5,911) (4,807) (2,326) (7,133)
Revaluation (78,307) (11,862) (90,169) 74,124 26,948 101,072
Carrying value at 31 March
(Note 9) 1,853,960 828,877 2,682,837 1,920,620 784,824 2,705,444
Valuation (loss)/gain
percentage (4.1%) (1.4%) (3.3%) 4.0% 3.6% 3.9%
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 19 June 2023 following approval from shareholders, the Company completed a scheme of
reconstruction under which the total issued share capital of the Company was reduced from
£4,073,839 to £836,841 by cancelling the 12,947,993 Ordinary B shares of 25 pence each in issue
(see Note 14 on page 73 for details of shareholdings at 31 March 2023). The Company
simultaneously issued 12,947,993 new Ordinary B shares of 25 pence each to Dock Newco Limited;
Dock Newco Limited then issued 12,947,993 of its own shares to the original Ordinary B
shareholders of the Company. This resulted in the entire share capital of the Company being owned
by Dock Newco Limited and the former B shareholders of the Company owning the same number
of shares and proportion of Dock Newco Limited as they did in the Company. There was therefore
no material financial effect to the Company or its shareholders from this reconstruction. Dock
Newco Limited subsequently changed its name to Daejan Group Holdings Limited on 28 June 2023.
PAGE 86
DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
COMPANY BALANCE SHEET
as at 31 March 2023
Notes 2023 2022
£000 £000 £000 £000
Fixed assets
Investment in subsidiary
undertakings 4 1,199,359 1,198,822
Deferred tax assets – 118
Loan to a related party 225,000 225,000
1,424,359 1,423,940
Current assets
Debtors 22,925 10,086
Cash at bank 32,849 44,656
55,774 54,742
Creditors: amounts falling
due within one year 5 (324,025) (255,938)
Net current liabilities (268,251) (201,196)
Total assets less current
liabilities 1,156,108 1,222,744
Creditors: amounts falling due
after more than one year 6 (12,225) (62,363)
Deferred tax liability (750) –
Net assets 1,143,133 1,160,381
Capital and reserves
Called up share capital 7 4,074 4,074
Share premium account 555 555
Other reserves 893 893
Profit and loss account 1,137,611 1,154,859
Equity shareholders’ funds 1,143,133 1,160,381
The Company’s profit for the year after taxation was £2,382,000 (2022 – loss of £1,448,000.
The financial statements of Daejan Holdings Limited (Company number 305105) on pages 87 to 92
were approved by the Board of Directors on 29 September 2023 and were signed on its behalf by:
B S E Freshwater
Director
The accompanying notes form an integral part of the Company financial statements.
PAGE 87
DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
COMPANY STATEMENT OF CHANGES IN EQUITY
Issued Share Equity
share premium Other Retained shareholders’
for the year ended 31 March 2023 capital account reserves earnings funds
£000 £000 £000 £000 £000
Balance at 1 April 2021 4,074 555 893 1,174,558 1,180,080
Loss for the year – – – (1,448) (1,448)
Dividends to equity shareholders – – – (18,251) (18,251)
Balance at 1 April 2022 4,074 555 893 1,154,859 1,160,381
Profit for the year – – – 2,382 2,382
Foreign exchange translation differences – – – (727) (727)
Dividends to equity shareholders – – – (18,903) (18,903)
Balance at 31 March 2023 4,074 555 893 1,137,611 1,143,133
The accompanying notes form an integral part of the Company financial statements.
PAGE 88
DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
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 Standards 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.
(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
profit and loss account.
PAGE 89
DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
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. Loss on Ordinary Activities before Taxation
The Company has no employees other than its Directors and their remuneration is set out on
pages 44 and 46 of the Group accounts. The parent company audit fee is disclosed on page 64 of
the Group accounts.
3. Dividends
2023 2022
£000 £000
Amounts recognised as distributions to equity holders in the year:
First interim dividend for the year ended 31 March 2022,
approved 18 August 2021 @ 56p per share – 9,125
Second interim dividend for the year ended 31 March 2022,
approved 7 March 2022 @ 56p per share – 9,126
First interim dividend for the year ended 31 March 2023,
approved 3 August 2022 @ 58p per share 9,451 –
Second interim dividend for the year ended 31 March 2023,
approved 28 March 2023 @ 58p per A share and 58p per B share 9,452 –
18,903 18,251
4. Investments in Subsidiary Undertakings
Shares at
cost Loans Total
£000 £000 £000
At 1 April 2022 992,205 206,617 1,198,822
Loans – 537 537
At 31 March 2023 992,205 207,154 1,199,359
PAGE 90
DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
5. Creditors: Amounts falling due within one year
2023 2022
£000 £000
Bank loans and overdrafts 50,139 136
Amounts owed to subsidiary undertakings 272,572 254,689
Other creditors and accruals 1,314 643
Derivative financial instruments – 470
324,025 255,938
6. Creditors: Amounts falling due after more than one year
2023 2022
£000 £000
Secured bank loans 12,225 62,363
7. Share Capital
2023 2023 2022 2022
Number £000 Number £000
Allotted, called up and fully paid:
Ordinary shares of 25 pence per share – – 16,295,357 4,074
Ordinary A shares of 25 pence per share 3,347,364 837 – –
Ordinary B shares of 25 pence per share 12,947,993 3,237 – –
Ordinary shares of 25 pence per share 16,295,357 4,074 16,295,357 4,074
In November 2022, the Company reclassified the 3,347,364 ordinary shares that were owned by
Dock Newco Limited to Ordinary A shares. The remaining 12,947,993 ordinary shares were
reclassified to Ordinary B shares.
None of the shares have or had any special rights or rights to fixed income in the current or previous
year. There are and have been no restrictions on the transfer of these shares or restrictions on voting
rights in either the current or previous year.
8. Profit and Loss Reserve
The Company previously 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 91
DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
NOTES TO THE COMPANY FINANCIAL STATEMENTS continued
9. Events after the reporting period
On 19 June 2023 following approval from shareholders, the Company completed a scheme of
reconstruction under which the total issued share capital of the Company was reduced from
£4,073,839 to £836,841 by cancelling the 12,947,993 Ordinary B shares of 25 pence each in issue
(see Note 14 on page 73 for details of shareholdings at 31 March 2023). The Company
simultaneously issued 12,947,993 new Ordinary B shares of 25 pence each to Dock Newco Limited;
Dock Newco Limited then issued 12,947,993 of its own shares to the original Ordinary B
shareholders of the Company. This resulted in the entire share capital of the Company being owned
by Dock Newco Limited and the former B shareholders of the Company owning the same number
of shares and proportion of Dock Newco Limited as they did in the Company. There was therefore
no material financial effect to the Company or its shareholders from this reconstruction. Dock
Newco Limited subsequently changed its name to Daejan Group Holdings Limited on 28 June 2023.
PAGE 92
DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
GROUP FIVE-YEAR RECORD (UNAUDITED)
2019 2020 2021 2022 2023
£000 £000 £000 £000 £000
Total rental and related income 156,161 166,143 162,457 168,386 184,977
Property operating expenses (79,580) (91,094) (91,659) (89,840) (104,847)
Net rental and related income 76,581 75,049 70,798 78,546 80,130
Profit on disposal of investment properties 12,203 15,775 3,248 15,344 9,352
Net valuation gains/(losses) on investment
properties 83,928 (90,494) 33,817 101,072 (90,169)
Administrative expenses
Recurring (13,904) (14,254) (14,984) (17,871) (18,610)
Non-recurring arising from Scheme
of Arrangement – – (3,259) – –
Total administrative expenses (13,904) (14,254) (18,243) (17,871) (18,610)
Net operating profit/(loss) before net
financing costs 158,808 (13,924) 89,620 177,091 (19,297)
Net financing expense (20,976) (19,227) (17,646) (17,432) (21,741)
Profit/(loss) before taxation 137,832 (33,151) 71,974 159,659 (41,038)
Income tax (charge)/credit (17,853) (13,441) (17,518) (102,011) 9,944
Profit/(loss) for the year 119,979 (46,592) 54,456 57,648 (31,094)
Earnings/(loss) per share £7.36 £(2.92) £3.35 £3.53 £(1.92)
Total assets 2,766,503 2,756,597 3,011,216 3,179,013 3,176,753
Equity shareholders’ funds 1,940,521 1,897,168 1,902,102 1,956,499 1,928,788
Equity shareholders’ funds per share £119.07 £116.35 £116.67 £120.01 £118.36
PAGE 93
DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
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 94
NOTES
DAEJAN HOLDINGS LTD Annual Report & Accounts 2023
PAGE 95
Opposite page: Ashworth Court, London W8. Back cover: Starlite Lodge, Greenford, Middlesex.
Design, art direction and UK and New York photography by Roger Watt
sterling 176645