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|FIVE YEAR SUMMARY|
|Profit before taxation (£m)||0.2||22.8||23.3||18.8||1.2|
|Net assets (£m)||228.9||231.4||187.5||173.2||125.1|
|Earnings per share||0.0p||63.4p||54.8p||54.3p||4.2p|
|Net assets per share||564p||568p||510p||472p||444p|
|The 2004-2007 results have been determined in accorance with IFRS|
The emphasis on measured risk is at the heart of our management philosophy; it assists the achievement of consistent results over time and the protection of the business and its investors from the effects of major market fluctuations.
A balanced business model
Our balanced business model, which we have applied consistently since the present management team began to come together in the late 1990s, has delivered positive returns for shareholders. Maintaining balance between short- and long-term returns, large-scale multi-phase projects and smaller scale developments, office, retail and industrial sectors, with sites across the UK, provides the necessary diversity to reduce the risks inherent in property development.
Conservative use of debt
While cash resources are generally available to allow us to capitalise on appropriate development and investment opportunities, balance sheet management and the conservative use of cash and debt apply an additional discipline to the Company as a further prudent method of risk control. Consistent with our policy of running an efficient balance sheet, from time to time surplus cash may become available to return to shareholders. The timing is related to the completion of major development projects when we benefit from substantial cash inflows. If circumstances allow, funds are returned to shareholders by special dividend or a share buy-back programme. The timing and nature of such action will be determined after taking into account prevailing market conditions and projected cash requirements.
Short-term and long-term visibility
The challenge for a development business is to provide a sustainable business model through the vagaries of the property and business cycles. This requires combining short-term development gains with a pipeline of multi-phase projects.
Development Securities has assembled a significant portfolio of large-scale development projects that offer the prospect of opportunity and reward spanning, in a number of cases, an extended period. Many of the projects are multi-phased and have stretched, or are likely to stretch, over a number of property and economic cycles, providing an unusual degree of visibility to future earnings.
Smaller, individual and self-contained developments are also identified and when these are overlaid on the large, multi-phased schemes, it is our belief that a more sustainable business model emerges.
The single most important component of our business model is the appropriate and balanced sharing of risk in the complex and substantial development projects in which we are involved. These projects include our schemes at PaddingtonCentral, The Royals Business Park, West Quay III Southampton and others comprising a total of over three million sq. ft. Since we do not believe it is appropriate for a company of our size to accept sole development risk in relation to this scale of activity, we endeavour to share the majority of such development project risk with financial institutions and partners who are the more appropriate long-term investors for such real estate projects.
Our funding partners have included:
The profits and cash flow from large developments can be uneven because they are influenced substantially by market conditions.
The Company allocates a significant element of its equity to the ownership of a diverse investment portfolio, consisting of properties spread across the UK, covering retail, office, and industrial sectors: this mix is driven by market conditions, availability and stock selection.
The investment portfolio provides a steady and predictable flow of funds, contributing significantly towards interest costs and central overheads.