Preliminary Results

Derwent Valley Holdings PLC 13 March 2001 DERWENT VALLEY HOLDINGS PLC Preliminary Results for the year ended 31 December 2000 Derwent Valley is a specialist investor and refurbisher of Central London commercial property. * Derwent Valley announces a 22.6% increase in net assets per share for the year-ended 31 December 2000. 2000 1999 Increase Net asset value per share (p) 883 720 22.6% Net rental income (£m) 34.9 27.1 28.8% Adjusted profit before tax (£m) 10.7 11.5 (7.0)% FRS3 profit before tax (£m) 10.7 16.6 (35.5)% Adjusted earnings per share (p) 19.05 18.89 0.8% Dividend per share (p) 8.5 7.7 10.4% * Investment portfolio valued at £770m - an uplift of £81.9m. Investment properties held throughout the year increased by 13.9%. * £98m spent on acquisitions in 2000 including New Garden House, EC1, Telstar House, W2 and 21 Grosvenor Place, SW1. * £65m of capital expenditure planned over the next two years with principal schemes at Tower House, WC2, Leonard Street, EC2 and Panton House, SW1. * Disposal of eight properties during the year realised £47m. Sales worth a further £52m contracted since the year-end. * Pre-lets agreed at Broadwick House, W1 and Oliver's Yard, EC2 for a combined annual income in excess of £7m. John Ivey, Chairman, commented: 'A five year compound growth rate of 21.6% per annum clearly demonstrates Derwent Valley's record of delivering substantial growth each year. With the scope for new development in the West End restricted, I am confident that the group's proven management skill of adding value from within its Central London portfolio will enable it to continue delivering this strong growth for shareholders.' 13 March 2001 ENQUIRIES: Derwent Valley Holdings plc Tel: 020 7457 2020 (a.m.) John Burns, Managing Director Tel: 020 7659 3000 (p.m.) College Hill Tel: 020 7457 2020 Gareth David Email: gareth.david@collegehill.com DERWENT VALLEY HOLDINGS PLC Preliminary Results for the year ended 31 December 2000 CHAIRMAN'S STATEMENT A 23% increase in net asset value per share to 883p maintains Derwent Valley's record of delivering substantial growth each year. A five year compound growth rate of 21.6% per annum clearly demonstrates this record. This level of performance has been achieved through the efforts of a skilled management team allied to the company's strategy of investing in one location - Central London. The group's profit before tax, excluding the results of the disposal of investment properties, was £10.7 million as against £11.5 million last year. However, due to the low tax charge for the year, adjusted earnings per share increased from 18.89p to 19.05p. As with the half year's results, this profit is after making a provision in respect of an onerous lease on the group's recently vacated head office premises. This, together with the absence of trading profits, reduced pre-tax profits by £1.0 million. There is no profit on disposal of investment properties in 2000 compared to £5.1 million in 1999 and consequently the FRS3 profit has decreased from £16.6 million to £10.7 million. The directors propose a final dividend of 6.0p per share, which makes a total of 8.5p for the year. This represents an increase of 10.4% from the 7.7p paid last year and a five year compound growth rate of 9.6% per annum. The final dividend will be paid on 6th June 2001 to those shareholders on the register on 18th May 2001. The year-end valuation of the investment portfolio at £770.4 million produced an uplift of £81.9 million for the full year. The gain in the second half of £ 44.4 million included a surplus of £12 million on Broadwick House, Soho, W1, which was valued for the first time since its redevelopment and letting to the Ford Motor Company. The value of investment properties held throughout the year, excluding those under development, rose by 13.9% compared with 11.1% last year and 11.0% for the Central London Offices Index reported by the IPD. Development properties with a carrying value of £59.3 million, that were not re-valued at the year-end, included 1 Oliver's Yard, EC2. This property has been pre-let to Globix Corporation, and is expected to be re-valued at the interim stage following completion of the scheme during the first half of 2001. With investment yields not moving significantly over the period, the increase in values in Central London last year was driven by rental growth. Demand for business space continued to exceed the limited supply, and rents in a number of locations reached record levels. The West End remained the most popular area but, with its rigid planning policy, scope for the new development needed to meet demand was restricted. DERWENT VALLEY HOLDINGS PLC Preliminary Results for the year ended 31 December 2000 CHAIRMAN'S STATEMENT (cont'd) Derwent Valley's expertise in refurbishment and redevelopment enables it to benefit from this excess demand in its core area. Tired and under managed properties are revitalised to create exciting and innovative office space. Alternatively, where a building's internal configuration is obsolete, consent for development is gained, even in the most controlled areas, by satisfying the planning authorities with creative designs, such as that at Broadwick House, that enhance the locality. As the group's portfolio has expanded beyond this core area, the same skills have been used to improve returns on other projects throughout Central London. In the year under review, over half of the capital expenditure of £32 million has been incurred at Broadwick House and 1 Oliver's Yard. The early letting of these schemes means that they will contribute to the group's net rental income in 2001. Concurrently, resources and management time continue to be invested in identifying future opportunities from within the portfolio. This managed progression of schemes means that £65 million is committed to capital expenditure over the next two years, with the principal projects in the current year being Tower House, Covent Garden, WC2, Leonard Street, EC2 (adjoining 1 Oliver's Yard) and Panton House, SW1. These schemes are described in more detail in the property review, which follows this statement. As West End rents have risen sharply, tenants have looked to other areas where accommodation costs are lower, such as Clerkenwell to the East, and Paddington to the West. These areas are amongst those that the board had identified for future growth, and buildings in both locations are included in the five properties acquired in the year at a total cost of £98.3 million. The strong investment market has enabled us to continue our strategy of disposing of those properties that would restrict the group's performance. Accordingly, eight properties were sold during the year for £46.6 million. Since the year-end, a further two disposals have been made which realised approximately £17.8 million, and contracts exchanged for the sale of another three properties for £34.1 million. The year under review has been one of achievement for Derwent Valley, with a total return of 23.8% being generated for shareholders. There are, currently, some concerns about an economic slowdown. However, I am confident that the group's proven management skill of adding value from within its Central London portfolio, together with its ability to make acquisitions when the opportunity arises, will enable Derwent Valley to continue its record of delivering strong growth for shareholders. John C. Ivey CHAIRMAN 13th March 2001 DERWENT VALLEY HOLDINGS PLC Preliminary Results for the year ended 31 December 2000 PROPERTY REVIEW The group's strategy of creating and rigorously managing a Central London commercial property portfolio continues to produce good returns. This area experienced record levels of office demand and strong rental growth in 2000. Therefore, the delivery of refurbished space into the market was a key objective. At the start of the year 34,600m(2), or 17%, of the portfolio was vacant and works were in progress on 29,000m(2) of this space. As a consequence of the refurbishment and development programme, capital expenditure increased substantially. Such expenditure falls into two categories. Firstly, that spent on development properties where buildings are either comprehensively refurbished or redeveloped with vacant possession and secondly, that on a rolling approach, where individual floors are refurbished, entrances and services improved whilst the building remains part occupied and income producing. The objective is the same for both: to promote quality architecture and design, and to deliver a product with a distinctive identity that meets tenant requirements. 'Successful development programme' Since last year-end, significant progress has been made with the three development schemes. Broadwick House, W1, a spectacular new glass and steel development of 3,000m(2), which has contributed to the Soho vista, has been completed and pre-let to Ford Motor Company Ltd. The rental at £592 per m(2) set a new level at the time, but now appears reversionary following subsequent lettings in the area. Oliver's Yard, EC2, our largest project to date, was pre-let in August to Globix Corporation. Completion of this 16,600m(2) development is scheduled for mid-2001, and the property is expected to be re-valued in June 2001. The third development scheme, Panton House, 25-27 Haymarket, SW1, is well underway and involves refurbishing and extending the office floors and creating a striking atrium entrance. This 2,600m(2) office and restaurant scheme is scheduled for completion in September 2001. In addition to the two development schemes carried over from 2000, two further developments will commence in 2001. The first is at Tower House, Covent Garden, WC2. Since its acquisition in 1997, rental income has been maintained whilst preserving the ability to obtain vacant possession. Planning permission has been achieved for a part new build and part refurbishment office and retail scheme of 9,100m(2) in what is a sensitive location adjacent to the Covent Garden piazza. The scheme involves an innovative design approach, which gives volume and light by creating a full height atrium behind a retained facade. Completion is anticipated in Autumn 2002. The second is at Leonard Street, EC2, part of the original Oliver's Yard acquisition. Planning permission for a new office building of 4,500m(2) has been granted on this former car park site. It is expected that construction will begin in mid-2001. The development properties, which are not revalued until practical completion, had a combined carrying value at year-end of £59 million against £32 million last year. DERWENT VALLEY HOLDINGS PLC Preliminary Results for the year ended 31 December 2000 'Rolling refurbishment programme continues' The rolling refurbishment programme of the core multi-let properties has continued alongside the developments. A number of lettings were made during the year on these smaller, yet important projects. Following a lease surrender at Middlesex House, W1, 1050m(2) of space was refurbished and re-let, which achieved new rental levels of £404 per m(2). At 6 Greencoat Place, SW1, 2,000m (2) of offices have been refurbished and the building given a new identity with the conversion of a redundant loading bay into a spacious entrance. This scheme was pre-let to Channel Four Television Corporation for a twenty year term at £430 per m(2). Channel Four had previously taken the penthouse office floor of 1,000m(2) at our adjacent Greencoat House property. A number of schemes are in progress in the current year. These include the first phase of refurbishment of the recently acquired multi-let office building at 21 Grosvenor Place, SW1 and the retail and office refurbishment of 135-155 Charing Cross Road, WC2. 'A competitive investment market but satisfactory progress made with acquisitions' The strength of occupational demand in Central London created a competitive investment market, as investors saw the potential for rental and capital growth. The group's management team, with an in depth market knowledge of the area, and a strong financial position, was able to act swiftly on purchases. This year the group succeeded in acquiring office buildings in two new and improving locations with the purchase of New Garden House, Hatton Garden, EC1 for £29 million and Telstar House, Paddington, W2 for £22.1 million. The Hatton Garden area is being transformed from a traditional jewellery centre into a more established office location. New Garden House, which totals 11,700m(2), is multi-let and vacant possession can be obtained in 2003. Redevelopment and refurbishment options are under consideration. The regeneration area of Paddington had been identified for investment for some time and in June the group was able to acquire Telstar House. Whilst this 8,300m(2) property is let until 2018 to London Regional Transport, the rental at £194 per m(2) is reversionary and thus offers a good opportunity for growth at the next rent review in 2003. The under utilised site has longer term redevelopment potential. In the more established office area of Belgravia, 21 Grosvenor Place, SW1 was acquired in October for £25 million. An immediate refurbishment opportunity arose and in December 2000 possession of 2,200m(2) was obtained in this 5,600m (2) building. The scheme includes the provision of a new, enlarged entrance. Strong interest is being shown in the space and the anticipated rental level should enhance the value of the group's other substantial holdings in Grosvenor Place. 'Continued disposal of smaller and provincial properties' Disposals continued of the smaller properties, where scope for growth was considered limited. In total, eight properties realised nearly £47 million. These included three of the four provincial properties, the remaining one being sold in 2001. DERWENT VALLEY HOLDINGS PLC Preliminary Results for the year ended 31 December 2000 'Considerable scope from within for future rental growth' Derwent Valley's portfolio has been assembled to provide short and medium term refurbishment and development opportunities that will enable the group to continue to grow from within. With tenant demand in Central London at its highest for ten years, and vacancy rates at the low level of 2.8% of floor area, there is an ongoing strategy of implementing schemes to take advantage of current rental levels. Whilst significant lettings were achieved in the year, the amount of vacant space in the investment portfolio at the year-end was 20,600m(2), or 9.8% of the floor area, which had an estimated rental value of £8.5 million per annum. Schemes, principally Panton House, SW1, Tower House, WC2 and 21 Grosvenor Place, SW1, represent 18,300m(2) and £7.6 million per annum of these figures respectively. Approximately 38% of the portfolio by area has been refurbished, including these projects, and a further 45% is identified as having similar potential. In addition, with the growth of rental levels over the last few years there is considerable rental reversion to flow through from rent reviews and lease renewals. The underlying average rental on let space is a low £245 per m(2), against £220 per m(2) last year. At the year-end, this reversionary element amounted to £20.2 million per annum, including a £2.7 million stepped rental uplift at 1 Oliver's Yard due in 2003. Much has been reported on the move in the sector towards more flexible and shorter leases. In an actively managed portfolio like Derwent Valley's varying lease lengths have a role to play in creating value. The group's approach on its larger, refurbished projects is to establish lease lengths, generally between 10 and 20 years, that generate unbroken income streams and facilitate financing. However, on the multi-tenanted buildings with smaller suites, or where future schemes require possession, shorter leases, often with mutual rolling breaks, are appropriate. DERWENT VALLEY HOLDINGS PLC Preliminary Results for the year ended 31 December 2000 FINANCIAL REVIEW Results Profit before taxation, excluding the effect of investment property disposals, was reduced in 2000 from £11.5 million to £10.7 million. Without the provision of £0.8 million required under FRS12 for the onerous lease on the group's recently vacated head office, profits would have been maintained at the 1999 level. The former head office premises have now been let, and the provision should unwind over the remaining 14 years of the lease. In the absence this year of profits from investment disposals, the FRS3 profit was reduced from £ 16.6 million to £10.7 million. However, net rental income showed strong growth and rose nearly 29% to £34.9 million. This increase of £7.8 million included not only £8.9 million from acquisitions but also £5.0 million from lettings and rent reviews. There will be further increases from the latter in 2001 as rent will become payable from the pre-lettings at Broadwick House and 1 Oliver's Yard. Rent lost due to disposals was £3.3 million and due to vacant space, predominantly caused by the capital expenditure programme, £1.7 million. The acquisitions and capital expenditure were debt financed which contributed to the increase in the average level of borrowings year on year of £96 million. Consequently, there was a rise in interest payable of £7.1 million. Excluding the premium for the onerous lease, there was an increase in administrative costs of £0.4 million. This was partly attributable to employment costs which, in addition to increased bonus payments, saw a rise in the number of employees from 22 at December 1999 to 30 at December 2000. Taxation The effective tax charge shown in the profit and loss account for 2000 was exceptionally low at 6.5%. This was due to the ongoing programme of capital allowance claims, which this year reduced the tax charge by £2.3 million compared with £1.3 million in 1999 and the release of a provision of £0.8 million after the agreement of prior years' tax liabilities with the Inland Revenue. Cash flow The group's cash outflow during the year totalled £74.3 million. The group generates only a small amount of its cash requirements from its ongoing operations. In 2000, the cash inflow after interest was £14.8 million, which was supplemented by a further £46.6 million from property disposals. However, capital expenditure of £128.1 million exceeded this by £66.7 million, which was financed by an increase in bank borrowings. Capital expenditure included £ 98.3 million on the acquisition of new properties while expenditure on existing buildings totalled £29.8 million. DERWENT VALLEY HOLDINGS PLC Preliminary Results for the year ended 31 December 2000 The group has a significant capital expenditure programme planned. Over £32 million is budgeted to be spent in both 2001 and 2002 and further projects are planned from 2003 onwards. The major schemes in 2001, and the expected expenditure in that year, are at Oliver's Yard (£7.2 million), Tower House (£ 4.2 million), Panton House (£4.0 million) and Charing Cross Road (£3.5 million). This future expenditure is expected again to be financed by disposals and the drawdown of existing bank facilities. Debt At the year-end, group debt totalled £283.4 million compared with £209.3 million a year earlier. With the exception of the company's listed debenture, all of the debt was in the form of medium term, secured, revolving credit facilities from a small number of prime banks. Currently, committed but unutilised facilities amount to £38 million. Gearing The company manages three gearing ratios: * profit and loss gearing * balance sheet gearing * property gearing The most significant of these is the profit and loss gearing. This ratio is defined as net rental income less administrative costs divided by net interest payable. For 2000, this ratio was 1.58 compared with 1.97 in 1999. Much of the reduction in this ratio can be accounted for by the dual effect of the substantial increase in the group's development programme - the loss of rent from properties under refurbishment and, as the group does not capitalise interest, an increased interest charge on development expenditure. The balance sheet gearing at the year-end was 60.4% which compared with 54.8% a year earlier and reflected the cash outflow on acquisitions and capital expenditure. Finally, property gearing was 36.8% compared with 34.6% in 1999 and still shows a comfortable borrowing capability. Interest rate hedging Interest rate hedging is used to protect the group from the risk of adverse interest rate movements. The policy remains to vary the total of fixed rate debt and that fixed using derivatives within a range of approximately 40% to 75% of borrowings, depending on the perceived risk to the group. During the year, advantage was taken of the inverted interest rate yield curve and a total of £60 million of swaps were undertaken. Currently, 51% of debt is either fixed or hedged and the weighted average cost of borrowing is 7.38%. Under FRS13, the company is required to disclose the effect of revaluing fixed rate debt and interest rate hedging instruments based on today's economic conditions as against those which prevailed at the point of commitment. DERWENT VALLEY HOLDINGS PLC Preliminary Results for the year ended 31 December 2000 The fair value adjustment arising as a result of this revaluation was a negative £16.1 million (31st December 1999 : negative £13.3 million) equivalent to a reduction in the group's net asset value per share of 30p (31st December 1999: 25p). After taking account of tax relief, these figures would be 21p and 17p respectively. If these figures were included in the balance sheet, the effect would be to increase the group's balance sheet gearing. However, there is no obligation or present intention to redeem the debenture or any of the hedging instruments other than at maturity when their redemption will be made at par. DERWENT VALLEY HOLDINGS PLC GROUP PROFIT AND LOSS ACCOUNT 2000 1999 Notes £m £m Gross rental income: Group and share of joint ventures 38.8 30.0 Less: Share of joint ventures (0.3) (0.2) Group gross rental income 38.5 29.8 Property outgoings net of recoveries 2 (3.6) (2.7) Net revenue from properties 34.9 27.1 Profit from property trading 3 - 0.2 Administrative costs 10 (5.5) (4.3) Operating profit 29.4 23.0 Share of operating results of joint 0.3 0.3 ventures Profit on disposal of investment 4 - 5.1 properties 29.7 28.4 Interest receivable - 0.1 Interest payable 5 (19.0) (11.9) Profit before taxation 10.7 16.6 Taxation 6 (0.7) (2.3) Profit after taxation 10.0 14.3 Dividend 7 (4.5) (4.1) Retained profit 11 5.5 10.2 All amounts relate to continuing activities. Adjusted earnings per share 8 19.05p 18.89p Adjustment for disposal of investment (0.19)p 8.00p properties Basic earnings per share 8 18.86p 26.89p Adjustment for dilutive share options (0.02)p (0.05)p Diluted earnings per share 8 18.84p 26.84p Dividend per share 7 8.50p 7.70p Total return 15 23.8% 20.7% DERWENT VALLEY HOLDINGS PLC GROUP BALANCE SHEET 2000 1999 Notes £m £m Fixed assets: Tangible assets 9 771.0 604.3 Investments in joint ventures: Share of gross assets 3.1 2.8 Share of gross liabilities (3.0) (3.0) 0.1 (0.2) 771.1 604.1 Current assets: Properties held for resale 2.6 2.2 Debtors 8.8 8.5 11.4 10.7 Creditors: Amounts falling due within one year Bank loans and overdrafts (50.1) (2.0) Other current liabilities (29.0) (23.3) Net current liabilities (67.7) (14.6) Total assets less current liabilities 703.4 589.5 Creditors: Amounts falling due after more than one year Bank loans (199.0) (173.0) 10 1/8% First Mortgage Debenture Stock 2019 (34.3) (34.3) Provision for liabilities and charges 10 (0.8) - 469.3 382.2 Capital and reserves - equity 11 Called up share capital 2.6 2.6 Share premium account 153.8 153.6 Revaluation reserve 260.3 186.4 Other reserves 0.7 0.7 Profit and loss account 51.9 38.9 469.3 382.2 Net asset value per share 14 883p 720p Gearing 60.4% 54.8% DERWENT VALLEY HOLDINGS PLC GROUP CASH FLOW STATEMENT 2000 1999 Notes £m £m Net cash inflow from operating activities 12 32.1 23.1 Net cash outflow from return on investments and servicing of finance (17.3) (10.0) Tax paid (2.9) (2.2) Cash outflow from capital expenditure and (82.1) (73.3) financial investment Equity dividends paid (4.1) (4.0) Cash outflow before management of liquid (74.3) (66.4) resources and financing Financing Net proceeds of share issue 0.2 0.4 Movement in bank loans 76.0 64.5 Net cash inflow from financing 76.2 64.9 Increase/(decrease) in cash in the period 1.9 (1.5) GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES 2000 1999 £m £m Profit for financial year 10.0 14.3 Unrealised surplus on revaluation of investment 82.5 53.5 properties Unrealised surplus on revaluation of joint venture's 0.3 - investment property Taxation on realisation of property revaluation Gain of (1.4) (0.8) previous years 91.4 67.0 DERWENT VALLEY HOLDINGS PLC NOTES 1. The results for the year-ended 31st December 2000 include those for the holding company and all of its subsidiary undertakings, together with the group's share of the results of its joint ventures. The results are prepared on the basis of the accounting policies set out in the 1999 financial statements. 2. Property outgoings net of recoveries 2000 1999 £m £m Ground rents 0.8 0.8 Other property outgoings net of recoveries 2.8 1.9 3.6 2.7 3. Profit from property trading 2000 1999 £m £m Sales 0.1 1.9 Cost of sales (0.1) (1.7) - 0.2 4. Profit on disposal of investment properties 2000 1999 £m £m Disposals 46.6 45.4 Cost/valuation (46.0) (40.1) Group profit on disposal of investment properties 0.6 5.3 Permanent diminution in value of investment property (0.6) (0.2) - 5.1 5. Interest payable 2000 1999 £m £m Group 18.7 11.6 Share of joint ventures 0.3 0.3 19.0 11.9 DERWENT VALLEY HOLDINGS PLC 6. Taxation 2000 1999 £m £m Tax on profit, adjusted for the surplus on disposal of investment properties, at 30% (1999 - 31%) 3.2 3.5 Capital allowances (2.3) (1.3) Other differences 0.5 (0.4) 1.4 1.8 Tax on profit on disposal of investment properties 0.1 0.9 Tax charge in respect of current year profits 1.5 2.7 Adjustments in respect of prior years (0.8) (0.4) 0.7 2.3 Tax on realised gains and losses 1.4 0.8 7. Dividend 2000 1999 £m £m Ordinary shares of 5p each Paid - interim dividend of 2.50p per share (1999 - 2.35p) 1.3 1.3 Proposed - final dividend of 6.00p per share (1999 - 5.35p) 3.2 2.8 4.5 4.1 The final dividend will be payable on 6th June 2001 to those shareholders on the register at the close of business on 18th May 2001. 8. Earnings per share Earnings per share have been computed on the basis of profit after taxation of £10,017,000 (1999 - £14,251,000) and 53,101,000 (1999 - 53,005,000) ordinary shares, being the weighted average number of ordinary shares in issue during the year. The adjusted earnings per share figure has been calculated using a profit after taxation of £10,115,000 (1999 - £10,015,000) which excludes the loss after tax arising from the disposal of investment properties in order to show the recurring element of the group's profit. The diluted earnings per share figure has been calculated using 53,181,000 (1999 - 53,087,000) ordinary shares which includes the number of dilutive share options outstanding at the year-end. DERWENT VALLEY HOLDINGS PLC 9. Tangible assets Freehold land and Leasehold Buildings Property Other fixed £m £m assets Total Cost or valuation: At 1st January 2000 431.1 173.1 1.1 605.3 Additions 91.6 38.9 0.6 131.1 Disposals (43.0) (3.2) (0.1) (46.3) Revaluation 58.3 23.6 - 81.9 At 31st December 2000 538.0 232.4 1.6 772.0 Amortisation and depreciation: At 1st January 2000 - 0.1 0.9 1.0 Disposals - (0.2) - (0.2) Provision for year - 0.1 0.1 0.2 At 31st December 2000 - - 1.0 1.0 Net book value: At 31st December 2000 538.0 232.4 0.6 771.0 At 31st December 1999 431.1 173.0 0.2 604.3 Assets stated at cost or valuation: 31st December 2000 478.7 232.4 - 711.1 valuation Prior years' valuation plus subsequent costs 52.5 - - 52.5 Cost 6.8 - 0.6 7.4 538.0 232.4 0.6 771.0 Short leasehold property with a value of £14.8m (1999 - £17.1m) is included in leasehold property above. Investment property in the course of development with a carrying value of £59.3m (1999 - £32.3m) is included in freehold land and buildings above. The freehold land and buildings and leasehold property, other than those in the course of development, were revalued by Keith Cardale Groves (Commercial) Limited and CB Hillier Parker Limited, chartered surveyors, at open market value on 31st December 2000. At 31st December 2000, the historical cost of the freehold land and buildings and leasehold property owned by the group was £510.5m (1999 - £417.6m). DERWENT VALLEY HOLDINGS PLC 10. Provision for liabilities and charges £m At 1st January 2000 - Provided during the year 0.8 At 31st December 2000 0.8 The provision relates to an onerous lease at the group's previous head office which expires in 2014 and reflects the discounted present value of future payments under that lease. This exceptional item is included under administrative costs. 11. Capital and reserves Share Profit and Share premium Revaluation Other loss capital account reserve reserves account £m £m £m £m £m At 1st 2.6 153.6 186.4 0.7 38.9 January 2000 Premium on - 0.2 - - - issue of shares Surplus on - - 82.5 - - property revaluation Surplus on joint venture's property Revaluation - - 0.3 - - Profit realised on disposal of investment - - (8.9) - 8.9 properties Tax attributable to revaluation surplus realised on disposal of investment - - - - (1.4) properties Retained - - - - 5.5 profit for year At 31st 2.6 153.8 260.3 0.7 51.9 December 2000 12. Reconciliation of operating profit to net cash inflow from operating activities 2000 1999 £m £m Operating profit 29.4 3.0 Depreciation charge 0.2 0.5 Increase in debtors (0.4) (1.8) Increase in creditors 7.0 3.1 (Increase)/decrease in properties held for resale (0.4) 0.4 Effect of other deferrals and accruals on operating activity cash flow (3.7) (2.1) Net cash inflow from operating activities 32.1 23.1 DERWENT VALLEY HOLDINGS PLC 13. Reconciliation of net cash flow to movement in net debt 2000 1999 £m £m (Increase)/decrease in cash in the year (1.9) 1.5 Cash inflow from movement in debt financing 76.0 64.5 Movement in net debt in the year 74.1 66.0 Net debt at 1st January 2000 209.3 143.3 Net debt at 31st December 2000 283.4 209.3 14. Net assets per share Net assets per share have been calculated on the basis of net assets as at 31st December 2000 of £469,378,000 (1999 - £382,201,000) and the number of ordinary shares in issue at the year-end of 53,157,000 (1999 - 53,072,000). 15. Total return Total return is the increase in net asset value per share plus dividend per share expressed as a percentage of the net asset value per share at the beginning of the year. 16. The announcement set out above, which was approved by the board on 12th March 2001, does not constitute a full financial statement of the group's affairs for the year-ended 31st December 2000. The auditors have reported on the full accounts for the said year and have accompanied them with an unqualified report. The accounts have yet to be delivered to the Registrar of Companies. The annual report and accounts will be posted to shareholders on 11th April 2001, and the annual general meeting of the company will be held on 17th May 2001.

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