Half-year Report

23 November 2016

DAEJAN HOLDINGS PLC

INTERIM RESULTS ANNOUNCEMENT for the half year ended 30 September 2016

The Board is pleased to present the Interim Statement for the half year ended 30 September 2016.

· The profit before tax for the period was £65.1 million (2015: £58.9 million) after accounting for the net valuation gain on investment properties of £38.6 million (2015: £35.5 million).

· The property portfolio has been valued by the Directors based on the recommendations of the Group's external advisers and continues to show modest growth in both the UK and USA.

· We continue to see some increase in rental income in the UK and USA. The significant reduction in the sterling/dollar exchange rate in this period has resulted in USA reported rental income increasing by £2.4 million and has, on the balance sheet, produced an overall net translation gain of £20.0 million (2015: £3.7 million loss).

· The tax charge in the period has benefited from a one-off adjustment to the cumulative deferred tax balance following a reduction in the rate of corporation tax.

· My last annual report was written shortly after the decision had been taken for the UK to leave the European Union. Despite some positive short term indicators since that time, it is still far too soon to be able to form a balanced judgement as to what lies ahead for the UK economy as a whole and the property sector in particular. In the USA we now have the uncertainty of a new and largely unknown President whose impact on the USA economy and the property sector cannot be foreseen at this stage. Against this background we will continue to pursue our long term, low risk approach to creating growth in net asset value.

· The principal risk factors affecting the remainder of the financial year continue to be exposure to movements in the valuation of the Group's investment properties and financial instruments, movements in the sterling/dollar currency rate of exchange and the incidence of voids and bad debts.

· An interim dividend of 35p per share will be paid on 10 March 2017 to shareholders on the register on 10 February 2017.

B S E Freshwater

Chairman

23 November 2016

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All other comprehensive income may be reclassified as profit and loss in the future.

Notes to the Consolidated Interim Financial Statements for the six months ended 30 September 2016

1. Basis of preparation  

This interim financial information has been prepared in accordance with International Accounting Standard (IAS) 34 Interim Financial Reporting, applying the accounting policies and presentation that were applied in the preparation of the Company's published consolidated financial statements for the year ended 31 March 2016. As required by the Listing Rules of the Financial Services Authority, the Directors have considered the result of the endorsement by the EU of new or changed International Financial Reporting Standards that are applicable or available for early adoption in the preparation of the Company's next consolidated financial statements for the year ending 31 March 2017 and concluded that they have no material effect on either the current or prior periods.

The Directors have reviewed the current and projected financial position of the Group and are satisfied that the Group has adequate resources to cover current liabilities. Therefore, the Directors continue to adopt the going concern basis in preparing the half year report.

2. Status of the interim financial information

The interim financial information in this statement has not been audited or reviewed by auditors pursuant to the Auditing Practices Board guidance on review of interim financial information and does not constitute statutory accounts, as defined in section 435 of the Companies Act 2006. The auditors' report on the statutory accounts for the year ended 31 March 2016 was unqualified and did not contain a statement under section 498 of the Companies Act 2006. Statutory accounts for the year ended 31 March 2016 have been delivered to the Registrar of Companies. The interim financial statements were approved by the Board of Directors on 22 November 2016. The preparation of the interim financial information requires management to make assumptions and estimates about future events which are uncertain, the actual outcome of which may result in a materially different outcome from that anticipated.

3. Segmental Analysis

4. Taxation

The tax charge in the interim statement has benefited from a one off credit of £7.7 million arising from the enactment of a reduction in the future UK corporation tax rate from 18% to 17% (effective 1 April 2020) which has reduced our cumulative net deferred tax liabilities. The tax charge for year ending 31 March 2016 benefited from a one off credit of £13.8 million arising from the enactment of a reduction in the future UK corporation tax rate from 20% to 18%.

5. Dividends  

No dividends were paid in the six months ended 30 September 2016 (six months ended 30 September 2015: £Nil).

6. Investment properties

The Directors have estimated the value of the investment properties at 30 September 2016 after consultation with the Group's advisers. A full valuation of the Group's properties will be carried out by independent professional valuers at 31 March 2017.

7. Financial Instruments - fair value disclosure

The Group seeks to reduce interest rate risk by fixing rates on the majority of its loans and borrowings, either through the use of fixed rate mortgage finance or through interest rate swaps. The Group does not speculate in treasury products.

The Group does not hedge account and all its mortgages and interest rate swaps are initially recognised at fair value. Mortgages are subsequently recorded at amortised cost whilst interest rate swaps are subsequently recorded at fair value, with any movement being recorded in the consolidated income statement. The fair values of all these financial instruments are determined by reference to observable inputs that are classified as Level 2 in the fair value hierarchy set out in International Financial Reporting Standard 13 Fair Value Measurement. Fair values have been determined by discounting expected future cash flows using market interest rates and yield curves over the remaining term of the instrument, as adjusted to reflect the credit risk attributable to the Group and, where relevant, its counterparty.

Fair value measurements are as follows:

In both 2016 and 2015 there were no non-recurring fair value measurements and there were no material differences between the fair value and carrying amounts of all the other financial assets of the Group.

8. Related party transactions

Day-to-day management of the Group's properties in the UK is mainly carried out by Highdorn Co. Limited and by Freshwater Property Management Limited. Mr BSE Freshwater and Mr SI Freshwater are directors of both companies. They have no beneficial interest in the share capital of Highdorn Co. Limited. Mr BSE Freshwater, Mr SI Freshwater and Mr D Davis are directors of the parent company of Freshwater Property Management Limited but have no beneficial interest in either company. Mr RE Freshwater has a beneficial interest in a trust holding interests in shares in Highdorn Co. Limited.

In their capacity as managing agents, Highdorn Co. Limited and Freshwater Property Management Limited collect rents and incur direct property expenses on behalf of the Group. At 30 September 2016, the aggregate net amounts due to the Group from Highdorn Co. Limited and Freshwater Property Management Limited in relation to such agency receipts and payments was £1.1 million (2015: £0.2 million due from the Group). These amounts are not secured and are payable on demand. No guarantees have been given or received and the amounts are settled in cash.

The amounts paid by the Group during the period for the provision of property and other management services by Highdorn Co. Limited and Freshwater Property Management Limited were £3.9 million (six months ended 30 September 2015: £2.6 million).

The board considers that the Directors are the key management personnel of the Group and their remuneration is disclosed in the Daejan Holdings PLC Annual Report for 31 March 2016.

9. Statement of Directors' responsibilities

The Directors confirm that this condensed set of financial statements has been prepared in accordance with IAS 34 as adopted by the European Union, and that the interim management report herein includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8.

The Directors of Daejan Holdings PLC are listed in the Daejan Holdings PLC Annual Report for31 March 2016. A list of current Directors is maintained on the Daejan Holdings PLC website www.daejanholdings.com.

B S E Freshwater

Chairman

23 November 2016