TIDMDLN
RNS Number : 2211R
Derwent London PLC
28 February 2023
28 February 2023
Derwent London plc ("Derwent London" / "the Group")
RESULTS FOR THE YEARED 31 DECEMBER 2022
WELL POSITIONED IN THE CONTINUING FLIGHT TO QUALITY
Paul Williams, Chief Executive of Derwent London, said:
"The GBP14.7m of lettings we have announced today further
demonstrate the depth of demand for our distinctively designed,
sustainable offices and we anticipate rental growth accelerating
for the best buildings over the medium-term. We have an
opportunity-rich pipeline, underpinned by our high quality core
portfolio. Our balance sheet remains strong helped by another year
of active capital recycling."
Lettings activity
-- 2022 lettings of GBP9.8m, 13.0% above December 2021 ERV
-- 2023 lettings of GBP14.7m year to date, including:
o PIMCO - 106,100 sq ft pre-let at 25 Baker Street W1, at rent
of GBP11.0m on a 15-year lease (no breaks)
o Buro Happold - 31,100 sq ft let at The Featherstone Building
EC1, at rent of GBP2.3m on a 15-year lease with a break at 10
Financial highlights
-- EPRA net tangible assets(1) 3,632p per share, down 8.3% from 3,959p at 31 December 2021
-- Net rental income of GBP188.5m, up 6.0% from GBP177.9m (restated)
-- IFRS loss before tax of GBP279.5m from a profit of GBP252.5m in 2021
-- EPRA earnings GBP119.7m or 106.6p per share, down 1.8% from 108.5p (restated)
-- Full year dividend of 78.5p, up 2.6% from 76.5p
-- Total return -6.3% from 5.8% in 2021
-- Interest cover of 423%, EPRA loan-to-value ratio of 23.9%
-- Net debt of GBP1,257.2m, broadly unchanged from GBP1,251.5m
-- Undrawn facilities and cash of GBP577m(2)
Portfolio highlights
-- Portfolio valued at GBP5.36bn, an underlying decline of 6.8%
with development valuations up 4.8%
-- True equivalent yield of 4.88% compared to 4.50% at December 2021
-- Portfolio ERV growth of 1.3%
-- Total property return of -3.4% outperforming our benchmark(3) at -8.0%
-- GBP133.0m of property acquisitions and GBP121.8m(4) of capital expenditure
-- GBP206.4m(5) of disposals, GBP25.6m above December 2021 book
value; further GBP53.6m sold in 2023
-- Development pipeline
o Three schemes completed in 2022, totalling 450,500 sq ft
o Two major projects on-site, totalling 435,000 sq ft, due for
completion in 2025
-- GBP29.6m of asset management transactions, 5.3% above December 2021 ERV
-- EPRA vacancy increased to 6.4% from 1.6% in December 2021;
reduces to 5.0% for 2023 lettings to date
Sustainability
-- Fully compliant with 2023 EPC legislation; 65.3% compliant with expected 2030 requirements
-- Energy intensity reduced 4% to 123 kWh/sqm, ahead of target for third consecutive year
Outlook
-- Our guidance is for average ERVs across our portfolio to increase by 0% to +3%
-- Upward yield pressure easing; yields for our portfolio to be
more resilient than wider London office market
(1) Explanations of how EPRA figures are derived from IFRS are
shown in note 25
(2) Excludes restricted cash
(3) MSCI Central London Offices Quarterly Index
(4) Including capitalised interest
(5) Disposals exclude the sale of trading property
Webcast and conference call
There will be a live webcast together with a conference call for
investors and analysts at 09:45 GMT today. The webcast can be
accessed via www.derwentlondon.com
To participate in the call, please register at
www.derwentlondon.com
A recording of the webcast will also be made available following
the event on www.derwentlondon.com
For further information, please contact:
Derwent London Paul Williams, Chief Executive
Tel: +44 (0)20 7659 3000 Damian Wisniewski, Chief Financial Officer
Robert Duncan, Head of Investor Relations
Brunswick Group Nina Coad
Tel: +44 (0)20 7404 5959 Emily Trapnell
CHAIRMAN'S STATEMENT
Derwent London aims to add value to its portfolio through a
combination of major projects and refurbishment schemes, while
recycling capital out of assets where we see lower forward returns.
We are committed to delivering high quality and sustainable offices
through the economic cycle.
Global events in 2022 caused a marked increase in uncertainty.
However, we have seen confidence return to the market in recent
months as the economic outlook has improved.
Following the decision in 2021 to retain our larger modern
developments for longer and to dispose of non-core properties, the
business made good progress against this strategic objective and
has seen relative outperformance against its property benchmarks.
This, together with our objective of operating with low leverage,
gives us firepower for further development and future investment
opportunities.
Estimated rental values across our portfolio rose by 1.3% over
2022 but the rapid outward movement in property yields seen in the
second half took our portfolio fair value to GBP5.36bn after a
revaluation deficit for the year of GBP430.9m, including our share
of joint ventures. This was a reversal from the GBP73.0m
revaluation surplus seen at the half year and took the Group's EPRA
net tangible asset (NTA) value to 3,632p at 31 December 2022. This
equates to an 8.3% decrease over the year from 3,959p in December
2021.
Gross rental income rose 6.0% to GBP207.0m for the year. EPRA
earnings were marginally lower than 2021 at 106.6p per share (2021
restated: 108.5p) but, after deducting premiums received in both
years, underlying EPRA earnings were slightly up year on year.
We propose raising the final dividend by 1.0p to 54.5p, in line
with our progressive and well covered dividend policy. It will be
paid on 2 June 2023 to shareholders on the register of members at
28 April 2023. This takes the full year's dividend to 78.5p, an
annual increase of 2.6%. EPRA earnings covered the 2022 interim and
final dividends 1.4 times.
In 2022, we refreshed our Vision, Purpose and Values:
-- Vision : We craft inspiring and distinctive space where people thrive.
-- Purpose : We design and curate long-life, low carbon,
intelligent offices that contribute to London's position as a
leading global city, while aiming to deliver above average
long-term returns for all our stakeholders.
-- Values : We build long-term relationships. We lead by design. We act with integrity.
Derwent London is an inclusive employer. Our people remain
highly engaged and in our recent employee survey, 91% of
respondents said they were 'proud to work for Derwent London'. I
would like to thank all the staff at Derwent London for their
continued hard work and commitment.
In recognition of the challenges faced in the uncertain economic
environment, we made a one-off cost of living payment to eligible
employees.
After nine years on the Board, Richard Dakin is stepping down
from his position as a Non-Executive Director of the Company and
Chair of the Risk Committee. The Board thanks Richard for his
significant contribution to the business and wishes him every
success in the future. Helen Gordon, who is the Senior Independent
Director and a member of the Risk Committee, will become Committee
Chair.
CEO STATEMENT
Introduction
At the start of 2022, confidence levels in London were strong.
In Q1, occupational and investment markets both recorded high
levels of activity. The outlook weakened as the year progressed
following the invasion of Ukraine and its economic impact globally,
as well as changes in the UK political landscape. In more recent
months, the outlook for the UK economy has improved and confidence
is recovering.
London is very busy again. The opening of the Elizabeth line has
increased capacity across the transport network, contributing to
substantially higher footfall around the central stations,
benefitting offices, shops and restaurants.
The flight to quality for London offices continues to gather
pace. Data from CBRE show a clear divergence in demand for new
versus secondhand space as businesses recognise the important role
design-led, amenity-rich, low carbon offices play in attracting and
retaining talent. The hybrid working model is now established and
occupiers are planning for peak occupancy with lower occupational
densities.
Letting progress
The 163,000 sq ft of leases signed in 2022, with a combined
annual rent of GBP9.8m, were agreed on average 13.0% above December
2021 ERV. As well as long leases, our letting activity included
seven 'Furnished + Flexible' lettings - also at substantial
premiums - bringing our total of these smaller units to 27 across
63,600 sq ft.
Activity has accelerated in 2023 with 10 new leases agreed
totalling GBP14.7m of rent, 7.7-% above December 2022 ERV on
average. The two key transactions are:
-- PIMCO (the investment management company) has pre-let 106,100
sq ft at 25 Baker Street W1 at a rent of GBP11.0m, well above
December 2022 ERV on a 15-year lease with no breaks (commercial
element 56% pre-let/sold ahead of completion in H1 2025); and
-- Buro Happold (a global engineering consultancy) has leased
31,100 sq ft at The Featherstone Building EC1 at a rent of GBP2.3m
in line with December 2022 ERV on a 15-year lease with a break at
year 10.
For further details, refer to the separate RNS announcement we
have published this morning.
We are in detailed negotiations with a number of other occupiers
across the portfolio.
New leases signed in 2022 had a weighted average unexpired lease
term to break (WAULT) of 5.7 years and our 'topped-up' WAULT at
year end was 7.2 years. This will increase with post-year end
activity and we see good demand for both long and short-term
leases. Our tenant retention rate remains high, and 79% of space
subject to break or expiry in 2022 was retained or re-let.
Completion of The Featherstone Building EC1, Soho Place W1 and
other smaller refurbishments led to an increase in our EPRA vacancy
rate to 6.4%, from 1.6% at 31 December 2021. Following lettings in
2023, proforma vacancy would reduce to 5.0%.
Property valuations
Portfolio ERV growth was 1.3% in 2022, in the middle of our
guidance range. However, there was a broad range of outcomes.
Buildings with a capital value above GBP1,000 psf saw ERVs up 2.5%,
while those below GBP1,000 psf saw ERVs up 0.3%, the latter often
being the raw material for future regeneration.
The portfolio's true equivalent yield increased 38bp in 2022 to
4.88%, a level last seen in 2014. Yields moved down 4bp in H1 and
up 42bp in H2. Our portfolio outperformed the market with a total
property return of -3.4% compared to the MSCI Central London Office
index down 8.0%, endorsing our strategy of keeping our recently
completed high quality buildings for longer.
The outward yield shift resulted in underlying values reducing
6.8% in the year and a revaluation deficit of GBP430.9m (including
share of joint ventures).
Market overview
London office investment volumes totalled GBP11.2bn, 12% higher
than in 2021, but this was 71% weighted to the first half. There
was a significant pause in Q4 which comprised just 6% of the annual
total.
London is recognised as a leading global city which appeals to a
diverse range of businesses. Many sectors continue to grow and
expand in the capital, including professional services, artificial
intelligence (AI), fintech, education and life sciences.
London office take-up reached 12.3m sq ft in the year, evenly
split between H1 and H2, up 29% from 2021 and in line with the
10-year average. The West End outperformed the City with take-up
23% above the 10-year average at 4.9m sq ft, while the City was in
line at 5.1m sq ft. We have seen an acceleration in the number of
companies committing to moving from outer London to the centre,
particularly in the West End.
Following an increase in 2020 and 2021, central London vacancy
reduced slightly but remains elevated at 8.2%. Looking in more
detail, there are two notable trends. First, vacancy is not evenly
spread. West End vacancy at 3.7% is in line with the 10-year
average while in the City it is nearly double its long-term average
at 11.9%. Secondly, the availability of prime space is very
constrained, with 64% of supply being secondhand including
tenant-controlled space.
There is increasing occupier focus on the overall service and
amenity offering. As well as the amenity provided within our
individual buildings, all our occupiers are given exclusive access
to shared lounges at DL/78 and DL/28 (due to open in Old Street in
Q4 2023). These offer a shared space in which to work, meet and
socialise, as well as bookable meeting rooms, private hire space
and events.
Strong balance sheet with low leverage
Despite a volatile market backdrop, 2022 was an active year for
capital recycling. We invested GBP133.0m on acquisitions and
GBP121.8m in capex (including capitalised interest), and were
pleased to sell several non-core assets above book value for
GBP206.4m (excluding trading properties), with a further GBP53.6m
sold in 2023. We have now made disposals of more than GBP700m since
the start of the pandemic three years ago.
Our balance sheet remains very strong with high interest cover
of 423% for the year and low EPRA LTV of 23.9% at 31 December 2022.
We also have a strong liquidity position with cash and undrawn
facilities at year end of GBP577m (excluding restricted cash).
The Group has no current exposure to market interest rates, with
100% of borrowings at fixed rates. Our average interest rate is
3.14% on a cash basis. We have little to refinance in the
near-term, with our first maturity being an GBP83m 3.99% secured
facility in October 2024. The average maturity of our drawn debt is
6.2 years.
Developments and refurbishments
At year end, our portfolio was split 57% 'core income' and 43%
'future opportunity'. We continue to deliver best in class space
that meets the evolving requirements of our occupiers. In 2022, we
completed three substantial projects delivering an average 27%
profit on cost at practical completion. We are on site at two major
projects, 25 Baker Street W1 (298,000 sq ft; commercial element 56%
pre-let/sold) and Network W1 (137,000 sq ft; speculative), both due
for completion in 2025.
We have submitted a planning application for a c.240,000 sq ft
scheme at our 50 Baker Street W1 50:50 joint venture with Lazari
Investments, and are refreshing our planning for Holden House W1
(c.150,000 sq ft).
We are working on longer term plans for Old Street Quarter EC1
which has potential for a 750,000+ sq ft mixed-use campus. Our
acquisition of the site for GBP239m is expected to complete from
2027. In addition, we are planning to increase the volume of major
refurbishment projects in the coming years where we see the
opportunity to substantially raise ERVs reflecting increased
quality, energy efficiency and sustainability credentials.
In 2022, build cost inflation rose to c.11% but is now settling
and is expected to moderate in 2023 and 2024. As previously
outlined, at 25 Baker Street we have fixed 97% of the office
element build costs (c.80% of overall) and we are close to agreeing
the contract sum at Network.
Sustainability
We made good further progress in 2022 reducing energy
consumption and thus operational carbon. Energy intensity across
our managed portfolio fell 4% year on year to 123 kWh/sqm, a 22%
reduction compared to our 2019 baseline, ahead of our science-based
targets for the third consecutive year. This resulted in a 7%
reduction in the operational carbon intensity across our managed
portfolio to 31.4 kgCO(2) e/sqm.
At our projects, we account for 100% of the embodied carbon in
the year of completion, at which point any residual is offset using
high quality, verified schemes. In 2022, we completed two major
developments (412,300 sq ft), one large refurbishment (38,200 sq
ft) and several small refurbishments. The weighted average embodied
carbon intensity for the major projects was 589 kgCO(2) e/sqm. This
is below the target set by the GLA of <600 kgCO(2) e/sqm.
While our regeneration activity leads to the creation of
embodied carbon, a project can take four to five years to deliver
and the building will have an extended design life of over 60
years. In addition, the buildings are designed to be more energy
efficient, and thus generate lower operational carbon in use, with
maximum future flexibility and adaptability.
We were pleased to receive resolution to grant planning consent
for a c.100 acre, 18.4MW solar park on our Scottish land which we
expect will generate more than 40% of the electricity needs of our
London managed portfolio.
At 31 December 2022, our portfolio was fully compliant with
forthcoming changes to EPC legislation which require a rating of E
or higher. These rules are due to become stricter in 2027 with a
minimum rating of C or better. From 2030, it is expected that there
will be a further change to a minimum of B. Including on-site
projects, our portfolio is 85.7% 2027 compliant by ERV (2021:
78.9%) and 65.3% 2030 compliant (2021: 61.0%).
In 2021, we commissioned a third party report that identified
c.GBP97m of works to achieve 2030 EPC compliance across our London
commercial portfolio. This has since been updated to c.GBP107m
reflecting the latest scope and 2022 cost inflation. Following the
sale of 19 Charterhouse Street EC1 in January 2023, the figure
reduces to c.GBP99m. Our external valuers have made a specific
deduction of c.GBP58m for identified EPC works across the
portfolio, plus further amounts for general upgrades on assumed
vacancies.
Recognising employee performance
We were delighted to recognise high performance with 17 internal
promotions in 2022, including four new appointments to the
Executive Committee. Philippa Davies, Head of Leasing, joined the
Committee from 1 July 2022 and there were a further two
appointments with effect from 1 January 2023: Katy Levine, Head of
Human Resources; and Robert Duncan, Head of Investor Relations and
Strategic Planning. Executive Committee member Jay Joshi was also
promoted to Group Financial Controller from Group Treasurer.
Outlook
We expect average ERV growth across our portfolio in 2023 of 0%
to +3%, with our higher quality properties continuing to
outperform. We anticipate rental growth accelerating for the best
buildings over the medium-term, particularly in the West End.
The ongoing weight of global capital looking to invest in
London, combined with the recent reduction in volatility across
financial markets, is encouraging. This is supported by London's
attractive yield relative to other European cities. Upward pressure
on yields is easing and we expect our portfolio to be more
resilient than the wider London office market.
Derwent London has a well-positioned portfolio, delivering the
right product to meet diverse occupier demand. We have an exciting
regeneration pipeline and the balance sheet capacity to take
advantage of acquisition opportunities that may emerge.
CENTRAL LONDON OFFICE MARKET
Occupational market
Letting activity in 2022 was in line with the 10-year average.
The flight to quality is well established and gathering pace, with
nearly 80% of take-up being of new or good quality space, while
availability of secondary remains elevated, in part due to
heightened occupier focus on sustainability credentials. The
constrained development pipeline, alongside occupiers being focused
on high quality buildings in more central locations, is leading to
an increase in pre-letting activity. Together with limited prime
supply, we see good reason for rental growth on higher quality
buildings.
Central London take-up of 12.3m sq ft was 29% higher than in
2021 reflecting continued re-engagement by businesses with
longer-term occupational strategies. This was focused on best
quality product, with 39% of the total being new (including
pre-lets) and 40% was Grade A secondhand. In the West End 4.9m sq
ft of space was leased, up 36% year-on-year and 23% ahead of the
10-year average. In the City, take-up of 5.1m sq ft rose 33%
compared to 2021, in line with the 10-year average.
Availability remains elevated across central London, with
vacancy of 8.2% down 0.4% on the prior year, but this average masks
a significant divergence between the West End and City. Strong
demand in the West End led to a 1.1% decline to 3.7% (10-year
average 3.4%). City availability also reduced, but by only 0.3% to
11.9%, nearly double the 10-year average (6.4%).
The amount of available secondhand space nearly doubled at the
start of the pandemic to a peak of 19.2m sq ft at Q1 2021 and
finished 2022 at 16.4m sq ft. The volume of tenant-controlled space
remains high at 28% of total availability. Overall secondhand
availability remains elevated at 64% of the total, but this
compares to a peak of 77% at Q1 2021.
Knight Frank estimate that there will be a 11m sq ft supply
shortage of best quality buildings over the next four years,
assuming normal levels of annual take-up. The committed central
London development pipeline between 2023 and 2025 totals 12.7m sq
ft with 7.1m sq ft scheduled to complete in 2023 of which 28% is
pre-let or under offer. Deliveries in 2024 and 2025 are
significantly below historic levels.
Businesses with large space requirements over the medium-term
are engaging at an increasingly early stage of development in order
to secure space that meets their requirements. Pre-lets comprised
24% of total take-up in 2022 and accounted for the nine largest
transactions. We are also seeing signs of recentralisation with
demand more focused on central and well-connected locations.
London is well recognised as a leading global city with broad
appeal to a diverse range of occupiers. The key sectors taking
space in 2022 were banking & finance (28%), and professional
and creative industries (17% each). This diversity is also seen in
the active demand figures, with banking & finance, business
services and creative industries together accounting for 71% in
total.
Businesses continue to adjust to more hybrid solutions but
whilst working patterns may have changed, the power and function of
the office seems to be more understood now than ever. Occupiers are
making decisions based on peak occupancy with lower occupational
densities, whilst also ensuring it is the right space to support
their talent and overall business productivity.
Our experience is that long leases remain important for large
occupiers given high fit-out costs and business continuity. For
pre-lets, pre-completion expansion/contraction options are becoming
more common. For smaller occupiers and in particular those in high
growth mode, shorter leases provide the flexibility they need to
adapt their real estate to their rapidly evolving requirements.
Sustainability credentials, high quality design, amenity,
customer service and experience all remain high on the agenda for
occupiers when it comes to making real estate decisions. That is
why we focus on delivering best in class, design-led and
sustainable buildings.
Macro backdrop
2022 was characterised by a spike in global inflation, a rapid
increase in borrowing costs and a cost of living crisis in the UK.
Towards the end of the year, inflationary pressures began to ease,
partly driven by a reduction in both energy and food costs, which
has led to expectations of a lower peak in interest rates than was
expected at the height of the political and economic
instability.
Following a strong post-pandemic bounce in 2021, UK GDP was 4.0%
in 2022 albeit weighted to Q1. The latest forecasts from Oxford
Economics and others are for both the UK and London to experience a
short-lived and mild recession in 2023 as households and businesses
respond to the increase in input costs from higher costs of
materials and utilities, and interest rates. The economy is then
expected to return to growth from 2024, with London to maintain its
outperformance
Job creation is an important indicator for London offices.
Forecasts from Oxford Economics show a small contraction in the
number of office- based jobs in 2023, before a return to growth
from 2024. These forecasts should be viewed, however, in the
context of the last two years during which a combined c.280,000 net
new office-based jobs were created.
The opening of the Elizabeth line, which has added c.10%
capacity to London's rail transport network, has driven a surge in
footfall around the central stations along the route. According to
TfL data, more than 100m journeys have already been made since
opening and daily usage is above the expected level of c.600,000.
Tottenham Court Road is now in the top five most-used stations in
the TfL network, with its usage increasing by more than 80% since
launch. Approximately 41% of our portfolio is located in nearby
Fitzrovia (including Soho Place).
Office occupancy rose through 2022 according to data from Remit
Consulting, following an initial period of adjustment when work
from home guidance was lifted in mid-January. West End office
occupation has increased from c.10% to in excess of 45%. By
contrast, occupation levels in the City continue to lag, reaching
c.30% through Q4.
London remains an attractive place to live as well as to work.
In 2022, the population rose by 1.2% to 9.5m and is forecast to
increase to 9.6m in 2023. Over the longer-term to 2035, the UN is
forecasting an annual increase of 0.8% to 10.6m, an increase of
more than 1m people over the next 13 years. This comes on the back
of sustained growth since the early-1980s when the population was
6.7m.
Long-term capital remains attracted to London
London remains an attractive location for domestic and
international investors and CBRE estimates there is c.GBP33bn of
potential investment demand targeting London offices. The story of
'the best versus the rest' continues and investor appetite is
polarised.
Well-located and high quality buildings with strong ESG
credentials, let on long leases to strong covenants remain in
demand as do those with potential for regeneration into prime.
Investor appetite for secondary assets, however, is very limited
and these are likely to underperform.
Investment activity for 2022 was GBP11.2bn, 12% above 2021 and
in line with the long-term average of GBP11.4bn. Unsurprisingly,
given the uncertain economic backdrop, investment volumes were low
in the last quarter of the year, totalling just GBP0.7bn. Overseas
capital dominated investment activity, accounting for 80% of all
transactions, with investors from Asia the most active at 43%.
Underlying rates and credit spreads both increased significantly
in the year with prospective investors appraising return
requirements against the higher borrowing costs. Consequently,
investment yields came under upward pressure through H2. The West
End was more resilient than the City, with prime yields rising
c.50bp to 3.75% compared to City yields up c.75bp to 4.5%.
The rise in yields combined with heightened risk awareness from
credit providers is expected to present potential acquisition
opportunities. Owners who are currently actively marketing assets
for sale are primarily driven by a combination of upcoming
refinancing events, future vacancy risk and EPC/upgrade capex
requirements.
Vendor pricing expectations are being reset as transactional
evidence starts to emerge and financial markets show signs of
stabilising. In contrast to previous market corrections, both the
development pipeline and the volume of debt maturing in the short
term are relatively low, which is expected to limit the magnitude
of any market correction.
VALUATION
As reported with our H1 2022 results, we have changed our
external valuer from CBRE to Knight Frank. At least half of our
London assets were valued by Knight Frank at H1 and for the
year-end valuation they were appointed on all the London assets.
Our Scottish land, less than 1% of the Group's portfolio, continues
to be valued by Savills.
The Group's investment portfolio was valued at GBP5.36bn as at
31 December 2022. There was a deficit for the year of GBP401.8m
which, after accounting adjustments of GBP29.1m, produced a decline
of GBP430.9m including our share of joint ventures. On an
underlying basis the portfolio decreased 6.8%, following a 3.5%
uplift in 2021.
This primarily reflected the weakening economy, with inflation
and interest rates rising significantly in the second half. This
had a direct impact on the commercial property sector with
valuation yields moving out. Accordingly, the positive H1 valuation
of 1.4% reversed in H2 to an 8.0% decline. Rental values generally
held up with office occupiers seeking better quality,
environmentally attractive accommodation, which is in short
supply.
By location, our central London properties, which represent 99%
of the portfolio, declined by 6.8% with the West End down 5.8% and
City Borders 9.2%. The balance of the portfolio, our Scottish
holdings, was down 5.7%.
Our portfolio valuation movement outperformed both the MSCI
Quarterly Index for Central London Offices and the wider UK All
Property Index which were down by 10.9% and 12.8%, respectively.
The quality of the portfolio, low vacancy rate, successful
development programme and active asset management all contributed
to this outperformance. The table shows performance trends in more
detail, with the higher capital value (in GBP psf) buildings
outperforming.
Capital value and ERV performance
Capital value
GBP psf banding Weighting by value Capital value change ERV growth
> GBP1,500 21% -3.5% 2.0%
GBP1,000 - GBP1,499 25% -7.4% 2.9%
<GBP1,000 39% -11.8% 0.3%
Underlying 85% -8.5% 1.4%
Developments 15% 4.8% 0.6%
--------------------- ------------------- -----------
Portfolio 100% -6.8% 1.3%
--------------------- ------------------- -----------
Our long-term development pipeline, which provides well designed
office space in central London, is well positioned, with occupiers
having a greater focus on high quality, environmentally attractive
space. This was reflected in our EPRA rental values which moved up
1.3%, an improvement on the 0.2% decline seen in 2021.
The portfolio's true equivalent yield moved out 38bp from 4.50%
to 4.88% over the year. The initial yield is 3.7% (December 2021:
3.3%) which, after allowing for the expiry of rent frees and
contractual uplifts, rises to 4.6% on a 'topped-up' basis (December
2021: 4.4%).
Derwent London's total property return for 2022 was -3.4%, which
compares to the MSCI Quarterly Index of -8.0% for Central London
Offices and -9.1% for UK All Property.
Our major development completions in 2022 were Soho Place W1 and
The Featherstone Building EC1, and together these were 71% let or
sold at year end. On-site developments are 25 Baker Street W1 and
Network W1, both in the West End. The latter commenced in June
2022. Both are due to be delivered in 2025 and require GBP324m of
capital expenditure to complete. Together the four schemes were
valued at GBP790m at December 2022, representing 15% of the
portfolio, and saw a 4.8% valuation uplift after capital
expenditure, as development surpluses were released. Excluding
these, the portfolio valuation decreased by 8.5% on an underlying
basis.
Further details on the progress of our projects are in the
'Development and refurbishment' section below and additional
guidance on the investment market is laid out in the 'Outlook'
section above.
Portfolio reversion
Our contracted annualised cash rent as at 31 December 2022 was
GBP204.2m, a 14% increase over twelve months as the pre-lets at our
2022 development completions came through. With a portfolio ERV of
GBP304.6m there is GBP100.4m of potential reversion. Within this,
GBP46.4m is contracted through a combination of rent-free expiries
and fixed uplifts, the majority of which is already straight-lined
in the income statement under IFRS accounting standards. On-site
developments and refurbishments could add GBP33.0m. The ERV of
available space is GBP17.3m. Just over half of this was at our
recently completed developments: GBP5.9m at The Featherstone
Building and GBP3.2m at Soho Place (retail). Since year end we have
let GBP2.4m of this space. The balance of the potential reversion
of GBP3.7m comes from future reviews and expiries less future fixed
uplifts.
LEASING, ASSET AND PROPERTY MANAGEMENT
Lettings - GBP9.8m of new rent at 13.0% above ERV
Leasing activity in 2022 totalled GBP9.8m, across 46
transactions, of which GBP2.3m were pre-lets. These 163,000 sq ft
of lettings were signed on average 13.0% above December 2021 ERV.
Nine transactions comprised 68% of the total.
Demand for furnished space is also strong with occupiers
prepared to pay a premium to secure high quality, ready to occupy
units. This provides an excellent solution for our smaller units
and we currently operate 63,600 sq ft of 'Furnished + Flexible'
space with a further 34,100 sq ft on site or committed.
Post-year end letting activity - GBP14.7m of new rent in 2023
YTD
Since the start of 2023, we have seen a noticeable increase in
letting activity. 10 new leases have been agreed totalling GBP14.7m
of rent on average 7.7% above December 2022 ERV. Key transactions
include:
-- PIMCO has pre-let 106,100 sq ft at 25 Baker Street W1 at a
rent of GBP11.0m, well above December 2022 ERV (commercial element
now 56% pre-let/sold); and
-- Buro Happold has leased 31,100 sq ft at The Featherstone
Building EC1 at a rent of GBP2.3m, in line with December 2022
ERV.
Leasing activity
Let Performance against
---------
Dec 21 ERV
---------
Area Income WAULT(1) Overall
sq ft GBPm pa yrs %
--------- -------- -------- --------- --------------------
H1 2022 109,300 7.1 6.1 9.3
H2 2022 53,700 2.7 4.2 23.7
2022 163,000 9.8 5.7 13.0
2023 YTD 162,600 14.7 13.4 7.7 (2)
-------- -------- --------- --------------------
(1) Weighted average unexpired lease term (to break) (2)
Performance against Dec 22 ERV
Principal lettings in 2022
Total annual Rent free
Property Tenant Area Rent rent Lease term Lease break equivalent
sq ft GBP psf GBPm Years Year Months
H1 2022
90 Whitfield
Street W1 Michael Kors 18,850 72.50 1.4 10 - 24
The
Featherstone 15, plus 9 if
Building EC1 Marshmallow 16,220 71.50 1.2 10 6 no break
The
Featherstone 11.5, plus 11.5
Building EC1 Dept Agency 11,450 85.25 1.0 10 5 if no break
White Collar
Factory EC1 Brainlabs 11,540 71.70 0.8 6 - 10.4
White Collar 12, plus 10 if
Factory EC1 Adobe 10,180 70.00 0.7 10 6 no break
230 Blackfriars Wandle Housing 7, plus 6 if no
Road SE1 Association 7,290 49.50 0.4 7.5 4 break
80 Charlotte
Street W1 NewRiver REIT 4,090 70.00 0.3 5 - 11
Holden House W1 Talon Outdoor 5,120 49.50 0.3 5 3.5 6
---------------- -------- ---------------- ------------
H2 2022
43 Whitfield
Street W1 Pollination 5,930 85.00 0.5 10 5 5
43 Whitfield 6, plus 5 if no
Street W1 Sine Digital 5,090 86.00 0.4 10 5 break
Gordon House
SW1 VCCP 7,380 52.50 0.4 3 - 7
---------------- -------- ---------------- ------------
Sub-total 103,140 71.75 7.4
Other 59,860 40.10 2.4
-------- ---------------- ------------
Total 2022 lettings 163,000 60.40 9.8
----------------------------------- -------- ---------------- ------------
Principal lettings in 2023 YTD
Total annual Rent free
Property Tenant Area Rent rent Lease term Lease break equivalent
sq ft GBP psf GBPm Years Year Months
---------------- -------- -------- ---------------- ------------
25 Baker Street
W1 PIMCO 106,100 103.40 11.0 15 - 37
The
Featherstone 24, plus 12 if
Building EC1 Buro Happold 31,100 74.40 2.3 15 10(1) no break
Jones Knowles 12, plus 12 if
Tea Building E1 Ritchie 8,100 60.00 0.5 10 5 no break
Other 17,300 51.10 0.9 - -
2023 YTD 162,600 90.10 14.7
---------------- ------------
(1) There is an additional break at year 5 on level eight
subject to a 12-month rent penalty payable by the tenant
Asset management - GBP29.6m of transactions on average 5.3%
above ERV
By March 2022, most Covid-19 restrictions in the UK had been
lifted. As office occupancy levels have increased, businesses have
re-engaged with their long term real estate strategy and, as a
result, we are seeing growing demand for long-term solutions from
the short-term extensions and regears experienced through the
pandemic.
We continually review our asset strategies as occupier
requirements evolve and align expiry profiles to facilitate the
refresh, upgrade and repositioning of our portfolio.
At the start of 2022, 9% of passing rent was subject to break or
expiry in the year. After adjusting for disposals and space taken
back for schemes, 79% of income exposed to breaks and expiries were
retained or re-let by year end. This compares to our 10-year
average retention/re-let rate of 85%.
10% of passing rent is subject to break or expiry in 2023, a
reduction from the 15% potentially at risk six months earlier.
Rent reviews were settled 6.2% above December 2021 ERV and
delivered a 10.1% uplift over the previous income. The majority of
this activity was at White Collar Factory EC1 where rents increased
between 14% and 16%.
Renewals were completed 12.5% above the previous rent and 9.3%
above December 2021 ERV. The main lease renewal was the extension
of Morningstar's lease at 1 Oliver's Yard EC1 to June 2027. They
have agreed a rental uplift reflecting an 18.8% premium to the
previous rent.
Regears, excluding the impact of a landlord development
facilitation break clause, completed 0.2% above previous rent and
1.6% above December 2021 ERV. The main regear was a restructuring
of Burberry's break clause at 1 Page Street SW1.
Asset management activity 2022
Number Area Previous rent New rent Uplift New rent vs
------------------
'000 sq ft GBPm pa GBPm pa % Dec 21 ERV %
------------------ ----------- --------- -------------
Rent reviews 20 215.7 12.6 13.8 10.1 6.2
Lease renewals 29 112.2 5.5 6.3 12.5 9.3
Lease regears(1) 13 189.0 9.5 9.5 0.2 1.6
Total 62 516.9 27.6 29.6 7.2 5.3
----------- ---------
(1) Excludes single development-linked regear in Q1
Vacancy - 6.4% at year end, 5.0% proforma for post-year end
lettings
The portfolio EPRA vacancy rate increased to 6.4% at 31 December
2022 from 1.6% at the start of the year. The increase primarily
reflects development completions at The Featherstone Building EC1
and Soho Place W1 as well as refurbishment completions at Tea
Building E1. Together these three projects contributed 58% to the
year end vacancy. Letting activity since the start of 2023 would
reduce the EPRA vacancy to 5.0% on a proforma basis.
Occupier survey
In January 2023, we carried out an occupier survey. 41 tenants
contributed with a combined ERV of GBP103m, equivalent to 50% of
ERV (excluding projects and contracted uplifts). When asked whether
any change in the organisation's real estate footprint was
anticipated over the next five years, 40% of respondents (by ERV)
said they expected either a small or significant increase and 34%
expect no change. Our occupier surveys (August 2020, January 2021
and July 2021) show a clear upward trend since the pandemic in the
number of occupiers expecting their real estate footprint to
increase or remain the same.
Rent collection - At pre-pandemic levels
As outlined with our H1 2022 results, rent collection continues
to match pre-pandemic levels with 98% of the December 2022 quarter
rent collected. Similarly, service charge collection remains strong
at 96%.
Property Management
As occupation continued to rise through 2022, the Property
Management team further engaged with our customers hosting a series
of events including workshops and competitions, alongside
initiatives to support local communities. Work has continued to
support the Group's journey to net zero carbon with the development
of a portfolio-wide metering strategy to ensure more robust data
capture, supporting our energy reduction programme and facilitating
roll-out of our Intelligent Building infrastructure. The team also
implemented a number of practical measures, including a reduction
in temperature set points, smart lighting initiatives and
adjustments to plant running times, helping exceed our energy
reduction targets.
ACQUISITIONS AND DISPOSALS
In 2021, the Group took the decision to retain its modern and
recently upgraded buildings for longer while reducing its exposure
to non-core properties with less repositioning potential. This
decision reflected our view that the flight to quality would gather
pace and that higher quality buildings would deliver stronger
returns.
We remain committed to owning a portfolio balanced between core
income properties and those that offer future regeneration
potential. At 31 December 2022, the portfolio was split 57% 'core
income' and 43% 'future opportunity' (excluding Old Street Quarter
EC1, with an existing floor area of c.400,000 sq ft, where our
acquisition is expected to complete from 2027 for GBP239m).
Since the start of 2022, we have made good further progress
against our objectives, actively recycling capital out of several
smaller non-core buildings above book value, where there was
limited capacity for extra floor area and amenity.
Disposal proceeds have been recycled into our development
pipeline thereby maintaining conservative gearing, providing
firepower for future acquisition opportunities that may arise.
Committed capex relating to our two on-site major projects totals
GBP324m.
Disposals (excluding trading property)
Area Net proceeds Net yield Net rental income
------------------------------------------------ ---------
Property Date sq ft GBPm % GBPm pa
------------------------------------------------ --------- ---------- ----------
New River Yard EC1 Q2 2022 70,700 65.9(1) 4.5 3.3
2 & 4 Soho Place W1 Q3 2022 18,400(2) 39.8 - -
Bush House WC2 Q3 2022 103,700 84.0 - -
Intermediate leasehold interest at Soho Place Q3 2022 - 15.3 - -
W1
Other - 1,600 1.4 - -
------------------------------------------------ ---------- ----------
Total 2022 disposals 194,400 206.4 3.3
----------------------------------------------------------- ---------- ----------
2023 YTD
19 Charterhouse Street EC1 Q1 2023 63,200 53.6 4.6 2.6
------------------------------------------------ ---------- ----------
(1) After deduction of rental top-ups and sale costs (2) Office
space
Acquisitions
Area Total after costs Net yield Net rental income Net rental income
-------------------------- ---------
Property Date sq ft GBPm % GBPm pa GBP psf
-------------------------- --------- ------- ---------- ------------------
230 Blackfriars Road SE1 Q1 2022 60,400 58.3 3.5 2.1 41.00
Soho Place W1 headlease Q1 2022 - 71.9 - - -
Other - - 2.8 - - -
Total 2022 acquisitions 60,400 133.0 2.1 -
------- ----------
DEVELOPMENT AND REFURBISHMENT
2022 project completions - 450,500 sq ft at an average 27%
profit on cost at completion
In 2022 we completed three major projects:
-- Soho Place W1 (285,000 sq ft development) - at 1 Soho Place,
the offices were fully pre-let to G-Research and Apollo Group at an
average rent of GBP93 psf and 15 year WAULT. The retail is
available to let but interest has strengthened following the
opening of the Elizabeth line. At 2 & 4 Soho Place, the theatre
and offices were pre-let to Nimax Theatres and Esselco respectively
and were sold in 2022. The profit on cost at practical completion
was 25% and the embodied carbon intensity of 1 Soho Place was 550
kgCO(2) e/sqm.
-- The Featherstone Building EC1 (127,300 sq ft development) -
after lettings to Dept Agency and Marshmallow, and following the
lettings to Buro Happold and the 2,350 sq ft retail unit in early
2023, the building is 59% let by floorspace. We are encouraged by
the level of interest in the remaining 53,000 sq ft of available
space. The profit on cost at practical completion was 30% and the
embodied carbon intensity was 539 kgCO(2) e/sqm.
-- Francis House SW1 (38,200 sq ft refurbishment) - pre-let to
Edelman at an average rent of GBP76 psf on a 15-year lease with a
break at year 10. The profit on cost at completion was 31%.
Major on-site projects - 435,000 sq ft with an estimated 11%
profit on cost
At the end of 2022, we were on site at two major projects
totalling 435,000 sq ft which we currently expect will deliver an
11% development profit and 5.4% yield on cost (excluding the
pre-let to PIMCO at 25 Baker Street).
-- 25 Baker Street W1 (298,000 sq ft) - this mixed-use project
comprises 218,000 sq ft of offices, plus residential and retail. As
part of the leasehold regear to a new 129-year headlease, we have
agreed to sell the courtyard retail and the smaller office block on
Gloucester Place to the freeholder, The Portman Estate. The
impressive landscaped retail courtyard forms an important part of
this design-led destination in the heart of Marylebone. Demolition
has completed and sub and super-structure works are progressing
well. 97% of construction costs of the office element have been
fixed (80% of total). Following the post year-end pre-let to PIMCO,
the commercial element of the scheme is 56% pre-let/sold. The mid
stage 5 embodied carbon estimate is c.600 kgCO(2) e/sqm.
-- Network W1 (137,000 sq ft) - demolition works at this
office-led scheme, adjacent to 80 Charlotte Street W1 and
DL/78.Fitzrovia, have completed and negotiations are at an advanced
stage with our preferred main build contractor. Supply in Fitzrovia
is highly constrained and we are encouraged by the level of early
occupier interest. The stage 4 design embodied carbon estimate is
c.530 kgCO(2) e/sqm.
Major on-site development pipeline
Project Total 25 Baker Street W1 Network W1
-------------------
Completion H1 2025 H2 2025
Office (sq ft) 350,000 218,000 132,000
Residential (sq ft) 52,000 52,000 -
Retail (sq ft) 33,000 28,000 5,000
Total area (sq ft) 435,000 298,000 137,000
-------------------
Est. future capex(1) (GBPm) 324 217 107
Total cost(2) (GBPm) 708 463 245
ERV (c.GBP psf) - 90 87.5
ERV (GBPm pa) 30.3 18.4(3) 11.9
Pre-let/sold area (sq ft) 31,000 31,000(4) -
Embodied carbon intensity (kgCO(2) e/sqm)(5) c.600 c.530
Target BREEAM rating Outstanding Outstanding
Target NABERS rating 4 Star or above 4 Star or above
Green Finance Elected Elect in 2023 (target)
---------------------------------------------- -------------------
(1) As at 31 December 2022
(2) Comprising book value at commencement, capex, fees and
notional interest on land, voids and other costs. 25 Baker Street
W1 includes a profit share to freeholder The Portman Estate
(3) Long leasehold, net of 2.5% ground rent
(4) 19,000 sq ft courtyard retail and 12,000 sq ft Gloucester
Place offices
(5) Embodied carbon intensity estimate as at stage 4 or 5
Future development pipeline - Four schemes totalling c.1.3m sq
ft
There are four key schemes that comprise our medium and
longer-term development pipeline. Our medium-term pipeline could
deliver c.390,000 sq ft (at 100%) of high quality office-led space.
At 50 Baker Street W1 (c.240,000 sq ft at 100%), which we own in a
50:50 joint venture with Lazari Investments, we have submitted a
planning application for a project approximately double the
existing floor area. This leasehold property is on The Portman
Estate and includes another building in their ownership. A regear
of the various interests would be required to implement any scheme.
At Holden House W1 (c.150,000 sq ft), we are working on a revised
planning application with new architects which will have a higher
office weighting and stronger sustainability credentials than the
existing planning consent.
Over the longer-term, we continue to progress plans for Old
Street Quarter EC1. Our current appraisals suggest the 2.5 acre
island site has potential for a 750,000+ sq ft mixed commercial use
campus targeted at different occupier sectors, including Life
Sciences among others. We have had constructive engagement with the
London Borough of Islington. Our acquisition of the site is
expected to complete from 2027, conditional on delivery of the new
eye hospital at St Pancras and subsequent vacant possession of the
site. At 230 Blackfriars Road SE1, our current plans assume a 2030
block date. Our early appraisals show the site has capacity for a
200,000+ sq ft office-led development, more than three times the
existing floor area.
Refurbishments - an increasing capex component
Refurbishment projects will comprise an increasing proportion of
annual capital expenditure over the next few years as we continue
to upgrade the portfolio to meet ever higher occupier requirements.
These projects provide the opportunity to enhance the ERV through
improving the amenity offer and overall quality. Smaller units will
be appraised for our 'Furnished + Flexible' product. Larger
refurbishments likely to commence over the near to medium term
include 1-2 Stephen Street W1, 20 Farringdon Road EC1, 1 Oliver's
Yard EC1 and Greencoat & Gordon House SW1. The floor area of
these four buildings is 756,800 sq ft.
FINANCE REVIEW
Introduction
Derwent London's capital allocation and funding strategies
through the last few years ensured that the Group ended 2022 with
low leverage combined with a long weighted-average unexpired lease
and debt profile. We have continued to balance value creation with
resilient earnings and dividend growth while delivering a
high-quality product which appeals to today's occupier with its
combination of location, design, amenity, flexibility in use and
customer focus.
The importance of a strong balance sheet and good long-term
planning became very evident through 2022 as the UK, like most
other major economies, experienced increasing costs and a
widespread upward yield shift. Covid-19's impact, so strongly felt
in 2020 and to a lesser extent in 2021, reduced further in 2022 but
we then saw the major conflict in Ukraine, increases to energy and
food prices and the emergence of other global tensions. These acted
as a catalyst for the inflation outlook to change significantly and
caused capital markets to re-look at interest rates and the pricing
of credit risk, particularly during the period of higher UK
volatility in late 2022. This has also not been an easy time for
businesses and key public service providers in the UK who face
staff shortages and cost pressures while dealing with regulatory
changes and the long-term climate change and biodiversity
emergencies.
Derwent London's product differentiates us in a central London
office market where a flight towards quality combines with
relatively low relevant supply. This bifurcation looks set to
continue and we have the balance sheet capacity and business model
to deliver our major developments while searching for new value-add
opportunities. We also expect to further upgrade amenities and
energy efficiency credentials within some of our more mature
properties over the next few years to help satisfy this occupier
demand.
Financial overview
As noted above, the Group's property valuation at 31 December
2022 was impacted by the significant upward yield shift seen in H2
giving rise to an 8.2% decline in the Group's total net assets over
the year. This took our total return over the year to -6.3%
compared to the +5.8% seen in 2021 with EPRA net tangible assets
(NTA) down 8.3% over 2022 to 3,632p per share.
2022 Restated 2021
p p
------ --------------
Opening EPRA NTA 3,959 3,812
Revaluation movement (373) 119
Profit on disposals 23 9
EPRA earnings 107 109
Ordinary dividends paid (78) (75)
Interest rate swap termination costs - (3)
Share of joint venture revaluation movement (8) (12)
Other 2 -
------ --------------
Closing EPRA NTA 3,632 3,959
------ --------------
EPRA Net Disposal Value (NDV), which takes account of the
GBP166m positive fair value movement on fixed rate debt, was
GBP4.24bn, equivalent to 3,768p per share. This is only 3.0 per
cent lower than the 3,884p per share recorded as at December
2021.
We have continued to invest in the portfolio with acquisitions
and project spend totalling GBP258m but property disposal proceeds
in 2022 of GBP210m meant that our debt levels were almost unchanged
compared to December 2021. Our gearing remains low, all of our
year-end debt was at fixed rates and our weighted average debt
maturity was 6.2 years.
Overall estimated rental values rose by 1.3% in 2022 with the
highest quality buildings outperforming. Vacancy levels were also
higher in 2022 than in recent years, partly the result of
development completions. However, with the exception of the
property revaluation movement, our income statement remained robust
with EPRA earnings only marginally down on 2021 at GBP119.7m or
106.6p per share. If the impact of non-recurring surrender and
rights-of-light premiums is ignored, EPRA earnings per share were
1.9 per cent higher than 2021 on an underlying basis.
Following new guidance issued by the IFRS Interpretations
Committee in October 2022, we have restated the results for 2020
and 2021 to reflect the writing off of Covid-19 concessions such as
rent forgiveness that related to historic receivable balances; our
previous accounting policy was to spread the concession over the
remaining life of the relevant lease. Where related to a future
lease obligation, the concession continues to be amortised over the
remaining life of the lease. None of the adjustments is material
but the re-presented figures follow the new guidance and ensure
proper comparability between years.
We have also grossed up cash balances within the balance sheet
to include cash held in tenant deposit accounts. These cash
balances are restricted and not generally available to the Group
but, as they are held within accounts which we control, have been
grossed up and the amounts re-presented. 'Cash held in restricted
accounts' also now includes cash within service charge bank
accounts which was previously disclosed within 'trade and other
receivables'. This change of treatment follows guidance from IFRIC
issued in March 2022.
Property portfolio and balance sheet
Our wholly-owned property portfolio was externally valued at
GBP5.3bn as at 31 December 2022, allocated across the balance sheet
as follows:
Dec 22 Dec 21
Restated
GBPm GBPm
------------------------------------------------------ ---------
Investment property 5,002.0 5,361.2
Non-current assets held for sale 54.2 102.8
Owner-occupied property 50.0 49.3
Trading property 39.4 32.2
---------
Property carrying value 5,145.6 5,545.5
Accrued income (non-current) 165.2 147.0
Accrued income (current) 26.1 22.8
Unamortised direct letting costs 13.8 12.3
Grossing up of headlease liabilities (34.2) (70.4)
Profit share due to TfL - (14.8)
Revaluation of trading property/other 5.3 3.9
Fair value of property portfolio 5,321.8 5,646.3
Fair value of properties held in joint venture (50%) 42.4 50.0
------------------------------------------------------ ---------
We continued to recycle capital within our property holdings in
2022 with acquisitions totalling GBP133.0m, capital expenditure of
GBP114.8m, capitalised interest of GBP7.0m and disposals with
carrying values totalling GBP182.1m. Interest capitalised in 2022
was considerably lower than the GBP12.0m recognised in 2021 as the
prior year included two major projects close to completion with
correspondingly high cumulative development expenditure while the
current year includes two relatively new schemes at 25 Baker Street
W1 and Network W1.
Disposals included Bush House WC2, sold for GBP85m (gross) in Q3
2022. At the beginning of 2022, we had expected to carry out a
comprehensive refurbishment of this property. Selling it instead,
for a price that captured most of our expected development profit,
substantially reduced our capital expenditure requirement and
helped keep the Group's gearing at lower levels than those
projected at the beginning of 2022.
Property, plant and equipment of GBP54.3m (2021: GBP54.0)
includes the GBP50.0m owner-occupied property at 25 Savile Row W1
and GBP4.3m of leasehold improvements, furniture, equipment and
artwork.
Investments of GBP43.9m (2021: GBP51.1m) are made up almost
entirely of the carrying value of our 50 per cent holding at 50
Baker Street W1, stated after a revaluation deficit of GBP9.3m in
the year and retained profits for 2022 of GBP2.0m.
The properties classified within 'non-current assets held for
sale' totalling GBP54.2m at 31 December 2022 were 19 Charterhouse
Street EC1, the sale of which completed in January 2023, and a
small property at 13 Charlotte Mews W1.
The GBP39.4m (2021: GBP32.2m) trading property at year end
comprised residential units under construction at 25 Baker Street
for delivery in 2025 and Welby House SW1, originally acquired as a
potential site for affordable housing and subject to a write-down
in value of GBP0.2m in 2022. Additional costs have also been
incurred within 'trading stock'; this is distinct from trading
property as we do not own an interest in the property itself but
have an agreement in place to deliver certain retail elements of
the 25 Baker Street scheme upon completion to the freeholder, The
Portman Estate, at an agreed price. Completion of this element of
the scheme is expected in 2025.
Other receivables treated as non current increased to GBP188.1
from GBP159.3m in 2021. This includes GBP9.1m (2021: GBPnil) of
design and planning application costs relating to the Old Street
Quarter EC1 scheme which are recoverable up to a capped amount of
GBP13.0m in the unlikely event that the vendor is unable to deliver
vacant possession of the site. Other receivables also include
accrued income from the 'straight-lining' of rental income under
IFRS16 to spread the effect of incentives and fixed uplifts over
the lease terms. The non-current element has increased to GBP165.2m
from a restated GBP147.0m in 2021. In addition, GBP26.1m (restated
2021: GBP22.8m) is included under current asset receivables as this
accrued income is due to unwind within a year. Unamortised letting
and legal fees, which are also included in receivables, increased
to GBP13.8m (2021: GBP12.1m) and are amortised over their
respective remaining lease terms.
Property income and earnings
Gross property and other income increased to GBP248.8m in 2022
from a restated GBP241.3m in the year to 31 December 2021. Gross
rental income was up 6.0% to GBP207.0m from GBP195.3m, largely due
to new lettings at the two large developments completed in the
first half of 2022. Soho Place W1 added GBP10.8m of income in 2022
and The Featherstone Building EC1 GBP1.0m. Other lettings across
the portfolio provided a further GBP9.3m. We were very active with
acquisitions and disposals through 2021 and 2022 and the major
acquisition at 250 Euston Road W1 in Q4 2021 increased gross rents
by GBP3.9m compared to the prior year, 230 Blackfriars SE1 added
GBP1.8m and Holford Works WC1 a further GBP0.5m. The disposals were
at a lower overall value but a higher yield; rental income reduced
by GBP2.3m year on year due to the sale of Angel Square EC1,
GBP1.5m at New River Yard EC1 and other disposals an additional
GBP0.7m.
Lease surrender and rights-of-light premiums were unusually high
in 2021 at GBP5.6m but fell back in 2022 to a more typical total of
GBP1.4m. Property trading activity has decreased now that all the
Asta House W1 residential units have been sold, the last one
completing early in 2022 for GBP1.6m. In 2021, the corresponding
sales turnover was GBP6.7m and, in 2020, was as high as GBP32.3m.
The next apartments for sale at our 25 Baker Street scheme are due
to complete in 2025 so trading property disposal proceeds are
likely to be very low for the next two years.
Service charges and energy costs have become a much more
significant issue for many of our tenants in 2022 with energy
costs, in particular, rising to unprecedented levels. Our ability
to manage energy tariffs has been impacted too by our commitment to
green energy. For example, we were not able to move to 'out of
contract' energy tariffs when rates spiked in Q4 2022 as those do
not support renewable electricity. Typical cost per kWh for
renewable electricity on six-monthly contracts increased from
around 31p at the beginning of 2022 to about 108p at the end of the
year but is now falling back to below 40p. Gas has seen a similar
story, rates moving from about 7p to 25p and now back to around 12p
per kWh. We very much hope to be able to pass on these lower costs
to our tenants as soon as possible and have offered some help with
the smoothing out of this price volatility where we can. One
positive outcome is that there is now even more focus on reducing
energy use with landlord and tenant seeking ways to co-operate
further.
With our higher average vacancy rate through much of 2022,
property costs borne by us have increased too, irrecoverable
property expenditure increasing from GBP11.8m in 2021 to GBP14.4m
in 2022. In addition, irrecoverable service charges, due to units
being vacant or where the tenant has negotiated a capped service
charge, increased by 50% to GBP5.1m in 2022 from GBP3.4m.
As noted above, we have revised the accounting treatment for
rent concessions granted in relation to historic amounts due and
these have now been written off in the appropriate period (mainly
in 2020 and 2021) where they were previously being spread over
their remaining lease terms. The adjustments have been shown as a
prior year adjustment and, while none of the amounts is material,
these have been adjusted so that there is meaningful comparison
year on year.
We carry out full impairment testing of receivable balances
using the expected credit-loss model in accordance with IFRS9. This
applies to trade receivables as well as the balances created by the
spreading of lease incentives, now slightly reduced as a result of
the change in accounting policy. These have been carried out for
each of our 64 largest tenants and for others where we believe the
risk is elevated, with the remaining balances considered according
to their sector. With improved conditions affecting many of our
tenants, particularly the smaller ones, and partly because the more
significant receivable risks have now been written off or provided
for, we saw a net reversal in 2022 with a credit to the income
statement of GBP1.0m compared to restated charges of GBP2.2m in
2021 and GBP16.1m in 2020.
As a result of these factors, net rental income increased from a
restated GBP177.9m in 2021 to GBP188.5m in 2022. Including
surrender premiums, dilapidation receipts, other property income
and management fees, net property and other income increased 4.0%
to GBP194.6m from GBP187.2m in 2021.
Salaries have risen both for our own staff and for those of our
many professional advisers and consultants. However, increased
headcount and salaries were offset by lower staff bonus levels and
reduced Directors' remuneration. As a result, administrative
expenses were 1.9% lower than the previous year at GBP36.4m
compared with GBP37.1, As in previous years, we do not capitalise
any of our overheads.
Lower impairment and administrative expenses have seen our EPRA
cost ratio move back down again in 2022. Including direct vacancy
costs, it fell to 23.3% from 24.9% in 2021.
As noted above, property valuations fell in the second half of
2022 with the main Group revaluation deficit being GBP422.1m after
accounting adjustments (2021: surplus of GBP131.1m). Our share of
the property revaluation deficit at 50 Baker Street was a further
GBP9.3m (2021: deficit of GBP10.2m) but our head office at Savile
Row showed a valuation rise of GBP0.7m, shown within the Group
Statement of Comprehensive Income rather than the Income
Statement.
The profit on disposal of investment properties increased to
GBP25.6m in 2022 from GBP10.5m in 2021. Most of this came from the
sale of Bush House for proceeds of GBP85m in Q3 2022. Further
proceeds of GBP55.8m was due to the disposal of the Group's
leasehold interest in 2 & 4 Soho Place W1 and GBP67.2m from New
River Yard EC1 in June 2022, both of these two properties having
been disclosed as 'assets held for sale' in the December 2021
balance sheet.
Net finance costs increased to GBP39.4m from GBP28.1m in 2021.
This was due to higher average borrowings though 2022 but was also
affected by capitalised interest falling from GBP12.0m in 2021 to
GBP7.0m in 2022.
Interest rate increases gave rise to a further GBP5.8m fair
value gain relating to our remaining interest rate swap.
Our joint venture with Lazari Investments relating to 50 Baker
Street W1 properties has produced a loss for the year of GBP7.3m,
impacted by the GBP9.3m revaluation deficit noted above.
The resulting IFRS loss for the year before tax was GBP279.5m
compared to a profit of GBP252.5m in the prior year. IFRS earnings
per share were -249.84p (2021: 224.99p).
A table providing a reconciliation of the IFRS results to EPRA
earnings per share is included in note 25 and is summarised
below.
EPRA like-for-like rental income
EPRA like-for-like (LFL) gross rental income was up 1.1% over
the year, partly because the higher vacancy rate in 2022 came
mainly from recently completed developments which fall outside our
EPRA LFL portfolio. EPRA LFL net rental income was up by 1.1% over
the year and EPRA LFL net property income, which takes account of
the unusually high surrender premiums received in 2021, was down by
1.0%.
Internal controls, assurance and the regulatory environment
We continue to focus on ensuring our internal controls are
robust and that we have a comprehensive approach to assurance
across our business, noting the particular interest in this area
from external stakeholders and regulators.
While the exact timing and scope of the forthcoming BEIS reforms
are yet to be finalised, we have commenced a project to map our
full assurance environment and to undertake a risk-based project to
enhance the documentation and evidencing of internal controls.
Independent internal audits continue to have a beneficial impact
on our control environment and we have also summarised our approach
to obtaining other forms of external assurance across the business.
Our principal sources of independent external assurance remain
consistent with last year and include the annual statutory audit,
internal audits carried out upon key risk areas throughout the
year, service charge audits and a twice-yearly external valuation.
In line with last year, we have engaged with an independent
external assurance provider in relation to selected sustainability,
health and safety and green finance disclosures.
We are committed to ensuring high-quality reporting that stands
up to scrutiny, both from within the business via robust internal
control mechanisms and from independent review. Activity in this
area will be scaled up in 2023 to further strengthen the internal
control environment and ensure compliance with the new requirements
as measures and mechanisms for implementation are finalised.
Taxation
The corporation tax charge for the year ended 31 December 2022
was GBP0.9m. Almost all of our portfolio is within the REIT regime
but this charge relates to non-REIT activity, mainly income arising
from certain property development and trading operations.
The movement in deferred tax for the year was a charge of
GBP0.9m, (2021: GBP0.8m credit) of which GBP0.1m was expensed
through the income statement. In addition, GBP0.6m was charged
through equity in relation to future tax deductions for
equity-settled share-based payments. A further GBP0.2m was charged
through 'other comprehensive income' in relation to the
owner-occupied property at Savile Row.
As well as other taxation paid during the year, in accordance
with our status as a REIT, GBP9.0m of tax was paid to HMRC relating
to tax withheld from shareholders on property income distributions
(PIDs).
Derwent London's principles of good governance extend to a
responsible approach to tax. Our statement of tax principles is
available on our website
www.derwentlondon.com/investors/governance/tax-principles and is
approved by the Board in line with the Group's long-term values,
culture and strategy.
Borrowings, net debt and cash flow
Rental income received from tenants increased to GBP194m in 2022
from GBP187m in 2021. However, cash paid out on property costs,
administration and interest payments increased by GBP18.4m over the
2021 equivalents. In terms of capital movements, outflows of
GBP258m for project expenditure and additions were largely offset
by GBP210m of property disposal proceeds. As a result, group
borrowings were almost unchanged at 31 December 2022 compared to a
year earlier.
Group borrowings at both year ends were GBP1.25bn, the 2022
figure being about GBP300,000 less than 2021. Leasehold liabilities
reduced in 2022 with the payment to TfL but long-term leasehold
liabilities also increased to GBP34.5m after the receipt of a
premium from an intermediate leaseholder. The net impact is that
gross debt has fallen from GBP1.32bn in December 2021 to GBP1.28bn
in December 2022. After adjusting for unrestricted cash and
derivatives, net debt increased marginally over the year to
GBP1.26bn.
On the new EPRA basis, our loan-to-value ratio increased a
little to 23.9% from 22.3% in December 2021, the main reason for
the increase being the property valuation declines in 2022.
Available cash and undrawn facilities remained significant at
GBP577m as at December 2022 (GBP608m at 31 December 2021). Interest
cover remained strong too at 4.2 times in 2022 (2021: 4.6 times).
Our main debt covenant continues to be 1.45 times.
Debt and financing
Conditions in the debt markets deteriorated markedly in the
second half of 2022 with central banks raising rates in an effort
to deal with rapid inflation increases. With rates at that time
expected to rise further and stay at these much higher levels for
longer, market rates across the curve increased to levels not seen
for many years. More recently, we have seen markets calm down
significantly but are still some way ahead of where they were a
year ago.
The UK 5-year swap rate peaked at around 5.4% in September 2022
but has since fallen back to around 4%. Similarly, the 10 year gilt
increased to 4.6% at its peak but has since moved back to about
3.6%.
At the same time as rates were rising sharply, there was a
sudden and significant increase in the credit spread that lenders
required to accept the risk associated with typical corporate
borrowers over and above the so called 'risk free' rate. Again,
these spreads have been closing significantly in 2023 but remain
elevated compared to more typical levels of recent years.
In these turbulent markets, we were helped by our high level of
refinancing activity in previous years. Our only debt transaction
in 2022 was the second one-year extension of the unsecured GBP100m
revolving credit facility provided by Wells Fargo, taking its
maturity to November 2027. At a time when loan extensions of this
sort are not taken for granted, this was another indication of the
strength of our banking relationships and we are grateful for the
continuing strong support we have received from Wells Fargo and all
of our lenders throughout 2022.
We have one remaining interest rate swap contract, providing a
fixed rate of 1.36% to April 2025 on GBP75m of borrowings. As we
had no floating rate borrowings at the balance sheet date, this
contract has been deferred to start post the year end. With rates
having risen so much in 2022, the fair value of this swap increased
by GBP5.8m during the year.
Our next refinancing exposure arises in October 2024 on the
GBP83m secured debt currently attracting a coupon of 3.99%. We will
look to refinance this in due course and current expectations are
that the cost of this will be a little higher than the current
level.
At the year end, the Group's weighted average interest rate on a
cash basis was 3.14%, the same as a year earlier, and 3.26% (31
December 2021: 3.27%) on an IFRS basis which adjusts for the
convertible and green bonds. These figures indicate the advantage
of having all of our debt at fixed rates as at the year end. The
weighted average maturity of our borrowings was 6.2 years at 31
December 2022 compared to 7.2 years at 31 December 2021.
Reporting under the Green Finance Framework
Derwent London's Green Finance Framework (the Framework) has
been prepared in line with the LMA Green Loan Principles and ICMA
Green Bond Principles guidance document, has been externally
reviewed and a second party opinion has been obtained. The latest
Framework is available on our website at www.derwentlondon.com
Out of our total debt facilities of GBP1.8bn, GBP650m satisfy
our definition of Green Financing Transactions (GFTs). The GFTs
comprise the GBP350m Green Bond issuance in 2021 and a GBP300m
'green' tranche included within our main corporate GBP450m
revolving credit facility taken out in 2019. Together these are
used to fund qualifying green expenditure.
In accordance with the reporting requirements set out in the
Framework, we are disclosing the Eligible Green Projects (EGPs)
that have benefited from our Green Financing Transactions, and the
allocation of drawn funds to each project.
The projects eligible for funds from the GFTs are as
follows:
Green project 80 Charlotte Street Soho Place W1 The Featherstone 25 Baker Street W1(1)
W1 Building EC1
---------------------- ---------------------- ---------------------- ---------------------- ----------------------
Expected completion Completed in 2020 Completed in 2022 Completed in 2022 2025
date
---------------------- ---------------------- ---------------------- ---------------------- ----------------------
Category for Green building, Green building, Green building, Green building,
eligibility criterion 1 of criterion 1 of criterion 1 of criterion 1 of
section 3.1 of the section 3.1 of the section 3.1 of the section 3.1 of the
Framework (excludes Framework (excludes Framework Framework (excludes
Asta House and Site B - Theatre) retail and
Charlotte refurbished
Apartments) residential)
---------------------- ---------------------- ---------------------- ---------------------- ----------------------
Impact reporting Building Building Building Building
indicator certification certification certification certification
achieved (system & achieved (system & achieved (system & achieved (system &
rating) rating) rating) rating)
---------------------- ---------------------- ---------------------- ---------------------- ----------------------
Green credentials Achieved: 1 Soho Place (Site A) Achieved: Offices Achieved
Achieved:
BREEAM - Excellent BREEAM - Outstanding BREEAM - Outstanding BREEAM - Outstanding
(post-construction) (post-construction) (post-construction) (design stage)
EPC - B EPC - B EPC - A
LEED - Gold
Expected: Expected: Expected:
LEED - Gold, on 2&4 Soho Place (Site LEED - Platinum, on BREEAM - Outstanding
target B) offices - DISPOSED target (post-construction)
OF IN 2022
Achieved: LEED - Gold, on
target
BREEAM - Excellent EPC - B, on target
(design stage)
EPC - B Private residential
Expected: Expected:
BREEAM - Excellent Home Quality Mark - 4
(post construction), Stars (design stage),
on target on target
---------------------- ---------------------- ---------------------- ---------------------- ----------------------
(1) Previously known as 19-35 Baker Street W1
Qualifying 'green' expenditure
The qualifying expenditure as at 31 December 2022 for each
project is set out in the table below. This includes an element of
'look back' capital expenditure on projects in which expenditure
had been incurred prior to management's approval of the project as
an EGP. This also includes capital expenditure on projects which
had already been incurred as at the original refinancing date in
October 2019.
Soho Place W1 and The Featherstone Building EC1 both commenced
on site in 2019 and reached practical completion in H1 2022. Soho
Place Site B was disposed of in the year and, in accordance with
section 3.3 of the Framework, the expenditure allocated to Site B
has therefore been removed from the qualifying expenditure.
The 25 Baker Street W1(1) scheme commenced on site in October
2021 and is due to reach practical completion in 2025.
Cumulative spend on each EGP as at the reporting date
Subsequent spend
-----------------------
Q4 2019 -
Look back spend FY 2021 2022 Spend Disposals Cumulative Spend
EGP GBPm GBPm GBPm GBPm GBPm
---------------- ---------- -----------------
80 Charlotte Street W1 185.6 51.6 0.9 - 238.1
---------------- ----------- ---------- -----------------
Soho Place W1 66.3 137.6 55.2 (34.8) 224.3
---------------- ---------- ----------- ---------- -----------------
The Featherstone Building EC1 29.1 60.3 7.3 - 96.7
---------------- ---------- ----------- ---------- -----------------
25 Baker Street W1(1) 26.5 5.8 36.5 - 68.8
---------------- ---------- ----------- ---------- -----------------
307.5 255.3 99.9 (34.8) 627.9
---------------- ---------- ----------- ---------- -----------------
(1) Previously known as 19-35 Baker Street W1
After deducting all previously eligible expenditure on Soho
Place Site B of GBP34.8m, the cumulative qualifying expenditure on
EGPs was GBP627.9m. Total qualifying expenditure incurred in 2022
was GBP99.9m.
Drawn borrowings from GFTs as at 31 December 2022 were GBP350m,
which comprised of the GBP350m Green Bonds with GBPnil drawn under
the green tranche of the RCF. Therefore, there was GBP300.0m
undrawn under the green tranche of the Group's RCF as at 31
December 2022, of which GBP277.9m was available to fund future cash
flow requirements of the Group.
A requirement under the Framework and the facility agreement is
for there to be an excess of qualifying spend on EGPs over the
amount of drawn borrowings from all GFTs which, as shown above, has
been met.
Dividend
We continue to operate a progressive but well covered dividend
policy, mindful also of our pension and other stakeholder
obligations and responsibilities. The board is recommending a 1.0p
per share or 1.9% increase in the final dividend to 54.5p. It will
be paid in June 2023 with 38.5p as a PID and the balance of 16.0p
as a conventional dividend. The Company's ISIN reference is
GB0002652740.
After adding in the interim 2022 dividend, the total dividend
for the year amounts to 78.5p, 2.6% higher than for 2021. Dividend
cover remains sound with dividends paid and declared in relation to
2022 earnings 1.36 times covered by EPRA earnings.
PRINCIPAL RISKS AND UNCERTAINTIES
MANAGING RISKS
We have identified certain principal risks and uncertainties
that could prevent the Group from achieving its strategic
objectives and have assessed how these risks could best be
mitigated, where possible, through a combination of internal
controls, risk management and the purchase of insurance cover.
These risks are reviewed and updated on a regular basis and were
last formally assessed by the Board on 24 February 2023. The Board
has confirmed that its risk appetite and key risk indicators remain
appropriate.
The Group's risk profile remained elevated during 2022 due
partly to political and economic uncertainty, although the risks
arising from the Covid-19 pandemic have lessened. The Board has
reinstated a fall in property values as a principal risk for the
Group. The current economic conditions have had an adverse impact
on property yields, and there is a risk that property values could
fall further in 2023.
We are operating in a changed interest rate environment
following a long period of historically low rates. At 31 December
2022, all of our borrowings were at fixed rates. As a consequence
of inflation and economic uncertainty, some of our occupiers may
face a more challenging financial situation, which could result in
Derwent London having higher future vacancy rates and/or reduced
rent receipts. The occupiers deemed to be most at risk are those
which rely heavily on consumer spending such as retail and
hospitality, which make up only 7% of the Group's income. Despite
the economic uncertainty, London remains resilient and occupier
demand remains good for the right product as the 'flight to
quality' continues.
Staying ahead of the sustainability curve and delivering on its
net zero carbon commitments is a fundamental part of Derwent
London's long-term strategy. Given that the built environment
contributes significantly to the UK's overall carbon footprint, we
are being proactive in finding solutions to further reduce
emissions and develop renewable energy sources. The Remuneration
Committee has introduced sustainability-related metrics (embodied
carbon reduction and energy intensity reduction) into the Executive
Directors' long-term incentive plan.
The principal risks and uncertainties facing the Group in 2023
are set out on the following pages with the potential impact and
the mitigating actions and controls in place. The Group's approach
to the management and mitigation of risk is included in the 2022
Report & Accounts.
Strategic risks
The Group's business model and/or strategy does not create the
anticipated shareholder value or fails to meet investors' and other
stakeholders' expectations.
Risk, effect and progression Controls and mitigation
-------------------------------------------------- ------------------------------------------------------------------
1. Failure to implement the Group's strategy
The Group's success depends on implementing its * The Board approves the strategic plan and significant
strategy and responding appropriately to internal projects, which includes the development pipeline.
and external factors including responding to The development pipeline has a degree of flexibility
changing work practices, occupational demand, that enables plans for individual properties to be
economic and property cycles, and London's global changed to reflect prevailing economic circumstances.
appeal. The London office market has generally
been cyclical in recent decades, with strong
growth followed by sharp economic downturns, * An annual strategic review and budget is prepared for
precipitated by rising interest rates and often Board approval alongside two-year rolling forecasts
coinciding with significant oversupply. which are prepared three times a year. The Board
considers the sensitivity of the Group KPIs to
changes in the assumptions underlying our forecasts
in light of anticipated economic conditions. If
necessary, modifications are made.
* We develop properties in locations where there is
good potential for future demand, such as near the
Elizabeth line. We do not have any properties in the
City or Docklands.
* We maintain income from properties until development
commences and have an ongoing strategy to extend
income through lease renewals and regears. We
regularly de-risk developments through pre-lets.
* The Credit Committee, chaired by either the CEO or
CFO, assesses and monitors the financial strength of
potential and existing occupiers. The Group's diverse
and high quality occupier base provides resilience
against occupier default. We also maintain close and
frequent contact with our occupiers.
* We maintain sufficient headroom for all the key
ratios and financial covenants, with a particular
focus on interest cover.
Financial risks
The main financial risk is that the Group becomes unable to meet
its financial obligations, which is not currently a principal risk.
Financial risks can arise from movements in the financial markets
in which we operate and inefficient management of capital
resources.
Risk, effect and progression Controls and mitigation
----------------------------- ------------------------
2. Risk of occupiers defaulting or occupier
failure
The majority of the Group's revenues comprise * The Credit Committee, chaired by either the CEO or
rent received from our occupiers and any CFO, assesses and monitors the financial strength of
deterioration potential and existing occupiers, with detailed
in their businesses and/or profitability could in reviews of all prospective occupiers being performed.
turn adversely affect the Group's rental
income or increase the Group's bad debts and/or
number of lease terminations. * A 'tenants on watch' register is maintained and
regularly reviewed by the Executive Committee and the
Board.
* Active rent collection, with regular reports to the
Executive Committee on day 1, 7, 14 and 21.
* We maintain close and frequent contact with our
occupiers.
* Rent deposits and/or guarantors are held where
considered appropriate.
3. Income decline
Changes in macroeconomic factors may adversely * The Credit Committee receives detailed reviews of all
affect London's office market. The Group is prospective occupiers.
exposed to external factors which are outside the
Group's control, such as future demand for
office space, the 'cost of living' crisis, the * A 'tenants on watch' register is maintained and
'grey' market in office space (i.e. occupier regularly reviewed by the Executive Committee and the
controlled vacant space), weaknesses in retail Board.
and hospitality businesses, increase in hybrid
working and the depth of a recession, and
subsequent rise in unemployment and/or interest * Ongoing dialogue is maintained with occupiers to
rates. understand their concerns and requirements.
* The Group's low loan-to-value ratio reduces the
likelihood that falls in property values have a
significant impact on our business continuity.
4. Fall in property values
The potential adverse impact of the economic and * The impact of yield changes is considered when
political environment on property yields potential projects are appraised.
has heightened the risk of a fall in property
values.
* The impact of yield changes on the Group's financial
covenants and performance is monitored regularly and
subject to sensitivity analysis to ensure that
adequate headroom is preserved.
* The Group's mainly unsecured financing makes
management of our financial covenants more
straightforward.
* The Group's low loan-to-value ratio reduces the
likelihood that falls in property values have a
significant operational impact on our business.
Operational risks
The Group suffers either a financial loss or adverse
consequences due to processes being inadequate or not operating
correctly, human factors or other external events.
Risk Controls and mitigation
-------------------------------------------------- ------------------------------------------------------------------
5A. Reduced development returns
Returns from the Group's developments may be * Our procurement process includes the use of highly
adversely impacted due to: delays on-site; regarded firms of quantity surveyors and is designed
increased to minimise cost uncertainty.
construction costs; material and labour
shortages; and adverse letting conditions.
* Development costs are benchmarked to ensure that the
Group obtains competitive pricing and, where
appropriate, fixed price contracts are negotiated.
* Post-completion reviews are carried out for all major
developments to ensure that improvements to the
Group's procedures are identified, implemented and
lessons learned.
* Investment appraisals are prepared and sensitivity
analysis is undertaken to judge whether an adequate
return is made in all likely circumstances.
* The Group's pre-letting strategy reduces or removes
the letting risk of the development as soon as
possible.
5B. 'On-site' risk
If the Group fails to: (i) adequately appraise * Regular monitoring of our contractors' cash flows.
investments prior to starting work on-site,
including through taking into account
contingencies and inflationary cost increases; * Frequent meetings with key contractors and
(ii) subcontractors to review their work programme and
use a procurement process that is properly maintain strong relationships.
designed (to minimise uncertainty around costs)
and that includes the use of highly regarded
quantity surveyors; (iii) benchmark development * Off-site inspection of key components to ensure they
costs; (iv) conduct thorough site investigations have been completed to the requisite quality.
to reduce the risk of unidentified issues
such as asbestos; (v) implement its pre-letting
strategy; or (vi) conduct detailed reviews * Prior to construction beginning on-site, professional
on construction projects to evaluate programme project managers conduct site investigations
forecasts made by contractors, development including the building's history and various surveys
projects may be significantly delayed and we to identify any potential issues.
could face a loss of rental income and penalties.
* Monthly reviews of Brexit related supply chain issues
for each of our major projects, including in respect
to potential labour shortages.
* Strict Covid-19 protocols are maintained at all of
our on-site developments, in accordance with Site
Operating Procedures (published by the Construction
Leadership Council).
5C. Contractor/subcontractor default
There have been ongoing issues within the * We use known 'Tier 1' contractors with whom we have
construction industry in respect of the level of established working relationships.
risk and narrow profit margins being accepted by
contractors.
* Regular monitoring of our contractors, including
their project cash flows, is carried out.
* Key construction packages are acquired early in the
project's life to reduce the risks associated with
later default.
* The financial standing of our main contractors is
reviewed prior to awarding the project contract.
* Our main contractors are responsible, and assume the
immediate risk, for subcontractor default.
* Payments to contractors are in place to incentivise
the achievement of project timescales, with damages
agreed in the event of delay/cost overruns.
* Regular on site supervision by a dedicated Project
Manager who monitors contractor performance and
identifies problems at an early stage, thereby
enabling remedial action to be taken.
* Contractors are paid promptly and are encouraged to
pay subcontractors promptly.
6A. Cyber-attack on our IT systems
The Group may be subject to a cyber attack that * The Group's Business Continuity Plan is regularly
results in it being unable to use its information reviewed and tested.
systems and/or losing data.
* The Group's Business Continuity Plan and
cybersecurity incident response procedures are
regularly reviewed and tested.
* Independent internal and external
penetration/vulnerability tests are regularly
conducted to assess the effectiveness of the Group's
security.
* Multi-Factor Authentication exists for remote access
to our systems.
* Incident response and remediation processes are in
place, which are regularly reviewed and tested.
* The Group's data is regularly backed up and
replicated off-site.
* Our IT systems are protected by anti-virus software,
24/7/365 threat hunting, security incident detection
and response, security anomaly detection and
firewalls that are frequently updated.
* Frequent staff awareness and training programmes.
* Security measures are regularly reviewed by the IT
team.
6B. Cyber-attack on our buildings
The Group is exposed to cyber attacks on its * Our cyber security incident management procedures are
properties which may result in data breaches regularly reviewed and tested.
or significant disruption to IT-enabled occupier
services.
* Physical segregation between the building's core IT
infrastructure and occupiers' corporate IT networks.
* Physical segregation of IT infrastructure between
buildings across the portfolio.
* Inclusion of Building Managers in any cyber security
awareness training and phishing simulations.
* Sophos Rapid Response team provide unlimited support
to our Cyber Incident Response Team in the event of a
cyber attack.
* Frequent staff awareness and training programmes.
6C. Significant business interruption (for
example, pandemic, terrorism-related event or
other business interruption)
Major incidents may significantly interrupt the * Fire protection and access/security procedures are in
Group's business, its occupiers and/or supply place at all of our managed properties. At least
chain. Such incidents could be caused by a wide annually, a fire risk assessment and health and
range of events such as fire, natural safety inspection are performed for each property in
catastrophes, our managed portfolio.
cyber events, terrorism, pandemic outbreak,
material supply chain failures and geopolitical
factors. * The Group has comprehensive business continuity and
incident management procedures both at Group level
and for each of our managed buildings which are
regularly reviewed and tested.
* Continuous review of property health and safety
statutory compliance.
* Government health guidelines are maintained at all of
our construction sites.
* Comprehensive property damage and business
interruption insurance which includes terrorism.
* Robust security at our buildings, including CCTV and
access controls.
* Most of our employees are capable of working remotely
and have the necessary IT resources.
7. Reputational damage
The Group's reputation could be damaged, for * Close involvement of senior management in day-to-day
example, through unauthorised or inaccurate media operations and established procedures for approving
coverage, unethical practices or behaviours by all external announcements.
the Group's executives, or failure to comply
with relevant legislation.
* All new members of staff benefit from an induction
programme and are issued with our Group staff
handbook.
* The Group employs a Head of Investor Relations &
Strategic Planning and retains services of an
external PR agency, both of whom maintain regular
contact with external media sources.
* A Group whistleblowing system for staff is maintained
to report wrongdoing anonymously.
* Social media channels are monitored.
* Ongoing engagement with local communities in areas
where the Group operates.
* Staff training and awareness programmes.
8. Our resilience to climate change
If the Group fails to respond appropriately, and * The Board and Executive Committee receive regular
sufficiently, to climate-related risks or updates and presentations on environmental and
fails to benefit from the potential sustainability performance and management matters as
opportunities. well as progress against our pathway to becoming net
zero carbon by 2030.
* The Sustainability Committee monitors our performance
and management controls.
* Strong team led by an experienced Head of
Sustainability.
* The Group monitors its ESG (environmental, social and
governance) reporting against various industry
benchmarks.
* Production of an annual Responsibility Report with
key data and performance points which are externally
assured.
* In 2017 we adopted independently verified
science-based carbon targets which have been approved
by the Science-Based Targets initiative (SBTi).
* Undertake periodic multi-scenario climate risk
assessments (physical and transition risks).
9A. Non-compliance with health and safety
legislation
An incident or breach of health and safety * All properties have the relevant health, safety and
legislation, including in respect of fire fire management procedures in place which are
safety, reviewed annually.
water hygiene, asbestos exposure, building
safety, construction design management etc.
* The Group has a qualified Health and Safety team
whose performance is monitored and managed by a
Health & Safety Committee, chaired by the CEO.
* Health and safety statutory compliance within our
managed portfolio is managed and monitored using a
software compliance platform. This is supported by
annual property health checks.
* The Managed Portfolio Health and Safety Manager
supports our Portfolio and Building Managers to
ensure statutory compliance.
* The Construction Health and Safety Manager ensures
our Construction (Design and Management) Regulations
(CDM) client duties are executed and monitored and
reviews health, safety and welfare on each
construction site on a monthly basis.
* The Board and Executive Committee receive frequent
updates and presentations on health and safety.
9B. Other regulatory non-compliance
The Group breaches any of the legislation that * We are proactive in adopting new and emerging
forms the regulatory framework within which legislation.
the Group operates.
* The Board and Risk Committee receive regular reports
prepared by the Group's legal advisers identifying
upcoming legislative/regulatory changes. External
advice is taken on any new legislation, if required.
* Managing our properties to ensure they are compliant
with the Minimum Energy Efficiency Standards (MEES)
for Energy Performance Certificates (EPCs).
* A Group whistleblowing system for staff is maintained
to report wrongdoing anonymously.
* Ongoing staff training and awareness programmes. As
part of staff performance appraisals, all employees
are required to confirm they have reviewed and
understood Group policies.
* Group policies and procedures dealing with all key
legislation are available on the Group's intranet.
* Quarterly review of our anti-bribery and corruption
procedures by the Risk Committee.
Financial instruments - risk management
The Group is exposed through its operations to the following
financial risks:
credit risk;
market risk; and
liquidity risk.
In common with all other businesses, the Group is exposed to
risks that arise from its use of financial instruments. The
following describes the Group's objectives, policies and processes
for managing those risks and the methods used to measure them.
Further quantitative information in respect of these risks is
presented throughout these financial statements.
There have been no substantive changes in the Group's exposure
to financial instrument risks, its objectives, policies and
processes for managing those risks or the methods used to measure
them from previous years. The Group's EPRA loan-to-value ratio has
increased to 23.9% as at 31 December 2022.
Principal financial instruments
The principal financial instruments used by the Group, from
which financial instrument risk arises, are trade receivables,
accrued income arising from the spreading of lease incentives, cash
at bank, trade and other payables, floating rate bank loans, fixed
rate loans and private placement notes, secured and unsecured bonds
and interest rate swaps.
General objectives, policies and processes
The Board has overall responsibility for the determination of
the Group's risk management objectives and policies and, whilst
retaining ultimate responsibility for them, it has delegated the
authority to executive management for designing and operating
processes that ensure the effective implementation of the
objectives and policies.
The overall objective of the Board is to set policies that seek
to reduce risk as far as possible without unduly affecting the
Group's flexibility and its ability to maximise returns. Further
details regarding these policies are set out below:
Credit risk
Credit risk is the risk of financial loss to the Group if a
customer or counterparty to a financial instrument fails to meet
its contractual obligations. The Group is mainly exposed to credit
risk from lease contracts in relation to its property portfolio. It
is Group policy to assess the credit risk of new tenants before
entering into such contracts. The Board has a Credit Committee
which assesses each new tenant before a new lease is signed. The
review includes the latest sets of financial statements, external
ratings when available and, in some cases, forecast information and
bank or trade references. The covenant strength of each tenant is
determined based on this review and, if appropriate, a deposit or a
guarantee is obtained. The Committee also reviews existing tenant
covenants from time to time.
Impairment calculations have been carried out on trade
receivables and accrued income arising as a result of the spreading
of lease incentives using the forward-looking, simplified approach
to the expected credit loss model within IFRS 9. In addition, the
Credit Committee has reviewed its register of tenants at higher
risk, particularly in the retail or hospitality sectors, those in
administration or CVA and the top 64 tenants by size with the
remaining occupiers considered on a sector by sector basis.
As the Group operates predominantly in central London, it is
subject to some geographical risk. However, this is mitigated by
the wide range of tenants from a broad spectrum of business
sectors.
Credit risk also arises from cash and cash equivalents and
deposits with banks and financial institutions. For banks and
financial institutions, only independently rated parties with a
minimum rating of investment grade are accepted. This risk is also
reduced by the short periods that money is on deposit at any one
time.
The carrying amount of financial assets recorded in the
financial statements represents the Group's maximum exposure to
credit risk without taking account of the value of any collateral
obtained.
Market risk
Market risk is the risk that the fair value or future cash flows
of a financial instrument will fluctuate due to changes in market
prices. Market risk arises for the Group from its use of variable
interest bearing instruments (interest rate risk).
The Group monitors its interest rate exposure on at least a
quarterly basis. Sensitivity analysis performed to ascertain the
impact on profit or loss and net assets of a 50 basis point shift
in interest rates would result in no increase (2021: GBP0.1m) or
decrease (2021: GBP0.1m), as all borrowings at the end of the year
were fixed.
It is currently Group policy that generally between 60% and 85%
of external Group borrowings (excluding finance lease payables) are
at fixed rates. Where the Group wishes to vary the amount of
external fixed rate debt it holds (subject to it being generally
between 60% and 85% of expected Group borrowings, as noted above),
the Group makes use of interest rate derivatives to achieve the
desired interest rate profile. Although the Board accepts that this
policy neither protects the Group entirely from the risk of paying
rates in excess of current market rates nor eliminates fully cash
flow risk associated with variability in interest payments, it
considers that it achieves an appropriate balance of exposure to
these risks. At 31 December 2022, the proportion of fixed debt held
by the Group was above this range at 100% (2021: 99%). During both
2022 and 2021, the Group's borrowings at variable rate were
denominated in sterling.
The Group manages its cash flow interest rate risk by using
floating-to-fixed interest rate swaps. When the Group raises
long-term borrowings, it is generally at fixed rates.
Liquidity risk
Liquidity risk arises from the Group's management of working
capital and the finance charges and principal repayments on its
debt instruments. It is the risk that the Group will encounter
difficulty in meeting its financial obligations as they fall
due.
The Group's policy is to ensure that it will always have
sufficient headroom in its loan facilities to allow it to meet its
liabilities when they become due. To achieve this aim, it seeks to
maintain committed facilities to meet the expected requirements.
The Group also seeks to reduce liquidity risk by fixing interest
rates (and hence cash flows) on a portion of its long-term
borrowings. This is further explained in the 'market risk' section
above.
Executive management receives rolling three-year projections of
cash flow and loan balances on a regular basis as part of the
Group's forecasting processes. At the balance sheet date, these
projections indicated that the Group expected to have sufficient
liquid resources to meet its obligations under all reasonably
expected circumstances.
The Group's loan facilities and other borrowings are spread
across a range of banks and financial institutions so as to
minimise any potential concentration of risk. The liquidity risk of
the Group is managed centrally by the finance department.
Capital disclosures
The Group's capital comprises all components of equity (share
capital, share premium, other reserves and retained earnings).
The Group's objectives when maintaining capital are:
to safeguard the entity's ability to continue as a going concern
so that it can continue to provide above average long-term returns
for shareholders; and to provide an above average annualised total
return to shareholders.
The Group sets the amount of capital it requires in proportion
to risk. The Group manages its capital structure and makes
adjustments to it in light of changes in economic conditions and
the risk characteristics of the underlying assets. In order to
maintain or adjust the capital structure, the Group may vary the
amount of dividends paid to shareholders subject to the rules
imposed by its REIT status. It may also seek to redeem bonds,
return capital to shareholders, issue new shares or sell assets to
reduce debt. Consistent with others in its industry, the Group
monitors capital on the basis of NAV gearing and loan-to-value
ratio. During 2022, the Group's strategy, which was unchanged from
2021, was to maintain the NAV gearing below 80% in normal
circumstances. These two gearing ratios, as well as the net
interest cover ratio, are defined in the list of definitions at the
end of this announcement and are derived in note 26.
The Group is also required to ensure that it has sufficient
property assets which are not subject to fixed or floating charges
or other encumbrances. Most of the Group's debt is unsecured and,
accordingly, there was GBP4.6bn (2021: GBP4.8bn) of uncharged
property as at 31 December 2022.
Directors' responsibilities
The Directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable law and
regulation.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
have prepared the Group and the Company financial statements in
accordance with UK-adopted international accounting standards.
Under Company law, Directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and Company and of the
profit or loss of the Group for that period. In preparing the
financial statements, the Directors are required to:
-- select suitable accounting policies and then apply them consistently;
-- state whether applicable UK-adopted international accounting
standards have been followed, subject to any material departures
disclosed and explained in the financial statements;
-- make judgements and accounting estimates that are reasonable and prudent; and
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and Company
will continue in business.
The Directors are responsible for safeguarding the assets of the
Group and Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The Directors are also responsible for keeping adequate
accounting records that are sufficient to show and explain the
Group's and Company's transactions and disclose with reasonable
accuracy at any time the financial position of the Group and
Company and enable them to ensure that the financial statements and
the Directors' Remuneration Report comply with the Companies Act
2006.
The Directors are responsible for the maintenance and integrity
of the Company's website. Legislation in the United Kingdom
governing the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
On behalf of the Board
Paul M. Williams Damian M.A. Wisniewski
Chief Executive Chief Financial Officer
27 February 2023
GROUP INCOME STATEMENT
2022 2021
Restated(1)
Note GBPm GBPm
Gross property and other income 5 248.8 241.3
----------------------------------------------------------- ---- --------- -----------
Net property and other income(2) 5 194.6 187.2
Administrative expenses (36.4) (37.1)
Revaluation (deficit)/surplus 11 (422.1) 131.1
Profit on disposal 6 25.6 10.4
(Loss)/profit from operations (238.3) 291.6
Finance income 7 0.3 -
Finance costs 7 (39.7) (28.1)
Movement in fair value of derivative financial instruments 5.8 4.8
Financial derivative termination costs 8 (0.3) (1.9)
Share of results of joint ventures 9 (7.3) (13.9)
(Loss)/profit before tax (279.5) 252.5
Tax (charge)/credit 10 (1.0) 1.3
(Loss)/profit for the year (280.5) 253.8
Attributable to:
- Equity shareholders (280.5) 252.3
- Non-controlling interest - 1.5
(280.5) 253.8
Basic (loss)/earnings per share 25 (249.84p) 224.99p
--------- -----------
Diluted (loss)/earnings per share 25 (249.84p) 224.44p
--------- -----------
(1) Prior year figures have been restated for a change in
accounting policy in relation to forgiveness of lease payments. See
note 2 for additional information.
(2) Net property and other income in 2022 includes a credit of
GBP1.0m for the movement in impairment of receivables (2021
restated: charge of GBP2.2m). See note 3 for additional
information.
GROUP STATEMENT OF COMPREHENSIVE INCOME
2022 2021
Note GBPm GBPm
(Loss)/profit for the year (280.5) 253.8
Actuarial (losses)/gains on defined benefit pension scheme (2.0) 2.7
Deferred tax charge on pension 20 - (0.4)
Revaluation surplus of owner-occupied property 11 0.7 3.7
Deferred tax charge on revaluation 20 (0.2) (1.3)
--------------------------------------------------------------- ---- ------- -----
Other comprehensive (expense)/income that will not
be reclassified to profit or loss (1.5) 4.7
Total comprehensive (expense)/income relating to the year (282.0) 258.5
Attributable to:
- Equity shareholders (282.0) 257.0
- Non-controlling interest - 1.5
(282.0) 258.5
GROUP BALANCE SHEET
2022 2021
Restated(1)
Note GBPm GBPm
Non-current assets
Investment property 11 5,002.0 5,361.2
Property, plant and equipment 12 54.3 54.0
Investments 14 43.9 51.1
Derivative financial instruments 19 5.0 -
Deferred tax 20 - 0.3
Pension scheme surplus 1.2 1.8
Other receivables 15 188.1 159.3
5,294.5 5,627.7
Current assets
Trading property 11 39.4 32.2
Trading stock 13 2.3 0.4
Trade and other receivables 16 42.4 41.0
Cash and cash equivalents 22 76.6 105.5
160.7 179.1
Non-current assets held for sale 17 54.2 102.8
Total assets 5,509.4 5,909.6
Current liabilities
Borrowings 19 19.7 12.3
Leasehold liabilities 19 0.5 51.2
Trade and other payables 18 148.1 145.9
Corporation tax liability 0.9 0.5
Derivative financial instruments 19 - 0.4
Provisions - 0.3
169.2 210.6
Non-current liabilities
Borrowings 19 1,229.4 1,237.1
Derivative financial instruments 19 - 0.4
Leasehold liabilities 19 34.5 19.4
Provisions 0.2 0.3
Deferred tax 20 0.6 -
1,264.7 1,257.2
Total liabilities 1,433.9 1,467.8
Total net assets 4,075.5 4,441.8
Equity
Share capital 5.6 5.6
Share premium 196.6 195.4
Other reserves 941.9 941.1
Retained earnings 2,931.4 3,299.7
Total equity 4,075.5 4,441.8
(1) Prior year figures have been restated for changes in
accounting policies. See note 2 for additional information.
GROUP STATEMENT OF CHANGES IN EQUITY
Attributable to equity shareholders
----------------------------------------------------
Equity Non-
Share Share Other Retained shareholders' controlling Total
capital premium reserves earnings funds interest equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 January 2022 5.6 195.4 941.1 3,299.7 4,441.8 - 4,441.8
Loss for the year - - - (280.5) (280.5) - (280.5)
Other comprehensive
income/(expense) - - 0.5 (2.0) (1.5) - (1.5)
Share-based payments - 1.2 0.3 1.2 2.7 - 2.7
Dividends paid - - - (87.0) (87.0) - (87.0)
At 31 December 2022 5.6 196.6 941.9 2,931.4 4,075.5 - 4,075.5
Attributable to equity shareholders
----------------------------------------------------
Equity Non-
Share Share Other Retained shareholders' controlling Total
capital premium reserves earnings funds interest equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 January 2021 5.6 193.7 939.4 3,124.5 4,263.2 51.9 4,315.1
Profit for the year - - - 252.3 252.3 1.5 253.8
Other comprehensive
income - - 2.4 2.3 4.7 - 4.7
Share-based payments - 1.7 (0.7) 5.2 6.2 - 6.2
Dividends paid - - - (84.6) (84.6) - (84.6)
Acquisition of
non-controlling
interest - - - - - (53.4) (53.4)
At 31 December 2021 5.6 195.4 941.1 3,299.7 4,441.8 - 4,441.8
GROUP CASH FLOW STATEMENT
2022 2021
Restated(1)
Note GBPm GBPm
Operating activities
Rents received 193.7 187.0
Surrender premiums and other property income 0.7 5.7
Property expenses (22.5) (14.3)
Costs recoverable from tenants (1.9) -
Service charge balance inflows 64.5 49.5
Service charge balance outflows (61.5) (49.1)
Tenant deposit inflows 13.9 1.5
Tenant deposit outflows (4.2) (2.7)
Cash paid to and on behalf of employees (25.1) (26.9)
Other administrative expenses (8.0) (7.8)
Interest received 7 0.3 -
Interest paid 7 (33.7) (21.9)
Other finance costs 7 (3.4) (3.1)
Other income 4.2 4.1
Disposal of trading properties 3.0 5.0
Expenditure on trading properties/stock (9.7) (1.6)
Tax paid in respect of operating activities (0.5) (0.5)
VAT movement 1.6 4.0
Net cash from operating activities 111.4 128.9
Investing activities
Acquisition of properties (137.6) (251.8)
Capital expenditure on the property portfolio 7 (120.7) (172.1)
Disposal of investment properties 206.7 297.3
Investment in joint ventures (0.3) (64.1)
Settlement of shareholder loan - 2.0
Purchase of property, plant and equipment (2.0) (1.6)
Disposal of property, plant and equipment - 0.2
VAT movement 2.2 3.5
Net cash used in investing activities (51.7) (186.6)
Financing activities
Net proceeds of green bond issue - 346.0
Net movement in revolving bank loans (10.1) (117.8)
Proceeds from other loan 7.4 12.3
Repayment of secured bank loan - (28.0)
Financial derivative termination costs 8 (0.3) (1.9)
Acquisition of non-controlling interest - (53.4)
Net proceeds of share issues 1.2 1.8
Dividends paid 21 (86.8) (84.3)
Net cash (used in)/from financing activities (88.6) 74.7
(Decrease)/increase in cash and cash equivalents in the year (28.9) 17.0
Cash and cash equivalents at the beginning of the year 22 105.5 88.5
Cash and cash equivalents at the end of the year 22 76.6 105.5
(1) Prior year figures have been restated for changes in
accounting policies. See note 2 for additional information.
NOTES TO THE FINANCIAL STATEMENTS
1. Basis of preparation
The financial statements have been prepared in accordance with
UK-adopted International Accounting Standards, (the "applicable
framework"), and have been prepared in accordance with the
provisions of the Companies Act 2006 (the "applicable legal
requirements"). The financial statements have been prepared under
the historical cost convention as modified by the revaluation of
investment properties, the revaluation of property, plant and
equipment, assets held for sale, pension scheme, and financial
assets and liabilities held at fair value.
Going concern
The Board continues to adopt the going concern basis in
preparing these consolidated financial statements. In considering
this requirement, the Directors have taken into account the
following:
-- The Group's latest rolling forecast for the next two years,
in particular the cash flows, borrowings and undrawn
facilities.
-- The headroom under the Group's financial covenants.
-- The risks included on the Group's risk register that could
impact on the Group's liquidity and solvency over the next 12
months.
-- The risks on the Group's risk register that could be a threat
to the Group's business model and capital adequacy.
The Directors have considered the relatively long-term and
predictable nature of the income receivable under the tenant
leases, the Group's year-end loan-to-value ratio for 2022 of 23.9%,
the interest cover ratio of 423%, the GBP577m total of undrawn
facilities and cash and the fact that the average maturity of
borrowings was 6.2 years at 31 December 2022. The impact of the
Covid-19 pandemic on the business and its occupiers has been
considered. The impact in 2022 was considerably less than in 2021
as evidenced by a partial reversal in impairment charges and rent
collection rates now close to that seen pre-pandemic. Office
occupation rates are also gradually recovering. The likely impact
of climate change has been incorporated into the Group's forecasts
and has taken account the impact of EPC upgrades across the
portfolio, estimated at GBP99m. Based on the Group's forecasts,
rental income would need to decline by 65% and property values
would need to fall by 60% before breaching its financial
covenants.
The financial position of the Group, its cash flows, liquidity
position and borrowing facilities are described in the financial
review. In addition, the Group's risks and risk management
processes can be found within the risk management and internal
controls.
Having due regard to these matters and after making appropriate
enquiries, the Directors have reasonable expectation that the Group
has adequate resources to continue in operational existence for a
period of at least 12 months from the date of signing of these
consolidated financial statements and, therefore, the Board
continues to adopt the going concern basis in their
preparation.
2. Changes in accounting policies
The accounting policies used by the Group in these condensed
financial statements are consistent with those applied in the
Group's financial statements for the year to 31 December 2021, as
amended to reflect the adoption of new standards, amendments and
interpretations which became effective in the year as shown
below.
New standards adopted during the year
The following standards, amendments and interpretations were
effective for the first time for the Group's current accounting
period and had no material impact on the financial statements.
Reference to the Conceptual Framework (amendments to IFRS
3);
IFRS 16 (amended) - Covid-19-related Rent Concessions beyond 30
June 2021;
IAS 37 (amended) - Onerous Contracts - Cost of Fulfilling a
Contract;
Annual improvements to IFRS Standards 2018-2020;
IAS 16 (amended) - Property, Plant and Equipment: Proceeds
before Intended Use.
Standards in issue but not yet effective
The following standards, amendments and interpretations were in
issue at the date of approval of these financial statements but
were not yet effective for the current accounting period and have
not been adopted early. Based on the Group's current circumstances,
the Directors do not anticipate that their adoption in future
periods will have a material impact on the financial statements of
the Group.
IFRS 17 (amended) - Insurance Contracts;
IAS 1 (amended) - Classification of liabilities as current or
non-current, Non-current Liabilities with Covenants;
IAS 1 and IFRS Practice Statement 2 (amended) - Disclosure of
Accounting Policies;
IAS 8 (amended) - Definition of Accounting Estimate;
IAS 12 (amended) - Income Taxes: Deferred Tax Related to Assets
and Liabilities Arising from a Single Transaction;
IFRS 16 (amended) - Lease Liability in a Sale and Leaseback;
IFRS 17 (amended) and IFRS 9 - Comparative Information.
Restatement - IFRIC Agenda Decision - Forgiveness of lease
payments
In October 2022, the IFRS Interpretations Committee ('IFRIC')
released its decision on the application of IFRS 9 and IFRS 16 in
relation to how a lessor should account for the forgiveness of
amounts due under leases.
It was determined that for any rent receivables that are past
their due dates and subsequently forgiven, the lessor should apply
the expected credit loss (ECL) model in IFRS 9. Therefore, the
forgiveness will be subject to the derecognition and impairment
requirements in IFRS 9, and the impact of relevant receivable
amounts written off reflected in the income statement. The Group
had previously treated the forgiveness of rent receivables, in
particular Covid-19 concessions, that were past their due dates as
lease modifications under IFRS 16, rather than the updated guidance
of applying IFRS 9.
However, forgiveness of future rent not currently due meets the
definition of a lease modification in IFRS 16. The impact of this
forgiveness is recognised on a straight-line basis over the
remaining term of the lease, which is consistent with the Group's
treatment.
The adjustments required to amounts forgiven for receivables
past their due date, including the remeasurement of the ECL, have
been recalculated and the impact determined to be immaterial for
each individual financial year. However, the Group has voluntarily
elected to apply IFRS 9 where applicable. This includes adjusting
the relevant 2020 opening balances and restating the 2021
comparative information. In the income statement, the restatement
has resulted in a change to gross rental income,
write-off/impairment of receivables and revaluation movement with
no impact in the total profit/(loss) in the respective years. In
addition, there is no impact on the total net assets within the
balance sheets, with adjustments in rents recognised in advance
(trade and other receivables), provision for bad debts, and
investment property. The impact of these adjustments is shown on
the following page. As the impact is not material, in accordance
with IAS 1 'Presentation of Financial Statements' the Group has not
presented revised balance sheets as at 31 December 2020 within the
financial statements.
Restatement - IFRIC Agenda Decision - Recognition of Tenant
Deposits as restricted cash
In March 2022, the IFRS Interpretations Committee ('IFRIC')
finalised a decision with respect to the treatment of demand
deposits with restrictions on use, which includes tenant rent
deposits. It was concluded that these deposits, which are subject
to contractual restrictions, meet the definition of 'cash and cash
equivalents' under IAS 7 and should therefore be included as
restricted cash under 'cash and cash equivalents' within the
financial statements. The Group had not previously recognised
tenant rent deposits on its balance sheet as these deposits are
only available upon a tenant defaulting under the terms of its
lease and are normally refunded upon expiry. As a result of the
IFRIC decision, the Group has revisited its policy and has now
included tenant rent deposits as restricted cash with a restatement
to the prior year comparatives. The adjustment has no impact on the
net assets of the Group, but cash and cash equivalents have
increased by GBP17.6m (2020: GBP18.8m) with a corresponding
increase in other payables. The movement in tenant rent deposits
has been included in net cash from operating activities in the cash
flow statement.
Cash collected on behalf of tenants to fund service charges of
properties in the portfolio was previously recognised within trade
and other receivables. This has now been reclassified and presented
as restricted cash within 'cash and cash equivalents'. For the
prior year, the adjustment has no impact on the net assets of the
Group, with cash and cash equivalents increasing by GBP19.4m (2020:
GBP19.0m) and a corresponding decrease of in trade and other
receivables. The movement in service charge balances has been
included in net cash from operating activities in the cash flow
statement.
The impact of these adjustments is shown on the following page.
As the total impact of both tenant deposits and service charge
balances is not material, the Group has not presented a revised
balance sheet as at 31 December 2020 within the financial
statements, in accordance with IAS 1 'Presentation of Financial
Statements'.
The following table shows the impact of these adjustments in the
prior years.
2021
--------------------------------------------------------
31 December
31 December Restatement(1) Restatement(2) Restated
GBPm GBPm GBPm GBPm
Group balance sheet (extract)
Investment property 5,359.9 1.3 - 5,361.2
Trade and other receivables 61.7 (1.3) (19.4) 41.0
Cash and cash equivalents 68.5 - 37.0 105.5
Trade and other payables (128.3) - (17.6) (145.9)
5,361.8 - - 5,361.8
Group income statement (extract)
Net property and other income
Gross rental income 194.2 1.1 - 195.3
Movement in impairment of receivables (0.8) (1.4) - (2.2)
Revaluation surplus 130.8 0.3 - 131.1
324.2 - - 324.2
Group cash flow statement (extract)
Net cash from operating activities 125.7 - (0.8) 124.9
125.7 - (0.8) 124.9
2020
--------------------------------------------------------
31 December
31 December Restatement(1) Restatement(2) Restated
GBPm GBPm GBPm GBPm
Group balance sheet (extract)
Investment property 5,029.1 1.4 - 5,030.5
Trade and other receivables 76.2 (1.4) (19.0) 55.8
Cash and cash equivalents 50.7 - 37.8 88.5
Trade and other payables (106.7) - (18.8) (125.5)
5,049.3 - - 5,049.3
Group income statement (extract)
Net property and other income
Gross rental income 202.9 0.5 - 203.4
Movement in impairment of receivables (10.1) (1.9) - (12.0)
Revaluation deficit (196.1) 1.4 - (194.7)
(3.3) - - (3.3)
Group cash flow statement (extract)
Cash and cash equivalents at the end of the
year 50.7 - 37.8 88.5
50.7 - 37.8 88.5
(1) Restatement in relation to IFRIC Agenda Decision -
Forgiveness of lease payments.
(2) Restatement in relation to IFRIC Agenda Decision -
Recognition of Tenant Deposits as restricted cash and service
charge reclassification.
Re-presentation of VAT in Group cash flow statement
The Group has re-presented the cash flow statement for the year
ended 31 December 2021, to separate VAT movements as either
operating activities or investing activities. This has the effect
of increasing the net cash from operations in 2021 by GBP4.0m with
a corresponding increase in the net cash used in investing
activities. There is no net impact upon the cash flow statement
overall.
Restatement of Property portfolio, historical cost
The disclosure of historical cost of the property portfolio
within Note 11 comparatives have been restated by GBP69.7m to
GBP3,464.4m to correct an error in the calculation of the
historical cost.
3. Significant judgments, key assumptions and estimates
The preparation of financial statements in accordance with the
applicable framework requires the use of certain significant
accounting estimates and judgements. It also requires management to
exercise judgement in the process of applying the Group's
accounting policies. Not all of these accounting policies require
management to make difficult, subjective or complex judgements or
estimates. Estimates and judgements are continually evaluated and
are based on historical experience and other factors, including
expectations of future events that are believed to be reasonable
under the circumstances. Although these estimates are based on
management's best knowledge of the amount, event or actions, actual
results may differ from those estimates. The following is intended
to provide an understanding of the policies that management
consider critical because of the level of complexity, judgement or
estimation involved in their application and their impact on these
condensed financial statements.
Key sources of estimation uncertainty
Property portfolio valuation
The Group uses the valuation carried out by external valuers as
the fair value of its property portfolio. The valuation considers a
range of assumptions including future rental income, investment
yields, anticipated outgoings and maintenance costs, future
development expenditure and appropriate discount rates. The
external valuers also make reference to market evidence of
transaction prices for similar properties and take into account the
impact of climate change and related Environmental, Social and
Governance considerations. Knight Frank LLP were appointed to value
the whole London-based portfolio as at 31 December 2022. More
information is provided in note 11.
Impairment testing of trade receivables and other financial
assets
Trade receivables and accrued rental income recognised in
advance of receipt are subject to impairment testing. This accrued
rental income arises due to the spreading of rent free and reduced
rent periods, capital contributions and contracted rent uplifts in
accordance with IFRS 16 Leases.
Impairment calculations have been carried out using the
forward-looking, simplified approach to the expected credit loss
model within IFRS 9. The impact of the Covid-19 pandemic on the
Group's business and its occupiers has been considered and in 2022
the severity of the impact was considerably less than in 2021 as
evidenced by a partial reversal in impairment charges and rent
collection rates now close to that seen pre-pandemic. The result is
a GBP3.3m reduction in the provision and after adding receivable
balances written off of GBP2.3m, the total credit to the income
statement for 2022 was GBP1.0m, compared to the restated GBP2.2m
charge recognised in 2021. In arriving at the estimates, the Group
considered the tenants at higher risk, particularly in the retail
or hospitality sectors, those in administration or CVA, the top 64
tenants by size and has also considered the remaining balances
classified by sector.
The impairment provisions are included within 'Other receivables
(non-current)' (see note 15) and 'Trade and other receivables' (see
note 16) as shown below:
Other Trade
receivables and other receivables
(non-current) (current) Total
GBPm GBPm GBPm
Lease incentive receivables before impairment 167.8 24.3 192.1
Impairment of lease incentive receivables (2.4) (0.7) (3.1)
Write-off (0.2) - (0.2)
Net lease incentive included within accrued income 165.2 23.6 188.8
Trade receivables before impairment - 9.0 9.0
Impairment of trade receivables - (1.8) (1.8)
Service charge provision - (0.1) (0.1)
Write-off - (2.2) (2.2)
Net trade receivables - 4.9 4.9
The assessment considered the risk of tenant failures or
defaults using information on tenants' payment history, deposits
held, the latest known financial position together with forecast
information where available, ongoing dialogue with tenants as well
as other information such as the sector in which they operate.
Following this, tenants were classified as either low, medium or
high risk and the table below provides further information. The
impairment against lease incentive receivable balances was GBP3.1m
and against trade receivable balances was GBP1.9m.
Lease incentive Lease incentive
receivables receivables Trade receivables
(non-current) (current) (current)
GBPm GBPm GBPm
Balance before impairment
Low risk 158.4 19.5 3.3
Medium risk 4.6 3.2 1.7
High risk 4.6 1.6 1.8
167.6 24.3 6.8
Impairment
Low risk - - -
Medium risk (0.2) (0.1) (0.1)
High risk (2.2) (0.6) (1.8)
(2.4) (0.7) (1.9)
165.2 23.6 4.9
Borrowings and derivatives
The fair values of the Group's borrowings and interest rate
swaps are provided by an independent third party based on
information provided to them by the Group. This includes the terms
of each of the financial instruments and data available in the
financial markets. More information is provided in note 19.
Significant judgements
Compliance with the real estate investment trust (REIT) taxation
regime
As a REIT, the Group benefits from tax advantages. Income and
chargeable gains on the qualifying property rental business are
exempt from corporation tax. Income that does not qualify as
property income within the REIT rules is subject to corporation tax
in the normal way. There are a number of tests that are applied
annually, and in relation to forecasts, to ensure the Group remains
well within the limits allowed within those tests.
The Group met all the criteria in 2022 with a substantial margin
in each case, thereby ensuring its REIT status is maintained. The
Directors intend that the Group should continue as a REIT for the
foreseeable future.
The Group has maintained its low risk rating with HMRC following
continued regular dialogue and a focus on transparency and full
disclosure.
4. Segmental information
IFRS 8 Operating Segments requires operating segments to be
identified on the basis of internal financial reports about
components of the Group that are regularly reviewed by the chief
operating decision makers (which in the Group's case are the four
executive Directors assisted by the other ten members of the
Executive Committee) in order to allocate resources to the segments
and to assess their performance.
The internal financial reports received by the Group's Executive
Committee contain financial information at a Group level as a whole
and there are no reconciling items between the results contained in
these reports and the amounts reported in the financial statements.
These internal financial reports include IFRS figures but also
report non-IFRS figures for the EPRA earnings and net asset value.
Reconciliations of each of these figures to their statutory
equivalents are detailed in note 25. Additionally, information is
provided to the Executive Committee showing gross property income
and property valuation by individual property. Therefore, for the
purposes of IFRS 8, each individual property is considered to be a
separate reportable segment in that its performance is monitored
individually.
The Group's property portfolio includes investment property,
owner-occupied property and trading property and comprised 97%
office buildings(1) by value at 31 December 2022 (2021: 97%). The
Directors consider that these individual properties have similar
economic characteristics and therefore have been aggregated into a
single reportable segment. The remaining 3% (2021: 3%) represented
a mixture of retail, residential and light industrial properties,
as well as land, each of which is de minimis in its own right and
below the quantitative threshold in aggregate. Therefore, in the
view of the Directors, there is one reportable segment under the
provisions of IFRS 8.
All of the Group's properties are based in the UK. No
geographical grouping is contained in any of the internal financial
reports provided to the Group's Executive Committee and, therefore,
no geographical segmental analysis is required by IFRS 8. However,
geographical analysis is included in the tables below to provide
users with additional information regarding the areas contained in
the strategic report. The majority of the Group's properties are
located in London (West End central, West End borders/other and
City borders), with the remainder in Scotland (Provincial).
(1) Some office buildings have an ancillary element such as
retail or residential.
Gross property income
2022 2021
Restated
----------------------- -----------------------
Office Office
buildings Other Total buildings Other Total
GBPm GBPm GBPm GBPm GBPm GBPm
West End central 118.3 1.5 119.8 109.5 0.3 109.8
West End borders/other 16.3 - 16.3 18.5 - 18.5
City borders 67.2 0.5 67.7 67.6 0.5 68.1
Provincial - 4.6 4.6 - 4.5 4.5
Gross property income
(excl. joint venture) 201.8 6.6 208.4 195.6 5.3 200.9
Share of joint venture gross
property income 2.1 - 2.1 0.4 - 0.4
203.9 6.6 210.5 196.0 5.3 201.3
A reconciliation of gross property income to gross property and
other income is given in note 5.
Property portfolio
2022 2021
Restated
------------------------- -------------------------
Office Office
buildings Other Total buildings Other Total
GBPm GBPm GBPm GBPm GBPm GBPm
Carrying value
West End central 3,123.9 81.2 3,205.1 3,314.9 82.2 3,397.1
West End borders/other 356.9 - 356.9 408.1 - 408.1
City borders 1,494.5 10.4 1,504.9 1,649.7 8.4 1,658.1
Provincial - 78.7 78.7 - 82.2 82.2
Group (excl. joint venture) 4,975.3 170.3 5,145.6 5,372.7 172.8 5,545.5
Share of joint venture 42.6 - 42.6 50.2 - 50.2
5,017.9 170.3 5,188.2 5,422.9 172.8 5,595.7
Fair value
West End central 3,234.9 86.3 3,321.2 3,348.9 84.2 3,433.1
West End borders/other 376.6 - 376.6 431.4 - 431.4
City borders 1,534.2 10.4 1,544.6 1,690.4 8.4 1,698.8
Provincial - 79.4 79.4 - 83.0 83.0
Group (excl. joint venture) 5,145.7 176.1 5,321.8 5,470.7 175.6 5,646.3
Share of joint venture 42.4 - 42.4 50.0 - 50.0
5,188.1 176.1 5,364.2 5,520.7 175.6 5,696.3
A reconciliation between the fair value and carrying value of
the portfolio is set out in note 11.
5. Property and other income
2022 2021
Restated
GBPm GBPm
Gross rental income 207.0 195.3
Surrender premiums received 1.1 3.6
Other property income 0.3 2.0
Gross property income 208.4 200.9
Trading property sales proceeds(1) 1.6 6.7
Service charge income(1) 34.6 30.2
Other income(1) 4.2 3.5
Gross property and other income 248.8 241.3
Gross rental income 207.0 195.3
Movement in impairment of receivables 1.0 (2.2)
Service charge income(1) 34.6 30.2
Service charge expenses (39.7) (33.6)
---------------------------------------- ------ --------
(5.1) (3.4)
Property costs (14.4) (11.8)
Net rental income 188.5 177.9
---------------------------------------- ------ --------
Trading property sales proceeds(1) 1.6 6.7
Trading property cost of sales (1.4) (6.0)
---------------------------------------- ------ --------
Profit on trading property disposals 0.2 0.7
Other property income 0.3 2.0
Other income(1) 4.2 3.5
Surrender premiums received 1.1 3.6
Dilapidation receipts 0.5 0.9
Write-down of trading property (0.2) (1.4)
Net property and other income 194.6 187.2
(1) In line with IFRS 15 Revenue from Contracts with Customers,
the Group recognised a total of GBP40.4m (2021: GBP40.4m) of other
income, trading property sales proceeds and service charge income,
which relates to expenditure that is directly recoverable from
tenants, within gross property and other income.
As described in note 2, gross rental income and movement in
impairment of receivables have been restated in accordance with the
guidance provided by the IFRS Interpretations Committee.
Gross rental income includes GBP20.3m (2021 restated: GBP19.5m)
relating to rents recognised in advance of cash receipts.
Other income relates to fees and commissions earned from tenants
in relation to the management of the Group's properties and was
recognised in the Group income statement in accordance with the
delivery of services.
The impairment review has been carried out using the expected
credit loss model within IFRS 9 Financial Instruments (see notes 3
and 16 for additional information). Included in this provision is a
charge of GBP0.4m against trade receivables relating to rental
income for the 25 December 2022 quarter day. Most of this income is
deferred and has not yet been recognised in the income statement. A
10% increase/decrease to the absolute probability rates of tenant
default in the year would result in a GBP1.6m increase/decrease and
GBP1.2m decrease/increase respectively, in the Group's profit/loss
for the year. This sensitivity has been performed on the medium to
high risk tenants as the significant estimation uncertainty is
wholly related to these.
6. Profit on disposal
2022 2021
GBPm GBPm
Investment property
Gross disposal proceeds 209.6 402.4
Costs of disposal (3.2) (3.7)
Net disposal proceeds 206.4 398.7
Carrying value (180.8) (387.5)
Adjustment for lease costs and rents recognised in advance - (0.7)
Profit on disposal of investment property 25.6 10.5
Artwork
Carrying value - (0.1)
Loss on disposal of artwork - (0.1)
Profit on disposal 25.6 10.4
Included within gross disposal proceeds for 2022 is GBP67.2m
relating to the disposal of the Group's freehold interest in New
River Yard EC1 in June 2022, GBP85.0m relating to the disposal of
the Group's freehold interest in Bush House, South West Wing WC2 in
July 2022, and GBP40.5m relating to the disposal of the Group's
leasehold interest in 2 & 4 Soho Place W1 in July 2022. In
addition, gross disposal proceeds also included GBP15.3m following
completion of the grant of an intermediate long leasehold interest
in relation to the Soho Place W1 development agreement.
7. Finance income and finance costs
2022 2021
GBPm GBPm
Finance income
Bank interest receivable (0.2) -
Other (0.1) -
Finance income (0.3) -
Finance costs
Bank loans 1.1 0.9
Non-utilisation fees 2.1 2.1
Unsecured convertible bonds 3.9 3.9
Unsecured green bonds 6.7 0.8
Secured bonds 11.4 11.4
Unsecured private placement notes 15.6 15.6
Secured loan 3.3 3.3
Amortisation of issue and arrangement costs 2.6 2.5
Amortisation of the fair value of the secured bonds (1.4) (1.3)
Obligations under headleases 1.1 0.7
Other 0.3 0.2
Gross finance costs 46.7 40.1
Less: interest capitalised (7.0) (12.0)
Finance costs 39.7 28.1
Finance costs of GBP7.0m (2021: GBP12.0m) have been capitalised
on development projects, in accordance with IAS 23 Borrowing Costs,
using the Group's average cost of borrowings during each quarter.
Total finance costs paid to 31 December 2022 were GBP44.1m (2021:
GBP37.0m) of which GBP7.0m (2021: GBP12.0m) was included in capital
expenditure on the property portfolio in the Group cash flow
statement under investing activities.
8. Financial derivative termination costs
The Group incurred net costs of GBP0.3m in the year to 31
December 2022 (2021: GBP1.9m) deferring interest rate swaps.
Included in this is GBP0.3m of receipts and GBP0.6m of costs.
9. Share of results of joint ventures
2022 2021
GBPm GBPm
Net property income 2.1 0.4
Administrative expenses (0.1) (0.1)
Revaluation deficit (9.3) (10.2)
(7.3) (9.9)
Joint venture acquisition costs incurred - (4.0)
(7.3) (13.9)
The share of results of joint ventures for the year ended 31
December 2022 includes the Group's 50% share in the Derwent Lazari
Baker Street Limited Partnership. See note 14 for further details
of the Group's joint ventures.
10. Tax charge/(credit)
2022 2021
GBPm GBPm
Corporation tax
UK corporation tax and income tax in respect of results for the year 0.5 0.9
Other adjustments in respect of prior years' tax 0.4 (0.4)
Corporation tax charge 0.9 0.5
Deferred tax
Origination and reversal of temporary differences 0.1 (1.1)
Adjustment for changes in estimates - (0.7)
Deferred tax charge/(credit) 0.1 (1.8)
Tax charge/(credit) 1.0 (1.3)
In addition to the tax charge of GBP1.0m (2021: credit of
GBP1.3m) that passed through the Group income statement, a deferred
tax charge of GBP0.2m (2021: GBP1.3m) relating to the revaluation
of the owner-occupied property at 25 Savile Row W1 was recognised
in the Group statement of comprehensive income. In 2021, a charge
of GBP0.4m relating to the future defined benefit pension
liabilities was also recognised in the Group statement of
comprehensive income.
The effective rate of tax for 2022 is lower (2021: lower) than
the standard rate of corporation tax in the UK. The differences are
explained below:
2022 2021
GBPm GBPm
(Loss)/profit before tax (279.5) 252.5
------- ------
Expected tax (credit)/charge based on the standard rate of
corporation tax in the UK of 19.00% (2021: 19.00%)(1) (53.1) 48.0
Difference between tax and accounting profit on disposals (3.1) (0.7)
REIT exempt income (16.0) (14.9)
Revaluation deficit/(surplus) attributable to REIT properties 78.6 (32.2)
Expenses and fair value adjustments not allowable for tax purposes 0.4 4.6
Capital allowances (6.5) (4.3)
Other differences 0.3 (1.4)
Tax charge/(credit) in respect of (loss)/profit for the year 0.6 (0.9)
Adjustments in respect of prior years' tax 0.4 (0.4)
Tax charge/(credit) 1.0 (1.3)
(1) C hanges to the UK corporation tax rates were substantively
enacted as part of the Finance Bill 2021 (on 24 May 2021) and
include increasing the main rate to 25% effective on or after 1
April 2023. Deferred taxes at the balance sheet date have been
measured using the expected enacted tax rate and this is reflected
in these financial statements.
11. Property portfolio
Total Owner- Assets Total
investment occupied held for Trading property
Freehold Leasehold property property sale property portfolio
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Carrying value
At 1 January 2022 4,140.4 1,220.8 5,361.2 49.3 102.8 32.2 5,545.5
---------------------------- -------- --------- ---------- -------- -------- -------- ---------
Acquisitions 0.1 132.9 133.0 - - - 133.0
Capital expenditure 47.7 58.8 106.5 - - 8.3 114.8
Interest capitalisation 1.3 3.9 5.2 - 1.4 0.4 7.0
---------------------------- -------- --------- ---------- -------- -------- -------- ---------
Additions 49.1 195.6 244.7 - 1.4 8.7 254.8
Disposals (46.6) (30.0) (76.6) - (104.2) (1.3) (182.1)
Transfers (54.2) - (54.2) - 54.2 - -
Revaluation (388.2) (33.9) (422.1) 0.7 - - (421.4)
Write-down of trading
property - - - - - (0.2) (0.2)
Movement in grossing up of
headlease liabilities - (51.0) (51.0) - - - (51.0)
At 31 December 2022 3,700.5 1,301.5 5,002.0 50.0 54.2 39.4 5,145.6
At 1 January 2021 (restated) 3,894.9 1,135.6 5,030.5 45.6 165.0 12.9 5,254.0
---------------------------- -------- --------- ---------- -------- -------- -------- ---------
Acquisitions 214.6 139.0 353.6 - - - 353.6
Capital expenditure 76.6 88.4 165.0 - - 1.1 166.1
Interest capitalisation 2.4 9.6 12.0 - - - 12.0
---------------------------- -------- --------- ---------- -------- -------- -------- ---------
Additions 293.6 237.0 530.6 - - 1.1 531.7
Disposals (75.8) (146.7) (222.5) - (165.0) (5.9) (393.4)
Transfers (63.7) (63.0) (126.7) - 101.2 25.5 -
Revaluation (restated) 91.4 39.3 130.7 3.7 - - 134.4
Write-down of trading
property - - - - - (1.4) (1.4)
Transfer from prepayments
and accrued income - - - - 1.6 - 1.6
Movement in grossing up of
headlease liabilities - 3.8 3.8 - - - 3.8
Movement in grossing up of
other liabilities - 14.8 14.8 - - - 14.8
At 31 December 2021
(restated) 4,140.4 1,220.8 5,361.2 49.3 102.8 32.2 5,545.5
Total Owner- Assets Total
investment occupied held for Trading property
Freehold Leasehold property property sale property portfolio
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Adjustments from fair value to carrying value
At 31 December 2022
Fair value 3,865.8 1,307.1 5,172.9 50.0 54.7 44.2 5,321.8
Selling costs relating to
assets
held for sale - - - - (0.5) - (0.5)
Revaluation of trading
property - - - - - (4.8) (4.8)
Lease incentives and costs
included in receivables (165.3) (39.8) (205.1) - - - (205.1)
Grossing up of headlease
liabilities - 34.2 34.2 - - - 34.2
Carrying value 3,700.5 1,301.5 5,002.0 50.0 54.2 39.4 5,145.6
At 31 December 2021
Fair value 4,296.2 1,161.9 5,458.1 49.3 104.8 34.1 5,646.3
Selling costs relating to
assets
held for sale - - - - (2.0) - (2.0)
Revaluation of trading
property - - - - - (1.9) (1.9)
Lease incentives and costs
included in receivables
(restated) (155.8) (26.3) (182.1) - - - (182.1)
Grossing up of headlease
liabilities - 70.4 70.4 - - - 70.4
Grossing up of other
liabilities - 14.8 14.8 - - - 14.8
Carrying value (restated) 4,140.4 1,220.8 5,361.2 49.3 102.8 32.2 5,545.5
Reconciliation of fair value
2022 2021
GBPm GBPm
Portfolio including the Group's share of joint ventures 5,364.2 5,696.3
Less: joint ventures (42.4) (50.0)
IFRS property portfolio 5,321.8 5,646.3
The property portfolio is subject to semi-annual external
valuations and was revalued at 31 December 2022 by external valuers
on the basis of fair value in accordance with The RICS Valuation -
Professional Standards, which takes account of the properties'
highest and best use. When considering the highest and best use of
a property, the external valuers will consider its existing and
potential uses which are physically, legally and financially
viable. Where the highest and best use differs from the existing
use, the external valuers will consider the costs and the
likelihood of achieving and implementing this change in arriving at
the property valuation. There were no such instances in the
year.
The external valuations for the London-based portfolio at
December 2022 were carried out by Knight Frank LLP, whilst the
December 2021 valuations were carried out by CBRE Limited.
Knight Frank valued properties at GBP5,285.6m (2021: GBPnil),
CBRE at GBPnil (2021: GBP5,610.8m) and other valuers at GBP36.2m
(2021: GBP35.5m), giving a combined value of GBP5,321.8m (2021:
GBP5,646.3m). Of the properties revalued, GBP50.0m (2021: GBP49.3m)
relating to owner-occupied property was included within property,
plant and equipment and GBP44.2m (2021: GBP34.1m) was in relation
to trading property.
The total fees, including the fee for this assignment, earned by
Knight Frank (or other companies forming part of the same group of
companies within the UK) from the Group is less than 5.0% of their
total UK revenues.
As described in note 2, the prior year revaluation has been
restated in accordance with the guidance provided by the IFRS
Interpretations Committee.
Net zero carbon and EPC compliance
In response to climate change, the Group published its pathway
to net zero carbon in July 2020 and has set 2030 as its target date
to achieve this. In accordance with the Group's Green Finance
Framework, GBP99.9m (year to 31 December 2021: GBP116.6m) of
eligible 'green' expenditure was incurred in the year to 31
December 2022 on major developments at 80 Charlotte Street W1, Soho
Place W1, The Featherstone Building EC1 and 25 Baker Street W1. As
these have met the criteria to be eligible qualifying projects
under the Framework, the Group has utilised the green tranche of
the GBP450m revolving credit facility and the GBP350m green
bonds.
In 2021, the Group commissioned a third-party report to
determine the costs of achieving EPC compliance across the
portfolio by 2030. Results of the study indicated an estimated cost
of c.GBP97m to upgrade the Group's properties to EPC 'B' or above.
This has since been updated to reflect the latest scope change and
2022 cost inflation, taking the estimate to c.GBP107m at year end.
This includes GBP8.0m relating to 19 Charterhouse Street EC1 which
was sold in January 2023. It is expected that a small proportion of
this cost will be recoverable through service charges. A specific
deduction of GBP58.4m for identified EPC upgrade works across the
portfolio has been included within the external valuation at 31
December 2022, with an additional allowance for further general
upgrades to properties following assumed tenant vacancies.
Reconciliation of revaluation (deficit)/surplus
2022 2021
Restated
GBPm GBPm
Total revaluation (deficit)/surplus (401.8) 142.9
Less:
Share of joint ventures 9.2 13.9
Lease incentives and costs (23.2) (19.4)
Assets held for sale selling costs (2.5) (2.0)
Trading property revaluation adjustment (3.3) (2.0)
IFRS revaluation (deficit)/surplus (421.6) 133.4
------- --------
Reported in the:
Revaluation (deficit)/surplus (422.1) 131.1
Write-down of trading property (0.2) (1.4)
Group income statement (422.3) 129.7
Group statement of comprehensive income 0.7 3.7
(421.6) 133.4
Historical cost
2022 2021
Restated
GBPm GBPm
Investment property 3,478.3 3,362.3
Owner-occupied property 19.6 19.6
Assets held for sale 51.5 38.5
Trading property 42.5 44.0
Total property portfolio 3,591.9 3,464.4
Sensitivity of measurement to variations in the significant
unobservable inputs
The significant unobservable inputs used in the fair value
measurement categorised within Level 3 of the fair value hierarchy
of the Group's property portfolio, together with the impact of
significant movements in these inputs on the fair value
measurement, are shown below:
Impact on fair value measurement Impact on fair value measurement
Unobservable input of significant increase in input of significant decrease in input
----------------------- ------------------------------------ ------------------------------------
Gross ERV Increase Decrease
Net initial yield Decrease Increase
Reversionary yield Decrease Increase
True equivalent yield Decrease Increase
----------------------- -------------------------------- --------------------------------
There are inter-relationships between these inputs as they are
partially determined by market conditions. An increase in the
reversionary yield may accompany an increase in gross ERV and would
mitigate its impact on the fair value measurement.
A sensitivity analysis has been performed to ascertain the
impact of a 25 basis point shift in true equivalent yield and a
GBP2.50 per sq ft shift in ERV on the property valuations. The
Group believes this captures the range of variations in these key
valuation assumptions. The results are shown in the tables
below:
West End West End City Provincial Provincial
central borders/other borders commercial land Total
---------------------- -------- ------------- ------- ---------- ---------- ------
True equivalent yield
+25bp (5.2%) (4.4%) (4.7%) (2.6%) - (4.9%)
-25bp 5.7% 4.9% 5.2% 2.8% - 5.4%
---------------------- -------- ------------- ------- ---------- ---------- ------
ERV
+GBP2.50 psf 3.9% 4.8% 4.7% 19.3% - 4.4%
-GBP2.50 psf (3.9%) (4.8%) (4.7%) (19.3%) - (4.4%)
---------------------- -------- ------------- ------- ---------- ---------- ------
12. Property, plant and equipment
Owner-
occupied
property Artwork Other Total
GBPm GBPm GBPm GBPm
At 1 January 2022 49.3 0.8 3.9 54.0
Additions - - 0.6 0.6
Depreciation - - (1.0) (1.0)
Revaluation 0.7 - - 0.7
At 31 December 2022 50.0 0.8 3.5 54.3
At 1 January 2021 45.6 1.0 3.6 50.2
Additions - - 1.3 1.3
Disposals - (0.1) (0.1) (0.2)
Depreciation - - (0.9) (0.9)
Revaluation 3.7 (0.1) - 3.6
At 31 December 2021 49.3 0.8 3.9 54.0
Net book value
Cost or valuation 50.0 0.8 7.8 58.6
Accumulated depreciation - - (4.3) (4.3)
At 31 December 2022 50.0 0.8 3.5 54.3
Net book value
Cost or valuation 49.3 0.8 8.0 58.1
Accumulated depreciation - - (4.1) (4.1)
At 31 December 2021 49.3 0.8 3.9 54.0
The artwork is periodically valued by Bonhams on the basis of
fair value using their extensive market knowledge. The latest
valuation was carried out in December 2021. In accordance with IFRS
13 Fair Value Measurement, the artwork is deemed to be classified
as Level 3.
The historical cost of the artwork in the Group at 31 December
2022 was GBP0.9m (2021: GBP0.9m). See note 11 for the historical
cost of owner-occupied property.
13. Trading stock
2022 2021
GBPm GBPm
Trading stock 2.3 0.4
Trading stock relates to capitalised development expenditure
incurred which is due to be transferred under development
agreements to a third party upon completion. This has been included
in trading stock as the Group does not have an ownership interest
in the property.
14. Investments
The Group has a 50% interest in four joint venture vehicles,
Derwent Lazari Baker Street Limited Partnership, Dorrington Derwent
Holdings Limited, Primister Limited and Prescot Street Limited
Partnership.
2022 2021
GBPm GBPm
At 1 January 51.1 0.9
Additions 0.1 64.1
Joint venture acquisition costs - (4.0)
Revaluation deficit (see note 9) (9.3) (10.2)
Other profit from operations (see note 9) 2.0 0.3
At 31 December 43.9 51.1
The Group's share of its investments in joint ventures is
represented by the following amounts in the underlying joint
venture entities.
2022 2021
--------------------------- ---------------------------
Joint ventures Group share Joint ventures Group share
GBPm GBPm GBPm GBPm
Non-current assets 85.0 42.5 100.5 50.2
Current assets 5.0 2.5 3.7 1.9
Current liabilities (2.7) (1.4) (2.7) (1.3)
Non-current liabilities (121.0) (60.5) (120.8) (60.4)
Net liabilities (33.7) (16.9) (19.3) (9.6)
Loans provided to joint ventures 60.8 60.7
Total investment in joint ventures 43.9 51.1
15. Other receivables (non-current)
2022 2021
GBPm GBPm
Prepayments and accrued income
Rents recognised in advance 165.2 147.0
Initial direct letting costs 13.8 12.3
Prepayments 9.1 -
188.1 159.3
Prepayments and accrued income include GBP165.2m (2021:
GBP147.0m) after impairments (see note 3) relating to rents
recognised in advance as a result of spreading tenant lease
incentives over the expected terms of their respective leases. This
includes rent free and reduced rent periods, capital contributions
in lieu of rent free periods and contracted rent uplifts. In
addition, GBP13.8m (2021: GBP12.3m) relates to the spreading effect
of the initial direct costs of letting over the same term. Together
with GBP26.1m (2021 restated: GBP22.8m), which was included as
accrued income within trade and other receivables (see note 16),
these amounts totalled GBP205.1m at 31 December 2022 (2021
restated: GBP182.1m).
Prepayments represent GBP9.1m of costs incurred in relation to
Old Street Quarter EC1. In May 2022, the Group entered into a
conditional contract to acquire the freehold of Old Street Quarter
island site. The site is being sold by Moorfields Eye Hospital NHS
Foundation Trust and UCL, together the Oriel joint initiative
("Oriel"). Completion is subject to Oriel's receipt of final
Treasury approval (subsequently received in February 2023),
delivery by Oriel of a new hospital at St Pancras and subsequent
vacant possession of the site, which is anticipated in 2027.
The total movement in tenant lease incentives is shown
below:
2022 2021
Restated
GBPm GBPm
At 1 January 167.0 148.5
Amounts taken to income statement 20.4 19.9
Capital incentives granted 0.6 0.7
Lease incentive reversal/(impairment) 1.0 (0.1)
Adjustment for non-current asset held for sale - (1.3)
Disposal of investment properties - (0.5)
Write off to bad debt (0.2) (0.2)
188.8 167.0
Amounts included in trade and other receivables (see note 16) (23.6) (20.0)
At 31 December 165.2 147.0
16. Trade and other receivables
2022 2021
Restated
GBPm GBPm
Trade receivables 4.9 6.9
Other receivables 5.8 3.7
Prepayments 3.8 5.3
Accrued income 27.9 25.1
42.4 41.0
The prior year prepayments have been restated to reclassify
GBP19.4m of cash collected on behalf of tenants' service charges
within cash and cash equivalents. For further information refer to
note 2.
The prior year accrued income has been restated by GBP1.3m in
relation to amounts forgiven for receivables past their due date as
a result of the IFRIC decision relating to forgiveness of lease
payments. For further information refer to note 2.
In response to the Group's climate change agenda, costs of
GBP0.7m (2021: GBP0.4m) were incurred in relation to a c.100 acre,
18.4MW solar park on its Scottish land and have been included
within prepayments. Resolution to grant planning consent for this
project was received in 2022.
Trade receivables are split as follows:
2022 2021
GBPm GBPm
less than three months due 4.9 6.8
between three and six months due - 0.1
4.9 6.9
Trade receivables as at 31 December 2022 are stated net of
impairment. As a result, the expected credit loss assessment under
IFRS 9 (see note 3) was lower than in 2021.
The Group has GBP5.0m of provision for bad debts as shown below.
GBP1.9m is included in trade receivables, GBP0.7m in accrued income
and GBP2.4m in prepayments and accrued income within other
receivables (non-current) (note 15).
Provision for bad debts
2022 2021
Restated
GBPm GBPm
At 1 January 8.3 8.4
Trade receivables provision (0.8) (0.4)
Lease incentive provision (0.2) 0.8
Service charge provision (0.2) 0.1
Released (2.1) (0.6)
At 31 December 5.0 8.3
The provision for bad debts are split as follows:
2022 2021
Restated
GBPm GBPm
less than three months due 2.2 3.7
between three and six months due 0.1 0.2
between six and twelve months due 0.3 0.3
over twelve months due 2.4 4.1
5.0 8.3
17. Non-current assets held for sale
2022 2021
GBPm GBPm
Transferred from investment properties (see note 11) 54.2 101.2
Transferred from prepayments and accrued income - 1.6
54.2 102.8
In January 2023, the Group exchanged contracts and completed on
the sale of its freehold interest in 19 Charterhouse Street EC1.
The property was valued at GBP53.0m as at 31 December 2022. In
accordance with IFRS 5 Non-current Assets Held for Sale, this
property was recognised as a non-current asset held for sale and,
after deducting selling costs of GBP0.5m, the carrying value was
GBP52.5m (see note 11).
At 31 December 2022, the freehold interest in 13 Charlotte Mews
W1 was recognised as a non-current asset held for sale, in
accordance with IFRS 5 Non-current Assets Held for Sale. 13
Charlotte Mews is under offer and is available for sale in its
present condition. As at 31 December 2022, the property was valued
at GBP1.7m and, after deducting selling costs of GBP0.05m, the
carrying value was GBP1.65m (see note 11).
18. Trade and other payables
2022 2021
Restated
GBPm GBPm
Trade payables 0.4 3.2
Other payables 24.6 38.0
Other taxes 11.8 8.0
Accruals 35.8 37.2
Deferred income 48.2 41.9
Tenant rent deposits 27.3 17.6
148.1 145.9
Deferred income primarily relates to rents received in
advance.
Prior year trade and other payables have been restated to
reflect the grossing up of tenant rent deposits of GBP17.6m. For
further information refer to note 2.
19. Net debt and derivative financial instruments
2022 2021
---------------- ----------------
Book Fair Book Fair
value value value value
GBPm GBPm GBPm GBPm
Current liabilities
Other loans 19.7 19.7 12.3 12.3
19.7 19.7 12.3 12.3
Non-current liabilities
1.5% unsecured convertible bonds 2025 170.1 157.2 168.3 174.0
6.5% secured bonds 2026 181.0 179.7 182.4 205.7
1.875% unsecured green bonds 2031 346.4 247.3 346.0 344.6
Unsecured private placement notes 2026 - 2034 453.3 410.4 453.0 493.1
3.99% secured loan 2024 82.7 80.6 82.5 85.6
Unsecured bank loans (4.1) - 4.9 10.0
1,229.4 1,075.2 1,237.1 1,313.0
Borrowings 1,249.1 1,094.9 1,249.4 1,325.3
Derivative financial instruments expiring in less than one year - - 0.4 0.4
Derivative financial instruments expiring in
greater than one year (5.0) (5.0) 0.4 0.4
Total borrowings and derivative financial instruments 1,244.1 1,089.9 1,250.2 1,326.1
Reconciliation to net debt:
Borrowings and derivative financial instruments 1,244.1 1,250.2
Adjustments for:
Leasehold liabilities 35.0 70.6
Derivative financial instruments 5.0 (0.8)
Cash at bank excluding restricted cash (see note 22) (26.9) (68.5)
Net debt 1,257.2 1,251.5
The fair values of the Group's bonds have been estimated on the
basis of quoted market prices, representing Level 1 fair value
measurement as defined by IFRS 13 Fair Value Measurement.
The fair values of the 3.99% secured loan and the unsecured
private placement notes were determined by comparing the discounted
future cash flows using the contracted yield with those of the
reference gilts plus the implied margins, and represent Level 2
fair value measurement.
The fair values of the Group's outstanding interest rate swaps
have been estimated by using the mid-point of the yield curves
prevailing on the reporting date and represent the net present
value of the differences between the contracted rate and the
valuation rate when applied to the projected balances for the
period from the reporting date to the contracted expiry dates.
These represent Level 2 fair value measurement.
The fair value of the Group's bank loans is approximately the
same as their carrying amount, after adjusting for the unamortised
arrangement fees, and also represents Level 2 fair value
measurement.
The fair value of the following financial assets and liabilities
are the same as their carrying amounts:
-- Cash and cash equivalents.
-- Trade receivables, other receivables and accrued income
included within trade and other receivables.
-- Trade payables, other payables and accruals included within trade and other payables.
-- Leasehold liabilities.
There have been no transfers between Level 1 and Level 2 or
Level 2 and Level 3 in either 2022 or 2021.
Unsecured bank borrowings are accounted for at amortised cost.
At 31 December 2022, there was GBPnil (2021: GBP10.0m) drawn on the
RCFs and the unamortised arrangement fees were GBP4.1m (2021:
GBP5.1m), resulting in the carrying value being a GBP4.1m debit
balance (2021: credit balance of GBP4.9m).
Other loans consist of a GBP19.7m interest-free loan with no
fixed repayment date from a third party providing development
consultancy services on the residential element of the 25 Baker
Street W1 development. The loan will be repaid from the sale
proceeds of these residential apartments after completion of the
scheme. The agreement provides for a profit share on completion of
the sales which, under IFRS 9 Financial Instruments, has been
deemed to have a carrying value of GBPnil at 31 December 2022
(2021: GBPnil). The carrying value of the loan at 31 December 2022
was GBP19.7m (2021: GBP12.3m).
The 3.99% secured loan 2024 was secured by a fixed charge over
GBP272.8m (31 December 2021: GBP305.2m) of the Group's properties.
In addition, the secured bonds 2026 were secured by a floating
charge over a number of the Group's subsidiary companies which
contained GBP448.8m (31 December 2021: GBP571.8m) of the Group's
properties.
Additionally, the Group had a secured bank loan which was
settled in the prior year in advance of the acquisition of the
non-controlling interest from The Portman Estate in 2021.
The Group continues to maintain significant headroom on all
financial covenants.
20. Deferred tax
Revaluation
(deficit)/surplus Other Total
GBPm GBPm GBPm
At 1 January 2022 3.3 (3.6) (0.3)
Charged/(credited) to the income statement 0.2 (0.1) 0.1
Charged to other comprehensive income 0.2 - 0.2
Charged to equity - 0.6 0.6
At 31 December 2022 3.7 (3.1) 0.6
At 1 January 2021 3.5 (3.0) 0.5
(Credited)/charged to the income statement (1.6) 0.5 (1.1)
Change in tax rates in the income statement 0.1 (0.8) (0.7)
Charged to other comprehensive income 0.9 0.5 1.4
Change in tax rates in other comprehensive income 0.4 (0.1) 0.3
Credited to equity - (0.7) (0.7)
At 31 December 2021 3.3 (3.6) (0.3)
Deferred tax on the balance sheet revaluation deficit/surplus is
calculated on the basis of the chargeable gains that would
crystallise on the sale of the property portfolio at each balance
sheet date. The calculation takes account of any available
indexation on the historical cost of the properties. Due to the
Group's REIT status, deferred tax is only provided at each balance
sheet date on properties outside the REIT ring-fence.
21. Dividend
Dividend per share
----------------------
Payment PID Non-PID Total 2022 2021
date p p p GBPm GBPm
Current year
2022 final dividend(1) 2 June 2023 38.50 16.00 54.50 - -
2022 interim dividend 14 October 2022 24.00 - 24.00 26.9 -
------ ------- -----
62.50 16.00 78.50
Prior year
2021 final dividend 1 June 2022 35.50 18.00 53.50 60.1 -
2021 interim dividend 15 October 2021 23.00 - 23.00 - 25.8
------ ------- -----
58.50 18.00 76.50
2020 final dividend 4 June 2021 35.00 17.45 52.45 - 58.8
Dividends as reported in the
Group statement of changes in equity 87.0 84.6
2022 interim dividend withholding tax 13 January 2023 (3.7) -
2021 interim dividend withholding tax 14 January 2022 3.5 (3.5)
2020 interim dividend withholding tax 14 January 2021 - 3.2
Dividends paid as reported in the
Group cash flow statement 86.8 84.3
(1) Subject to shareholder approval at the AGM on 12 May 2023
.
22. Cash and cash equivalents
2022 2021
Restated
GBPm GBPm
Cash at bank 26.9 68.5
Cash held in restricted accounts
Tenant rent deposits 27.3 17.6
Service charge balances 22.4 19.4
76.6 105.5
Prior year cash and cash equivalents have been restated to
include GBP17.6m of tenant deposits, which are subject to
contractual restrictions. In addition, GBP19.4m of cash collected
on behalf of tenants to fund the service charge of properties in
the portfolio has now been reclassified from trade and other
receivables and presented as restricted cash. For further
information refer to note 2.
23. Post balance sheet events
In January 2023, the Group exchanged contracts and completed the
disposal of its freehold interest in 19 Charterhouse Street EC1 for
GBP54.0m before costs.
24. Related parties
There have been no related party transactions for the year ended
31 December 2022 that have materially affected the financial
position or performance of the Group. All related party
transactions are materially consistent with those disclosed by the
Group in its financial statements.
25. EPRA performance measures
Unaudited unless stated otherwise.
Number of shares
Earnings per share Net asset value per share
Weighted average At 31 December
2022 2021 2022 2021
Audited Unaudited Audited Unaudited
'000 '000 '000 '000
For use in basic measures 112,270 112,139 112,291 112,209
Dilutive effect of share-based payments 142 273 138 308
For use in diluted measures 112,412 112,412 112,429 112,517
The GBP175m unsecured convertible bonds 2025 ('2025 bonds') have
an initial conversion price set at GBP44.96.
The Group recognises the effect of conversion of the bonds if
they are both dilutive and, based on the share price, likely to
convert. For the year ended 31 December 2021 and 2022, the Group
did not recognise the dilutive impact of the conversion of the 2025
bonds on its earnings per share (EPS) or net asset value (NAV) per
share metrics as, based on the share price at the end of each year,
the bonds were not expected to convert.
The following tables set out reconciliations between the IFRS
and EPRA earnings for the year and earnings per share. The
adjustments made between the figures are as follows:
A - Disposal of investment and trading property (including the
Group's share in joint ventures), and associated tax and
non-controlling interest.
B - Revaluation movement on investment property and in joint
ventures, write-down of trading property and associated deferred
tax and non-controlling interest.
C - Fair value movement and termination costs relating to
derivative financial instruments, associated non-controlling
interest and loan arrangement costs written off.
Earnings and earnings per share
Adjustments EPRA
IFRS A B C basis
GBPm GBPm GBPm GBPm GBPm
Year ended 31 December 2022 (audited)
Net property and other income 194.6 (0.2) 0.2 - 194.6
Total administrative expenses (36.4) - - - (36.4)
Revaluation deficit (422.1) - 422.1 - -
Profit on disposal of investments 25.6 (25.6) - - -
Net finance costs (39.4) - - - (39.4)
Movement in fair value of derivative financial instruments 5.8 - - (5.8) -
Financial derivative termination costs (0.3) - - (0.1) (0.4)
Share of results of joint ventures (7.3) - 9.3 - 2.0
Loss before tax (279.5) (25.8) 431.6 (5.9) 120.4
Tax charge (1.0) - 0.3 - (0.7)
Earnings attributable to equity shareholders (280.5) (25.8) 431.9 (5.9) 119.7
(Loss)/earnings per share (249.84p) 106.62p
Diluted (loss)/earnings per share (249.84p) 106.48p
The diluted loss per share for the period to 31 December 2021 was restricted to a loss of
249.84p per share, as the loss per share cannot be reduced by dilution in accordance with
IAS 33, Earnings Per Share.
Adjustments EPRA
IFRS A B C basis
GBPm GBPm GBPm GBPm GBPm
Year ended 31 December 2021 (unaudited)
Net property and other income (restated) 187.2 (0.7) 1.4 - 187.9
Total administrative expenses (37.1) - - - (37.1)
Revaluation surplus (restated) 131.1 - (131.1) - -
Profit on disposal of investments 10.4 (10.4) - - -
Net finance costs (28.1) - - - (28.1)
Movement in fair value of derivative financial instruments 4.8 - - (4.8) -
Financial derivative termination costs (1.9) - - 1.9 -
Share of results of joint ventures (13.9) - 14.2 - 0.3
Profit before tax 252.5 (11.1) (115.5) (2.9) 123.0
Tax credit 1.3 - (1.5) - (0.2)
Profit for the year 253.8 (11.1) (117.0) (2.9) 122.8
Non-controlling interest (1.5) - 0.4 - (1.1)
Earnings attributable to equity shareholders (restated) 252.3 (11.1) (116.6) (2.9) 121.7
Earnings per share (restated) 224.99p 108.53p
Diluted earnings per share (restated) 224.44p 108.26p
EPRA Net Asset Value metrics
2022 2021
Audited Unaudited
GBPm GBPm
Net assets attributable to equity shareholders 4,075.5 4,441.8
Adjustment for:
Revaluation of trading properties 4.8 1.9
Deferred tax on revaluation surplus(1) 1.9 1.7
Fair value of derivative financial instruments (5.0) 0.8
Fair value adjustment to secured bonds 6.5 8.0
EPRA Net Tangible Assets 4,083.7 4,454.2
Per share measure - diluted 3,632p 3,959p
Net assets attributable to equity shareholders 4,075.5 4,441.8
Adjustment for:
Revaluation of trading properties 4.8 1.9
Fair value adjustment to secured bonds 6.5 8.0
Mark-to-market of fixed rate debt 159.5 (69.5)
Unamortised issue and arrangement costs (10.1) (12.6)
EPRA Net Disposal Value 4,236.2 4,369.6
Per share measure - diluted 3,768p 3,884p
Net assets attributable to equity shareholders 4,075.5 4,441.8
Adjustment for:
Revaluation of trading properties 4.8 1.9
Deferred tax on revaluation surplus 3.7 3.3
Fair value of derivative financial instruments (5.0) 0.8
Fair value adjustment to secured bonds 6.5 8.0
Purchasers' costs(2) 361.9 383.9
EPRA Net Reinstatement Value 4,447.4 4,839.7
Per share measure - diluted 3,956p 4,301p
(1) Only 50% of the deferred tax on the revaluation surplus is
excluded .
(2) Includes Stamp Duty Land Tax. Total costs assumed to be 6.8%
of the portfolio's fair value.
Cost ratios (unaudited)
2022 2021
Restated
GBPm GBPm
Administrative expenses 36.4 37.1
Write-off/impairment of receivables (1.0) 2.2
Other property costs 12.7 10.4
Dilapidation receipts (0.5) (0.9)
Net service charge costs 5.1 3.4
Service charge costs recovered through rents but not separately invoiced (0.7) (0.6)
Management fees received less estimated profit element (4.2) (3.5)
Share of joint ventures' expenses 0.5 0.1
EPRA costs (including direct vacancy costs) (A) 48.3 48.2
Direct vacancy costs (7.9) (6.1)
EPRA costs (excluding direct vacancy costs) (B) 40.4 42.1
Gross rental income 207.0 195.3
Ground rent (1.7) (1.4)
Service charge components of rental income (0.7) (0.5)
Share of joint ventures' rental income less ground rent 2.5 0.5
Adjusted gross rental income (C) 207.1 193.9
EPRA cost ratio (including direct vacancy costs) (A/C) 23.3% 24.9%
EPRA cost ratio (excluding direct vacancy costs) (B/C) 19.5% 21.7%
In addition to the two EPRA cost ratios, the Group has calculated an additional cost ratio
based on its property portfolio fair value to recognise the 'total return' nature of the Group's
activities.
Property portfolio at fair value (D) 5,321.8 5,646.3
Portfolio cost ratio (A/D) 0.9% 0.9%
The Group has not capitalised any overheads in either 2022 or
2021.
Property-related capital expenditure (unaudited)
2022 2021
Group Joint Group Joint
(excl. Joint ventures Total (excl. Joint ventures Total
ventures) (50% share) Group ventures) (50% share) Group
GBPm GBPm GBPm GBPm GBPm GBPm
Acquisitions 133.0 - 133.0 353.6 60.0 413.6
Development 94.7 1.6 96.3 146.6 0.2 146.8
Investment properties
Incremental lettable space 0.9 - 0.9 0.1 - 0.1
No incremental lettable space 18.5 - 18.5 16.7 - 16.7
Tenant incentives 0.8 - 0.8 2.5 - 2.5
Capitalised interest 6.9 - 6.9 12.0 - 12.0
Total capital expenditure 254.8 1.6 256.4 531.5 60.2 591.7
Conversion from accrual to
cash basis (1) 11.1 0.1 11.2 (107.6) (0.2) (107.8)
Total capital expenditure
on a cash basis 265.9 1.7 267.6 423.9 60.0 483.9
(1) In the prior year, the conversion from accrual to cash basis
figure includes GBP100.7m in relation to the regrant of a headlease
at 25 Baker Street W1.
26. Gearing and interest cover
NAV gearing
2022 2021
GBPm GBPm
Net debt 1,257.2 1,251.5
Net assets 4,075.5 4,441.8
NAV gearing 30.8% 28.2%
Loan-to-value ratio
2022 2021
GBPm GBPm
Group loan-to-value ratio
Net debt 1,257.2 1,251.5
Fair value adjustment of secured bonds (6.5) (8.0)
Unamortised discount on unsecured green bonds 1.7 1.8
Unamortised issue and arrangement costs 10.1 12.6
Leasehold liabilities (35.0) (70.6)
Drawn debt net of cash (A) 1,227.5 1,187.3
Fair value of property portfolio (B) 5,321.8 5,646.3
Group loan-to-value ratio (A/B) 23.1% 21.0%
Proportionally consolidated loan-to-value ratio
Drawn debt net of cash (A) 1,227.5 1,187.3
Share of cash and cash equivalents joint ventures (1.6) (1.2)
Drawn debt net of cash including Group's share of joint ventures (C) 1,225.9 1,186.1
Fair value of property portfolio (B) 5,321.8 5,646.3
Share of fair value of property portfolio of joint ventures 42.4 50.0
Fair value of property portfolio including Group's share of joint ventures (D) 5,364.2 5,696.3
Proportionally consolidated loan-to-value ratio (C/D) 22.9% 20.8%
EPRA loan-to-value ratio
Drawn debt net of cash including Group's share of joint ventures (C) 1,225.9 1,186.1
Debt with equity characteristics (19.7) (12.3)
Adjustment for hybrid debt instruments 3.3 4.5
Net payable adjustment 74.1 91.7
Adjusted debt (E) 1,283.6 1,270.0
Fair value of property portfolio including Group's share of joint ventures (D) 5,364.2 5,696.3
EPRA loan-to-value ratio (E/D) 23.9% 22.3%
Net interest cover ratio
2022 2021
Restated
GBPm GBPm
Group net interest cover ratio
Net property and other income 194.6 187.2
Adjustments for:
Other income (4.2) (3.5)
Other property income (0.3) (2.0)
Surrender premiums received (1.1) (3.6)
Write-down of trading property 0.2 1.4
Profit on disposal of trading properties (0.2) (0.7)
Adjusted net property income 189.0 178.8
Finance income (0.3) -
Finance costs 39.7 28.1
Adjustments for:
Finance income 0.3 -
Other finance costs (0.3) (0.2)
Amortisation of fair value adjustment to secured bonds 1.4 1.3
Amortisation of issue and arrangement costs (2.6) (2.5)
Finance costs capitalised 7.0 12.0
Net interest payable 45.2 38.7
Group net interest cover ratio 418% 462%
Proportionally consolidated net interest cover ratio
Adjusted net property income 189.0 178.8
Share of joint ventures' net property income 2.1 0.4
Adjusted net property income including share of joint ventures 191.1 179.2
Net interest payable 45.2 38.7
Proportionally consolidated net interest cover ratio 423% 463%
27. Total return (unaudited)
2022 2021
p p
EPRA Net Tangible Assets on a diluted basis
At end of year 3,632 3,959
At start of year (3,959) (3,812)
(Decrease)/increase (327) 147
Dividend per share 78 75
(Decrease)/increase including dividend (250) 222
Total return (6.3%) 5.8%
28. List of definitions
Building Research Establishment Environmental Assessment Method
(BREEAM)
An environmental impact assessment method for non-domestic
buildings. Performance is measured across a series of ratings;
Good, Very Good, Excellent and Outstanding.
Capital return
The annual valuation movement arising on the Group's portfolio
expressed as a percentage return on the valuation at the beginning
of the year adjusted for acquisitions and capital expenditure.
Company Voluntary Arrangement (CVA)
An insolvency procedure allowing a company with debt problems or
that is insolvent to reach a voluntary agreement with its creditors
to repay its debt over a fixed period.
Diluted figures
Reported results adjusted to include the effects of potential
dilutive shares issuable under the Group's share option schemes and
the convertible bonds.
Earnings/earnings per share (EPS)
Earnings represent the profit or loss for the year attributable
to equity shareholders and are divided by the weighted average
number of ordinary shares in issue during the financial year to
arrive at earnings per share.
Energy Performance Certificate (EPC)
An EPC is an asset rating detailing how energy efficient a
building is, rated by carbon dioxide emission on a scale of A-G,
where an A rating is the most energy efficient. They are legally
required for any building that is to be put on the market for sale
or rent.
Estimated rental value (ERV)
This is the external valuers' opinion as to the open market rent
which, on the date of valuation, could reasonably be expected to be
obtained on a new letting or rent review of a property.
European Public Real Estate Association (EPRA)
A not-for-profit association with a membership of Europe's
leading property companies, investors and consultants which strives
to establish best practices in accounting, reporting and corporate
governance and to provide high-quality information to investors.
EPRA's Best Practices Recommendations includes guidelines for the
calculation of the following performance measures which the Group
has adopted.
- EPRA Earnings Per Share
Earnings from operational activities.
- EPRA Loan-to-value (LTV)
Debt divided by the property value. Debt is equal to drawn
facilities less cash, adjusted with equity characteristics, adding
back the equity portion of hybrid debt instruments and including
net payables if applicable. Property value is equal to the fair
value of the property portfolio including net receivables if
applicable.
- EPRA Net Reinstatement Value (NRV) per share
NAV adjusted to reflect the value required to rebuild the entity
and assuming that entities never sell assets. Assets and
liabilities, such as fair value movements on financial derivatives
are not expected to crystallise in normal circumstances and
deferred taxes on property valuation surpluses are excluded.
- EPRA Net Tangible Assets (NTA) per share
Assumes that entities buy and sell assets, thereby crystallising
certain levels of unavoidable deferred tax.
- EPRA Net Disposal Value (NDV) per share
Represent the shareholders' value under a disposal scenario,
where deferred tax, financial instruments and certain other
adjustments are calculated to the full extent of their liability,
net of any resulting tax.
- EPRA capital expenditure
The total expenditure incurred on the acquisition, enhancement,
and development of investment properties. This can include amounts
spent on any investment properties under construction or related
development projects, as well as the amounts spent on the completed
(operational) investment property portfolio. Capitalised finance
costs included in the financial statements are also presented
within this total. The costs are presented on both an accrual and a
cash basis, for both the Group and the proportionate share of joint
ventures.
- EPRA Cost Ratio (including direct vacancy costs)
EPRA costs as a percentage of gross rental income less ground
rent (including share of joint venture gross rental income less
ground rent). EPRA costs include administrative expenses, other
property costs, net service charge costs and the share of joint
ventures' overheads and operating expenses (net of any service
charge costs), adjusted for service charge costs recovered through
rents and management fees.
- EPRA Cost Ratio (excluding direct vacancy costs)
Calculated as above, but with an adjustment to exclude direct
vacancy costs.
- EPRA Net Initial Yield (NIY)
Annualised rental income based on the cash rents passing at the
balance sheet date, less non-recoverable property operating
expenses, divided by the market value of the EPRA property
portfolio, increased by estimated purchasers' costs.
- EPRA 'topped-up' Net Initial Yield
This measure incorporates an adjustment to the EPRA NIY in
respect of the expiration of rent free periods (or other unexpired
lease incentives such as discounted rent periods and stepped
rents).
- EPRA Vacancy Rate
Estimated rental value (ERV) of immediately available space
divided by the ERV of the EPRA portfolio.
In addition, the Group has adopted the following recommendation
for investment property reporting.
- EPRA like-for-like rental income growth
The growth in rental income on properties owned throughout the
current and previous year under review. This growth rate includes
revenue recognition and lease accounting adjustments but excludes
properties held for development in either year and properties
acquired or disposed of in either year.
Fair value adjustment
An accounting adjustment to change the book value of an asset or
liability to its market value.
Ground rent
The rent payable by the Group for its leasehold properties.
Under IFRS, a liability is recognised using the discounted payments
due. Fixed lease payments made are allocated between the interest
payable and the reduction in the outstanding liability. Any
variable payments are recognised in the income statement in the
period to which it relates.
Headroom
This is the amount left to draw under the Group's loan
facilities (i.e. the total loan facilities less amounts already
drawn).
Interest rate swap
A financial instrument where two parties agree to exchange an
interest rate obligation for a predetermined amount of time. These
are generally used by the Group to convert floating rate debt to
fixed rates.
Key Performance Indicators (KPIs)
Activities and behaviours, aligned to both business objectives
and individual goals, against which the performance of the Group is
annually assessed.
Lease incentives
Any incentive offered to occupiers to enter into a lease.
Typically the incentive will be an initial rent free or half rent
period, stepped rents, or a cash contribution to fit-out or similar
costs.
Loan-to-value ratio (LTV)
Drawn debt net of cash divided by the fair value of the property
portfolio. Drawn debt is equal to drawn facilities less
unrestricted cash and the unamortised equity element of the
convertible bonds.
Mark-to-market
The difference between the book value of an asset or liability
and its market value.
MSCI Inc. (MSCI IPD)
MSCI Inc. is a company that produces independent benchmarks of
property returns. The Group measures its performance against both
the Central London Offices Index and the UK All Property Index.
National Australian Built Environment Rating System (NABERS)
This is a building performance rating system which provides an
energy performance benchmark using a simple star rating system on a
1-6 scale. This helps property owners understand and communicate a
building's performance versus other similar buildings to occupiers.
Ratings are validated on an annual basis.
NAV gearing
Net debt divided by net assets.
Net assets per share or net asset value (NAV)
Equity shareholders' funds divided by the number of ordinary
shares in issue at the balance sheet date.
Net debt
Borrowings plus bank overdraft less unrestricted cash and cash
equivalents.
Net interest cover ratio
Net property income, excluding all non-core items divided by
interest payable on borrowings and non-utilisation fees.
Property income distribution (PID)
Dividends from profits of the Group's tax-exempt property rental
business under the REIT regulations.
Non-PID
Dividends from profits of the Group's taxable residual
business.
Real Estate Investment Trust (REIT )
The UK Real Estate Investment Trust ("REIT") regime was launched
on 1 January 2007. On 1 July 2007, Derwent London plc elected to
convert to REIT status.
The REIT legislation was introduced to provide a structure which
closely mirrors the tax outcomes of direct ownership in property
and removes tax inequalities between different real estate
investors. It provides a liquid and publicly available vehicle
which opens the property market to a wide range of investors.
A REIT is exempt from corporation tax on qualifying income and
gains of its property rental business providing various conditions
are met. It remains subject to corporation tax on non-exempt income
and gains e.g. interest income, trading activity and development
fees.
REITs must distribute at least 90% of the Group's income profits
from its tax exempt property rental business, by way of dividend,
known as a property income distribution (PID). These distributions
can be subject to withholding tax at 20%.
If the Group distributes profits from the non-tax exempt
business, the distribution will be taxed as an ordinary dividend in
the hands of the investors (non-PID).
Rent reviews
Rent reviews take place at intervals agreed in the lease
(typically every five years) and their purpose is usually to adjust
the rent to the current market level at the review date. For
upwards only rent reviews, the rent will either remain at the same
level or increase (if market rents are higher) at the review
date.
Reversion
The reversion is the amount by which ERV is higher than the rent
roll of a property or portfolio. The reversion is derived from
contractual rental increases, rent reviews, lease renewals and the
letting of space that is vacant and available to occupy or under
development or refurbishment.
Scrip dividend
Derwent London plc sometimes offers its shareholders the
opportunity to receive dividends in the form of shares instead of
cash. This is known as a scrip dividend.
Task Force on Climate-related Financial Disclosures (TCFD)
Set up by the Financial Stability Board (FSB) in response to the
G20 Finance Ministers and Central Bank Governors request for
greater levels of decision-useful, climate-related information; the
TCFD was asked to develop climate-related disclosures that could
promote more informed investment, credit (or lending), and
insurance underwriting decisions. In turn, this would enable
stakeholders to understand better the concentrations of
carbon-related assets in the financial sector and the financial
system's exposures to climate-related risks.
'Topped-up' rent
Annualised rents generated by the portfolio plus rent contracted
from expiry of rent free periods and uplifts agreed at the balance
sheet date.
Total property return (TPR)
Total property return is a performance measure calculated by the
MSCI IPD and defined in the MSCI Global Methodology Standards for
Real Estate Investment as 'the percentage value change plus net
income accrual, relative to the capital employed'.
Total return
The movement in EPRA Net Tangible Assets per share on a diluted
basis between the beginning and the end of each financial year plus
the dividend per share paid during the year expressed as a
percentage of the EPRA Net Tangible Assets per share on a diluted
basis at the beginning of the year.
Total shareholder return (TSR)
The growth in the ordinary share price as quoted on the London
Stock Exchange plus dividends per share received for the year,
expressed as a percentage of the share price at the beginning of
the year.
Transmission and distribution (T&D)
The emissions associated with the transmission and distribution
losses in the grid from the transportation of electricity from its
generation source.
Underlying portfolio
Properties that have been held for the whole of the year (i.e.
excluding any acquisitions or disposals made during the year).
Underlying valuation increase
The valuation increase on the underlying portfolio.
Well to tank (WTT)
The emissions associated with extracting, refining and
transporting raw fuel to the vehicle, asset or process under
scrutiny.
Yields
- Net initial yield
Annualised rental income based on cash rents passing at the
balance sheet date, less non-recoverable property operating
expenses, divided by the market value of the property, increased by
estimated purchasers' costs.
- Reversionary yield
The anticipated yield to which the net initial yield will rise
once the rent reaches the estimated rental values.
- True equivalent yield
The constant capitalisation rate which, if applied to all cash
flows from the portfolio, including current rent, reversions to
valuers' estimated rental value and such items as voids and
expenditures, equates to the valuation having taken into account
notional purchasers' costs. Rent is assumed to be received
quarterly in advance.
- Yield shift
A movement in the yield of a property asset, or like-for-like
portfolio, over a given period. Yield compression is a
commonly-used term for a reduction in yields.
29. Copies of this announcement will be available on the
Company's website, www.derwentlondon.com, from the date of this
statement. Copies will also be available from the Company
Secretary, Derwent London plc, 25 Savile Row, London, W1S 2ER.
Notes to editors
Derwent London plc
Derwent London plc owns 70 buildings in a commercial real estate
portfolio predominantly in central London valued at GBP5.36 billion
as at 31 December 2022, making it the largest London-focused real
estate investment trust (REIT).
Our experienced team has a long track record of creating value
throughout the property cycle by regenerating our buildings via
development or refurbishment, effective asset management and
capital recycling.
We typically acquire central London properties off-market with
low capital values and modest rents in improving locations, most of
which are either in the West End or the Tech Belt. We capitalise on
the unique qualities of each of our properties - taking a fresh
approach to the regeneration of every building with a focus on
anticipating tenant requirements and an emphasis on design.
Reflecting and supporting our long-term success, the business
has a strong balance sheet with modest leverage, a robust income
stream and flexible financing.
As part of our commitment to lead the industry in mitigating
climate change, Derwent London has committed to becoming a net zero
carbon business by 2030, publishing its pathway to achieving this
goal in July 2020. In 2019 the Group became the first UK REIT to
sign a Revolving Credit Facility with a 'green' tranche. At the
same time, we also launched our Green Finance Framework and signed
the Better Buildings Partnership's climate change commitment. The
Group is a member of the 'RE100' which recognises Derwent London as
an influential company, committed to 100% renewable power by
purchasing renewable energy, a key step in becoming a net zero
carbon business. Derwent London is one of the property companies
worldwide to have science-based carbon targets validated by the
Science Based Targets initiative (SBTi).
Landmark buildings in our 5.5 million sq ft portfolio include 1
Soho Place W1, 80 Charlotte Street W1, Brunel Building W2, White
Collar Factory EC1, Angel Building EC1, 1-2 Stephen Street W1,
Horseferry House SW1 and Tea Building E1.
In January 2022 we were proud to announce that we had achieved
the National Equality Standard - the UK's highest benchmark for
equality, diversity and inclusion. In October 2022, 80 Charlotte
Street won the BCO's Best National Commercial Workplace award 2022.
In October 2021, the Group won EG's UK Company of the Year award
and in January 2022 came top of the Property Sector and 38th
position overall in Management Today's Britain's Most Admired
Companies awards 2021. In 2013 the Company launched a voluntary
Community Fund which has to date supported over 150 community
projects in the West End and the Tech Belt.
The Company's share capital is comprised of a single class of 5p
ordinary shares (ISIN: GB0002652740).
The Company is a public limited company, which is listed on the
London Stock Exchange and incorporated and domiciled in the UK. The
address of its registered office is 25 Savile Row, London, W1S
2ER.
For further information see www.derwentlondon.com or follow us
on Twitter at @derwentlondon
Forward-looking statements
This document contains certain forward-looking statements about
the future outlook of Derwent London. By their nature, any
statements about future outlook involve risk and uncertainty
because they relate to events and depend on circumstances that may
or may not occur in the future. Actual results, performance or
outcomes may differ materially from any results, performance or
outcomes expressed or implied by such forward-looking
statements.
No representation or warranty is given in relation to any
forward-looking statements made by Derwent London, including as to
their completeness or accuracy. Derwent London does not undertake
to update any forward-looking statements whether as a result of new
information, future events or otherwise. Nothing in this
announcement should be construed as a profit forecast.
This information is provided by RNS, the news service of the
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END
FR UWORROBUUURR
(END) Dow Jones Newswires
February 28, 2023 02:00 ET (07:00 GMT)
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