The emphasis on measured risk is at the
heart of our management philosophy
Development Securities is one of the UK’s
leading property development and investment companies. Its objective is
to generate consistent superior returns for investors by the creation and
recycling of development gains and investment surpluses but always subject
to prudent financial management.
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.
Balance and diversity
Our balanced business model, which we have applied consistently since the
present management team began to come together in the mid 1990s, has delivered
positive returns for shareholders. Maintaining balance between short- and
long-term returns, large-scale multi-phase projects and smaller scale developments,
across office, retail and industrial sectors, with sites across the UK,
provides the necessary diversity to minimise the risks inherent in property
development.
In our experience, large and complex development projects offer greater
profit potential than smaller ones, without significantly increasing the
inherent risk profile. Our strategy enables the Company to focus its efforts
on these major projects, which would otherwise be beyond our capability
to finance with internally generated funds.
Forward-funding
The single most important component is the appropriate and balanced sharing
of risk in the complex and very substantial development projects in which
we are involved. These projects include our schemes at PaddingtonCentral,
Cambourne Business Park, The Royals Business Park, Heart of Slough and Curzon
Park in Birmingham, comprising over three million sq. ft. and 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. Accordingly, 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 real estate
projects of this scale.
Investment portfolio
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 office, retail 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.
Furthermore, these funds enable the Company to retain its small team of
high quality professionals during a property market downturn. The Company
has built an excellent team which has delivered value to investors, and
that must be maintained.
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. As a matter
of policy, Development Securities does not have a fixed gearing limit, although
in recent years its level of net borrowings as a percentage of shareholders’
funds has been amongst the lowest in the property sector. 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.
 |
|
|
|
|
|
| Five Year Summary |
| |
2006*
£’m |
2005*
restated
£’m |
2004*
£’m |
2003
£’m |
2002
£’m |
| Results |
|
|
|
|
|
| Revenue |
48.7 |
25.5 |
23.7 |
32.2 |
33.5 |
| Profit before taxation |
22.8 |
23.3 |
18.8 |
1.2 |
10.0 |
| |
|
|
|
|
|
| Net assets |
231.4 |
187.5 |
173.2 |
125.1 |
121.5 |
| |
|
|
|
|
|
| Statistics |
|
|
|
|
|
| Earnings per share |
63.4p |
54.8p |
54.3p |
4.2p |
26.9p |
| Net assets per share |
568p |
510p |
472p |
444p |
423p |
| |
|
|
|
|
|
| *The 2004, 2005 and 2006 results
have been determined in accordance with IFRS. |
| |
|
|
|
|
|
