Preliminary Results

Development Securities PLC

("Development Securities" or "the Company" or "the Group")

PRELIMINARY RESULTS FOR THE YEAR ENDED 28th FEBRUARY 2015

Development Securities today reports a step change in performance with a record level profit before tax and a record level of development and trading gains realised during the year

Financial highlights

· Headline profit before tax increased by 133% to £45.4 million* (2014: £19.5 million)

· Continued NAV growth - EPRA NAV per share increased by 8.4% to 284p (2014: 262p**) before payment of a £10.0 million special dividend (8.0 pence per share)

· Step change in level of development and trading gains - 69% increase to £45.7 million (2014: £27.0 million)

· £11.2 million increase (12.1%) in value of investment portfolio including share of joint ventures (2014: £4.8 million increase)

· Total dividends for the year increased to 13.9 pence per share (2014: 5.6 pence per share), comprising a recommended, increased final dividend of 3.5 pence per share (9.4% higher than 2014), interim dividend of 2.4 pence per share and special dividend of 8.0 pence per share

Operating highlights

· Cathedral Group acquisition in May 2014 has expanded portfolio of projects and is delivering value

· Management succession secured with strong leadership for the future

· Capital recycling enhances and refocuses investment portfolio

· Good visibility on significant development and trading gains in FY 2016 and beyond

· Clear focus and strategy for deployment of capital into new opportunities

Commenting on the results, Michael Marx, Chief Executive, said:

"This has been a record year for the Company, delivering the highest level of underlying profitability to date. This was largely driven by a step change in the level of development and trading gains realised, leading to a material increase in shareholder distributions. We are confident of sustaining and building on this performance in the years ahead. We have a clear strategy, a strong leadership team and good visibility on a pipeline of significant development and trading profits in the years ahead."

Enquiries:

A video interview with the Executive Directors will be available from 7am today at http://www.developmentsecurities.co.uk/devsecplc/en/ir/financial-reports

An analyst presentation will be held at 10.30am this morning. Dial in details as follows:

Participant dial in number: 020 3427 1915

Participant dial in code: 6965652

To download a copy of the results presentation, follow this link http://www.developmentsecurities.co.uk/devsecplc/uploads/reports/DevSec_FY2015Results_29Apr2015_Presentation.pdf

Financial Summary

*before exceptional items of £10.6m relating to termination costs of cross currency swap (£7.9m) and acquisition costs of Cathedral Group (£2.7m)

**restated after restructure of Euro loan notes, cancelling previous mark to market swap deficit

Chairman's statement

A year of record-level performance

Financial performance

This has been an excellent year for your Company in which the successful execution of our strategic objectives has produced a record-level of performance. I am delighted to report a headline profit before tax of £45.4 million for the year ended 28th February 2015 (2014: £19.5 million), the highest profit ever recorded by your Company. After exceptional items* of £10.6 million, the profit before tax amounted to £34.8 million. The main contributor to our overall profitability was the £45.7 million of development and trading gains realised from a number of asset disposals during the year (2014: £27.0 million), another record-level result for the business.

After the deduction of £17.0 million by way of dividends including the special dividend, shareholders' funds increased by £26.1 million (8.1 per cent) to £346.4 million from £320.3 million as at 28th February 2014. Net assets per share ended the year at 276 pence per share compared to 262 pence per share at 28th February 2014.

Our level of net debt, excluding our share of debt within joint ventures, remained low at 36.3 per cent compared with 48.0 per cent at 28th February 2014. Given the strength and stability of our Balance Sheet and our prudent business model, the Board has recommended the payment of a final dividend for the year of 3.5 pence per share, payable on 20th August 2015 to shareholders on the register on 24th July 2015. Including the special dividend paid on 7th April 2015, this final dividend will bring the total dividends paid during the year to 13.9 pence per share, more than double the amount paid in the previous year.

The special dividend of £10.0 million (8.0 pence per share) was paid out of both the strong cash flow arising from a number of land and asset sales, and from the successful monetisation of one of our remaining significant legacy assets, 399 Edgware Road. Going forward we will continue to review the efficiency of our Balance Sheet in order to maintain a disciplined capital structure and maximise returns to shareholders.

Acquisition of Cathedral Group

The acquisition of specialist regeneration developer Cathedral Group (Cathedral) in May 2014 was a strategic step change for your Company, significantly expanding our current portfolio of projects and deepening the strength and experience of our management team. Cathedral's expertise in residential-led mixed-use regeneration projects in Greater London and the South East is complementary to our own, and has expanded our capacity to build our pipeline and market share going forward. It is pleasing to note that the sale in December 2014 of the Cathedral project, Telegraph Works in Greenwich, has already contributed to our strong development and trading gains during the year.

Management changes

In February 2015, we announced that after 21 years of service on the Board, Michael Marx will stand down from his position as Chief Executive at the Annual General Meeting (AGM) on 14th July 2015. Michael will be succeeded by Matthew Weiner as Chief Executive, who has served as a Board Director for 10 years. Richard Upton, formerly Chief Executive of Cathedral and a Board Director of Development Securities, will be appointed as Deputy Chief Executive with Marcus Shepherd continuing as Finance Director. Matthew has been pivotal to the success of the business in recent years and will be supported by a strong management team. I am confident that this team is best placed to deliver the full potential of the business. Following the AGM, Michael will remain on the Board as a Non-executive Director until 29th February 2016. I would like to thank Michael for his outstanding contribution for many years as Chief Executive. Under his leadership, the Company has grown into one of the UK's leading regeneration developers.

In March 2015, Julian Barwick stepped down from the Board in order to reduce his time commitment to the business. Julian retains his position as a Director of our development subsidiary and I have no doubt that he will still contribute significantly to the business in the years ahead with a continued focus on our office-led development projects.

I am also pleased to note again the appointment of Barry Bennett to your Board, previously Chairman of Cathedral, who brings with him significant and relevant experience of residential and mixed-use development.

Outlook

The ongoing economic recovery in the UK is now beginning to manifest itself in real wage growth, job creation and reduced unemployment which I believe will continue to support the increasingly vibrant economy in Greater London and the South East. This provides a healthy backdrop for all of our activities, particularly our ability to create value through regeneration. With such a talented senior management team, a diversified portfolio of projects and deep expertise in regeneration development, we enter 2015 strongly positioned to continue to deliver enhanced shareholder value.

Finally, my thanks to our management team and staff who have continued to apply themselves wholeheartedly and with the utmost professionalism to create the significant value that we have achieved this year and that we believe we will continue to achieve in the future.

David Jenkins

Chairman

29th April 2015

*exceptional, non-recurring items relate to termination of cross currency swap and acquisition costs of Cathedral Group.

chief executive's statement

well positioned to deliver strengthened returns

Our focus

During the year, we have seen an improved financial performance derived from the strategic direction that we set a few years ago. Our focus remains to create value through property regeneration and trading, with planning betterment providing the key to value creation in the majority of our activities. We have expanded the number of regeneration projects on which we are working and are largely focused within Greater London and the South East region where economic growth is most pronounced. Rather than invest a disproportionate amount of our resources into any one project, we have continued to limit the amount of equity invested by us into any one scheme, thus reducing specific asset pricing risk. As a consequence, deal flow and activity levels have been high and I would expect this to remain unchanged in the medium-term.

Our regeneration activities focus on mixed-use development and placemaking. It is a process whereby we can add significant value as areas of previous dereliction and neglect are radically changed into vibrant new communities with an infrastructure that creates a quality legacy for future generations. Our activities in this area of the market have been significantly enhanced through the acquisition of Cathedral Group (Cathedral), which has brought with it an increase in the number of delivery options available to us, particularly with respect to residential development activity and Public Private Partnership projects.

Our performance

During the financial year, we realised development and trading gains of £45.7 million, a record-level for your Company and the first of what we believe will be many years of heightened profitability. This included significant gains of £4.4 million arising from our main legacy asset, 399 Edgware Road. Other significant contributors to profitability were 10 Hammersmith Grove, our 110,000 sq. ft. prime office development which is now fully let and generated gains of £6.7 million, and the substantial residential development at Telegraph Works, Greenwich, one of Cathedral's projects, which realised an initial profit of £10.2 million.

As one would expect, the realisation of such significant profits, together with the monetisation of the underlying invested equity capital, has released funds for us to reinvest in new projects within our acknowledged area of expertise. Our focus is on opportunities where we can create value through planning gain, regeneration and development. Dublin became an increasing area of interest for us as we took our expertise and experience into an international capital city where development had also been severely constrained since the financial crash and where demand is currently resurging.

Within our investment portfolio, property valuations continued to benefit from the narrowing yield spread between primary and secondary markets. During the year, we successfully recycled in excess of £60 million out of assets where we had maximised added value and reinvested this into convenience retail and alternative assets with robust long-term income streams, more resilient values and attractive income yields. Our investment portfolio is now re-established at its £200 million level.

Our market

The UK economic recovery continues, with GDP growth in the current year likely to equal or even exceed that of 2014. This stable environment is attracting not only inward migration but also a significant flow of funds from overseas investors into London and other big cities. Notwithstanding, the Government has some way yet to go in order to reduce the significant UK budget account deficit, implying that further reductions in Government expenditure are to be anticipated.

Outlook

This has been a year of standout performance for your Company with activity levels now established at an enhanced level as terms of trade remain attractive in the geographic and operational sectors in which we operate. It is especially pleasing to report that the management team has been deepened in both quality and numbers following the Cathedral acquisition. It is this management team that will deliver the promise that lies ahead and in whom I have undoubted confidence.

Michael Marx

Chief Executive

29th April 2015

Risk Review

Our business model is defined by the risks the Directors consider material to our Strategy, size and capabilities

Risk management structure

The Group's risk profile is maintained under continual review by its Risk Committee, which meets quarterly, and also by the Board.

Mapping our risks

The Group categorises risks according to the likelihood of occurrence and the potential impact on the Group. The Directors consider the following to be the principal risks and uncertainties facing the Group.

These risks have been grouped as either:

External risks - whose occurrence is beyond the control of the Group; or

Business risks - which the Directors choose to manage as part of the Group's operations.

Key

Change from last year: ↑ Risk exposure increased → No significant change in risk exposure ↓ Risk exposure reduced

Portfolio review

development and trading portfolio

Disposals

The main contributors to the £45.7 million of development and trading gains realised during the year were the following land and property disposals:

· 10 Hammersmith Grove, a 110,000 sq. ft. town centre office building which was fully let during the year, realising a development profit of £6.7 million.

· 12 Hammersmith Grove where we secured funding with Aberdeen Asset Management for the construction of a 167,000 sq. ft. prime office building realising a land improvement profit of £2.7 million.

· 399 Edgware Road where we secured Aberdeen Asset Management as forward-funding partner for the foodstore and L&Q as joint venture partner for the residential element of this major mixed-use regeneration project. Both of these deals have realised profits of £4.4 million with the potential for significant further profit in the near-term.

· Telegraph Works, Greenwich, where our partnership with Weston Homes has realised an initial gain of £10.2 million for a residential development of 256 apartments and 16 townhouses on the Greenwich peninsula.

· Tollgate House and Market Place, Romford, where we fully disposed of all of the elements of this town centre mixed-use development, realising profits in the year of 3.8 million.

· North London office portfolio which we acquired in February 2014 and fully disposed of during the year generating profits of £6.3 million.

Acquisitions

During the year, we made six acquisitions of development and trading assets worth £160.7 million, the full details of which are disclosed in the property matrix below. Notably, we increased our presence within Dublin, acquiring four new development and trading assets: Donnybrook House, Charlemont Clinic, Robswall and Burlington House. All of these properties present opportunities for us to add value through a process of planning gain, regeneration and/or development.

Overview

We create value through regeneration, development and trading activity. During the year, we realised profits of £45.7 million (2014: £27.0 million). We are continuing to secure further opportunities to reinvest this realised equity, and terms of trade remain in our favour. Our development and trading portfolio is split into two key areas of activity, mixed-use regeneration development and trading as outlined below.

The acquisition of Cathedral Group (Cathedral) in May 2014 added nine regeneration projects to our portfolio and has enhanced our expertise within the residential-led mixed-use development space. Furthermore, the integration of Cathedral's team and our own and the knitting together of our complementary skills is presenting opportunities for us to generate additional value from within our existing portfolio and also to enhance our capacity to secure a strong pipeline of future projects.

The Cathedral team has a strong track record in both the delivery of Public Private Partnership projects and residential-led regeneration. With respect to our activity in the residential market, this is becoming an area of increased focus for us. Cathedral's expertise in this field has added greater optionality in terms of delivery, namely, it now gives us the skill set to build residential for sale on our own Balance Sheet or in partnership with more passive capital. Our view on the residential market is that the shortage of homes within our area of focus will only increase, with forecasts indicating that an additional 2.5 million homes will be required by 2036 in the London City Region. This compares to an estimated supply of 1.5 million and a consequent shortfall of over one million homes up to 2036 or 50,000 homes per annum (Source: AECOM). Hence, we see ongoing opportunities to create value as we enable and deliver residential-led projects. Our focus remains in the price range of up to £800 per sq. ft. sales value that is affordable to both rental investors and professional couples.

Mixed-use regeneration

We create value through regeneration. We do this by acquiring secondary or tertiary assets and land, and through planning betterment and redevelopment, transitioning these assets into prime markets in which demand is strong. With the yield between secondary and prime markets still wide, we see continued opportunity to generate value through this process.

Public Private Partnership projects (PPP)

This specialist area of development is one in which Cathedral has built a strong reputation and track record that complements our own experience of working with public sector land owners and joint venture partners. The PPP model (see diagram above) applies to development opportunities where a local authority or public sector body is the land owner and we act as their development partner to deliver a shared development vision that creates regeneration, new jobs, community facilities, new homes and ultimately a strong financial return from land improvement and/or development profits. The upfront costs of securing the land for development are typically low or deferred as the public body makes the land available for development at zero or negligible cost in return for the delivery of new public amenity space at no cost to the public purse. It allows us to deliver a mixed-use development that creates vital new public facilities for the local community whilst we realise gains from the delivery of the 'private' elements of the development e.g. residential, student housing, office space. With 40 per cent of brownfield land in the UK currently owned by local authorities, we see ample opportunity to extend our pipeline of PPP projects.

Office-led development

Our portfolio of commercial office developments builds on our lengthy track record and reputation in this sector. Outside of Central London's traditional core market, the tide has undoubtedly been running against office development for some years now, with residential development dominating the market, resulting in a very tight office supply. However, as demand starts to strengthen, the supply shortage is manifesting itself in rising rents, which in turn is increasing the viability of office development in the markets in which we are particularly active.

We have seven office-led projects in Greater London, Cambridge and Dublin of which two are currently under construction. These locations offer competitive advantage and strong underlying fundamentals, namely, proximity to existing or planned transport hubs or major infrastructure networks, access to strong labour pools and tension between supply and demand. The quality of the product that we are known for sets us apart from the competition within these markets, allowing us to outperform with regard to rental values. For example, in Hammersmith, West London, our town centre office development, 10 Hammersmith Grove set a new benchmark for Hammersmith rents at around 25 per cent ahead of the previous rental peak.

Trading activities

Within our portfolio, we seek to balance our longer-term profit flows with projects that have shorter life cycles, where we can efficiently add value. During the year, we fully exited from two trading projects in Romford and in North London. Both of these projects were acquired by us where the market has mispriced value allowing us to secure favourable terms of trade. We added value to both of these projects through a process of planning improvement and refurbishment ahead of ultimate disposal, allowing us to maximise their value and best position them for a profitable exit. We will continue to look for further trading opportunities where our size and nimble approach affords us competitive advantage. We anticipate that these opportunities will largely arise from the banks as they continue to delever and from secondary trades of individual assets from within private equity real estate portfolios.

INVESTMENT PORTFOLIO

Investment property - key statistics

*Based on the core investment property assets only.

Overview

We maintain an investment portfolio in order to generate a stable income stream that supports the running costs of our business and provides an anchor to our development activities. The majority of our portfolio consists of convenience retail schemes (73.0 per cent of our portfolio) with 37.2 per cent of our portfolio located in the South East of England. We target higher yielding assets with strong, stable income streams where we can improve value through asset management and enhancement activities, including the potential for redevelopment.

During the year, we have continued to proactively drive value within our investment portfolio. Across our portfolio and including our share of joint venture assets, property valuations increased by £11.2 million (2014: £4.8 million). As yields within the secondary, regional markets in which we operate continue to compress, we expect this improved level of performance to continue. Void rates across our portfolio are low at 5.0 per cent (2014: 6.3 per cent) and income levels are at £13.8 million (2014: £14.1 million) as we have recycled capital within our portfolio. We have remained stable throughout the year as we have recycled capital into new assets.

Recycling capital within our portfolio

With liquidity and competitive tension increasing in the markets within which we operate, we have continued to recycle capital within our investment portfolio, disposing of mature assets and acquiring new, well-positioned investment opportunities where we see the potential to add value. Since 1st March 2014 and including joint ventures, we have disposed of seven assets totalling £60.8 million and acquired six assets totalling £65.7 million. Two of these assets (Armagh and Killingworth) benefit from a major foodstore anchor and act as the principal convenience retail destination in their locality driving footfall to the units. The overall size of our investment portfolio is now at £203.3 million (2014: £202.1 million).

Outlook

It appears that yields are unlikely to face any meaningful upward pressure in the medium-term due to the strength of investment demand, continued low base rates and the volume of capital seeking higher yielding opportunities. Hence, we anticipate positive total returns to continue over the coming years in the investment markets in which we focus. In addition, modest rental growth will continue to drive capital values higher. These factors combine to produce a 'sweet spot' for real estate where year on year rents are rising while yields tighten. This strengthening investment market provides a positive backdrop to our investment activities and we will continue to recycle capital within our portfolio in a timely manner, focusing on higher yielding investment assets where we can drive value growth through our asset enhancement and management activities.

Top five occupiers as at 28th February 2015

Income generating properties - Like-for-like rental income received

Completed investment portfolio - 28th February 2015

FINANCIAL REVIEW

RECORD PERFORMANCE FOR THE YEAR

Review of the Year

The past year has been one of the most significant in the history of the Group. Set against a backdrop of recovery in the UK economy, primarily in our core market of London and the South East together with improving debt markets and continued inflows of overseas capital, we have been able to deliver record levels of trading and development gains as well as announce a special dividend to distribute surplus capital back to shareholders.

The most significant event during the year was the acquisition of Cathedral Group in May 2014 for £22.9 million comprising nine projects in Greater London and the South East representing over 5 million sq. ft. of residential-led mixed use development and a 28 strong team with considerable experience in this area.

The consideration paid was structured into a number of elements. The initial consideration of £20.4 million comprised:

· £17.0 million payable upon completion of the acquisition comprising £11.0 million in cash from existing resources and £6.0 million in new Ordinary shares (Consideration Shares) at 233.5 pence per share, equating to 2.6 million shares. The Consideration Shares are locked up for a 42-month period (subject to limited customary exceptions) following completion.

· Deferred consideration of £3.4 million which will be paid in instalments of £1.2 million in May 2015, comprising £0.9 million of loan notes and £0.3 million of cash, and £2.2 million in May 2016, comprising £2.1 million loan notes and £0.1 million cash.

· £2.5 million of contingent consideration, relating to the signing of the sale and purchase agreement for the Preston Barracks project, which was paid in cash in July 2014.

In addition, contingent consideration of £4.0 million may be payable in respect of two of the projects, Preston Barracks and Morden Wharf, dependent both on the performance of these projects and the overall returns generated from across the portfolio of Cathedral projects now acquired. The Board will continue to review the likelihood of this consideration becoming payable.

The Company considered various funding options for the acquisition and decided that funding the purchase from a mixture of shares and existing cash resources would be in the best interest of shareholders.

With the two Groups combined we are now starting to see additional benefits accrue. The partial disposal of The Telegraph Works site in Greenwich has been at a higher than anticipated profit and, utilising the Group's banking relationships, we have been able to refinance the development funding at the Deptford project at a significantly lower cost, saving an estimated £0.8 million over the life of the project.

In March, we restructured our €47.0 million floating rate loan notes and associated hedging and cash collateralisation arrangements, shortening the maturity of the loan from 13 to seven years. This has reduced our combined interest, hedging and transaction costs by £0.8 million per annum. The restructure is finance cost neutral in the year to February 2015 as previously capitalised costs have been written off, with annual savings of £0.8 million delivered thereafter.

The loan restructure released cash collateral of £9.5 million. The renegotiation of the terms of these loan notes has helped to increase the efficiency of our Balance Sheet and reduce our overall finance costs going forward as well as releasing capital to reinvest in to further opportunities.

In our major development activities we have continued to produce successful returns from our schemes in Hammersmith Grove. We completed the letting of 10 Hammersmith Grove and also secured funding of £92.0 million from Aberdeen Asset Management in March 2014 to fund the build out of a further 167,000 sq. ft. at 12 Hammersmith Grove. Overall during the course of the year we have generated £9.4 million of profits and also repatriated our equity investment via the funding agreement.

In our development and trading portfolio we have successfully exited from two schemes which were acquired in the previous financial year. At Market Place Romford, after concluding our asset management programme, we disposed of the separate elements of this mixed use town centre scheme to deliver profits of approximately £3.8 million. In addition we have exited from the North London office portfolio during the course of the year generating £6.3 million of profit in less than twelve months.

By utilising our extensive contact base within the market as well as our structuring skills we continue to seek out similar opportunities to acquire assets capable of short term value enhancement through either asset management or planning betterment.

In a similar vein we have also been able to acquire a stake in a joint venture to own Chill Factore and the associated retail and leisure assets. The ability to structure this complex deal means that we are in a position to bring our property expertise to a previously under-managed operational business and also produce a high level of net income return which will be beneficial to our Group profits.

We have continued to expand our activities in Dublin as we capitalise on our early mover advantage and wide contact base to source development, trading and investment opportunities. At 28th February 2015 we had £26.5 million of equity invested in seven schemes. We continue to monitor our Euro exposure on a regular basis. Our current Balance Sheet equity exposure is more than offset by our Euro denominated loan notes. Our net foreign exchange gains during the year have been £2.3 million.

As highlighted above in terms of financing, we continue our efforts to drive efficiency in our Balance Sheet and capital strategy. The restructuring of historic loans, realisation of non-income producing legacy assets such as 399 Edgware Road and release of pledged cash collateral have enabled us to generate sufficient surplus cash to pay a special dividend of £10.0 million (8.0 pence per share) in April 2015. We continue our efforts in this regard.

As at 28th February 2015, our weighted average debt maturity was 5.4 years (5.0 years including share of joint ventures), compared with 6.8 years as at 28th February 2014 (6.4 years including share of joint ventures).

As at 28th February 2015, net debt, including share of joint ventures, stood at £172.5 million, a decrease from £181.9 million at 28th February 2014. This represents gearing of 49.8 per cent, just outside our normal target level of 50-60 per cent, which is as expected given the number of realisations during the year. As at 29th April 2015, net debt had increased to £208.9 million, representing gearing of 60.3 per cent.

If joint ventures are excluded, the Group's gearing was 36.3 per cent as at 28th February 2015, compared with 48.0 per cent a year earlier. The Group's overall loan-to-value ratio, calculated as net debt divided by total property assets, was 34.4 per cent (2014: 44.7 per cent).

As a result of the level of profits achieved during the year, the Group has been able to pay a special dividend of 8.0 pence in April 2015. After accounting for this our net asset value has increased to 276 pence per share (2014: 262 pence). Prior to this special dividend the NAV would have been 284 pence.

Capital structure and liquidity management

The Group's strategy for capital structure and liquidity management is to maintain a conservative balance between equity and debt appropriate to the nature and profile of our asset portfolio, achieving both certainty and flexibility. This takes into consideration our operational strategy and our intention for each asset, together with our expectations for the availability and cost of alternative sources of finance.

In particular we operate within a structure which limits the level of our equity exposure to any particular asset and also the level of external debt which can be applied.

Our cash resources and overall liquidity are managed at Group level, with each asset or project monitored according to its own specific risk profile.

All development and trading assets have business plans which include timetables for realisation. The Group always retains a £20.0 million cash buffer to ensure that delays in planned asset realisations do not impact upon the normal operation of the business.

Where we enter into debt facilities, secured against assets, we do so in a way that matches debt profile against asset business plan.

We have a number of long-term fixed rate debt facilities which are used to fund long-term investment assets. In respect of shorter-term trading assets, we fund these with asset specific debt which is structured to support the individual asset business plan.

Within our debt portfolio we maintain a mix of fixed and variable interest rates, with a preference for fixing of both larger and longer-term borrowings so as to significantly mitigate our interest rate risk. For shorter maturity facilities our preference is to cap our interest rates exposure rather than to fix it.

The Group does not usually take development risk on large scale major development projects. This risk is mitigated in several ways, including the completed forward sale of the land and project assets through to the contracted sale of the completed development with appropriate guarantees of completion. Where direct development is undertaken on more modest schemes, this is funded by way of Group equity and medium-term bank facilities, providing the necessary flexibility of funding for both site assembly and construction.

Investments in joint ventures and associates are funded directly with equity. Any gearing is deployed within the ventures themselves.

Responsibility for the management of cash and liquidity risk rests with the Board. The executive team has systems in place for the monitoring and management of this key area of our business. Daily review of this area is delegated to the Finance Director. The executive team consider this on a weekly basis and the Board formally reviews the position at its meetings, which occur at least eight times per year.

The principal tools utilised for the management of cash and liquidity are:

· 15-month risk-analysed cash flow forecast

· Schedule of all debt facilities and amounts drawn against them

· Summary of net debt, including derivative instruments

· Summary of current cash deposits including liquidity thereof

· Formal commentary on the above by the Finance Director prepared for each Board meeting.

Short-term liquidity requirements are fairly predictable and are managed out of existing cash resources. Cash requirements are monitored on a weekly and monthly basis. Cash buffers are retained to ease cash flow management.

Medium-term liquidity is provided through a mix of the Group's equity and its debt facilities. The Group has strong long-term relationships with a diversified range of major lenders and as such has not been restricted in its ability to raise new debt for investment, trading or development projects.

Longer-term liquidity and the Group's capital structure are reviewed on a regular basis by the Directors, taking account of relevant factors including the real estate cycle, changes in the nature and liquidity of the Group's asset portfolio, forthcoming risks and opportunities and the markets for debt and equity finance. This is formally considered at least twice a year by the Group's Risk Committee, which reports to the Board, as a part of the annual strategy review and also as appropriate at each Board meeting.

As at 28th February 2015, restricted cash balances were £19.4 million (2014: £27.3 million). The decrease is as a result of investment property acquisitions, predominantly in the second half of the year.

Cash management

Group cash resources are managed in accordance with our policy, which prioritises security, liquidity and counterparty risk ahead of absolute returns, with limits set by the Board in respect of minimum credit ratings for and maximum exposures to individual counterparties.

Cash may be invested across a range of instruments including instant access and term deposits, money market funds and commercial paper. As at 28th February 2015, the Group had £79.3 million of cash held with ten different counterparties.

Current bank facilities and borrowings

The Group's bank facilities are set out in the following table. As at 28th February 2015, the Group had borrowings of £205.0 million (2014: £221.1 million). Cash balances were £79.3 million (2014: £67.3 million), including amounts of £19.4 million held as restricted deposits, giving net debt of £125.7 million and gearing of 36.3 per cent (2014: £153.8 million and gearing of 48.0 per cent).

The Group's share of net debt in joint ventures was £46.8 million (2014: £28.1 million); if this is aggregated with Group balances then net debt rises to £172.5 million and gearing to 49.8 per cent (2014: £181.9 million and 56.8 per cent).

During the year, the Group, together with its joint ventures, has drawn new borrowings of £185.4 million. Included within this have been new facilities as follows:

We have continued to expand our sources of debt to ensure that not only do we have a wide range of trusted debt providers but we can also ensure that we are not over reliant on any specific source of funding.

The Group has also repaid £106.3 million of borrowings, including joint ventures, as individual assets have been disposed of or facilities re-negotiated including:

1 Interest cover ratios are specific to the loan and the relevant property. Minimum net worth refers to the net asset value of the Group per its latest Balance Sheet (28th February or 31st August).

2 These unsecured, variable rate loan notes are denominated in Euros, with a nominal value of €47 million. The Group has entered into an option to acquire €25,000,000 in April 2017 in order to limit its € exposure. An interest rate cap is also in place to limit the Group's exposure to movements in the EURIBOR rate.

3 Loans relating to Joint Ventures represent the total loan facility and not the Group's share.

4 This facility is currently being refinanced and will be repayable in 2018.

5 The facilities have the provision to allow interest to be rolled into the loan.

~ Represents the amount of the Group's liability in Sterling as at the balance sheet date.

Gross committed facilities as at 29th April 2015 total £223.9 million with a weighted average term of 4.9 years, the earliest maturity arises in July 2015. Unutilised facilities are £55.3 million.

The Directors keep bank covenants (typically loan to value and interest cover ratios) under review, and are content with the current position. The aim is to agree loan to value covenants at levels which provide sufficient headroom for foreseeable changes in either the general market or specific assets. We also incorporate cure mechanisms into facility agreements such that we have an appropriate opportunity to restore covenant compliance by making cash deposits or repayment as required.

Interest rate risk and hedging

As at 28th February 2015, the summary of the Group's interest rate exposure was as follows:

The weighted average interest rate payable was 5.4 per cent, 5.7 per cent including joint ventures (2014: 5.8 per cent and 5.7 per cent respectively).

Facilities with variable rates of interest, in particular longer-term facilities, expose the Group to the risk of interest rate fluctuations. This risk is constantly reviewed by the Directors who regularly consider the possibility and likely cost of extending interest rate hedging.

Currently a mix of fixed and variable rates is maintained in order to provide a degree of certainty, whilst at the same time benefiting from historically low absolute levels of rates. Longer-term facilities tend to be structured with fixed rates.

A key element in all hedging arrangements is counterparty risk, i.e. the potential failure of the counterparty to the transaction. The Group mitigates this risk by only transacting with major banks and institutions. There is currently no indication that any of the Group's hedge counterparties may be unable to settle its obligations.

Interest rate derivatives are marked-to-market in the Balance Sheet, giving rise to the risk of fair value movements in the instrument and a consequent impact on net asset value.

Development and trading portfolio

The principal financial instrument risks in these assets are the credit risk of transaction counterparties. Given the nature of these assets, the amounts owed to the Group can be significant. These arrangements are monitored very closely both before contracts are exchanged as part of our due diligence procedures and throughout the execution period.

As at 28th February 2015 the Group had no material, unsecured debtors in respect of the sales of development and trading assets.

In respect of certain transactions, the Group contracts to provide funding for the development of either individual phases or whole schemes. The Directors are satisfied that the combination of the Group's risk averse approach to development funding, its rigorous selection of development partners and its focused and active management of each project provide appropriate comfort over the risks of these financial exposures.

Investment portfolio

The principal financial instrument risk in the investment portfolio is the credit risk implicit in potential tenant failure which, over recent years has been heightened in some sectors, and most notably amongst retail tenants. The Group maintains the portfolio under continual review. The portfolio is managed by local agents, with active involvement by the Group's investment team. The Board receives at each of its meetings, analyses of tenant profile (including the concentration of credit risk, both by sector and by entity), existing and anticipated voids, overdue rents, and future and outstanding rent reviews, as well as a formal commentary by the investment team. The current profile of the portfolio and comments on performance in the year are set out in the Operating Review.

Projects in partnership

The Group conducts a number of projects in partnership with others, where the Group brings both development expertise and funding. These interests are carried in a number of balance sheet categories, and are summarised in note 15 of the financial information.

The financial instrument risks in respect of projects in partnership are the credit risk implicit in the financial strength and integrity of the operating partner, the contractual risk in the partnership arrangements and the operating success of the venture. The Group manages these risks by securing appropriate rights in each case over the use of the Group's invested capital and by active participation in the joint strategic and operating control of the ventures.

Contingent liabilities

Contingent liabilities are described in note 13. The Directors ensure that these risks are appropriately documented and monitored, and that the risk of actual liabilities arising is restricted so far as is possible.

Foreign currency risk

The Group's operations are conducted predominantly in the UK, however the Group has continued to invest in the Republic of Ireland. The Group's principal exposure to foreign currency movements is in its €47.0 million Euro-denominated loan notes and Euro denominated property assets.

Outside of the UK, the Group conducts business activities in Dublin and as such is exposed to foreign currency risk on its Euro-denominated property investments. At 28th February 2015, the Group had Euro-denominated investments of £44.0 million. The Directors actively monitor the overall Group exposure to Euro-denominated assets and liabilities and the associated currency risk.

Maximum credit risk exposure

The Directors consider that the maximum credit risk exposure in each class of financial asset is represented by the carrying value as at 28th February 2015.

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 Chief Executive's Statement and in the Operating Review. The financial position of the Group, its cash flows, liquidity position, borrowing facilities and financial instrument risks are described in the Financial Review, which also covers the Group's objectives, policies and processes for managing its capital, its financial risk management objectives, details of its financial instruments and hedging activities, and its exposures to credit risk and liquidity risk. Note 11(c) of the financial information gives further details about the Group's financial instruments and hedging activities.

The Group has considerable financial resources. The Directors maintain a risk-averse capital structure, with gearing typically in the range of 50-60 per cent and long average debt maturities, with borrowings spread across a number of lenders. The Group continues to enjoy access to bank finance, as demonstrated by loans arranged during the year. Banking covenants are regularly monitored and appropriate cure mechanisms are incorporated in facility documents.

The Directors are alert to potential liquidity risk in the Group's cash flow forecasts. The Directors keep both short- and medium-term cash flows under continual review, and moderate outflows according to the level of this uncertainty. The model preserves a cash liquidity buffer at all times, to protect against delays in asset realisations.

The Group's rental income is also subject to risk of delay or non-payment. This risk is mitigated by proactive asset management, which includes close monitoring of tenant resilience, and a strong focus on actual and potential voids.

As a consequence of the above, the Directors believe that the Group is well-placed to manage its business risks successfully. In addition, by closely monitoring the Group's forecasts and projections, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis in preparing the financial statements.

Result for the year

Headline profit before tax for the year ended 28th February 2015 was £45.4 million (2014: £19.5 million) before non-recurring exceptional items of £10.6 million. The exceptional items relate to costs associated with the acquisition of Cathedral (£2.7 million) and the termination of the Euro denominated interest rate swap £7.9 million). After dividend payments of £17.0 million, the Group's share of net assets increased by £25.5 million to £345.7 million (2014: £320.2 million), representing an increase of 14.0 pence per share to 276 pence per share (2014: 262 pence per share).

Investment property valuation gains for the year, including our share of joint ventures, totalled £11.2 million (2014: £4.8 million). This has been a reflection of the gradual improvement in secondary yields.

Net rental income

Gross rental income from the investment portfolio for the year ended 28th February 2015 was £12.7 million. After direct costs of £2.7 million, the net rental income for the year was £10.0 million, which is an 18.9 per cent decrease when compared to the £12.3 million for the previous year on a like for like basis. A number of significant acquisitions have been made in the second half of the year which will provide a positive contribution to net rental income going forward.

The Group also earned net rental income of £2.6 million from the development and trading portfolio, a slight decrease from the £2.8 million earned in the year ended 28th February 2014.

Development and trading profits

During the year under review, across its direct and joint venture holdings, the Group made development and trading profits of £45.7 million (2014: £27.0 million).

Development and trading profits can be analysed as follows:

Further details of development and trading activities can be found in the Operating Review.

Operating costs

Operating costs of £17.9 million for the year were 27.4 per cent ahead of the equivalent figure of £14.0 million for the previous year. This reflects the operating costs of the Cathedral Group which was acquired in May 2014.

Net finance costs

Finance costs for the year were £12.8 million, compared to £13.5 million for the previous year. This reflects a higher amount of interest being capitalised during the last year on development and trading properties net of the impact of the restructure of the Euro denominated loan notes.

Investment portfolio

During the course of the year, the investment property portfolio has increased to £203.3 million from £202.1 million at 28th February 2014. The Group disposed of a number of investment assets during the year but following a period of reinvestment, the Group has acquired £47.6 million of new investment property assets.

At 28th February 2015, the valuation of the investment property portfolio increased by £11.2 million (2014: increase of £4.8 million), including our investment properties held under joint venture.

Further details of acquisitions, disposals and valuation movements are set out in note 6 of the financial information, and further analyses of the performance and management of the portfolio are given in the Operating Review.

Inventory - development and trading properties

After allowing for continued investment in and development of the portfolio, the portfolio stood at £217.5 million at 28th February 2015 (2014: £192.5 million). This includes £64.7 million of development assets following the acquisition of the Cathedral Group. Further details are contained within the Operating Review.

Associates and joint ventures

Reflecting our strategy of working with partners and other equity sources, investments in associates and joint ventures has continued during the year. The Group's interests in projects in partnerships are structured in a number of different accounting categorisations. Note 15 of the financial information summarises the position.

The current carrying values of associates and joint ventures are analysed in note 7.

During the year we have entered into new associate and joint venture arrangements including:

· Becket House in London, where we have a 15 per cent stake in an £87.0 million office building totalling 146,000 sq. ft. bought in conjunction with Proprium Capital Partners

· A 1.7 acre development site in Dublin with planning consent for a 172,000 sq. ft. grade A office building. The site was acquired in joint venture with Colony Capital LLC and local partners for €40.5 million with the company having a 20 per cent share

· The acquisition of Chill Factore and associated retail and leisure units for £15.5 million in joint venture with Pemberstone Investments Limited, with the company having an 80 per cent property shareholding.

Derivative financial instruments

The Group's Euro-denominated loan notes and the related currency and interest rate hedges are carried as separate instruments in the Balance Sheet. During the year, Sterling strengthened against the Euro, decreasing the Sterling liability of the loan by £4.6 million to £34.1 million.

Other financial assets

Other financial assets include loans to a number of joint operations and associate companies which reflects the way in which the Group invests in these activities.

The largest loan is to Northpoint Developments Limited which, together with accrued interest at 28th February 2015, totals £18.2 million (2014: £17.0 million).

Cash and borrowings

The gross debt figure includes the €47.0 million 2021 Unsecured Subordinated Loan Note facility, stated in Sterling at the current value of £34.1 million (2014: £38.7 million, 2027 Loan Notes).

Loan to value gearing

Net debt expressed as a proportion of total property assets (including shares of properties and net debt in all projects in partnerships) was 34.4 per cent (2014: 44.7 per cent).

Taxation

The net current tax charge in the Statement of Comprehensive Income was £4.1 million, principally in respect of tax on trading profits in excess of group relief. The Group has significant potential deferred tax asset balances and the Directors previously restricted recognition to the amount of corresponding deferred tax liabilities, as uncertain market conditions did not offer sufficient probability of profits in the foreseeable future. This year, however, the Group has recognised an additional deferred tax charge of £0.3 million on certain profits projected in future accounting periods which can be forecast with a high enough degree of certainty. The Group's deferred tax treatment falls within the criteria of IAS 12.

In conjunction with our overall business strategy, the Group pursues a tax strategy that is principled, transparent and sustainable in the long-term. The Group has established ethics regarding its tax policy which have been ratified by the Board; these include the following key points:

A commitment to ensure full compliance with all statutory obligations including full disclosure to all relevant tax authorities

Any tax planning strategy entered into is done after full consideration of the risks and those findings are recorded in any relevant structuring document

The maintenance of good relationships with tax authorities and the interaction between tax planning and the Group's wider corporate reputation

Management of tax affairs in a manner that seeks to maximise shareholder value whilst operating within the parameters of existing tax legislation.

The Group has certain operations in jurisdictions that have been dictated to us by our majority joint venture partners and under most circumstances the Group does not enjoy any fiscal advantage of being in these jurisdictions. The Group has also recently undertaken a Transfer Pricing review to ensure that all cross-border services provided are conducted at the appropriate arm's length market rate.

The suitability of our tax strategy is kept under constant review to ensure compliance with the fiscal needs of the Group and constant evolution of tax legislation.

Dividends

On 24th February 2015 the Board approved the payment of a special dividend of 8.00 pence per share to be paid on 7th April 2015 to ordinary shareholders on the register at the close of business on 6th March 2015.

The Board will recommend to shareholders at the Annual General Meeting on 14th July 2015 a final dividend of 3.5 pence per share (2014: 3.2 pence per share) to be paid on 20th August 2015 to shareholders on the register on 24th July 2015. This final dividend, amounting to £4.4 million, has not been included as a liability at 28th February 2015, in accordance with IFRS. Including the 8.0 pence per share special dividend, total dividend for the year is 13.9 pence per share (2014: 5.6 pence per share).

Earnings per share

Basic and diluted earnings per share for the year represented earnings of 26.8 pence (2014: 14.9 pence). After removing the unrealised revaluation of the investment portfolio, the gain on the disposal of investment properties and impairment of development and trading properties, the EPRA adjusted earnings per share was 23.9 pence (2014: 7.8 pence).

Performance measures

Key performance indicators are set out below:

Five year summary

† 14-month period.

Marcus Shepherd

Finance Director

29th April 2015

Consolidated Statement of Comprehensive Income

 For the year ended 28th February 2015

* Adjusted earnings per share from continuing activities is given in note 5.

All amounts in the Consolidated Statement of Comprehensive Income relate to continuing operations.

Consolidated balance sheet

As at 28th February 2015

Approved and authorised for issue by the Board of Directors on 29th April 2015 and signed on its behalf by

M H Marx

Director

Consolidated Statement of Changes in Equity

For the year ended 28th February 2015

Consolidated Cash Flow Statement

For the year ended 28th February 2015