Annual Report 2012 - Development Securities PLC

6 Development Securities PLC / Annual Report 2012
Business Model
A stable and risk-averse business
model that supports our progress
through changing property cycles
For 15 years, the management team has adopted
a consistent approach to risk management and
commercial focus, allowing the Company to pursue
opportunities in different stages of the property and
economic cycles whilst mitigating the effects of
major market fluctuations.
The following five principles underpin our strategy
and approach. Adherence to these principles
enabled the Company to survive the financial crash
in 2008 without recourse to shareholder funds.
01
Low risk financial and funding structure
The Group maintains modest levels of gearing at 50 – 60
per cent.
02
Large-scale development projects in partnership
with major institutions
We consider large-scale development projects to be
generally a late economic cycle activity driven by an
expanding economy and strengthening demand. In our
experience, large and complex developments delivered
at the right part of the cycle offer greater profit potential
than smaller schemes. Nonetheless, we have never
believed it appropriate for a company of our size to
accept sole development risk in relation to our complex
and substantial development projects and, consequently,
we share the majority of development project risk with
financial institutions and partners who are the more
appropriate long-term investors.
Our funding partners on major projects have included:
Standard Life Investments
Scottish Widows Investment Property
Partnership Trust
The Prudential Assurance Company
Legal & General Assurance Society
Aviva Investors
Corpus Sireo Immobilienfonds
03
Focus on commercial property
Whilst the emphasis of our activities may shift between
major, complex developments and smaller scale
development and trading properties at the different
stages of the property cycle, we maintain a predominant
focus on securing planning consents and redeveloping
commercial property.
Our property portfolio is focused on:
Single, prestige office developments
Multi-phase office developments
Regional urban regeneration projects
Food-anchored retail development projects
Mixed-use developments
Selected residential schemes, hotels and student
accommodation
Since July 2009, we have broadened the scope of our
real estate activities to take advantage of specific
opportunities, partnering with specialist operators and
developers as necessary.
04
Actively managed investment portfolio for
steady income
We maintain an investment portfolio that is proactively
managed to drive capital growth and enhance rental
income. Thus, the investment portfolio provides a steady
and predictable flow of funds, contributing significantly
towards central overheads and mitigating the more
uneven profits and cash flow arising from the major
development and trading portfolio. The investment
portfolio accounts for a significant element of invested
equity and represents a diverse portfolio of assets across
the UK, comprising carefully selected retail and office
properties. The scale and profile of our portfolio does not
suit the concentration of risk from any significant
investment in Central London commercial property.
05
Geographic focus
All of our development and investment activity is
conducted within the United Kingdom.
Five year summary
2012† 2010 2009 2008 2007
Revenue (£m) 80.0 44.4 35.1 171.1 60.4
(Loss)/profit before taxation (£m) (10.2) 2.6 (11.4) (65.6) 0.2
Net assets (£m) 313.2 333.1 244.0 161.0 228.9
(Loss)/earnings per share* (10.3)p 1.7p (16.8)p (134.6)p 0.0p
Net assets per share
*Restated following Placing and Rights Issue.
†14-month period.
256p 272p 297p 397p 564p