Development Securities raised equity in the summers of 2009 and 2010 to invest in property at the bottom of the cycle. Those investments are just beginning to bear fruit, with development profits of £8.5m last year, up from £5.5m.
Yet much bigger gains are still to come. The group holds £155m of trading properties on its balance sheet at cost - or net realisable value if it is lower - even though their redevelopment is well under way. That value will only be recognised when the assets are sold, a process that should start in earnest next year. Analysts expect development profits of roughly £25m both this year and next.
Although the company's investment portfolio - the rental income from which covers most, but not all, of its recurring administration and debt costs - sagged, leading to £4.4m of revaluation losses. Like the economy, the commercial property market has entered a double-dip phase. There were also writedowns on interest rate swaps and a struggling portfolio of serviced offices, bringing paper losses to £12m in total. In cash terms the pre-tax loss was a more modest £2.6m.
Broker Peel Hunt expects adjusted NAV of 265p for end-February 2013 (262p for 2012).
DEVELOPMENT SECURITIES (DSC) | ||||
|---|---|---|---|---|
| ORD PRICE: | 160p | MARKET VALUE: | £196m | |
| TOUCH: | 160-162p | 12M HIGH / LOW | 237p | 130p |
| DIVIDEND YIELD: | 3.0%† | TRADING PROP: | £155m | |
| DISCOUNT TO NAV: | 37% | |||
| INVESTMENT PROP: | £238m | NET DEBT: | 49% | |
| Year to 31 Dec | Net asset value (p) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2007 | 568 | 0.2 | nil | 7.2 |
| 2008 | 397 | -65.6 | -149 | 4.8 |
| 2009 | 297 | -11.4 | -16.8 | 4.8 |
| 2010 | 272 | 2.65 | 1.70 | 4.8 |
| to 29 Feb | (p) | (£m) | (p) | (p) |
| 2012* | 254 | -10.2 | -10.3 | 5.6 |
| % change | -7 | - | - | +17 |
Ex-div: 26 Sep Payment: 26 Oct *14 months †annualised | ||||
