6th Sep 2006 07:02
Derwent Valley Holdings PLC06 September 2006 6 September 2006 Derwent Valley Holdings plc ("Derwent Valley" / "Group") Interim results for the half year ended 30th June 2006 Derwent Valley, a specialist investor and refurbisher of Central Londoncommercial property, announces its results for the half year ended 30th June2006. Highlights Half year Half year Year Change to 30.06.06 to 30.06.05 to 31.12.05 %Adjusted net asset value per share (p) 1,540 1,176 1,335 15.4 *Adjusted net property income (£m)** 23.6 23.5 46.6 0.4Adjusted profit before tax (£m) *** 9.7 8.7 16.7 11.5IFRS profit before tax (£m) 122.6 61.5 150.4 99.3Adjusted earnings per share (p) *** 15.33 13.25 26.23 15.7Dividend per share (p) 4.225 3.925 13.65 7.6Total return (%) 16.1 10.3 25.5 - * Change based on 31st December 2005 ** Excludes development income *** Excludes the development income, revaluation movement on investmentproperties, profit on the disposal of investment properties and the movement infair value of derivative financial instruments, together with the related taxeffects for earnings per share. • Adjusted net asset value per share rose 205p to 1,540p reflecting letting activity and the strength of the Central London property market. • Value of investment portfolio increased by an underlying 9.7% to £1.14 billion; average uplift in valuation of West End and City properties of 9.7% and 9.6% respectively. • Adjusted profit before tax increased £1.0 million to £9.7 million. • Development income £6.3 million - the initial share of profit from the Telstar redevelopment, prelet to Rio Tinto. • Interim dividend increased by 7.6% to 4.225p. • Strong progress with asset management and letting activity; 6,200 sq m of vacant space let during the period at a contracted rent of £1.3 million; significant lettings made in the second half to date, particularly at The Johnson Building. • Acquisitions totalled £34.1 million; two freehold interests from the Crown were purchased subsequent to the half year for £14.65 million. • Five major projects underway (39,400 sq m) and further advances in the delivery of the Group's project pipeline with two major planning permissions recently obtained. John Ivey, Chairman, commented: "Derwent Valley owns a portfolio which is exclusively focused on one of theareas of choice for both investors and tenants. With rental values maintainingtheir upward trend and an extensive pipeline of projects, we remain confident ofcontinuing to deliver strong returns for shareholders. For further information, contact: Derwent Valley Holdings plc 020 7659 3000 - after 11:00 amJohn Burns, Managing Director Financial Dynamics 020 7831 3113Stephanie Highett/ Dido Laurimore CHAIRMAN'S STATEMENT Half year review The board is pleased to report strong progress in the half year to 30th June2006 with an adjusted net asset value per share increase of 15.4% to 1,540pagainst 9.5% for the equivalent period last year. Ongoing asset management andletting activity, together with further advances in our development pipeline,were key achievements during the period under review. This momentum has beenmaintained since the half year end. Valuation The investment portfolio was valued at £1.14 billion, reflecting an underlyingvaluation increase of 9.7%. The valuation surplus was £99.6 million beforededucting the lease incentive adjustment of £0.4 million. This uplift wasachieved by way of lettings and improved rental values during the period, whichtogether accounted for £38.1 million of the surplus. Yield compressioncontributed £57.2 million, due to an almost relentless demand from theinvestment market. Those properties under refurbishment or redevelopmentincreased in value by £2.6 million, with further surpluses expected to accrue asthe developments reach completion. The balance of £1.7 million came fromacquisitions. The portfolio is apportioned in value between the West End at£846 million (74%) and the City borders at £294 million (26%). An uplift of9.7% in the West End marginally exceeded that for the City borders of 9.6%. Thesmaller City borders' portfolio enjoyed a substantial uplift from two of itslargest properties - The Johnson Building (post completion) and the Tea Building(rental improvement). The West End villages enjoyed strong growth, with Soho/Covent Garden 10.5%, Victoria 9.4% and North of Oxford Street 8.8%. On a likefor like basis, the increase in rental value for the portfolio for the periodwas 3.4% against 2.8% for the comparable period last year. Results Profit before tax, adjusted to show the recurring element of the group's profit,was £9.7 million against £8.7 million for the comparable half year period. The£1.0 million increase reflects the rise in gross property income, and lowerinterest charges, which were partially offset by higher vacant property costs.Gross property income rose from £24.8 million to £26.1 million with the mainincreases coming from lettings (£1.2 million) and surrender premiums received(£0.9 million), offset by voids arising from new schemes (£0.9 million). Theredevelopment and refurbishment programme caused an increase in propertyoutgoings and, consequently, net property income would have remainedapproximately the same at £23.6 million but for the development income from theTelstar project estimated at £6.3 million. IFRS profit before tax was £122.6million compared with £61.5 million for the equivalent period last year. Inaddition to the net revaluation surplus of £99.2 million, and the profit ondisposal of investment properties of £1.7 million, the IFRS results alsoincluded a revaluation surplus from the joint venture property of £3.5 million.Total return for the half year was 16.1% compared to 10.3% for the first half of2005. Dividend The board has declared a dividend of 4.225p per share, an increase of 7.6% onthe 3.925p paid at the interim stage last year. Further details concerning thedividend are given in note 11 of the interim financial statements. Portfolio review In the half year to 30th June 2006, our most significant acquisition was thelandmark Astoria retail/entertainment centre in Charing Cross Road, WC2,together with a small adjacent property in Oxford Street, W1, for £23.75million. This purchase adds to our existing holdings in the area and offers anexcellent opportunity for future redevelopment. Property sales in the firsthalf have been at a more modest level than in the past with the disposal of theresidential accommodation at The Johnson Building and three properties from theIslington portfolio realising £12.0 million in total. The highlight of the first half was the early pre-letting of Telstar,Paddington, W2. Rio Tinto, a leading international company, has agreed to leasethe entire 9,900 sq m office building at a rental level of £498 per sq m, whichis the highest figure achieved in Paddington. This redevelopment, which we arecarrying out as development manager for Prudential, is due to be completed inautumn 2007. We have a profit participation in the project and our share of theestimated total profit will be taken in stages, with £6.3 million beingrecognised in this half year. Since the half year end, we have made significant progress in letting TheJohnson Building, Hatton Garden, EC1. Here, Grey Advertising and Faber Maunsellhave taken 4,700 sq m and 3,400 sq m respectively, and considerable interest isbeing shown in the remaining space. This success is further evidence of ourability to produce quality space for tenants, and confirms Midtown as a viablealternative to the West End. In addition, we have purchased two freeholdinterests from The Crown Estate: at Riverwalk House, SW1 for £13.0 million andat Argosy House, W1 for £1.65 million. In both instances we already heldmedium-term leases. The properties have development or refurbishment potentialand by bringing them under our direct control as freeholder, we have positionedourselves to extract maximum benefit. Linked to this transaction was the saleof our leasehold interest in Morley House, W1 to the freeholder, The CrownEstate, for £17.5 million. The second half will see progress on various schemes from the developmentpipeline, with Horseferry House, Victoria, SW1 being the most significant. Acomprehensive refurbishment of the entire building is being undertaken andcompletion is scheduled for the beginning of 2008. This project includesreconfiguring the layout, which will increase the floor area by 1,200 sq m to15,100 sq m. With tenant demand improving, we are confident both about thislocation and the product. Other schemes include a 4,400 sq m office developmentat Gresse Street, W1, a mixed-use project at Portobello Dock, W10 of 6,400 sq mof office and residential space, and a 3,600 sq m refurbishment at City Road,EC1. Planning permission has been obtained at Wedge House, SE1 to replace theexisting 3,600 sq m building with an 8,100 sq m office block. This scheme islikely to commence when the occupational lease expires in 2008. Financing At the half year, net debt was £327.0 million. The increase of £23.1 millionsince the year end is due primarily to acquisitions of £32.3 million which,together with capital expenditure of £8.4 million, exceeded disposal proceeds of£12.0 million. With a number of schemes starting in the second half, capitalexpenditure for the whole of 2006 is forecast to be £34 million with a further£49 million in 2007. On a comparable basis to last year, profit and lossgearing for the half year was 2.07 compared with 1.86 for the equivalent periodin 2005 and 1.84 for the whole of 2005. Balance sheet gearing decreased to47.1% from 50.1% at the year end, as the increase in debt was more thancompensated by the increase in net assets. Currently, 62% of net debt is eitherat fixed rates or hedged using various interest rate derivative products. Theweighted average cost of borrowing is 6.4%. The fair value adjustment figurefor the debenture was a negative £13.0 million compared to a negative £14.1million at the year end and a negative £13.5 million at 30th June 2005. This isequivalent to 17p per share after tax (31st December 2005: 18p; 30th June 2005:18p). REITs The board continues to evaluate the benefits of becoming a REIT. Whilst theMarch budget statement resolved the major issues, a number of operationalmatters, relevant to the refurbishment and redevelopment activities of ourbusiness, remain outstanding. We expect these matters to be progressivelyresolved. We shall advise shareholders as soon as we are satisfied that tobecome a REIT will be in the best interest of the company and its shareholders. Prospects Our portfolio is exclusively focused on one of the areas of choice for bothinvestors and tenants. Therefore, with rental values maintaining their upwardtrend and an extensive pipeline of current and future projects, we remainconfident of continuing to deliver strong returns for shareholders. J.C. Ivey 6th September 2006 OPERATING REVIEW We continue our strategy of delivering our distinctive brand of offices into animproving Central London market, where tenant demand is strong and where thereis a lack of good quality space. Current projects are expected to create over 55,000 sq m of modern space, whichwill become available over the next three years. Furthermore, we are advancingthrough the planning process a number of significant opportunities within ourmedium- and longer-term development pipeline, which could add a similar level ofspace. Redevelopment and refurbishment Projects currently in progress include: • Telstar, Paddington, W2 We are acting here as development managers on behalf of the Prudential in a9,900 sq m office development. Construction is progressing well, with thestructural frame already out of the ground and the cladding installation due tocommence shortly. Completion of the development is anticipated in autumn 2007.We have recently pre-let the entire building at £4.95 million per annum to theinternational mining company, Rio Tinto, for their European headquarters. Thissuccessful letting endorses not only Paddington as an important core West Endoffice location but also the quality of the building's design. • Horseferry House, Victoria, SW1 Acquired last year with short-term income, vacant possession has been obtainedand work has now commenced on this 15,100 sq m scheme. Our proposals seek tore-invent this imposing 1930s property over the next 12 months with the emphasison creating contemporary office space in the Derwent Valley style. The buildingwill be completely refocused through the creation of a new central circulationcore around the existing atrium. A striking, spacious entrance with improvedground floor uses will allow retail and restaurant space, and introduce streetlife to this location. • 16-19 Gresse Street, Noho, W1 Following receipt of planning permission last year for a new office development,we have finalised the design and construction process, enabling a 4,400 sq moffice scheme to commence. Whilst this was taking place, the building wasfully let on a short-term basis although vacant possession has now beenobtained. We expect this project, which will be completed towards the end of2007, to generate strong demand from the media and communication sectors. • Portobello Dock and Kensal House, Ladbroke Grove, W10 Work has commenced on the 6,400 sq m mixed use scheme in this canal-sidesetting. We have identified this as an interesting regeneration area, and byusing the character of the original buildings and the setting, we will createunique office spaces and high-grade residential units. Completion is expectedin autumn 2007. Planning permissions and applications The company has made significant progress with the following schemes: • 20 Leonard Street, EC2 Planning permission has now been obtained for development of this site, which isan improving location on the edge of the City to the rear of our Oliver's Yardbuilding. The scheme will create 2,000 sq m of offices and 47 privateresidential apartments. The planning requirement for affordable housing wassuccessfully negotiated off site and will be located at two other propertieswithin our Islington portfolio. Construction will commence in autumn 2006. • Wedge House, Blackfriars Road, SE1 This 3,600 sq m building is our only ownership south of the Thames and we haverecently been granted planning consent to redevelop 8,100 sq m of new offices.The property is currently let at a low rent, and it is anticipated theredevelopment will commence upon lease expiry in mid 2008. • 40-43 Chancery Lane, Holborn, WC2 A planning application has recently been submitted for a 9,900 sq m officedevelopment around a central courtyard. This application encompasses anadjacent building, the owner of which also owns the freehold of part of oursite. If successful the scheme could potentially commence in 2008. In theinterim, we are maximising the short-term income. Lettings Lettings in the first half totalled 6,200 sq m in 36 transactions, which willgenerate rental income of £1.3 million per annum. This activity was across theportfolio and included suites at the Tea Building, Turnmills and Morelands,which all offer studio style office space. In addition, we achieved lettings atour recent scheme at St. Cross Street and the reconfigured Holden House retailunit in Oxford Street. Since the half year end, there has been further important letting activity. Inparticular, nearly 60% of the space at The Johnson Building has been let. Thisrecently completed project, which is our largest to date, provides 13,900 sq mof stylish and innovative office space. The building, a blend of new andrefurbished accommodation, created architectural and construction challenges andis set around a dramatic central atrium, which provides a nucleus for thebuilding. It was the intention to create space that would draw West Endoccupiers to this Midtown location. In this we have been successful. GreyAdvertising, a leading media agency, is relocating from the West End, and hastaken 4,700 sq m at £1.8 million per annum on a fifteen year lease, with a breakat year ten. In addition, Faber Maunsell, an international engineering andmanagement consultancy, has taken 3,400 sq m at £1.3 million per annum. We arein discussion with other potential tenants for the balance of the space. After adjusting for these transactions, the amount of space available forletting is 15,300 sq m or 6% of the portfolio's rental value. This is higherthan the 9,500 sq m at last year end, principally reflecting the balance of TheJohnson Building, which was completed in the first half. Even with The JohnsonBuilding now being classified as available for letting, vacant space underrefurbishment or identified for refurbishment increased from 28,600 sq m at lastyear end to 32,400 sq m at the half year end. This is a direct consequence ofprogressing our project programme within a favourable Central London environmentwhere the outlook is positive for the foreseeable future. Acquisitions and disposals The investment market remains exceptionally competitive driven by a shortage ofstock, and further evidence of rental growth. Against this background, we havemade £34.1 million of additions to the portfolio during the first half: • The Astoria, 157-165 Charing Cross Road, WC2 and 17 Oxford Street, W1 These properties, which were acquired in June for £23.75 million, excludingcosts, comprise an entertainment venue and retail space, and are positionedadjacent to Tottenham Court Road underground station at the junction of OxfordStreet an Charing Cross Road. The total income is £1.3 million per annum. This4,200 sq m acquisition provides an important strategic opportunity to beinvolved with the regeneration of the area, which has been designated as part ofthe West End Special Policy Retail Area and also identified within the long-termCrossrail proposals. When combined with our existing holding at 135-155 CharingCross Road, these create the prospect of a substantial redevelopment.Architectural studies have been initiated to evaluate the long-term potential ofsuch a scheme. • 35 Kentish Town Road, Camden, NW1 Having owned this leasehold property for a number of years, we have been able toimprove our holding through the acquisition of the freehold interest for £2.25million, excluding costs. Together with our adjacent ownership, which has canalfrontage, we envisage a mixed-use scheme of approximately 3,300 sq m in thisestablished village location. A planning application will be submitted laterthis year for a scheme in 2008. • 186-188 City Road, EC1 Following acquisition in February 2006 for £6.8 million, excluding costs, vacantpossession has now been obtained at this 3,600 sq m building and refurbishmentwill commence shortly. Situated close to our Oliver's Yard building, therefurbishment is designed to offer good value office space with rents around£270 per sq m. Since the half year end, we have completed an important transaction with TheCrown Estate. This involved the acquisition of two freehold interests for£14.65 million and the disposal of a leasehold property for £17.5 million. Weacquired the freeholds of Argosy House, 215-217 Great Portland Street, W1 (2,800sq m) and Riverwalk House, 157-166 Millbank, SW1 (6,900 sq m) where we alreadyheld leasehold interests of 55 years and 57 years respectively. The merger ofthe freehold and leasehold interests creates an immediate uplift in value withthe prospect that further value can be unlocked. A modest refurbishment schemehad been planned at Argosy House but with the improved tenure we can nowconsider a more extensive project to meet market demands. Riverwalk Houseoccupies an important position with strategic Thames frontage, and we areevaluating the longer term potential of this under-utilised site. Thetransaction included the sale of Morley House, 314-322 Regent Street, W1, wherewe held a 71 year leasehold interest and where we had undertaken a rollingrefurbishment over the last few years. On the disposal front, the first half was somewhat quieter than the first halfof last year with £12.0 million raised against £58.6 million. Net disposalproceeds came from the 14 residential loft style apartments at Sweeps, HattonGarden for £5.7 million, and three Islington properties for £6.3 million. J.D. Burns 6th September 2006 GROUP INCOME STATEMENT (UNAUDITED) Half year Half year Year to 30.6.06 to 30.06.05 to 31.12.05 Note £m £m £m Gross property income 26.1 24.8 49.5Development income 2 6.3 - -Property outgoings (2.5) (1.3) (2.9) _______ _______ _______Net property income 29.9 23.5 46.6Administrative expenses (4.2) (4.1) (8.8) _______ _______ _______ 25.7 19.4 37.8Revaluation surplus 99.2 49.7 124.1Profit on disposal of investment properties 3 1.7 4.5 9.6 _______ _______ _______Profit from operations 126.6 73.6 171.5Finance income 0.2 0.2 0.4Finance costs (9.9) (10.9) (21.5)Movement in fair value of derivativefinancial instruments 2.2 (1.4) -Share of results of joint ventures 4 3.5 - - _______ _______ _______Profit before tax 122.6 61.5 150.4Tax expense 5 (30.4) (13.1) (33.7) _______ _______ _______Profit for the period 10 92.2 48.4 116.7 _______ _______ _______ Earnings per share 6 172.42p 90.71p 218.63p _______ _______ _______ Diluted earnings per share 6 170.98p 89.94p 216.81p _______ _______ _______ All amounts are attributable to the equity holders of the parent company. GROUP BALANCE SHEET (UNAUDITED) 30.6.06 30.06.05 31.12.05 Note £m £m £mNon-current assetsInvestment property 7 1,144.6 926.2 1,015.6Property, plant and equipment 8 0.3 0.4 0.4Investments in joint ventures 5.3 1.8 1.8Other receivables 13.7 12.6 13.3 ________ ________ ________ 1,163.9 941.0 1,031.1 ________ ________ ________Current assetsTrade and other receivables 16.6 13.8 12.3Cash and cash equivalents 7.2 7.9 14.7 ________ ________ ________ 23.8 21.7 27.0 ________ ________ ________ Total assets 1,187.7 962.7 1,058.1 Current liabilitiesBank overdraft - - 2.0Trade and other payables 21.0 29.7 20.7Corporation tax liability 3.8 2.3 3.0Provisions 0.1 0.1 0.1 ________ ________ ________ 24.9 32.1 25.8 ________ ________ ________Non-current liabilitiesBank loans 280.0 242.0 262.010 1/8% First Mortgage Debenture Stock 34.5 34.5 34.52019Leasehold liabilities 19.7 22.1 20.1Derivative financial instruments 0.9 4.5 3.1Provisions 1.3 1.1 1.2Deferred tax liability 9 131.8 88.4 105.2 ________ ________ ________ 468.2 392.6 426.1 ________ ________ ________ Total liabilities 493.1 424.7 451.9 ________ ________ ________Total net assets 694.6 538.0 606.2 ________ ________ ________ Equity attributable to equity holders of the parent company 10Share capital 2.6 2.6 2.6Share premium 156.1 154.9 155.1Other reserves 2.7 0.6 2.3Retained earnings 533.2 379.9 446.2 ________ ________ ________Total equity 694.6 538.0 606.2 ________ ________ ________ GROUP CASH FLOW STATEMENT (UNAUDITED) Half year Half year Year to 30.6.06 to 30.06.05 to 31.12.05 £m £m £m Operating activitiesCash received from tenants 29.5 27.0 46.3Direct property expenses (2.2) (1.7) (3.0)Cash paid to and on behalf of employees (2.9) (2.7) (4.5)Other administrative costs (1.6) (1.4) (2.8)Interest received 0.2 0.2 0.4Interest paid (10.6) (10.3) (21.7)Tax expense paid in respect of operating activities (2.2) (0.4) (1.0) ________ ________ ________Net cash from operating activities 10.2 10.7 13.7 ________ ________ ________Investing activitiesAcquisition of investment properties (32.3) (4.0) (40.3)Capital expenditure on investment properties (8.4) (12.2) (26.7)Disposal of investment properties 12.0 62.3 97.8Tax expense paid in respect of investment activities (0.8) (2.1) (3.2) ________ ________ ________Net cash (used in)/from investment activities (29.5) 44.0 27.6 ________ ________ ________Financing activitiesMovement in bank loans 18.0 (46.0) (26.0)Net proceeds of share issue 1.0 0.8 1.0Dividends paid (5.2) (4.8) (6.8) ________ ________ ________Net cash from/(used in) financing activities 13.8 (50.0) (31.8) ________ ________ ________ (Decrease)/increase in cash and cash equivalents inthe period (5.5) 4.7 9.5 Cash and cash equivalents at the beginning of theperiod 12.7 3.2 3.2 ________ ________ ________ Cash and cash equivalents at the end of the period 7.2 7.9 12.7 ________ ________ ________ NOTES TO THE FINANCIAL STATEMENTS 1 This statement does not comprise statutory accounts as defined inSection 240 of the Companies Act 1985. The results for the half year to 30thJune 2006, and the comparative period for the half year to 30th June 2005, havenot been audited. The results to 31st December 2005 are extracted from thefinancial statements for that year. These received an unqualified independentauditor's report and have been filed with the Registrar of Companies. The results for the half year to 30th June 2006 include those for the holdingcompany and all of its subsidiaries, together with the group's share of theresults of its joint ventures. The results are prepared on the basis of theaccounting policies set out in the 2005 annual report and financial statementswith the addition of a policy for development income. This is recognised inaccordance with IAS 18, Revenue, and is based on the directors' assessment ofthe stage of completion of the project, the future costs and the expected valueof the completed building. 2 Development income The amount of £6.3 million is the proportion of the total profit share estimatedto have been earned by the group in the half year to 30th June 2006 from theconstruction and letting of a property on behalf of a third party in accordancewith the accounting policy stated above. 3 Profit on disposal of investment properties Half year Half year Year to 30.6.06 to 30.06.05 to 31.12.05 £m £m £m Disposal proceeds 12.0 58.6 97.8Carrying value (10.3) (54.1) (90.1)Leasehold liabilities - - 1.9 ________ ________ ________ 1.7 4.5 9.6 ________ ________ ________ 4 Share of results of joint ventures Half year Half year Year to 30.6.06 to 30.06.05 to 31.12.05 £m £m £m Profit from operations before revaluation surplus - - -Revaluation surplus 3.5 - - ________ ________ ________ 3.5 - - ________ ________ ________ 5 Tax expense Half year Half year Year to 30.6.06 to 30.06.05 to 31.12.05 £m £m £m Corporation tax expenseUK corporation tax and income tax on profitsfor the period 3.8 1.4 4.0Adjustment for under provision in prior periods - 0.8 0.6 ________ ________ ________ 3.8 2.2 4.6 ________ ________ ________Deferred tax expenseOrigination and reversal of temporary differences 26.6 10.9 30.9Adjustment for over provision in prior periods - - (1.8) ________ ________ ________ 26.6 10.9 29.1 ________ ________ ________ ________ ________ ________ 30.4 13.1 33.7 ________ ________ ________ The tax for all periods is lower than the standard rate of corporation tax inthe UK. The differences are explained below: Half year Half year Year to 30.6.06 to 30.06.05 to 31.12.05 £m £m £m Profit before tax 122.6 61.5 150.4 ________ ________ ________ Expected tax charge based on the standard rate of corporation tax in the UK of 30%(2005: 30%) 36.8 18.5 45.1Indexation relief on investment properties (6.7) (4.4) (8.0)Difference between tax and accounting profit ondisposals 0.3 (1.6) (1.4)Other differences - (0.2) (0.8) ________ ________ ________Tax expense on current period's profit 30.4 12.3 34.9Adjustments in respect of prior periods' tax - 0.8 (1.2) ________ ________ ________ 30.4 13.1 33.7 ________ ________ ________ Tax charged directly to reservesDeferred tax on fair value of derivative financialinstruments - - (0.9)Deferred tax on share-based payments - - (1.4) ________ ________ ________ - - (2.3) ________ ________ ________ 6 Earnings per share Weighted average Profit for number of Earnings the period shares per share £m '000 p Half year ended 30th June 2006 92.2 53,475 172.42Adjustment for dilutive share-based payments - 451 (1.44) ________ ________ ________Diluted 92.2 53,926 170.98 ________ ________ ________ Half year ended 30th June 2005 48.4 53,303 90.71Adjustment for dilutive share-based payments - 455 (0.77) ________ ________ ________Diluted 48.4 53,758 89.94 ________ ________ ________ Year ended 31st December 2005 116.7 53,378 218.63Adjustment for dilutive share-based payments - 447 (1.82) ________ ________ ________Diluted 116.7 53,825 216.81 ________ ________ ________ Half year ended 30th June 2006 92.2 53,475 172.42Adjustment for development income (4.4) - (8.23)Adjustment for deferred tax on capital allowances 1.6 - 2.99Adjustment for disposal of investment properties (1.0) - (1.87)Adjustment for group revaluation surplus (75.7) - (141.56)Adjustment for share of joint venture's revaluation surplus (2.9) - (5.43)Adjustment for derivative fair value movement (1.6) - (2.99) ________ ________ ________Adjusted 8.2 53,475 15.33 ________ ________ ________ Half year ended 30th June 2005 48.4 53,303 90.71Adjustment for deferred tax on capital allowances (0.1) - (0.22)Adjustment for disposal of investment properties (3.0) - (5.71)Adjustment for group revaluation surplus (39.2) - (73.40)Adjustment for derivative fair value movement 1.0 - 1.87 ________ ________ ________Adjusted 7.1 53,303 13.25 ________ ________ ________ Year ended 31st December 2005 116.7 53,378 218.63Adjustment for deferred tax on capital allowances (0.8) - (1.50)Adjustment for disposal of investment properties (7.0) - (13.11)Adjustment for group revaluation surplus (94.9) - (177.79) ________ ________ ________Adjusted 14.0 53,378 26.23 ________ ________ ________ The adjusted earnings per share excludes the after tax effect of fair valueadjustments to the carrying value of assets and liabilities, development incomeand the profit or loss arising from the disposal of investment properties inorder to show the underlying trend. The adjusted earnings per share figure alsoexcludes the deferred tax charge in respect of capital allowances claimed on thebasis that it is unlikely that a liability will ever crystallise. 7 Investment property Freehold Leasehold Total £m £m £mCarrying valueAt 1st January 2006 724.2 291.4 1,015.6Transfer 2.5 (2.5) -Additions 40.1 0.4 40.5Disposals (10.3) - (10.3)Revaluation 81.5 17.7 99.2Movement in grossing up of headlease liabilities - (0.4) (0.4) ________ ________ ________At 30th June 2006 838.0 306.6 1,144.6 ________ ________ ________ At 1st January 2005 595.4 320.2 915.6Additions 13.6 0.9 14.5Disposals (31.9) (21.7) (53.6)Revaluation 40.3 9.4 49.7 ________ ________ ________At 30th June 2005 617.4 308.8 926.2 ________ ________ ________ At 1st January 2005 595.4 320.2 915.6Transfer 23.2 (23.2) -Additions 64.6 1.4 66.0Disposals (55.4) (34.7) (90.1)Revaluation 96.4 27.7 124.1 ________ ________ ________At 31st December 2005 724.2 291.4 1,015.6 ________ ________ ________Adjustments from fair value to carrying valueAt 30th June 2006Fair value 851.8 287.8 1,139.6Adjustment for lease incentives (13.8) (0.9) (14.7)Adjustment for grossing up of headlease liabilities - 19.7 19.7 ________ ________ ________Carrying value 838.0 306.6 1,144.6 ________ ________ ________At 30th June 2005Fair value 629.4 288.1 917.5Adjustment for lease incentives (12.0) (1.4) (13.4)Adjustment for grossing up of headlease liabilities - 22.1 22.1 ________ ________ ________Carrying value 617.4 308.8 926.2 ________ ________ ________At 31st December 2005Fair value 737.5 272.3 1,009.8Adjustment for lease incentives (13.3) (1.0) (14.3)Adjustment for grossing up of headlease liabilities - 20.1 20.1 ________ ________ ________Carrying value 724.2 291.4 1,015.6 ________ ________ ________ The investment property was revalued at 30th June 2006 at £1,139.6m (30th June2005: £917.5m; 31st December 2005: £1,009.8m) by either CB Richard Ellis Limitedor Keith Cardale Groves (Commercial) Limited, as external valuers, on the basisof market value as defined by the Appraisal and Valuation Manual published bythe Royal Institution of Chartered Surveyors. At 30th June 2006, the historical cost of investment property owned by the groupwas £667.4m (30th June 2005: £617.5m; 31st December 2005: £635.6m). 8 Property, plant and equipment 30.6.06 30.06.05 31.12.05 £m £m £m Net book valueAt beginning of period 0.4 0.6 0.6Disposals - (0.1) (0.1)Depreciation (0.1) (0.1) (0.1) ________ ________ ________At end of period 0.3 0.4 0.4 ________ ________ ________Net book value at end of periodCost 1.3 1.3 1.3Accumulated depreciation (1.0) (0.9) (0.9) ________ ________ ________ 0.3 0.4 0.4 ________ ________ ________ 9 Deferred tax liability Revaluation Capital surplus allowances Other Total £m £m £m £m At 1st January 2006 91.6 13.6 - 105.2Provided during the period 24.1 1.6 0.9 26.6 ________ ________ ________ ________At 30th June 2006 115.7 15.2 0.9 131.8 ________ ________ ________ ________ At 30th June 2005 72.9 14.3 1.2 88.4 ________ ________ ________ ________ The deferred tax on the revaluation surplus at 30 June 2006 includes an amountof £0.6m in relation to the revaluation surplus in the joint venture. Deferred tax on the revaluation surplus is calculated on the basis of thechargeable gains that would crystallise on the sale of the investment propertyportfolio as at each balance sheet date. The calculation takes account ofindexation on the historic cost of the properties and any available capitallosses. 10 Equity Share Share Other Retained capital premium reserves earnings £m £m £m £m At 1st January 2006 2.6 155.1 2.3 446.2Premium on issue of shares - 1.0 - -Share-based payments expensetransferred to reserves - - 0.4 -Profit for the period - - - 92.2Dividend paid - - - (5.2) ________ ________ ________ ________At 30th June 2006 2.6 156.1 2.7 533.2 ________ ________ ________ ________ 11 Dividend The results for the half year to 30th June 2006 do not include the dividenddeclared after the end of the accounting period. In respect of these results, adividend of 4.225p per share (2005 interim: 3.925p; 2005 final: 9.725p) will bepaid on 6th November 2006 to those shareholders on the register at the close ofbusiness on 13th October 2006. 12 Net asset value per share Net asset Net Number of value per assets shares share £m '000 p At 30th June 2006 694.6 53,656 1,295Adjustment for deferred tax on capital allowances 15.2 - 28Adjustment for deferred tax on revaluation surplus 115.7 - 216Adjustment for post tax fair value of derivative financial instruments 0.6 - 1 ________ ________ ________Adjusted 826.1 53,656 1,540 ________ ________ ________ At 30th June 2005 538.0 53,425 1,007Adjustment for deferred tax on capital allowances 14.3 - 26Adjustment for deferred tax on revaluation surplus 72.9 - 137Adjustment for post tax fair value of derivative financial instruments 3.2 - 6 ________ ________ ________Adjusted 628.4 53,425 1,176 ________ ________ ________ At 31st December 2005 606.2 53,472 1,134Adjustment for deferred tax on capital allowances 13.6 - 26Adjustment for deferred tax on revaluation surplus 91.6 - 171Adjustment for post tax fair value of derivative financial instruments 2.2 - 4 ________ ________ ________Adjusted 713.6 53,472 1,335 ________ ________ ________ Adjusted net assets excludes the deferred tax provided in respect of capitalallowances claimed, on the basis that it is unlikely that this liability willever crystallise. The deferred tax on the revaluation surplus and the post taxfair value of derivative financial instruments are also excluded, on the basisthat these amounts are not relevant when considering the group as an ongoingbusiness. 13 Total return Total return for the half year to 30th June 2006 is 16.1% (half year to 30thJune 2005: 10.3%; year to 31st December 2005: 25.5%). Total return is themovement in adjusted net asset value per share, as derived in note 12, plus thedividend per share paid during the period expressed as a percentage of theadjusted net asset value per share at the beginning of the period. 14 Gearing Balance sheet gearing at 30th June 2006 is 47.1% (30th June 2005: 54.0%; 31stDecember 2005: 50.1%). This is defined as net debt divided by net assets. Profit and loss gearing for the half year to 30th June 2006 is 2.07 (half yearto 30th June 2005: 1.86; year to 31st December 2005: 1.84). This is defined asrecurring net property income less administrative costs divided by net interestpayable, having reversed the reallocation of ground rent payable on leaseholdproperties to interest payable of £0.6m (half year to 30th June 2005: £0.7m;year to 31st December 2005: £1.3m). 15 Post balance sheet events On 31st July 2006, the group completed the purchase of the freehold interests oftwo of its leasehold investment properties for £14.7m, excluding costs, and thedisposal of an investment property for £17.5m, excluding costs. 16 Copies of this announcement are being posted to shareholders on 15thSeptember 2006 and will be available on the company's website,www.derwentvalley.co.uk, from the date of this statement. Copies will also beavailable from the Company Secretary, Derwent Valley Holdings plc, 25 SavileRow, London, W1S 2ER. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Derwent London