213800BXKQ9KZNUR1M61 2023-01-01 2023-12-31 213800BXKQ9KZNUR1M61 2022-01-01 2022-12-31 213800BXKQ9KZNUR1M61 2023-12-31 213800BXKQ9KZNUR1M61 2022-12-31 213800BXKQ9KZNUR1M61 2021-01-01 2021-12-31 213800BXKQ9KZNUR1M61 2021-12-31 213800BXKQ9KZNUR1M61 2022-01-01 2022-12-31 ifrs-full:SeparateMember 213800BXKQ9KZNUR1M61 2022-01-01 2022-12-31 ifrs-full:IssuedCapitalMember ifrs-full:SeparateMember 213800BXKQ9KZNUR1M61 2022-01-01 2022-12-31 ifrs-full:SharePremiumMember ifrs-full:SeparateMember 213800BXKQ9KZNUR1M61 2022-01-01 2022-12-31 ifrs-full:OtherReservesMember ifrs-full:SeparateMember 213800BXKQ9KZNUR1M61 2022-01-01 2022-12-31 ifrs-full:RetainedEarningsMember ifrs-full:SeparateMember 213800BXKQ9KZNUR1M61 2022-01-01 2022-12-31 ifrs-full:RetainedEarningsMember 213800BXKQ9KZNUR1M61 2022-01-01 2022-12-31 ifrs-full:IssuedCapitalMember 213800BXKQ9KZNUR1M61 2022-01-01 2022-12-31 ifrs-full:SharePremiumMember 213800BXKQ9KZNUR1M61 2022-01-01 2022-12-31 ifrs-full:OtherReservesMember 213800BXKQ9KZNUR1M61 2023-01-01 2023-12-31 ifrs-full:SeparateMember 213800BXKQ9KZNUR1M61 2023-01-01 2023-12-31 ifrs-full:IssuedCapitalMember 213800BXKQ9KZNUR1M61 2023-01-01 2023-12-31 ifrs-full:SharePremiumMember 213800BXKQ9KZNUR1M61 2023-01-01 2023-12-31 ifrs-full:SeparateMember ifrs-full:IssuedCapitalMember 213800BXKQ9KZNUR1M61 2023-01-01 2023-12-31 ifrs-full:SeparateMember ifrs-full:SharePremiumMember 213800BXKQ9KZNUR1M61 2023-01-01 2023-12-31 ifrs-full:SeparateMember ifrs-full:OtherReservesMember 213800BXKQ9KZNUR1M61 2023-01-01 2023-12-31 ifrs-full:SeparateMember ifrs-full:RetainedEarningsMember 213800BXKQ9KZNUR1M61 2023-01-01 2023-12-31 ifrs-full:OtherReservesMember 213800BXKQ9KZNUR1M61 2023-01-01 2023-12-31 ifrs-full:RetainedEarningsMember 213800BXKQ9KZNUR1M61 2022-12-31 ifrs-full:SeparateMember 213800BXKQ9KZNUR1M61 2023-12-31 ifrs-full:SeparateMember 213800BXKQ9KZNUR1M61 2021-12-31 ifrs-full:SeparateMember 213800BXKQ9KZNUR1M61 2021-12-31 ifrs-full:IssuedCapitalMember 213800BXKQ9KZNUR1M61 2021-12-31 ifrs-full:SharePremiumMember 213800BXKQ9KZNUR1M61 2021-12-31 ifrs-full:OtherReservesMember 213800BXKQ9KZNUR1M61 2021-12-31 ifrs-full:RetainedEarningsMember 213800BXKQ9KZNUR1M61 2021-12-31 ifrs-full:IssuedCapitalMember ifrs-full:SeparateMember 213800BXKQ9KZNUR1M61 2021-12-31 ifrs-full:SharePremiumMember ifrs-full:SeparateMember 213800BXKQ9KZNUR1M61 2021-12-31 ifrs-full:OtherReservesMember ifrs-full:SeparateMember 213800BXKQ9KZNUR1M61 2021-12-31 ifrs-full:RetainedEarningsMember ifrs-full:SeparateMember 213800BXKQ9KZNUR1M61 2022-12-31 ifrs-full:IssuedCapitalMember 213800BXKQ9KZNUR1M61 2022-12-31 ifrs-full:SeparateMember ifrs-full:RetainedEarningsMember 213800BXKQ9KZNUR1M61 2022-12-31 ifrs-full:SeparateMember ifrs-full:IssuedCapitalMember 213800BXKQ9KZNUR1M61 2022-12-31 ifrs-full:SeparateMember ifrs-full:SharePremiumMember 213800BXKQ9KZNUR1M61 2022-12-31 ifrs-full:SeparateMember ifrs-full:OtherReservesMember 213800BXKQ9KZNUR1M61 2022-12-31 ifrs-full:SharePremiumMember 213800BXKQ9KZNUR1M61 2022-12-31 ifrs-full:OtherReservesMember 213800BXKQ9KZNUR1M61 2022-12-31 ifrs-full:RetainedEarningsMember 213800BXKQ9KZNUR1M61 2023-12-31 ifrs-full:IssuedCapitalMember 213800BXKQ9KZNUR1M61 2023-12-31 ifrs-full:SharePremiumMember 213800BXKQ9KZNUR1M61 2023-12-31 ifrs-full:OtherReservesMember 213800BXKQ9KZNUR1M61 2023-12-31 ifrs-full:RetainedEarningsMember 213800BXKQ9KZNUR1M61 2023-12-31 ifrs-full:OtherReservesMember ifrs-full:SeparateMember 213800BXKQ9KZNUR1M61 2023-12-31 ifrs-full:RetainedEarningsMember ifrs-full:SeparateMember 213800BXKQ9KZNUR1M61 2023-12-31 ifrs-full:IssuedCapitalMember ifrs-full:SeparateMember 213800BXKQ9KZNUR1M61 2023-12-31 ifrs-full:SharePremiumMember ifrs-full:SeparateMember iso4217:GBP iso4217:GBP xbrli:shares
Report and Accounts 2023
Derwent London plc
The largest
London office-
focused REIT
with a distinctive
5.4 million sq ft
portfolio
Brunel Building W2
Strategic report
05
Our strategic framework
06
Our year in review
08
Chairman’s statement
10
Chief Executive’s statement
13
Central London office market
16
Investment case
18
Right product, right location
24
Our portfolio
26
Regeneration projects
28
Business model & strategy
32
Strategic objectives
37
Measuring our performance
42
Our stakeholders
44
Responsibility
46
Environmental
50
Social
56
Governance
62
Property review
76
Finance review
86
Going concern & viability
90
Managing risks
Governance
120
Introduction from the Chairman
121
Governance at a glance
122
Board of Directors
124
Executive management team
126
Corporate governance statement
130
The Section 172(1) Statement
140
Nominations Committee report
144
Audit Committee report
156
Risk Committee report
166
Responsible Business Committee
report
172
Remuneration Committee report
198
Directors’ report
203
Statement of Directors’
responsibilities
Financial statements
206
Independent Auditors’ report
214
Group income statement
215
Group statement of
comprehensive income
216
Balance sheets
217
Statements of changes in equity
218
Cash flow statements
219
Notes to the financial statements
Other information
277
Ten-year summary
278
EPRA summary
281
Principal properties
283
List of definitions
287
Shareholder information
288
Awards & recognition
Derwent London plc
Report and Accounts 2023
01
Strategic
report
25 Baker Street W1
02
05
Our strategic framework
06
Our year in review
08
Chairman’s statement
10
Chief Executive’s statement
13
Central London office market
16
Investment case
18
Right product, right location
24
Our portfolio
26
Regeneration projects
28
Business model & strategy
32
Strategic objectives
37
Measuring our performance
42
Our stakeholders
44
Responsibility
46
Environmental
50
Social
56
Governance
62
Property review
76
Financial review
86
Going concern & viability
90
Managing risks
The inspiration for 25 Baker
Street came from the rare
opportunity to regenerate
an entire urban block with
a major new public space
at its centre.
Mike Taylor
Hopkins Architects
Derwent London plc
Report and Accounts 2023
Strategic report
03
White Collar Factory EC1
04
We are driven by our...
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
Purpose
We craft inspiring and distinctive
space where people thrive
Vision
We build long-term relationships
We lead by design
We act with integrity
Values
Achieved by our...
Core activities
Asset management
Refurbishment & development
Investment activity
Strategic objectives
1
2
3
4
5
To optimise returns
and create value
from a balanced
portfolio
To grow recurring
earnings and
cash ﬂow
To attract, retain
and develop
talented employees
To design, deliver
and operate
our buildings
responsibly
To maintain
strong and
ﬂexible ﬁnancing
Our stakeholders
To create value for...
Strong governance, risk management & culture
Occupiers
Employees
Local
communities
& others
Suppliers
Central & local
government
Shareholders &
debt providers
OUR STRATEGIC FRAMEWORK
See pages 28 and 29
See pages 32 to 36
See page 126
See pages 42 and 43
Derwent London plc
Report and Accounts 2023
Strategic report
05
Operational highlights
Portfolio performance
ESG highlights
Occupier demand for the right product was strong through 2023. We had another
successful year of letting and asset management activity across our portfolio and good
progress was made on site at our major developments. However, the macro environment
remained challenging, impacting both property yields and the cost and availability of
new debt.
£
28.4
m
Lettings, 8.0% above December 2022 ERV
4.0
%
EPRA vacancy rate (December 2022: 6.4%)
R
46
%
Major on-site projects pre-let
100%
Construction costs ﬁxed for on-site projects
DL/28
Launch of second Member lounge
149
kWh/sqm
Energy intensity (2022: 142 kWh/sqm)
R
14,370
tCO
2
e
Operational carbon footprint (2022: 11,314 tCO
2
e)
68.4
%
EPC rating A or B (by ERV) including projects (2022: 65.3%)
18.4
MW
Planning consent for Scottish solar park
£
464k
Community fund & sponsorship donations committed
-10.6
%
Capital return
-7.3
%
Total property return
R
5.55
%
Equivalent yield
2.1
%
ERV growth
OUR YEAR IN REVIEW
06
3,129
p
EPRA NTA per share
1, 2
(2022: 3,632p)
£
212.8
m
Gross rental income
(2022: £207.0m)
-11.7
%
Total return
R
(2022: -6.3%)
£
480
m
Cash and undrawn facilities
(2022: £577m)
4.1x
Interest cover ratio
3
(2022: 4.2x)
27.9
%
EPRA loan-to-value ratio
1, 3
(2022: 23.9%)
102.0
p
EPRA earnings per share
1, 2
(2022: 106.6p)
£
186.2
m
Net rental income
(2022: £188.5m)
79.5
p
Dividend per share
(2022: 78.5p)
Financial highlights
1
EPRA performance measure – see page 283 for deﬁnitions.
2
See note 40 on page 264 in the ﬁnancial statements for reconciliation to IFRS ﬁgures.
3
See note 42 on page 270 in the ﬁnancial statements for calculation.
R
Links to remuneration – see page 37.
DL/Service at White Collar Factory EC1
Derwent London plc
Report and Accounts 2023
Strategic report
07
CHAIRMAN’S STATEMENT
Our long-term strategic approach
has ensured that the Group remains
well-positioned against an uncertain
and challenging backdrop.
While our total property return was
negative in 2023, we outperformed
the MSCI IPD Central London Oﬃce
benchmark. Our total return was -11.7%,
taking the NTA to 3,129p. The Group’s
balance sheet remains robust with EPRA
LTV of 27.9% and interest cover of 4.1
times, giving us capacity to continue
investing in our pipeline.
The occupational market continues
to polarise with good rental growth
prospects for high quality, sustainable
buildings where there is deep demand
and constrained supply, particularly in
the West End where 72% of our portfolio
is located. In 2023, we agreed £28.4m
of new leases, on average 8% ahead of
December 2022 ERV, which includes
pre-letting 75% of the oﬃces at
25 Baker Street W1 ahead of completion
in H1 2025. This gives us conﬁdence in
the letting prospects for our Network W1
project as well as the next phase of our
development pipeline.
The London oﬃce investment market
has been adversely impacted by higher
inﬂation and the subsequent upward
movement in interest rates. We expect
to see a rise in the number of motivated
sellers, and we have the balance sheet
capacity to explore these opportunities
as they emerge.
Our experienced management team has
a strong track record of value creation
across the economic cycle. We recognise
the importance of investing in our people
and planning ahead. Over the last three
years, there have been eight promotions
to the Executive Committee with
representation from across the business.
This diversity of skills and expertise helps
position us well as the macroeconomic
environment starts to recover.
The Group has been impacted by
global inﬂationary pressures and
we have also invested more in the
amenity we oﬀer our occupiers. As a
result, EPRA EPS is down slightly year-
on-year to 102.0p. However, we have
substantial reversionary potential from
a combination of on-site projects
(requiring £223m of capex to complete),
underlying rental uplifts and vacant
space. In addition, we expect only a
modest impact on our cost of debt from
near-term reﬁnancing.
I am therefore pleased to conﬁrm a
1.3% increase in the full year dividend to
79.5p in line with our progressive and well
covered dividend policy, with the ﬁnal
dividend raised by 0.5p to 55.0p.
Highlights
•
A year of operational progress against a challenging market backdrop
•
Strong balance sheet and long-term strategy means we are well
positioned as opportunities emerge
•
Annual dividend 79.5p, up 1.3%; uninterrupted annual growth since 2007
Mark Breuer
– Chairman
08
It will be paid on 31 May 2024 to
shareholders on the register of members
at 26 April 2024. EPRA earnings covered
the 2023 interim and ﬁnal dividends
1.28 times.
We greatly value and nurture
relationships with stakeholders, including
the local communities in which we
operate. Working alongside external
consultants, we have strengthened our
commitment to social value, our primary
goals and how they will be measured
and achieved. At the end of 2023, we
published our new Social Value Strategic
Framework.
After nine years on the Board, Claudia
Arney will step down at the 2024 AGM
from her position as a Non-Executive
Director of the Company and Chair
of the Remuneration Committee. The
Board thanks Claudia for her signiﬁcant
contribution to the business and wishes
her every success in the future.
Sanjeev Sharma, currently a Non-
Executive Director and member of the
Remuneration Committee, will become
Remuneration Committee Chair.
PwC was appointed as the Group’s
external auditor in 2014 and, in
accordance with the Competition and
Markets Authority’s (CMA) requirements,
we conducted a competitive tender
in 2023. Following a comprehensive
process, the Board has approved PwC’s
ongoing appointment, subject to annual
shareholder approval.
Despite the challenging global
environment over the last few years,
the Group is well positioned with an
outstanding central London portfolio
and a strong team.
Mark Breuer
Chairman
£
28.4
m
new leases agreed
25 Baker Street W1
Derwent London plc
Report and Accounts 2023
Strategic report
09
CHIEF EXECUTIVE’S STATEMENT
Overview
Following its peak at 11.1% in October
2022, CPI inﬂation declined signiﬁcantly
through the course of 2023, ending the
year at 4.0%. The hike in UK interest
rates appears to have concluded, with
base rate on hold at 5.25% since August.
On the assumption that inﬂation slows
further towards the 2% target, the
consensus expectation is for a series of
base rate cuts in 2024 and beyond.
Market interest rates have responded
positively to slowing inﬂation but remain
volatile. The yield on the 10-year UK gilt,
which started 2023 at 3.7%, ended the
year at 3.6%, having peaked at 4.7%
in August. However, since the start of
2024, it has increased again to 4.1%. This
reﬂects both a small rise in inﬂation in
December and more cautious ‘higher for
longer’ commentary from central banks.
Combined with the higher cost and
restricted availability of debt, sentiment
in the investment market was subdued
in 2023. Meanwhile, the occupational
market has remained strong for the right
product in the right location. Businesses
are focused on their longer-term real
estate strategies and the ﬂight to quality
is continuing. With constrained availability
and a thin forward development pipeline,
rents for the best space are rising.
Strong operational performance
We enjoyed an excellent year for leasing
in 2023 with £28.4m of new rent agreed,
on average 8.0% above December 2022
ERV. This included 155,500 sq ft of
pre-lets at 25 Baker Street W1, 13.4%
ahead of ERV as well as 19 ‘Furnished +
Flexible’ units leased at an average
9.2% premium to the adjusted ERV.
Key transactions in the year include:
•
25 Baker Street W1:
Two pre-lets –
to PIMCO and Moelis – at our on-site
major development which completes
in H1 2025, with total rent of £16.0m;
the oﬃces are now 75% pre-let; and
•
The Featherstone Building EC1:
Four
further lettings with combined rent
of £4.3m in line with ERV; the building
is now 80% leased, with further
occupier interest.
Since the start of 2024, new leases
totalling £1.8m have been signed, 5.6%
ahead of December 2023 ERV, with a
further £2.7m of space under oﬀer.
London is maintaining its long-term
reputation as a world-leading city with
broad appeal to a diverse range of
businesses and investors despite the
ongoing macroeconomic challenges.
Highlights
•
Strong leasing activity of £28.4m, on average 8% above December
2022 ERV
•
LTV remains amongst lowest in UK REIT sector, despite 10.6% decline
in capital values in 2023
•
2023 ERV growth of 2.1%, towards top end of guidance range
• 2024 guidance:
–
ERVs to increase 2% to 5%
–
Inﬂation signiﬁcantly reduced and expected to fall further;
yields to respond
Paul Williams
– Chief Executive
10
Lease length is an important indicator
for the Group. At year end, our ‘topped-
up’ WAULT (to break) was 7.4 years
(2022: 7.2 years). Overall, our EPRA
vacancy rate reduced 2.4% to 4.0% as
we leased space across the portfolio in
both the West End and the City Borders.
Property valuations
Underlying capital values reduced by a
further 10.6% in 2023 and we believe
valuations are now approaching this
cycle’s lows. The decline in capital values
has been predominantly yield driven with
our equivalent yield up 67bp to 5.55% in
the year. By comparison, our valuation
ERV was up 2.1% in the year, towards the
top end of our guidance range for 2023
of 0% to +3%. Capital values across the
UK real estate sector have declined, with
the MSCI Central London Oﬃce index
down 11.1% and the MSCI UK All Property
index down 5.6% in the year.
This headline movement masks a broad
range of outcomes, with our higher
quality buildings and developments
delivering a more resilient performance,
supporting the nuanced change we
made to our strategy in 2021 to retain
our better buildings for longer.
The value of our on-site developments
increased 8.1% in 2023 and properties
valued at ≥£1,500 psf, generally the
higher quality buildings, reduced by 7.1%,
which is a 350bp outperformance of
the portfolio average. By comparison,
buildings valued at <£1,000 psf (our
‘raw material’ for future regeneration)
fell 14.3%. Impacted by these valuation
movements, EPRA NTA per share
declined 13.8% to 3,129p.
Our portfolio delivered a total property
return of -7.3% compared to the MSCI
Central London Oﬃce index of -7.9%.
Derwent’s diﬀerentiators
At Derwent London, we have long
recognised the importance of providing
best-in-class space to maximise the
appeal of our buildings to occupiers.
Modern oﬃces need to be high
quality and well-designed to inspire
innovation, collaboration and collective
productivity. Good design has always
been in our DNA, but in today’s market
this increasingly extends beyond the
individual building to our broader
portfolio approach, which includes a
commitment to service and amenity
as well as net zero carbon ambitions.
With over 50,000 people estimated to
work in our buildings, we focus on the
end user. Each individual is able to beneﬁt
from the full DL/Member oﬀering which
provides amenity and service to the whole
London portfolio. This includes access to
our two strategically located Member
Lounges in Fitzrovia (DL/78) and Old
Street (the recently opened DL/28), the
App and the Experience team.
Given every business has its own unique
space requirements, we design our
buildings to be as adaptable as possible –
‘long-life, low carbon, intelligent’ – which
increases tenant demand while also
reducing obsolescence. Our buildings are
designed to be desirable over the long-
term. We oﬀer a range of leasing options,
from large-scale HQ space on long leases
to smaller ‘Furnished + Flexible’ units on
shorter leases.
Taken together, and as the bifurcation
between prime and secondary properties
continues to evolve, we expect this
relationship-driven approach to result in
reduced vacancy, shorter void periods,
increased occupier retention and strong
rental growth.
The Featherstone Building EC1
Derwent London plc
Report and Accounts 2023
Strategic report
11
CHIEF EXECUTIVE’S STATEMENT
continued
London oﬃce market
The vacancy rate across central London
rose 1.7% in 2023 to 9.1%. However,
averages do not show the full picture.
West End vacancy is 4.4%, compared
to the City at 11.9% and Docklands at
16.7%, while availability of new space
rose more slowly than secondary
space. We believe that the supply of
new buildings has rarely been more
constrained, particularly in the West
End, which helps to explain why rents
here are rising.
According to CBRE, the amount of space
currently under construction across
London is relatively low with 12.9m sq
ft due to complete by 2027, of which
7.9m sq ft (62%) is currently available.
Compared to long-term take-up, this
equates to eight months’ supply (and 11
months’ supply in the West End) of new
space being delivered over the coming
four years.
London has broad appeal to a diverse
range of businesses, both by sector
and by size. We are encouraged by
the substantial 74% increase in overall
active demand to 9.9m sq ft at the
end of 2023, which indicates a rapid
rise in interest from a range of sectors.
Take-up in the year was 16% lower when
compared to the prior year at 10.5m
sq ft, with the West End down 27% at
3.6m sq ft. The City, however, beneﬁtted
from a number of high proﬁle pre-lets,
including HSBC and Cliﬀord Chance
returning from Docklands to more
central locations, and year-on-year take-
up was in line at 5.3m sq ft. Activity in
2023 was dominated by the banking
& ﬁnance (31%) and business services
(19%) sectors.
Economic prospects are an important
demand driver for oﬃces. Growth in
jobs, population and the economy,
alongside inﬂation prospects all have an
impact. According to CBRE, following a
boom in oﬃce job creation over the last
three years (+415k new jobs), a further
c.165k (net) positions are expected to
be created over the next ﬁve years and
there is a continuing increase in the
number of companies requiring staﬀ to
come back to the oﬃce. The demand
outlook for London oﬃces remains
positive. London real GDP growth
of 1-2% pa is forecast to continue
outperforming the UK and there is
an ongoing increase in the population
of c.0.9m to 10.6m by 2035.
Strong balance sheet
and capital allocation
The Group aims, over the long-term,
to operate with modest leverage and
a simple ﬁnancial structure to ensure
resilience through the economic cycle.
We believe that having a strong balance
sheet has rarely been more important
than at present.
We are well positioned. Our EPRA LTV
ratio is 27.9% (December 2022: 23.9%)
and interest cover is both strong and
stable at 4.1 times (2022: 4.2 times).
At the end of 2023, 98% of our debt was
either ﬁxed or hedged, with an average
interest rate on a cash basis of 3.17%.
In addition, we have limited reﬁnancing
in 2024 and 2025, with an £83m 3.99%
secured facility maturing in October
2024 and a £175m 1.5% convertible
bond maturing in June 2025.
Over the medium-term, we seek to
balance disposals against capital
expenditure and acquisitions. This has
helped to contain the increase in our
net debt and ensure we can continue
to invest into our regeneration pipeline,
which includes the acquisition of the
exciting Old Street Quarter EC1 project
which is likely to complete from 2027.
With the investment market slowdown
seen in 2023, we completed a lower than
normal £66m of disposals. This compared
to £173m of acquisitions and capital
expenditure on major projects, smaller
refurbishments and our second Member
Lounge, DL/28.
Sustainability
Our plans for an 18.4 MW solar park in
Scotland came a step closer with planning
consent now received. We expect green
electricity generation to commence on
completion in 2025, providing c.40%
of the electricity needs of our London
managed portfolio. We are also exploring
other sustainability-related opportunities
across our Scottish portfolio.
In accordance with our stated ambition,
we rebased our SBTi-veriﬁed targets to
align with a 1.5°C climate scenario. Our
revised target commits us to a 42%
reduction in Scope 1 & 2 carbon emissions
by 2030 from our 2022 baseline. We are
committed to managing our carbon
footprint and building in climate
resilience while collaborating across
the industry and with our supply chain.
Our strong team
We were pleased to recognise the
achievements of our employees, with
18 internal promotions in 2023 which
included two promotions to the Executive
Committee: Richard Dean, Director of
Investment, joined the Committee from
1 July 2023 and Matt Cook, Head of
Digital Innovation & Technology, with
eﬀect from 1 January 2024. We were also
delighted to be recognised externally,
being included on The Sunday Times
‘Best Places to Work 2023’ list where we
scored highly in many categories against
industry and global comparisons, and
also winning ‘Employer of the Year’ at
both the Westminster Business Council
and EG (Estates Gazette) Awards.
Outlook and guidance
We have previously anticipated an
acceleration in rental growth for the best
buildings. Occupier demand continues to
focus on well-located space with best-in-
class amenity and service, while existing
supply and the development pipeline are
restricted. We expect these conditions to
become increasingly favourable through
2024 and as such increase our portfolio
rental guidance for the year to a range
of 2% to 5%, with our better buildings
to outperform.
Over the last few years, we have
reduced our exposure to buildings
which can no longer meet evolving
occupier requirements and have
invested signiﬁcant capital upgrading
our remaining portfolio. With inﬂation
continuing to reduce and the cost and
availability of ﬁnance improving, property
yields are expected to respond, following
a period of substantial increases. We
believe we are now approaching the
end of this yield cycle, with transaction
volumes expected to increase and for
opportunities to emerge.
Paul Williams
Chief Executive
12
CENTRAL LONDON OFFICE MARKET
Highlights
•
Take-up 10.5m sq ft; acceleration
in Q4 to 3.4m sq ft (Q1 to Q3
average: 2.4m sq ft)
•
Space under oﬀer up 19% to
3.0m sq ft; active demand up
74% to 9.9m sq ft
•
Vacancy elevated at 9.1%:
West End remains tight at 4.4%
• Development pipeline 38%
pre-let; eight months’
speculative supply
•
Prime yields in West End at 4.0%
(up 25bp in 2023) compared
to the City at 5.75% (up 125bp)
• Investment transactions £5.2bn,
59% below 10-year average
Overview and macro backdrop
The global economy has experienced
signiﬁcant uncertainty and volatility
since 2020. The resulting supply chain
disruption and global conﬂicts led to
a rise in inﬂation which started three
years ago and peaked in late 2022. In
response, there has been a substantial
increase in benchmark interest
rates around the world, leading to a
signiﬁcant hike in the cost of debt and
reduced availability. For the commercial
property sector, this has resulted in a
material adjustment in property yields.
Softening inﬂation data through 2023,
however, has raised market expectations
that the interest rate cycle has peaked,
with cuts now forecast in 2024. This
is feeding through into lower market
interest rates and narrower credit
spreads and there are signs of improving
credit availability.
Whilst GDP growth in the UK has
plateaued for the time being, London
is outperforming, with economic
growth to 2028 forecast to average
c.2% pa. Combined with a positive
outlook for both jobs (c.165k net new
jobs to be created by 2028 according
to CBRE) and population growth
(c.0.9m increase by 2035 to 10.6m
according to Macrotrends), the macro
demand drivers for London oﬃces are
encouragingly robust.
In line with long-term trends, foreign
direct investment (FDI) into London
remains higher than other core global
cities including Paris, New York and Hong
Kong. Throughout 2023 there was an
increase in the number of FDI projects
to 103 in London which compares to a
reduction in other global cities.
Derwent London plc
Report and Accounts 2023
Strategic report
13
Central London oﬃce stock
City
34%
West End
38%
Midtown
11%
Docklands
9%
Southbank
8%
London’s oﬃce cycle
Available space by sub-market
Capital growth
Rental value growth
West End
City
Docklands
Central London
Index (1980=100)
Vacancy rate (%)
0
0
2
4
6
8
10
12
14
16
18
50
100
150
200
250
300
350
400
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
2017
2019
2021
2023
2001 2003 2005 2007 2009 2011
2013
2015
2017
2019
2021 2023
Central London oﬃce yields
West End
City
3.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
Prime oﬃce yield (%)
2001 2003 2005 2007 2009 2011
2013 2015 2017 2019 2021 2023
CENTRAL LONDON OFFICE MARKET
continued
In a continuation of the trend seen over the last few years,
businesses are becoming increasingly strategic around their
real estate planning and more selective in both the building
and the landlord they choose. Against a backdrop of restricted
supply of high quality space, landlords that provide great space
in the right location, with best-in-class amenity and service
are seeing attractive rental growth as the ﬂight to quality
continues. According to Knight Frank, the oﬃce now fulﬁls ﬁve
key purposes in the post-Covid era, underlining its importance:
talent attraction and retention; increased collaboration; cost
management and mitigation; corporate brand and image; and
employee wellbeing.
London’s broad appeal to a diverse range of businesses
continues to serve it well. It is not overly dependent on
any one sector and the diversity of scale and occupational
requirements supports demand across a wide spectrum, from
large global HQs let on long leases to space for SMEs on more
ﬂexible terms. In recent years, there has been a convergence in
the space needs across business sectors, as the importance of
quality has risen and there is a more uniﬁed approach to what
an oﬃce needs to provide.
Location and connectivity have also been important factors in
the market and data from a number of agents shows a clear
preference among occupiers for centrally located oﬃces. Over
the last few years, a signiﬁcant number of businesses have
returned to London’s core markets. The trend is widely expected
to continue.
Over the course of 2023, there has been a shift in the number
of companies issuing clearer guidance to employees around
working policies. A recent study of 400 global companies by
VTS found that over the last six months, 60% of European
respondents have either ‘mandated’ or ‘encouraged’ more time
in the oﬃce. Looking forward to 2024, a similar pattern is seen,
with 52% planning to further ‘mandate’ or ‘encourage’ more
time in the oﬃce. On a global basis, only 10% of respondents
have adopted a remote-ﬁrst approach and 1% of companies
have gone fully remote.
Occupational market
London is not a homogenous market. Rather, it comprises a
series of sub-markets, each with its own characteristics and
nuances – it is a tale of three cities. This is particularly apparent
when looking at vacancy levels. Overall, central London vacancy
is elevated at 9.1% against the 10-year average (10YA) of 5.2%.
This compares to the West End at 4.4% (10YA: 3.4%), City at
11.9% (10YA: 6.7%) and Docklands at 16.7% (10YA: 8.9%).
14
Central London oﬃce take-up
West End
City
Docklands, Midtown & Southbank
0
2
4
6
8
10
12
14
16
18
20
Take-up (million sq ft)
2001 2003 2005 2007 2009 2011
2013
2015 2017 2019 2021 2023
Central London development pipeline
Completed
Under construction let/under oﬀer
Under construction available
Vacancy rate
Completed average
0
2
2
4
4
6
6
8
8
10
10
12
12
0
Floorspace (million sq ft)
Vacancy rate (%)
2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025
Central London oﬃce investment transactions
Average
Investment transactions (£bn)
0
2
4
6
8
10
12
14
16
18
20
22
2023
2021
2019
2017
2015
2013
2011
2009
2007
2005
2003
2001
While market dynamics vary by location, there is also a diﬀerence
in occupier demand between prime and secondary space.
As a result, the composition of vacancy is more relevant than
the headline. Across London, there is 26.1m sq ft of available
space, of which 18.1m sq ft (69%) is secondhand, 4.0m sq ft
is newly completed space and 4.0m sq ft is under construction.
Applying this to the market, ‘competing supply’ for our high
quality portfolio is meaningfully lower than the headlines
suggest, supporting our positive outlook for rental growth.
According to CBRE, the pull back by Big Tech impacted take-up
in 2023, which was down 16% relative to 2022 at 10.5m sq ft.
West End take-up was down 27% to 3.6m sq ft, against a
supply-constrained backdrop, but City take-up was up 1% to
5.3m sq ft, buoyed by several large pre-lets, including HSBC
and Cliﬀord Chance, both of whom will vacate their existing
space in Canary Wharf. However, active demand is high, rising
from 5.7m sq ft at December 2022 to 9.9m sq ft at December
2023 suggesting substantial pent-up requirements.
Another important market indicator is the development
pipeline, which remains restricted as a result of increases in
construction and ﬁnance costs, coupled with a more diﬃcult
planning backdrop. Across central London, CBRE estimates
12.9m sq ft of space will complete between 2024 and 2027,
31% lower than the total over the preceding four years.
5.0m sq ft (38%) is pre-let and 7.9m sq ft is speculative.
Relative to average take-up over the last 10 years (12.1m sq ft),
speculative completions equate to just eight months’ supply.
Investment market
Investment activity was subdued in 2023 with investor
sentiment impacted by the limited availability and high cost of
debt. Transactions in the year totalled £5.2bn, which compares
to the 10-year average of £12.7bn.
In the West End, smaller assets (typically sub-£100m) were the
most liquid and robust in terms of pricing, with purchasers less
reliant on debt ﬁnancing. In the City, where the average lot size
is larger and investors are generally more leverage-dependent,
pricing showed greater weakness, in particular for buildings in
more secondary locations.
Well-located, value-add assets have continued to ﬁnd a
market, albeit at repriced levels. By contrast, demand for
secondary assets and leaseholds remains constrained.
With the pace of inﬂation continuing to slow in the UK and the
hike in interest rates appearing to have concluded, the cost of
debt is starting to moderate as lender risk appetite shows signs
of recovery. Consequently, there are early signals that investor
sentiment is starting to turn a corner. London, and in particular
the West End, remains an attractive location for domestic and
international investors and is likely to beneﬁt from any positive
shift in momentum.
The number of potential investors has started to increase, and
we expect 2024 and 2025 will present interesting acquisition
opportunities for well-capitalised investors that can move
quickly, for several reasons. The number of reﬁnancings is
gathering pace, with many borrowers facing both increased
debt costs and an equity gap. At the same time, a number of
funds are having to deal with ongoing redemption requests
which is leading to them selling their more liquid assets.
Derwent London plc
Report and Accounts 2023
Strategic report
15
Strategic report
A well-placed
business
INVESTMENT CASE
Our
portfolio
and
people
together deliver
long-term
performance
Well-recognised
brand and
experienced team
1
Strong demand
for prime
London oﬃces
2
Balanced
portfolio
3
Diﬀerentiated
design-led and
amenity-rich
approach
4
Responsible
value creation
5
Resilience through
strong capital
management
6
16
16
•
A brand renowned for design
and innovation
•
Established team with a
strong track record of success
See page 30
1
•
London is a global city,
attracting a range of occupiers
•
Quality oﬃces play a key
role in the ’war for talent’
See page 13
2
•
Opportunity-rich portfolio –
44% with regeneration potential
•
72% located in the West End
where demand is strong
See pages 24 to 29
3
•
Matching product to location
through bespoke design
•
Portfolio-wide approach to amenity
made possible by village clusters
See pages 20 to 23
4
•
Ensuring value creation for all
stakeholders
•
Investing in self-generated electricity as
part of our commitment to NZC by 2030
See pages 42 to 55
5
•
Strong balance sheet with
modest leverage
•
Focus on long-term dividend
growth, well covered by earnings
See page 36
6
Derwent London plc
Report and Accounts 2023
Strategic report
17
Delivering the
right product...
Soho Place W1
18
...in the
right location
Derwent London plc
Report and Accounts 2023
Strategic report
19
Unique design
•
6-8 Greencoat Place (32,400 sq ft) is part of our 287,000 sq ft Victoria portfolio.
•
A former Victorian warehouse, it was originally part of the Army & Navy stores.
•
We have been regenerating the entire block, which includes Greencoat & Gordon
House and Francis House, in partnership with architect Squire & Partners.
•
Following this regeneration which completed in 2021, it was fully leased to Fora
on a 15-year lease at £68 psf, an uplift from £30 psf before the refurbishment.
RIGHT PRODUCT, RIGHT LOCATION
continued
•
Comprehensive refurbishment
(£9m)
•
Improved EPC rating to B
(from E)
•
Removed gas boilers and
enhanced sub-metering
•
Installed double glazing
•
Improved bike spaces and
shower facilities
•
LED lighting with PIR sensors
6-8 Greencoat Place SW1 –
heritage regeneration
Before
After
£68 psf
Headline rent; uplift from
£30 psf pre-refurbishment
15
yr
Term certain lease to Fora
20
•
Originally a collection of 1960s leasehold blocks (143,000 sq ft) held in a
joint venture with The Portman Estate, we acquired full ownership in 2021.
•
The large surface car park provided an opportunity to double the ﬂoor area.
•
The scheme, designed by Hopkins Architects and due for completion in 2025,
includes 206,000 sq ft of Grade A oﬃces at 25 Baker Street, 75% of which
are already pre-let to PIMCO and Moelis.
•
In addition, there is 52,000 sq ft of residential – private and aﬀordable.
Five private units pre-sold as at December 2023, with a further two in 2024.
•
We are also delivering 28,000 sq ft of new high quality retail space set
around a landscaped central courtyard open to the public.
We understand that each organisation has diﬀerent space preferences and
requirements. Our approach recognises the importance of creating the right
product in the right location. Whether it is retroﬁtting heritage space or delivering
highly eﬃcient new-build space, we create ‘long-life, low carbon, intelligent’
buildings that meet the evolving requirements of increasingly selective occupiers.
25 Baker Street oﬃces:
•
75% pre-let; average £103 psf
•
Target BREEAM Outstanding and
EPC A
•
Targeting NABERS UK rating of
4.5 stars
•
Fixed price construction
contract
•
Funded under Green Finance
Framework
25 Baker Street W1 –
high quality new build, green space
Before
After
298,000
sq ft
On completion in 2025 (108% uplift)
75
%
Pre-let to PIMCO and Moelis
Derwent London plc
Report and Accounts 2023
Strategic report
21
RIGHT PRODUCT, RIGHT LOCATION
continued
We strive for excellence by doing things diﬀerently.
This applies not just to the physical spaces that we
create, but also to the amenity and services we oﬀer
our occupiers, delivering many tangible beneﬁts.
As well as attracting occupiers to our portfolio,
this encourages them to remain with us as their
businesses evolve.
Our distinctive design-led approach
•
Design excellence is at the heart of
our business.
•
We believe well-designed space has the
power to inspire innovation, promote
collaboration and drive collective
productivity.
•
Every building is unique, requiring a design
that complements its character and
location and uses the right materials to
create the right aesthetic.
•
We look to provide generous space with
a focus on volume and light, as well as
ﬂexibility to ensure space can be adapted
to a diverse range of occupiers and
consequently stand the test of time.
•
Amenity is also important, including
generous reception areas, cycle facilities,
the provision of outdoor space and our
unique member beneﬁts.
•
We look to the future, considering new
construction techniques, alternative low
carbon materials and the adoption of
intelligent systems within our buildings.
Unique product
& service
DL/28 in Old Street EC1
22
Our unique ‘Furnished +
Flexible’ product
•
We continue to deliver our
‘Furnished + Flexible’ product
across smaller units, typically
less than 10,000 sq ft.
•
144,400 sq ft of the portfolio
has already been delivered with
a further 21,500 sq ft planned.
•
These are ready-to-occupy, fully
furnished units which provide
occupiers with their own front
door and are generally let on
shorter lease terms.
•
We apply our design principles
to these units to ensure they
have a distinctive look, but also
that they meet the needs of
their particular locations.
Exclusive DL/Member beneﬁts
We have designed our member oﬀering to be available to all of our oﬃce occupiers, no
matter the size of building they occupy. Access is complementary and covers a range of
diﬀerent beneﬁts:
Beautifully designed multi-purpose spaces
for our occupiers to work, meet, socialise
and attend events. High-spec meeting
rooms and private event space are also
available to hire on a pay-as-you-go basis.
We have two strategically located lounges
in operation – DL/78 in the west (Fitzrovia)
and DL/28 in the east (Old Street).
A digital platform for us to communicate
with our members and to oﬀer exclusively
negotiated discounts from a range of
businesses, including local coﬀee shops,
restaurants and wellness brands. It also
provides a quick and easy way to book
meeting rooms at our DL/Lounges.
An in-house team dedicated to ensuring
our occupiers receive an excellent
‘front-of-house’ experience and bringing
value-added services across our buildings.
They run a programme of curated events
throughout the year, including networking
events, rooftop yoga, ﬁlm screenings,
charity activities and competitions.
This year we introduced DL/Service, a food
and beverage oﬀering operated out of a
number of our buildings. With a diverse
all-day menu, it provides preferential
pricing to our members. Catering is also
available to order with meeting room and
event bookings. See page 133 for details.
Our portfolio-wide approach allows us to connect and build communities within our portfolio
and ensures this enhanced amenity is delivered in a cost-eﬀective way.
Derwent London plc
Report and Accounts 2023
Strategic report
23
Paddington
Marylebone
Marylebone
Mayfair
Paddington
OUR PORTFOLIO
72% of our portfolio is located in the West End
Our portfolio weighting by villages – 13 in London (98%)
West End Central
Fitzrovia
34%
Victoria
9%
Soho/Covent Garden
7%
Marylebone
7%
Paddington
7%
Mayfair
2%
West End Borders & Other
Islington and Camden
6%
City Borders
Old Street
12%
Shoreditch & Whitechapel
7%
Clerkenwell
6%
Southbank
1%
Scotland
2%
Contracted net rental income
£
206.5
m
2022: £204.2m
Weighted average unexpired
lease term (WAULT) – to break
6.5
yrs
2022: 6.4 years
Estimated rental value
1
£
309.6
m
2022: £304.6m
‘Topped-up’ WAULT –
to break
7.4
yrs
2022: 7.2 years
EPRA net initial yield
4.3
%
2022: 3.7%
True equivalent
yield
5.55
%
2022: 4.88%
Valuation
£4.9bn
Floor area
5.4m sq ft
Tenants
393
Buildings
66
1
After additional capex of £228m.
24
Pimlico
Vauxhall
Cannon Street
London
Bridge
River Thames
River Thames
Liverpool Street
Tower
Gateway
DLR
Farringdon
Angel
Tottenham
Court Road
Whitechapel
King’s Cross
St. Pancras
Victoria
Euston
Barbican
Blackfriars
Fenchurch Street
Bond Street
Elephant and Castle
Waterloo
Soho /
Covent Garden
Southbank
Holborn
Victoria
Whitechapel
Shoreditch
Old Street
Islington
Clerkenwell
Fitzrovia
The City
Key
Villages
Properties
Conditional acquisition
Brixton
Derwent London plc
Report and Accounts 2023
Strategic report
25
BREEAM:
Outstanding (target)
1
NABERS UK:
4 Star+ (target)
1
Embodied carbon:
c.600 kgCO
2
e/sqm
Total capex:
£290m, plus
estimated overage of £26m
Leasing:
75% pre-let
(commercial oﬃce element)
1
BREEAM:
Outstanding (target)
NABERS UK:
4 Star+ (target)
Embodied carbon:
c.530 kgCO
2
e/sqm
Total capex:
£125m
Leasing:
Speculative
298,000
sq ft
139,000
sq ft
25 Baker Street W1
Target completion
H1 2025
Network W1
Target completion
H2 2025
On-site developments
(437,000 sq ft)
REGENERATION PROJECTS
2024
2025
2026
2027
2028
2029
2030+
25 Baker Street
Network
50 Baker Street
Holden House
230 Blackfriars Road
Selected refurbishments
Old Street Quarter
We invest in a
combination of
development and
refurbishment
projects across
the portfolio.
We typically invest £150m to £250m in the
portfolio each year.
Refurbishment projects usually fall
into one of two categories: rolling or
comprehensive. We reposition properties
with enhanced amenity and general
upgrades which grow income and future-
proof asset value. Simultaneously, part
of our activity relates to EPC upgrade
works to ensure compliance with evolving
environmental legislation. 68.4% of our
portfolio is rated EPC A or B (including
projects), with a further 19.1% rated C.
The timing, pace and extent of rolling
refurbishments depends on when we get
space back. On completion, we anticipate
being able to achieve an attractive uplift
in rental value.
Major projects and refurbishments
are classiﬁed in the ‘With Potential’ or
‘Under Development’ sections of our
balanced portfolio. On completion, they
will typically move into the ‘Core Income’
category where we continue to create
value through asset management.
See page 29
Regeneration project timeline
1
Excludes oﬃces at 30 Gloucester Place.
26
Proposed
c.
150,000
sq ft
Existing
90,600
sq ft
Proposed (at 100%)
c.
240,000
sq ft
Existing (at 100%)
122,300
sq ft
50 Baker Street W1
(50:50 JV)
From
2026
Holden House W1
From
2025
Medium-term developments
(c.390,000 sq ft)
Proposed
750,000+
sq ft
Proposed
200,000+
sq ft
Existing
c.
400,000
sq ft
Existing
60,100
sq ft
Old Street Quarter EC1
From
2028+
230 Blackfriars Road SE1
From
2030+
Long-term developments
(950,000+ sq ft)
Selected refurbishments
20 Farringdon Road
EC1
Rolling from
2027
Passing rent
1
£
53
psf
Estimated rental value
2
£
80
+ psf
Middlesex House
W1
Rolling from
2025
Passing rent
1
£
59
psf
Estimated rental value
2
£
75
+ psf
1-2 Stephen Street
W1
Rolling from
2023
Passing rent
1
£
67
psf
Estimated rental value
2
£
75
+ psf
Greencoat &
Gordon House SW1
Comprehensive from
2025
Passing rent
1
£
54
psf
Estimated rental value
2
£
70
+ psf
1
‘Topped-up’ oﬃce rent.
2
ERV after capex.
Derwent London plc
Report and Accounts 2023
Strategic report
27
Culture
Dedicated
& adaptable
A passion to
improve London’s
oﬃce spaces
Strong customer
focus
Progressive
& pragmatic
‘Open door’
and inclusive
Collaborative
& supportive
Our
portfolio
and
people
together deliver
long-term
performance
BUSINESS MODEL & STRATEGY
Purpose
Vision
Values
How we add value
Asset management
Understanding our occupiers helps
us tailor buildings and leases to their
needs thereby reducing vacancy,
growing our income streams and
adding value
Refurbishment & development
Our focus on design, amenity and
innovation creates sustainable and
adaptable buildings, characterised by
generous volumes and good natural
light with high quality amenities
Investment activity
We recycle capital, acquiring
properties with future regeneration
opportunities to build a pipeline
of projects and disposing of
those which no longer meet our
investment criteria and forward
return expectations
Strategic objectives
Core activities
1
2
3
4
5
To optimise returns
and create value
from a balanced
portfolio
To grow recurring
earnings and
cash ﬂow
To attract, retain
and develop
talented employees
To design, deliver
and operate our
buildings
responsibly
To maintain
strong and
ﬂexible ﬁnancing
Governance framework
Risk management
Risk management is integral
to the delivery of our strategy
Performance & remuneration
Success against our objectives is measured using our
KPIs and rewarded through our incentive schemes
Annual priorities are set for each strategic objective
We apply our asset management and regeneration skills to the Group’s 5.4m sq ft property
portfolio by combining our people, relationships and ﬁnancial resources to add value and
grow income. Stakeholder, climate change and wider ESG impacts form key considerations
in the strategy we pursue for each individual property. This beneﬁts the communities in
which we operate and the wider environment.
See pages 32 to 36
See page 5
See pages 52 and 53
See page 30
28
How we add value
Sell relatively lower returning
assets; capital recycled into
higher returning opportunities
Continue to add value through
satisfying occupier needs,
minimising voids, growing
income and further upgrades
Buy properties with modest
capital values and potential to
upgrade and/or add ﬂoor area;
usually income-producing
Secure planning consent; refurbish or redevelop,
adding ﬂoor area where possible; seek to de-risk
with pre-let(s) and ﬁxed price contracts
Explore the best
plan for a building
whilst maintaining
income; agree
landlord breaks at
future dates which
provide ﬂexibility
over vacant
possession for
regeneration
56
%
Core income
44
%
Under
development/
potential
Portfolio characteristics
Floor area:
3.04m sq ft
Rental income:
£140.9m
WAULT:
7.6 years
Rent:
£66.93 psf
ERV:
£68.30 psf
Floor area:
0.44m sq ft
Pre-let income:
£15.6m
WAULT:
13.4 years
Rent:
£102.73 psf
ERV:
£92.19 psf
Floor area:
1.91m sq ft
Rental income:
£65.6m
WAULT:
4.1 years
Rent:
£49.94 psf
ERV:
£51.82 psf
C
o
r
e
a
c
t
i
v
it
i
e
s
I
n
v
e
s
t
m
e
n
t
:
r
e
c
y
c
l
i
n
g
A
s
s
e
t
m
a
n
a
g
e
m
e
n
t
I
n
v
e
s
t
m
e
n
t
:
a
c
q
u
i
s
i
t
i
o
n
B
a
l
a
n
c
e
d
p
o
r
t
f
o
l
i
o
R
e
f
u
r
b
i
s
h
m
e
n
t
&
d
e
v
e
l
o
p
m
e
n
t
A
s
s
e
t
m
a
n
a
g
e
m
e
n
t
We plan for a portfolio balanced
between ‘Regeneration’ and ‘Core
Income’ assets. At 31 December
2023, our portfolio was split
44% ‘With Potential’ or ‘Under
Development’ and 56% ‘Core
Income’. The balance may ﬂuctuate
depending on the market cycle.
‘Core income’
Buildings where most of the
repositioning activity has taken place,
but we use our asset management skills
to continue to grow income and value.
‘With potential’ or
‘Under development’
Buildings either on site or with
potential to add further value through
regeneration. We have excluded the
proposed major development at Old
Street Quarter EC1 as completion of
the purchase contract signed in May
2022 is conditional.
Core income
On-site schemes
Potential schemes
2
5.4
m
sq ft
1
£
206.5
m
rent
1
Comprises 4.95m sq ft of existing buildings plus 0.44m sq ft of on-site developments.
2
Includes Future appraisal, Under appraisal and Consented categories.
Future appraisal
22%
Core income
56%
Under appraisal
10%
Consented 4%
On-site
schemes
8%
Derwent London plc
Report and Accounts 2023
Strategic report
29
Total return index
Our strategy is well established and explains how we aim
to fulﬁl our purpose for the beneﬁt of all our stakeholders.
Strategic
objectives
Successful implementation of the
Group’s strategy requires our teams to
work together with a shared vision and
common values.
These include focusing on creative
design and ensuring sustainability
and responsibility are embedded in
everything we do.
We have fostered an inclusive culture
that is progressive and hard-working,
building a team passionate about
improving London’s oﬃce space.
This strategy is deﬁned through our
ﬁve strategic objectives:
1
To optimise returns and create
value from a balanced portfolio
2
To grow recurring earnings and
cash ﬂow
3
To attract, retain and develop
talented employees
4
To design, deliver and operate
our buildings responsibly
5
To maintain strong and ﬂexible
ﬁnancing
See pages 32 to 36
Risk
management
Risk management is an integral part of
our business as we seek to achieve the
appropriate balance of risk and return.
The level of risk is monitored regularly
and is split into categories considering
the likely impact on strategy, operations,
ﬁnancial position and stakeholders.
We take a long-term view on planning,
risk mitigation and ﬁnancial discipline
as our projects may take many years
to complete.
Annual preparation of a ﬁve-year plan
helps us identify risks and opportunities.
It enables us to anticipate and maintain
a balance between income/dividend
growth and value adding through
higher risk projects, both now and into
the future. It also helps us monitor
our responsibilities to our various
stakeholders.
Long-standing relationships with
our supply chain form an important
source of value and help mitigate risk.
Principal risks /
See page 94
Emerging risks /
See page 102
Performance
& remuneration
Key Performance Indicators (KPIs) help
us measure performance and assess the
eﬀectiveness of our strategy. These are
listed for each objective on pages 32 to 36.
The main performance measures
we use to ascertain overall business
performance and determine the
majority of the variable elements
of executive remuneration are:
Total return (TR) –
Combines our
dividends with the movement in net asset
value per share (measured using EPRA
NTA) to provide an overall return for the
year, measured against a peer group.
Total property return (TPR) –
Measures
the income and movement in value from
our properties, compared against an
index of other relevant properties.
Total shareholder return (TSR) –
Compares our dividends and share price
movement with the relevant index.
These metrics ensure strong alignment
between the interests of shareholders
and our decision makers. In addition,
non-ﬁnancial targets represent 25% of
the potential annual bonus and 10% of
the potential LTIP, which measure our
success in meeting ESG and climate
change responsibilities and the needs
of other stakeholders.
Remuneration Committee report /
See pages 172 to 197
2007
2009
2011
2013
2015
2017
2019
2021
2023
0
50
100
150
200
250
300
Index (31 Dec 2007 = 100)
BUSINESS MODEL & STRATEGY
continued
Total return
Real estate is cyclical, impacted by many
diﬀerent factors. Our business model
of value creation through regeneration
requires a long-term approach with
conservative leverage.
30
Soho Place W1
Derwent London plc
Report and Accounts 2023
Strategic report
31
STRATEGIC OBJECTIVES
1
To optimise returns and create
value from a balanced portfolio
We plan to optimise returns from a
portfolio which is balanced between
properties with potential to add
further value through regeneration
and those which have already been
repositioned but where our asset
management skills can continue
to grow value and income. This
is measured by reference to the
balanced portfolio split as set out on
page 29 and is constantly changing
depending on where we are in the
property cycle and where individual
properties are in their life cycle.
Having a pipeline of current and
future projects is a key part of our
strategy as returns generated from
value-enhancing projects help
us outperform our benchmarks
(principally the MSCI Central London
Oﬃce Index). These projects often
take several years with proﬁts derived
from a combination of planning uplift,
the regearing of leases and physical
refurbishment or redevelopment.
2023 Priorities
Progress
Progress 25 Baker Street
W1 and Network W1 and
secure pre-lets
Good progress made and both projects
on track to complete in 2025. 100% of
construction costs ﬁxed. Oﬃce space at
25 Baker Street is now 75% pre-let and
ﬁve residential units pre-sold at Dec 2023
Let remaining space at
The Featherstone Building
EC1 and Soho Place W1
A further 81,700 sq ft of combined space
was let, adding £6.4m of income to the
portfolio
Progress planning
applications for 50 Baker
Street W1 JV and Old Street
Quarter EC1
Advanced our master planning exercise
for Old Street Quarter and engaged with
Westminster City Council on 50 Baker
Street proposals
Seek further opportunities
within the portfolio to
upgrade or reposition
assets to maximise returns,
increase our ‘Furnished +
Flexible’ oﬀering and explore
Life Sciences possibilities
Explored various options to reposition a
number of assets, including 20 Farringdon
Road EC1 and Middlesex House W1.
Additional 80,800 sq ft of space converted
to ‘Furnished + Flexible’ during the year,
a 127% increase
We regularly review the portfolio to identify capital recycling opportunities
which involves disposing of assets where we believe most of the upside has
been captured or which no longer meet our investment criteria.
Performance measures:
1
2
3
4
7
8
10
KPIs /
See page 37
Maintaining a balanced portfolio
enables us to start schemes
speculatively. However, we often
look to de-risk projects by agreeing
pre-letting terms with one or more
tenants during the construction
period. The momentum that this
provides encourages us to consider
the next phase of our project
pipeline, adding further value
where we see opportunities.
Given the inherent risk of
development projects, we seek to
balance these with ‘core income’
properties in the portfolio where the
focus is on customer relationships
and maintaining or growing income
through active asset management.
This enables us to achieve the
appropriate balance of risk and
return for the business.
2024 Priorities
•
Make further progress on
25 Baker Street and Network,
including additional pre-lets
and residential pre-sales
•
Let the remaining space at
The Featherstone Building,
Soho Place and elsewhere
•
Secure planning for 50
Baker Street JV and progress
plans for Old Street Quarter
•
Dispose of properties
that no longer meet our
investment criteria
•
Review emerging
acquisition opportunities
44
%
of assets ‘Under development / With
potential’ (by area) / see page 29
56
%
of assets ‘Core income’ (by area)
Principal risks:
1
3
4
5
6A
6B
6C
7A
7B
7C
8
9
10
See page 94
Emerging risks:
A
B
C
See page 102
2023 Priorities and progress
32
2
To grow recurring
earnings and cash flow
Property valuations are essentially
determined by contracted and
expected future cash ﬂows combined
with a market yield which takes
account of risk, growth expectations,
quality, environmental considerations
and other factors.
Establishing the right strategy for
a property can both add value
and increase cash ﬂow, but these
may occur at diﬀerent times of the
property cycle. Value creation tends to
occur ﬁrst as expectations that rent
will grow above its current passing
level emerge, referred to as ‘reversion’,
with an uplift in cash ﬂow captured
later upon lease events such as rent
reviews, lease regears and other forms
of lease restructuring.
2023 Priorities
Progress
Deliver DL/28 and
continue to build on our
customer membership
oﬀering
Completed and opened DL/28 in October,
launched DL/Service (food and beverage
oﬀering) in a number of our buildings and
expanded our member discount oﬀers
Proactively manage
upcoming expiries/breaks
and vacancies to retain
or increase income
where viable
Carried out asset management activities
over 670,000 sq ft, increasing rent by
3.5% to £41.5m. Our combined retention
and re-let rate was 65% and average
lease length was stable at 6.5 years
(2022: 6.4 years)
Look to upgrade existing
stock where opportunities
arise to maximise income
Invested £36m on smaller upgrade
projects across the portfolio
We believe that by creating the right space and providing our occupiers with
the ﬂexibility, adaptability and amenity they are increasingly looking for we
can generate further rental growth in the future.
Using established relationships with
occupiers, and with a focus on local
communities and other stakeholders,
our asset managers capture
reversion by:
•
working closely with our occupiers
and consultants to arrive at
appropriate rent review outcomes;
•
negotiating with our occupiers
to extend leases or remove break
clauses;
•
coordinating ‘block dates’ to gain
possession of buildings when a
regeneration scheme is planned;
•
reviewing levels of ‘grey’ space, i.e.
ﬂoor area that is let but which is
not currently occupied or is being
marketed by an occupier; and
•
trying to anticipate our occupiers’
needs, thereby optimising income.
Examples are ﬁxed or minimum
rental uplifts and a ﬂexible
approach to dilapidations
and alienation clauses.
Achieved
In progress
Not achieved
Performance measures:
1
2
3
4
7
9
10
KPIs /
See page 37
2024 Priorities
•
Continue to proactively
manage upcoming
reviews, expiries/breaks
and vacancies to retain or
increase income
•
Work to reduce irrecoverable
property costs
•
Look to upgrade existing
stock where opportunities
arise to maximise income
•
Further promote DL/Lounges
and DL/Service and continue
to build on our member
oﬀering
1.7
%
increase in like-for-like gross
rental income in 2023
4.0
%
EPRA vacancy rate
Principal risks:
1
2
3
4
5
6A
6B
6C
7A
7B
7C
8
9
10
See page 94
Emerging risks:
A
B
C
D
E
See page 102
2023 Priorities and progress
Derwent London plc
Report and Accounts 2023
Strategic report
33
STRATEGIC OBJECTIVES
continued
3
To attract, retain and develop
talented employees
Our employees are vital to the
successful delivery of our strategy
and long-term business performance.
We are an inclusive and respectful
employer that welcomes diversity
and promotes equality. We have a
high performing, progressive and
collaborative culture, coupled with
a consultative and professional
leadership style, focused on teamwork,
integrity and long-term relationships.
Our employees are our brand
ambassadors and we invest
considerable time and resources in
their development and growth. The
Group enjoys a high rate of staﬀ
retention with 43% having been with
the business for at least ﬁve years.
When we recruit externally, we look
for diverse, outstanding individuals
who can bring creativity, skills and
competencies to the business.
2023 Priorities
Progress
Further embed diversity
and inclusion, focusing
on disability
Joined Business Disability Forum and
completed self-assessment programme.
Conducted internal disability survey to
identify proportion of our employees
with disability or long-term condition
Maintain focus on future
succession planning
18 internal promotions, including
two to the Executive Committee
Provide further health
and wellbeing initiatives
Variety of health and wellbeing
workshops and initiatives provided.
See page 53 for details
Analyse ‘pulse survey’
results and take
appropriate action
Initiatives to improve collaboration
introduced, including team coaching
and personal development plan training
for line managers, and workﬂows
streamlined through DIT activities
Run ﬁfth biennial
employee survey
(October 2023)
Conducted ﬁfth employee survey
with high 94% response rate
We remain focused on embedding our diversity and inclusion ambitions
throughout the business.
Performance measures:
1
3
16
KPIs /
See page 37
The Group’s reputation stems from
behaviours and values promoted by
the Board and Executive Committee.
These are reinforced through our
induction programme, performance
management process, core skills
workshops and our management
and leadership training.
Our structure enables complex
transactions to be managed eﬀectively
and decisions made quickly with the
overall aim of creating value and
driving income growth across our
portfolio. Although we are organised
by discipline, we assemble speciﬁc
project teams from across the business
to increase creativity and innovation.
We undertake an annual anonymous
staﬀ survey which achieves a high
response rate. This provides an
important forum for staﬀ to provide
feedback which helps us identify areas
where we have made a positive impact
and areas for future improvement.
89
%
Proud to work at Derwent London
88
%
Overall employee satisfaction
88
%
Staﬀ retention rate during 2023
2024 Priorities
•
Host four individuals
through the #10,000
Interns programme
•
Inclusive management
training for line managers
•
Progress work on Disability
Strategy and Action Plan
•
Take appropriate action
identiﬁed by employee
focus groups following
staﬀ survey
Principal risks:
6B
7A
7B
7C
8
9
10
11
See page 94
Emerging risks:
B
C
See page 102
2023 Priorities and progress
34
4
To design, deliver and operate
our buildings responsibly
Delivering well-designed, adaptable,
occupier-focused buildings with
enhanced amenity is an integral part
of our business model. We believe
these buildings oﬀer better long-term
value for customers through more
eﬃcient occupation, reduce letting
risk and void levels, and command
stronger rents, yields and values.
Setting high standards for design
and environmental responsibility
builds ﬂexibility, longevity and climate
resilience into our portfolio, both
new schemes and the properties
we manage.
To meet our target of becoming a
net zero carbon business by 2030,
we must deliver buildings that are
increasingly energy eﬃcient, powered
by renewable energy and have very
low embodied carbon footprints.
Likewise, we must reduce the reliance
of our managed properties on
natural gas and further lower their
energy consumption and associated
operational carbon footprints.
2023 Priorities
Progress
Rebase our SBTi targets
to 1.5°C scenario
Rebased near-term SBTi-veriﬁed target
to 1.5°C-aligned scenario
Convert occupier
engagement into
lower energy usage
Engaged with 104 occupiers
(44% of ERV)
Progress EPC
upgrade plans
EPC upgrade works incorporated
into asset management plans
Align our Net Zero Pathway
with UK’s Transition
Plan Taskforce (TPT)
Formal publication of UK TPT delayed
until late 2023; we provided comments
prior to publication
Further develop our carbon
impact measurement
approach
Internal workshops held to deﬁne our
approach to carbon impact measurement
Complete and implement
new Social Value Strategic
Framework
New Social Value Strategic Framework
launched
We aim to ensure our portfolio is ﬁt for purpose over the long-term and
continues to generate the returns we expect.
Performance measures:
1
3
11
12
13
14
15
KPIs /
See page 37
Our approach to becoming net zero
carbon is set out in further detail on
pages 46 to 49, together with our full
TCFD (Task Force on Climate-related
Financial Disclosures) disclosure on
pages 104 to 117. A phased programme
of works to upgrade EPC ratings to
ensure compliance with evolving
Minimum Energy Eﬃciency Standards
(MEES) legislation is underway.
We work with our stakeholder groups
to ensure we are meeting their
expectations and standards, as well
as acting responsibly. This ranges from
engaging with the local communities
around our buildings, through using
the best designers and contractors,
to ensure our portfolio meets the
standards we set (see pages 42
and 43). In 2023, we updated our
Responsible Development Brief to
keep our targets at the forefront.
68.4
%
EPC rating A or B, including projects
(by ERV)
10
%
Reduction in energy intensity
since 2019 baseline (kWh/sqm)
27
%
Increase in operational carbon emissions
(Scope 1, 2 & 3 excl. embodied carbon)
since 2022 (tCO
2
e)
2024 Priorities
•
Collaborate with occupiers
to reduce energy usage
•
Review and expand material
Scope 3 inventory elements,
including those relating to
occupier energy which we
do not procure
•
Complete double-
materiality assessment
(see page 48 for deﬁnition)
Principal risks:
1
6B
6C
7A
7B
7C
8
9
10
11
See page 94
Emerging risks:
A
C
D
E
See page 102
2023 Priorities and progress
Achieved
In progress
Not achieved
Derwent London plc
Report and Accounts 2023
Strategic report
35
Our REIT status
Derwent London plc has been a
Real Estate Investment Trust (REIT)
since July 2007. The REIT regime (see
page 285) was launched to provide
a structure which closely mirrors the
tax position of an investor holding
property directly and removes tax
inequalities between diﬀerent real
estate investors. REITs are principally
property investors with tax-exempt
property rental businesses, but
remain subject to corporation tax
on non-exempt income and gains.
In addition, we are required to
deduct withholding tax from certain
shareholders on property income
distributions and, in 2023, £9.7m
was paid to HMRC.
5
To maintain strong and
flexible financing
We ﬁnance our business using equity and
a moderate level of debt from a wide
variety of sources. We are relationship-
driven and value consistency and
reliability with our lenders but we also
look to be progressive and innovative.
Our overriding principle is one of
modest ﬁnancial leverage and generous
interest cover, to balance the relatively
higher risk attached to our regeneration
schemes. Using a combination of
unsecured ﬂexible revolving bank
facilities and longer term ﬁxed rate
debt (both unsecured and secured),
we can adjust the level of drawn
debt to our day-to-day requirements.
We aim to maintain considerable
headroom under our facilities to enable
us to move quickly when acquisition
opportunities arise. This has a cost
in terms of non-utilisation fees but
demonstrates that cash ﬂows can be
funded without delay. It also reassures
our management team and our
stakeholders that the development
pipeline is capable of being ﬁnanced
and delivered without overstretching
the balance sheet.
Priorities
Progress
Maintain or strengthen
available facilities
Maintained existing facilities throughout
the year
Maintain suﬃcient
headroom on
ﬁnancial covenants
Interest cover remains strong at 4.1 times;
property income could fall by 65% before
breaching the interest cover covenant.
High level of cash and undrawn facilities
maintained (£480m at December) and
EPRA LTV remains low at 27.9%
Review reﬁnancing options
for the £83m 3.99%
secured loan due in 2024
Positive discussions started with a variety
of lenders to renew or reﬁnance this facility
Continue to keep
close to our existing
relationship lenders
Maintained regular dialogue with all our
lenders throughout the year and hosted a
number of property tours
We value long-term relationships with our lenders, valuing the stability and
mutual understanding that this creates over an approach that seeks the
very lowest funding cost.
Performance measures:
1
3
5
6
KPIs /
See page 37
Principal risks:
1
2
3
4
5
6A
7A
7B
7C
8
9
10
11
See page 94
Emerging risks:
D
E
See page 102
Our ﬁnancing model is based on the
following principles:
• conservative ﬁnancial leverage;
•
a strong focus on interest cover
to support our credit rating
(Fitch issuer default rating of
‘BBB+‘ with a stable outlook);
•
borrowing from a diverse group
of relationship lenders who
understand and support our
business model;
•
managing the cost of debt but
also looking to have signiﬁcant
protection against interest rate
ﬂuctuations and long average
debt maturities;
•
keeping structures and covenants
simple and understandable and
thinking ahead; and
•
ensuring the Group’s ﬁnancing
strategy supports and is consistent
with our overall business goals.
This approach provides ﬁnancial
stability and helps us when
considering issues such as going
concern and viability statements.
STRATEGIC OBJECTIVES
continued
2024 Priorities
•
Agree and execute strategy
for £83m 3.99% secured
loan due in 2024
•
Consider reﬁnancing
options for £175m
convertible bonds and
£55m private placement
notes due to mature
over the next 24 months
•
Maintain substantial
headroom on ﬁnancial
covenants
•
Continue to maintain
close relations with
our existing lenders
2023 Priorities and progress
Achieved
In progress
Not achieved
36
To attract, retain
and develop talented
employees
To design, deliver and
operate our buildings
responsibly
To maintain strong
and ﬂexible ﬁnancing
Measuring our
performance
We use a balance of ﬁnancial and non-ﬁnancial key performance indicators
(KPIs) to measure our performance and assess the eﬀectiveness of our strategy.
They are also used to monitor the impact of the principal risks that have been
identiﬁed and a number are used to determine remuneration.
Key Performance Indicators
Key to strategic objectives
To optimise returns
and create value from
a balanced portfolio
To grow recurring
earnings and cash ﬂow
Remuneration
Assured
Audited
R
A
A
1
2
3
4
5
Financial
Operational measures
Total return
Total property return
Total shareholder return
EPRA earnings per share
Gearing measures
Gearing & available
resources
Interest cover ratio
Operational measures
Reversionary percentage
Development potential
Tenant retention
Void management
Non-Financial
MEASURING OUR PERFORMANCE
Strategy /
See page 30
Responsibility measures
BREEAM ratings
Energy Performance
Certiﬁcates
Energy intensity
1
Embodied carbon intensity
1
Accident frequency rate
Staﬀ satisfaction
1
KPI introduced in 2023.
Derwent London plc
Report and Accounts 2023
Strategic report
37
6.6%
(1.8)%
5.8%
(14.1)%
(0.6)%
(3.9)%
(12.8)%
17.8%
(6.3)%
(11.7)%
2019
2020
2021
2022
2023
(8.0)%
(7.9)%
7.4%
0.3%
6.3%
4.1%
(2.4)%
5.9%
(3.4)%
(7.3)%
2019
2020
2021
2022
2023
1.7%
2.1%
7.1%
4.6%
4.7%
5.8%
1.6%
5.1%
1.1%
(1.5)%
2019
2020
2021
2022
2023
Derwent London
FTSE UK 350 Super Sector Real Estate Index
36.3%
(16.6)%
10.3%
1.5%
(31.1)%
26.4%
(14.1)%
27.2%
8.4%
(28.2)%
2019
2020
2021
2023
2022
103.1
98.0
108.5
102.0
106.6
2019
2020
2021
2023
2022
MEASURING OUR PERFORMANCE
continued
1. Total return (TR)
Total return is the movement in EPRA NTA plus dividends paid
during the year. Our aim is to exceed the average of other major
real estate companies (our ‘benchmark’).
Our performance
Total return in 2023 was -11.7% against a benchmark of about
-0.6% based on current estimates. Over the past ﬁve years, our
average annual return is -1.7%, a 1.7% p.a. outperformance
against the benchmark (-3.4%). This demonstrates the ability of
our business model to generate above average long-term returns.
Strategic objectives
1
2
3
4
5
A
R
Derwent London
Weighted average of major UK REIT companies
3. Total shareholder return (TSR
)
This measures the Group’s success in providing above average
long-term returns to its shareholders.
We compare our performance against the FTSE UK 350 Super
Sector Real Estate Index, using a 30-day average of the returns
in accordance with industry best practice.
Our performance
The fall in the share price during the year, in comparison to those
of our peers mainly invested in other property sectors, meant that
the Group underperformed its benchmark index in 2023. Despite
this, our ability to deliver long-term returns is demonstrated by the
fact that £100 invested in Derwent London 10 years ago would,
at the end of 2023, have been worth £122, which is just below the
benchmark index of £126.
Strategic objectives
1
2
3
4
5
R
2. Total property return (TPR)
This is used to assess progress against our property-focused
strategic objectives. Our aim is to exceed the MSCI Central London
Oﬃce Index on an annual basis and the MSCI UK All Property Index
on a three-year rolling basis.
Annual
Our performance
Good progress on delivery and de-risking of projects resulted in a
0.6% outperformance of the MSCI Central London Oﬃce Index
during 2023. Derwent’s three-year rolling average was -1.5% p.a.,
a 3.6% underperformance against the MSCI UK All Property Index.
This was mainly due to the strength of the industrial sector in
previous years.
Strategic objectives
1
2
R
Three-year rolling
Derwent London
MSCI UK All Property Index
Derwent London
MSCI Central London Office Index
Our performance
EPRA EPS fell 4.4% to 102.0p per share in 2023. Despite an increase
in gross rental income, mainly due to letting activity at recently
completed developments, this was oﬀset by void costs incurred on
vacant space and higher admin costs.
Strategic objectives
1
2
A
4. EPRA earnings per share (EPS)
EPRA EPS is the principal measure used to assess the Group’s
operating performance and a key determinant of the annual
dividend. A reconciliation of this ﬁgure back to the IFRS proﬁt
can be found in note 40 on page 265.
Financial
38
4.6x
4.5x
4.6x
4.1x
4.2x
2019
2020
2021
2023
2022
Minimum target = 200%
5. Gearing & available resources
The Group monitors capital on the basis of NAV gearing and
the LTV ratio. We also monitor our undrawn facilities and
cash, and the level of uncharged properties, to ensure that we
have suﬃcient ﬂexibility to take advantage of acquisition and
development opportunities.
2022
2023
EPRA LTV ratio
23.9%
27.9%
NAV gearing
30.8%
38.7%
Cash and undrawn facilities
£577m
£480m
Uncharged properties
£4,600m
£4,202m
Our performance
Cash and undrawn facilities at the year end remains substantial
at £480m, following net investment in our portfolio of £114.6m.
The fall in property values in the year has led to an increase in
the NAV gearing and LTV ratios, but both remain at low levels.
Strategic objectives
5
A
6. Interest cover ratio (ICR)
We aim for interest payable to be covered at least two times
by net rents. The basis of calculation is similar to the covenant
included in the facility agreements for our unsecured bank debt.
Calculation of this measure can be found in note 42 on page 271.
Our performance
The ICR decreased in 2023. Gross income increased in the year
but higher property expenditure resulted in net property income
falling. Despite this, rental income would need to fall by a further
65% before the main ICR covenant of 145% was breached.
Strategic objectives
5
A
7. Reversionary percentage
This is used to monitor the potential future income growth of
the Group.
It is the percentage by which cash ﬂow from rental income
would grow, assuming the passing rents increase to the
estimated rental value (ERV), and assuming on-site schemes
are completed and let.
2019
2020
2021
2022
2023
%
79
54
65
49
50
Our performance
The Group’s ERV increased by £5.0m to £309.6m. This was
due to rental growth across the portfolio, including the on-
site developments, partly oﬀset by disposals in the year. The
potential reversion at December 2023 was £103.1m, 50% of
the net passing rent of £206.5m, of which 58% is contracted.
Strategic objectives
1
2
8. Development potential
We monitor the proportion of our portfolio with
refurbishment or redevelopment potential to ensure it
contains suﬃcient opportunities for future value creation.
2019
2020
2021
2022
2023
%
43
43
48
43
44
Our performance
At the end of 2023, on-site developments represented 8%
of the portfolio with a further 36% identiﬁed as potential
schemes. This excludes Old Street Quarter EC1 (conditional
acquisition).
We continue to seek opportunities to achieve the optimal
balance between core income and development potential.
Strategic objectives
1
R
Non-Financial
Derwent London plc
Report and Accounts 2023
Strategic report
39
MEASURING OUR PERFORMANCE
continued
Non-Financial
continued
11. BREEAM ratings
BREEAM is an environmental impact assessment method for
non-domestic buildings.
Performance is measured across a series of ratings: Pass, Good,
Very Good, Excellent and Outstanding.
We target minimum BREEAM ratings of ‘Excellent’ for major
developments and ‘Very Good’ for major refurbishments.
Completion
Rating
25 Baker Street W1
H1 2025
1
Outstanding
2,3
Network W1
H2 2025
1
Outstanding
2
1
Targeted
2
Certiﬁed at Design Stage
3
Excluding the oﬃces at 30 Gloucester Place which was rated BREEAM
‘Excellent’ at Design Stage
Our performance
Our two developments currently on site were rated BREEAM
‘Outstanding’
3
at Design Stage.
Strategic objectives
4
12. Energy Performance Certiﬁcates (EPCs)
EPCs indicate the energy eﬃciency of a building. The ratings range
from ‘A’ (very eﬃcient) to ‘G’ (ineﬃcient).
We target a minimum EPC of ‘A’ for major new-build schemes and
‘B’ for major refurbishments.
Completion
Rating
25 Baker Street W1
H1 2025
1
A
1,2
Network W1
H2 2025
1
A
1
1
Targeted
2
Excluding the oﬃces at 30 Gloucester Place which has a target EPC of B
Our performance
Our two on-site developments are targeting an EPC of A
2
.
Strategic objectives
4
10. Void management
To optimise our rental income we plan to minimise the space
immediately available for letting.
We aim for this to remain below 10% of the portfolio’s estimated
rental value (ERV).
2019
2020
2021
2022
2023
Year end (%)
0.8
1.8
1.6
6.4
4.0
Average (%)
1.2
1.3
2.3
5.7
4.3
Our performance
Our average EPRA vacancy rate for 2023 was 4.3% and at the
end of 2023 it was 4.0%. This was helped by strong letting activity
of vacant space, including at recently completed developments
Soho Place W1 and The Featherstone Building EC1.
Strategic objectives
1
2
R
9. Tenant retention
Maximising tenant retention, in the absence of regeneration plans,
minimises void periods and contributes towards net rental income.
2019
2020
2021
2022
2023
Exposure (£m p.a.)
10.4
12.5
19.7
13.2
21.5
Retention (%)
83
65
47
59
62
Re-let (%)
7
22
30
20
3
Total (%)
90
87
77
79
65
Our performance
Our retention and re-let rate was 65% in 2023. This is mainly due
to minor refurbishment and improvement works being carried
out on a number of units where leases expired towards the end
of the year.
Strategic objectives
2
R
40
140
160
180
120
100
80
60
40
20
0
2019
1
2020
1
2021
1
2022
1
2023
2024
2025
2026
2027
2028
2029
2030
Energy intensity
Target
166
90
149
1
2019 to 2022 data restated – see page 60 for details.
14. Embodied carbon intensity
The embodied carbon intensity reduction targets are aligned
with the business’ targets to achieve net zero by 2030.
Embodied carbon intensity is the measure of total carbon
emissions generated in the construction of new developments
divided by the new gross ﬂoor area, measured in kgCO
2
e/sqm.
This is a new KPI for 2023.
Completion
kgCO
2
e/sqm
25 Baker Street W1
H1 2025
1
c.600
Network W1
H2 2025
1
c.530
1
Targeted.
Our performance
We have worked closely with our designers and contractors to
reduce carbon across our on-site developments, 25 Baker Street
W1 and Network W1. The embodied carbon intensity for both
projects is anticipated to be 600 kgCO
2
e/sqm or less, in line with
our corporate targets.
Strategic objectives
4
R
13. Energy intensity
The energy intensity reduction targets are aligned with the
business’ targets to achieve net zero by 2030.
Energy intensity is measured as energy consumption over the
gross internal ﬂoor area (kWh/sqm) across our managed
portfolio. The energy intensity target for 2030 is 90 kWh/sqm.
This is a new KPI for 2023.
Our performance
Energy intensity across our managed portfolio increased by
5% from 2022, but is a reduction of 10% from 2019 baseline.
The increase is primarily associated with Soho Place W1, The
Featherstone Building EC1 and Francis House SW1 becoming
operational following major works.
Strategic objectives
4
A
R
15. Accident Frequency Rate (AFR)
This is calculated based on the number of RIDDOR injuries and
incidents during the year multiplied by 1,000,000 and divided by
the total work exposure hours. This was a new KPI introduced in
2021 based on development RIDDOR injuries, and subsequently
revised in 2023 to also include employees and managed portfolio.
2020
2021
2022
2023
Total (%)
n/a
n/a
n/a
3.81
Developments (%)
2.72
1.26
3.60
4.38
Our performance
In 2023, the total AFR was 3.81 with 8 RIDDORs reported. As a
full year of data was not available for 2022, there is no prior year
comparative.
Strategic objectives
4
A
R
16. Staﬀ satisfaction
We assess employee satisfaction through a staﬀ survey.
We target a satisfaction rate above 80%.
2019
2020
2021
2022
2023
%
92.5
96.3
90.5
88.4
87.5
Our performance
Although the rate fell marginally in 2023, staﬀ satisfaction
remained high at 87.5%. This strong level is testament to our
collaborative and supportive culture and the pride our staﬀ feel
in working for Derwent.
Strategic objectives
3
R
Derwent London plc
Report and Accounts 2023
Strategic report
41
Occupiers
Local
communities
& others
Employees
Suppliers
Central & local
government
Shareholders &
debt providers
Delivering
value to our
stakeholders
OUR STAKEHOLDERS
Key stakeholder groups
Local communities & others
Our buildings play an important and positive role in the
communities in which they sit. We are committed to supporting
local businesses, residents and the wider public. Our support
takes many forms, both ﬁnancial and non-ﬁnancial. Employee
volunteering, work experience opportunities and building open
days all contribute to establishing and maintaining eﬀective
connections.
Occupiers
Our success depends on our ability to understand and respond to
the changing needs and aspirations of occupiers. We maintain
ongoing dialogue through our Asset and Property Management
teams, provide high quality amenity, such as our Member
lounges, and take a collaborative approach to sustainability.
Employees
The success of the business stems from having an experienced,
diverse, inclusive and engaged workforce. We undertake an
annual employee survey. Staﬀ receive training on a variety of
topics and are kept informed of business activities through
monthly town hall meetings and our intranet.
Suppliers
We seek to partner with like-minded businesses for our
outsourced activities. Through regular interactions, we operate
our Supply Chain Responsibility Standard which includes our
approach to net zero carbon. We adhere to strict Modern Slavery
standards and are signatories to the CICM Prompt Payment
Code, working to treat our suppliers fairly.
Central & local government
As a responsible business, we are committed to constructive
engagement with central and local government to ensure we
support the wider community. We engage across a variety of
levels including local planners, local community groups and
HMRC. The Group seeks to positively impact policy through
involvement in various bodies, such as the Westminster Property
Association (WPA) and the New West End Company (NWEC).
Shareholders & debt providers
We have an open and transparent approach to engagement with
shareholders and debt providers and see value in these long-
term relationships. It plays an important role in helping inform
our strategy and monitor our governance. We host a variety of
events including roadshows, presentations, property tours and
a combination of one-to-one and larger group meetings. All
material news is published via Regulatory News Services (RNS).
Through eﬀective engagement, we build strong
and sustainable relationships with our stakeholders
based on knowledge of their concerns and priorities.
We recognise that we
have a
responsibility
to all our stakeholders.
42
Contribution received
Value we create
Value created in 2023
Priorities for 2024
Feedback on the needs
of local communities,
neighbourhoods and
charitable organisations
so that our buildings can
become, and remain,
an integral part of the
community.
Enhancement of the local
area for the joint beneﬁt
of Derwent London,
our occupiers and
local communities. We
operate as a responsible
neighbour and member
of the community.
•
£464k community fund and
sponsorship donations committed
•
Launched Social Value Strategic
Framework
•
Host four individuals through
the #10,000 Interns programme
•
Prioritise homelessness as a key
focus of the Sponsorship and
Donations Committee
•
Embed the Social Value Strategic
Framework into all community
initiatives
Invaluable feedback
on changing occupier
trends and requirements.
Collaboration on our
net zero carbon and
community initiatives.
Design-led, amenity-rich
‘long-life, low carbon,
intelligent’ space which
helps to retain and enrich
talent. A community
‘village’ environment
for our occupiers.
•
Opened second member lounge,
DL/28, in Old Street
•
Launched DL/Service initiative in
selective areas of portfolio
•
Ongoing roll-out and upgrades of DL/App
•
Continued engagement and
collaboration on energy usage
•
Promotion of DL/Member beneﬁts
to build occupier awareness
•
Work with occupiers to further
reduce energy consumption
•
Ongoing roll-out of Intelligent
Building programme
Beneﬁt of their talent,
skills, knowledge and
experience. Receipt of new
ideas and perspectives.
An inclusive, fulﬁlling
and high-performing
workplace. Initiatives
that support health and
wellbeing. Long-term
relationships with our
occupiers, suppliers and
other key stakeholders.
•
Membership of Business Disability Forum
•
Ongoing staﬀ training, development and
wellbeing programme
•
Established Health, Safety & Accessibility
Working Group
•
Progressed work on Disability Strategy
and Action Plan
•
Employee health and wellbeing
programme
•
Action focus group feedback from
2023 Employee Survey
•
Roll out the 2024 Health & Wellbeing
plan incorporating feedback from
the Disability Survey
•
Launch core skills programme
for 2024 to include Emotional
Intelligence and Thriving Personally
& Professionally, among others
Expertise and service from
our supply partners.
Sustainable relationships
built on trust and mutual
respect for human rights.
•
Engagement with suppliers through our
Supply Chain Responsibility Standard
questionnaire
•
Prompt payment of suppliers (19 days)
•
Issued our 2023 Modern Slavery
statement
•
Continue to progress the
recommendations from Unseen UK
on our Modern Slavery practices
•
Further supplier engagement on
compliance with the Supply Chain
Responsibility Standard from the
results of the questionnaire
Better understanding
of public policy and
regulatory frameworks
and inﬂuence over policy,
where appropriate.
We are helping to lead
the industry in supporting
the Government’s net
zero carbon ambitions
and improving the
carbon footprint of
the built environment.
We provide access to
employment and training
opportunities.
•
Represented real estate sector at
Sustainable Markets Initiative (SMI)
•
50 Baker Street W1 planning application
contained details of our social value oﬀer
•
Further work with WPA and NWEC
on Oxford Street East regeneration
•
‘Low risk’ tax status with HMRC was
conﬁrmed in 2023
•
Collaborate with industry bodies to
reduce carbon emissions within the
built environment
•
Monitor new regulation/best
practice guidelines and ensure our
compliance
•
Prepare for UK Sustainability
Disclosure Standards (SDS) and
Transition Plan Taskforce (TPT)
Long-term and cost-
eﬀective ﬁnance, strategic
input and stewardship.
Maintenance of our
strong ﬁnancial position
and delivering, above
average long-term
returns in a responsible
manner.
•
Conservative ﬁnancial position and
leverage (LTV 27.9%)
•
High interest cover of 4.1 times
•
Green ﬁnance used to fund projects
at 25 Baker Street W1 and Network W1
•
Ongoing open dialogue with equity
and debt market participants
•
Maintain an open dialogue through a
series of individual and group events
•
Maintain conservative ﬁnancial
position, with a focus on interest
cover
•
Early engagement in relation to
reﬁnancing
Below we show the contribution provided to Derwent London by our stakeholders and the value we
create in return. Our Section 172(1) Statement for the year ended 31 December 2023, on pages 130 to 133,
demonstrates how these responsibilities inﬂuenced some of the decisions taken by the Board in 2023.
Derwent London plc
Report and Accounts 2023
Strategic report
43
Derwent London is committed to high standards of integrity,
transparency and safety, whilst ensuring our buildings are
designed, delivered and operated responsibly to manage
our carbon footprint and ensure climate resilience.
RESPONSIBILITY
Environmental
1 Designing & delivering buildings
responsibly
2 Managing our assets responsibly
See page 46
Social
3 Creating value in the community
4 Engaging & developing our
employees
5 Ensuring the highest standards
of health & safety
6 Protecting human rights
See page 50
Governance
7 Setting the highest standards
of corporate governance
See page 56
Our
Responsibility
Policy and
Strategy set out
what operating
responsibly
means to us.
See our website
Our seven Environmental, Social & Governance priorities
44
Why
How
Well-designed, thoughtfully delivered
real estate can positively impact the
environment.
Our energy reduction targets are aligned
with a 1.5°C climate scenario.
To ensure we proactively comply with
forthcoming environmental legislation.
Energy intensity down 10% since 2019 on our journey to
net zero carbon
Collaborating with stakeholders,
including occupiers and supply chain
Developing solar park in Scotland as part of
electricity self-generation
initiative
Purchasing
renewable energy
on REGO/RGGO-backed tariﬀs
Stretching
embodied carbon
targets for regeneration projects
£650m of
green ﬁnance
facilities; £416.5m has been drawn for green capex
High quality carbon credits used to
oﬀset residual
£95m
EPC upgrade programme
to maintain compliance
Partnering
with like-minded organisations to amplify impact
As a long-term investor, the success of our
buildings and our collaborative approach
has a positive social impact.
Supporting local communities
through community funds and donations
Social value creation
measured through new Social Value Strategic Framework
Local authority engagement
and monitoring of post-completion social impact
Our employees are key to our successful
performance and will provide the next
generation of leadership talent.
High employee retention ensures
continuity.
Ongoing vocational and compliance
training & mentoring
Internship opportunities
for people from diverse backgrounds
Proactive mental and physical
wellbeing
programme
Regularly measuring and addressing
employee satisfaction
levels
We seek to minimise risks and promote a
safe working environment working with our
supply chain and industry peers, supported
by our Responsible Business Committee.
Collaborating with peers on
benchmarking and best practice
Empowering
employees and contractors to speak up
Acting in a fair and responsible manner is
a core element of our business which runs
through all levels starting with the Board.
Remuneration
clearly linked to sustainability outcomes
Accountability
throughout our organisation
Proactively adopting
new and emerging legislation
Respect for
human rights
across our supply chain
Obtaining
third party assurance
on our actions and outcomes
Providing staﬀ with access to independently operated
whistleblowing
system
Derwent London plc
Report and Accounts 2023
Strategic report
45
ENVIRONMENTAL
Reducing operational energy and
carbon emissions
Our commitment
We are committed to operating our investment portfolio
on a net zero carbon basis by 2030. This involves
driving down our energy consumption signiﬁcantly,
upgrading and retroﬁtting our properties to remove
gas use and improve eﬃciency where feasible, as well
as collaborating with our occupiers.
Energy saving opportunities
Every four years, we are required to perform a portfolio-
wide Energy Savings Opportunity Scheme (ESOS)
assessment. Our 2023 assessment identiﬁed several
operational and capex-led opportunities, many of which
are already being implemented across the portfolio,
including changing plant set points, LED lighting,
upgrading BMS sensors, additional insulation, M&E
upgrades and installation of air source heat pumps.
Data environment upgrade
In 2023, we undertook signiﬁcant work upgrading our
data environment to enhance our data capture and
analysis processes. We also changed our corporate energy
broker, which identiﬁed a number of existing energy
contracts that needed to be included. In addition, a
comprehensive ﬂoor area review was carried out based
on new and updated surveys, alongside an update in
apportionment methodology. Combined, these resulted
in the restatement of Scope 1, 2 and 3 carbon as well as
historic energy ﬁgures and intensity metrics – see page
60 for full details. This results in a revised 2019 baseline
energy intensity of 166 kWh/sqm. Our 2030 target is
unchanged at 90 kWh/sqm. To achieve our target, a 4.2%
annual reduction against the 2019 baseline is required.
Occupier engagement
In addition to having a Net Zero Carbon Action Plan
for each building within the managed portfolio, we
have undertaken signiﬁcant occupier engagement
(2023: 104 occupiers representing 44% of portfolio
ERV) and implemented a variety of opportunities:
• Upgrading existing
green lease clauses
in our
standard documentation;
• Rolling out
intelligent building
infrastructure
across managed portfolio for more granular data;
• Providing
energy usage data
and recommended
reduction targets
to occupiers;
•
Best practice sharing
and issued guidance notes
on energy and water reduction; and
• Holding
behaviour change events
such as
Recycling Awareness days.
Procuring and investing
in renewable energy
Our commitment
The Group is committed to ensuring that all the
energy we procure – electricity and gas – is from
renewable sources. This means contracting electricity
on renewable tariﬀs backed by ‘Renewable Energy
Guarantees of Origin’ (REGO) certiﬁcates and gas
contracts backed by ‘Renewable Gas Guarantees of
Origin’ (RGGO) certiﬁcates.
99% of energy on renewable tariﬀs in 2023
During 2023, 99% of purchased electricity was
on REGO-backed tariﬀs (2022: 99%) and 99% of
purchased gas was on RGGO-backed tariﬀs (2022:
80%). Together, 99% of energy (electricity and gas
combined) purchased in 2023 was on green contracts
(2022: 93%).
All electricity is procured from within the UK and is
from solar, wind or hydro projects which are less than
15 years old.
At 31 December 2023, 100% of our electricity and
gas contracts were on renewable tariﬀs backed by
REGOs/RGGOs.
Self-generation in Scotland and London
Our Scottish land provides several opportunities which
support our journey to net zero. Among others, in 2023
we received full planning consent for a c.100 acre, 18.4
MW solar park at Lochfaulds. Construction is expected
to commence in 2024. On completion in mid-2025, it
is forecast to generate c.40% of the electricity used
across our London managed portfolio (compared to
a 2019 baseline).
Where feasible, we install solar photovoltaic (PV)
panels on our buildings. At 31 December 2023, six
buildings have PV arrays. In addition, we also have
a small PV array at Easter Cadder in Scotland.
During 2024, we will seek to identify our strategy to
self-generate the remaining electricity across the
managed portfolio.
Climate change
46
Climate change is a material issue for society, our sector and our business. Incorporating
the right environmental and climate change measures throughout our business enables
us to operate responsibly across our portfolio and within the community.
Reducing the embodied carbon
of development projects
Our commitment
Under our net zero pathway, new developments and
major refurbishments will be net zero carbon on
completion. We account for 100% of the embodied
carbon in the year an eligible project completes, at
which point it will be oﬀset.
Deﬁning embodied carbon
We carry out whole life cycle assessments on our
projects to inform design decisions and report on the
‘Cradle to Completed Development’ (A1-A5) aspects.
Refer to our Whole Life Carbon Assessment Brief at
www.derwentlondon.com/news/publications/
responsibility-policies
.
The ‘Completed Development’ stage of delivery can
be either ‘Shell and Core’ or ‘Cat A’ depending on
commercial negotiations with occupiers and may
diﬀer by project.
Stretching targets
We work closely with our design and construction
teams and broader supply chain to assess and reduce
a scheme’s embodied carbon footprint. The wider
industry needs to adapt and work together to fully
achieve our aims and we are active in this endeavour.
Our targets for commercial oﬃce new build
developments align with the Greater London
Authority (GLA) and LETi targets. They are phased
by completion dates:
•
From 2025: ≤600 kgCO
2
e/sqm
•
From 2030: ≤500 kgCO
2
e/sqm
Our on-site projects are being delivered to align
with our 2025 target:
•
25 Baker Street W1: c.600 kgCO
2
e/sqm
•
Network W1: c.530 kgCO
2
e/sqm
To achieve these targets we hold detailed workshops
with our design teams at each stage of design and
ensure early supply chain engagement on procurement
of low carbon materials. We also collaborate on
industry-wide initiatives.
No major projects completed in 2023. Consequently,
with only six smaller refurbishments completing, our
Scope 3, Category 2 (Capital Goods) footprint reduced
to 799 tCO
2
e from 32,869 tCO
2
e in 2022 when two major
projects – Soho Place W1 and The Featherstone Building
EC1 – and several smaller projects completed. This has
been oﬀset using robust and veriﬁed carbon credits.
Offsetting residual carbon
emissions we cannot eliminate
Our commitment
The Group’s business model of oﬃce regeneration and
operation will, by its nature, result in the emission of
embodied and operational carbon across Scopes 1, 2
and 3. For this reason, whilst we have set ambitious
targets to reduce our carbon footprint as far as possible,
we have committed to oﬀset any residual carbon that
we are unable to either manage out or eliminate.
A focus on quality
These residual emissions will be oﬀset using robust,
veriﬁed carbon oﬀset schemes. We plan ahead for our
regeneration projects which may involve the forward
purchase of carbon credits. We acknowledge this is a
changing landscape and refer to latest guidance from
the UKGBC (Carbon Oﬀsetting & Pricing Guidance).
We purchase carbon oﬀsets through our provider
Climate Impact Partners. Oﬀsets already purchased
are validated under the Veriﬁed Carbon Standard
(VCS) or the Climate, Community and Biodiversity
Standard (CCB).
We are reviewing a number of oﬀsetting opportunities
across our Scottish portfolio. In 2015, we planted 30ha of
trees under the Woodland Carbon Code, the ﬁrst veriﬁed
credits from which were received in 2021. We have now
progressed our tree planting feasibility study and intend
to plant c.50ha over the next two years. In addition, a
further c.240ha of land has been identiﬁed as potentially
suitable for planting, subject to further appraisals.
Tree planting on our Scottish land
Derwent London plc
Report and Accounts 2023
Strategic report
47
ENVIRONMENTAL
continued
Our pathway
to net zero
2019
2023
2030
Future initiatives
•
Continue to roll out LED lighting and PIR sensors across
managed portfolio
•
Incorporate semi-annual BMS checks into maintenance
contracts to ensure alignment with summer/winter
operation
•
Implement recommendations of 2023 ESOS assessment
•
Progress removal of gas supplies from buildings
•
Ongoing occupier engagement: increase data sharing,
introduce league tables etc
•
Carry out EPC upgrade works
•
Implement actions identiﬁed in Intelligent Building
reports
Achievements
Our net zero journey requires a
collaborative approach which is focused on
both the large and the small details. We have
made good progress, but there is more to do.
•
Occupier engagement strategy following net
zero survey, including holding green forums
for occupiers
•
Energy saving measures implemented: initial
roll out of LED lighting and passive infrared
(PIR) sensors, EPC upgrade works, electric panel
heater replacements and adding time controls
to chillers/boilers
•
Building Management System (BMS) health
checks carried out
•
Out of hours energy assessments conducted
across 35% of portfolio
2023 Highlights
•
SBTi-veriﬁed targets rebased
to 1.5°C-aligned scenario
(42% reduction in Scope 1 & 2
by 2030 from 2022 baseline)
•
Engaged with 44% of occupiers
by ERV as part of our work to
reduce energy usage
•
Scope 3 inventory now captures
categories 1, 6 & 7 (Purchased
goods and services; Business
travel; Employee commuting)
•
New environmental database
•
Reﬁned energy intensity
calculation methodology (2022:
142 kWh/sqm, revised up 15%)
2024 Priorities
•
Update and ﬁnalise our
long-term SBTi-veriﬁed
net zero target
•
Carry out double-materiality
assessment
1
•
Review Scope 3 materiality, with
a particular focus on Purchased
goods and services (category 1)
•
Continue occupier engagement
to further reduce energy
consumption and gain
additional visibility over
energy we do not procure
Water and waste
Water consumption was 29% higher in
2023 compared to 2022. The majority
of the increase relates to Soho Place
W1, The Featherstone Building EC1
and Francis House SW1 becoming
operational following major works.
The recycling rate across the portfolio
improved to 71% in 2023 from 68%
in 2022. We performed more than 30
waste ﬂoor walks with occupiers in the
year as part of our ongoing engagement
to improve recycling practices.
Land in our Scottish portfolio
1
Double materiality requires a company to assess
how their business is impacted by ESG issues
and how their activities impact society and
the environment.
48
Energy usage – electricity and gas
0
10
20
30
40
50
60
70
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
0
10
20
30
40
50
60
70
80
90
100
kWh (millions)
tCO
2
e
London commercial portfolio by ERV (%)
‘Operational’ carbon footprint – Scopes 1, 2 & 3
EPC ratings
Energy intensity
0
20
40
60
80
100
120
140
160
180
kWh/sqm
2019
2
2019
2
2021
2
2022
2021
2
2020
2
2021
2020
2
2022
2
2023
2022
2
2022
2
2023
2023
2023
•
Overall consumption increased in 2023; electricity up by
14%, gas up by 9%
•
The increase is primarily associated with Soho Place W1,
The Featherstone Building EC1 and Francis House SW1
becoming operational following major works
•
Landlord electricity rose 9% and tenant electricity
increased 16%
•
On a like-for-like basis, total electricity increased by 1%
and gas decreased by 7%
•
‘Operational’ carbon footprint up 27% year-on-year
(location-based; excludes embodied carbon)
•
This was primarily driven by the completion of two major
projects, as well as a 7% increase in the Government’s UK
grid carbon conversion factor for electricity
•
Managed portfolio energy intensity increased 5% in 2023,
but is 10% lower than our 2019 baseline
•
Building optimisation works over several years helped
reduce intensity at several buildings (see ‘Achievements’
on page 48)
•
Energy reduction is unlikely to be linear and will be impacted
by the completion of upgrade and regeneration projects,
as well as the timing of service charge-related interventions
•
We rebased our energy intensity methodology in 2023 to
more accurately reﬂect data coverage. Our key focus for
2024 is to gain visibility over occupier electricity we do
not procure
•
68.4% of portfolio rated EPC ‘A’ or ‘B’ (including on-site
projects) with a further 19.1% EPC ‘C’
•
EPC upgrade works are factored into all refurbishment
projects to ensure ongoing compliance with evolving
legislation
Gas
Electricity
Scope 1
Scope 2
Scope 3
EPC A/B
EPC C
2
2019 to 2022 data restated – see page 60 for details.
166
64.6
139
61.0
17.9
49.2
140
65.3
20.4
49.7
142
68.4
19.1
50.4
149
56.7
-10%
3,062
2,388
5,864
4,364
2,795
7,211
11,314
14,370
Derwent London plc
Report and Accounts 2023
Strategic report
49
SOCIAL
Our social contribution
2023 Highlights
•
Finalised and published
our Social Value Strategic
Framework
•
10 years of operating our
community funds – £1.1m
of funding to date
•
Pledged a four year funding
commitment to London’s
Air Ambulance
•
Funded refurbishment of
UCLH staﬀ room
Refurbishment of a rest
area for UCLH staﬀ
At the beginning of 2023, we funded
the refurbishment of a staﬀ room
at UCLH. Prior to this, the staﬀ were
using part of a three-bedded bay as
a staﬀ area as they did not have the
capacity to house a room suitable
for the number of employees on
the ward. Staﬀ areas for rest and
relaxation became a focus for the
hospital trust during the pandemic
as staﬀ wellbeing was a high priority
due to the diﬃcult circumstances
many of them were experiencing
while they cared for patients with
Covid-19. The new staﬀ/seminar
room provides a comfortable,
relaxing space where staﬀ can meet,
eat, sit and relax during time away
from patients.
We are very grateful to
Derwent for recognising the
importance of clinical staﬀ
having somewhere comfortable,
clean and well-equipped to rest
during long, demanding days.
Carol Haraldsson
Head of Charitable Giving, UCLH Charity
We recognise that our buildings can have a signiﬁcant impact on
the communities in which they sit, and we strive to create value
where possible for all our stakeholders.
Our approach to social value
Our commitment to delivering social
value has been a core part of our
business practice for many years. This
commitment takes many forms to ensure
we maximise the positive impact we
have on local communities. Financial
support through our corporate giving
and community funds is important.
We place equal value on being part of
each community to ensure we remain
alert to their concerns and aspirations
and can have a meaningful impact.
Employee volunteering, work experience
opportunities and building open-days
have all contributed to establishing and
maintaining eﬀective connections with
these communities.
Published our Social Value
Strategic Framework
Since 2022 we have been working with
external consultants to help us deﬁne a
framework which outlines our primary
goals and how they will be measured
and achieved in respect of the social
value we create. This culminated in the
publication of our Social Value Strategic
Framework in December 2023. This
strengthens our commitment and will
clearly demonstrate the beneﬁts we are
delivering to local residents, businesses,
our occupiers and the broader public.
See
www.derwentlondon.com/
responsibility/social/communities
for more details.
2024 Priorities
•
Continue investment in our
community funds
•
Embed the new Social Value
Strategic Framework into
our community work across
the portfolio
•
Prioritise homelessness as a
key focus of the Sponsorship
and Donations Committee
£464k
Community fund & sponsorship
donations committed in 2023
18
Community fund projects supported
in 2023
£1.1m
Community funds provided to date
UCLH staﬀ room
50
Community fund stories
To mark the 10th anniversary of the inception of our ﬁrst
community fund we published a ‘10 Years 10 Stories’ feature,
highlighting some of the enterprises we have helped with the
£1.1m of funds invested across a variety of local projects over
this period. Here are some of those stories.
The Soup Kitchen at the American International
Church –
Preparing 120 meals daily, The Soup Kitchen at
the American International Church is a vital community
service. As well as beneﬁting from our funding, the kitchen
is frequently assisted by our volunteers, and companies in
our supply chain helped build and support a cabin, providing
mental health support.
All Souls Clubhouse –
Beating loneliness among older people
in the community is the worthy mission of this charity. Over
the years, we have provided them with new kitchen facilities,
helped fund their Wednesday lunch club and other social
activities and provided volunteers at Christmas.
Fitzrovia Youth in Action –
The Warren ﬁve-a-side football
pitch generates income that supports Fitzrovia Youth in
Action’s essential work with young people. The Fund helped
resurface the pitch and set up a football league. We’ve also
supported intergenerational activities, youth social action
programmes and Christmas lunches for the community.
Continued to support
our community funds
We operate two community funds:
Fitzrovia and West End (founded in 2013)
and the Tech Belt (founded in 2016). The
key priority of these funds is to support
and create value in the community
by providing funding for a variety of
grassroots projects with a focus on
community events, environmental
improvements, health and wellbeing
activities, music and culture, and
ongoing help for disadvantaged/isolated
groups. It also acts as a springboard
for further engagement with local
neighbourhoods, leading to corporate
volunteering, school engagement
and work experience opportunities.
In addition, it enables us to anticipate
further funding needs.
This year we celebrated 10 years since
the inception of the ﬁrst fund and
to date have provided over £1.1m
of combined funding across 164
diﬀerent projects.
To mark this milestone, we published
a ’10 Years 10 Stories’ feature on our
Community page on Instagram (see
box above for more details). In 2022
we made a number of improvements
to the application process to make it
more ﬂexible and inclusive, including
removal of the £10,000 cap for
registered charities which a number of
organisations beneﬁted from in 2023.
Other activities
In 2023, our Sponsorship and Donations
Committee approved £339,000 of
charitable donations to good causes.
Below are some of the ways these
funds have been used to create value
in the community during the year.
Supporting UCLH staﬀ members –
We provided funding to refurbish a staﬀ
room at University College Hospital.
See opposite page for more details.
Bartlett scholarship –
We continued to
support a student on their educational
journey to becoming an architect.
Donation to Westminster Wheels –
We donated funds towards a trainee’s
six month placement at Westminster
Wheels, an organisation which helps
unemployed local residents develop the
skills to become qualiﬁed bike mechanics.
London’s Air Ambulance –
We pledged
a four year commitment to provide funds
to London’s Air Ambulance.
In addition, our employees took part in
a variety of activities during the year,
including fundraising and participation
in London’s Air Ambulance Charity abseil
down the highest rooftop helipad in
Europe and regular volunteering at
The Soup Kitchen.
Staﬀ volunteering at The Soup Kitchen
Derwent London plc
Report and Accounts 2023
Strategic report
51
SOCIAL
continued
Our people
2023 Highlights
•
Won three employer awards
– see below
•
Became a member of the
Business Disability Forum
and completed the self-
assessment
•
Oﬀered one-to-one
employee health checks
•
Completed ﬁfth full
employee survey
Employee engagement
Employee engagement and
communication is important, facilitated
by our ‘open-door’ policy. 74% of
employees are based at our head
oﬃce which enables eﬀective, regular
face-to-face interaction. Together
with a range of formal and informal
communication channels, including
our regular town hall meetings, we
have a highly engaged workforce.
We use anonymous annual employee
surveys to obtain staﬀ feedback and
gauge satisfaction levels. This consists
of a short ‘pulse survey’ and a full
independent survey in alternating
years. In 2024, we will establish employee
focus groups, comprising individuals
from varying departments, gender,
ethnicity, age and length of service
to review the 2023 survey results and
put forward recommendations to the
Executive Committee.
We achieved a 94% response rate to
our 2023 survey, demonstrating our
open culture. The results indicate a
high satisfaction rate:
88
%
Overall employee satisfaction
89
%
‘I am proud to work for Derwent London’
87
%
‘I feel I can make a valid contribution
to the success of Derwent London’
83
%
‘We have an inclusive working environment’
We aim to attract, inspire and engage a talented and diverse workforce. In a year
dominated by geopolitical and macroeconomic uncertainty, the dedication of our
people enabled the business to remain resilient.
Attracting and optimising talent
The top talent we employ and develop
are instrumental to the success of the
business. Our aim is to create a culture
which enables our exceptional and
diverse workforce to thrive, have a
voice and be their authentic selves.
We enjoy high employee retention (88%
for 2023) and a long average tenure –
43% of our workforce have ﬁve or more
years of service, and 24% are 10+ years.
We seek to balance continuity with fresh
ideas, experience and skills and in 2023
we recruited 38 people externally, 39%
of which were for newly created roles.
Ongoing development and career
progression is important to us, and
we actively consider and encourage
succession planning. To facilitate
this, we invest in our employees
with comprehensive learning and
development programmes – both
behavioural and technical – at all
levels. These include core skills and
technical workshops, one-to-one and
team coaching, as well as mandatory
compliance training. We also encourage
regular feedback and performance
conversations, in addition to formal
review meetings. In 2023 there were 18
internal promotions (eight women and
ten men), including three new Executive
Committee appointments.
Investing in existing talent is not enough.
For the real estate industry to appeal
to a broader cross-section of society,
creating opportunities for people from
diﬀerent backgrounds is important.
In 2023, we:
•
Hosted seven work experience
candidates;
•
Provided mock interview practice for
students at two Westminster schools;
•
Provided career advice as part of
Islington’s World of Work initiative;
and
•
Co-hosted an event for Construction
Youth Trust with Laing O’Rourke.
2024 Priorities
•
Host four individuals
through the #10,000
Interns programme
•
Provide inclusive
management training
to line managers
•
Formulate a Disability
Strategy and Action Plan
•
Action focus group
feedback from 2023
Employee Survey
EG Awards – Employer of the Year
The Sunday Times –
Best Places to Work 2023
Westminster Business Council
Awards – Employer of the Year
52
Health and wellbeing
The health and wellbeing of our people
remained a priority during 2023. We
know that people are most productive
when they are physically and mentally
thriving and socially connected.
In addition to a suite of employment
beneﬁts, we have trained mental health
ﬁrst aiders, an employee assistance
programme and occupational health
support. We ran a series of ‘lunch and
learn’ sessions covering topics such as
neurodiversity, brain and heart health,
and the impact of changing seasons.
We also launched new Menopause
Guidelines and oﬀered on-site one-to-
one health checks and annual ﬂu jabs.
Staﬀ survey results demonstrate the
value this brings to our employees. 85%
of respondents agreed that ‘the Health
& Wellbeing initiatives were useful and
informative’.
To allow us to continue to build healthy,
nurturing and supportive relationships
and foster a genuine community spirit,
our social committee work hard to
arrange regular inclusive events and
volunteering opportunities are open
to everyone.
A focus on disability
During 2023, we had a particular
focus on disability. In March, we
became a member of the Business
Disability Forum (BDF), a leading
business membership organisation
in disability inclusion.
To ensure it is integrated throughout
the business, our Diversity &
Inclusion and newly formed Health,
Safety & Accessibility Working
Groups have worked together to
undertake stage 1 of the Disability
Smart Audit, an in-depth Self-
Assessment. This has enabled us
to assess how we are performing
against the ten areas in the BDF
Framework and where we are in
our ‘disability smart’ journey.
To understand, measure and
improve the experiences of our
employees who have a disability or
long-term condition, we rolled out
a short ‘Disability Data’ survey to
which we received an 87% response
rate. The results of this survey have
fed into our health & wellbeing
strategy and will continue
to inform our work on
disability in 2024.
Diversity and inclusion (D&I)
We believe a diverse and inclusive
workforce helps foster collaboration,
productivity and innovation. This year
we placed an emphasis on disability
awareness which included conducting
an employee survey to identify what
proportion of our people have a disability
or long-term condition. We also became
a member of the Business Disability
Forum (BDF) – see adjacent box.
As part of our commitment to
encouraging inclusive behaviour and a
consistent approach to performance
management, all line managers
attended Personal Development Plan
training to assist them in conducting
eﬀective performance discussions with
individual team members.
One of our objectives this year was to
increase communication around D&I and
our activities in this area. Internally this
included increasing awareness around
diﬀerent religious festivals and cultural
celebrations, as well as issuing our ﬁrst
D&I Working Group newsletter which
provided a comprehensive update to
staﬀ on the Group’s initiatives and focus
areas for 2024. Externally, we improved
our social responsibility messaging and
shared our inclusive values to the market
via social media channels.
Members of the Health, Safety & Accessibility Working Group
Derwent London plc
Report and Accounts 2023
Strategic report
53
SOCIAL
continued
Health & Safety
2023 Highlights
•
Set up internal Health,
Safety and Accessibility
forum
•
Developed health and
wellbeing programme for
employees in partnership
with Human Resources
•
Embedded H&S policies and
procedures into the Scottish
portfolio operations
•
Interpreted the Building
Safety Act outcomes and
provided clear guidance
across the business to
enhance awareness
•
Achieved a Royal Society
for Prevention of Accidents
(RoSPA) Gold Award
During 2023 this included 182 person days
of H&S training covering topics such as
Legionella (City & Guilds), Emergency
First Aid and Fire Marshal (British Red
Cross), Safe Systems of Work/RAMS,
as well as topical H&S webinars, live
coaching sessions and health check-ups.
We use an H&S training matrix to identify
speciﬁc training requirements by job
proﬁle. During 2023 a comprehensive
review of the matrix and programme
was undertaken and updates were made.
In 2023 we set up an employee Health,
Safety and Accessibility forum with wide
representation from across the business.
As well as considering H&S matters, this
forum seeks to address the main barriers
that people with disabilities encounter in
the workplace. The forum also highlights
where an early design stage accessibility
review can be beneﬁcial in creating more
accessible schemes. To support this, the
Group became a member of the Business
Disability Forum (BDF) – see page 53.
Making our assets safe to occupy
Ensuring our occupiers, visitors and
those who live and work in and around
our buildings are safe and healthy is
critical. This requires designing, building,
maintaining and operating our buildings
using best practices, and involves
collaboration across the business.
Our in-house H&S team supports our
Property Management team throughout
the year to ensure our buildings are being
operated safely and with minimal risk.
During 2023 the H&S team reviewed
the Building Safety Act outcomes and
provided guidance on its application
to the Property Management and
Development teams. Buildings which
are in-scope were registered prior to
the 1 October 2023 deadline.
To monitor and report on H&S risk
and compliance across the managed
portfolio we use the RiskWise system.
The health, safety and wellbeing of our people, occupiers, residents,
service partners, contractors and the public is a high priority for us.
This is achieved through robust and eﬀective risk management.
Our approach to health,
safety and wellbeing
Our approach is centred around people,
assets and developments. For our rural
and agricultural portfolio in Scotland
we have a separate suite of health
and safety (H&S) standards tailored
to their activities.
•
Our aim
is to provide healthy, safe
and secure environments for our
people, customers and contractors
to work, live, visit and relax.
•
Our people
are fundamental to the
success of our business, which is why
we invest in and train them to ensure
healthy and safe work environments.
•
Our integrated approach
ensures
that health, safety and wellbeing
is considered at every stage of a
building’s life cycle: from acquisition,
through development, management,
leasing and disposal.
We achieve this by:
•
Designing suitable health, safety
and wellbeing systems which are
proactively managed.
•
Establishing and maintaining robust
policies and procedures which comply
with latest legislation.
•
Ensuring work is assigned to
competent individuals.
•
Carrying out rigorous and ongoing
training on best practices.
•
Regularly reviewing our health and
safety performance.
•
Ensuring we learn when incidents
occur and make appropriate changes.
Providing a safe work
environment for our people
Providing a safe place for our people
to work is of paramount importance
to us, with focus on both physical
and mental wellbeing to enable our
employees to thrive. This is achieved by
ensuring staﬀ are well informed in H&S
best practices through ongoing internal
and external training.
2024 Priorities
•
Roll out Building Safety
Act plans for our ‘in-scope’
residential development and
managed properties
•
Implement a ‘client audit’
and early H&S risk review
for our design team on our
major projects
•
Set up the Continuous
Improvement Group (CIG)
for our architects, principal
designers and project
managers
•
Enhance our Fire Safety
Management system and
obtain Primary Authority
ﬁre service agreement
54
Ongoing monitoring includes annual inspections and ﬁre risk
assessments for each building. We also use data from the Real
Estate Benchmarking Group, which we co-founded in 2021, to
assess our relative H&S performance against peers in our sector.
In 2023 we achieved the Royal Society for Prevention of Accidents
(RoSPA) Gold Award for the Derwent London H&S management
system in respect of our managed portfolio.
High health and safety standards on construction sites
We have strong relationships with our principal and main contractors,
endeavouring to lead by example as an informed and responsible
construction client. As well as both independent and internal H&S
monitoring of our construction sites, we require our supply chain to
achieve speciﬁc stretching target scores for Construction Logistics
and Community Safety (CLOCS) and Considerate Constructors
Scheme (CCS).
With 437,000 sq ft of space on site, 2023 was a busy year for major
developments. The RIDDOR accident frequency rate (AFR) on our
developments was 4.38. This was an increase from the rate of 3.60
in 2022, principally due to our major development schemes moving
into higher risk construction phases, smaller projects starting, and
a general rise in ‘Over 7 day injuries’.
Our H&S team continue to work closely with the Development team
to improve visibility and identiﬁcation of design elements which could
have H&S risk implications to ensure these are addressed at an early
stage of the project.
Health and Safety data
The table below details our key H&S statistics which have been subject to independent limited assurance by Deloitte LLP in
accordance with the ISAE 3000 (Revised) Standard. This data allows us to identify trends and highlights areas of focus for the
business. Refer to the Health and Safety Basis of Reporting in the
Responsibility Report
.
Employees
Managed portfolio
Developments
2023
2022
2023
2022
2023
2022
Person hours worked
266,513
288,000
920,142
1
370,314
913,843
833,258
Minor injuries
0
0
27
20
10
18
Near miss
1
0
20
20
37
17
Lost time injuries
7
3
0
3
0
4
2
RIDDORs
1
0
3
2
0
4
3
Dangerous occurrences
0
0
0
0
0
0
Fatalities
0
0
0
0
0
0
Improvement notices
0
0
0
0
0
0
Prohibition notices
0
0
0
0
0
0
Injury rate
3, 7
0
0.00
29.34
54.01
10.94
21.60
Lost day rate
4, 7
48.78
0.00
10.87
0.00
5.47
2.40
Severity rate
5, 7
3.25
0.00
0.30
0.00
0.28
0.11
RIDDOR AFR
6
3.75
0.00
3.26
0.00
4.38
3.60
1
Person hours worked – signiﬁcant increase in managed portfolio in 2023 due to full inclusion of third party contractor hours across all properties.
2
RIDDORs – increase in managed portfolio in 2023 due to full inclusion of third party contractor data across all properties.
3
Injury rate – (injuries excluding RIDDOR and lost time injuries)/(total hours worked) x 1,000,000.
4
Lost day rate – (lost time injuries excluding RIDDOR)/(total hours worked) x 1,000,000.
5
Severity rate – total number of lost work days (excluding RIDDORs)/total number of incidents x 1,000,000.
6
RIDDOR accident frequency rate (AFR) – the number of RIDDORs/(total hours worked) x 1,000,000.
7
Deloitte LLP do not assure lost time injuries, injury rate, lost day rate or severity rate for ‘Employees’.
Members of the Development and Health & Safety teams
Derwent London plc
Report and Accounts 2023
Strategic report
55
The Board
Overall responsibility for ESG matters
Nominations
Committee
Ensures ESG skills,
knowledge and
experience is a
consideration when
assessing the Board’s
composition and the
identiﬁcation of any
skill gaps
Audit
Committee
Monitors assurance
and internal ﬁnancial
control arrangements.
Ensures ESG-related
expenditure is
appropriately reﬂected
in our ﬁnancial
statements
Risk
Committee
Identiﬁes and evaluates
key ESG risks (principal
and emerging),
ensuring they are
appropriately managed
Remuneration
Committee
Ensures ESG factors are
included in executive
remuneration (long-
term incentive plans)
Responsible Business
Committee
Monitors the Group’s
corporate responsibility,
sustainability
and stakeholder
engagement activities
GOVERNANCE
Responsibility
governance
2023 Highlights
•
Publication of climate-related ﬁnancial disclosures
consistent with the TCFD Recommendations as
required by the Listing Rule 9.8.6 (8)(b)
•
Revised the long-term remuneration targets under
the Performance Share Plans to include embodied
carbon and energy intensity reduction
•
HMRC reaﬃrmed the Group’s low-risk status across
all tax regimes following the Business Risk Review+
•
Requested evidence that our major suppliers are
compliant with the Supply Chain Responsibility
Standard
•
Published our latest Modern Slavery Statement
•
Continued mandatory compliance training for all
employees (including the Board) which covered
competition law, conﬂicts of interest, anti-bribery
and cyber fraud awareness
A responsible business
The oversight of ESG matters is critical. It not only allows the
Board to appreciate the overall impact of its decisions on key
stakeholders and the environment, but also ensures it is kept
aware of any signiﬁcant changes in the market. This includes
the identiﬁcation of emerging trends and risks, which in turn
can be factored into its strategy discussions. We conduct
business with integrity and work with stakeholders who share
our values and ethical principles.
ESG is overseen principally by the Board, Responsible
Business Committee and Sustainability Committee.
Governance Framework /
See page 127
Our Chief Executive, Paul Williams, is the designated Director
with overall accountability for ESG matters. However,
the responsibility for overseeing it is delegated to Nigel
George (Executive Director). Paul Williams oversees the
review and performance of our responsibility work as Chair
of the Sustainability Committee and as a member of the
Responsible Business Committee.
Executive Directors with assistance from the Executive Committee
Responsibility for oversight of the Group’s ESG initiatives
Sustainability
Committee
Responsible for implementing
the Board’s ESG strategy
Health and Safety
Committee
Responsible for monitoring
health and safety
management and
performance
Sponsorship and Donations
Committee
Responsible for the Group’s
charitable activities and
donations
Social
Committee
Aims to encourage team
working and collaboration
between departments through
social activities
56
Acting in a transparent and responsible manner is a core element
of our business and underpins our key governance practices.
Climate change governance
The governance of climate change risk and opportunities is
ultimately the responsibility of the Board. However, day-to-day
management is delegated to the Executive Committee and
senior management.
The Board monitors the Group’s progress against our
published net zero carbon targets, speciﬁcally energy intensity,
operational carbon footprint and embodied carbon intensity
on major projects. In addition, speciﬁc performance indicators
are assured by Deloitte LLP and these can be found in their
assurance statement which is available within the latest
Responsibility Report.
Responsibility Report /
www.derwentlondon.com/
responsibility/publications
Our strategy and targets for energy consumption and
carbon emissions are set and monitored by the Board.
The Board, Responsible Business Committee and Executive
Committee receive regular updates and presentations on
sustainability performance from the Head of Sustainability.
In addition, the Audit Committee received training in respect
of climate-related reporting (see page 147).
Green ﬁnance governance
Our Green Finance Framework allows us to clearly link
our ﬁnancing to the environmental beneﬁts our activities
generate. The Audit Committee receives annual updates
on our green ﬁnance initiatives including in respect to our
reporting disclosures.
Our Green Finance Framework received a Second Party
Opinion (SPO) from DNV that it is aligned with the Loan
Market Association’s Extended Green Loan Principles and
the International Capital Market Association’s Green Bond
Principles. The SPO is available on our website. Deloitte
have also provided reasonable assurance over selected
green ﬁnance KPI disclosures. Their assurance statement
is available within the latest Responsibility Report.
Our Green Finance Framework /
See page 84
Supply chain governance
It is important to us that our suppliers and construction
partners operate responsibly and share our ESG business
principles.
Our supply chain governance procedures ensure our suppliers
are aware of the standards we expect from them and the
business practices which we will not tolerate. All suppliers with
whom we spend more than £20,000 per annum are required
to provide evidence of how they are complying with our Supply
Chain Responsibility Standard, which sets out our principles
and expectations in terms of the environmental, social, ethical
and governance issues which relate to our supply chains.
Supply Chain Responsibility Standard /
See page 169
Ensuring our payment practices are fair is a key requirement
in governing our supply chain. This will remain an area of
particular importance and focus for the Group, due to the
economic uncertainty businesses are currently experiencing.
Protecting human rights
The protection of human rights and fundamental freedoms is
one of our key ESG priorities which we manage from an internal
(within our business) and external perspective (with our supply
chain and our relationships with contractors). Internally, the
Board monitors our culture to ensure we maintain our values
and high standards of transparency and integrity. Our HR
team ensures that we have the right systems and processes
in place to strengthen and sustain our culture.
The Board’s role in managing the Group’s culture /
See page 129
Externally, we are active in ensuring our ESG standards are
clearly communicated to our supply chain, principally via our
Supply Chain Responsibility Standard. To ensure the human
rights of our supply chain are respected we are clear on our
zero-tolerance position with regards to slavery and human
traﬃcking as set out in our Modern Slavery Statement.
Based on our ongoing risk assessment, we continue to believe
the risk of any slavery or human traﬃcking in respect of our
employees is very low. Further information on our eﬀorts to
prevent modern slavery occurring in our supply chain is on
page 169.
Modern Slavery Statement /
www.derwentlondon.com/
investors/governance/modern-slavery-act
£
754
m
Cumulative Eligible Green Project (EGP) capex
at 31 December 2023 across ﬁve eligible projects
Derwent London plc
Report and Accounts 2023
Strategic report
57
GOVERNANCE
continued
Non-ﬁnancial reporting
As we have fewer than 500 employees, the non-ﬁnancial and sustainability information statement (NFSIS) requirements contained
in the Companies Act 2006 do not apply to us. However, due to our commitment to promoting transparency in our reporting and
business practices, we have elected to provide further information in the table below.
Category
Our key policies and standards
Additional Information
Environmental
matters
• Responsibility Policy
•
Net Zero Carbon Pathway
• Science-based carbon targets
•
Task Force on Climate-related Financial
Disclosures (TCFD)
•
Streamlined Energy and Carbon Reporting
(SECR) disclosure
Responsibility Report
www.derwentlondon.com/responsibility/publications
Our pathway to net zero carbon
Pages 48 and 49
Climate change governance
Pages 57 and 113
Risk management
Pages 160 and 161, 164
Executive Directors’ LTIP 2023
Pages 192 to 194
UN SDGs
Page 59
TCFD
Pages 104 to 107
SECR
Pages 60 and 61
Social and
employee
aspects
• Volunteer Policy
•
Equal Opportunities and Diversity Policy
•
Professional development and training
• Shared parental leave
•
Smart Working Policy
Community Fund
Pages 50 and 51
Our people
Pages 52 and 53
Executive Directors’ annual bonus
Page 190
Diversity and inclusion
Pages 53 and 168
Employees on a committee
Page 167
The Section 172(1) Statement
Pages 130 to 133
Respect for
human rights
• Individual Rights Policy
•
Health and Safety Policy Statement
•
Supply Chain Responsibility Standard
• Modern Slavery Statement
•
Code of Conduct & Business Ethics
Health and safety
Pages 54 and 55
Human rights
Page 57
Modern slavery
Page 169
Supply Chain Responsibility Standard
Page 169
Anti-corruption
and bribery
issues
• Anti-bribery Policy
• Speak up Policy
• Expenses Policy
•
Money Laundering and Terrorist
Financing Policy
•
Preventing Facilitation of Tax
Evasion Policy
Audit Committee report
Pages 144 to 155
Risk Committee report
Pages 156 to 165
Anti-bribery and corruption
Page 165
Our principal risks
Pages 94 to 101
Our emerging risks
Pages 102 and 103
Compliance training
Page 165
Tax governance
We take our obligations as a taxpayer
seriously and focus on ensuring that,
across the wide range of taxes that we
deal with, we have the governance and
risk management processes in place
to allow us to meet all our continuing
tax obligations. The Board has overall
responsibility for our tax strategy, risk
assessment and tax compliance.
Our statement of tax principles, which
is approved by the Board, is available
on our website:
www.derwentlondon.
com/investors/governance/tax-
principles
We have an open and transparent
relationship with HMRC and seek to
anticipate any tax risks at an early
stage, including clarifying areas of
uncertainty as they become evident.
We keep HMRC informed of how our
business is structured and respond
to all questions or requests promptly.
Senior members of our tax department
regularly engage with HMRC to support
consultations or to seek legislative
clariﬁcation in areas that could
potentially impact our business. HMRC
have awarded the Group a low-risk
status across all tax regimes following
the Business Risk Review+ (BRR+) review.
Reporting frameworks and ESG data
58
UN SDG reporting
The United Nations Sustainable Development Goals (SDGs) are an international standard developed to support global change
and sustainable growth. We believe that we have a role in supporting the UK in responding to this standard and helping positively
aﬀect change.
We have reviewed the suite of 17 goals and have selected those goals which align most closely to our ESG priorities. Set out below
is a summary of our eﬀorts against the selected goals.
Our ESG priority
UN Goal
Target
Indicator
Our efforts
Creating value in
the community
and for our wider
stakeholders
4.4
4.4.1
Our Community Fund enables us to invest in and support groups who work
with and upskill young people from socially and economically challenged
backgrounds. For example, the work of London Village Network and their
Amplify programme aims to help young people identify their strengths
and equip them to gain meaningful employment by way of mentoring
programmes in schools with business volunteers that share their career
journeys and provide industry insights and visits.
4.a
4.a.1
Similar to the above the work of The Doorstep Library, a literacy-outreach
charity, seeks to boost and improve children’s reading skills in their
homes, resulting in improved outcomes at school. Increased literacy and
conﬁdence stay with the children through their time in education and into
the workplace.
Protecting human
rights, Engaging
and developing
our employees
5.1
5.1.1
Beyond any legislative requirements we are active in ensuring meaningful
gender equality across our business. In 2022 we achieved the National
Equality Standard accreditation and our Diversity & Inclusion Working
Group work hard to ensure that progress is being made and best practice
is implemented. All our training and development initiatives are available
company-wide, we adopt smart working practices, oﬀer enhanced
family leave policies and our employee surveys enable us to identify
any diﬀerentials with regards to gender and ethnicity.
5.5
5.5.2
We have a 48%:52% male/female ratio and 31% of Senior Managers are
women. In 2023 there were 18 internal promotions with 44% being female.
Designing and
delivering buildings
responsibly,
Managing our
assets responsibly
7.2
7.2.1
Our aim is to ensure we purchase renewable energy in line with our RE100
commitment. During 2023, 99% of energy procured was on renewable
tariﬀs. At the end of 2023, 100% of electricity contracts were on REGO-
backed tariﬀs, and 100% of gas contracts were on RGGO-backed tariﬀs.
As part of our net zero carbon pathway, we are developing a 100-acre
solar park on our Scottish land. Planning consent has been received and
construction will commence during 2024.
7.3
7.3.1
We have developed speciﬁc energy intensity reduction targets designed
to help us improve the energy eﬃciency of our managed properties and
movement towards net zero carbon.
Creating value in
the community
and for our wider
stakeholders
11.7
11.7.1
We actively promote the inclusion of public spaces in and around our
buildings and ensure they are fully accessible. In addition, we are part of
the London Mayor’s Business Climate Leaders Group which was set up to
help London become a zero-carbon city by 2030.
Managing our
assets responsibly
12.5
12.5.1
We have established a portfolio-wide minimum recycling target of 75%
and a no waste to landﬁll policy.
12.6
12.6.1
We integrate comprehensive sustainability reporting information into our
company reporting cycles and public reporting.
Designing and
delivering buildings
responsibly,
Managing our
assets responsibly
13.2
13.2.2
We have new independently veriﬁed science-based carbon targets which
have been rebased to a 1.5°C scenario. In addition, we have set embodied
carbon and energy intensity reduction targets for our developments and
managed properties respectively. This means we are committed to reducing
our carbon emissions and making sure our portfolio is climate resilient.
Derwent London plc
Report and Accounts 2023
Strategic report
59
In line with SECR regulations, the
adjacent table shows our carbon
emissions (tCO
2
e) across Scopes 1, 2 and
3 together with appropriate intensity
ratios (kgCO
2
e/sqm). We also show
the global energy consumption (kWh)
used to calculate our emissions.
Streamlined Energy and Carbon Reporting
(SECR) disclosure
GOVERNANCE
continued
Boundary
(consolidation approach)
Operational control, based on our corporate activities and managed property portfolio which is
principally in central London (UK). Landlord emissions from our retail park in Glasgow are also included.
Alignment with
ﬁnancial reporting
The only variation to our ﬁnancial reporting approach is that GHG emissions and energy data
are excluded for buildings where the Group does not have control or inﬂuence. These are either
single-let properties (also referred to as FRI) or areas for which we do not have management
control (e.g. we do not procure utilities). The rental income of these properties is included in the
consolidated ﬁnancial statements.
Reporting method
GHG emissions reporting is in line with the Greenhouse Gas (GHG) Protocol Corporate Accounting
and Reporting Standard. Further details on our data calculation methodology can be found in the
data section of our annual
Responsibility Report
.
Emissions factor source
(location-based)
UK Government emissions factors are used to convert energy usage into location-based carbon
equivalents (
www.gov.uk/government/collections/government-conversion-factors-for-
company-reporting
).
Prior year restatements
There are three principal restatements to the 2022 data. First, an energy and water contract audit
identiﬁed several existing supplies which have now been included where appropriate. Secondly, the
landlord/occupier ﬂoor area allocation has been amended following a comprehensive ﬂoor area
(GIA to NIA) reconciliation and new building measurements obtained. Thirdly, our energy intensity
methodology has been updated to more clearly align ﬂoor areas and energy consumption. For
further details, refer to the Environmental Basis of Reporting in the 2023
Responsibility Report
.
Market-based emissions
The Scope 2 market-based factor is based on the provenance of electricity supplies, 99% of which
were on REGO-backed tariﬀs in 2023. For gas, 99% of supplies in 2023 were RGGO-backed.
Embodied carbon
Embodied carbon, included within Scope 3, Category 2 – Capital goods – is reported in full in
the year a project completes. This can lead to signiﬁcant variances year on year depending
on completions. Following the completion of two major projects in 2022, there were no major
completions in 2023. Six smaller refurbishment projects completed in 2023.
Independent assurance
Selected 2023 metrics were subject to independent limited assurance by Deloitte LLP in accordance
with ISAE 3000 (Revised) and ISAE 3410 Standards. Their unqualiﬁed assurance opinion and our
Environmental Basis of Reporting can be found in the 2023
Responsibility Report
.
Data notes
Embodied carbon emissions associated
with our asset regeneration activity,
included within Scope 3, Category 2 –
Capital goods, are recognised in full
in the year of completion. No major
projects completed in 2023.
Energy eﬃciency actions
The Group undertook a number of energy
eﬃciency actions in 2023. These included:
•
occupier engagement with a cross-
section of occupiers, some of whom
we have previously engaged and
others for the ﬁrst time;
•
six Green Forums, covering energy
analysis and sharing of both best
practice and ‘easy wins’;
•
recycling and energy audits, with
communication of follow-up
Recycling Improvement Strategies;
•
introduction to new organisations
that our occupiers already work
with to enhance energy saving
and/or biodiversity;
•
out of hours assessments to identify
actions for application across the
portfolio, including external light
assessments with ﬁndings reported
to occupiers across the portfolio; and
•
ongoing roll-out of LED lighting and
PIR sensors, building on work carried
out in previous years.
As the average occupation level across
our portfolio has continued to rise
and two new large buildings became
operational (Soho Place W1 and The
Featherstone Building EC1), energy
consumption has increased. However,
as the result of the actions noted
above, consumption remains below
pre-pandemic levels. Compared to our
2019 baseline, energy usage has reduced
12%, or 10% on an intensity basis.
See page 49
www.derwentlondon.com/
responsibility/publications
60
GHG emissions
tCO
2
e
% change
Location/
Market-based
2023
2022
2023
vs 2022
Scope 1
Combustion of fuel
1, 7
Location
3,007
2,750
9
Fugitive emissions
2
Location
1,357
312
335
Total Scope 1 emissions
7
Location
4,364
(A)
3,062
43
Scope 2
Purchased electricity, heat, steam and cooling for own use
3, 7
Location
2,795
(A)
2,388
17
Renewable tariﬀ REGO-backed electricity
7
Market
29
(A)
36
(21)
Total Scope 1 & 2 emissions
7
Location
7,159
5,450
31
(A)
Total Scope 1 & 2 emissions intensity (kgCO
2
e/sqm)
7
Location
18.2
14.7
23
Proportion UK-based
100%
100%
–
Scope 3 emissions
4
Category
1. Purchased goods and services (includes water)
7
36
38
(5)
2. Capital goods
5
799
(A)
32,869
(98)
3. Fuel and energy-related activities
7
1,411
1,309
8
5. Waste generated in operations
79
60
32
6. Business travel
7
58
24
142
7. Employee commuting
110
<5%
–
13. Downstream leased assets
6,7
5,517
4,433
24
Total Scope 3
7
8,010
(A)
38,733
(79)
Total Scope 1, 2 & 3 emissions
7
15,169
44,183
(66)
Total Scope 1, 2 & 3 (excluding embodied carbon) emissions
7
14,370
11,314
27
Total Scope 1, 2 & 3 (excluding embodied carbon) emissions
intensity (kgCO
2
e/sqm)
7
36.4
30.6
19
1
Managed portfolio gas use and fuel use in Derwent London owned vehicles.
2
Managed portfolio refrigerant loss from air conditioning systems.
3
Managed portfolio electricity use for common parts and shared services (landlord-controlled areas); no heat, steam or cooling was/is purchased.
4
Categories 4, 8, 9, 10, 11, 12, 14 & 15 are currently a) not identiﬁed as material to scope of business or b) not relevant.
5
Embodied carbon emissions from projects that completed in the year.
6
Emissions from tenant electricity consumption.
Metrics denoted with an
(A)
have been subject to independent limited assurance by Deloitte LLP – see Data notes on page 60.
Global energy use
kWh
% change
2023
2022
7
2023
vs 2022
7
Gas (combusted on a whole building basis)
16,424,375
(A)
15,027,749
9
Electricity (consumption from landlord-controlled areas)
13,596,037
(A)
12,427,759
9
Electricity (consumption from tenant-controlled areas)
26,642,461
(A)
22,926,293
16
Total energy (consumption from landlord areas for electricity and gas)
30,020,412
(A)
27,455,508
9
Total building energy (consumption from landlord and
tenant-controlled areas and gas)
56,662,873
(A)
50,381,801
12
Derwent London vehicles
11,245
26,715
(5)
7
2022 carbon and energy data restated – see page 60 for details.
For more analysis of our GHG emissions, energy consumption and renewable energy generation, use and procurement, visit the
data section of our latest
Responsibility Report
.
Derwent London plc
Report and Accounts 2023
Strategic report
61
Our
buildings
are our
brand
PROPERTY REVIEW
Network W1
62
The UK economy remained sluggish in
2023, with elevated interest rates and
inﬂation impacting conﬁdence. In the
real estate sector, higher debt costs and
lower investor conﬁdence fed through
to a substantial slowdown in investment
turnover. In central London, the £5.2bn
of transactions was 59% below the
10-year average. Although the second
half of the year saw inﬂation decrease
and interest rates stabilise, the outward
movement in property valuation yields,
which began in H2 2022, continued
throughout 2023.
Against this backdrop the Group’s
investment portfolio was valued
at £4.9bn as at 31 December 2023
compared to £5.4bn at the end of
2022. There was a deﬁcit for the year
of £583.3m which, after accounting
adjustments of £11.7m, produced
a decline of £595.0m, including our
share of joint ventures.
Valuation
The portfolio valuation, including
developments, decreased 10.6%,
following a 6.8% decline in 2022. This
takes the writedown since June 2022
to 17.8% and we believe valuations
are now approaching this cycle’s lows.
Our portfolio valuation movement
outperformed the MSCI Central London
Oﬃces Quarterly Index which was
-11.1% (and -21.6% since June 2022).
This outperformance was driven by
the quality of our portfolio, balanced
between core income properties and
value add opportunities. The wider UK
All Property Index was down by 5.6%.
The EPRA initial yield is 4.3% (December
2022: 3.7%) which, after allowing for the
expiry of rent-free periods and contractual
uplifts, rises to 5.2% on a ‘topped-up’
basis (December 2022: 4.6%).
The occupier market remained more
resilient for better quality buildings.
Our EPRA valuation rental values were
up 2.1%, an improvement on the 1.3%
uplift in 2022, and towards the top end
of our guidance range for 2023 of 0%
to +3%. Leasing activity was particularly
buoyant, with £28.4m of transactions
during the year.
Our central London properties, which
represent 98% of the portfolio, declined
by 10.7%. West End values were down
8.6% outperforming the City Borders,
where values reduced 15.8%, with the
latter seeing greater outward yield
movement. The balance of the portfolio,
our Scottish holdings, was down 4.9%.
During the year, our two on-site
developments were 25 Baker Street W1
and Network W1. Both are in the West End
where occupier demand is strongest. They
were valued at £394.6m, up 8.1% after
adjusting for capex invested during the
year and represent 8% of the portfolio.
Highlights
•
Portfolio underlying capital value
movement -10.6%
–
On-site developments +8.1%,
principally due to pre-letting
activity at 25 Baker Street W1
–
Portfolio excluding
developments -11.9%
–
Buildings valued at ≥£1,500
psf outperformed with values
-7.1%
•
EPRA valuation ERV growth 2.1%
•
True equivalent yield up 67bp to
5.55%
Nigel George
– Executive Director
Derwent London plc
Report and Accounts 2023
Strategic report
63
Valuation yields
Derwent London true equivalent yield
UK 10-year Gilt
%
0
2
4
6
8
10
12
2001
2003
2005
2007
2009
2011
2013
2015
2017
2019
2021
2023
True equivalent yield
%
4.0
4.5
5.0
5.5
6.0
2014
(26)
2015
2016
2017
2018
2019
2020
2021
2022
2023
(29)
(4)
6
25
(4)
(6)
(3)
3
1
3
0
(9)
(15)
(4)
42
25
42
(3)
5-year movement:
+82 basis points
(17)
Portfolio income potential
Contractual rent
Contractual rental uplifts
(including pre-lets)
Available to occupy
Under refurbishment / development
Rent reviews and lease renewals
Reversion %
0
100
25
200
50
300
75
400
100
Rental income (£m)
Reversion (%)
2019
2020
2021
2022
2023
BBB yield
PROPERTY REVIEW
continued
Valuation
continued
This overall strong performance mainly came from 25 Baker
Street where there was signiﬁcant pre-letting during the year,
despite an outward movement in valuation yields. In addition,
the valuers released some development surpluses following
good progress on site. Both developments are due for delivery
in 2025 and require £223m of capex to complete. Excluding
these, the portfolio valuation decreased by 11.9% on an
underlying basis.
The core income element of our portfolio is largely buildings
where refurbishment or redevelopment has been undertaken,
providing quality well-designed oﬃce space to meet current
occupier trends. These properties generally have a higher
capital value per square foot and, as illustrated below, proved
more resilient. Our lower value properties mostly provide future
repositioning opportunities where we can deliver the next
generation of high quality space.
Valuation movement by capital value banding
Capital value banding
£psf
Weighting by value
%
Capital value change
%
≥£1,500
22
(7.1)
£1,000 - £1,499
23
(11.4)
<£1,000
47
(14.3)
Sub-total
92
(11.9)
On-site developments
8
8.1
Portfolio
100
(10.6)
Derwent London’s total property return for 2023 was -7.3%,
which compares to the MSCI Quarterly Index of -7.9% for
Central London Oﬃces and -1.0% for UK All Property.
Further details on the progress of our projects are in the
‘Developments and refurbishments’ section below and additional
guidance on the investment market is laid out in the ‘Outlook
and guidance’ section above.
Portfolio reversion
Our contracted annualised cash rent as at 31 December
2023 was £206.5m, a 1.1% increase over the last 12 months.
With a portfolio ERV of £309.6m there is £103.1m of potential
reversion. Within this, £44.6m is contracted through a
combination of rent-free expiries and ﬁxed uplifts, all of
which is straight-lined in the income statement under IFRS
accounting standards; our IFRS accounting rent roll at
31 December 2023 was £211.0m.
On completion, our on-site developments could add £33.0m
at the current ERV, of which £15.6m or 47% of this is pre-let.
There are then £7.5m of smaller refurbishment projects. This is
up from £2.7m a year ago, however, c.80% of this came from
expiries and breaks in the last four months of the year. These
units will be upgraded during 2024. The ERV of ‘available to
occupy’ space is £10.9m, the main elements of which are £4.1m
at The White Chapel Building E1, £1.8m at The Featherstone
Building EC1 and £1.3m at 230 Blackfriars Road SE1. Since year
end, £3.3m of available space has been let or is under oﬀer.
The balance of the potential reversion of £7.1m comes from
future reviews and expiries.
64
Rental value growth
Derwent London H1 growth
Derwent London H2 growth
MSCI Central London Oﬃces annual growth
Rental growth (%)
(5)
0
5
10
15
2014
2015
2016
2017
2018
2019
2021
2022
2023
2020
Total property return
Derwent London
MSCI Central London Oﬃces
1
MSCI UK All Property
1
(12)
(9)
(6)
(3)
0
3
6
9
12
15
18
Total return (%)
2019
2020
2021
2022
2023
1
Quarterly Index.
1.2
7.4
4.1
0.3
(1.0)
(2.4)(2.3)
6.3
5.9
16.5
(3.4)
(7.3)
(8.0)
(7.9)
(9.1)
Members of the Valuation and Investment team
Tea Building E1
Derwent London plc
Report and Accounts 2023
Strategic report
65
PROPERTY REVIEW
continued
Valuation
continued
Portfolio statistics – valuation
Valuation
£m
Weighting
%
Valuation
1
performance
%
Let
floor area
2
‘000 sq ft
Vacant
available
floor area
‘000 sq ft
Vacant
refurbishment
floor area
‘000 sq ft
Vacant
project
floor area
‘000 sq ft
Total
floor area
‘000 sq ft
West End
Central
3,211.5
66
(7.9)
2,659
27
77
236
2,999
Borders
318.4
6
(15.5)
395
24
10
0
429
3,529.9
72
(8.6)
3,054
51
87
236
3,428
City
Borders
1,272.9
26
(15.8)
1,387
220
34
0
1,641
Central London
4,802.8
98
(10.7)
4,441
271
121
236
5,069
Provincial
75.7
2
(4.9)
312
13
0
0
325
Total portfolio
2023
4,878.5
100
(10.6)
4,753
284
121
236
5,394
2022
5,364.2
100
(6.8)
4,656
359
41
404
5,460
1
Underlying – properties held throughout the year.
2
Includes pre-lets.
Rental income proﬁle
Rental
uplift
£m
Rental
per annum
£m
Annualised contracted rental income, net of ground rents
206.5
Contractual rental increases across the portfolio
44.6
Contractual rental from pre-lets on developments
1
15.6
Letting 284,000 sq ft available ﬂoor area
10.9
Completion and letting 121,000 sq ft of refurbishments
7.5
Completion and letting 236,000 sq ft of developments
17.4
Anticipated rent review and lease renewal reversions
7.1
Portfolio reversion
103.1
Potential portfolio rental value
309.6
1
155,500 sq ft of pre-lets in addition to 45,800 sq ft pre-sold, at 25 Baker Street W1.
Portfolio statistics – rental income
Net contracted
rental income
per annum
£m
Average rental
income
£ per sq ft
Vacant space
rental value
per annum
£m
Lease reversion
per annum
1
£m
Portfolio
estimated rental
value per annum
£m
Average
unexpired lease
length
2
Years
West End
Central
116.3
45.08
25.0
53.3
194.6
7.9
Borders
21.0
53.42
0.8
0.4
22.2
5.6
137.3
46.17
25.8
53.7
216.8
7.5
City
Borders
64.7
47.34
9.8
13.4
87.9
4.6
Central London
202.0
46.54
35.6
67.1
304.7
6.6
Provincial
4.5
14.53
0.2
0.2
4.9
1.6
Total portfolio
2023
206.5
44.42
35.8
67.3
309.6
6.5
3
2022
204.2
44.86
50.3
50.1
304.6
6.4
1
Contracted uplifts, rent reviews/lease renewal reversion and pre-lets.
2
Lease length weighted by rental income at year end and assuming tenants break at ﬁrst opportunity.
3
7.4 years after adjusting for ‘topped-up’ rents and pre-lets.
66
Sustainability
In 2019, we published our original SBTi-
veriﬁed targets which were aligned
with a 2°C climate warming scenario.
Following publication by SBTi of its
1.5°C-aligned pathway, we have rebased
our near-term targets to align with this
new methodology. We are committed
to reducing our Scope 1 & 2 carbon
footprint by 42% by 2030 from our 2022
baseline. We are ﬁnalising our long-
term SBTi net zero carbon target, which
will commit us to reducing our overall
carbon footprint across all Scopes by
90% by 2040 against our 2022 baseline.
In 2023, 99% of energy used in the
year was purchased on renewable
tariﬀs backed by REGOs (electricity)
or RGGOs (gas).
Whilst energy usage across the London
managed portfolio increased 12.5%
in 2023 to 56.7million kWh, this was
principally due to Soho Place W1 and
The Featherstone Building EC1 became
operational in mid-2022. Consequently,
energy intensity increased year on year
to 149 kWh/sqm which is above the
‘target’ of 138 kWh/sqm. Although an
increase, we remain on track to meet
our longer-term target of 90 kWh/
sqm in 2030, which equates to a 46%
reduction compared to our 2019 baseline
(166 kWh/sqm).
Our overall carbon footprint reduced in
the year to 15,169 tCO
2
e (2022: 44,183
tCO
2
e). There were no large completions
in 2023, compared to two major
project completions in the prior year.
Consequently, our embodied carbon
(Scope 3, Category 2) fell from 32,869
tCO
2
e in 2022 to 799 tCO
2
e in 2023, and
has been oﬀset. Our operational carbon
footprint (Scopes 1, 2 & 3, excluding
embodied carbon; location-based)
increased 27% to 14,370 tCO
2
e.
At December 2023, 68% of our London
commercial portfolio by ERV (including
on-site projects) had an EPC rating of ‘A’
or ‘B’ and was compliant with proposed
2030 legislation. A further 19% was rated
EPC ‘C’. The costs and likely timing of
upgrading the remainder of the portfolio
to ensure ongoing legislative compliance
have been integrated into our asset
management and ﬁnancial planning.
Highlights
•
Planning consent secured for 18.4
MW solar park on Scottish land
•
Energy usage increased to
56.7million kWh (+12.5%)
–
Soho Place W1 and The
Featherstone Building EC1
completed and became
operational in mid-2022
• Energy intensity increased
to 149 kWh/sqm (+4.9%)
• Embodied carbon intensity
of both on-site developments
are in line with 2025 targets
(≤600 kgCO
2
e/sqm)
Our plans for an 18.4 MW solar park
on our Scottish land, that we expect
will generate in excess of 40% of
the electricity needs of our London
managed portfolio, came a step closer
following receipt of planning consent in
the year. Construction is scheduled to
start through the second half of 2024,
with generation of green electricity
to commence through 2025. We also
continue to explore other self-generation
and carbon removal opportunities,
including further tree planting.
Ten largest tenants
% of rental
income1
Expedia
7.6%
Burberry
6.7%
Public sector
6.0%
G-Research
4.7%
Boston Consulting Group
3.3%
Fora (including
The Oﬃce Group)
3.1%
Arup
2.5%
VCCP
2.1%
FremantleMedia Group
2.0%
Apollo
1.9%
Tenant diversity
% of rental
income1
Media
20
Business services
17
Retail head oﬃce
10
Online leisure
9
Fintech
9
Financial
7
Retail & hospitality
7
Technology
6
Public sector
6
Flexible oﬃce providers
4
Other
5
1
Based upon contracted net rental income
of £206.5m.
Central London oﬃce rent
‘Topped-up’ income
£0-£30 per sq ft
4%
£30-£40 per sq ft
8%
£40-£50 per sq ft
11%
£50-£60 per sq ft
24%
£60-£70 per sq ft
18%
£70-£80 per sq ft
17%
£80+ per sq ft
18%
Derwent London plc
Report and Accounts 2023
Strategic report
67
Leasing and
asset management
Lettings
We saw strong occupier demand
across all our villages, with total letting
activity in 2023 of £28.4m across 50
transactions and covering 340,500
sq ft. This is a signiﬁcant increase
compared to the £9.8m of lettings
in the prior year. On average, new
leases (including pre-lets) were agreed
8.0% above December 2022 ERV.
Highlights
Lettings
•
£28.4m of new leases, on average
8.0% above December 2022 ERV
–
Includes £16.0m of pre-lets
at 25 Baker Street W1, 13.4%
above ERV
•
Strong demand across all villages,
split 77% West End and 23%
City Borders
Asset management
• 81 asset management
transactions with rent of £41.5m,
3.5% above the previous income
•
Average 1.7% above December
ERV
EPRA vacancy rate
•
Down 2.4% through 2023 to 4.0%
Pre-lets at 25 Baker Street W1 to PIMCO
and Moelis, which together total £16.0m
of headline rent, were signed 13.4%
above ERV with the remaining open
market lettings 4.4% above ERV.
The average WAULT (to break) of new
leases in 2023 was 9.9 years, rising to
10.8 years excluding the £3.6m (51,100
sq ft) of ‘Furnished + Flexible’ lettings,
and we currently operate 144,400 sq
ft of these smaller units with a further
21,500 sq ft on site or committed.
Since the start of 2024, £1.8m of new
leases have been agreed on average
5.6% above December 2023 ERV, and
there is £2.7m under oﬀer.
PROPERTY REVIEW
continued
Leasing by location in 2023
Location
Pre-let income
(£m)
Non pre-let income
(£m)
Total income
(£m)
Total income
%
West End
16.3
5.6
21.9
77
City Borders
–
6.5
6.5
23
Total
16.3
12.1
28.4
100
Emily Prideaux
– Executive Director
68
Leasing in 2023 and 2024 to date
Let
Performance against Dec-22 ERV (%)
Area
sq ft
Income
£m pa
WAULT
1
yrs
Open market
Overall
2
H1 2023
228,000
19.3
11.0
8.9
7.3
H2 2023
112,500
9.1
7.5
10.4
9.5
2023
340,500
28.4
9.9
9.4
8.0
2024 to date
32,000
1.8
8.8
7.4
3
5.6
3
1
Weighted average unexpired lease term (to break).
2
Includes short-term lettings at properties earmarked for redevelopment.
3
Performance against December 2023 ERV.
Principal lettings in 2023
Property
Tenant
Area
sq ft
Rent
£ psf
Total
annual
rent
£m
Lease term
Years
Lease break
Year
Rent-free equivalent
Months
H1
25 Baker Street W1
PIMCO
106,100
103.40
11.0
15
–
37
The Featherstone Building EC1
Buro Happold
31,100
74.40
2.3
15
10
1
24, plus 12 if no break
One Oxford Street W1
Uniqlo
22,200
Conf
2
Conf
2
10
5
12
Tea Building E1
Jones Knowles Ritchie
8,100
60.00
0.5
10
5
12, plus 12 if no break
The White Chapel Building E1
Comic Relief
5,000
61.90
3
0.3
5
3
6, plus 1 if no break
Middlesex House W1
Zhonging Holding Group
4,200
81.00
3
0.3
3
1.5
–
H2
25 Baker Street W1
Moelis
49,400
101.25
5.0
15
10
24, plus 9 if no break
The Featherstone Building EC1
Tide
14,400
71.00
1.0
10
5
15, plus 11 if no break
The Featherstone Building EC1
Avalere Health
10,900
81.00
3
0.9
10
5
5, plus 5 if no break
Tea Building E1
Gemba
7,100
63.80
3
0.5
5
–
8
Tottenham Court Walk W1
Sostrene Greene
6,400
54.90
0.4
10
6
12
The White Chapel Building E1
Asthma & Lung UK
7,000
45.00
0.3
10
3
7, plus 8 if no break
1
There is an additional break at year 5 on level eight subject to a 12-month rent penalty payable by the tenant.
2
Uniqlo will pay a base rent (subject to annual indexation) plus turnover top-up.
3
‘Furnished + Flexible’ (Cat A+) lettings.
45 Whitﬁeld Street W1
Derwent London plc
Report and Accounts 2023
69
Strategic report
Asset management
As the shortage of quality supply across
the London oﬃce market becomes
increasingly apparent, businesses are
having to plan their occupational
requirements earlier. Consequently,
we engaged with several occupiers
who have already begun planning for
lease breaks/expiries in 2026/27. The
opening of our two Member Lounges
– DL/78 in 2021 and DL/28 in 2023 – is
having a positive impact on these early
conversations, with many occupiers
valuing the additional amenity and level
of service they provide.
Overall, asset management activity
in 2023, excluding two short-term
development-linked regears, totalled
670,000 sq ft, 30% higher than in 2022
(516,900 sq ft).
The key transactions were:
•
Brunel Building W2:
Paymentsense
took an additional 49,600 sq ft on
a lease assignment from Splunk,
increasing its occupancy by 150%
to 82,600 sq ft. Simultaneously the
lease break on their existing space
was removed and the term across
all ﬁve ﬂoors was extended to 2036,
with a minimum rental uplift at next
review. The WAULT on these ﬁve ﬂoors
increased to 12.7 years from 6.9 years.
•
1 Stephen Street W1:
As part
of a wider asset management
transaction, Fremantle agreed
the removal of its lease break in
September 2024 on levels 3 to 6
adding ﬁve years’ term certain
alongside a 7.2% uplift in rent in
September 2024, and the hand
back of level 7. The space will be
refurbished this year unlocking a
substantial rental uplift.
Also within the building, Freud
Communications agreed the
removal of its lease break in
September 2024, adding ﬁve
years’ term certain to the lease.
•
White Collar Factory EC1:
Rent
review on 28,400 sq ft to AKTII settled
15% ahead of the previous rent,
and in line with December 2022 ERV.
•
Tea Building E1:
Monkey Kingdom
renewed its lease on 7,500 sq ft
at £0.5m, a level 9.1% above the
previous rent and 4.3% above
December 2022 ERV.
The WAULT (to break) across the
portfolio was broadly stable at 6.5
years (December 2022: 6.4 years)
despite the passage of time, reﬂecting
our leasing and asset management
activity. This is split 7.5 years in the West
End and 4.6 years in the City Borders.
Our ‘topped-up’ WAULT (adjusted for
pre-lets and rent-free periods) was
also stable at 7.4 years (December
2022: 7.2 years).
At the start of 2023, 10% of passing
rent was subject to break or expiry in
the year. After adjusting for disposals
and space taken back for larger
schemes, 65% of income exposed to
breaks and expiries was retained or
re-let by year end. This is lower than
the rate reported at H1 2023 because
units with a passing rent of £6.0m were
vacated in the ﬁnal four months of the
year and there was insuﬃcient time to
complete our asset improvement plans
prior to year end. 1-2 Stephen Street
W1 (units previously let to BrandOpus
and G-Research on low rents of £43.75
psf and £50 psf respectively) and 20
Farringdon Road EC1 (unit previously
let to Indeed at a rent of £57.50 psf)
comprised 67% of this and improvement
works have already commenced at these
units ahead of re-letting.
Asset management activity in 2023
Number
Area
‘000 sq ft
Previous rent
£m pa
New rent
2
£m pa
Uplift
%
New rent vs Dec-22
ERV %
Rent reviews
28
381.0
22.1
23.4
5.8
2.4
Lease renewals
39
62.8
3.1
3.2
3.3
6.7
Lease regears
1
14
226.2
14.9
14.9
0.1
-0.3
Total
81
670.0
40.1
41.5
3.5
1.7
1
Excludes two development-linked regears.
2
Headline rent, shown prior to lease incentives.
Members of the Leasing and Marketing teams
PROPERTY REVIEW
continued
Leasing and asset management
continued
70
Ten-year vacancy trend
Derwent London (by rental value)
CBRE central London oﬃces (by ﬂoorspace)
CBRE West End oﬃces (by ﬂoorspace)
Vacancy rate (%)
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
0
1
2
3
4
5
6
7
8
9
10
Average unexpired lease length
West End
Central London
City Borders
0
2
4
6
8
10
12
Years
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
Lease expiry and break analysis
Retained
Re-let
Vacant
Average retained/re-let (83%)
0
10
20
30
40
50
60
70
80
90
100
%
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
63
45
63
57
76
83
65
47
59
62
10
44
26
35
14
7
22
30
20
3
27
11
11
8
10
10
13
23
21
35
Vacancy
The portfolio EPRA vacancy (which is space ‘available to
occupy’) decreased by 2.4% through 2023 to 4.0% (December
2022: 6.4%) with an ERV of £10.9m. The decrease primarily
reﬂects leasing progress at The Featherstone Building EC1
(58,600 sq ft leased in 2023), The White Chapel Building E1
(15,200 sq ft leased in 2023) and Soho Place W1 (23,100 sq ft
of retail space leased in 2023).
Within our EPRA portfolio, there is project space with an ERV
of £7.5m which is excluded from the EPRA vacancy rate. This
includes space vacated in the last four months of the year
where projects are at an early stage. Once complete, EPRA
vacancy would increase to 6.8%, a 0.3% reduction compared
to the comparable rate at December 2022 (7.1%).
Rent and service charge collection
Rent and service charge collection rates remain high at 98%
for the December 2023 quarter.
Members of the Asset and Property Management teams
Derwent London plc
Report and Accounts 2023
Strategic report
71
Investment
We incurred total project expenditure
(including our share of the 50 Baker
Street W1 JV) of £162.8m, plus £6.5m
of capitalised interest. Of this, £117.4m
was at our two on-site major projects.
We remain committed to owning
a portfolio balanced between core
income properties and those that
oﬀer future regeneration potential.
At 31 December 2023, the portfolio
was split 56% ‘core income’ and 44%
‘future opportunity’. This excludes
Old Street Quarter EC1, with an
existing ﬂoor area of c.400,000 sq ft,
where our conditional acquisition is
expected to complete from 2027 and
oﬀers signiﬁcant potential to create
a mixed-use campus.
Highlights
Developments
•
£169.3m of project expenditure
•
Two major projects on site – 25
Baker Street W1 (298,000 sq ft)
and Network W1 (139,000 sq ft)
–
Combined 5.8% yield on cost
and 13% development proﬁt
–
25 Baker Street oﬃces
75% pre-let (13.4% above
December 2022 ERV)
•
Medium and longer-term pipeline
totals over 1.3m sq ft
Disposals
•
Total disposals £66m; major
sales were 19 Charterhouse Street
EC1 (Q1: £53.6m; 4.6% yield)
and 12-16 Fitzroy Street W1
(Q2: £6.7m; 6.9% yield)
Over the last ﬁve years, we have sold
£894.0m of property, primarily focused
on smaller non-core buildings where
there was limited capacity for extra ﬂoor
area and amenity. Disposal proceeds
have largely been recycled into our
development pipeline, with £855.4m
of capital expenditure and acquisitions
of £468.6m. This has helped us maintain
a strong balance sheet with conservative
levels of gearing, despite the valuation
declines seen, and provides ﬁrepower
for future acquisition opportunities that
we expect to arise over the coming
12-24 months.
The Group’s capital allocation decisions
in 2023 were focused on its exciting
development and refurbishment pipeline.
PROPERTY REVIEW
continued
Paul Williams
– Chief Executive
Nigel George
– Executive Director
72
Net property investment
Acquisitions
Disposals
Capital expenditure
£m
(400)
(300)
(200)
(100)
0
100
200
300
400
500
2019
2020
2021
2022
2023
Principal disposals in 2023
Property
Date
Area
sq ft
Total
after
costs
£m
Net yield
%
Net
rental
income
£m pa
19 Charterhouse
Street EC1
Q1
63,200
53.6
4.6
2.6
12-16 Fitzroy
Street W1
Q2
8,600
6.7
6.9
0.5
Other
–
2,200
5.3
–
–
Total
74,000
65.6
4.4
3.1
Acquisitions and disposals
Developments and refurbishments
Major on-site projects
437,000
sq ft
Major on-site projects
Signiﬁcant progress was made through 2023 at our two
on-site projects, 25 Baker Street W1 and Network W1, which
together total 437,000 sq ft and are both in the West End.
The construction costs are now ﬁxed and we have substantially
de-risked delivery at 25 Baker Street. With limited competing
supply in either the Marylebone or Fitzrovia sub-markets, we
are conﬁdent in the leasing prospects for the remainder of
the available space. We currently expect them to deliver a
combined 5.8% yield on cost and 13% development proﬁt.
•
25 Baker Street W1
(298,000 sq ft) – an oﬃce-led scheme
in Marylebone, which is expected to complete in H1 2025,
comprising 218,000 sq ft of best-in-class oﬃces, 28,000 sq
ft of new destination retail around a central landscaped
courtyard (which is being delivered for the freeholder, The
Portman Estate) and 52,000 sq ft of residential, of which
45,000 sq ft is private. Occupier demand for the oﬃce
space is high, with 155,500 sq ft pre-let through 2023
at an average headline rent of £103 psf, 13.4% ahead
of December 2022 ERV.
In addition, seven of the 41 private residential units have
exchanged for £38.9m, reﬂecting an average capital value
of £3,560 psf, and a further three are under oﬀer. The oﬃce
and residential structures have now completed and the
façade installation is making good progress. The mid-Stage
5 embodied carbon estimate is c.600 kgCO
2
e/sqm.
•
Network W1
(139,000 sq ft) – an oﬃce-led scheme in
Fitzrovia, targeted for completion in H2 2025, comprising
134,000 sq ft of adaptable oﬃces and 5,000 sq ft of retail.
The project is being delivered on a speculative basis. Ground
and basement works have completed and construction of
the core and upper slabs has reached level six. The Stage 4
design embodied carbon estimate is c.530 kgCO
2
e/sqm.
There was limited investment activity in 2023. Disposals totalled £65.6m at a blended capital value of £845 psf and
yield of 4.4% (excluding the forward sale of residential units at 25 Baker Street W1), compared to acquisitions of £3.8m.
Derwent London plc
Report and Accounts 2023
Strategic report
73
PROPERTY REVIEW
continued
Major on-site development pipeline
Project
Total
25 Baker Street
W1
Network
W1
Completion
H1 2025
H2 2025
Oﬃce (sq ft)
352,000
218,000
134,000
Residential (sq ft)
52,000
52,000
–
Retail (sq ft)
33,000
28,000
5,000
Total area (sq ft)
437,000
298,000
139,000
Est. future capex
1
(£m)
223
139
84
Total cost
2
(£m)
734
486
248
ERV (c.£ psf)
–
95
90
ERV (£m pa)
33.0
20.4
3
12.6
Pre-let /sold area (sq ft)
201,300
201,300
4
–
Pre-let income (£m pa, net)
15.6
15.6
–
Embodied carbon intensity (kgCO
2
e/sqm)
5
c.600
c.530
Target BREEAM rating
Outstanding
6
Outstanding
Target NABERS rating
4 Star or above
6
4 Star or above
Green Finance
Elected
Elected
1
As at 31 December 2023.
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
Includes PIMCO and Moelis pre-lets, ﬁve private residential units at year end, the pre-sold aﬀordable housing plus the courtyard retail and Gloucester Place oﬃces
pre-sold to The Portman Estate.
5
Embodied carbon intensity estimate as at stage 4 or mid-stage 5.
6
Excludes oﬃces at 30 Gloucester Place.
Developments and refurbishments
continued
Network W1
74
Our medium-term pipeline
•
Holden House W1
(c.150,000 sq ft) – from mid-2025: we are
updating our plans which will have a higher oﬃce weighting
and better sustainability credentials than the existing
planning consent.
•
50 Baker Street W1
(c.240,000 sq ft at 100%) – from early
2026: held in a 50:50 joint venture with Lazari Investments,
we have submitted a planning application, the outcome of
which is expected in H1 2024. This leasehold property is on
The Portman Estate and includes another building in their
ownership.
Our longer-term pipeline
•
Old Street Quarter EC1
(750,000+ sq ft) – from 2027/28: we
continue to progress plans for this 2.5-acre island site which
our studies suggest has potential for a signiﬁcant mixed-
use campus development, potentially incorporating both
oﬃce and ‘living’ components. 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 existing site.
•
230 Blackfriars Road SE1
(200,000+ sq ft) – from 2030:
our early appraisals show capacity for a large oﬃce-led
development for this 1960s building, more than three times
the existing ﬂoor area.
Refurbishments
Refurbishment projects will comprise an increasing proportion
of capital expenditure over the coming years as we continue
to upgrade the portfolio to meet the evolving requirements of
an increasingly selective occupier base. Through improving the
amenity oﬀer and overall quality, as well as upgrading EPCs,
we expect these projects to deliver an attractive rental uplift.
Smaller units, typically <10,000 sq ft, will be appraised for our
‘Furnished + Flexible’ product where occupiers are willing to pay
a premium rent for ﬂexible, high quality space.
Members of the Design team and MSMR Architects
Medium-term pipeline
c.
390,000
sq ft
(at 100%) of high quality oﬃce-led space
Four schemes totalling
c.
1.3
m
sq ft
Longer-term pipeline could deliver
950,000
+
sq ft
of mixed-use, oﬃce-led space
Future development projects
Derwent London plc
Report and Accounts 2023
Strategic report
75
FINANCE REVIEW
Macroeconomics had a major impact
on UK real estate in 2023, driving up
property investment yields and the
cost of new ﬁnance quite sharply.
Introduction
Most of the yield shift came in the
second half of the year and, though
there was a signiﬁcant improvement in
mood during December, volatility has
carried through into early 2024. Oﬃce
investment volumes in 2023 were also
substantially lower than normal. General
cost pressures continued to erode
business and household conﬁdence
through 2023 but inﬂation and wage
growth both moderated in the ﬁnal
quarter and the outlook is now for the
UK base interest rate to fall rather than
to rise. The pace and extent of those rate
decreases will have a decisive impact
upon our sector.
Derwent London has continued to
operate its well-established business
model eﬀectively through this period of
volatility, with many of the trends seen in
2022 continuing in 2023. Average oﬃce
rents in central London grew in the year,
better-quality buildings with modern
amenities and stronger environmental
performance outperforming. Older stock
was under pressure and we also saw
elevated energy costs carry into H1 2023.
Together with higher average vacancy
rates, these factors led to increased
irrecoverable property costs which
impacted our recurring earnings in 2023.
In addition, rental growth continued to
lag general cost inﬂation, a pattern we
have seen now for several years.
Similarly, while development and
refurbishment projects are both
bringing positive incremental returns,
development proﬁts have been
impacted by upward yield shift, higher
construction costs /fees and elevated
marginal interest rates.
Against this challenging background,
we have continued to balance value
creation with relatively resilient recurring
earnings and dividend growth, our high-
quality product is in demand and the
Derwent London balance sheet remains
among the strongest in the UK real
estate sector.
With a shortage of top-quality stock,
strong occupier demand and cost
increases moderating, conditions may be
starting to emerge where rents for the
best oﬃce space can outpace the lower
levels of general inﬂation.
Presentation of ﬁnancial results
The ﬁnancial statements have been prepared in accordance with UK
adopted International Accounting Standards (IAS). In common with usual
and best practice in our sector, alternative performance measures have
also been provided to supplement IAS based on the recommendations of
the European Public Real Estate Association (EPRA). EPRA Best Practice
Recommendations (BPR) have been adopted widely throughout this
report and are used within the business when considering our operational
performance as well as matters such as dividend policy and elements of
our Directors’ and senior staﬀ remuneration. Full reconciliations between
IFRS and EPRA ﬁgures are provided in note 40 and the EPRA deﬁnitions
are set out on pages 283 and 284.
Damian Wisniewski
– Chief Financial Oﬃcer
76
Net asset values and total return for the year
Upward yield shift, particularly in the second half, saw our IFRS
net asset value fall by 13.9% from £4,076m to £3,509m over
the year. EPRA net tangible asset (NTA) value per share also
declined 13.8% from 3,632p per share to 3,129p at 31 December
2023, 37% of the movement coming in the ﬁrst half and 63%
in the second.
EPRA net tangible assets per share
2,500
2,750
3,000
3,250
3,500
3,750
4,000
Pence
31 Dec 2022
EPRA
earnings
Proﬁt
on disposal
Dividends
paid
Revaluation
deﬁcit
Revaluation
deﬁcit in JVs
Other
31 Dec 2023
(79)
(516)
(8)
(3)
3,632
102
1
3,129
-13.8%
EPRA NTA movement
2023
p
2022
p
Opening EPRA NTA
3,632
3,959
Revaluation movement
(516)
(373)
Proﬁt on disposals
1
23
EPRA earnings
102
107
Ordinary dividends paid
(79)
(78)
Interest rate swap termination income
2
–
Share of joint venture revaluation
movement
(8)
(8)
Other
(5)
2
Closing EPRA NTA
3,129
3,632
After adding back dividends and property income distributions
paid in the year, the Group’s total return for the year was
-11.7% compared to -6.3% in 2022.
EPRA Net Disposal Value (NDV), which takes account of the
£138m positive fair value impact of ﬁxed rate debt and bonds
over their book values, was 3,243p per share against 3,768p per
share as at 31 December 2022.
Total net assets
£
3,508.8
m
Dec 2022: £4,075.5m
EPRA NTA per share
3,129
p
Dec 2022: 3,632p
IFRS loss before tax
£(
475.9
)m
2022: (£279.5m)
Property portfolio at fair value
£
4,844.7
m
Dec 2022: £5,321.8m
EPRA earnings per share (EPS)
102.0
p
2022: 106.6p
LTV ratio
27.9
%
Dec 2022: 23.9%
NAV gearing
38.7
%
Dec 2022: 30.8%
Interim and ﬁnal dividend per share
79.5
p
2022: 78.5p
Net interest cover ratio
4.1
x
2022: 4.2x
Net debt/EBITDA
8.8
x
Dec 2022: 7.8x
Gross property and other income
£
265.9
m
2022: £248.8m
Net rental income
£
186.2
m
2022: £188.5m
Derwent London plc
Report and Accounts 2023
Strategic report
77
FINANCE REVIEW
continued
Property portfolio at fair value
Knight Frank and Savills provided external valuations of the Group’s property portfolio as at 31 December 2023, the total of £4.8bn
wholly-owned properties allocated across the balance sheet as follows:
Dec 2023
£m
Dec 2022
£m
Investment property
4,551.4
5,002.0
Non-current assets held for sale
–
54.2
Owner-occupied property
46.1
50.0
Trading property
60.0
39.4
Property carrying value
4,657.5
5,145.6
Accrued income (non-current)
173.9
165.2
Accrued income (current)
20.2
23.6
Unamortised direct letting costs (non-current)
14.5
13.8
Unamortised direct letting costs (current)
2.4
2.5
Grossing up of headlease liabilities
(33.6)
(34.2)
Revaluation of trading property
9.8
4.8
Other
–
0.5
Fair value of property portfolio
4,844.7
5,321.8
Fair value of properties held in joint venture (50%)
33.8
42.4
Capital expenditure of £152.3m (2022: £114.8m) was invested
across the wholly-owned property portfolio in 2023 together
with capitalised interest of £6.3m (2022: £7.0m). Acquisitions
of new property were only £3.8m compared with £133.0m
a year earlier and the carrying value of disposals was also
lower at £64.0m (2022: £182.1m), principally the sale of
19 Charterhouse Street EC1 in Q1 which had been classiﬁed
as an ‘asset held for sale’ at 31 December 2022. A slower
investment market meant that our recycling activity
was below typical levels in 2023 and, as a result, we
have increased our planned disposals in 2024 and 2025.
Owner-occupied property comprises our head oﬃce at
25 Savile Row W1 and is included within ‘property, plant
and equipment’ at £46.1m (2022: £50.0m) together with
£3.8m (2022: £4.3m) of leasehold improvements, furniture,
equipment and artwork.
Trading property at the year-end increased to £60.0m
(2022: £39.4m) as we continue to build the residential units
under construction at 25 Baker Street W1. To date, we have
exchanged contracts on seven of these units totalling £39m
with completion due in 2025. Sales prices achieved to date are
in excess of our book cost and the estimated fair values, which
are not included within the IFRS balance sheet, were £9.8m
(2022: £4.8m) above cost at the year-end. The remaining
trading property was Welby House SW1, held at £3.6m. It was
originally acquired as a potential site for aﬀordable housing
and was sold in early 2024.
The accrued income through incentive periods also increased
marginally, the non-current amount being £173.9m (2022:
£165.2m) and the current portion being £20.2m (2022: £23.6m).
The fair value of our 50% holding at 50 Baker Street W1 was
£33.8m (2022: £42.4m) after a revaluation deﬁcit of £9.2m
(2022: £9.3m) in the year, retained proﬁts of £2.0m (2022:
£2.0m) and capital expenditure of £0.6m (2022: £1.6m).
Together with our other small joint venture interests, this
is included within ‘investments’ of £35.8m (2022: £43.9m).
Other balance sheet items
Our agreements in relation to the 25 Baker Street development
require us to deliver certain retail elements upon completion
to the freeholder, The Portman Estate, at an agreed price.
Further costs of £6.6m were incurred in 2023 and the £8.9m
total is included within ‘trading stock’. It cannot be classiﬁed
as ‘trading property’ as we hold no legal interest in the real
estate itself.
Trade and other receivables were £42.7m at 31 December
2023 (2022: £42.4m) and include £20.2m (2022: £23.6m) of
income accrued through incentive periods under IFRS 16 and
classiﬁed as a current asset. As noted above, £173.9m (2022:
£165.2m) of accrued rent was also classiﬁed as non-current as
the amounts reverse in more than one year from the balance
sheet date. The remaining accrued income shown as current
related to £2.4m of initial direct letting fees and £0.8m of rent
and interest. The balance of other non-current receivables was
made up of £14.5m (2022: £13.8m) of initial direct letting fees
and £12.6m (2022: £9.1m) of design and planning application
costs relating to the Old Street Quarter EC1 scheme. Our
expectation is that we will acquire the site in 2027 or once the
vendor provides vacant possession, if later. When that occurs,
these design and planning costs will be allocated and included
within investment property at fair value.
Property and other income
The Group’s gross property and other income increased to
£265.9m in 2023 from £248.8m in the year ended 31 December
2022. Gross rental income rose by 2.8% to £212.8m from
£207.0m, a further £8.0m of rent coming from Soho Place W1,
The Featherstone Building EC1 and Francis House SW1. In each
case, these projects completed in 2022 but a full 12 months
of income arose in 2023. £7.5m of additional rent came from
the rest of the portfolio while tenants vacating and space
taken back for refurbishments reduced gross rents by £5.7m
compared to 2022. Net disposals also reduced rent by £4.0m
compared to the prior year.
78
Lease surrender and rights-of-light premiums were only
£0.1m in total in 2023 compared with £1.4m in 2022. With no
completed residential properties available to be sold, trading
property sale proceeds were £nil (2022: £1.6m) though, as
noted above, we have now exchanged contracts on £39m
of new sales at our 25 Baker Street W1 construction project.
In accordance with our accounting policy, these sales will be
reﬂected in the income statement on completion, expected
to be in 2025.
As noted within last year’s statement and our 2023 half year
results, energy costs increased through late 2022 to mid 2023.
In addition, many of the services provided via our service
charges have also risen in price due to general inﬂation and
wage growth. Together with higher average vacancy rates,
irrecoverable service charge costs were therefore higher
than usual in H2 2022 and H1 2023. With energy costs falling
in the second half, irrecoverable service charge costs were
substantially lower in the second half of 2023, as set out below:
Our usual impairment testing of receivable balances has
again been carried out on trade receivables and the accrued
income balances created by the spreading of lease incentives.
Oﬃce rent collection across the portfolio has remained high
but there is still some weakness among the retail, gym and
hospitality sectors and we also saw a few of our smaller
tenants fail in 2023. We have also considered the carrying
value of prepaid costs at Old Street Quarter in accordance
with IAS 36. Together, this has taken the overall impairment
charge to £2.6m in 2023 against a credit in 2022 of £1.0m.
After allowing for all of these costs, net rental income fell
slightly to £186.2m in 2023 from £188.5m in 2022. With
surrender premiums, dilapidation receipts, other property
income and management fees included, net property and
other income also fell a little to £190.5m from £194.6m in
the prior year.
H1 2022
£m
H2 2022
£m
2022
£m
H1 2023
£m
H2 2023
£m
2023
£m
Service charges
Voids
0.6
2.8
3.4
2.1
1.8
3.9
Inclusive leases
0.3
0.4
0.7
0.3
0.2
0.5
Caps
0.3
0.3
0.6
1.0
0.1
1.1
Balancing charges/other
0.3
0.1
0.4
1.1
0.0
1.1
1.5
3.6
5.1
4.5
2.1
6.6
Other irrecoverable property expenditure also increased. In 2023, it totalled £17.4m, up from £14.4m in 2022, allocated across the
following main cost categories:
H1 2022
£m
H2 2022
£m
2022
£m
H1 2023
£m
H2 2023
£m
2023
£m
Property costs
Legal and letting
1.8
2.0
3.8
2.2
2.4
4.6
Rates
1.1
1.0
2.1
1.1
1.7
2.8
Ground rent
0.5
1.2
1.7
1.2
1.1
2.3
Marketing
1.1
0.7
1.8
1.0
0.7
1.7
Lounges & customer service
0.2
0.3
0.5
0.3
1.1
1.4
Repairs
0.2
0.5
0.7
0.7
0.4
1.1
Other
2.0
1.8
3.8
2.1
1.4
3.5
6.9
7.5
14.4
8.6
8.8
17.4
Movement in gross rental income
0
50
100
150
200
250
£m
31 Dec 2022
Major
developments &
refurbishments
Other lettings
& asset
management
Breaks, expiries
& voids
Acquisitions &
disposals
31 Dec 2023
207.0
8.0
7.5
212.8
(5.7)
(4.0)
Derwent London plc
Report and Accounts 2023
Strategic report
79
FINANCE REVIEW
continued
IFRS loss before tax and EPRA earnings per share
The IFRS income statement, which includes the substantial fair
value deﬁcit on the property portfolio and derivative ﬁnancial
instruments, showed a loss before tax for the year of £475.9m
(2022: loss of £279.5m). IFRS earnings per share were -424.3p
(2022: -249.8p).
EPRA earnings per share, which adjust for the fair value
movements and certain other items, was 102.0p per share
(2022: 106.6p). As noted above, the main reason was an
increase in irrecoverable property costs and overheads.
A table showing a reconciliation of the IFRS results to
EPRA earnings per share is included in note 40.
Like-for-like rental income
Like-for-like (LFL) gross rental income was up 1.7% over the
year, reﬂecting modest underlying rental growth. However,
LFL net rental income was lower by 1.4% due to the higher
irrecoverable property costs explained above and LFL net
property income, which takes account of dilapidations and
other property income, was down by 2.1%.
Internal controls, assurance and the regulatory
environment
Internal controls remained a key focus area during the year,
with good progress made enhancing existing documentation
and the evidencing of controls in anticipation of changes to
governance requirements and potential regulation.
The Financial Reporting Council has recently issued the
updated UK Corporate Governance Code (the Code), following
consultation during 2023. Changes to the Code have been
kept to a minimum, after the Government withdrew draft
secondary legislation in the autumn and recognising that
eﬀective governance should be targeted and proportionate.
The most signiﬁcant change to the Code will require Boards to
include an annual declaration in the annual report explaining
how they have monitored and reviewed the eﬀectiveness of the
internal control framework, and the Board’s conclusion as to
the eﬀectiveness of material controls.
In this context, we are continuing to document, review and,
where necessary, strengthen key processes and controls. This
will further build our resilience and enable the business to
respond quickly to emerging risks, while combating fraud and
enhancing the quality of reporting.
We continue to be supported by independent assurance
obtained from a range of external providers. Consistent with
last year, the principal sources include the annual statutory
audit, which was subject to a tender process in 2023. After
strong presentations from each of the shortlisted ﬁrms, the
Board has recommended that PwC remain as our auditor.
Additional external assurance is obtained on selected
sustainability, health and safety and green ﬁnance disclosures,
service charge audits, a twice-yearly external valuation and
internal audits that cover a range of key business risk areas.
Work will continue throughout 2024 to further enhance the
control environment, deﬁning key controls deemed material
to the long-term sustainability of the business and ensuring
we have suﬃcient assurance in place over these to inform the
Board’s declaration which will be required for our ﬁnancial year
commencing on 1 January 2026.
Administrative expenses and EPRA cost ratios
Salaries increased by an average of 6% in 2023 and headcount
also increased by 15 in the year. In addition, there was a £1.2m
underaccrual in 2022 for bonus payments awarded in March
2023 to Directors and Executive Committee members which
has therefore fallen into 2023. As a result, administrative
expenses were £39.1m in 2023 against £36.4m in 2022.
Adjusting for the bonus underaccrual, the underlying increase
year on year was 1.0%. In accordance with our normal practice,
we do not capitalise any of our overheads.
The higher property and administrative expenses in 2023 have
increased our EPRA cost ratio, including direct vacancy costs,
to 27.3% from 23.3% in 2022. Excluding direct vacancy costs,
the EPRA cost ratio was 22.3% (2022: 19.5%).
Other income statement items
The deﬁcit on the wholly owned investment portfolio’s
revaluation in 2023 was £581.5m (2022: £422.1m) with a
further £9.2m (2022: £9.3m) from our share of the 50 Baker
Street joint venture. Our head oﬃce at 25 Savile Row saw a
revaluation deﬁcit of £3.9m (2022: surplus of £0.7m), included
within the Group Statement of Comprehensive Income.
As noted above, the proﬁt on disposal of investment properties
was lower than usual in 2023 at £1.2m (2022: £25.6m), mainly
from the sale of 19 Charterhouse Street EC1.
Net ﬁnance costs increased marginally to £39.5m from £39.4m
in 2022 with capitalised interest slightly lower than the prior
year at £6.5m (2022: £7.0m).
The Group’s interest rate swaps saw a fair value loss on
derivative ﬁnancial instruments of £2.1m in 2023, contrasting
with the £5.8m gain in 2022 when rates moved sharply
upwards, but much of the 2023 movement was oﬀset by
a £1.8m gain in deferring the start date of these swaps.
Our joint venture with Lazari Investments at 50 Baker Street W1
showed a loss for the year of £7.2m (2022: £7.3m), mainly due
to the £9.2m (2022: £9.3m) revaluation deﬁcit noted above.
EPRA Earnings
0
50
100
150
200
250
£m
Gross rental
income
Premiums &
other income
Property
expenditure
Admin
expenses
Net
ﬁnance costs
Waivers &
impairments
Tax
charge
JVs/other
EPRA
earnings
212.8
4.6
(39.1)
(24.0)
(39.5)
(2.6)
(0.4)
2.7
114.5
80
Maturity proﬁle of debt facilities
0
100
200
300
400
500
600
700
800
£m
Fixed rate bonds and loans
Drawn bank loans
Headroom
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
83
175
230
66.5
383.5
118
127
475
82.5
17.5
30
Taxation
The corporation tax charge for the year ended 31 December
2023 was £nil.
The movement in deferred tax for the year was a credit of
£0.5m, (2022: charge of £0.9m) of which £0.5m was expensed
through the income statement. The amount credited through
‘other comprehensive income’ in relation to the owner-
occupied property at 25 Savile Row was £1.0m.
As well as other taxation paid during the year, in accordance with
our status as a REIT, £9.7m of tax was paid to HMRC relating to
withholding tax on property income distributions (PIDs).
Derwent London’s principles of good governance extend to
a responsible approach to tax. Derwent London has a low
tolerance of tax risk and successfully retained its low risk
status in every area of HMRC’s Business Risk Review (BRR+) in
July 2023. 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
Group borrowings rose to £1.34bn at 31 December 2023 from
£1.25bn a year earlier, impacted by lower than usual property
disposals in a hesitant investment market. The increase in debt
came from drawings under our unsecured revolving credit
facilities but available cash and undrawn facilities remained
very substantial, totalling £480m at the December 2023 year
end (2022: £577m). During the year, the £83m secured loan
also moved into current liabilities as it is due for repayment
or reﬁnancing in October 2024.
Taking account of leasehold liabilities, which were almost
unchanged over the year, derivative ﬁnancial instruments
and unrestricted cash, net debt was £1.36bn compared with
£1.26bn in December 2022.
The increase in debt as well as lower property valuations meant
that the Group’s EPRA loan-to-value ratio increased to 27.9%
from 23.9% in December 2022. It continues to be one of the
lowest in the sector. Interest cover also remained strong at
4.1 times, only marginally below the 4.2 times in 2022 with our
main debt covenant at 1.45 times. We have also disclosed net
debt to EBITDA for the ﬁrst time this year as it is increasingly
being used by some of our stakeholders. As at 31 December
2023, it was 8.8 times (31 December 2022: 7.8 times).
The other main change this year was the presentation of the
Cash Flow Statement, bringing us in line with a majority of our
peers and simplifying the presentation of what was becoming
an increasingly long statement. While the previous ‘direct’
method has some advantages, the ‘indirect’ method that
we now use indicates the main working capital movements
and clearly sets out the linkages between the proﬁt /loss from
operations and the cash ﬂow from operations.
Cash generated from operations in 2023 was £135.3m
(2022: £148.7m), the 2023 ﬁgure including £24.7m of cash
outﬂows (2022: £9.7m) incurred building up trading stock and
trading property balances at the 25 Baker Street development.
Though this is a project lasting several years, IAS 7 requires
these cashﬂows to be shown as a deduction against operating
cash ﬂow (rather than in investing activities) as they relate to
elements to be sold on completion rather than to be held as
investment properties. At the point when they are disposed of,
expected to be in 2025, there will be a substantial cash inﬂow
which will also pass through operating activities.
Though acquisitions were considerably lower than in 2022, cash
generated from property disposals was also much lower this
year and, as a result, the net cash used in investing activities
was £98.0m (2022: £51.7m).
Members of the Finance team
Derwent London plc
Report and Accounts 2023
Strategic report
81
FINANCE REVIEW
continued
Debt facilities and reconciliation to borrowings and net debt at 31 December 2023
Drawn
£m
Undrawn
£m
Total
£m
Maturity
Unsecured convertible bonds
175.0
–
175.0
2025
Secured bonds
175.0
–
175.0
2026
Unsecured green bonds
350.0
–
350.0
2031
Unsecured private placement notes
455.0
–
455.0
2026 – 2034
Secured loan
83.0
–
83.0
2024
Other loan
20.0
–
20.0
n/a
Non-bank debt
1,258.0
–
1,258.0
Club revolving credit – unsecured
66.5
383.5
450.0
2026
Bilateral revolving credit – unsecured
17.5
82.5
100.0
2027
Committed bank facilities
84.0
466.0
550.0
Debt facilities
1,342.0
466.0
1,808.0
Acquired fair value of secured bonds less amortisation
5.0
Unamortised discount on unsecured green bonds
(1.5)
Equity adjustment to convertible bonds less amortisation
(2.0)
Unamortised issue and arrangement costs
(7.4)
Borrowings
1,336.1
Leasehold liabilities
34.6
Cash and cash equivalents
(13.9)
Net debt
1,356.8
As we have been drawing more of our revolving credit facilities
in recent months, we decided to split our 1.36% interest rate
swap expiring in April 2025 into four parts. At the year end,
a £20m swap was subject to a forward start date and three
swaps totalling £55m were active.
Our next reﬁnancing is due in October 2024, an £83m secured
loan with a coupon of 3.99%. We are expecting to reﬁnance
this later in the year and have had a number of encouraging
discussions. Expectations are that the rate will be a little higher
than the current level.
At the year-end, 94% of our debt was at ﬁxed rates, 4% was
hedged by the active swaps and the balance of 2% was at
ﬂoating rate. With so much of the debt at ﬁxed rates, the
Group’s weighted average interest rate on a cash basis only
rose very slightly to 3.17% from 3.14% in December 2022 and
to 3.29% from 3.26% on an IFRS basis which adjusts for the
convertible and green bonds. The weighted average maturity of
our borrowings was 5.0 years at 31 December 2023 compared
to 6.2 years at 31 December 2022.
Debt and ﬁnancing
In 2022 and 2023, the real estate debt environment suﬀered
what are probably its two most challenging years since the
ﬁnancial crisis in 2007/8. The reasons this time are quite
diﬀerent and, importantly, banks and most other lenders
remain well capitalised. Borrowers also have generally
manageable levels of debt. However, after many years when
UK interest rates were held down by quantitative easing, the
return of inﬂation and a number of other global events have
led to big increases in the rates set by many central banks.
After 14 rate rises from December 2021, the UK base rate
reached 5.25% in August where it remains. Other features of
the past year or so have been volatility and uncertainty as the
market tries to absorb rapidly changing data and sentiment.
To illustrate this, the UK 5-year swap rate started 2023 at
4.0%, reached a high of 5.3% in July, and ended the year
close to its 12-month low of 3.3%. Longer rates also moved
signiﬁcantly: the 10-year UK gilt was 3.7% at the beginning of
2023, fell to 3.0% in early February, hit a high of 4.7% in August
before falling over 100bps to end the year at 3.6%.
Credit spreads have also ﬂuctuated signiﬁcantly. Against this
background, we chose not to reﬁnance any of our debt in 2023
but continued to hold active discussions with our relationship
lenders and also engaged with new parties. Conditions in early
2024 look more positive and we detect a little more optimism
among both lenders and borrowers. However, rates across the
curve have moved upwards since the beginning of 2024 and
uncertainty remains elevated.
82
Dividend
As in previous years, our dividend policy is to target progressive increases but to maintain a payout well-covered by EPRA earnings.
We also take our obligations to other stakeholders into account and consider any other IFRS realised gains and losses which
do not form part of EPRA earnings. The Board is recommending a 0.5p per share increase in the ﬁnal dividend to 55.0p. It will
be paid in May 2024 with 39.0p as a PID and the balance of 16.0p as a conventional dividend. The Company’s ISIN reference is
GB0002652740.
This will take the total dividend for the year to 79.5p, a 1.3% increase over 2022 with dividends paid and declared in relation to
2023 earnings 1.28 times covered by EPRA earnings.
Debt: key stats
2023
2022
Hedging proﬁle (%)
Fixed
94
100
Swaps
4
0
98
100
Percentage of debt that is unsecured (%)
81
79
Percentage of non-bank debt (%)
92
100
Weighted average interest rate – cash basis (%)
3.17
3.14
Weighted average interest rate – IFRS basis (%)
3.29
3.26
Weighted average maturity of facilities (years)
4.5
5.5
Weighted average maturity of borrowings (years)
5.0
6.2
Undrawn facilities and unrestricted cash (£m)
480
577
Uncharged properties (£m)
4,202
4,600
80 Charlotte Street W1
Derwent London plc
Report and Accounts 2023
Strategic report
83
FINANCE REVIEW
continued
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 £1.8bn, £650m satisfy our deﬁnition of Green Financing Transactions (GFTs). The GFTs comprise
the £350m Green Bond issuance in 2021 and a £300m ‘green’ tranche included within our main corporate £450m 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 beneﬁtted 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
W1
Soho Place
W1
The Featherstone
Building EC1
25 Baker Street
W1
Network
W1
Expected
completion
date
Completed in 2020
Completed in 2022
Completed in 2022
2025
2025
Category
for eligibility
Green building,
criterion 1 of section
3.1 of the Framework
(excludes Asta
House and Charlotte
Apartments)
Green building,
criterion 1 of section
3.1 of the Framework
(Site A)
Green building,
criterion 1 of section
3.1 of the Framework
Green building, criterion 1
and 2 of section 3.1 of the
Framework (excludes retail
and refurbished residential)
Green building,
criterion 1 of section
3.1 of the Framework
Impact
reporting
indicator
Building certiﬁcation
achieved (system &
rating)
Building certiﬁcation
achieved (system &
rating)
Building certiﬁcation
achieved (system &
rating)
Building certiﬁcation
achieved (system &
rating)
Building certiﬁcation
achieved (system &
rating)
Green
credentials
1
Achieved:
BREEAM – Excellent
(post-construction)
EPC – B
LEED – Gold
1 Soho Place
(Site A)
Achieved:
BREEAM –
Outstanding
(post-construction)
EPC – B
LEED – Gold
Achieved:
BREEAM –
Outstanding
(post-construction)
EPC – A
LEED – Platinum
25 Baker Street oﬃces
2
Achieved:
BREEAM – Outstanding
(design stage)
Expected:
BREEAM – Outstanding
(post-construction),
on target
LEED – Gold, on target
EPC – A, on target
30 Gloucester Place
2
oﬃces
Achieved:
BREEAM – Excellent
(design stage)
Expected:
BREEAM – Excellent
(post-construction),
on target
EPC – B, on target
Private residential
Expected:
Home Quality Mark –
4 Stars, on target
Achieved:
Outstanding
(design stage)
Expected:
BREEAM –
Outstanding (post-
construction), on
target
LEED – Gold, on target
EPC – A, on target
1
Green EGP credentials disclosed in accordance with the Framework and the Green Finance Basis of Reporting, available on our website and within the
Responsibility Report.
2
The development includes 206,000 sq ft of oﬃces at 25 Baker Street and 12,000 sq ft of oﬃces at 30 Gloucester Place.
84
Green borrowings and qualifying expenditure
£m
Green
facilities
Qualifying
expenditure
Drawn green
facilities
0
100
200
300
400
500
600
800
700
416.5
233.5
350
300
754.1
Green RCF
Available green headroom
Green bond
Drawn green facilities
Green expenditure
Qualifying ‘green’ expenditure
The qualifying expenditure as at 31 December 2023 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.
Costs which form part of the initial project appraisal or which are associated with delivering the project through to practical
completion are included within the eligible green expenditure of the project. Costs incurred subsequently are generally excluded
unless speciﬁcally elected as green projects.
80 Charlotte Street, Soho Place, and The Featherstone Building are all completed projects and are fully operational. The 25 Baker
Street scheme, which commenced on site in 2021, is due to reach practical completion in H1 2025 and the Network building, which
commenced on site in 2022 and was elected as an EGP in 2023, is due to reach practical completion in H2 2025.
Cumulative spend on each EGP as at the reporting date
Subsequent spend
EGP
Look back spend
£m
Q4 2019 – FY 2022
£m
2023 Spend
£m
Cumulative Spend
£m
80 Charlotte Street W1
185.6
52.5
–
238.1
Soho Place W1
1
57.5
166.8
(0.9)
2
223.4
The Featherstone Building EC1
29.1
67.6
0.8
97.5
25 Baker Street W1
26.5
42.3
89.8
158.6
Network W1
23.8
–
12.7
36.5
322.5
329.2
102.4
754.1
1
Soho Place Site B was disposed of in 2022. In accordance with section 3.3 of the Framework, the expenditure of £34.9m allocated to Site B has now been removed.
2
This relates mainly to capital contributions received post completion, for costs incurred during the construction period.
The total qualifying expenditure incurred in 2023 was £102.4m
and the cumulative qualifying expenditure on the EGPs at
31 December 2023 was £754.1m.
Drawn borrowings from GFTs as at 31 December 2023 were
£416.5m, which comprised of the £350m Green Bonds and
£66.5m drawn under the green tranche of the RCF. Therefore,
there was £233.5m undrawn under the £300m green tranche
of the RCF, all of which is 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.
More information can be found
in the
Responsibility Report 2023
Derwent London plc
Report and Accounts 2023
Strategic report
85
Short-term
Under provision 30 of the Code, the Board is required to
report whether it considers it appropriate to adopt the
going concern basis of accounting in the preparation of our
ﬁnancial statements. The assessment focused primarily on the
short-term and at least the next 12 months to February 2025.
The Directors’ assessment included consideration of:
•
the Group’s current ﬁnancial position;
•
the latest rolling forecast for the next two years, in
particular the cash ﬂows, borrowings and undrawn facilities;
•
the timing of repayment of existing ﬁnancing facilities;
•
potential sources of replacement ﬁnancing;
•
lease expiry proﬁle; and
•
any material uncertainties or assumptions.
The Group is in a strong ﬁnancial position. At 31 December
2023, the Group has:
•
£466m of undrawn facilities and cash (2022: £577m);
•
a low EPRA loan-to-value ratio of 28.0% (including share of
joint ventures);
•
a low overall cost of debt with a weighted average interest
rate of 3.29% as at 31 December 2023;
•
98% of our borrowings either ﬁxed or hedged;
•
signiﬁcant headroom on our ﬁnancial covenants; and
•
strong interest cover of 414% (inc. share of joint ventures).
The Group has suﬃcient access to ﬁnance in the short-term and
medium-term.
At 31 December 2023, our average maturity of borrowings
is 5.0 years and average maturity of facilities is 4.5 years.
The Group’s next loan maturity is the £83m secured loan with
Mass Mutual, which matures in October 2024. We are in early
discussions with the existing lender, and also speaking to a
number of other potential debt providers who have expressed
interest in developing a lending relationship with us.
Alternatively, we have suﬃcient headroom on our revolving
credit facility to repay the secured loan. Whilst the debt capital
markets remain challenging for real estate, we have remained
close to our existing lenders and continue to engage with new
possible debt providers. We are also reviewing pricing and the
availability of debt in the secured lending markets, which are
currently looking more favourable for businesses with stronger
credit proﬁles.
With interest rates rising considerably over the past six
months, the Group beneﬁts from having strong interest cover
and substantially all borrowings are either ﬁxed or hedged.
Additionally, the Group can make use of a £75m forward-starting
swap which has a ﬁxed rate of 1.36% and runs to April 2025.
Material uncertainties or assumptions
The Directors did not identify any material uncertainties to the
Company’s ability to continue to operate as a going concern
over the period of its assessment. The key sources of estimated
uncertainty in the next 12 months are considered to be:
Tenant default or failure
The economic situation, high interest rates and cost inﬂation
continue to cause a heightened risk of ﬁnancial diﬃculty
among some of our tenants. The impairment review of
outstanding trade receivable balances and amounts due
under the spreading of lease incentives has been carried
out for our largest tenants and others where we believe the
risk is greatest. It has resulted in a decrease of £0.4m in our
overall impairment provision and a net charge to the income
statement of £2.0m in the year. This is mainly due to write-oﬀs
of certain tenants’ balances.
Fall in property values
Sentiment towards oﬃce real estate has weakened in 2023,
driven mainly from the US. Together with higher interest rates,
this has impacted property yields. The impact of yield changes
on the Group’s ﬁnancial covenants and performance are
monitored and are subject to sensitivity analysis and testing
against severe yet plausible ‘downside’ scenarios to ensure that
adequate headroom is preserved. The Group’s low loan-to-value
ratio reduces the likelihood that falls in property values have
a signiﬁcant operational impact on our business. Property
values would need to fall by a further 53% before our funding
covenants would be breached.
Related information is on the following pages:
Signiﬁcant ﬁnancial judgements /
See page 146
Property review /
See page 62
GOING CONCERN & VIABILITY
Our resilience
In accordance with the 2018 UK Corporate Governance
Code (the Code), the Directors and senior management
team assessed the prospects of the Company and
potential threats to our resilience:
•
in the short-term (over the next 12 months as
required by the ‘Going concern’ provision); and
•
in the medium-term (a ﬁve-year period to
31 December 2028) as required by the ‘Viability
statement’ provision.
This statement also contains references to the longer
term threats to the Company’s resilience (beyond the
ﬁve-year period).
86
Group’s risk register
The Schedule of Principal Risks contains the risks which are
currently impacting on the Group or could impact the Group
over the next 12 months. These risks are routinely subject to
a comprehensive review by the Executive Committee, Risk
Committee and the Board. Consideration is given to the risk
likelihood, impact and velocity (speed at which the risk could
impact on the Group). The Board agreed that, given the
level of headroom, none of the changes in risk likelihood or
probability during the year had a signiﬁcant impact on the
Group’s short-term viability.
Going concern statement
After making appropriate enquiries, the Directors have
a reasonable expectation that the Group and Company
have adequate resources to continue in operational
existence until at least February 2025. Therefore, the
Board continues to adopt the going concern basis in
preparing the ﬁnancial statements.
Medium-term
The Directors challenge the time period over which to assess
the Company’s medium-term viability on an annual basis. The
Directors determined that the ﬁve-year period to 31 December
2028 remains an appropriate period based on the following:
•
for a major scheme, ﬁve years is a reasonable
approximation of the time taken from obtaining planning
permission for a typical development to letting the
property;
•
most leases contain a ﬁve-year rent review pattern or break
options. Therefore, ﬁve years allows for the forecasts to
include the reversion arising from those reviews while also
assessing the potential impact of income lost from breaks
exercised. Our weighted average unexpired lease term is
7.4 years (‘topped-up’ including rent-frees and pre-lets); and
•
our average maturity of borrowings is 5.0 years as at
31 December 2023.
As part of its assessment, the Board considered the Group’s
emerging risks (page 102), including how these were being
addressed. Emerging risks involve a high degree of uncertainty
and are therefore factored into the Board’s medium-term
viability assessment and the long-term sustainability of the
Group. The methodology used to identify, assess and monitor
emerging risks is described in the risk management framework
on pages 160 and 161.
The Directors concluded that none of the individual emerging
risks would in isolation or collectively compromise the Group’s
viability over the ﬁve-year period to 31 December 2028.
The Board’s medium-term assessment focused on our strategy,
ﬁnance and operations.
Viability of our strategy
The Board formally reviews its strategy on an annual basis
to ensure it remains capable of sustainable value creation
and is responding appropriately to changing macroeconomic
conditions, work practices and stakeholder expectations.
When assessing the viability of the Group’s strategy, the
Board’s key qualiﬁcations and assumptions were:
•
a continued focus on the central London oﬃce market;
•
a strategy of recycling capital by selling buildings when we
have maximised their potential, or they no longer meet our
investment criteria, and purchasing buildings where there is
an opportunity to replenish our development pipeline or add
value via asset management or refurbishment;
•
maturing debt facilities could be reﬁnanced, albeit generally
at a higher cost than the prevailing rate;
•
a property portfolio which remains approximately the same
size, at 5.39m sq ft (2022: 5.46m sq ft); and
•
a progressive dividend policy, whilst targeting dividend cover
in or above the range of 125% to 150%.
The Board agreed that we have a proven business model
which has allowed us to remain ﬂexible and resilient during
previous property cycles and periods of signiﬁcant uncertainty.
Additionally, we have the ability to ﬂex our business plan to
react to unforeseen circumstances by either selling a property
to generate additional cash ﬂow or commencing, stopping or
scaling back projects to manage our capital expenditure.
Given the political and economic uncertainties, there has been
a slowdown in the investment market although the letting
market remains resilient. The Directors noted that occupier
demand remains good for the right product. Our strong
ﬁnancial position and proactive stakeholder-focused approach
will help us to weather the economic and political uncertainty.
The Board agreed that no material change was required to
its strategy, which continued to generate sustainable returns.
Derwent London plc
Report and Accounts 2023
Strategic report
87
Viability of our strategy
continued
Sensitivity and scenario testing
A detailed ﬁve-year strategic review was conducted which
considered the Group’s cash ﬂows, dividend cover, REIT
compliance and other key ﬁnancial ratios over the period.
These metrics were subjected to sensitivity analysis to
assess the Group’s ability to deliver its strategic objectives.
The Directors stress tested our strategy against various
scenarios to determine whether they were likely to have a
signiﬁcant impact on the Group’s solvency and liquidity in
the short- and medium-term. In addition, a reverse stress
test scenario was modelled to determine the circumstances
under which we would breach our covenants.
The scenarios are amended each year as required, to reﬂect
the key areas of concern identiﬁed by the Board. The four
scenarios assessed were:
•
a ‘base case’ scenario which was management’s best
estimate of market and business changes; and
•
three scenarios (two downside and one upside) of varying
movements in property values, costs and income, or a
combination thereof.
In all scenarios, our net interest cover remained above 3.45
times and our EPRA loan-to-value ratio below 35%, both
of which are comfortably within our ﬁnancial covenants.
The modelling indicated that under all scenarios the Group
would still be able to execute its strategic plan over the next
ﬁve years without breaching any covenants or experiencing
any liquidity concerns.
Nature of oﬃce occupation
The Directors considered changing work practices and tenant
demand for amenity-rich sustainable space which has been
identiﬁed as an emerging strategic risk for the Group.
The Board was satisﬁed that the business was:
•
responding appropriately to the changing needs of our
occupiers via bespoke solutions which recognise the diﬀering
demands of our diverse customer base. For larger occupiers,
typically on longer leases, this might mean a combination
of core and ﬂex space with some optionality. For smaller
occupiers looking for greater ﬂexibility, our ‘Furnished +
Flexible’ product provides an attractive solution;
•
delivering well-designed, adaptable and amenity-rich
workspace. Our customer-focused approach led us
to initiatives such as DL/Lounges and DL/Service
(see pages 23 and 133); and
•
being proactive to ensure the achievement of our net
zero carbon ambitions, operating a continuous upgrade/
refurbishment programme to improve the sustainability
credentials of our older buildings, investing in Intelligent
Building infrastructure to create sustainable spaces for
our occupiers, and investing in software for eﬀective ESG
data capture.
Viability of our ﬁnances
Derwent London would become unviable if we were unable
to meet our ﬁnancial covenants. If this occurred, we would
need to repay our debt borrowings, and this would likely require
the sale of assets to meet these liabilities. As at 31 December
2023, we have signiﬁcant headroom over our covenants,
as shown below:
Covenant
31 Dec 2023
Loan to value (speciﬁc assets)
≤ 60%
1
44%
≤ 70%
2
34%
Ratio of unencumbered assets
to unsecured net debt
≥ 1.6 times
3.8 times
Group NAV gearing
≤ 145%
38.7%
Consolidated interest cover
3
> 145%
414%
1
6.5% secured bonds.
2
3.99% secured loan.
3
Includes joint ventures.
Our covenant headroom was subject to sensitivity analysis
and scenario testing as part of the Group’s strategy review.
Even in the most extreme ‘downside’ scenario we modelled,
the covenant ratios are covered and there is suﬃcient cash
and unutilised facilities available.
For the Group to breach the NAV gearing limit, the value of
our portfolio would have to fall in excess of £2,572m (or by a
further 53%). This is signiﬁcantly higher than we have seen in
recent market down cycles, the worst of which was following
the Global Financial Crisis where the value of our underlying
portfolio fell 34% but still outperformed the MSCI Central
London Oﬃce Index which fell 43%. Moreover, we have the
ability to move properties between the facilities to optimise
headroom under covenants.
To assess the Group’s liquidity and ﬁnancial resilience, the
Directors also reviewed:
•
a detailed ﬁve-year strategic review which included
assessment of the Group’s cash ﬂows, dividend cover, REIT
compliance and other key ﬁnancial ratios. These metrics
were subjected to sensitivity analysis to assess the Group’s
ability to deliver its strategic objectives under varying
market conditions;
•
the risks which could impact on the Group’s liquidity and
solvency over the next 12 months, ﬁve years and the longer
term; and
•
the Group’s emerging risks.
The Board’s assessment highlighted that, despite the
macroeconomic environment deteriorating during 2023, the
Group beneﬁts from:
•
reasonable income visibility for the life of our leases which
on average are 11.5 years (including rent-frees and pre-lets)
with upward-only or contracted rent reviews. In addition,
the Group has a known level of tenant lease expiries and
breaks which is actively managed by our Asset Management
team; and
•
a high quality customer base of tenants, with none of
our occupiers being responsible for more than 8% of total
rental income and relatively low exposure to the retail and
restaurant sectors.
GOING CONCERN & VIABILITY
continued
88
Reﬁnancing risk
Reﬁnancing risk has been classiﬁed as a principal ﬁnancial
risk for the Group. The availability and cost of ﬁnancing
has changed signiﬁcantly in the past year and is a wider
industry issue. Lenders are being more selective in terms of
who they support and how much they lend with an impact
upon liquidity. We have positive relationships with our lenders
and, to date, we have had positive discussions on reﬁnancing
with existing and new lenders. The Directors considered that
reﬁnancing was unlikely to compromise the Group’s viability
over the ﬁve-year period to 31 December 2028.
Viability of our operations
The Board received an update from the Chairs of the Audit and
Risk Committees on the work performed during 2023 in respect
to risk monitoring and reviewing the eﬀectiveness of internal
controls (see page 92).
We have a robust approach to cyber security which is routinely
subject to independent testing (see pages 162 and 163). Our
Intelligent Building Programme is a medium- to long-term
initiative which will assist with meeting our net zero carbon
ambitions, the strengthening of our portfolio’s cyber security
and cost savings for our occupiers.
Of the Group’s emerging risks, the Board considered EPC
compliance to have the greatest potential impact on the
Group in the medium-term. Our approach to product and
service, in a market where the demand for high quality
amenity-rich buildings is increasing, is detailed on pages
18 to 23.
Based on the Board’s assessments, none of the operational
principal or emerging risks currently facing the Group were
likely to have a material impact on the Group’s operations
or cause it to become unviable in the short- to medium-term.
Related information is on the following pages:
Business continuity and disaster recovery /
See page 163
Investing in our employees /
See page 184
Mandatory compliance training /
See page 165
Viability statement
Based on the Board’s assessments, the Directors have a
reasonable expectation that the Company will be able
to continue in operation and meet its liabilities as they
fall due over the ﬁve-year period to 31 December 2028.
Long-term
The Board considered a number of longer term factors (which
could impact on the Company and its business model in the
next ﬁve to 10 years) and how these were being addressed.
These factors included the impact of climate change and
technology advancement.
Related information is on the following pages:
Business model & strategy /
See pages 28 to 36
Regeneration projects /
See pages 26 and 27
Right product, right location /
See pages 18 to 23
Climate change
Derwent London is committed to be net zero carbon by 2030.
The Group has conducted risk assessments against varying
temperature scenarios (~1.5°C, ~2°C to 3°C, >4°C) to identify
and assess our key transition and physical risks. The time
frames used for these assessments have focused on our
short-, medium- and long-term resilience (see page 105).
Of the risks identiﬁed, none were likely to have a substantial
impact on the viability of our business, although our cost
proﬁle could increase.
The Board receives updates on our progress to net zero carbon
by 2030. The factors which could impact on our ability to
become net zero carbon by 2030 have been identiﬁed as:
Newly acquired properties:
one of the ways we add value
through our business model is by acquiring poorer quality
buildings to regenerate. As a result, there is likely to always
be an element of our portfolio which is progressing towards
becoming net zero carbon.
Unmanaged portfolio:
within our portfolio we have a number
of single-let buildings, with long leases, where the occupier
is responsible for maintaining the property and ensuring its
energy eﬃciency (currently 19% of our portfolio). As we are
not responsible for the management of the building, this could
be an area of challenge to achieving net zero carbon by 2030.
We are actively engaging with these occupiers to promote the
beneﬁts of net zero carbon.
Emerging regulation and science:
our strategy to becoming
net zero carbon will need to adapt in line with emerging
regulation, planning policies and science.
Building climate resilience /
See pages 104 to 117
Intelligent buildings
Adoption of technology is an emerging risk for the Group.
Technology in our sector is advancing at a rapid pace.
The Executive Committee has monitored the phased roll-out of
Intelligent Building infrastructure during the year. The Derwent
London Intelligent Building Programme seeks to enable our
buildings (where appropriate) to be digitally monitored and
operated more eﬃciently, driving down equipment faults
(and consequential maintenance) and delivering energy and
operational carbon savings.
Digital strategy risks/
See page 163
Derwent London plc
Report and Accounts 2023
Strategic report
89
MANAGING RISKS
Our risk profile
External
Property-related
Climate
change
See page 46
Political
uncertainty
See page 94
Geopolitical
instability
See page 102
Property
values
See page 63
Planning
requirements
See page 91
Vacancy
rates
See page 71
Economic
growth
See page 13
Inﬂation
See page 76
Interest
rates
See page 82
Contractor
default
See page 91
Health &
safety
See page 54
Energy
prices
See page 91
Despite the wider macroeconomic environment, the Group had an operationally strong
year with £28.4m of new rent agreed.
As a predominantly London-based Group, we are particularly sensitive to factors which impact upon
central London’s growth and demand for oﬃce space. We are also impacted by the wider macroeconomic
environment. Some of the external and property-related risks which have impacted on the Group during
2023 are shown below. These risks are factored into the Board’s strategy discussions and help to inform the
scenarios chosen by the Board to stress test the viability of our business (see page 88).
90
An overview of the risks and uncertainties which
have impacted on the Group’s risk proﬁle during 2023
Inﬂation
To mitigate inﬂation-related risks, we aim to ﬁx most, if not
all, of our construction costs. As previously outlined, we have
secured a ﬁxed price for 99.8% of the costs for our Network W1
development and 99.0% of the costs for our 25 Baker Street W1
development. Where possible, we procure our materials locally
and continue to divert our development designs away from
materials attracting higher price increases.
Contractor/subcontractor default
Due to the ﬁxed price nature of our construction contracts,
the risk exposure falls principally on our contractors. To aid
their cash ﬂow, we are committed to pay our invoices within
30 days and during 2023, our average payment term was 19
days. We were pleased that none of our main contractors or
subcontractors went insolvent during the year; however we are
mindful that several are facing increased ﬁnancial diﬃculties.
As a result, we will continue to actively monitor our main
contractors and subcontractors during 2024.
Fall in property values
During the 12 months to 31 December 2023, our property
portfolio fell by 10.6% and is now valued at £4.879bn. This
headline movement masks a broad range of outcomes, with
our higher quality buildings and developments delivering a
more resilient performance (see page 63).
Planning requirements
Planning policies in London are becoming more challenging.
Local authorities are promoting a refurbishment-ﬁrst approach
instead of new build. There is a risk that this shift in planning
policies could result in Derwent London having to retain more
secondary oﬃce space which is likely to be less attractive to
occupiers in comparison to top quality new space. De-risking
planning is achieved by a sound understanding of policy,
coupled with a collaborative approach with the borough and
local community. We beneﬁt from a strong track record of
delivering quality and economic/social value.
Health and safety (H&S)
The Building Safety Act 2022 (and subsequent regulations)
is arguably the most signiﬁcant change to H&S legislation in
decades. As a result, we have reviewed our responsibilities and
have provided clear guidance across the business. Whilst we
operate and develop within environments that often contain
higher risk activities, Derwent London strives to continuously
improve our H&S mitigations and controls. In recognition of our
high safety standards, in 2023 we achieved the Royal Society
for Prevention of Accidents (RoSPA) Gold Award (see page 55).
Energy prices
Energy prices impact on our occupiers as they are recharged
both through the service charge for common facilities and
directly for demised space. To ensure the best deal for our
occupiers, we place our energy contracts via an independent
utility management service, who perform benchmarking
to ensure that we remain competitive against the market.
We continue to be transparent with our occupiers and
highlight the utility pricing within our managed portfolio
service charge budgets.
Principal risks
The principal risks and uncertainties facing the Group
in 2024 (as at 27 February 2024) are:
•
Failure to implement the Group’s strategy
• Reﬁnancing risk
(new)
•
Risk of occupiers defaulting or occupier failure
• Income decline
•
Fall in property values
• Reduced development returns
• ‘On-site’ risk
• Contractor/subcontractor default
•
Cyber attack on our IT systems
•
Cyber attack on our buildings
• Signiﬁcant business interruption
• Reputational damage
•
Our resilience to climate change
• Health and safety
•
Non-compliance with law and regulations
Our principal risks /
See pages 94 to 101
Emerging risks
During 2023, the Risk Committee reassessed and
consolidated its emerging risks. The emerging risks
identiﬁed by the Board are:
•
Nature of oﬃce occupation
• Technological change
• Climate change
• Geopolitical instability
(new)
•
Shortage of electrical power
Our emerging risks /
See page 102
Climate change
We identify and monitor climate change risks and
opportunities as part of our wider risk management
procedures. Our climate risk assessments have identiﬁed
the transition and physical risks and opportunities
applicable to our business:
• EPC rating requirements
•
Change in customer demand
• Emission oﬀset
• Planning requirements
•
Cost of raw materials
•
Cost of debt via green bonds
• Heat stress
• Flooding
• Drought
• Fire
• Windstorm
• Subsidence
Building climate resilience /
See pages 104 to 117
Derwent London plc
Report and Accounts 2023
91
Strategic report
MANAGING RISKS
continued
Very low risk
Low risk
Medium risk
High risk
Very high risk
Risk management
The Board has ultimate responsibility for the Group’s approach
to risk management. On a regular basis, the Board reviews the
Group’s risk registers and conducts robust assessments of the
Group’s principal and emerging risks (see page 157).
Changes to our principal and emerging risks
Reﬁnancing (new principal risk)
The availability and cost of ﬁnancing has changed signiﬁcantly
in the past year and is a wider industry issue. Our next
reﬁnancing is in October 2024; an £83m secured facility with a
coupon of 3.99%. We are in early discussions with the existing
lender, and also speaking to a number of other potential
debt providers who have expressed interest in developing a
lending relationship with us. Despite our strong long-standing
relationships with lenders, there is inevitably a small risk that the
Group will be unable to raise ﬁnance in a cost-eﬀective manner
which optimises our capital structure. The Board has therefore
classiﬁed reﬁnancing as a principal risk for 2024 (see page 95).
Geopolitical instability (new emerging risk)
Geopolitical instability has been identiﬁed as an emerging risk
for the Group, as continued geopolitical tensions could cause
prolonged global supply chain disruption and commodity price
inﬂation (see page 102).
Eﬀectiveness review
To ensure focused oversight, the Board operates a separate
Risk Committee (see pages 156 to 165). The Risk Committee
reviews the eﬀectiveness of the Group’s risk management
policies and practices. This eﬀectiveness review is conducted
through speaking with senior management directly, third party
assurance reviews, reports from internal and external audit, and
independent testing of our key controls. During 2024, the Board
and Risk Committee intend to review the Group’s risk registers
and identify opportunities for consolidation and simpliﬁcation.
The Audit Committee reviews the adequacy and eﬀectiveness
of the Group’s system of internal ﬁnancial controls which are
described brieﬂy in the table on page 149. The Audit Committee
remains satisﬁed that the review of internal ﬁnancial controls
did not reveal any signiﬁcant weaknesses or failures and
they continue to operate eﬀectively. Following the Audit
Committee’s and Risk Committee’s reviews, the Chairs of each
Committee conﬁrmed to the Board that they were satisﬁed
that the Group’s internal control framework (ﬁnancial and
non-ﬁnancial) and risk management procedures:
•
operated eﬀectively throughout the period; and
•
are in accordance with the guidance contained within
the FRC’s Guidance on Risk Management, Internal
Control and Related Financial and Business Reporting.
Risk rating
As part of the Directors’ assessment process, we estimate the likelihood of the risk occurring and the potential quantitative and
qualitative impacts. Risks are rated in accordance with the Board’s Risk Appetite Statement. A simpliﬁed version of our risk rating
criteria is provided below. Our risk management framework is on pages 160 and 161.
Impact
Insignificant
Minor
Moderate
Major
Significant
Likelihood
Rare
Unlikely
Possible
Likely
Certain
The risk ratings for our principal risks are detailed below:
Principal risks
Inherent risk
(without controls)
Residual risk
(with controls)
Our risk
tolerance
Failure to implement the Group’s strategy
Medium
Low
Low
Reﬁnancing risk
(new)
Medium
Medium
Medium
Risk of occupiers defaulting or occupier failure
Medium
Low
Medium
Income decline
Medium
Low
Medium
Fall in property values
High
Medium
Medium
Reduced development returns
Medium
Low
Medium
‘On-site’ risk
High
Medium
Medium
Contractor/subcontractor default
High
Medium
Medium
Cyber attack on our IT systems
Very high
Medium
Low
Cyber attack on our buildings
Very high
Medium
Low
Signiﬁcant business interruption
High
Low
Medium
Reputational damage
Medium
Low
Low
Our resilience to climate change
Medium
Low
Low
Health and safety
Very high
Medium
Zero
Non-compliance with law and regulations
Medium
Low
Zero
92
Risk Appetite Statement
Summary of risk tolerance
Operational
Health and safety
Zero
IT continuity (including cyber attacks)
Low
Staﬀ retention
Medium
Climate change resilience
Low
Other operational risks
Medium
Financial*
REIT status
Low
Credit rating
Low
Decrease in asset value (>£100m)
Medium
Proﬁts (>£5m)
Medium
Cost overruns (>5%)
Medium
Interest cover (<20%)
Medium
Reputational
Brand value
Low
Regulatory
Statutory
Zero
Governance
Low
*
Financial amounts are measures of deviation from Group annual budget.
Key
Zero
The Board has a zero-tolerance approach and is
committed to promoting full health & safety and
statutory compliance
Low
The Board is risk averse and is reluctant to take risks
Medium
The Board is willing to take measured risks if they are
identiﬁed, assessed and controlled
High
The Board is willing to take signiﬁcant risks
Time horizons
The Board seeks to assess and identify the risks facing the Group in the short-, medium- and long-term.
Imminent
< 1 year
Short-term
< 5 years
Medium-term
5 to 15 years
Long-term
15+ years
Principal risks
See pages 94 to 101
Emerging risks
See page 102
Climate-related risks
See pages 104 to 117
Risk appetite
The Group’s risk appetite is set by the Board and is the level of
risk we are willing to accept to achieve our strategic objectives.
Our overall risk appetite is low with varying levels of risk
tolerance. This, alongside our culture, informs how our staﬀ
respond to risk. Due to our open and collaborative working
style, any potential problem, risk or issue is identiﬁed quickly
so appropriate action can be taken.
During 2023, the addition of inherent and residual ‘risk ratings’
within our Schedule of Principal Risks made it easier for the
Board to identify which risks were not aligned with its tolerance
on a residual (after controls) basis:
•
When assessing our health and safety risks, we consider all
of our core activities, including the work of our contractors
on site at our developments. Due to the nature of these
activities, health and safety is classiﬁed as a ‘medium risk’ at
residual level, which requires further contractor-led controls
to be implemented and the adoption of best practice
standards. As the Board is committed to promoting the
highest health and safety standards, its tolerance for health
and safety risks is set at zero. Further information on health
and safety is on pages 54 to 55.
•
Similarly, the Board’s tolerance for cyber threats is low.
The Board recognises that due to the evolving nature of
the threat, it is diﬃcult to reduce the residual risk from
medium to low. To provide the Board with comfort that
our Digital Information and Technology (DIT) team are
adopting a continuous improvement strategy towards our
cyber security posture, we commission regular independent
reviews and assessments (see pages 162 and 163).
Risk is inherent in running any
business. At Derwent London we aim
to deliver on our strategic objectives
for the beneﬁt of our shareholders
and other stakeholders, whilst
operating within the risk tolerance
levels set by our Board.
Derwent London plc
Report and Accounts 2023
93
Strategic report
The Schedule of Principal Risks
The Board classiﬁes the Group’s most material risks as its ‘principal risks’. Materiality is assessed based on the potential impact
and its probability of occurring within the next 12 months. The key controls we have identiﬁed on pages 94 to 101 were in operation
during the year under review and up to the date the 2023 Report & Accounts was approved.
Strategic
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
Our actions
Key controls
1. Failure to implement the Group’s strategy
The Group’s success depends on implementing
its strategy and responding appropriately to
internal and external factors including changing
work practices, occupational demand, economic
and property cycles. The London oﬃce market
has generally been cyclical in recent decades,
with strong growth followed by economic
downturns, precipitated by rising interest rates.
The impact of these cycles is dependent on the
quality and location of the Group’s portfolio.
2023
•
Annual Board Strategy meeting was held
on 15 and 16 June 2023 which included an
external presentation and discussion on the
future of London.
•
Reviewed our portfolio for further asset
management opportunities and reduced
the vacancy rate.
•
Monitored letting progress and occupier
demand for our buildings.
•
Progressed opportunities to self-generate
renewable energy from our land holdings in
Scotland.
•
Received political and economic updates
from external advisers throughout the year.
•
Regularly liaised with occupiers to ensure
our buildings are meeting their needs.
2024
•
Examine opportunities for acquisitions and,
in order to recycle capital, identify assets
for disposal.
•
Continue with our current controls and
mitigating actions, including operating the
business on a basis that balances risk and
income generation.
Key performance indicators:
•
Total property return
•
Interest Cover Ratio (ICR)
•
Gearing & available resources
In addition, we also consider inﬂation, interest
rates and yield changes.
1.
The Board maintains a formal schedule of
matters which are reserved solely for its
approval. These matters include decisions
relating to the Group’s strategy, capital
structure, ﬁnancing, any major property
acquisition or disposal, the risk appetite
of the Group and the authorisation of
capital expenditure above the delegated
authority limits.
2.
Frequent strategic and ﬁnancial reviews.
An annual strategic review and budget
is prepared for Board approval alongside
two-year rolling forecasts which are
prepared three times a year.
3.
Assess and monitor the ﬁnancial strength
of potential and existing occupiers.
The Group’s diverse and high quality
occupier base provides resilience against
occupier default.
4.
Maintain income from properties until
development commences and have an
ongoing strategy to extend income through
lease renewals and regears. Developments
are derisked through pre-lets.
5.
Maintain suﬃcient headroom for all the
key ratios and ﬁnancial covenants, with
a particular focus on interest cover.
6.
Develop properties in central locations
where there is good potential for future
demand, such as near the Elizabeth Line.
We do not have any properties in the City
core or Docklands.
Risk tolerance:
Low
Executive responsibility:
Paul Williams
Impact:
Should the Group fail to respond and
adapt to such cycles or execute the projects
that underpin its strategy, it may have a
negative impact on the Group’s expected
growth and ﬁnancial performance.
Strategic objectives:
1
2
4
5
Stakeholders:
Could potentially impact on all
our stakeholders
Trend:
Given the political and economic uncertainties,
there has been a slowdown in the investment
market although the letting market remains
resilient. Occupier demand in London remains
good for the right product in the right location,
and the ﬂight to quality continues.
Our principal risks
MANAGING RISKS
continued
Our principal risks are not an exhaustive list of all risks facing the Group but
are a snapshot of the Company’s main risk proﬁle as at 27 February 2024.
94
Financial
The main ﬁnancial risk is that the Group becomes unable to meet its ﬁnancial obligations. The probability of this occurring is low
due to our signiﬁcant covenant headroom (see page 88). Financial risks can arise from movements in the ﬁnancial markets in which
we operate and ineﬃcient management of capital resources.
Risk
Our actions
Key controls
2. Reﬁnancing risks (new)
Inability to raise ﬁnance in a cost-eﬀective
manner that optimises the capital structure
of the Group.
2023
•
Recycling of capital is a key assumption in
our annual budget and is updated in each
ﬁve-year cash ﬂow and rolling forecast.
•
Regular updates with our advisers to
understand debt market trends.
•
Monitoring the impact upon ﬁnancial
covenants of valuation, interest cost and/
or income movements.
2024
•
Reﬁnance the £83m secured loan expiring
in October 2024.
•
Early and frequent engagement with
existing and potential lenders.
•
Consideration of more asset disposals.
Key performance indicators:
•
Gearing & available resources
•
Interest Cover Ratio (ICR)
•
EPRA Earnings Per Share (EPS)
1.
Preparation of ﬁve-year cash ﬂow, annual
budgets and three rolling forecasts enable
the Group to raise ﬁnance in advance of
requirements.
2.
Excellent long-standing relationships
with funders.
3.
Regular review of ﬁnancial covenants
to monitor the impact of changes in
valuation, interest rates and rental income.
4.
Going concern and viability reviews
considered at least half yearly.
5.
The Group’s ﬁnancial position is reviewed
at each Executive Committee and Board
meeting with update on leverage metrics
and capital markets from the CFO.
6.
Annual review with credit rating agency
and low leverage tolerance.
Risk tolerance:
Medium
Executive responsibility:
Damian Wisniewski
Impact:
Gradual rise in interest costs incurred
as debt reﬁnanced over the next few years, with
a consequent impact on earnings and interest
cover.
Strategic objectives:
2
5
Stakeholders:
Shareholders and debt providers
Trend:
The availability and cost of ﬁnancing has
changed signiﬁcantly in the past year and is
a wider industry issue. Lenders are being more
selective in terms of who they support and how
much they lend with an impact upon liquidity.
3. Risk of occupiers defaulting or occupier failure
The majority of the Group’s revenues comprise
rent received from our occupiers and any
deterioration in their businesses and/or
proﬁtability could in turn adversely aﬀect the
Group’s rental income or increase the Group’s
bad debts and/or number of lease terminations.
2023
•
We have maintained proactive
engagement with our occupiers, dealing
with their concerns on a case-by-case basis
and supporting them as appropriate.
•
The Credit Committee continued to meet
on a frequent basis, at least weekly.
•
We continued to support certain
restaurants, retail and leisure occupiers in
our buildings, as these businesses add value
to our buildings and are seen as amenities
for our other occupiers and local residents.
2024
•
Continue with our current controls and
mitigating actions.
Key performance indicators:
•
Tenant retention
•
Void management
In addition, we consider our Lease Incentive
Debtor (LID) balance and level of rent deposits.
1.
Assess and monitor the ﬁnancial strength
of potential and existing occupiers.
The Group’s diverse and high quality
occupier base provides resilience against
occupier default.
2.
Focus on letting our buildings to large and
established businesses where the risk of
default is lower.
3.
Active in-house rent collection, with regular
reports to the Executive Directors on day 1,
7, 14 and 21 of each rent collection cycle.
4.
Ongoing dialogue is maintained with
occupiers to understand their concerns
and requirements.
5.
Rent deposits are held where considered
appropriate.
Risk tolerance:
Medium
Executive responsibility:
Paul Williams
Impact:
In the event that some of our
occupiers went into default, we could incur
impairments and write-oﬀs of IFRS 16 lease
incentive receivable balances which arise from
the accounting requirement to spread any
rent-free incentives given to an occupier over
the respective lease term, in addition to a loss
of rental income.
Strategic objectives:
1
2
5
Stakeholders:
Occupiers, shareholders and
debt providers
Trend:
Due to the current economic conditions, our
occupiers could be facing increased ﬁnancial
diﬃculty. Inﬂation remained elevated through
2023. Signiﬁcant cost increases pose a greater
risk of occupier default and late payment.
Although it should be noted that oﬃce rent
typically remains a small proportion of a
company’s total overheads.
Strategic objectives
To optimise returns
and create value
from a balanced
portfolio
To attract, retain
and develop
talented employees
To maintain
strong and
ﬂexible ﬁnancing
Increased
Decreased
Unchanged
To grow recurring
earnings and
cash ﬂow
To design, deliver and
operate our buildings
responsibly
1
2
3
4
5
Trend
Derwent London plc
Report and Accounts 2023
95
Strategic report
Risk
Our actions
Key controls
4. Income decline
Changes in macroeconomic factors may
adversely aﬀect London’s overall oﬃce
market. The Group is exposed to external
factors which are outside the Group’s control,
such as future demand for oﬃce space, the
‘grey’ market in oﬃce space (i.e. occupier
controlled vacant space), weaknesses in retail
and hospitality businesses, increase in hybrid
working, a recession, and subsequent rise in
unemployment and/or interest rates.
2023
•
The Group produced a budget, ﬁve-year
strategic review and three rolling forecasts
during the year which contain detailed
sensitivity analyses, including the eﬀect
of changes to valuation yields.
•
Quarterly management accounts were
provided to the Board.
•
We worked to reduce our lease expiry
exposure in 2023 through asset
management activities and good
relationships with our occupiers.
•
The ‘tenants on watch’ register was
regularly reviewed to carefully monitor the
ﬁnancial performance of existing occupiers.
•
We maintained proactive engagement with
our occupiers, dealing with their concerns
on a case-by-case basis and supporting
them as appropriate.
2024
•
Continue with our current controls and
mitigating actions, including operating
the business on a basis that balances
risk and income generation.
Key performance indicators:
•
Tenant retention
•
Void management
In addition, we consider the amount of
‘grey space’ and lease expiries/breaks.
1.
The Credit Committee receives detailed
reviews of all prospective occupiers. The
focus is on large and established businesses
where the risk of default is lower, and they
also ensure the Group has a diverse range
of occupiers.
2.
A ‘tenants on watch’ register is maintained
and regularly reviewed by the Executive
Directors and the Board.
3.
Ongoing dialogue is maintained with
occupiers to understand their concerns,
requirements and future plans.
4.
The Group’s low loan-to-value ratio and
high interest cover ratio reduces the
likelihood that falls in property values
have a signiﬁcant impact on our business
continuity.
5. Regular review of the lease expiry proﬁle.
6. Regular forecasts provide visibility of
potential signiﬁcant vacancies.
Risk tolerance:
Medium
Executive responsibility:
Damian Wisniewski
Impact:
Such macroeconomic conditions lead
to a general property market contraction, a
decline in rental values and Group income,
which could impact on property valuation yields.
Strategic objectives:
1
2
5
Stakeholders:
Shareholders and debt providers
Trend:
Although not likely to impact on the Group in
the short-term, the current economic situation
could lead to some of our occupiers facing a
more challenging ﬁnancial situation. Footfall at
restaurants, retail and leisure properties is likely
to reduce, as consumer spending slows, which
could impact on the revenues and operations
of such occupiers. Retail, restaurants and
hospitality occupiers account for approximately
7% of the Group’s portfolio income. During a
recession, leasing transactions can take longer
to ﬁnalise as occupiers tend to adopt a ‘wait-
and-see’ approach leading to a greater risk of
aborted transactions.
5. Fall in property values
The potential adverse impact of the economic
and political environment on property yields has
heightened the risk of a fall in property values.
2023
•
The Group produced a budget, ﬁve-year
strategic review and two rolling forecasts
during the year which contain detailed
sensitivity analysis, including the eﬀect
of changes in valuation yields.
•
Quarterly management accounts were
provided to the Board and included
the Group’s performance against the
ﬁnancial covenants.
2024
•
Continue to examine opportunities
for further disposals to recycle capital.
•
Continue with our current controls and
mitigating actions.
Key performance indicators:
•
Gearing & available resources
•
Total property return
•
Void management
•
Reversionary percentage
In addition, we consider the impact of changes
in property yields.
1.
The impact of valuation yield changes
is considered when potential projects
are appraised.
2.
The impact of valuation 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.
3.
The Group’s mainly unsecured ﬁnancing
makes management of our ﬁnancial
covenants more straightforward.
4.
The Group’s low loan-to-value ratio and
high interest cover ratio reduces the
likelihood that falls in property values
have a signiﬁcant impact on our
business continuity.
Risk tolerance:
Medium
Executive responsibility:
Nigel George
Impact:
A fall in property values will have an
impact on the Group’s net tangible assets
(NTA) and gearing levels.
Strategic objectives:
1
2
5
Stakeholders:
Occupiers, shareholders and
debt providers
Trend:
A fall in property values was classiﬁed as a
principal risk by the Risk Committee in August
2022. Since the publication of our 2022 Report
& Accounts, the MSCI Central London Oﬃce
Quarterly Index has shown negative capital
growth movements. Despite the economic
uncertainty, London remains resilient and
occupier demand remains good for the right
property in the right area and the ﬂight to
quality continues.
MANAGING RISKS
continued
Financial
continued
96
Operational
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
Our actions
Key controls
6a. Reduced development returns
Returns from the Group’s developments may
be adversely impacted due to: increased
construction costs and interest rates; material
and labour shortages; movement in yields and
adverse letting conditions.
2023
•
Secured a ﬁxed price for 99.8% of the costs
for our Network development.
•
Monitored construction cost inﬂation in
relation to future projects.
•
The Board and Executive Directors
received regular updates on our principal
developments including construction costs.
•
Speciﬁc risk assessments on budget
allowances for inﬂation are kept under
review on a quarterly basis to test
adequacy of budgets.
•
Progressed on-site activities at 25 Baker
Street and Network.
2024
•
Progress planning applications for 50 Baker
Street and Old Street Quarter.
•
Progress the design of Holden House W1.
•
Continue to monitor construction cost
inﬂation.
Key performance indicators:
•
Total return
•
Total property return
•
Development potential
In addition, we consider construction cost
inﬂation and project proﬁtability status.
1.
Our procurement process includes the
use of highly regarded ﬁrms of quantity
surveyors and is designed to minimise
cost uncertainty.
2.
Development costs are benchmarked to
ensure that the Group obtains competitive
pricing and, where appropriate, ﬁxed price
contracts are negotiated.
3.
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.
4.
Investment appraisals are prepared and
sensitivity analysis is undertaken to judge
whether an adequate return is made in all
likely circumstances.
5.
The Group’s pre-letting strategy reduces or
removes the letting risk of the development
as soon as possible.
Risk tolerance:
Medium
Executive responsibility:
Paul Williams
Impact:
Any signiﬁcant delay in completing
the development projects may result in
ﬁnancial penalties or a reduction in the Group’s
targeted ﬁnancial returns.
Strategic objectives:
1
2
Stakeholders:
Suppliers and occupiers
Trend:
Planning authorities have an increasing
preference for refurbishment ahead of
redevelopment. The Board is monitoring
the potential impact of a tighter planning
environment on our strategy and future
development returns. We have secured a ﬁxed
price for 99.8% of the costs for our Network
development and 99.0% of the costs for our
25 Baker Street development. However, our
ability to secure ﬁxed price construction will be
more challenging, and it is likely that only part
of future contracts will be ﬁxed.
6b. ‘On-site’ risk
Risks that can materialise whilst on site include:
•
unexpected ground conditions;
•
deleterious material (including asbestos);
•
activity in adjacent sites /buildings; and
•
unidentiﬁed issues with the existing building.
‘On-site’ risks can cause development projects
to be signiﬁcantly delayed and could lead
to penalties and a deferral of rental income.
‘On-site’ risks typically arise if inadequate site
investigations have been conducted prior to
starting work on site.
2023
•
Continued to engage with our contractors,
subcontractors and supply chain to
understand the impact of rising inﬂation
on their operations.
•
The Board and Executive Directors
received regular updates on our principal
developments.
•
Quarterly cost reports provided an update
on development progress from a cost,
proﬁtability and programme perspective.
2024
•
We will continue with our current controls
and mitigating actions.
Key performance indicators:
•
Accident Frequency Rate (AFR)
•
Total property return
1.
Prior to construction beginning on site, we
conduct thorough site investigations and
surveys to reduce the risk of unidentiﬁed
issues, including investigating the building’s
history and adjacent buildings /sites.
2.
Adequately appraise investments prior to
starting work on site, including through:
(a) the benchmarking of development
costs; and (b) following a procurement
process that is properly designed (to
minimise uncertainty around costs) and
that includes the use of highly regarded
quantity surveyors.
3.
Regular monitoring of our contractors’
cash ﬂows.
4.
Frequent meetings with key contractors
and subcontractors to review their
work programme and maintain strong
relationships.
5.
Oﬀ-site inspection of key components to
ensure they have been completed to the
requisite quality.
6.
Monthly reviews of supply chain issues for
each of our major projects, including in
respect to potential labour shortages.
Risk tolerance:
Medium
Executive responsibility:
Paul Williams
Impact:
Risk of project delays and/or cost
overruns caused by unidentiﬁed issues.
Strategic objectives:
1
2
3
4
Stakeholders:
Suppliers and occupiers
Trend:
There has been no change in the risk proﬁle
during the period of this review. Ongoing
vigilance is always required.
Strategic objectives
To optimise returns
and create value
from a balanced
portfolio
To attract, retain
and develop
talented employees
To maintain
strong and
ﬂexible ﬁnancing
Increased
Decreased
Unchanged
To grow recurring
earnings and
cash ﬂow
To design, deliver and
operate our buildings
responsibly
1
2
3
4
5
Trend
Derwent London plc
Report and Accounts 2023
97
Strategic report
Risk
Our actions
Key controls
6c. Contractor/subcontractor default
There have been ongoing issues within the
construction industry in respect of the level of
risk and narrow proﬁt margins being accepted
by contractors.
2023
•
Engaged continuously with our contractors,
subcontractors and supply chain to
understand the impact of rising inﬂation on
their operations.
•
Accepted early ordering of materials ahead
of their need on site to accelerate cash ﬂow
to our supply chain.
•
The Board and Executive Directors
received regular updates on our principal
developments.
•
Quarterly cost reports provided an update
on development progress from a cost,
proﬁtability and programme perspective.
2024
•
We will continue with our current controls
and mitigating actions.
Key performance indicators:
•
Total return
•
Total property return
In addition, we consider average payment
days to our suppliers, project delays and
construction cost inﬂation.
1.
We use known ‘Tier 1’ contractors with
whom we have established working
relationships and regularly work with
tried and tested sub-contractors.
2.
Regular monitoring of our contractors,
including their project cash ﬂows,
is carried out.
3.
Key construction packages are acquired
early in the project’s life to reduce the
risks associated with later default.
4.
The ﬁnancial standing of our main
contractors is reviewed prior to awarding
the project contract.
5.
Our main contractors are responsible,
and assume the immediate risk, for
subcontractor default.
6.
Payments to contractors are in place to
incentivise the achievement of project
timescales, with damages agreed in the
event of delay/cost overruns.
7.
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.
8.
Contractors are paid promptly and
are encouraged to pay subcontractors
promptly. In addition, we externally publish
our payment terms.
Risk tolerance:
Medium
Executive responsibility:
Paul Williams
Impact:
Returns from the Group’s
developments are reduced due to delays
and cost increases caused by either a main
contractor or major subcontractor defaulting
during the project.
Strategic objectives:
1
2
4
Stakeholders:
Suppliers and occupiers
Trend:
There is an increased risk of insolvencies
in the construction industry as a result of
rising inﬂation and construction costs, which
under ﬁxed price contracts are a risk for the
contractor and subcontractors. We have
engaged with our principal contractors to
ensure they have suﬃcient headroom under
the ﬁxed contracts to cope with rising costs.
On a quarterly basis, we meet with key
subcontractors to understand their businesses
and pressures. We will continue to actively
monitor the ﬁnancial health of our main
contractors and subcontractors.
7a. Cyber attack on our IT systems
The Group may be subject to a cyber attack
that results in it being unable to use its
information systems and/or losing data.
2023
•
Conducted an internal phishing test to
help gauge the eﬀectiveness of previous
cyber security awareness campaigns with
additional mandatory training being sent
to anyone who did not pass the test.
•
Enhanced the speed at which we can
detect and respond to fraudulent and
malicious emails with the introduction
of new AI-driven technology.
•
Sent out mandatory compliance training
in Q3 on cyber security and cyber fraud.
•
Introduced new AI-driven security
awareness coaching with the ability to
detect patterns of risky behaviour, identify
high-risk users and tailor awareness
programmes based on roles.
•
Continued to develop and implement
our Information Security Management
Framework.
2024
•
Continue to develop and implement
our IT governance framework.
Key performance indicators:
Could indirectly impact on a number of our
KPIs. In addition, we consider any security
issues raised and the results of independent
assurance reviews.
1.
The Group’s Business Continuity Plan and
cyber security incident response procedures
are regularly reviewed and tested.
2.
Independent internal and external
penetration/vulnerability tests are regularly
conducted to assess the eﬀectiveness of
the Group’s security.
3.
Multi-Factor Authentication is in place for
access to our systems.
4.
The Group’s data is regularly backed up
and replicated oﬀ-site.
5.
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.
6.
Frequent staﬀ awareness and training
programmes.
7.
Security measures are regularly reviewed
by the DIT team.
Risk tolerance:
Low
Executive responsibility:
All Executive Directors
Impact:
Such an attack could severely restrict
the ability of the Group to operate, lead to an
increase in costs and/or require a signiﬁcant
diversion of management time.
Strategic objectives:
1
2
3
4
5
Stakeholders:
Could potentially impact on all
our stakeholders
Trend:
There has been a heightened risk of cyber
attacks amid escalating geopolitical tensions.
To date, Derwent London has not experienced
a signiﬁcant increase in cyber attacks. Staﬀ
vigilance is critical to the prevention of cyber
attacks. The Digital Innovation & Technology
(DIT) team are proactive in providing regular
guidance and refresher training to all
employees on cyber security matters.
MANAGING RISKS
continued
Operational
continued
98
Risk
Our actions
Key controls
7b. Cyber attack on our buildings
The Group is exposed to cyber attacks on its
properties which may result in data breaches
or signiﬁcant disruption to IT-enabled occupier
services.
2023
•
Conducted an internal phishing test to
help gauge the eﬀectiveness of previous
cyber security awareness campaigns with
additional mandatory training being sent
to anyone who did not pass the test.
•
Created a risks, actions, issues and
decisions (RAID) log for each building to
identify any IT risks and track remediation.
•
Continued to collaborate with our IT
partner on security hardening networks
and infrastructure and standardising
security controls across the portfolio.
•
Identiﬁed any information and
communication technology (ICT) hardware
that is reaching the manufacturer’s end of
supported life and collaborated with our IT
partner on refreshing hardware if required.
•
Completed an audit with our internal
auditors on the cyber security controls in
place in relation to intelligent buildings.
2024
•
Further develop our IT governance
framework, security monitoring and
security incident response procedures.
Key performance indicators:
Could indirectly impact on a number of our
KPIs. In addition, we consider any security
issues raised and the results of independent
assurance reviews.
1.
The Group’s Business Continuity Plan and
cyber security incident response procedures
are regularly reviewed and tested.
2.
Physical segregation between the building’s
core IT infrastructure and occupiers’
corporate IT networks.
3.
Physical segregation of IT infrastructure
between buildings across the portfolio.
4.
Frequent staﬀ awareness and training
programmes. Building Managers are
included in any cyber security awareness
training and phishing simulations.
5.
Sophos Rapid Response team provides
unlimited support to our Cyber Incident
Response Team in the event of a cyber
attack.
Risk tolerance:
Low
Executive responsibility:
All Executive
Directors
Impact:
A major cyber attack against the
Group or its properties could negatively impact
the Group’s business, reputation and operating
results.
Strategic objectives:
1
2
3
4
5
Stakeholders:
Could potentially impact on all
our stakeholders
Trend:
There has been a heightened risk of cyber
attacks amid escalating geopolitical tensions.
To date, Derwent London has not experienced a
signiﬁcant increase in cyber attacks. As part of
the Intelligent Building Programme, the Digital
Innovation & Technology (DIT) team have
worked alongside our portfolio IT partner to
conduct network and IT asset inventories and
cyber security assessments.
7c. Signiﬁcant business interruption
Major incidents may signiﬁcantly interrupt
the Group’s business, its occupiers and/
or supply chain. Such incidents could be
caused by a wide range of events such as ﬁre,
natural catastrophes, cyber events, terrorism,
pandemic outbreak, material supply chain
failures and geopolitical factors.
2023
•
Review of ﬂood risk to our portfolio
with the assistance of external advisers.
•
Engaged with a portfolio IT partner
to provide additional support for
ICT infrastructure and cyber security
assessments.
•
Remediated key ﬁndings from the last
security penetration test and commissioned
another independent internal/external test.
•
Completed a business continuity technical
test and full disaster recovery test.
•
Conducted monthly vulnerability scans.
•
Continued to conﬁgure secure VPN
connections and deploy fully encrypted
laptops to enable secure hybrid working
capabilities.
2024
•
Continue with our current controls and
mitigating actions.
Key performance indicators:
Could indirectly impact on a number of our
KPIs. In addition, we consider any downtime
incidences and the outcome of disaster
recovery testing.
1.
Fire protection and access /security
procedures are in place at all of our
managed properties. At least annually, a
ﬁre risk assessment and health and safety
inspection are performed for each property
in our managed portfolio.
2.
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.
3.
Continuous review of property health
and safety statutory compliance.
4.
Comprehensive property damage and
business interruption insurance which
includes terrorism.
5.
Robust security at our buildings, including
CCTV and access controls.
6.
Most of our employees are capable of
working remotely and have the necessary
IT resources.
Risk tolerance:
Medium
Executive responsibility:
All Executive
Directors
Impact:
This could result in issues such as
being unable to access or operate the Group’s
properties, occupier failures or reduced rental
income, share price volatility or loss of key
suppliers.
Strategic objectives:
1
2
3
4
5
Stakeholders:
Could potentially impact on all
our stakeholders
Trend:
Although not classiﬁed as a signiﬁcant business
interruption for Derwent London, rising
geopolitical tensions have elevated global
supply chain and market volatility.
Strategic objectives
To optimise returns
and create value
from a balanced
portfolio
To attract, retain
and develop
talented employees
To maintain
strong and
ﬂexible ﬁnancing
Increased
Decreased
Unchanged
To grow recurring
earnings and
cash ﬂow
To design, deliver and
operate our buildings
responsibly
1
2
3
4
5
Trend
Derwent London plc
Report and Accounts 2023
99
Strategic report
Risk
Our actions
Key controls
8. Reputational damage
The Group’s reputation could be damaged, for
example, through unauthorised or inaccurate
media coverage, unethical practices or
behaviours by the Group’s executives, or failure
to comply with relevant legislation.
2023
•
Rebranded our Whistleblowing Policy and
procedures to ‘Speak up’ to encourage
reporting and remove the stigma attached
to ‘whistleblowing’.
•
Published our updated Employee Handbook
and Code of Conduct & Business Ethics to
all employees.
•
Conducted a review of our key governance
policies to ensure they remain up to date.
•
Continued to implement a mandatory
compliance training programme for all
employees (including Directors).
2024
•
Continue to communicate and listen to
our stakeholders.
•
Support our staﬀ’s training requirements.
•
Continue with our current controls and
mitigating actions.
Key performance indicators:
•
Total shareholder return
•
Accident Frequency Rate (AFR)
•
Staﬀ satisfaction
Could indirectly impact on a number of our
KPIs. In addition, we consider compliance
training completion rates and feedback received
from employee and occupier ‘pulse surveys’.
1.
Social media channels are monitored,
and the Group retains the services of an
external PR agency to monitor external
media sources.
2.
The Executive Directors and Board
receive ad hoc social media reports.
Our social media strategy is approved
by the Executive Directors.
3.
Close involvement of senior management
in day-to-day operations and established
procedures for approving all external
announcements.
4.
All new members of staﬀ attend an
induction programme and are issued
with our Group staﬀ handbook.
5.
A Group whistleblowing system is in
place for staﬀ to report wrongdoing
anonymously.
6.
Ongoing engagement with local
communities in areas where the Group
operates.
7.
Staﬀ training and awareness programmes.
Risk tolerance:
Low
Executive responsibility:
All Executive Directors
Impact:
This could lead to a material adverse
eﬀect on the Group’s operating performance
and overall ﬁnancial position. Our strong
culture, low overall risk tolerance and
established procedures and policies mitigate
against the risk of internal wrongdoing.
Strategic objectives:
1
2
3
4
5
Stakeholders:
Could potentially impact on all
our stakeholders
Trend:
The Derwent London brand is well-regarded and
respected within our industry. We demonstrate
our brand and values through our actions,
external memberships and associations.
We value integrity and transparency.
9. Our resilience to climate change
If the Group fails to respond appropriately, and
suﬃciently, to climate-related risks or fails to
beneﬁt from the potential opportunities.
2023
•
Launched our new Responsible Asset
Framework and a revised Responsible
Development Framework.
•
We aligned our SBTi targets to a more
challenging 1.5°C climate scenario in line
with our net zero carbon ambition.
•
Received full planning consent for an
18.4 MW solar park at Lochfaulds and
we have installed a solar array at Easter
Cadder.
•
Published our latest Responsibility Report in
April 2023.
•
Reviewed our climate change strategy at
the June Board strategy meeting.
2024
•
Review the results of latest climate risk
scenario assessment and agree mitigation
plans.
•
Progress the construction of our solar park,
with delivery anticipated in 2025.
•
Roll out a new ESG data platform to collate
and analyse key data points.
Key performance indicators:
•
Total shareholder return
•
BREEAM ratings
•
Energy Performance Certiﬁcates (EPCs)
•
Energy intensity
•
Embodied carbon intensity
1.
The Board and Executive Directors receive
regular updates and presentations
on environmental and sustainability
performance and management matters,
as well as progress against our pathway
to becoming net zero carbon by 2030.
2.
The Sustainability Committee monitors our
performance and management controls.
3.
Strong team led by an experienced Head
of Sustainability.
4.
Production of an annual Responsibility
Report with key data and performance
points which are internally reviewed and
externally assured.
5.
Undertake periodic multi-scenario climate
risk assessments (physical and transition
risks).
Risk tolerance:
Low
Executive responsibility:
Nigel George
Impact:
This could lead to reputational
damage, loss of income and/or property values.
In addition, there is a risk that the cost of
construction materials and providing energy,
water and other services to occupiers will rise.
Strategic objectives:
1
2
3
4
5
Stakeholders:
Could potentially impact on all
our stakeholders
Trend:
Sustainability-related disclosure requirements
are increasing. During the past 12 months,
numerous publications have been released
which could require additional disclosures on
our net zero carbon plans, for example the
ISSB (IFRS) Sustainability Disclosure Standards.
MANAGING RISKS
continued
Operational
continued
100
Risk
Our actions
Key controls
10. Health and safety (H&S)
A major incident occurs at a managed
property or development scheme which
leads to signiﬁcant injuries, harm, or fatal
consequences.
2023
•
Reviewed the internal H&S management
system in line with updated legislation,
guidance and best practice (Building
Safety Act 2022, Fire Safety Act 2021,
Fire Safety (England) Regulations 2022).
•
Registered our High Risk Buildings (HRBs)
with the new Building Safety Regulator and
developed building safety cases for those
in scope of the Building Safety Act 2022.
•
Rolled out our Health & Safety Training
Matrix and revised water hygiene protocols.
2024
•
Ensure our internal policies and processes
are eﬀective and consistently applied
across the portfolio.
•
Continue to develop the Director H&S
Leadership Tours which were launched
in 2023.
•
Continue to work with contractors on
construction health, safety, and wellbeing.
Key performance indicators:
•
Accident Frequency Rate (AFR)
•
Staﬀ satisfaction
In addition, we consider feedback received
from employee and occupier surveys, and
H&S training data.
1.
Relevant and eﬀective health, safety, and
ﬁre management policies and procedures.
2.
The Group has a competent H&S team,
whose performance is monitored and
reviewed by the H&S and Risk Committees.
3. The H&S competence of our main
contractors and service partners is veriﬁed
by the H&S team prior to their appointment.
4.
Our main contractors must submit suitable
Construction Phase Plans, Management
and Logistics Plans, and Fire Management
Plans, before works commence.
5.
The H&S team, with the support of internal
and external stakeholders, support both
our Development Project teams and
our Managed Portfolio teams to ensure
statutory compliance, eﬀective reporting,
and feedback.
6.
The H&S team, with the support of external
appointments and audits, ensure our
Construction (Design and Management)
(CDM) client duties are executed and
monitored on a monthly basis.
7.
The Board, Risk Committee and
Executive Directors receive frequent
updates and presentations on key H&S
matters, including ‘Signiﬁcant Incidents’,
legislation updates, and trends across the
development and managed portfolio.
Risk tolerance:
Zero
Executive responsibility:
Paul Williams
Impact:
A major health and safety incident
could cause loss of life, life-changing injuries,
signiﬁcant business interruption, Company or
Director ﬁnes or imprisonment, reputational
damage, and/or loss of our licences to operate.
Strategic objectives:
1
2
3
4
5
Stakeholders:
Could potentially impact on all
our stakeholders
Trend:
Construction activities can have a high inherent
risk for injury, harm, or loss, particularly in
demolition and early construction phases. In
addition, serious accidents involving falls from
height, pedestrian-vehicle collision, and slips
and trips are still frequent within the Property
Management and Maintenance sectors.
Derwent London continues to work closely to
ensure high levels of H&S compliance across all
of our activities.
11. Non-compliance with law and regulations
The Group breaches any of the legislation that
forms the regulatory framework within which
the Group operates.
2023
•
Following the development of our Fraud
Risk Management Framework in 2022, we
have been working towards the agreed
focus areas.
•
Reviewed the internal H&S management
system in line with updated legislation,
guidance and best practice.
•
Arranged ‘roundtable’ training sessions
with a data protection lawyer and
specialist to discuss our current procedures.
2024
•
Review the UK Corporate Governance Code
2024 to ensure our continued compliance.
•
Continue with our current controls and
mitigating actions.
Key performance indicators:
•
Total shareholder return
•
Accident Frequency Rate (AFR)
•
A signiﬁcant diversion of time could aﬀect
a wider range of KPIs
In addition, we consider compliance training
completion rates and feedback received from
employee and occupier surveys.
1.
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.
2.
Managing our properties to ensure they
are compliant with the Minimum Energy
Eﬃciency Standards (MEES) for Energy
Performance Certiﬁcates (EPCs).
3.
A Group whistleblowing system
(‘Speak-up’) for staﬀ is maintained
to report wrongdoing anonymously.
4.
Ongoing staﬀ training and awareness
programmes.
5.
Group policies and procedures dealing
with all key legislation are available on
the Group’s intranet.
6.
Quarterly review of our anti-bribery
and corruption procedures by the
Risk Committee.
Risk tolerance:
Zero
Executive responsibility:
All Executive
Directors
Impact:
The Group’s cost base could increase
and management time could be diverted. This
could lead to damage to our reputation and/or
loss of our licence to operate.
Strategic objectives:
3
4
5
Stakeholders:
Could potentially impact on all
our stakeholders
Trend:
The Group has been actively monitoring the
proposed regulatory changes which could
impact on our business, including the reform
of the UK Prospectus and Listing regime,
and the UK Economic Crime and Corporate
Transparency Act 2023. Following the
publication of the UK Corporate Governance
Code 2024, the Board will ensure the Group is
fully compliant with the revised provisions by
the applicable dates, particularly in respect of
internal controls.
Strategic objectives
To optimise returns
and create value
from a balanced
portfolio
To attract, retain
and develop
talented employees
To maintain
strong and
ﬂexible ﬁnancing
Increased
Decreased
Unchanged
To grow recurring
earnings and
cash ﬂow
To design, deliver and
operate our buildings
responsibly
1
2
3
4
5
Trend
Derwent London plc
Report and Accounts 2023
101
Strategic report
Emerging risks are conditions, situations or trends that could signiﬁcantly impact the Group’s ﬁnancial strength, competitive
position or reputation within the next ﬁve years. Emerging risks are therefore factored into the Board’s viability assessment and
strategic planning process. Emerging risks could involve a high degree of uncertainty. The methodology used to identify, assess
and monitor emerging risks is described in the risk management framework on pages 160 and 161.
Time horizon
Risk
0-5
years
5-10
years
15+
years
Impact
Our actions
A. Nature of
oﬃce occupation
Strategic objectives:
1
2
4
The Group needs to ensure it is thinking
ahead, so that our product remains
attractive to businesses, thereby
retaining its competitive edge. Buildings
that are unable to meet these objectives
may suﬀer in value unless they can be
redeveloped or repurposed.
Close engagement with our occupiers and
the wider market ensures we are aware of
changing trends and respond appropriately.
We believe our approach of delivering space
with creative design, enhanced amenity,
‘Intelligent Building’ infrastructure, and
employee wellbeing at its core will exceed
these evolving requirements.
B. Technological
change
Strategic objectives:
1
2
3
A failure to adopt technology could lead
to the Group becoming less eﬃcient
than its competitors, leading to a loss
of competitive advantage. Buildings are
becoming increasingly ‘intelligent’ and
occupiers may begin to choose such
buildings over those without the same
technological amenities. If the Group
fails to respond to occupier demands
for technology, the Group’s oﬃce
spaces could become less desirable,
leading to potential vacancies and
loss of rental income.
We have a Digital Strategy which is being
implemented by our dedicated, cross-
functional and highly collaborative Digital,
Innovation & Technology team. We critically
analyse new technology to ensure that
maximum value can be derived from any
new system or service that we choose to
add into our overall digital and technological
framework. In particular, analysing the
capability of the new system or service to
support our Net Zero Carbon Pathway.
Phase 2 of our Intelligent Building project
commenced during 2023.
C. Climate-related
risks
Strategic objectives:
1
2
3
4
The six climate-related emerging risks
which are considered to have the
greatest impact on Derwent London
are: EPC rating requirements, emissions
oﬀsets, planning requirements, cost of
raw materials, windstorm and ﬂooding.
To avoid duplication, our climate-related
emerging risks are contained on pages
110 and 111.
Through our ongoing refurbishment
programme, we continually improve the
energy eﬃciency of our buildings. In addition
to purchasing renewable energy and green
tariﬀ supplies, wherever possible, we are
researching opportunities to increase our
own supply base of renewable energy. During
2023, we received planning consent for a
c.100-acre solar park on our Scottish land.
D. Geopolitical
instability
(New)
Strategic objectives:
2
4
5
Continued geopolitical tensions could
cause prolonged global supply chain
disruption, commodity price inﬂation,
market uncertainty and deglobalisation.
There is also a risk of increased cyber
attacks and social unrest.
Despite the uncertainty, our supply chain
has been relatively unaﬀected due to our
approach of early pre-ordering and storage.
Early supply chain engagement in project
designs helps with the identiﬁcation of
potential risks and alternative solutions.
E. Shortage of
electrical power
Strategic objectives:
2
4
5
Shortage of electrical power is a risk for
London, particularly in West London.
Shortage of electrical power could lead
to power cuts and cost pressures. UKPN
consider power cuts as being possible but
unlikely and will be driven by a combined
impact of very cold weather and a
reduction in power generated from
wind farms due to lack of wind.
UKPN are the provider in central London,
covering all Derwent London properties
and have put in place robust plans to meet
future load requirements. Early engagement
for schemes with UKPN is the key to risk
mitigation for the provision of power.
Derwent London engage with UKPN on a
regular basis at a monthly meeting and we
have a dedicated UKPN Account Manager.
MANAGING RISKS
continued
Our emerging risks
102
Climate change
A principal or emerging risk?
Due to its dynamic and complex nature, we acknowledge
that climate-related risks are developing, and our
exposure/vulnerability may change over time. As a result,
we have included the risks arising from climate change
within both our principal and emerging risk registers.
We seek to identify and monitor the climate-related risks
and opportunities that could impact on our business in
the short-, medium- and long-term, recognising that
climate-related issues, in particular physical risks are often
(but not exclusively) linked to the medium- to long-term
and that the properties within our investment portfolio
have a long lifespan of many decades.
Our resilience to climate change is a principal risk for the
Group (see page 100). We invest signiﬁcant time and eﬀort
into ensuring we are managing the risks that climate change
presents. As a leading property investor, we recognise our
responsibility to reduce energy and carbon emissions and
make our portfolio climate resilient. We have also identiﬁed six
climate-related emerging risks which we monitor to determine
their future potential impact. On pages 104 to 117, we detail
how we are assessing and managing climate-related risks.
Old Street Yard EC1
Derwent London plc
Report and Accounts 2023
103
Strategic report
The built environment
Climate change is a major global challenge and will impact
how business operates in the future. Given that the built
environment contributes signiﬁcantly to the UK’s overall
carbon footprint (approximately 40%), we are being proactive
in ﬁnding solutions to further reduce emissions and develop
renewable energy sources (see pages 46 to 49).
We are committed to being a net zero carbon business by
2030. We are also helping to lead the industry in supporting
the Government’s net zero carbon ambitions and improving
the carbon footprint of the built environment.
Through our engagement with industry partners and
organisations, such as the Better Building Partnership
and the British Property Federation, we are helping to
develop best practice guidance for our sector.
We were early signatories to the Westminster City Council
(WCC) Sustainable City Charter, which provides a framework
for reducing carbon emissions from non-domestic buildings
across Westminster. John Davies, our Head of Sustainability,
is the Chairman of its Steering Committee. Our CEO, Paul
Williams, sits on the Sustainable Markets Initiative (SMI)
Buildings Taskforce which is part of His Majesty King Charles
III’s Terra Carta. The aim of the initiative is to put nature,
people and the planet at the heart of global value creation.
Engagement
We seek to actively engage with our peers, occupiers and other
stakeholders to reduce energy use and carbon emissions within
the built environment. If you wish to discuss our pathway to net
zero carbon, you can contact our Sustainability team via email:
sustainability@derwentlondon.com
We are proactive in ﬁnding solutions to further reduce
emissions and develop renewable energy sources.
MANAGING RISKS
continued
Building climate
resilience
The Featherstone Building EC1
104
Task Force on Climate-related Financial Disclosures (TCFD)
Compliance statement
Our disclosures in this section are consistent with the TCFD’s Recommendations and Recommended Disclosures. When
assessing the consistency of our disclosures, we have had due regard for all relevant guidance including the TCFD’s Guidance
for All Sectors. In line with the UK’s Financial Conduct Authority Listing Rules, we have identiﬁed in the table on page 116
where our responses to the TCFD’s 11 recommendations can be located.
We provide more granular, detailed climate-related data sets and performance metrics within our Responsibility Report at
www.derwentlondon.com/responsibility/publications
. We report this way to satisfy the variety of stakeholders we have
and for those who want a more detailed data breakdown which the Responsibility Report provides.
We are reviewing the sustainability disclosure standards published by the International Sustainability Standards Board
(IFRS S1 and IFRS S2) and will ensure our climate-related disclosures are fully compliant. During 2023, the Audit Committee
received training on the IFRS S1 and IFRS S2 climate disclosure requirements (see page 147).
Our approach
Climate change is a material issue for our business. We deem
an issue to be ‘material’ when it is assessed as being suﬃciently
important to both our business and our stakeholders. As a
REIT our properties are subject to climate-related risks such
as increasing temperatures which could lead to greater
physical stresses. Our strategy involves both investing in new
developments and acquiring older properties which hold future
regeneration/income potential.
We ensure a high degree of resilience in our new developments
and regeneration of older properties by setting high standards
for sustainability, which includes climate-related aspects.
When managing our core income portfolio, we focus on energy
and carbon reduction (as dictated by our energy intensity
reduction targets), ensuring our buildings operate as eﬃciently
as possible. As a result, our strategy centres around the concept
of continual improvement which ensures a high degree of both
climate and ﬁnancial resilience. Our environmental priorities are
on pages 46 to 49.
Climate risk assessment
We identify and monitor climate change risks and opportunities
as part of our wider risk management procedures which are
overseen by the Board and its principal committees (see pages
112 to 113 and 147).
Our risk management framework is disclosed on pages 160
and 161 and comprises of four stages. We have structured our
climate risk disclosures on pages 104 to 117 in accordance with
this four-stage approach.
Identiﬁcation
See page 106
Assessment
See page 108
Monitoring
See page 112
Response
See page 114
Owing to their complex nature, the identiﬁcation and
assessment of climate-related risks and opportunities are
undertaken with the support of third party expertise. Our last
independent climate risk assessment and scenario analysis was
conducted in 2022 by Willis Towers Watson (WTW). The scope of
the assessment included our entire London-based investment
portfolio (including our head oﬃce) and our Scottish land.
During our climate risk assessments we considered short-,
medium- and long-term time horizons (see page 93),
recognising that climate-related issues, in particular physical
risks are often (but not exclusively) linked to the medium-
to long-term and that the properties within our investment
portfolio have a long lifespan of many decades.
The climate risk assessments sought to identify the transition
and physical risks and opportunities applicable to our business.
As our business is based in and solely focused on the UK, the
risks/opportunities were not considered on an international
and/or segmental basis.
Through this process we identiﬁed and reviewed nearly 20
transition and physical issues. On page 106 we have disclosed
the most material risks and opportunities, in terms of impact,
likelihood (transition risk) and exposure (physical risk). Once the
risks and opportunities had been identiﬁed, three pre-deﬁned
climate scenarios were applied to test the resilience of our
business, strategy and ﬁnancial planning.
Derwent London plc
Report and Accounts 2023
105
Strategic report
Identiﬁcation
Transition
Transition risks and opportunities are those which arise from the transition to a low carbon economy. We identiﬁed and assessed
transition risks and opportunities, in terms of their impact and likelihood, via a facilitated workshop with cross-functional
representation from across our business. As part of our risk assessment, we considered how these risks changed under a 1.5°C
aligned scenario (the ‘Low Carbon World’). Overall, our transition risk exposure under the ‘Low Carbon World’ scenario was
assessed to be moderate in 2025 and 2030 (see table below).
The impact and likelihood of each identiﬁed risk was challenged in the context of the latest regulatory updates and Willis Towers
Watson’s (WTW)/our experience with the real estate sector. We also estimated the ﬁnancial impact (whether to the balance sheet
or income statement) and assigned high and low impact estimates to applicable cost components, depending on the success
of our planned mitigating actions. Through the assessment process, we applied mitigation measures already captured within
the scope of our Net Zero Carbon Pathway and those within our existing business processes, to deﬁne our residual risk proﬁles.
Due to the strength of our mitigation strategies, the impact of these risks reduced signiﬁcantly on a residual basis.
Based on our assessment, we consider EPC rating requirements, emissions oﬀsets, planning requirements and cost of raw
materials as the most material transition risks applicable to our business.
Material transition risks and opportunities identiﬁed:
Risk rating on a residual basis
‘Low Carbon World’ (~1.5°C)
Risks
Opportunities
0-5 years
5-15 years
0-5 years
5-15 years
EPC rating requirements
Medium
Medium
Change in customer demand
Low
Low
Low
Very low
Emissions oﬀsets
Medium
Medium
Planning requirements
Low
Medium
Cost of raw materials
Medium
Medium
Cost of debt via green bonds
Very low
Very low
Low
Low
Risk rating /
See page 92
Physical
Physical risks were identiﬁed and assessed through an asset-by-asset exposure analysis using a range of acute and chronic climate
hazards (risks). The scenarios were tested as at the present day, as well as for future projections under three climate scenarios
(see table below). This was supplemented by a climate risk modelling analysis for ﬂood and windstorms. Physical assets were
considered exposed if they were in an area where a climate hazard may occur.
The degree of exposure was deﬁned by the severity/intensity of that hazard, with each hazard having its own intensity scale.
If an exposure was deemed to be moderate or above it could have a material impact. It should be noted that the scores were
based on a global scale. For the UK, a modest increase in a chronic hazard, such as heat-stress (heatwaves), from very low to
low could have wider implications on properties and infrastructure.
Our exposure to physical risks increases into the medium- and long-term and as global temperatures rise. Based on our
assessment, we consider windstorm and ﬂooding to be the most material physical risks to our business. Drought and subsidence
risks have not been included as material physical risks due to there being no clear ﬁnancial quantiﬁcation models available within
the data sets used.
Our physical risk exposure:
MANAGING RISKS
continued
Short-term
0-5 years
Medium-term
5-15 years
Long-term
15+ years
Present day
‘Low Carbon
World’
(~1.5°C)
‘Current
Policies’
(~2 to 3°C)
‘Hot House
World’
(>4°C)
‘Current
Policies’
(~2 to 3°C)
‘Hot House
World’
(>4°C)
Heat stress
Very low
Very low
Very low
Low
Low
Low
Flooding
Low
Low
Low
Moderate
Moderate
Moderate
Drought
Very low
Very low
Low
Low
Low
Medium
Fire
Very low
Low
Low
Low
Low
Low
Windstorm
Moderate
Moderate
Moderate
Moderate
Moderate
Moderate
Subsidence
No data
No data
No data
High
No data
High
106
Solar energy in Scotland
Climate risk and opportunities
As part of our 2022 risk assessment, we investigated the climate exposure of our proposed solar park in Scotland. We have
detailed below the most material risk and opportunities identiﬁed through the assessment and how this has been factored
into decision making. As part of the 2022 strategy review, the Board visited our Scottish land holdings to see ﬁrst-hand our
sustainability initiatives. In 2023, the Board approved capital expenditure of £18.7m for the solar park in Scotland (with
£1.1m of capital expenditure spent as at 31 December 2023). Construction of the solar park is due to commence in 2024.
Opportunity: Sunshine and cloud cover
Our assessment identiﬁed an upward trend in observed
sunshine duration per year in Scotland. Projections show
that by the 2050s under the 4°C ‘Hot House World’
scenario, cloud cover in the summer could decrease for
the UK with changes in Scotland between -15% and +5%
(-5% on average).
Although Scotland receives a relatively low level of irradiation
(<3 kWh/m
2
), solar panels still produce electricity on cloudy
days and during winter, with peak eﬃciency reached when
the sun is shining.
Under these conditions, the solar park could potentially
capture more sunlight in the future. The panels we instal will
be speciﬁed to ensure maximum eﬃciency and any future
replacements will follow suit. Therefore, if sunshine levels
do increase, we will be able to take advantage accordingly.
Risk: Windstorm
There is currently no consensus for future shifts in wind
speeds and storm activity in the UK and it is considered to
remain within the current levels of volatility. Therefore, our
solar park’s exposure to windstorms was modelled against a
windspeed in the range of 161-200 km/h. This windspeed was
chosen as it represented a 1-in-100-year or ‘bad year’ event
(which has a 10% likelihood of occurring in any year). Under
these conditions, it was determined that no extra design
provisions were required on top of current best practice. It
was noted that in general, most solar panels can withstand
windspeeds of up to 225 km/h.
Although the risk to our assets in Scotland (solar energy and
woodlands) is relatively low, we will still ensure that the solar
parks design considers extreme wind gusts, high speciﬁcation
impact resistant panelling and site protection from ﬂying
debris. During 2023 we designed and installed a small solar
array at Easter Cadder, which was built in accordance with
these principles and is performing well.
Solar panels at Easter Cadder Farm on our Scottish land
Derwent London plc
Report and Accounts 2023
107
Strategic report
Assessment
Testing our resilience
The risks and opportunities we identiﬁed were applied against
three climate scenarios to test the resilience of our business,
strategy and ﬁnancial planning.
Our approach to creating scenarios followed the updated
guidelines produced by the TCFD within their Guidance on
Scenario Analysis for Non-Financial Companies. We set out
on page 117 the assumptions and risk data sources that were
used in our most recent climate scenarios.
When conducting the scenario analysis, we had due regard to
the following:
•
Forecasting:
scenarios are not intended to be forecasts of
the future, rather a way to imagine plausible states of the
world and plan for our resilience.
•
Balance:
they should have aspects of quantiﬁcation, but
not so much that it impairs strategic thinking.
•
Challenge:
they must ensure we challenge our own thinking
about our organisation and business model.
•
Certainty:
some drivers within the scenarios may be
relatively certain and predictable whilst others highly
uncertain as to their development and impacts over time.
•
Number:
the resilience of our strategy should be
investigated under multiple scenarios, including a 2°C
or lower scenario.
The tables on pages 110 to 111 illustrate how we have
incorporated these risks and opportunities into our strategy
and ﬁnancial planning. Ultimately, we do not envisage having
to make changes to our overall strategic approach when
considering climate-related scenarios.
Risk rating /
See page 92
Scenario 1 – ‘Low Carbon World’
~1.5°C
A low temperature rise scenario as the world transitions
to a low carbon economy
•
A minimum EPC rating of B is required for commercial
property.
•
There are signiﬁcant price increases to voluntary carbon
oﬀsets.
•
Increased stringency of building planning and design
requirements to meet net zero targets.
•
Increased cost of high carbon raw materials (such as steel,
cement and glass), which is further impacted by a carbon
tax.
•
Suppliers pass on 50-100% of their exposure to high carbon
taxation via increased prices.
Transition risks
Moderate
Our overall risk exposure under the ‘Low Carbon World’ (1.5°C)
scenario is moderate in both the short-term (2025) and the
medium-term (2030). The most material transition risks
identiﬁed were EPC rating requirements, increased cost of raw
materials and rising emission oﬀset prices.
Physical risk exposure
Very Low
to Low
Our physical risk exposure was low under this scenario. However,
our Scottish land had greater exposure to windstorm and river
ﬂoods in comparison to our London portfolio.
Potential ﬁnancial impacts
Moderate
In 2021, approximately £97m of capex was identiﬁed to achieve
an EPC rating of B across our London commercial portfolio.
This has since been revised to £95.3m to reﬂect the latest scope
(change in building regulations), subsequent inﬂation, disposals
and work carried out to date.
Based on the International Energy Agency’s (IEA) projected
carbon prices of £62 per tonne in 2025 and £108 per tonne in
2030, and if we achieve our emission reduction targets:
•
The increased cost of voluntary carbon oﬀsets could have a
projected impact of ~£450,000 to £750,000 per annum by
2025 and ~£800,000 to £1.1m per annum by 2030. If we are
unable to achieve our emission reduction targets, the impact
is estimated as rising to ~£1.5m per annum by 2030.
•
The increased cost of raw materials could have a projected
impact of ~£200,000 to £400,000 per annum by 2025 and
~£350,000 to £700,000 per annum by 2030.
Potential impact on strategy
Low
Our strategy and ﬁnancial planning already reﬂect more
stringent planning and design requirements, primarily via the
introduction of our Net Zero Carbon Pathway in July 2020.
We estimate that the cost impact of achieving our pathway
requirements is approximately 5% to 10% of our development
costs which is factored into our appraisals.
Over the long-term, we can reduce the cost impact of carbon
oﬀsets on our balance sheet by extending our carbon removal
projects (e.g. tree planting) on our Scottish land which will
help to reduce our reliance on the voluntary carbon market.
However, in this scenario we are unlikely to realise the full
value for some time given such projects take time to yield
a signiﬁcant number of credits.
Of the risks identiﬁed, none were
deemed likely to have an impact
such that the viability of our business
would be interrupted, although our
cost proﬁle could increase.
MANAGING RISKS
continued
108
Scenario 2 – ‘Current Policies’
~2 to 3°C
The world follows the emissions trajectory based on current
policies/practices
•
No change in EPC rating requirements.
•
Oﬀset prices increase but not by as much as under the
‘Low Carbon World’ scenario.
•
There are no changes to existing planning and design
requirements for developments.
•
The increase in cost of key materials is anticipated to be
substantially lower than in the ‘Low Carbon World’ scenario.
•
Suppliers pass on 50-100% of their exposure to high carbon
taxation via increased prices.
Transition risks
Moderate
Under this scenario, the risk impact and likelihood proﬁles for
transition risks were unchanged in comparison to the ‘Low
Carbon World’ scenario. This is because strategically we are
expecting to decarbonise in a shorter time frame compared
to the current policy approach.
Physical risk exposure
Low to
Moderate
Within this climate scenario there was no scientiﬁc evidence
to suggest that intensity or frequency of windstorms would
increase signiﬁcantly, therefore the risk proﬁle has been deemed
to be broadly similar to that in the short-term. All our London
portfolio assets are either out of risk zones or are protected
by the Thames Barrier. Four agricultural assets in our Scottish
portfolio are currently exposed to very high ﬂooding risk and
part of the land could be ﬂooded. As a result, ﬂooding presents
itself as a moderate risk in this scenario.
Potential ﬁnancial impacts
Moderate
Based on the IEA’s STEPS scenario and assuming the UK
implements a carbon price of $65 (£54) by 2030 in line with
stated EU prices, under this scenario:
•
The increased cost of voluntary carbon oﬀsets could have
a projected impact for Derwent London of £400,000 to
£570,000 per annum by 2030.
•
The increased cost of raw materials could have a projected
impact of £170,000 to £340,000 per annum by 2030.
Potential impact on strategy
Low
Sustainability has always been part of our strategy which
puts us in a good position to take advantage of market and
occupier demand for more sustainable space, which in turn is
leading towards better rental premiums. Likewise, there are also
operational cost savings that can be achieved from reduced
energy intensity of more eﬃcient spaces.
Under this scenario, we would continue to retroﬁt and improve
our properties in line with our net zero strategy and overall
business model.
It is assumed the opportunities available on our Scottish
portfolio remain the same.
Scenario 3 – ‘Hot House World’
4°C
A high carbon scenario where the world fails to transition,
and temperatures rise
•
No change in EPC rating requirements.
•
Current policies promoting sustainability are removed.
•
No carbon pricing in existence.
•
Exploitation of abundant fossil fuel resources.
•
Little or no development in low carbon technology.
•
Adoption of resource and energy intensive lifestyles.
Transition risk exposure
N/A
Transition risks were not modelled under this scenario.
These risks only arise if the world actively attempts to
transition to a low carbon economy.
Physical risk exposure
Moderate
to High
Our London portfolio could see a moderate risk of drought,
between three to four months per year, a notable increase
over today’s climate. Under this scenario, there is increased
susceptibility of subsidence, with all the London portfolio
having ‘probable’ increases and instability issues in line with
the wider London area. There was also no scientiﬁc evidence to
suggest that intensity or frequency of windstorm would increase
signiﬁcantly, therefore the risk proﬁle has been deemed to be
broadly similar to that in the ‘Current Policies’ scenario.
Potential ﬁnancial impacts
Low
Within the next 10 years, modelling showed that there was a
10% probability of windstorm damage costing approximately
£2.6m.
Potential impact on strategy
Low
Heat stress is not projected to be a signiﬁcant risk by 2050
but changes in average temperatures and increased number
of heatwaves in London could impact occupier comfort
within buildings (overheating), increase energy costs for
cooling and lead to increased demand for ventilation and air
conditioning. We seek to address these risks through energy
eﬃcient building design and use of renewable energy to meet
the increased demand.
Drought might create water stress issues and shortages in
water supply for London. Our water management strategy
would need to be strengthened to use water more optimally
(reuse, collections etc.) which could lead to higher maintenance
and regeneration costs.
Although the overall ﬂood risk is not signiﬁcant, projected
changes indicate that the frequency of ﬂood events could
increase in the UK (and more for Scotland) and create
additional direct building and infrastructure damage and
more frequent interruptions. Flood risk assessment is one of
our considerations during our acquisition’s appraisal process.
Derwent London plc
Report and Accounts 2023
109
Strategic report
Assessment
continued
Impact on our strategy and ﬁnancial planning
The outputs from the risk and scenario assessments (see pages 106 to 109) have been embedded into our business to ensure all
of our core activities accurately reﬂect the required actions and investments. Our strategy remains unchanged as we continue to
develop design-led, amenity-rich, low carbon oﬃce space in line with market and customer demand.
Material risk
Exposure
Impact on strategy
Impact on financial planning
0-5
years
5-10
years
15+
years
Transition risks
Energy Performance
Certiﬁcate (EPC) rating
requirements
Current environmental
regulation in the UK
prevents leasing space with
an EPC rating of worse
than E. These rules could
become stricter in 2027
with a minimum rating of
C or better. From 2030, it
is projected that there will
be a further change to a
minimum rating of B.
To improve our older buildings, we
may need to commit to additional
capital expenditure. The Group may be
unable to lease the space during the
improvement phase, leading to reduced
rental income and longer void periods.
Through our programme of continual
improvements and regeneration, at
31 December 2023, our portfolio
(including on-site projects), is 87.5%
2027 compliant by ERV and 68.4%
2030 compliant.
Strategic objectives:
1
2
4
Business model:
All of our core activities
Following an independent third party
assessment in 2021, approximately
£97m of capex was identiﬁed to achieve
2030 EPC compliance across our
London commercial portfolio. This has
since been revised to £95.3m as at
31 December 2023 to reﬂect the latest
scope (change in building regulations),
subsequent inﬂation, disposals and
work carried out to date. The Audit
Committee regularly monitors how
these costs are reﬂected in our
forecasting and portfolio valuations
(see page 147).
Planning requirements
It is likely that the UK will
need to incrementally
increase the stringency
of building planning and
design requirements as part
of its eﬀorts to meet its
net zero targets. This would
aﬀect our development
pipeline, including
increasing development
costs to ensure all new
buildings are net zero
carbon ready.
Our Responsible Development
Framework and Net Zero Carbon
Pathway aim to ensure that our
properties are more climate resilient,
built for a longer life, ﬂexible to occupy
and operate, less reliant on mechanical
cooling and free from fossil fuel use i.e.
all electric heating and cooling.
Strategic objectives:
1
2
4
Business model:
Refurbishment &
Development
The requirement to be net zero
aligned is already factored into our
development appraisal process and
ensures we have a more robust level of
cost certainty and ﬁnancial forecasting
ability. Access to good quality,
aﬀordable ﬁnance is also important to
enable us to deliver our development
pipeline eﬀectively and demonstrate
how we are addressing and eﬀectively
managing climate risk. Further
information on our green ﬁnance
initiatives is on pages 84 and 85.
Cost of raw materials
There is a risk of increased
development cost if the
construction value chain
passes onto us the impact
of carbon pricing for high
carbon building materials
such as steel and cement.
Setting robust embodied carbon
reduction targets drives us to explore
lower carbon materials and methods of
construction which in turn should assist
us in reducing the signiﬁcance of the
impact created by such carbon-related
cost increases on our proﬁt and loss.
However, we recognise that the
transition timeframe and subsequent
availability of these lower carbon
materials is not yet entirely clear in
some instances. As a result, it could
mean it takes longer to realise the use
of such materials in our developments.
Strategic objectives:
2
4
Business model:
Refurbishment &
Development
Whilst the increased cost of raw
materials cannot be borne solely by
customers, the market has seen price
increases to key material groups, albeit
not necessarily exclusively linked to
sustainability-related drivers. In line with
our approach to embodied carbon we
continue to engage with our principal
contractors and Tier 1 suppliers on the
impacts of using traditional materials
and moving to less carbon intensive
materials, and the implications of doing
so, for example, availability, cost and
supply chain knowledge.
MANAGING RISKS
continued
110
Material risk
Exposure
Impact on strategy
Impact on financial planning
0-5
years
5-10
years
15+
years
Transition risks
continued
Emissions oﬀsets
As more companies commit
to net zero, the demand for
high quality carbon removal
oﬀsets is increasing,
resulting in higher prices.
There is also an increasing
reputational risk associated
with the use of emission
oﬀsets if carbon oﬀsetting
is chosen as the only net
zero measure instead
of focusing on reducing
energy consumption
and emissions ﬁrst.
We have put in place energy intensity
reduction targets for properties in our
managed portfolio which look to reduce
intensity by 4% year-on-year, from
our 2019 baseline out to 2030. These
are designed to ensure (alongside our
renewable energy procurement) that we
drive down operational carbon as much
as possible.
Our strategy has been to utilise our
Scottish land to create our own oﬀsets,
initially via tree planting schemes. We
are reviewing our oﬀsetting strategy
for the operational emissions of our
investment portfolio which will be
described and quantiﬁed in subsequent
disclosures once agreed.
Strategic objectives:
4
Business model:
Asset Management &
Investment activities
To oﬀset our development-based
residual embodied carbon we use
carbon removal oﬀsets purchased
from the voluntary carbon market.
Our development appraisals include
a cost of carbon for these oﬀsets,
currently set at £25 per tonne with an
annual inﬂation factor of 10% applied.
This is then complemented by our
embodied carbon targets which aim to
drive down the amount of embodied
carbon on scheme completion and
subsequently the need for and cost
of oﬀsetting. The carbon price and
inﬂation factor included within our
development appraisals ensure we are
robustly mapping the possible ﬁnancial
impact and reducing exposure to future
demand-led price movements.
Physical risks
Windstorm
The risk arising from
windstorms is damage
to our buildings (which
could include façade and
roof damages and power
outages), primarily caused
by ﬂying debris.
Our buildings are in storm susceptible
regions, with our land in Scotland being
at highest risk. Overall, the impact of
windstorms on our portfolio does not
impact on our business strategy. We
have adequate building maintenance
and management measures in place.
Strategic objectives:
1
2
3
4
5
Business model:
All of our core activities
As modelling showed a minor potential
ﬁnancial loss of approximately £2.6m,
we currently do not believe that it
will impact on our ﬁnancial planning.
Recommendations from the climate
assessments will be factored into our
property management plans and
planned preventive maintenance
schedules.
Flooding
All of our London assets
are out of risk zones or
protected by the Thames
Barrier. In Scotland
(c.1% of our total portfolio),
we have locations which
are currently exposed to
very high ﬂooding risk for
agricultural.
The risks from ﬂooding do not impact
our overall business strategy, albeit we
are likely to undertake a greater level
of due diligence during the acquisition
process given future purchase targets
could potentially be in ﬂood zones.
Strategic objectives:
2
4
Business model:
All of our core activities
To ensure we understand the ﬂood risk
of potential new acquisitions, our due
diligence procedures will need to be
enhanced to account for a greater level
of ﬂood mapping to ensure we aren’t
introducing higher levels of risk and loss
exposure into the portfolio.
Further information on how we have addressed these risks can be found on the following pages:
Our pathway to net zero /
See page 48
Regeneration of 6-8 Greencoat Place SW1 (EPC rating of E to B) /
See page 20
Occupier engagement on climate change /
See page 46
Strategic objectives
To optimise returns
and create value
from a balanced
portfolio
1
To grow recurring
earnings and
cash ﬂow
2
To attract, retain
and develop
talented employees
3
To design, deliver and
operate our buildings
responsibly
4
To maintain
strong and
ﬂexible ﬁnancing
5
Derwent London plc
Report and Accounts 2023
111
Strategic report
Monitoring
Role of the Board
The Board has overall accountability for climate-related risks
and opportunities. It is responsible for ensuring that climate
change is adequately reﬂected in the Group’s strategy to ensure
our future resilience. Due to its importance, climate-related
matters are regularly discussed during the Board’s strategy
reviews and factored into the Board’s assessment of our
viability (see page 89).
Climate resilience has been classiﬁed as a principal risk for
the Group and is contained on our Schedule of Principal Risks
(see page 100). The Board reviews and approves the Group’s
risk registers on at least an annual basis and they are subject
to review by the Risk Committee at each of its meetings.
Climate-related topics are included on the agenda of each
meeting of the Responsible Business Committee and the
Sustainability Committee, including our progress to net zero
carbon. Climate-related risks and reporting are standing
agenda items for the Risk and Audit Committee meetings.
The climate risk governance framework is on page 113.
To embed a further level of oversight, we have linked
climate-related performance measures into our Remuneration
Policy for the Executive Directors’ incentive remuneration
(see page 177). These targets are directly linked to our
Net Zero Carbon Pathway.
Further information on the role of the Board and its
Committees in respect of climate change is available
on the following pages:
Audit Committee Report /
See page 147
Remuneration Committee Report /
See page 173
Intelligent Building Programme /
See page 163
The Board does not have terms of reference, instead it
maintains a schedule of matters reserved solely for its
attention. Within this schedule, climate change and other
environmental factors which could impact on the design or
management of our portfolio is reserved to the Board and its
Committees, principally the Responsible Business Committee
and Audit Committee. To formalise the role of each Committee
in the oversight of climate-related risks and opportunities,
we intend to update their Terms of Reference in 2024.
The Board’s assessment of its skills, experience and knowledge
is on page 136 and includes reference to environmental matters,
including climate change. The Audit Committee also received
training on climate-related disclosures during the year.
Board training in 2023 /
See page 136
Role of management
As Chief Executive, Paul Williams has overall accountability
to the Board for climate-related issues. Paul Williams
has delegated management oversight to Nigel George
(Executive Director) and responsibility for implementation
to John Davies (Head of Sustainability).
The table below illustrates their involvement in the Group’s
climate risk framework. As a result, they have a comprehensive
oversight of all our climate-related work.
Paul Williams
Nigel George
John Davies
Board
Member
Member
By invitation
Audit
Committee
By invitation
Regular
attendee
Regular
attendee
Risk
Committee
Regular
attendee
By invitation
Regular
attendee
Remuneration
Committee
By invitation
–
–
Nominations
Committee
By invitation
–
–
Responsible
Business
Committee
Member
By invitation
Regular
attendee
Executive
Committee
Chairman
Member
Member
Sustainability
Committee
Chairman
Member
Member
Sustainability
Team
–
Oversight
Head of
Department
Throughout the year, the Executive Committee reviews the
Group’s risk registers, which include sustainability/climate
change-related risks. These reviews consider the risk severity,
likelihood and the internal controls and/or mitigation actions
required to reduce our risk exposure, so that it is aligned with or
below our risk appetite. This approach allows the eﬀects of any
mitigating procedures to be considered properly, recognising
that risk cannot be eliminated in every circumstance.
The Sustainability Committee comprises of key department
leaders, many of whom have a responsibility for oversight
and implementation of climate-related issues within their
department. At each meeting, a ‘performance and data’
dashboard is produced for discussion and analysis.
Members from key departments were involved in the climate
risk assessment and climate scenarios conducted with Willis
Towers Watson, the outputs of which underpin our disclosure.
MANAGING RISKS
continued
112
Oversight
Board
Overall accountability for climate-related risks and opportunities
Climate risk governance framework
As climate risks and opportunities are likely to have an impact on various aspects of our business, all the Board’s Committees are
involved in the oversight of climate-related matters. As illustrated below, the business has a ‘top down, bottom up’ approach to
the oversight of climate-related aspects, from individual departments to the Board.
Monitoring
Management
Responsible Business Committee
Monitors the management of our climate-related risks and opportunities and meets at least twice
per year to ensure that the Board adequately reﬂects climate-related issues in its decision making.
Sustainability team
Responsible for developing appropriate climate-related management measures for implementation across the business and
identifying climate risk and opportunities to inform the risk management process.
Audit
Committee
Ensures climate-related risks
and capital expenditure are
appropriately reﬂected in
our ﬁnancial statements
and portfolio valuations. The
Committee typically meets
three times per year.
Executive Committee
Typically meets monthly and has overall responsibility for
oversight of climate-related risks and opportunities.
Sustainability Committee
Typically meets quarterly and is comprised of key
department leaders and is chaired by the CEO. The
Committee is responsible for monitoring our day-to-day
climate-related progress and performance.
Risk
Committee
Ensures climate-related risks
are appropriately identiﬁed,
monitored and managed.
This Committee typically
meets three times per year.
Remuneration
Committee
Ensures climate-related
aspects are appropriately
included in executive
remuneration. The
Committee typically meets
at least twice per year.
Nominations
Committee
Ensures climate and
environmental skills,
knowledge and experience
are a consideration
when assessing the
Board’s composition and
identiﬁcation of any
skill gaps. The Committee
meets as required.
Development
Responsible for ensuring
our development schemes
embed the required climate-
related and net zero carbon
aspects within their design
and delivery programmes.
Property Management
Responsible for ensuring
our properties are operated
eﬃciently e.g. building
energy consumption is
reducing in line with our
energy targets.
Asset Management
Responsible for ensuring
EPCs are tracked and
monitored across the
investment portfolio.
Company Secretarial
Responsible for ensuring
climate-related issues are
adequately reﬂected within
our corporate governance
structure.
Derwent London plc
Report and Accounts 2023
113
Strategic report
Response
Capturing opportunities
As a responsible business, we understand, balance and manage our environmental, social and governance opportunities
proactively; it is visible in our culture, approach and design and management of our buildings. Our management structure and
style ensure that we can respond to changes in regulation and occupier demand. Likewise, they enable us to plan more eﬀectively
for the long-term and ensure we are putting the right systems and processes in place to maintain our position as London’s leading
oﬃce-focused REIT and capture the opportunities which arise.
Through our climate risk assessment, we identiﬁed the opportunities that we could embrace. Of the opportunities identiﬁed,
changing occupier demands and cost of debt through green initiatives were considered most material. We detail below some
of the ways in which we are capturing climate-related opportunities.
EPC improvements
Refurbishing space to optimise rents as and when vacancies occur is an integral part of our business
model and typically includes upgrades which improve a building’s energy performance. Since
the
independent third party assessment in 2021, we have
invested £3.0m of capital expenditure on
EPC upgrade works. EPC upgrades are factored into all refurbishment projects to ensure ongoing
compliance with evolving legislation.
Intelligent Buildings
Our Intelligent Building Programme is a medium- to long-term initiative which seeks to enable our
buildings to be digitally monitored and operated more eﬃciently, driving down equipment faults
(and consequential maintenance) and delivering energy and operational carbon savings. The key
indicators of success will be the cost savings to our occupiers and the operational carbon savings
for our occupiers and Derwent London.
Green Finance
Our Green Finance Framework has been speciﬁcally developed to allow us to link our debt to our net
zero carbon ambitions by clearly showing the connection between the use of our new debt and our
development and refurbishment activities. To date, we have two speciﬁc debt facilities which are
linked to our framework; the £300m ‘green’ tranche of our main corporate £450m revolving credit
facility and a £350m Green Bond issued in 2021. These are being used to part-fund our latest eligible
projects. Further information on our Green Finance Framework is on pages 84 and 85.
Woodlands
Nearly seven years ago we planted over 30 hectares of woodlands which has already generated
127 Woodland Carbon Code veriﬁed carbon credits and we are exploring how to increase this further.
Our ambition is to be as self-suﬃcient with our oﬀsetting as possible to meet our long-term needs
and increase the transparency and robustness of the oﬀsets we use. Resolution to grant planning
consent was received for a c.100 acre, 18.4 MW solar park on part of our Scottish land. When
completed and operational, we expect it to generate electricity equivalent to more than 40%
of the needs of our managed London portfolio.
MANAGING RISKS
continued
The Poets’ Park at 80 Charlotte Street W1
114
Metrics and targets
The Group reports annually on its progress towards net zero by
2030. A brief outline of our 2023 progress is set out on pages 46
to 49. To help our stakeholders to understand our performance,
the data section within our annual Responsibility Report sets
out a broad range of climate and energy performance data
and metrics. This includes extensive carbon reporting and
historical performance data to allow for trend analysis.
Our Responsibility Report is available on our website.
We align our Responsibility Report disclosures to externally
recognised frameworks including the EPRA Best Practices
Recommendations for Sustainability Reporting and the
Sustainability Accounting Standards Board (SASB). We
participate in internationally recognised indices, namely CDP
and GRESB and our performance against these can be found
on the inside back cover.
Since 2023, embodied carbon reduction and energy intensity
reduction performance metrics have been included within the
Executive Director and Executive Committee incentive plan
(the PSP). Further information is on page 180.
In 2020 we published our Net Zero Carbon Pathway which
is aligned to the Better Building Partnership (BBP) Climate
Change Commitment. As part of our Net Zero Carbon
Pathway, we have set some ambitious climate-related targets,
which are shown below.
Reducing operational energy and carbon emissions
An annual reduction in energy intensity of our managed
portfolio to achieve 90 kWh/sqm by 2030
Near-term: we commit to reduce absolute Scope 1 and 2
GHG emissions by 42% by 2030 from a 2022 baseline and
to measure Scope 3 emissions
Long-term: reduce absolute Scope 1, 2 and 3 GHG emissions
by 90% by 2040 from a 2022 baseline
Reducing embodied carbon of development projects
New build commercial oﬃce schemes completing from 2025
to achieve: ≤600 kg/CO
2
e/sqm (upfront carbon, A1-A5)
New build commercial oﬃce schemes completing from 2030
to achieve: ≤500 kg/CO
2
e/sqm (upfront carbon, A1-A5)
Energy and carbon reporting
We publish a full breakdown of our corporate carbon footprint
(inclusive of Scopes 1, 2 and 3) and energy usage in our
Streamlined Energy and Carbon Reporting (SECR) disclosure on
pages 60 and 61. Our Scope 1, 2 and 3 totals in 2023 have been
subject to independent limited assurance by Deloitte LLP in
accordance with ISAE 3000 (Revised) and ISAE 3410 Standards.
SECR disclosures /
See page 60
EPC ratings
EPC ratings indicate the energy eﬃciency of a building. We are
following a phased programme of works to upgrade the EPC
ratings of our portfolio. We target a minimum EPC of ‘A’ for
major new-build schemes and ‘B’ for major refurbishments
(see page 40 for our progress in 2023).
68.4
%
of our portfolio (by ERV)
has an EPC rating of A or B
Percentage of portfolio (by ERV)
2023
2022
2021
Rated A
10%
9%
6%
Rated B
47%
45%
35%
Rated C
19%
20%
18%
Rated D
8%
9%
14%
Rated E
5%
4%
6%
Rated F
0%
0%
0%
Rated G
0%
0%
0%
Properties in development
11%
12%
19%
Exempt /under review/outstanding
0%
1%
2%
Renewable energy
The Group is committed to ensuring that all the energy
we procure, electricity and gas, is from renewable sources.
99
%
of our electricity is
from renewable sources
Target: 100%
2023
2022
2021
Percentage of electricity from
renewable sources1
99%
99%
97%
On-site renewable energy
generation (kWh)
97,440
81,367
48,188
1
Electricity purchased on renewable tariﬀs backed by REGOs.
Certiﬁcation
BREEAM and LEED certiﬁcations recognise the sustainability
of our buildings, their construction and operation. We
target minimum BREEAM ratings of ‘Excellent’ for major
developments and ‘Very Good’ for major refurbishments
(see page 40 for our progress in 2023).
Percentage of portfolio
(by floor area – NIA)
2023
2022
2021
BREEAM certiﬁed
35%
34%
30%
LEED certiﬁed
22%
13%
9%
19.1
%
of our portfolio (by ERV)
has an EPC rating of C
Derwent London plc
Report and Accounts 2023
115
Strategic report
Our progress
As part of our commitment, we analyse our activities to ensure
we are reducing our carbon footprint across all our spheres
of inﬂuence. Our pathway focuses on four principal areas:
•
Reducing operational energy and carbon emissions
through setting annual reduction targets and engaging
with our occupiers
•
Procuring and investing in renewable energy
•
Reducing the embodied carbon of our future pipeline
•
Oﬀsetting residual carbon emissions we cannot eliminate
Further information on these commitments and our progress
in 2023 is detailed on pages 46 to 49.
MANAGING RISKS
continued
Future priorities
On page 48 we have outlined our environmental priorities
for 2024. In addition to these focus areas, we intend to
action the following:
• Governance
: The Board will continue to build its
competency through training and monitoring of
developing best practice.
• Risk management
: In 2024, we will refresh our climate
risk assessment with the support of third party expertise.
• Strategy
: Monitor construction of our 18.4 MW solar park
in Scotland which is expected to commence in 2024.
• Metrics and targets:
Update our double-materiality
assessment and start to report on our rebased
SBTi-veriﬁed targets (aligned to a 1.5°C scenario).
Supporting information
TCFD directory
We have identiﬁed in the table below where our responses to the TCFD’s 11 recommendations can be located. We retain suﬃcient
evidence/records to support our compliance statement (on page 105) and our data disclosures in our annual Report & Accounts
and Responsibility Reports.
Governance
a)
Describe the Board’s oversight of climate-related risks and opportunities
Pages 112 and 113
b)
Describe management’s role in assessing and managing climate-related risks and opportunities
Pages 108 to 113
Strategy
a)
Describe the climate-related risks and opportunities the organisation has identiﬁed over the
short-, medium- and long-term
Pages 106 to 109
b)
Describe the impact of climate-related risks and opportunities on the organisation’s business
strategy and ﬁnancial planning
Pages 110 and 111
c)
Describe the resilience of the organisation’s strategy, taking into consideration diﬀerent
climate-related scenarios, including a 2°C or lower scenario
Pages 106 to 109
Risk management
a)
Describe the organisation’s processes for identifying and assessing climate-related risks
Pages 105 to 111
b)
Describe the organisation’s processes for managing climate-related risks
Pages 100, 112 to 115
c)
Describe how processes for identifying and managing climate-related risks are integrated into
the organisation’s overall risk management
Page 105
Metrics and targets
a)
Disclose the metrics used by the organisation to assess climate-related risks and opportunities in
line with its strategy and risk management process
Pages 60, 61 and 115
b)
Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 greenhouse gas (GHG) emissions, and the
related risks
Pages 60 and 61
c)
Describe the targets used by the organisation to manage climate-related risks and opportunities
and performance against targets
Pages 49 and 115
Response
continued
116
Climate scenarios – assumptions and risk data sources
2022 Willis Towers Watson risk assessment
Scenario Name
‘Low Carbon World’ (~1.5°C)
‘Current Policies’ (~2 to 3°C)
‘Hot House World’ (>4°C)
Temperature Range
1.4°C (median, 2100, IEA NZE2050)
~1.5°C (median, 2100, RCP2.6)
2.6°C (median, 2100, IEA STEPS)
~2.3°C (mean, 2100, RCP4.5)
~4.2°C (mean, 2100, RCP8.5)
Sources
IEA – Energy Outlook 2021:
NZE2050
IPCC, 2014: Synthesis Report:
RCP2.6
Narratives for SSPs*: SSP1
IEA – Energy Outlook 2021: STEPS
IPCC, 2014: Synthesis Report:
RCP4.5
Narratives for SSPs*: SSP2
IPCC, 2014: Synthesis Report:
RCP8.5
Narratives for SSPs*: SSP5
Primary risks
Transition risks (2025 and 2030)
Moderate transition
(2025 and 2030) and physical
risks (current, 2030, 2050)
Physical risks
(current, 2030, 2050)
Underlying assumptions
Global net zero
achieved by:
2050 (IEA NZE2050)
Not achieved before 2100
(IEA STEPs)
Not achieved
Carbon price
Advanced economies:
2025, 2030, 2040, 2050
$75/tonne; $130/tonne;
$205/tonne; $250/tonne
(IEA NZE2050)
EU: 2030, 2040, 2050
$65/tonne; $75/tonne;
$90/tonne
(IEA STEPs)
No carbon pricing in existence.
(SSP5)
Building sector
policies
Implementation of more stringent
building energy conservation
building codes for existing and
new buildings, including net zero
emission requirements by 2030
and 85% of all buildings are
zero carbon-ready in 2050.
(IEA NZE2050)
In the UK, Low Carbon Heat
Support and Heat Networks
Investment Project; various
retroﬁt incentive schemes for
improving buildings eﬃciency
as part of Plan for Jobs. It does
not however assume increasing
stringency of EPC requirements.
(IEA STEPs)
Assumes current policies
promoting sustainability
are removed. (SSP5)
Social assumptions
Assumes low growth in material
consumption and increasing
consumer pressure on businesses
to drive sustainability. (SSP1)
The world follows a path in
which social, economic, and
technological trends do not shift
markedly from historical patterns.
Global and national institutions
work towards but make slow
progress in achieving sustainable
development goals. (SSP2)
The push for economic and social
development is coupled with the
exploitation of abundant fossil
fuel resources and the adoption
of resource and energy intensive
lifestyles around the world.
(SSP5)
Technology
assumptions
Promotion of alternative fuels and
technologies such as hydrogen,
biogas, biomethane and carbon
capture utilisation and storage
across sectors. The share of
renewables by 2030 in the global
electricity supply would increase
to approximately 61%, shifting
economies from being fossil
fuel-dependent to renewable
energy driven. (IEA NZE2050)
Phase out of traditional
coal-ﬁred power by 2024 in
the UK and the Ten Point Plan,
with up to 40 GW oﬀshore wind
capacity by 2030. Electriﬁcation
component of the Sixth Carbon
Budget and Industrial Energy
Transformation Fund provides
grant funding for energy
eﬃciency projects. (IEA STEPs)
Little to no development in
low carbon technology. (SSP5)
Physical risk data sources
Willis Towers Watson’s Global Peril Diagnostic and Climate Diagnostic Tools, data from the MunichRe hazard databases, and
the Intergovernmental Panel on Climate Change (IPCC). For the climate loss modelling the catastrophe model from RMS
(Risk Management Solutions) was used.
Derwent London plc
Report and Accounts 2023
117
Strategic report
Governance
Network W1
118
120
Introduction from the Chairman
121
Governance at a glance
122
Board of Directors
124
Executive management team
126
Corporate governance statement
130
The Section 172(1) Statement
140
Nominations Committee report
144
Audit Committee report
156
Risk Committee report
166
Responsible Business Committee report
172
Remuneration Committee report
198
Directors’ report
203
Statement of Directors’ responsibilities
Network boasts an
architecture that leaves
an enduring and positive
impression on the city.
Stuart Piercy
Piercy & Company
Derwent London plc
Report and Accounts 2023
Governance
119
INTRODUCTION FROM THE CHAIRMAN
2024
Focus areas
•
Ongoing review of the Group’s strategy and
ﬁve-year plan
•
Continue to monitor the Group’s long-term
succession and talent development pipeline
•
Appoint a new Non-Executive Director during H1 2024
•
Monitor the Group’s performance towards net
zero carbon
Board members and attendance in 2023
Independent
Number of
meetings
Attendance
1
Chairman
Mark Breuer
Yes
6
100%
Executive Directors
Paul Williams
No
6
100%
Damian Wisniewski
No
6
100%
Nigel George
No
6
100%
Emily Prideaux
No
6
100%
Non-Executive Directors
Claudia Arney
Yes
6
100%
Lucinda Bell
Yes
6
100%
Helen Gordon
Yes
6
100%
Cilla Snowball
Yes
6
100%
Sanjeev Sharma
Yes
6
100%
1
Percentages based on the meetings entitled to attend for the
12 months ended 31 December 2023.
2
Richard Dakin stepped down from the Board on 28 February 2023.
Mark Breuer
Chairman
Dear Shareholder,
On behalf of the Board, I am pleased to introduce
the Group’s 2023 Corporate governance statement
on pages 126 to 139.
The Board’s activities
2023 has been a progressive year for the Group. The Board’s
strategy awayday in June was held over two days and included
a challenging review of the Group’s strategy with key members
of the Executive Committee.
Following a comprehensive tender process for the Group’s
external auditor, the Board approved the reappointment of
PricewaterhouseCoopers LLP for the 2024 year end audit. The
tender process was eﬀectively led by the Audit Committee and
was fully compliant with the Audit Committees and the External
Audit: Minimum Standard. Further information can be found on
pages 150 and 151.
Board changes
Succession planning for the Non-Executive Directors and
Executive Directors was an area of focus for the Nominations
Committee as Claudia Arney approaches her ninth year on the
Board. Sanjeev Sharma will succeed Claudia Arney as Chair
of the Remuneration Committee following the conclusion of
the AGM on 10 May 2024. The Board expresses its gratitude
to Claudia for all her valuable insights and contributions over
the years.
During the year we agreed our candidate speciﬁcation for the
recruitment of a new Non-Executive Director and appointed an
external search consultancy to begin our search (see page 142).
Stakeholder engagement
Feedback from our key stakeholders is important and informs
the Board’s decision making and strategy discussions. Following
the positive stakeholder feedback received on DL/78 in Fitzrovia,
the Board approved and launched a new shared amenity hub,
DL/28, at The Featherstone Building.
During the year, we conducted our ﬁfth biennial employee
survey. The Board was delighted with the high level of
engagement, with 94% of the workforce providing their feedback.
The Group also conducted its ﬁrst Disability Survey which was
approved by the Business Disability Forum (see page 53).
The Annual General Meeting (AGM)
The forthcoming AGM will be hosted at DL/78 on 10 May 2024.
Alongside my fellow Directors, I hope that you will be able to
join us. If you wish to discuss any aspect of our governance
arrangements, please contact me via our Company Secretary,
David Lawler.
Telephone:
+44 (0)20 7659 3000
or
Email:
company.secretary@derwentlondon.com
Mark Breuer
Chairman
27 February 2024
120
GOVERNANCE AT A GLANCE
Transparency and accountability underpins eﬀective corporate governance and builds
stakeholder conﬁdence.
Key governance activities
The Board’s key governance activities during the year
have included:
•
Regularly monitored the Group’s principal and emerging
risks (see pages 90 to 103)
•
Reviewed the Group’s internal controls and Fraud Risk
Assessment (see pages 148 and 149)
•
Continued to monitor the Group’s progress towards net
zero carbon (see pages 48 and 49)
•
Reviewed the Group’s talent pipeline and Non-Executive
Director succession plans (see page 142)
•
Conducted a competitive external audit tender
(see pages 150 and 151)
•
Monitored the FRC’s consultation on the UK Corporate
Governance Code
Major Board decisions
The major Board decisions made in 2023 included:
•
Capital expenditure approval of £18.7m for the Solar
Park in Scotland
•
Approved the refurbishment and public realm upgrades
at the Strathkelvin Retail Park for £20.2m
•
Approved the portfolio value of £4.9bn as at
31 December 2023
•
Agreed the speciﬁcation for a new Non-Executive
Director and appointed an external search consultancy
•
Approved the reappointment of PwC as external Auditor
for the 2024 year end audit
94
%
employee engagement
with the employee survey
52
%
female representation
in our workforce
60
%
Board independence
1.5
%
Total Shareholder Return for the
year ended 31 December 2023
The Board conﬁrms that for the year ended 31 December 2023, we have complied with the provisions, and have
consistently applied the principles of good corporate governance, contained in the Code.
1. Board leadership and Company purpose
We have a diverse and eﬀective Board which leads the Group
to achieve our purpose and safeguard our strong stakeholder
focused culture.
See pages 126 to 129
2. Division of responsibilities
Our Board is comprised of 60% independent Directors.
We monitor the external commitments and conﬂicts of
interest which could impact on our Directors’ independence
and eﬀectiveness.
See pages 134 and 135
3. Composition, succession and evaluation
The composition of the Board and its succession plans are
kept under regular review by the Nominations Committee.
We have an ongoing training programme and follow a
three-year cycle of internal and external Board evaluations.
See page 136
4. Audit, risk and internal control
We have a low tolerance for risk taking and a conservative
management style, which is supported by a framework of
internal controls and risk management policies which are
routinely subject to independent assurance. During 2023
the Audit Committee conducted a competitive external
audit tender.
See pages 144 to 155
5. Remuneration
We are transparent about our pay practices which aim
to incentivise our employees to achieve our strategy and
generate sustainable value for our stakeholders. At the
2023 AGM the Remuneration Policy was approved by
95% of shareholders.
See pages 172 to 197
Further information on the Code can be found on the
Financial Reporting Council’s website:
www.frc.org.uk
UK Corporate Governance Code 2018 (the Code)
The Section 172(1) Statement /
See pages 130 to 133
Key activities of the Board /
See pages 138 and 139
Derwent London plc
Report and Accounts 2023
Governance
121
BOARD OF DIRECTORS
3 Paul Williams
(Age 63)
Chief Executive
Appointed to the Board: 1998
Paul is a chartered surveyor who joined
the Group in 1987. He was appointed
Chief Executive in 2019, and has overall
responsibility for Group strategy, business
development, sustainability, health & safety
and day-to-day operations.
Other public appointments:
Director of Sadler’s Wells Foundation, Chair
of the New West End Company (NWEC)
and Board member of the Westminster
Property Association.
Committee:
Responsible Business.
5 Helen Gordon
(Age 64)
Senior Independent Director
Appointed to the Board: 2018
Helen is a chartered surveyor and is Chief
Executive Oﬃcer of Grainger plc. Previously,
she was Global Head of Real Estate Asset
Management of Royal Bank of Scotland plc
and has held senior property positions at
Legal & General Investment Management,
Railtrack and John Laing Developments.
Other public appointments:
CEO of Grainger plc, Board member and
Past President of the British Property
Federation and Vice Chair and Board
Member of EPRA, Non-Executive Director
of Business LDN.
Committee:
Risk (Chair), Nominations, Remuneration.
2 Emily Prideaux
(Age 44)
Executive Director
Appointed to the Board: 2021
Emily has overall responsibility for
overseeing leasing and asset management
transactions. In addition, Emily leads our
DL/Member initiative, driving excellent
customer service and relations; and
leads our marketing and digital strategy
whilst continuing to ensure that our
future developments provide best in class
workspace. Emily is a chartered surveyor
and was previously Director of Investment
Management at CBRE North America.
Other public appointments:
Director of The Paddington Partnership
and NLA Expert Panel Member.
4 Sanjeev Sharma
(Age 60)
Non-Executive Director
Appointed to the Board: 2021
Sanjeev is an independent member of
the Estates Strategy Committee of King’s
College University London. Sanjeev is on
the Patrons Committee of Real Estate
Balance and a Trustee Director of the
Prudential Staﬀ Charitable Trust.
Other public appointments:
Chief Property Portfolio Oﬃcer at M&G
Real Estate – a leading ﬁnancial solutions
provider for global real estate investors,
which is part of M&G plc’s £75bn Private
Markets business.
Committee:
Audit, Nominations, Remuneration, Risk.
1
Dame Cilla Snowball
(Age 65)
Non-Executive Director
Appointed to the Board: 2015
Cilla is the former Group Chairman and
Group CEO at AMV BBDO, one of the top
advertising agencies in the UK.
Other public appointments:
Governor of the Wellcome Trust, Director of
Genome Research Limited, Non-Executive
Director of Whitbread PLC and Lay
Member of the Council of the University
of Birmingham.
Committee:
Responsible Business (Chair), Audit,
Nominations, Risk.
1
2
3
4
5
122
7 Mark Breuer
(Age 62)
Chairman
Appointed to the Board: 2021
Mark worked in investment banking for
30 years and, in 2017, retired from a 20-year
career at JP Morgan in London, where he
held the position of Vice Chairman Global
M&A and was a member of the Global
Strategic Advisory Council. Mark is a Fellow
of the Institute of Chartered Accountants of
England and Wales, having qualiﬁed in 1987,
and has a BA from Vassar College in the US.
Other public appointments:
Chairman of DCC plc.
Committee:
Nominations (Chair).
10 Damian Wisniewski
(Age 62)
Chief Financial Oﬃcer
Appointed to the Board: 2010
Damian is a chartered accountant who
held previous senior roles within the
real estate sector. Damian has overall
responsibility for ﬁnancial strategy, treasury,
taxation and ﬁnancial reporting as well as
other operational responsibilities including
board responsibility for the Property
Management, Facilities Management
and Building Management teams.
Other public appointments:
Member of the governing body and Chair
of Audit Committee at the Royal Academy
of Music and Deputy Chairman and Chair
of the Finance and Business Development
Committee at the ABRSM.
6 Nigel George
(Age 60)
Executive Director
Appointed to the Board: 1998
Nigel is a chartered surveyor who joined
the Group in 1988. Nigel is responsible for
leading Derwent London’s investment
acquisitions, disposals and analysis.
In addition, his responsibilities include
overseeing the Group’s Development and
Sustainability teams.
Other public appointments:
None.
9 Claudia Arney
(Age 53)
Non-Executive Director
Appointed to the Board: 2015
Claudia was Group Managing Director
of Emap until 2010. Prior to that she held
senior roles at HM Treasury, Goldman Sachs
and the Financial Times.
Other public appointments:
Chair of Deliveroo plc and Non-Executive
Director of Kingﬁsher plc. Member of the
Takeover Panel (Hearings Committee)
and Lead Non-Executive Board member
for the Department for Digital, Culture,
Media & Sport.
Committee:
Remuneration (Chair), Audit, Nominations,
Responsible Business.
8 Lucinda Bell
(Age 59)
Non-Executive Director
Appointed to the Board: 2019
Lucinda is a chartered accountant and
from 2011 to 2018 was CFO of The British
Land Company plc (British Land). Prior to
that, she held a range of ﬁnance and tax
roles at British Land.
Other public appointments:
Non-Executive Director at Man Group Plc.
Committee:
Audit (Chair), Nominations, Remuneration,
Risk.
6
7
8
9
10
Derwent London plc
Report and Accounts 2023
Governance
123
EXECUTIVE MANAGEMENT TEAM
1
Richard Baldwin
Director of Development
Joined Derwent London:
January 2011
Appointed to Executive Committee:
January 2011
5 Katy Levine
Head of Human Resources
Joined Derwent London:
September 2008
Appointed to Executive Committee:
January 2023
6 Richard Dean
Director of Investment
Joined Derwent London:
January 2023
Appointed to Executive Committee:
July 2023
2 Philippa Davies
Head of Leasing
Joined Derwent London:
April 2013
Appointed to Executive Committee:
July 2022
4 Robert Duncan
Head of Investor Relations
& Strategic Planning
Joined Derwent London:
September 2021
Appointed to Executive Committee:
January 2023
3 Jennifer Whybrow
Head of Financial Planning
& Analysis
Joined Derwent London:
June 2007
Appointed to Executive Committee:
January 2018
Senior management
Joined Derwent London
Lesley Bufton
Head of Marketing
October 2003
Tim Hyman
Group Architect
September 2008
Benjamin Lesser
Head of Design & Innovation
May 2010
Umar Loane
Head of Property Accounts
February 2013
Matt Massey
Head of Project Management
March 2014
1
2
3
4
5
6
124
8 Vasiliki Arvaniti
Head of Asset Management
Joined Derwent London:
September 2019
Appointed to Executive Committee:
January 2022
9 Matt Cook
Head of Digital Innovation
& Technology
Joined Derwent London:
November 2015
Appointed to Executive Committee:
January 2024
11 John Davies
Head of Sustainability
Joined Derwent London:
January 2013
Appointed to Executive Committee:
January 2022
12 David Lawler
Company Secretary
Joined Derwent London:
September 2017
Appointed to Executive Committee:
September 2017
10 Victoria Steventon
Head of Property Management
Joined Derwent London:
December 2019
Appointed to Executive Committee:
January 2022
7 Jay Joshi
Group Financial Controller
Joined Derwent London:
April 2012
Appointed to Executive Committee:
April 2021
Joined Derwent London
Heethen Patel
Financial Controller
January 2008
Matt Peaty
Head of Health & Safety
November 2022
Julie Schutz
Head of Internal Audit
January 2023
Giles Sheehan
Head of Investment
February 2007
Jonathan Theobald
Head of Investment Analytics
December 2012
7
8
9
10
11
12
Derwent London plc
Report and Accounts 2023
Governance
125
CORPORATE GOVERNANCE STATEMENT
Governance
At Derwent London our approach
to governance is rooted in the
concepts of fairness, transparency,
and accountability.
The Governance section has been organised to follow
the structure (1 to 5) and principles (A to R) of the 2018
UK Corporate Governance Code (the Code) to illustrate
how we have applied the Code principles and complied
with the provisions. Further information on the Code
and our compliance is on page 121.
Page
1.
Board leadership and Company purpose
A.
Eﬀective Board
126
B.
Purpose, values and culture
129
C.
Governance framework and arrangements
127
D.
Stakeholder engagement
131
E.
Workforce policies and practices
128
2.
Division of responsibilities
F.
Board roles
134
G. Independence
135
H.
External appointments
135
I.
Key activities of the Board
138
3.
Composition, succession and evaluation
J.
Appointments to the Board
135
K.
Board skills, experience and knowledge
136
L.
Annual Board evaluation
137
4.
Audit, risk and internal control
M.
Financial reporting
Internal and external audit
145
148
N.
Review of the 2023 Report & Accounts
145
O.
Internal ﬁnancial controls
Risk management
148
157
5.
Remuneration
P.
Linking remuneration with our purpose,
values and strategy
177
Q.
Summary of Remuneration Policy
178
R.
Pay for performance
Strategic targets
190
191
Board leadership
Eﬀective Board
Our Board is composed of diverse professionals who bring a
range of skills, perspectives and corporate experience to our
boardroom. The composition of the Board is subject to periodic
review by the Nominations Committee to ensure it remains
suﬃciently balanced and diverse to eﬀectively oversee and
determine the Group’s strategy.
The Board, its principal committees and individual Directors are
subject to annual eﬀectiveness evaluations to identify areas for
improvement or action (see page 137). The Chairman discusses
with each Director their training needs to ensure they keep
their knowledge and skills up to date.
To ensure suﬃcient time for discussion, the Board utilises
its ﬁve principal committees to eﬀectively manage its time
(see page 127). At each Board meeting, the agenda ensures
suﬃcient time for the committee chairs to report on the
contents of discussions, any recommendations to the Board
which require approval and the actions taken.
Board composition /
See page 136
Board diversity policy /
See page 143
Training /
See page 136
Value creation and preservation
The role of the Board is to generate long-term value for
shareholders and other key stakeholders and contribute to
wider society.
The appropriateness of our strategy is subject to detailed
review at the Board’s Strategy Awaydays which are held
annually. Additionally, before making a material decision, the
Directors have due regard for the wider context including the
macroeconomic environment, property cycle and the impacts
on all our stakeholders and wider society.
Some of the key aspects discussed by the Board during its
strategy discussions include:
•
changes to the London oﬃce market and investment
market (see pages 13 to 15);
•
nature of oﬃce occupation;
•
our aspirations, culture and purpose;
•
feedback received from our employees and other key
stakeholders;
•
climate change risk and opportunities;
•
our development pipeline in respect to its replenishment
and future potential; and
•
review of the ﬁve-year plan including the potential impact
of external risk factors on the business and our stakeholders,
including inﬂation, interest rates and recession.
The Board required no signiﬁcant changes to the Group’s
strategy which continues to assist in the achievement of
our purpose and is aligned with our values. As a business,
we continue to create value responsibly through responsible
initiatives, a conservative balance sheet and resilient strategy
(see pages 16 and 17).
126
Governance framework
We pride ourselves on conducting our business in an open and transparent manner.
Our well-established culture ensures that our governance framework remains ﬂexible, allowing for fast decision making,
eﬀective oversight and clear accountability throughout the organisation.
Our shareholders and other key stakeholders play an important role in monitoring and safeguarding the governance of our Group.
Further information on how we engage with our key stakeholders is on pages 42, 43 and 131.
Engagement with shareholders and other stakeholders
The Board
The Board is primarily responsible for setting the Group’s strategy for delivering long-term value to our shareholders and
other stakeholders, providing eﬀective challenge to management concerning the execution of the strategy and ensuring
the Group maintains an eﬀective risk management and internal control system.
Our strategy /
See page 28
Managing risks /
See page 90
The Section 172(1)
Statement /
See page 130
Board activities /
See page 138
Executive Directors
The Board delegates the execution of the Company’s strategy and the day-to-day management
of the business to the Executive Directors, assisted by other members of the Executive Committee.
Chief Executive’s
statement /
See page 10
Measuring our
performance /
See page 37
Property review /
See page 62
Executive management
team /
See page 124
The Board delegates certain matters to its five principal committees
Nominations
Committee
Audit
Committee
Risk
Committee
Responsible Business
Committee
Remuneration
Committee
Ensures the Board (and
its committees) have
the correct balance of
skills, knowledge and
experience and that
adequate succession
plans are in place.
Oversees the Group’s
ﬁnancial reporting,
maintains an appropriate
relationship with the
external Auditor and
monitor’s the Group’s
ﬁnancial internal controls.
Reviews and monitors
the Group’s principal
and emerging risks
and the eﬀectiveness
of the Group’s risk
management systems.
Monitors the Group’s
corporate responsibility,
sustainability and
stakeholder engagement
activities.
Establishes the Group’s
Remuneration Policy
and ensures there is
a clear link between
performance and
remuneration.
Report /
See page 140
Report /
See page 144
Report /
See page 156
Report /
See page 166
Report /
See page 172
The terms of reference for each Board Committee are available on the Group’s website at
www.derwentlondon.com
Supporting committees
The executives operate a number of supporting committees that provide oversight on key business activities and risks,
examples include:
Credit Committee
Health and Safety
Committee
Sustainability Committee
Cost Committee
Derwent London plc
Report and Accounts 2023
Governance
127
CORPORATE GOVERNANCE STATEMENT
continued
Governance arrangements
Corporate governance is essential to ensuring our business is
run in the right way for the beneﬁt of all of our stakeholders.
Our governance arrangements support the development and
delivery of strategy by:
•
ensuring accountability and responsibility;
•
facilitating the sharing of information to inform decisions;
•
establishing engagement programmes with key stakeholders
(see page 131);
•
maintaining a sound system of risk oversight, management
and an eﬀective suite of internal controls (see pages 90 to
117 and 144 to 165);
•
providing independent insight and knowledge from the
Non-Executive Directors;
•
facilitating the development and monitoring of key
performance indicators (see pages 37 to 41); and
•
promoting the desired culture and values (see page 129).
The Board maintains a formal schedule of matters which are
reserved solely for its approval. These matters include decisions
relating to the Group’s strategy, capital structure, ﬁnancing,
any major property acquisition or disposal, the risk appetite of
the Group and the authorisation of capital expenditure above
the delegated authority limits.
The delegated authority limits are detailed below:
Board approval is required for:
Level of approval:
Major property
acquisition or disposal
Valued above £40m
Major capital
expenditure project
Projected costs above £20m
Material occupier
lease or contract
Rental income greater than 7.5%
of the Group’s total rental income
Although the Board is formally required to authorise
capital expenditure above this limit, the open nature of our
organisation means that the Board is aware of all active
projects within our portfolio.
If any Director has concerns about the running of the Group
or a proposed course of action, they are encouraged to express
those concerns which are then minuted. No such concerns
were raised during 2023.
All Directors have access to the services of the Company
Secretary and any Director may instigate an agreed procedure
whereby independent professional advice may be sought at
the Company’s expense. No such advice was sought by any
Director during the year.
Governance framework /
See page 127
Key activities of the Board /
See pages 138 and 139
Workforce policies and practices
The Executive Directors have been delegated responsibility
for ensuring that policies and behaviours set at Board level
are eﬀectively communicated and implemented across
the business.
Policies are published on the intranet and where relevant
included in the employee handbook. To ensure policies are
embedded in our business practices, we operate a mandatory
training programme which aims to reinforce key compliance
messages in areas such as anti-bribery, modern slavery,
conﬂicts of interest, etc.
If the Board is concerned or dissatisﬁed with any behaviours
or actions, it seeks assurance that corrective action is being
taken. No such action was required during 2023.
Compliance training /
See page 165
Conﬂicts of interest
All employees (including the Board) are required to notify the
Company as soon as they become aware of a situation that
could give rise to a conﬂict or potential conﬂict of interest.
Prior to all major Board decisions, the Chairman requires the
Directors to conﬁrm that they do not have a potential personal
conﬂict with the matter being discussed. If a conﬂict does
arise, the Director is excluded from discussions and voting,
unless the Board unanimously decides otherwise.
Independence /
See page 135
Anonymous reporting of concerns
As a business, we seek to conduct ourselves with honesty and
integrity and believe that it is our duty to take appropriate
measures to identify and remedy any malpractice within or
aﬀecting the Company. Our employees embrace our high
standards of conduct and are encouraged to speak out if they
witness any wrongdoing which falls short of those standards.
All employees have access to our ‘Speak up’ system. Our
procedures are included within our employee handbook, on
our Group intranet and staﬀ noticeboards. Following receipt
of a message we have procedures in place to ensure an
independent and proportionate investigation.
The Board receives updates from the Company Secretary
on the operation of the ‘Speak up’ system. During the year
under review, we did not receive any messages via our system
(2022: no messages). Due to the ‘open door’ nature of our
business, concerns are often raised directly with management,
the CEO or the HR team.
128
Purpose
Why we do
what we do
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.
Strategy
We apply our asset management and regeneration
skills to the Group’s 5.4m sq ft property portfolio
using our people, relationships and ﬁnancial resources
to add value and grow income while beneﬁting the
communities in which we operate and the wider
environment. Successful implementation of our strategy
requires our teams to work together with a shared vision
and common values.
Culture
How we work together
Our culture has developed from our values and is a
key strength of our business. The beneﬁts of a strong
culture are seen in our employees’ engagement scores,
retention rate and levels of productivity.
Values
The qualities
we embody
Our values articulate the
qualities we embody and
our underlying approach
to doing business. They
are embedded in our
operational practices
through the policies
approved by the Board
and the direct oversight
and involvement of the
Executive Directors. The
feedback received from
employee surveys provides
valuable insights into
what is valued and seen
as corporate norms.
Vision
We craft inspiring and distinctive
space where people thrive.
Purpose, values & culture
Our purpose communicates the Group’s strategic direction and
intentions to our employees, occupiers and wider stakeholders.
Due to its importance, it is routinely reviewed by the Board.
Further information on our progress towards achieving our
purpose during 2023 can be reviewed on the following pages:
Long-life, low carbon, intelligent oﬃces /
See pages 18 to 27
Long-term returns for all our stakeholders /
See pages 38 and 195
Embedding our culture
The Board reinforces our culture and values through its
decisions, strategy and conduct. Culture and value ‘ﬁt’ is a
key consideration during our recruitment process, which is
reinforced during our induction programme, town halls run by
the CEO, and is monitored through performance appraisals.
As part of the six-monthly performance review cycle, our
employees reﬂect on whether they demonstrate the core
‘competencies’ outlined in the review. These competencies
include the ability to build strong internal and external
relationships, communicate clearly, build trust, and
demonstrate creativity, initiative and teamwork. These
discussions reinforce the behaviours we wish to foster within
our workforce and link our culture to our reward mechanisms.
Our senior management team undertake training to
ensure they are supporting their teams and encouraging
the behaviours which align with our culture. During
2023, management training covered the use of Personal
Development Plans and strength proﬁles.
Assessment and monitoring
The Board monitors the culture and values of the Group via:
•
Regularly meeting with management and inviting
employees to present at Board and committee meetings.
•
Receiving feedback via the four employee representatives
that sit on our Responsible Business Committee.
•
Assessing cultural indicators such as:
–
management’s attitude to risk;
–
health and safety data;
–
compliance with the Group’s policies and procedures;
and
–
key performance indicators, including staﬀ retention.
•
Feedback from our wider stakeholders, including from
occupier ‘pulse surveys’.
•
Promptness of payments to suppliers.
•
Independent assurance was sought via the outsourced
internal audit function and other advisers.
The feedback received from employee surveys provides valuable
insights into what is valued and seen as corporate norms. The
biennial employee survey includes a speciﬁc question on how
our employees would describe our culture.
Derwent London plc
Report and Accounts 2023
Governance
129
The Section 172(1) Statement
The Board of Directors conﬁrm that during the year under review, it has acted to promote
the long-term success of the Company for the beneﬁt of shareholders, whilst having due
regard to the matters set out in section 172(1)(a) to (f) of the Companies Act 2006.
CORPORATE GOVERNANCE STATEMENT
continued
Issues, factors and stakeholders
The Board has direct engagement principally with our
employees and shareholders but is also kept fully informed
of the material issues of other stakeholders through the
Responsible Business Committee, Executive Directors, reports
from senior management and external advisers.
We utilise various engagement channels to receive informative
feedback from our key stakeholders which can be factored into
our principal decisions and activities. On page 131, we outline
the ways in which we have engaged with key stakeholders.
s.172 factor
Relevant disclosures
a) the likely
consequences of
any decision in
the long-term
Company purpose (page 5)
Central London oﬃce market (page 13)
Our business model and strategy (page 28)
b) the interests of
the Company’s
employees
Our people (page 52)
Diversity and inclusion (page 53)
Non-ﬁnancial reporting (page 58)
Employee engagement (page 131)
c) the need to
foster the
Company’s
business
relationships
with suppliers,
customers and
others
Social Value Strategic Framework
(page 50)
Responsible payment practices (page 169)
Modern slavery (page 169)
Supply Chain Responsibility Standard
(page 169)
d) the impact of
the Company’s
operations on
the community
and the
environment
Environmental (page 46)
Our pathway to net zero (page 48)
Community Fund (page 51)
Streamlined Energy and Carbon Reporting
(SECR) disclosure (pages 60 to 61)
Task Force on Climate-related Financial
Disclosures (TCFD) (pages 104 to 117)
e) the desirability
of the Company
maintaining a
reputation for
high standards
of business
conduct
‘Speak up’ procedures (page 128)
Purpose, values and culture (page 129)
Internal ﬁnancial controls (page 148)
Risk management (page 157)
Anti-bribery and corruption (page 165)
Awards and recognition
(see inside back cover)
f) the need to act
fairly between
members of the
Company
Annual General Meeting (page 200)
Voting (page 200)
Rights attached to shares (page 201)
Principal methods used by the Board in 2023
The main methods used by the Directors to perform their
duties include:
•
strategy reviews which assess the long-term sustainable
success of the Group and our impact on key stakeholders;
•
the Responsible Business Committee monitors the Group’s
corporate responsibility, sustainability and stakeholder
engagement activities and reports to the Board on its
activities (see pages 166 to 171);
•
assessing the potential impact of signiﬁcant capital
expenditure decisions on our stakeholders;
•
identifying the risks and potential consequences of decisions
in the short-, medium- and long-term so that mitigation
plans can be put in place;
•
direct and indirect stakeholder engagement (see page 131);
•
external assurance is received from stakeholder surveys,
brokers and advisers; and
•
speciﬁc training for our Directors and senior managers, in
addition to the mandatory compliance training programme
(see pages 136 and 165).
Informed decision making
The Board’s procedures require a stakeholder impact analysis
to be completed for all material decisions requiring its approval
that could impact on one or more of our stakeholder groups.
The stakeholder impact analysis assists the Directors in
performing their duties under s.172 of the Companies Act 2006
and provides the Board with assurance that the potential
impacts on our stakeholders are being carefully considered by
management when developing plans for Board approval. The
key activities and principal decisions undertaken by the Board
in 2023 are detailed on pages 138 and 139.
Public Interest Statement – 2023
We are aware of our wider obligations to be a responsible
business partner to our occupiers and to the communities
in which we operate. As our activities impact on multiple
stakeholder groups, our Board ensures that stakeholder
matters are central to its decision making alongside the
long-term ﬁnancial success of our business. We extend
our obligations beyond the statutory requirements
to add value and build long-term mutually beneﬁcial
relationships. Our obligations are incorporated into our
purpose, which strongly inﬂuences our values (see page
129). We have detailed on pages 44 to 61 and 130 to 133
how we have acted in the public interest during 2023.
130
Stakeholder engagement
We recognise the importance of clear communication and proactive engagement with all of our stakeholders. Our Chairman aims
to routinely meet with institutional investors and report their views to the Board. On an annual basis, Mark Breuer writes to all our
major shareholders inviting them to meet with him to discuss any areas of concern or provide feedback. For our private investors,
there is an opportunity to meet the entire Board (including the Non-Executive Directors) at our Annual General Meeting (AGM).
The Board appointed four employees to the Responsible Business Committee, who are fully involved in all aspects of the
Committee’s activities (see page 167). Employees at Board level enable our employees to have direct involvement in decision
making and bring the voice of our employees directly to the boardroom. All stakeholder engagement programmes are kept under
routine review by the Board.
Stakeholder
Engagement methods
Material concerns
Occupiers
Strategic
objectives:
2
4
5
•
Occupier ‘pulse surveys’
•
Constructive and collaborative discussions on sustainability initiatives
and achieving net zero carbon
•
Interaction and engagement through the DL/App
•
Occupier-focused amenity with the development of DL/28
•
Well-designed and sustainable buildings
•
Suitable lease terms
•
Exclusive access to available amenities
•
Adaptable space to accommodate new
and collaborative ways of working
Employees
Strategic
objectives:
3
4
•
Biennial employee survey
•
Disability survey, approved by the Business Disability Forum
•
Employee Working Groups, including the newly established Health,
Safety and Accessibility Working Group
•
Independent ‘Speak up’ system
•
A dedicated Non-Executive Director for gathering the views of the
workforce
•
Employee members of the Responsible Business Committee
•
Overall health and wellbeing
•
A diverse and inclusive working
environment
•
Opportunities for training, development
and progression
•
Adoption of smart working principles
Local
communities
& others
Strategic
objectives:
3
4
•
Operation of our Community Fund
•
Volunteering and charitable donations
•
Provided employment and work experience opportunities
•
Engagement throughout the planning and development process
•
Engagement with Non-Governmental Organisations (NGOs),
Business Improvement Districts and industry bodies
•
Minimising local disruption
•
Impact on the local economy
•
Eﬀective communication and
engagement
•
Being a responsible neighbour
Suppliers
Strategic
objectives:
4
•
Regular correspondence and updates at the Responsible Business
Committee
•
Supply Chain Questionnaire circulated to all major suppliers
•
Signatories to the Prompt Payment Code
•
‘Unseen’, the independent charity, conducted a gap analysis on our
modern slavery procedures
• Long-term partnerships
• Collaborative approach
•
Open terms of business
•
Fair payment practices
Central & local
government
Strategic
objectives:
4
•
Maintain proactive relationships through regular dialogue and
correspondence with government departments such as HMRC
•
Continued our pledge to the Westminster City Council Sustainability
City Charter
•
Ongoing engagement with local authorities to ensure high quality
planning applications are submitted
•
Openness and transparency
•
Proactive engagement with local
authorities
•
Support for local economic plans and
strategies
•
Compliance with legislation
Shareholders &
debt providers
Strategic
objectives:
1
5
•
Annual General Meeting (AGM)
•
Our annual Report & Accounts
•
Regular announcements via the London Stock Exchange’s regulatory
news service (RNS)
•
Annual Bondholders Meeting
•
Investor meetings, presentations and property tours
• Shareholder consultations
• Financial performance
•
Environmental, social and governance
performance
•
Openness and transparency
• Dividend
Key to strategic objectives
To optimise returns
and create value from
a balanced portfolio
To attract, retain
and develop
talented employees
To maintain
strong and ﬂexible
ﬁnancing
To grow recurring
earnings and
cash ﬂow
To design, deliver and
operate our buildings
responsibly
1
2
3
4
5
Derwent London plc
Report and Accounts 2023
Governance
131
CORPORATE GOVERNANCE STATEMENT
continued
The Section 172(1) Statement
continued
Factoring our stakeholders into our decisions
The three case studies below are examples of how the Board has factored stakeholders
into its decisions in 2023.
Strathkelvin Retail Park
Engagement and communication with our occupiers is
integral in order to ensure all needs and demands are
consistently considered and met.
The Strathkelvin Retail Park in Bishopbriggs, near Glasgow,
totals over 313,000 sq ft and has near full occupancy.
Occupier feedback was received that smaller retail units
are more desirable in comparison to larger ﬂoor-plates and
that there were opportunities to improve the wider public
realm surrounding the retail park to improve the user
experience and prioritise stakeholder needs.
In response, the Board approved capital expenditure of
£20.2m to refurbish the retail park, including:
•
the subdivision of a larger unit into three smaller units
providing 129,643 sq ft of lettable space and preserving
c.£1.33m pa of income and a highly valued occupier
relationship; and
•
public realm improvements to the car park, pathways
and signage to improve congestion, wayﬁnding and
ensure safety of pedestrians.
It is expected that the works will be completed during 2024.
Diversity and inclusion
Creating an inclusive and diverse environment is
paramount to ensuring all employees feel supported.
The 2022 employee ‘pulse survey’ showed that 84.1% of
employees strongly agreed that Derwent London is an
inclusive place to work. Whilst this is an excellent outcome,
we continually seek opportunities to improve and provide
an even more inclusive workspace for our employees.
During 2023, the Responsible Business Committee
approved our membership of the Business Disability Forum
and for us to complete stage one of the Disability Smart
Audit, in the form of a Business Disability Self-Assessment.
The results of the self-assessment were shared with the
Committee and an action plan for implementing the
recommendations was agreed. The Committee, and
Board, will monitor our progress during 2024.
We also launched a range of wellbeing sessions on a
variety of inclusivity topics including, but not limited to,
neurodiversity and mental health awareness. All sessions
were well attended and received positive feedback.
During 2024, the Group’s wellbeing strategy will continue
to be an area of focus with actions implemented by
employee-led working groups.
Investor meetings
253
we engaged with 72% of
our shareholder register
during 2023
Conferences
12
during 2023, we attended
12 property conferences
Property tours
73
during the year we
hosted 73 property tours
Occupiers
104
occupiers engaged with as
part of our work to reduce
energy usage (44% of ERV)
132
We recognise the important role that design-led, well-
located and amenity-rich oﬃces play in attracting and
retaining talent. In response to feedback from occupiers,
in 2023 we introduced DL/Service, a food and beverage
oﬀering, at four of our buildings – The Featherstone Building
EC1, DL/28, The White Chapel Building E1 and White Collar
Factory EC1.
DL/Service oﬀers our occupiers a diverse all-day menu
and preferential pricing for our community of Members.
Operated in partnership with a third party service provider
(at cost to Derwent London), we have ﬂexibility to update
the oﬀering to suit evolving occupier requirements. Early
feedback has been positive, with the additional amenity
well received by occupiers.
DL/Service at The White Chapel Building E1
Derwent London plc
Report and Accounts 2023
Governance
133
CORPORATE GOVERNANCE STATEMENT
continued
Division of responsibilities
Board roles
There is clear division between executive and non-executive responsibilities which ensure accountability and oversight. The roles of
the Chairman and Chief Executive are separately held and their responsibilities are well deﬁned, set out in writing and subject to
review by the Board.
Chairman, Mark Breuer
•
Responsible for the eﬀective running of the Board and ensuring
it is appropriately balanced to deliver the Group’s strategic
objectives
•
Promote a boardroom culture that is rooted in the principles
of good governance and enables transparency, debate and
challenge
•
Ensure that the Board as a whole plays a full and constructive
part in the development of strategy and that there is suﬃcient
time for boardroom discussion
•
Eﬀective engagement between the Board, its shareholders and
other key stakeholders
Chief Executive, Paul Williams
•
To provide clear and visible leadership
•
Execute the Group’s strategy and commercial objectives together
with implementing the decisions of the Board and its committees
•
To keep the Chairman and Board appraised of important and
strategic issues facing the Group
•
To ensure that the Group’s business is conducted with the highest
standards of integrity, in keeping with our culture
•
Manage the Group’s risk proﬁle and ensure actions are compliant
with the Board’s risk appetite
•
Investor relation activities, including eﬀective and ongoing
communication with shareholders
Senior Independent Director, Helen Gordon
•
Provide a ‘sounding board’ for the Chairman in matters of
governance or the performance of the Board
•
Available to shareholders if they have concerns which have not
been resolved through the normal channels of communication
•
To at least annually lead a meeting of the Non-Executive Directors
without the Chairman present to appraise the performance of the
Chairman
•
To act as an intermediary for Non-Executive Directors when
necessary and act as Chairman if the Chairman is conﬂicted
•
To act as an independent point of contact in the Group’s
whistleblowing procedures
Chief Financial Oﬃcer, Damian Wisniewski
•
Support the CEO in developing and implementing strategy
•
Provide ﬁnancial leadership to the Group and align the Group’s
business and ﬁnancial strategy
•
Responsible for ﬁnancial planning and analysis, treasury and tax
functions
•
Responsible for presenting and reporting accurate and timely
historical ﬁnancial information
•
Manage the capital structure of the Group
•
Investor relation activities, including communications with
shareholders, alongside the CEO
Designated NED for gathering the views of our workforce
1
,
Dame Cilla Snowball
Cilla Snowball has been designated the NED responsible for gathering
the views of our workforce. This is achieved by:
•
Attendance at key employee and business events, including
property launches and the Summer Party
•
Review messages received through the ‘Speak up’ system from
the Group’s employees
•
Monitor the eﬀectiveness of engagement programmes
established for employees
•
Monitor the outcome of employee surveys and provide input on
their design
Other Executive Directors
•
Support the CEO in developing and implementing strategy
•
Oversee the day-to-day activities of the Group
•
Manage, motivate and develop staﬀ
•
Develop business plans in collaboration with the Board
•
Ensure that the policies and practices set by the Board are
adopted at all levels of the Group
•
Investor relation activities, including communications with
shareholders, alongside the CEO
Non-Executive Directors (NEDs)
•
Provide constructive challenge to our executives, help to develop
proposals on strategy and monitor performance against our KPIs
•
Ensure that no individual or group dominates the Board’s decision
making
•
Promote the highest standards of integrity and corporate
governance throughout the Company and particularly at Board
level
•
Determine appropriate levels of remuneration for the senior
executives
•
Review the integrity of ﬁnancial reporting and that ﬁnancial
controls and systems of risk management are robust
Company Secretary, David Lawler
•
Secretary to the Board and its committees
•
Develop Board and committee agendas and collate and distribute
papers
•
Ensure compliance with Board procedures
•
Advise on regulatory compliance and corporate governance
•
Facilitate induction programmes for Directors and assist with their
training and development, as required
•
Responsible for communications with retail shareholders and the
organisation of the Annual General Meeting
•
Available to support all Directors
1
Cilla Snowball was chosen for this position as she chairs the Responsible Business Committee which oversees stakeholder engagement. The Chairman ensures that
all Directors continue to remain engaged with our employees, and challenge and contribute to discussions on workforce engagement.
134
Appointments to the Board
At Derwent London, we ensure that appointments to our
Board are made solely on merit with the overriding objective of
ensuring that the Board maintains the correct balance of skills,
length of service and knowledge of the Group to successfully
determine the Group’s strategy. The Nominations Committee
report on pages 140 to 143 provides further information on:
•
Board composition and Non-Executive Director tenure;
•
Board appointments and induction; and
•
Succession planning and diversity.
Independence
The Non-Executive Directors play an important role in holding
to account the performance of executive management and
ensuring that no individual or group dominates the Board’s
decision making. It is therefore of paramount importance
that their independence is maintained. To safeguard their
independence, Non-Executive Directors are not permitted to
serve more than three three-year terms unless in exceptional
circumstances (see page 141).
The Board has identiﬁed in the table below which Directors
are considered to be independent. The Board has reconﬁrmed
that our Non-Executive Directors remain independent from
executive management and free from any business or other
relationships which could materially interfere with the exercise
of their judgement.
The Chairman held a number of meetings with the Non-
Executive Directors without executive management being
present. These meetings are useful to safeguard the
independence of our Non-Executive Directors by providing them
with time to discuss their views in a more private environment.
Related party disclosures /
See page 262
External commitments
The Board takes into account a Director’s other external
commitments when considering them for appointment
to satisfy itself that the individual can discharge suﬃcient
time to the Derwent London Board and assess any potential
conﬂicts of interest. Our Directors are required to notify the
Chairman of any alterations to their external commitments
that arise during their tenure with an indication of the time
commitment involved.
When assessing additional directorships, the Board considers
the number of public directorships held by the individual
already and their expected time commitment for those
roles (see biographies on pages 122 and 123).
Executive Directors may accept a non-executive role at
another company with the approval of the Board. Currently,
none of our Executive Directors are directors of other listed
companies. However, several of our Executive Directors
are Trustees of charitable organisations or members of
industry-related bodies.
All Directors have conﬁrmed (as they are required to do
annually) that they have been able to allocate suﬃcient time
to discharge their responsibilities eﬀectively (see page 120 for
Board meeting attendance).
The 2023 Board evaluation conducted by Helen Gordon, Senior
Independent Director, also considered whether each Director
had suﬃcient time to discharge their responsibilities eﬀectively
at Derwent London (see page 137).
Other publicly listed
appointments
The Board takes into account guidance published by institutional investors and proxy advisers as to the maximum number of public
appointments which can be managed eﬃciently. For the table below, we have used the methodology contained in the ISS UK and
Ireland Proxy Voting Guidelines in respect of ‘overboarding’ to calculate our Non-Executive Directors’ mandates in respect of their
publicly listed appointments. Any person who holds more than ﬁve mandates at listed companies would be classiﬁed as ‘overboarded’.
The Board conﬁrms that none of our Directors are overcommitted and are capable of discharging suﬃcient time to Derwent London.
Non-Executive Director
Board Chairman
Executive Director
Independent
Appointments
Mandates
Appointments
Mandates
Appointments
Mandates
Total
Mandates
1
Mark
Breuer
Yes
–
–
Derwent London plc
DCC plc
4
–
–
4
Claudia
Arney
Yes
Derwent London plc
Kingﬁsher plc
2
Deliveroo plc
2
–
–
4
Lucinda
Bell
Yes
Derwent London plc
Man Group Plc
2
–
–
–
–
2
Helen
Gordon
Yes
Derwent London plc
1
–
–
Grainger plc
3
4
Sanjeev
Sharma
Yes
Derwent London plc
1
–
–
M&G Real
Estate
3
4
Cilla
Snowball
Yes
Derwent London plc
Whitbread PLC
2
–
–
–
–
2
1
Inclusive of their appointment at Derwent London plc. For the purposes of calculating the number of total mandates: a non-executive directorship counts as one
mandate, a non-executive chairmanship counts as two mandates, and a position as executive director (or a comparable role) is counted as three mandates.
Derwent London plc
Report and Accounts 2023
Governance
135
4
6
4
5
3
3
2
6
4
3
2
5
1
4
2
5
1
3
2
4
4
6
1
2
Executive or strategic leadership
Property, real estate or construction
CFO, accountancy or audit
Financial markets, investment banking or capital projects
Risk management
Health and safety
Environmental (including climate change)
Corporate responsibility or community relations
Investor relations and engagement
Governance, legal or compliance
Remuneration, human resources or people management
Technology, digital, data or cyber security
CORPORATE GOVERNANCE STATEMENT
continued
Composition, succession and evaluation
Board composition and knowledge
Our Board is a diverse and eﬀective team, focused on promoting the long-term success of the Group for the beneﬁt of all
stakeholders. Further information on Board composition is on pages 141 and 143.
During 2023
•
The Audit Committee received training on the
International Sustainability Standards Board (IFRS S1
and IFRS S2) climate disclosure requirements and Energy
Certiﬁcate Performance (EPC) improvements.
•
The Risk Committee reviewed a legal update on upcoming
legislative changes in November.
•
All Directors attended regular external brieﬁng sessions
from the major accountancy ﬁrms.
•
All employees (including Directors) participated in online
compliance training courses on a range of topics including
competition law, conﬂicts of interest, anti-bribery and
cyber fraud awareness.
Compliance training /
See page 165
Training
With the ever-changing environment in which Derwent
London operates, it is important for our Executive and Non-
Executive Directors to remain aware of recent, and upcoming,
developments. We require all Directors to keep their knowledge
and skills up to date and include training discussions with the
Chairman in their annual performance reviews.
As required, we invite professional advisers to provide in-depth
updates. Updates and training are not solely reserved for
legislative developments but aim to cover a range of issues
including, but not limited to, market trends, the economic
and political environment, environmental, technological and
social considerations.
Our Company Secretary provides regular updates to the Board
and its committees on regulatory and corporate governance
matters. In addition, we invite our Directors to attend courses
hosted by the Deloitte Academy and PwC.
Board skills and experience
The chart below provides an overview of the skills and experience of our Directors as at 31 December 2023.
To be counted for each skill area, a Director is required to have executive or senior management experience.
100
%
Board meeting attendance
during 2023
60
%
Independence of the Board
50
%
of our Board are women
9.1
%
of the Board is from an
ethnic minority group
For the skill areas in which our Directors have less experience at an executive-level, we
provide training and regular updates either to the entire Board or to speciﬁc committees.
Board biographies /
See pages 122 and 123
Executive Director
Non-Executive Director
136
On an annual basis, an evaluation process is undertaken
which considers the eﬀectiveness of the Board, its principal
committees and individual Directors. This review identiﬁes
areas for improvement, informs training plans for our Directors
and identiﬁes areas of knowledge, expertise or diversity which
should be considered in our succession plans. The Board follows
a formal three-year cycle that was developed to enable reviews
to be led from a fresh perspective, each year.
Annual Board evaluation
Evaluation for the year ended 31 December 2023
The 2023 Board evaluation was internally facilitated by Helen
Gordon, our Senior Independent Director, who was informed
by the recommendations arising from the 2022 external
Board evaluation. The process covered the following areas:
•
Role of the Board
•
Eﬀective use of committees
•
The Board’s understanding of purpose and values
• Board skills
• Executive succession
•
The Board’s understanding of business
•
Strategy review and execution monitoring
•
Horizon scanning for risk and resilience
• Agenda planning
• Assurance
• Stakeholders’ perspective
Feedback from the 2023 Board evaluation
As a result of the evaluation, the Board conﬁrmed that its
structure, balance of skills and operation continues to be
satisfactory and appropriate for the Group. Overall, the
feedback of the internal evaluation was positive from all
Board members, however, for continuous improvement the
Board identiﬁed a number of focus areas for 2024 arising
from the evaluation:
•
A wider range of outside voices to be brought into the
boardroom.
•
To hold a broader debate on risk appetite.
•
Further discussions around the use of artiﬁcial intelligence
and technology.
•
Further interaction and engagement between the Board
and wider workforce.
Re-election of Directors
In accordance with the Code, all Directors (excluding Claudia
Arney) will be putting themselves forward for re-election at
the AGM on 10 May 2024. Following the formal performance
evaluation (detailed above) and taking into account the
Directors’ skills and experience (set out on page 136), the
Board believes that the re-election of each Director is in the
best interests of the Company.
Evaluation for the year ending 31 December 2024
In accordance with our three-year cycle, the performance
evaluation for the year ending 31 December 2024 will be
internally facilitated by Mark Breuer, our Chairman.
Evaluation for the year ended 31 December 2022
The 2022 Board evaluation was externally facilitated by
Manchester Square Partners LLP and was outlined in the 2022
Report & Accounts on page 149. As a result of this evaluation,
the Board identiﬁed a number of areas which it wished to focus
upon during 2023:
Focus area
Actions during 2023
Succession and talent
development
The Nominations Committee
continued to focus on succession
planning and talent development
across the Group (see page 142)
Board skills matrix
A speciﬁcation was prepared for
the appointment of a new Non-
Executive Director. The speciﬁcation
outlined a detailed composition
review of the Board, including its
skills, experience, and diversity
Site visits and Board
meetings
During the year a number of site
visits were held across the portfolio.
The Board held a meeting at
DL/28, the new amenity at
The Featherstone Building
Year 2
Internal evaluation
facilitated by the
Senior Independent
Director
Year 1
Externally facilitated
independent review
Year 3
Internal evaluation
facilitated by the
Chairman
Derwent London plc
Report and Accounts 2023
Governance
137
CORPORATE GOVERNANCE STATEMENT
continued
Key activities of the Board during 2023
Overview
The Board met six times during the year (including the Annual General Meeting). Additional meetings are arranged if necessary for
the Board to properly discharge its duties. An overview of our Board’s key activities is provided below.
Property portfolio
Strategy and financing
Risk management
and internal control
•
Approved the refurbishment of the
Strathkelvin Retail Park inclusive
of the subdivision and wider public
realm improvements
•
Capital expenditure approval for
£18.7m at the Solar Park in Scotland
•
Received regular updates on key
construction projects
•
Reviewed the portfolio pipeline for
future acquisitions and disposals
•
Continued to invest across the
portfolio on various upgrades
including in respect of EPC ratings
•
Regular updates from the Asset and
Property Management teams on
the portfolio
•
Ongoing updates from the
Executive Directors on the
implementation of strategy
throughout the year, including a
Board Strategy Awayday in June
•
Received regular updates on lease
expiries and potential vacancies
•
Reviewed and approved the Group’s
ﬁve-year plan and forecast
•
Reviewed quarterly project cost
reports
•
Approved the portfolio valuation as
at 30 June 2023 and 31 December
2023
•
Approved the 2023 interim and
ﬁnal dividends
•
Updates from the Risk and Audit
Committee Chairs on the key
areas discussed
•
Routinely considered the Board’s
conﬂict of interests
•
Regular reports received on health
and safety matters
•
Received assurance reports from
Deloitte in respect to environmental
reporting and green ﬁnance
•
Reviewed the compliance training
completion rates and approved the
2023/2024 training programme
•
Conducted regular ‘deep dive’
analysis of the share register in
line with the UK sanctions regime
•
Approved the Group’s model
for internal audit services
Strategic objectives:
1
2
4
Strategic objectives:
1
4
5
Strategic objectives:
2
3
4
Jan
Feb
Mar
Apr
May
Board and
committee meetings
Remuneration
Committee
Audit Committee
& Valuers meeting
Executive Committee
Main Board
Remuneration
Committee
Remuneration
Committee
Executive Committee
Risk Committee
Annual General
Meeting
Audit Committee
Main Board
Responsible Business
Committee
Key announcements
and activities
Sale of 19
Charterhouse Street
EC1
Full year results
announcement
Investor meetings
2022 Report &
Accounts and Notice
of AGM
Q1 Business update
138
Key to strategic objectives
Corporate reporting and
performance monitoring
Stakeholder engagement
Governance
•
Reviewed the rolling forecasts
and approved the 2024 budget
•
Received updates on the Group’s
Net Zero Carbon Pathway to 2030
•
Approved the full year and interim
results
•
Approved the Q1 and Q3 business
updates
•
Reviewed the 2023 Report &
Accounts to ensure it is fair,
balanced, and understandable
•
Published our annual Responsibility
Report
•
Our Senior Independent Director,
Helen Gordon, conducted the 2023
internal Board evaluation
•
Hosted the Annual General Meeting
(AGM) on 12 May 2023
•
Invited all shareholders to engage
in the external audit tender
•
Received updates from the
Responsible Business Committee
on the Group’s sustainability and
stakeholder initiatives
•
Reviewed the results of the biennial
employee survey
•
Appointed Unseen UK to conduct a
gap analysis on our modern slavery
policies and procedures
•
Conducted a Disability Survey and
became members of the Business
Disability Forum
•
Received updates on our investor
engagement programmes and
regular investor relations reports
•
Held an analyst/investor launch
event at the new amenity space,
DL/28
•
Performed a review of the Board
committees’ memberships, led by
the Chairman
•
Monitored the FRC’s consultation
on the UK Corporate Governance
Code
•
Approved the 2023 Modern Slavery
Statement
• Implemented the recommendations
and focus areas arising from the
2022 Board evaluation
•
Approved the reappointment of
PwC for the 2024 year end audit
•
Reviewed succession planning and
talent development across the
business
•
Adopted the 2023 Performance
Share Plan following its approval
at the 2023 AGM
• Received regular governance
updates from the Company
Secretary
Strategic objectives:
1
2
5
Strategic objectives:
3
4
Strategic objectives:
1
3
June
Jul
Aug
Sep
Oct
Nov
Dec
Main Board
(Strategy Awayday)
Executive
Committee
Audit Committee
& Valuers meeting
Main Board
Risk Committee
Executive
Committee
Main Board
Nominations
Committee
Remuneration
Committee
Audit Committee
Executive
Committee
Risk Committee
Main Board
Remuneration
Committee
Responsible
Business
Committee
Unaudited interim
results
Portfolio site tour
with Board and
members of senior
management
Q3 Business update
DL/28 analyst/
investor launch
event
To optimise returns
and create value from
a balanced portfolio
To attract, retain
and develop
talented employees
To maintain
strong and ﬂexible
ﬁnancing
To grow recurring
earnings and
cash ﬂow
To design, deliver and
operate our buildings
responsibly
1
2
3
4
5
Derwent London plc
Report and Accounts 2023
Governance
139
2024
Focus areas
•
Recruit a new Non-Executive Director in H1 2024
•
Continue to monitor the talent development pipeline
•
Further discuss the long-term succession of senior
executives
•
Ensure a smooth transition of responsibility to
Sanjeev Sharma as he succeeds Claudia Arney
as Remuneration Chair from 10 May 2024
Committee membership during 2023
Independent
Number of
meetings
Attendance
1
Mark Breuer
Yes
2
100%
Claudia Arney
Yes
2
100%
Lucinda Bell
Yes
2
100%
Helen Gordon
Yes
2
100%
Sanjeev Sharma
Yes
2
100%
Cilla Snowball
Yes
2
100%
1
Percentages are based on the meetings entitled to attend for the
12 months ended 31 December 2023.
Mark Breuer
Chair of the Nominations Committee
Dear Shareholder,
I am pleased to present an overview of the
Committee’s work during 2023. The Committee
has principally focused on succession planning
and the recruitment of a Non-Executive Director.
Board changes
Claudia Arney will step down from the Board at the 2024 AGM
as she reaches her ninth year anniversary. The Board thanks
Claudia for all her support and valuable contributions over
the years. Sanjeev Sharma who is currently a member of the
Remuneration Committee, will take over responsibility for
chairing the Remuneration Committee from 10 May 2024.
During H1 2024, the Committee will recruit a new Non-Executive
Director. Further information is on page 142. To ensure we have
the correct skills and experience, the Committee has prepared
a speciﬁcation for a new Non-Executive Director based on the
Board’s skills, experience and diversity.
Executive development and succession planning
I am delighted to see a number of internal promotions as well
as the strengthening of teams through external appointments.
Derwent London’s talented and diverse employees are a key
asset and as such, the Committee met regularly to review
succession and talent development plans.
During 2023, the Committee has focused on succession
planning particularly in respect to the Executive Directors.
Diversity and inclusion
The Board is fully compliant with the diversity recommendations
arising from the Parker Review and the FTSE 350 Women Leaders
Review (see page 143). In respect to ethnic diversity, we are
mindful that this remains a focus area so that we can further
harness its beneﬁts.
In accordance with the latest Parker Review recommendations,
we are setting a target for the percentage of our senior
management team self-identifying as being of an ethnic
minority by December 2027. Due to being a relatively small
company in respect to the number of people we employ,
we feel the target we have set is challenging but realistic.
Further engagement
If you wish to discuss any aspect of the Committee’s activities,
I will be attending the forthcoming AGM on 10 May 2024 and
would welcome your questions. I am also available via our
Company Secretary, David Lawler.
Telephone:
+44 (0)20 7659 3000
or
Email:
company.secretary@derwentlondon.com
Mark Breuer
Chair of the Nominations Committee
27 February 2024
NOMINATIONS COMMITTEE REPORT
140
Non-Executive Directors’ tenure
The Committee monitors a schedule of the Non-Executive Directors’ tenure and reviews potential departure dates assuming
the relevant Directors are not permitted to serve more than three three-year terms (nine years) from their appointment date,
unless in exceptional circumstances (see the chart below).
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
Claudia Arney
1
Cilla Snowball
Helen Gordon
Lucinda Bell
Mark Breuer
Sanjeev Sharma
Committee composition and performance
Our Committee consists of ﬁve independent Non-Executive
Directors as well as our independent Chairman (biographies
are available on pages 122 and 123). At the request of the
Committee, members of the Executive Committee, Executive
Directors, members of the senior management team and
external advisers may be invited to attend all or part of any
meeting, as and when appropriate. During the year under review,
the Committee held two meetings (2022: three meetings).
On a regular basis, the Nominations Committee considers
the composition of the Board and its committees in terms of
its balance of skills, experience, length of service, knowledge
of the Group and wider diversity considerations; alongside
considering whether each Non-Executive Director has suﬃcient
time to discharge their duties (see page 135).
The Committee did not identify any material skill gaps on the
Board or its committees, but agreed that Cilla Snowball should
be appointed to the Audit Committee in August. An overview
of the Board’s skills, experience and knowledge is on page 136.
The Committee’s role and responsibilities are set out in the
terms of reference, which were last updated in November 2023
and are on the Company’s website at:
www.derwentlondon.
com/investors/governance/board-committees
The 2023 evaluation of the Board, its committees and individual
Directors was internally facilitated by the Senior Independent
Director, Helen Gordon, in accordance with our three-year cycle
of evaluations (see page 137). The review conﬁrmed that the
Committee continues to operate eﬀectively, with no signiﬁcant
matters raised.
The table below provides an overview of the composition of
the Board’s ﬁve principal committees as at 31 December 2023.
Further information on the Board’s diversity is on page 143.
Board and committee composition
Audit
Risk
Remuneration
Nominations
Responsible
Business
Mark Breuer
Chair
Claudia Arney
Chair
Cilla Snowball
Chair
Helen Gordon
Chair
Lucinda Bell
Chair
Sanjeev Sharma
Number of
independent NEDs:
4
4
4
6
2
Number of Executive
Directors:
–
–
–
–
1
Number of employee
representatives:
–
–
–
–
4
Total membership:
4
4
4
6
7
Following the Committee’s review, it was conﬁrmed that the
membership of the ﬁve principal committees continues to be
appropriate, eﬀective and in accordance with the 2018 UK
Corporate Governance Code.
Succession planning /
See page 142
1
Claudia Arney will step down from the Board at the 2024 AGM.
Derwent London plc
Report and Accounts 2023
Governance
141
Succession planning
As Directors we have a duty to ensure the long-term success
of the Company, which includes ensuring that we have a
steady supply of talent for executive positions and established
succession plans for Board changes.
Executive and Non-Executive Director succession
The Committee considers the Group’s succession planning
on a regular basis to ensure that changes to the Board are
proactively planned and coordinated. During the year, the
Committee had a detailed discussion on the succession of
the Executive leadership team.
The Committee continues to monitor the Non-Executive
Directors’ tenure (see page 141). To identify and capture
any future requirements for Non-Executive Directors, the
Committee has prepared a speciﬁcation following a detailed
composition review of the Board, including of its skills,
experience and diversity.
Claudia Arney will step down at the 2024 AGM as she reaches
her ninth year on the Board. The Committee has facilitated
an eﬀective handover of responsibility to Sanjeev Sharma
who will succeed Claudia Arney as Remuneration Chair
from 10 May 2024. The Committee is aware that Dame Cilla
Snowball will also be approaching her ninth anniversary
on the Board during 2024.
Board appointments
The Committee is responsible for leading the recruitment
process for new Directors. Generally, the Committee will
utilise an external search consultancy when recruiting a
Chairman for the Board or a new Non-Executive Director.
During the year under review, there have not been any
new appointments made to the Board but the recruitment
process has commenced for a new Non-Executive Director.
The Board’s appointment policy requires that, where possible,
each time a Director is recruited at least one of the shortlisted
candidates is female and at least one of the candidates is
from an ethnic minority group. Whilst we have identiﬁed
areas where we could further improve our diversity balance,
principally our ethnic diversity, we do not positively discriminate
during the recruitment process.
The Company provides new Directors with a comprehensive
and tailored induction process which includes visiting a number
of the Group’s properties, meetings with the Group’s audit
partner and corporate lawyer, together with meetings with
the Executive Directors, Executive Committee and senior
management.
Induction programmes are developed by the Group’s Company
Secretarial team and approved by the Chairman. If considered
appropriate, new Directors are also provided with external
training that addresses their role and duties as a Director
of a quoted public company. We aim to limit the amount of
information provided as reading material during an induction
process. All new Directors are provided with access to our
electronic Board paper system.
Appointment review
As Mark Breuer and Helen Gordon reached the end of their
current three-year terms, the Committee performed a rigorous
review of their appointments. Mark and Helen were not
present when their terms of appointment were considered
by the Committee, respectively. The Committee is pleased to
report that it is satisﬁed with both Mark’s and Helen’s ongoing
performance and commitment and has recommended that
their appointments be extended for another three years.
Executive Committee
The Group’s talent pipeline has been strengthened through a
number of internal promotions. During the year, Richard Dean
(Director of Investment) joined the Executive Committee.
As at 31 December 2023, the composition of the Executive
Committee consists of four Executive Directors, the Company
Secretary and 10 senior managers. The gender diversity
composition of the Executive Committee is now 40% female,
achieving the FTSE 350 Women Leaders Review target of 40%
(see page 143).
Senior management
The Executive Directors are responsible for the Group’s succession
plans below the Board. The Committee receives periodic updates
on these succession plans and monitors the development of
the Executive management team below the Board, to ensure
that there is a diverse supply of senior executives and potential
future Board members with appropriate skills and experience.
Non-Executive Director recruitment process
Stage 1
Stage 2
Stage 3
Stage 4
Stage 5
Stage 6
The speciﬁcation for
a new Non-Executive
Director following the
Committee’s review of
the Board’s composition
of skills, experience and
diversity was agreed
at the Committee
meeting on
30 October.
At the Nominations
Committee meeting
on 27 November the
Committee agreed to
appoint an external
search consultancy
from the shortlisted
ﬁrms provided.
External search
consultancy to
provide a ‘Long List’
of candidates with the
ﬁrst stage interviews
conducted by the
Chairman.
A ﬁnal ‘Short List’
of candidates to be
selected for ﬁnal stage
interviews with the
Committee members,
CEO and Chairman.
The Committee to
make their ﬁnal
recommendation
to the Board.
A comprehensive
induction programme
will be organised
by the Company
Secretarial team
with input from
the Chairman
NOMINATIONS COMMITTEE REPORT
continued
The Board conﬁrms that the external search consultancy was appointed free from any conﬂicts of interest.
142
FTSE Women Leaders Review
During 2022, the FTSE 350 Women Leaders Review
published its recommendations which aim to further
female representation on boards beyond the Hampton-
Alexander Review targets, increasing the target from
33% to 40%.
We are pleased that Derwent London’s eﬀorts to
actively promote the importance of diversity has
ensured our Board and senior management teams
achieve the targets set by the FTSE 350 Women Leaders
Review, the Listing Rules and the Parker Review.
Board diversity
A diversiﬁed Board brings constructive challenge and fresh
perspectives to discussions. We consider diversity, in its widest
sense (and not limited to gender), during our Board and
committee composition reviews and the development of
recruitment speciﬁcations during recruitment.
The Listing Rules include speciﬁc diversity targets which require
companies to report against on a ‘comply or explain’ basis.
Target
Compliance
At least 40% of the Board
are women
50.0% of our Board
are women
At least one of the senior Board
positions is held by a woman
Helen Gordon is our Senior
Independent Director
At least one member of the
Board is from a minority
ethnic background
Sanjeev Sharma joined the
Board in October 2021
Ethnic diversity
The Parker Review continues to monitor and champion ethnic
diversity on boards. During 2023, the Parker Review issued the
results of the 2022 voluntary census. Derwent London achieved
the 2024 target in 2021 with the appointment of Sanjeev
Sharma to the Board. Within the FTSE 250, 224 companies
responded to the Parker Review questionnaire, with 149 out of
the 224 (67%) currently meeting the December 2024 target.
During the results publication of the 2022 voluntary census
the Parker Review published a new recommendation for
a December 2027 target. In accordance with these latest
recommendations, we are setting a target of at least 15% of
our senior management team self-identifying as being of an
ethnic minority by December 2027. In accordance with the
Parker Review we have deﬁned our senior management team
as being our Executive Committee (inclusive of Executive
Directors) and our senior managers (see pages 122 to 125).The
Board recognises that this is a challenging but realistic target.
As at 31 December 2023, we had 26 managers in our senior
management team of which three self-identify as being of an
ethnic minority (11.5%).
Throughout the year, the Diversity and Inclusion Working Group
(D&I Working Group) has established initiatives and events
which focused on further harnessing, and celebrating, the
beneﬁts of diversity. Further information on the actions of the
D&I Working Group is on page 168.
1
The combined diversity balance of the Executive Committee and
its direct reports (excluding administrative and support staﬀ) is
44.4% women.
2
Independent Non-Executive Directors, excluding the Chairman.
3
Direct reports to the Executive Committee, excluding
administrative and support staﬀ, is 45.6% women. Direct reports
to the Executive Committee, including administrative and support
staﬀ, is 53.7% women.
80.0
%
Female Non-Executive Directors
2
Target: 40%
40.0
%
Women on the Executive Committee
1
Target: 40%
45.6
%
Female direct reports of the Executive Committee
3
Target: 40%
50.0
%
Women on the Board
Target: 40%
Derwent London plc
Report and Accounts 2023
Governance
143
2024
Focus areas
•
Ensure a smooth and eﬀective transition to Thomas
Norrie at PwC, as the new Lead Audit Partner
•
Continue to monitor the internal control framework
and its eﬀectiveness
•
Monitor the performance of the new in-house
internal audit function
•
Oversee the implementation of a new ﬁnance system
which is expected to commence in 2024
•
Monitor the transition from Savills to Knight Frank as
Valuers of the Scottish land
Committee membership during 2023
Independent
Number of
meetings
1
Attendance
2
Lucinda Bell
Yes
4
100%
Claudia Arney
3
Yes
4
100%
Sanjeev Sharma
Yes
4
100%
Cilla Snowball
4
Yes
2
100%
1
In addition to the scheduled meetings, a number of extra meetings
were held for the external audit tender.
2
Percentages are based on the meetings that each member is
entitled to attend for the 12 months ended 31 December 2023.
3
Claudia Arney will be stepping down from the Board at the 2024 AGM.
4
Cilla Snowball was appointed as a member of the Audit Committee
on 1 August 2023.
Lucinda Bell
Chair of the Audit Committee
Dear Shareholder,
I am pleased to provide you with an overview of
the Committee’s main activities and areas of focus.
External audit tender
During the year, the Committee conducted a competitive
tender for the Group’s external Auditor. The Committee was
mindful of best practice and ensured that the tender was
conducted in accordance with the Audit Committees and
the External Audit: Minimum Standard
(
see page 150).
An invitation was extended to all shareholders for their
engagement in the tender, however, no responses were
received. Overall, the Committee has found the tender process
informative and gained further insight on audit quality.
Following a comprehensive discussion, the Board approved
the reappointment of PwC as external Auditor for the 2024
year end audit (see pages 150 and 151).
Portfolio valuation and the latest guidance from
the Royal Institution of Chartered Surveyors (RICS)
Due to its importance, the Committee considers the valuation
of the Group’s property portfolio to be a principal area of
judgement. During 2023, the Committee reviewed the latest
guidance published by RICS, following the independent review
performed by Peter Pereira Gray, and approved an amendment
to its Valuer Policy. Following the change of valuers in 2022,
the vast majority of our valuation was in compliance with the
new rules. However, to ensure full compliance, the valuation
of our Scottish land will be conducted by Knight Frank from
June 2024.
Climate change and ESG disclosures
A continuing focus area for 2023 was climate change matters
in respect of our ﬁnancial statements and portfolio valuation.
The Committee reviewed the assurance provided by Deloitte
on our ESG disclosures and Green Finance Framework.
For further information on assurance over external reporting
see pages 154 and 155.
Internal controls and internal audit
The Committee is responsible for reviewing the robustness
of the Group’s internal controls, in partnership with the Risk
Committee (see pages 148 and 149). Positive progress has
been made to further strengthen our controls during the
year. During 2024, the Committee will continue to review the
internal control environment, particularly as new systems are
introduced. Since 2018, RSM have been the Group’s outsourced
internal auditors. As the Group’s internal control framework
continues to mature, the Committee reviewed the provision of
internal audit and decided to bring the function in-house with
Julie Schutz being appointed as the Head of Internal Audit.
Further engagement
If you wish to discuss any aspect of this report, please contact
me via our Company Secretary, David Lawler.
Telephone:
+44 (0)20 7659 3000
or
Email:
company.secretary@derwentlondon.com
Lucinda Bell
Chair of the Audit Committee
27 February 2024
AUDIT COMMITTEE REPORT
144
Committee composition and performance
During the year under review, the Committee was composed
of independent Non-Executive Directors with a wide range of
experience, including real estate and ﬁnance (biographies are
available on pages 122 and 123).
The Board considers that the Committee (including its Chair,
Lucinda Bell) is composed of a suﬃcient number of ﬁnancial
experts, with an appropriate level of recent and relevant
ﬁnancial experience, to discharge its duties. At the request of
the Committee Chair, meetings are attended by the Board
Chairman, internal and external Auditors, and members of
the Group’s senior management team. In addition, Deloitte
regularly attends meetings when ESG assurance is discussed.
To further facilitate open dialogue, the Committee holds
private sessions with the Auditors without members of
management being present.
During 2023, the Committee held four scheduled meetings
(2022: three meetings) two of which included an update from
the Group’s external property valuers. A number of additional
meetings were held during the year as part of the external
audit tender process (see page 150). In addition, the Risk
Committee held four meetings during 2023.
The Committee’s role and responsibilities are set out in
the terms of reference, which were last updated in August
2023. Following the publication of the 2024 UK Corporate
Governance Code, the Committee’s terms of reference
will be updated in 2024. The Audit Committee terms of
reference are available on the Company’s website at:
www.derwentlondon.com/investors/governance/board-
committees
The 2023 evaluation of the Board, its committees and
individual Directors was internally facilitated by Helen Gordon,
Senior Independent Director, in accordance with our three-
year cycle of evaluations (see page 137). The review conﬁrmed
that the Committee continues to operate eﬀectively, with no
signiﬁcant matters raised.
Financial reporting
One of the Committee’s principal responsibilities is to review
and report to the Board on the clarity and accuracy of the
Group’s ﬁnancial statements, including the annual Report
& Accounts and interim statement. When conducting its
reviews, the Committee considers the overall requirement
that the ﬁnancial statements present a ‘true and fair view’
and the following:
•
the accounting policies and practices applied (see note 43
on pages 272 to 276) including in respect to any signiﬁcant
transactions during the year;
•
material accounting assumptions and estimates made by
management (see note 3 on pages 221 to 223);
•
signiﬁcant judgements and key audit matters identiﬁed by
the external Auditor (see page 146 and pages 207 to 209);
•
the eﬀectiveness and application of internal ﬁnancial
controls (see pages 148 and 149); and
•
compliance with relevant accounting standards and other
regulatory ﬁnancial reporting requirements including the UK
Corporate Governance Code and European Single Electronic
Format (ESEF) requirements.
2024 UK Corporate Governance Code (the Code)
The FRC conducted a consultation during 2023 and
subsequently published the updated Code in January
2024. Overall, the Committee remains conﬁdent in the
Group’s compliance with the existing Code, and will
work closely with Julie Schutz, Head of Internal Audit,
to ensure requirements of the new Code are addressed
in advance of applicable dates.
Review of the 2023 Report & Accounts
At the request of the Board, the Committee was asked
to review the Group’s Report & Accounts and to consider
whether, taken as a whole, it was fair, balanced and
understandable. In carrying out its review, the Committee
had regard to the following:
Fairness and balance
•
Is the report open and honest?
•
Are we reporting on our weaknesses, diﬃculties and
challenges alongside our successes and opportunities?
•
Do we provide clear explanations of our KPIs and is there
strong linkage between our KPIs and our strategy?
•
Do we show our progress over time and is there consistency
in our metrics and measurements?
Understandable
•
Do we explain our business model, strategy and accounting
policies simply, using precise and clear language?
•
Do we break up lengthy narrative with quotes, tables,
case studies and graphics?
•
Do we have a consistent tone across the Report & Accounts?
•
Are we clearly ‘signposting’ to where additional information
can be found?
Speciﬁc considerations for the 2023 Report & Accounts
•
Our external audit tender disclosures and conﬁrmation
of our compliance with the Audit Committees and the
External Audit: Minimum Standard (see pages 150 and 151).
•
Whether our restructured climate change section
adequately explains the climate-related risks and
opportunities facing the Group (see pages 104 to 117).
•
The disclosure of our December 2027 target for ethnic
diversity in our senior management team in accordance
with the Parker Review’s latest recommendation
(see page 143).
The Committee paid particular attention to these changes
to ensure they did not adversely impact on the balance and
clarity of the Report & Accounts.
Following its review, the Committee conﬁrmed to the Board
that the 2023 Report & Accounts is fair, balanced and provides
suﬃcient clarity for shareholders to understand our business
model, strategy, ﬁnancial position and performance.
Derwent London plc
Report and Accounts 2023
Governance
145
AUDIT COMMITTEE REPORT
continued
Significant financial judgements, key assumptions and estimates
Any key accounting issues or judgements made by management are monitored and discussed with the Committee throughout the
year. The table below provides information on the key issues discussed with the Committee in 2023 and the judgements adopted.
Issue
Assumptions or estimates
Outcome
Valuation of the Group’s property portfolio
Due to its size, nature and the direct
impact upon the Group’s net asset
value, the Committee considers this
to be the primary area of judgement
in determining the accuracy of the
ﬁnancial statements.
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 (ESG) considerations.
Where reasonable and measurable, the
eﬀects and consequences of climate
change are reﬂected in these ﬁnancial
statements and valuations (see note 16
on pages 233 and 237).
The valuation is performed twice yearly by the
external valuers and due to its signiﬁcance,
is also reviewed by the external Auditor.
The Committee reviewed the underlying
assumptions used in the valuation, including
the Group’s development property portfolio
and property held in joint ventures, in addition
to the external valuers’ objectivity and
methodology. These procedures enabled the
Committee to be satisﬁed with the assumptions
and estimates used in the valuation of the
Group’s property portfolio.
Impairment review
Sentiment amongst our occupiers
continued to improve through 2023,
with rent collection levels across the
oﬃce portfolio close to pre-Covid levels.
However, due to the economic situation,
with relatively high interest rates and
inﬂation, there remains a heightened
risk of ﬁnancial diﬃculty among some
of our tenants.
Impairment testing of trade receivables
and accrued income recognised in
advance of receipt has been carried out
under IFRS 9 and IAS 36, respectively.
This has required estimates to be made
in relation to recoverability and the
probability of default across our portfolio.
Recoverability and estimated probability
of default has been judged to be broadly
the same as in 2022.
The probability of default was considered using
a risk-based approach. In particular, our top
50 tenants, those in administration or CVA or
in high risk sectors such as retail and hospitality,
were looked at in detail with the remaining
balances classiﬁed by sector. The review was
carried out by the Finance team in conjunction
with the Credit Committee and a detailed
paper was reviewed by the Audit Committee
in February 2024.
Taxation and REIT compliance
Should the Group not comply with
UK REIT regulations, it could incur
tax penalties or ultimately be expelled
from the REIT regime, which would
have a signiﬁcant impact on the
ﬁnancial statements.
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 has a qualiﬁed and experienced
tax team who the Committee meets at least
annually. The Committee noted the frequency
with which compliance with the tests and
regulations was reported to the Board and
considered the substantial margin by which
the Group complied. Based on this, and the
level of headroom shown in the latest Group
forecasts, the Committee agreed that sound
application of judgement has been made.
146
Climate change
The Group is committed to be net zero carbon by 2030.
The Committee’s role is to gain assurance that the eﬀects
and consequences of climate change are being adequately
reﬂected in our ﬁnancial statements and valuations.
Training and assurance
Climate disclosures and emissions reporting can be complex.
During 2023, the Committee received training on the following:
•
The International Sustainability Standards Board (ISSB) and
their sustainability reporting standards – IFRS S1 and IFRS
S2. See pages 104 to 117 for the climate-related risks and
opportunities we have identiﬁed.
•
The sustainability eﬀect of Energy Performance Certiﬁcate
(EPC) improvements on the valuation of our portfolio.
Further information on our EPC ratings is on page 115.
The Committee will continue to monitor developing best
practice, and seek training/professional guidance when
required, to ensure it continues to eﬀectively oversee our
reporting in this area.
The Committee receives further assurance through Deloitte’s
review of selected ESG metrics. During 2023 we reviewed the
number of metrics assured by Deloitte and received limited
assurance from them in relation to 2023 data (see pages 154
and 155).
Impact on the valuation
Following an independent third party assessment in 2021,
approximately £97m of capital expenditure was identiﬁed to
achieve 2030 EPC compliance across our London commercial
portfolio. This has since been revised to £95.3m to reﬂect the
latest scope (change in building regulations), subsequent
inﬂation, disposals and work carried out to date. Of this,
Knight Frank made a speciﬁc deduction of £48m in their
December 2023 external valuation. In addition, further
amounts have been allowed for general upgrades between
assumed tenant vacancies.
Environmental /
See pages 46 to 49
Net zero carbon /
See pages 48 and 49
Building climate resilience /
See pages 104 to 117
Portfolio valuation
The main area of reporting risk relates to the valuation of our
portfolio. Our property portfolio is valued by external valuers
for both our interim and year end results. As at 31 December
2023, it was valued at £4.879bn (2022: £5.364bn) and principally
consists of 66 properties. Further information on our valuation
is on pages 63 to 66.
The valuation of our portfolio is a major component of EPRA
net tangible assets (NTA) and is a key determinant for our
investors when assessing our performance. Movements in the
valuation are a signiﬁcant part of how we measure our progress
and a material determinant of the Group’s total return.
Due to its signiﬁcance, the biannual valuation is overseen by
the Audit Committee and also subject to a detailed internal
review by our Investment and Valuation team, which consists
of experienced and qualiﬁed professionals.
Key matters discussed during the meetings in 2023 included:
•
The performance of Knight Frank.
•
The valuation of our on-site developments; 25 Baker Street
W1 and Network W1.
•
The impact of the macroeconomy on the valuation.
•
How the valuation was taking into account the costs to
achieve 2030 EPC compliance and the impact of other
climate change factors.
•
The valuation of joint venture properties, which was on the
same basis as other Derwent London properties.
•
Any valuation movements that were not broadly in line with
the MSCI indices.
The assumptions underlying the valuation are discussed with
the external Auditor and an update on the matters discussed
at the meetings is provided to the Board. During the year, RICS
published guidance following its ‘Independent Review of Real
Estate Investment Valuation’. Our Scottish land is a relatively
small portfolio that has previously been valued by Savills.
However, to ensure full compliance with the latest guidance, it
has been agreed that Knight Frank will value the Scottish land
from June 2024.
Eﬀectiveness of the Group’s valuers
A review into the eﬀectiveness of the external valuers is
performed after the year end and interim valuations, with
assistance from Nigel George, Executive Director.
The eﬀectiveness review for 2023 was conducted in February
and August and considered the following:
•
experience, qualiﬁcation and objectivity of the valuation
team;
•
quality of presentation and data; and
•
robustness of the valuation.
At both meetings it was concluded that the external valuers
performed to a high standard and the timetable for delivery
was achieved.
Derwent London plc
Report and Accounts 2023
Governance
147
Internal audit
The Internal Audit Plan for 2023 was jointly approved by the
Risk and Audit Committees and was comprised of risk-based
reviews across a range of business areas. Both Committees
receive reports on internal audit activity and monitor the
status of internal audit recommendations.
During 2023, a formal review of the eﬀectiveness of the internal
auditor and the internal audit process was conducted. It was
concluded that the process had been conducted eﬀectively
and that the independent assurance received through
internal audits had been beneﬁcial to the Committee and
management. Audits performed during 2023:
•
Intelligent buildings implementation and management
•
Energy Performance Certiﬁcate (EPC) compliance
•
Supplier selection and due diligence
• Fraud controls
• IT development controls
• Financial controls
Annual review of the internal audit function
The internal audit function has been outsourced to RSM since
December 2018, and they have carried out all reviews during
2023. In line with the Group’s commitment to continuously
enhance the internal control environment, the Audit and Risk
Committees reviewed the model for the provision of internal
audit services and decided to bring the function in-house.
Julie Schutz, our new Head of Internal Audit, is a Chartered
Accountant with extensive experience in the provision of risk
and assurance services across a diverse range of industries. Julie
will work closely with the Risk and Audit Committees to develop
and deliver a risk-based internal audit programme for 2024. The
plan will include a combination of both assurance activities over
key risk areas and advisory work, which will support the business
in further strengthening its control environment.
Internal controls
Our internal ﬁnancial controls environment allows the
Company to safeguard its assets, prevent and detect material
fraud and errors, and ensure accuracy and completeness of its
accounting records which are used to produce reliable ﬁnancial
information. During 2023, we have undertaken the following
actions to further strengthen our ﬁnancial controls:
•
Cyber risk continues to be an area of key focus and is
subject to independent testing (pages 162 and 163). The
Digital Innovation & Technology (DIT) team enhanced our
Business Continuity Plan and conducted a full disaster
recovery test with minor lessons learned to further resilience.
•
Implementation of a new continuous learning approach to
cyber awareness. Staﬀ are now completing ‘small’ modules
throughout the year enabling us to raise awareness of
new attack methods in real-time and targeting those at
heightened risk due to their role type.
•
Ongoing documentation, review and enhancement of key
ﬁnancial processes and controls as part of the Internal
Controls Project.
•
Implementation of a new HR solution to automate
workﬂows and introduce more preventative controls.
The payroll module is to go live during 2024.
•
Development of a new supplier set-up portal to strengthen
controls by automating due diligence checks.
Eﬀectiveness review
The Committee receives detailed reports on the operation and
eﬀectiveness of the internal ﬁnancial controls from members
of the senior management team and our internal auditors.
In addition, the outcome of the external audit at year end
and the half year review are considered in respect of ongoing
enhancements to internal controls.
On an annual basis, the Committee reviews the Group’s fraud
risk management framework, of which a fraud risk assessment
is a key component. The framework helps management
assess and improve upon its fraud resilience measures across
a range of key components, while the risk assessment sets
out the detailed controls which safeguard the Company’s
assets and help prevent and detect fraud and errors. A heat
map summarises residual risk scores based on the fraud
risk assessment, and those risks with scores above tolerance
levels have action plans in place to help further mitigate the
residual risk.
As training and staﬀ awareness forms part of the Group’s
internal control framework, the Risk Committee receives
updates on key policies and procedures in place and how
these are being communicated to, and complied with,
by our staﬀ. Further information is on pages 159 and 165.
Following the Audit and Risk Committees’ reviews (see page
92), the Chairs of each Committee conﬁrmed to the Board
that they are satisﬁed that the Group’s internal control
framework (ﬁnancial and non-ﬁnancial) and risk management
procedures:
•
operated eﬀectively throughout the period; and
•
are in accordance with the guidance contained within the
FRC’s Guidance on Risk Management, Internal Control and
Related Financial and Business Reporting.
Internal audit is responsible for
fostering a culture of accountability
and continuous improvement.
Julie Schutz
Head of Internal Audit
148
AUDIT COMMITTEE REPORT
continued
Derwent London plc
Report and Accounts 2023
Governance
149
Internal ﬁnancial controls
Our internal ﬁnancial controls operate within the following control environment and context:
•
Company culture:
We have a deﬁned set of values and strategic objectives that are supported by a Code of Conduct
and Business Ethics which creates an environment that values integrity, openness, transparency and building long-term
relationships. Our culture promotes collaboration and encourages employees to ask questions and challenge decisions.
•
Workforce:
Our ﬂat structure and modest headcount (relative to asset values) allows for the close supervision and monitoring
of activity by members of the Executive Committee.
•
Group structure:
Relatively simple and transparent Group legal structure with relatively few subsidiaries and joint ventures.
•
Income/costs:
Rent, service charge, administrative costs (mainly salaries), interest and other ﬁnance costs are predictable.
Quarterly management accounts are prepared that analyse income and expenditure and compare them with the prior year
and budget, with unexpected variances investigated and explained.
•
Capital costs:
The largest costs incurred relate to capital expenditure. All capex on investment properties is approved and,
where material, is subject to external conﬁrmation, before being paid. These approved budgets are monitored internally.
Overview of internal ﬁnancial controls:
Governance
framework
Our governance framework (see page 127) supports eﬀective internal control through an approved
schedule of matters reserved for decision by the Board and the Executive Directors, supported by deﬁned
responsibilities, levels of delegated authority and supporting committees.
Risk identiﬁcation
and monitoring
Management regularly review and assess key risks facing the Group, including scenarios which could
result in material ﬁnancial and/or tax fraud or errors. Key risks are documented in risk registers, along
with a schedule of key controls and key risk indicators. The schedule of key controls provides evidence of
how the controls are being operated, their eﬀectiveness and areas of potential weakness and further
improvement. Risk management activities are overseen by the Risk Committee, and their report is on
pages 156 to 165.
Financial controls
Comprehensive systems of ﬁnancial control are in place including an annual budgeting exercise with three
rolling forecasts, as well as a ﬁve-year strategic review. Breakeven and sensitivity analyses are included in
both the ﬁve-year review and the rolling forecasts, with quarterly variance analysis performed between
budget and actuals. A range of both preventative and detective controls, including segregation of duties,
reconciliations, approvals, management reviews and exception reporting helps ensure accuracy and
completeness of ﬁnancial records.
Treasury and
tax controls
Treasury activities are controlled by the Chief Financial Oﬃcer and Group Financial Controller. All large
and/or complex transactions are discussed in advance with the Board and Executive Directors, executed
in line with delegated authority levels and externally reviewed by our advisers. Taxation is a complex area
and is subject to frequent external review. Corporate tax returns are prepared by the Tax Analyst, reviewed
and prepared internally by senior members of the tax department and externally by RSM on a sample
basis. Other higher risk areas like VAT, PAYE and CIS are subject to thorough examination and testing.
We maintain an open relationship with HMRC who assessed our tax status in 2023 as ‘low risk’ in all
categories. Further information on tax governance is on page 58.
IT controls
IT general controls are a fundamental part of the ﬁnancial control environment and apply to applications,
databases and operating systems. They ensure appropriate access to, and integrity of our data, which
ultimately ﬂows through to the ﬁnancial statements. A robust system of back up is in place to protect
against the potential loss or corruption of data against the backdrop of ever-evolving cyber threats.
Training and staﬀ
awareness
Key policies and procedures are available to employees on our Group intranet. Employees are required
to conﬁrm their understanding of our key internal policies upon joining, and periodically thereafter as
required for compliance purposes. Cyber risk training is delivered throughout the year to help maintain
high levels of staﬀ awareness and core system training is delivered when new systems are implemented,
or ways of working are changed. The Group operates a ‘Speak Up’ Policy which includes access to an
anonymous reporting hotline to raise any concerns of misconduct, wrongdoing, or fraud (see page 128).
External
evaluation
The outsourced internal auditors, RSM, performed various assurance reviews over key ﬁnancial controls as
part of the 2023 Internal Audit Plan. The implementation of recommendations arising from the reviews
are monitored by the Risk and Audit Committees. During the year, it was decided that the provision
of internal audit services would be brought in-house (see page 148). The Group’s VAT procedures are
subject to ongoing periodic review by external advisers. An independent review of particular ﬁnancial
controls is undertaken with assistance from external advisers, as required.
An annual credit rating review
is performed by an external agency and each year, at renewal, a comprehensive review of the Group’s
insurance cover is prepared by our independent insurance adviser.
AUDIT COMMITTEE REPORT
continued
External audit tender
During 2023, the Audit Committee conducted a competitive audit
tender taking into account best practice guidance from the FRC.
Compliance statement
During 2023 the Audit Committee, Non-Executive
Directors and members of senior management have
been involved in conducting a rigorous and detailed
external audit tender for the 2024 year end audit.
The Committee conﬁrms that for the year ended
31 December 2023, it has complied with the Audit
Committees and the External Audit: Minimum Standard
and that the external audit tender was conducted free
from third party inﬂuence, and consistently applied the
key principles.
Shareholder engagement
Ongoing and transparent dialogue with our shareholders is
important to us and informs the Board’s decision making.
In preparation for the tender, we invited all shareholders to
engage with us via the 2022 Report & Accounts and the Notice
of AGM. The Committee sought shareholder views on the
following matters; however, no response was received:
•
ﬁrms to be included on the ‘Long List’;
•
number and size of the ﬁrms to involve; and
•
factors the Committee should consider when selecting
its ‘Short List’ and making its ﬁnal recommendation.
Preparation
In advance of the tender the following tasks were performed by
the Committee:
•
Reviewed best practice guidelines on external audit tenders
•
Agreed the tender process timetable
•
Discussed the key attributes required from our external
Auditor and the Lead Audit Partner
•
Identiﬁed suitable ﬁrms for the ‘Long List’
‘Long List’
The Committee carefully tailored the ‘Long List’ to ensure that
the chosen ﬁrms had the experience, track record and capacity
to perform a robust audit. The ‘Long List’ included the current
incumbent ﬁrm, PwC, as well as three ﬁrms from the ‘Big 4’
and two non-’Big 4’ ﬁrms.
One of the ‘Big 4’ ﬁrms withdrew from the tender due to having
limited resources available for December year end audits.
Conﬁrmation of independence was sought from each ﬁrm on
the ‘Long List’. As one of the ﬁrms provided no response to our
request for independence, they were excluded from the process.
An assessment criteria was prepared to ensure critical and fair
evaluation of each ﬁrm. As part of the tender process, Lucinda
Bell (Committee Chair) and Damian Wisniewski (CFO) held
introductory meetings with all of the proposed Lead Audit
Partners. Lucinda Bell provided the Committee with feedback
on each proposed Lead Audit Partner. Following which, the
Committee agreed the ‘Short List’, which was comprised of
two ‘Big 4’ ﬁrms and a non-’Big 4’ ﬁrm.
‘Short List’
Each shortlisted ﬁrm received a Request for Proposal (RFP)
on 4 September 2023 outlining the selection criteria and
further information in preparation for the presentations to the
Committee. In addition to the RFP, and following the completion
of the prepared NDA, secure access to the Data Room was
provided to the shortlisted ﬁrms on 15 September 2023.
All ﬁrms were given the opportunity to meet with members
of the Audit Committee, Executive Committee and senior
management to aid them in understanding our requirements
and in preparing their proposal.
External Audit Tender Timetable
Stakeholder engagement
2022 Report & Accounts and 2023
Notice of AGM
Agree ‘Long List’ of ﬁrms
and conﬁrmation of independence
12 May 2023
Agree ‘Short List’ of ﬁrms and
ﬁnalise Request for Proposals
4 August 2023
150
Presentations to the Audit Committee
Presentations by all ﬁrms to the Audit Committee were held
on 7 November 2023 with a scorecard template used to assess
each ﬁrm based on the selection criteria outlined in the RFP.
The Committee has remained consistently involved throughout
the tender process. The presentations were well attended by
members of the Committee, Non-Executive Directors and
senior managers from the Finance team.
Following the presentations, an average score for each ﬁrm
was calculated. The ‘approach to transition’ from the selection
criteria was not included in the calculation of scores, as it would
have provided an unfair advantage to the incumbent auditor.
Approach to fees
Throughout the tender process the primary focus of the
Committee has been on securing a ﬁrm who will provide
a robust and independent audit.
Although the approach to fees was outlined by each ﬁrm in
advance, the content was not disclosed to the Committee
until the ﬁnal selection stage. Consideration of fees only
became a focus when the Committee prepared to make
its ﬁnal recommendations to the Board.
Recommendations to the Board
On 14 November 2023, a robust discussion was held by the
Committee to agree its recommendations for the Board. The
Committee took into consideration the feedback from individual
Committee members, Non-Executive Directors, members of
the ﬁnance team and the results of presentation scorecards.
It was agreed that all three shortlisted ﬁrms were appointable
candidates who had performed well throughout the tender;
however, careful consideration was given to audit quality.
At the Board meeting on 8 December 2023, the Audit
Committee recommended two of the shortlisted ﬁrms.
After a detailed discussion, the Board agreed to reappoint
PwC as the external Auditor for the 2024 year end audit.
Audit ﬁrm selection criteria:
Capability and competence (including reputation)
•
Knowledge and experience, particularly on REIT audits
•
Team’s skillset and expertise of the real estate industry
•
The ﬁrm’s independence, internal quality processes and
performance assessed by the Audit Quality Review
• ESG assurance capability
Audit approach
•
Clear audit plan based on transparent risk assessment
of the business
•
Ability to demonstrate independence and challenge
•
Approach to systems and controls reliance and ability
to deliver insights and added value
•
Plans to use technology to drive eﬃciency and insight
•
Approach to judgemental issues, including timing, use
of experts and communication to the Audit Committee
•
Clarity on fees, time spent and staﬃng mix
Alignment with our values
•
Culture of the audit ﬁrm
•
Approach to diversity and inclusion within the ﬁrm and
audit team
•
Ability to build a practical working relationship with
management and the Audit Committee
Quality of deliverables
•
Clarity and conciseness of proposal document and
presentation
•
Behaviour of team: quality of interaction, organisation
and preparation
•
Ability to demonstrate independence and challenge
Approach to transition
•
A clear and well thought out transition plan
Access to Data Room
and management meetings
From 15 September to 12 October 2023
Presentations to the
Audit Committee
7 November 2023
Recommendations to the Board
8 December 2023
Derwent London plc
Report and Accounts 2023
Governance
151
AUDIT COMMITTEE REPORT
continued
External Auditor
The Committee has primary responsibility for managing the
relationship with the external Auditor, including assessing their
performance, eﬀectiveness, and independence annually and
recommending to the Board their reappointment or removal.
The Company has complied with the provisions of the
Competition and Markets Authority’s order for the ﬁnancial
year under review in respect to audit tendering and the
provision of non-audit services.
The Committee conducts an eﬀectiveness review of the
external Auditor on an annual basis which aims to ensure a
robust audit is performed, auditor performance is optimised
and encourages candid feedback and communication between
the Auditor and the Committee. The aspects considered by the
Committee during its review are detailed in the adjacent table.
An important aspect of managing the external Auditor
relationship is ensuring there are adequate safeguards to
protect auditor objectivity and independence. In assessing this
matter, the Committee considered the following:
•
the Auditor’s independence letter which annually conﬁrms
their independence and compliance with the Financial
Reporting Council’s (FRC) Ethical Standard;
•
how the Auditor demonstrated professional scepticism and
challenged management’s assumptions, where necessary;
•
the tenure of the external Auditor and the Lead Audit Partner;
•
the outcome of the FRC’s latest inspection of PwC’s audit
quality; and
•
how the Auditor identiﬁed risks to audit quality and how
these were addressed, including the network level controls
the Auditor relied upon.
In assessing how the Auditor demonstrated professional
scepticism and challenged management’s assumptions,
the Committee considered the depth of discussions held
with the Auditor, particularly in respect to challenging the
Group’s approach to its signiﬁcant judgements and estimates
(see pages 207 to 209).
Audit quality can be challenging to deﬁne and measure.
The Committee utilises Audit Quality Indicators (AQIs)
to assess PwC’s audit quality. The Committee ﬁnds the
use of AQIs an eﬀective addition to its review processes.
The proposed AQIs for the 2023 year end were as follows:
•
experience and continuity of the audit team;
•
success in achieving the agreed timetable;
•
management and engagement team feedback;
•
number of audit misstatements, both adjusted and
unadjusted; and
•
number of control ﬁndings.
After taking all of these matters into account, the Committee
concluded that PwC had performed their audit eﬀectively,
eﬃciently, and to a high quality. Following the tender
conducted during 2023 (see pages 150 and 151) the Committee
recommended two shortlisted ﬁrms to the Board. The Board
agreed to reappoint PwC as Auditor to the Group for the year
ending 31 December 2024, subject to reappointment at the
2024 AGM.
The Independent Auditor’s report to the members of Derwent
London plc is available on pages 206 to 213, and its audit opinion
is consistent with the report received by the Audit Committee.
Change in audit partner
Sandra Dowling has been Lead Audit Partner since the 2020
half year review. The Committee has been pleased with the
challenge raised by Sandra Dowling and her team during the
year. Following the external audit tender, Thomas Norrie will
succeed Sandra Dowling as Lead Audit Partner in 2024.
Audit exemption
For the year ended 31 December 2023, a number of the Group’s
wholly owned subsidiaries are entitled to exemption from audit,
under section 479A of the Companies Act 2006. We have
identiﬁed in the table on pages 216 and 262 which subsidiaries
intend to utilise the audit exemption.
Derwent London plc is the sole member of these companies
and has unanimously agreed to the adoption of the
exemptions and to the granting of a guarantee in accordance
with section 479C of the Companies Act 2006.
Annual eﬀectiveness review of the external Auditor
Qualiﬁcation and expertise
The qualiﬁcation and expertise of the Lead Audit Partner
and the wider audit team
Resources
The availability of resources to perform a comprehensive
and timely audit
Non-audit services
Adherence to the Non-Audit Services Policy
Quality
Quality of the audit plan, overall audit and outcome report
Planning
Quality of planning and ability to meet deadlines
Judgements and estimates
Quality of audit in respect of key judgements and estimates
152
Non-audit services
The objective of maintaining the Non-Audit Services Policy
(the Policy) is to ensure the independence of the external
Auditor is not compromised and that the provision of such
services does not impair the external Auditor’s objectivity.
The Policy was last approved by the Audit Committee in
November 2023. The review conﬁrmed that the Policy remains
compliant with regulation, with no signiﬁcant matters raised.
The Committee has provided pre-approval limits which allow
management to appoint the external Auditor to conduct
permissible non-audit services if they fall below an amount
it deems as trivial. The approval limits for non-audit services
are provided below and are subject to review:
Value
Approval required prior to engagement
Up to £25,000
Chief Financial Oﬃcer
£25,001 to
£100,000
At least two members of the Audit
Committee (including the Committee Chair)
£100,001
and above
Board of Directors
Extract of the Non-Audit Services Policy
Under the policy, all services provided by the external Auditor
(other than the audit itself) are regarded as non-audit
services. Our policy draws a distinction between permissible
services (which could be provided subject to conditions set
by the Committee) and prohibited services (which may not
be provided by the external Auditor except in exceptional
circumstances when the Auditor has been provided with
approval by the Financial Conduct Authority).
The type of non-audit services deemed to be permissible
includes review of the half year results and assurance work
on non-ﬁnancial data. In accordance with audit legislation,
the total fees for non-audit services provided by the external
Auditor to the Group shall be limited to no more than 70% of
the average of the statutory audit fee for the Company paid
to the Auditor in the last three consecutive ﬁnancial years.
When reviewing requests for permitted non-audit services,
the Committee will assess:
•
whether the provision of such services impairs the Auditor’s
independence or objectivity and any safeguards in place to
eliminate or reduce such threats;
•
the nature of the non-audit services;
•
whether the skills and experience make the Auditor the
most suitable supplier of the non-audit service;
•
the fee to be incurred for non-audit services, both for
individual non-audit services and in aggregate, relative
to the Group audit fee; and
•
the criteria which govern the compensation of the
individuals performing the audit.
In accordance with the FRC Ethical Standard, the Committee
would also assess whether it is probable that an objective,
reasonable and informed third party would conclude
independence is not compromised.
Audit and non-audit services in 2023
The audit fees incurred by PwC during the year totalled £619,500. In respect to the non-audit services provided by PwC, this
equated to £70,500 and related to the review of interim results. The Committee conﬁrmed that it does not believe that the level
or nature of the non-audit services provided during 2023 have impacted on PwC’s actual or perceived independence as Auditor.
2023
2022
2021
£’000
%
£’000
%
£’000
%
Audit of Derwent London plc and subsidiaries
620
90
657
2
90
530
78
Review of interim results
71
10
64
10
60
9
Other non-audit services
–
–
–
–
90
1
13
Total fees
691
100
721
100
680
100
1
During 2021, PwC assisted with the preparation and issue of comfort letters as part of the green bond issuance. The fee for this project was £90,000.
2
The audit fee in relation to the year ended 31 December 2022 includes a cost overrun of £97,800.
Derwent London plc
Report and Accounts 2023
Governance
153
AUDIT COMMITTEE REPORT
continued
Our approach
It is crucial that the information we disclose is relevant,
informative and suﬃciently transparent, so that our
stakeholders can assess our performance and have trust in
the integrity of our reporting. To keep our shareholders and the
wider market informed, we release results on a quarterly basis.
Our ﬁnancial calendar for 2024 can be found on page 287.
Full year results announcement and annual
Report & Accounts
Our ﬁnancial year is the 12 months to 31 December, and we
ﬁnalise our full year results in late February. The disclosures
contained in this announcement form the foundation for our
annual Report & Accounts (principally the front end of the
Strategic report as well as the ﬁnancial statements).
Our ﬁnancial statements are subject to audit by our
external Auditor, PricewaterhouseCoopers LLP (PwC) and
the entire annual Report is subject to a fair, balanced and
understandable review by both the Audit Committee and the
Derwent London Board (see page 145). In addition, any key
accounting issues or judgements made by management are
reviewed and agreed with the Audit Committee (page 146).
The main area of reporting risk relates to the valuation of our
portfolio. Our property portfolio is valued by external valuers
for both our interim and year end results (see page 147).
Impairment review
Impairment testing of trade receivables and accrued rental
income recognised in advance of receipt remains a key area
of estimation for the Group, and is subject to extensive review
by our internal team.
As at 31 December 2023, our lease incentive and trade debtors,
including impairment, amounted to £204.5m (2022: £193.7m)
and an ECL provision of £4.6m has been recorded (2022: £5.0m)
for bad debts (see pages 222 and 240).
Risks and uncertainties
Our principal and emerging risk registers are regularly reviewed
by the Executive Committee and Risk Committee, prior to
approval by the Board. As part of our review of principal risks,
the Risk Committee utilises a Board Assurance Framework
which identiﬁes the key controls for each risk and the level of
assurance available.
Remuneration
Key disclosures in our Remuneration Committee report are
subject to independent audit by PwC. Our remuneration
disclosures are also reviewed by Deloitte LLP to ensure they
are aligned with best practice. Deloitte LLP also independently
review the executive incentive outcomes under the PSP and
annual bonus to provide assurance to the Remuneration
Committee that the outcomes have been accurately calculated.
Going concern and viability
In order to assure our stakeholders that the Company remains
viable for the next 12 months and into the medium-term
(the next ﬁve years), we have provided detailed disclosures on
pages 86 to 89. The process and assumptions underlying the
short-, medium- and long-term assessments and scenarios,
which form the going concern and viability statements, are
subject to a detailed review by the Audit Committee and
Board. As part of their audit, PwC tested the integrity of the
underlying calculations within the going concern modelling,
assessed the appropriateness of the key assumptions and
agreed the underlying cash ﬂow projections (see page 210).
Environmental, social and governance (ESG)
We understand the importance of clear and accurate reporting
of key ESG data to our stakeholders. During the year, we have
obtained independent limited assurance from Deloitte LLP in
accordance with ISAE 3000 (Revised) and ISAE 3410 Standards,
in respect of:
•
Selected energy and carbon reporting metrics(Scope 1, 2
and 3 GHG emissions data, intensity ratio and energy data);
and
•
Selected health and safety metrics (all RIDDORs, fatalities,
minor injuries, signiﬁcant near misses, and any enforcement
notices data).
The assurance statements are published in our annual
Responsibility Reports which are available on our website
(the assurance received over our Responsibility Report is
detailed on page 155).
We have voluntarily disclosed under the Task Force on
Climate-related Financial Disclosures (TCFD) since the 2018
Report & Accounts. As these disclosures are now mandatory,
our TCFD disclosures are subject to periodic third party
review. Our last review was undertaken on our 2022 Report
& Account disclosures.
Other annual report disclosures
The rest of our Strategic report and governance disclosures are
subject to detailed internal review and veriﬁcation. Other key
audit matters which, in the Auditor’s professional judgement,
were of most signiﬁcance in the audit of the ﬁnancial
statements and include the most signiﬁcant assessed risks of
material misstatement were:
•
Valuation of investment properties
•
Compliance with REIT guidelines
•
Valuation of investments in, and loans to, subsidiaries
Information on PwC’s audit of these disclosures is provided on
pages 207 to 209.
Assurance over external reporting
Our approach to assurance is influenced by our low tolerance to risk taking
and our management approach and culture.
154
Half year results announcement
The main risks in relation to half year reporting are the
valuation and revenue recognition. In respect to valuation,
a similar process to year end is adopted with our investment
properties being independently valued which is then reviewed
at valuation meetings by the Audit Committee and approved
by the Board.
Although not legally required, our external Auditor performs
a review on our half year results announcement. Whilst this
is not to the same level of assurance as a year end audit,
it does allow an independent review of our half year results
announcement and any issues are raised and discussed with
the Audit Committee.
Investor presentations
We prepare detailed investor presentations for year end and
half year results. A signiﬁcant amount of information contained
in our investor presentations is extracted from results
announcements released via the London Stock Exchange’s
regulatory news service (RNS). Any additional information is
subject to detailed internal review.
Quarterly business updates
We provide a market update with portfolio information in
April/May and October/November. No ﬁnancial numbers
are provided, nor do we revalue or provide any forecasts in
respect to the valuation of our portfolio. Due to the limited
information provided, no external assurance is provided or
deemed necessary. However, the announcements are subject
to signiﬁcant internal review and veriﬁcation.
Annual Responsibility Report and our progress
to net zero carbon
We publish an annual Responsibility Report which is structured
around our seven key ESG priorities (see page 44). Certain
environmental and health and safety metrics are subject to
independent limited assurance under the ISAE 3000 (Revised)
and ISAE 3410 Standards. This assurance captures the data
we disclose on utility usage, waste generation and energy
consumption.
In addition to TCFD (see pages 104 to 117), we report in
accordance with the EPRA Best Practices Recommendations
on Sustainability Reporting. Disclosures are prepared by the
Sustainability team and subject to detailed internal reviews.
Other reports
There are a limited number of other ﬁnancial reports provided
to external stakeholders. These relate mainly to RNS and press
release announcements of transactions. The announcements
are subject to internal veriﬁcation checks to ensure values,
rental levels, areas and yields are fairly stated and, where
material, are signed oﬀ by the CEO and CFO. In relation to
acquisitions and disposals, ﬁgures are reconciled to cash
movements and completion statements.
When reported, rent collection ﬁgures are generated
internally from daily cash sheets and entered into our
property management database. Given the daily nature
of this information, and the immateriality of individual
amounts, it is not considered practical to seek external
assurance in relation to this information.
Assurance over key disclosures
The table below provides an overview of our key reporting disclosures in the 2023 Report & Accounts and the level of assurance we
received. This is in addition to the detailed veriﬁcation process adopted by the Executive management team to ensure the accuracy
of our disclosures.
Key reporting risk area
Current level of assurance
Current provider(s)
Further information
Financial statements
International Standards on Auditing (UK) and applicable law
PwC
Pages 214 to 282
Key EPRA ﬁnancial metrics
1
International Standards on Auditing (UK) and applicable law
PwC
Page 278
Portfolio valuation
External valuation in accordance with RICS Valuation
Global Standards and the Red Book
Knight Frank
& Savills
Pages 63 to 66
Key performance
indicators
2
Detailed internal review and external assurance on speciﬁc
KPIs from PwC and Deloitte LLP
PwC &
Deloitte LLP
Pages 37 to 41
Environmental, energy
and carbon
ISAE 3000 (Revised) and ISAE 3410 Standards ‘limited
assurance’
Deloitte LLP
Pages 60 and 61
Task Force on Climate-
related Financial
Disclosures (TCFD)
Detailed internal review during 2023 following an external
private review in 2022
–
Pages 104 to 117
Health and safety
statistics
ISAE 3000 (Revised) Standard ‘limited assurance’
Deloitte LLP
Page 55
Green Finance Framework
and disclosures
Our Green Finance Framework received a Second Party
Opinion (SPO) from DNV that it is aligned with the Loan
Market Association’s Extended Green Loan Principles
and the International Capital Market Association’s Green
Bond Principles. Deloitte have also provided reasonable
assurance over selected green ﬁnance KPI disclosures.
Deloitte LLP
& DNV
Pages 84 and 85
1
EPRA earnings and EPRA NAV metrics (EPRA NRV, EPRA NTA and EPRA NDV).
2
The key performance indicators subject to independent limited assurance by Deloitte LLP (energy intensity) and audit by PwC are identiﬁed on pages 37 to 41.
Derwent London plc
Report and Accounts 2023
Governance
155
RISK COMMITTEE REPORT
2024
Focus areas
•
Ongoing monitoring of the Group’s principal and
emerging risks
•
Identify opportunities for consolidation and
simpliﬁcation of the Group’s risk registers
•
Ensure health and safety risks are being eﬀectively
managed across the Group
•
Continue to receive regular updates on the Group’s
main development projects
Committee membership during 2023
Independent
Number of
meetings
1
Attendance
2
Helen Gordon
Yes
4
100%
Lucinda Bell
Yes
4
100%
Sanjeev Sharma
Yes
4
100%
Cilla Snowball
Yes
4
100%
1
In addition to the scheduled meetings, an additional meeting was
held in October 2023 to review the management of health and
safety risks.
2
Percentages are based on the meetings entitled to attend for the
12 months ended 31 December 2023.
Helen Gordon
Chair of the Risk Committee
Dear Shareholder,
I am pleased to provide a report on the activities
and focus areas of the Risk Committee. This is my
ﬁrst report to you, as I succeeded Richard Dakin
as Chair of the Risk Committee from 1 March 2023.
The Group’s risk proﬁle remained elevated during 2023, as
the sector continued to be impacted by the wider macro
environment. Further information can be found in the
Managing risks section on pages 90 to 117.
Key activities of the Committee during 2023
It has been another busy year for the Committee. In addition
to monitoring the wider macroeconomic risks, the Committee
has overseen a wide range of activities within four key
categories (see pages 158 to 159):
• Property and market
• Technology
• People and environment
• Compliance
The Committee invited members of the senior management
team to present on risks relevant to their departments. This
allowed the Committee to delve deeper into management’s
approach to risk and compliance with key policies. The
Committee also conducted ‘deep dive’ reviews with senior
management on water hygiene management and construction
health and safety. The Committee was pleased that both
risk areas are subject to intensive independent oversight and
assurance. Further information on health and safety is on
pages 54 to 55.
Following the media reporting of Reinforced Autoclaved
Aerated Concrete (RAAC) failing, an independent review of
our portfolio was conducted and the outcome was presented
to the Committee. The review provided assurance that our
managed portfolio did not contain RAAC (see page 160).
Emerging risks
During the year, the Committee revisited its emerging risks and
agreed they would be consolidated from eight risks to ﬁve to
simplify its disclosures (see page 102). It has been another year
of rising geopolitical tensions. If this continues, there could be
prolonged global supply chain disruption and commodity price
inﬂation. As a result, the Committee has classiﬁed geopolitical
risks as a new emerging risk for the Group.
Further engagement
The forthcoming AGM is on 10 May 2024 and I will be available
to answer any questions on the Committee’s activities that
you may have. If you wish to contact me, I am available via
our Company Secretary, David Lawler.
Telephone:
+44 (0)20 7659 3000
or
Email:
company.secretary@derwentlondon.com
Helen Gordon
Chair of the Risk Committee
27 February 2024
156
Committee composition and performance
The Committee’s membership for the year under review
is detailed in the table on page 156. In addition to the
Committee members, the Board Chairman, other Directors,
senior management and the internal and/or external Auditors,
are often invited to attend all or part of any meeting as and
when appropriate or necessary. In 2023, the Risk Committee
met four times (2022: three meetings). The meetings in
August and November included a joint session with the Audit
Committee to review the outcome of the internal auditor’s
reviews (see page 148).
The Committee’s role and responsibilities are set out in the
terms of reference, which were last updated in March 2023,
and are available on the Company’s website at:
www.derwentlondon.com/investors/governance/board-
committees
The 2023 evaluation of the Board, its committees and
individual Directors was internally facilitated, in accordance
with our three-year cycle of evaluations (see page 137).
The review conﬁrmed that the Committee continues to
operate eﬀectively, with no signiﬁcant matters raised.
Risk management
At Derwent London, the management of risk is treated as a
critical and core aspect of our business activities. Although
the Board has ultimate responsibility for the Group’s robust
risk identiﬁcation and management procedures, certain risk
management activities are delegated to the level that the
Board judge is most capable of overseeing and managing the
risks. In order to gain a comprehensive understanding of the
risks facing the business and the management thereof, the
Risk Committee invites senior managers and external advisers
to present at its meetings.
A robust assessment of the principal risks facing the Group
is regularly performed by the Directors, taking into account
the risks that could threaten our business model, future
performance, solvency or liquidity, as well as the Group’s
strategic objectives over the coming 12 months. Our principal
risks are documented in the Schedule of Principal Risks (see
pages 94 to 101) which includes a comprehensive overview of
the key (ﬁnancial and non-ﬁnancial) internal controls in place
to mitigate each risk and the potential impact. The Directors
also review an assurance framework which evidences how each
internal control is managed, overseen and (where appropriate)
independently assured.
Due to its importance, changes to the Schedule of Principal
Risks can only be made with approval from the Risk Committee
or Board (changes made to our principal risks during 2023 are
on page 92). Further information on the Group’s risk registers
subject to review by the Risk Committee are detailed in the
table below.
Risk documentation and monitoring
Schedule of
Principal Risks
(see pages 94 to 101)
Contains the risks which are classiﬁed as the Group’s main risks which impact on the Group or could
impact the Group over the next 12 months. The Schedule of Principal Risks also includes an assurance
framework to evidence how each control is managed, overseen, and independently veriﬁed. As at
31 December 2023, the Schedule of Principal Risks contains 15 risks (2022: 14 risks).
Schedule of
Emerging Risks
(see page 102)
Contains the internal and external emerging risks that could signiﬁcantly impact the Group’s ﬁnancial
strength, competitive position or reputation within the next ﬁve years. Emerging risks could involve a
high degree of uncertainty. As at 31 December 2023, the Schedule of Emerging Risks contains ﬁve risks
(2022: eight risks).
Group Risk Register
Risks not deemed to be principal to the Group are documented within the Group’s Risk Register,
which is maintained by the Executive Directors, with assistance from the Executive Committee. The
Board reviews and approves the Group’s Risk Register on an annual basis and it is reviewed by the Risk
Committee at each of its meetings. As at 31 December 2023, the Group Risk Register contains 47 risks
(2022: 37 risks).
Key risk indicators
The Risk Committee has identiﬁed risk areas which could indicate an increase in the Group’s risk proﬁle.
These indicators are reviewed at each Risk Committee meeting and are compared against the Board’s
Risk Appetite Statement (see page 93). Any deviance or signiﬁcant increase is subject to challenge by
the Risk Committee. The risk indicator contains 10 risk areas including cyber security, cost inﬂation,
project status, data protection, and health and safety incidents etc.
Functional/
departmental
risk registers
Risk registers are maintained at a departmental/functional level to ensure detailed monitoring of
risks, where necessary. These registers are the responsibility of each department and are periodically
reviewed by the Risk Committee during risk-speciﬁc presentations. Examples of these registers are
the development risk registers for each building project and the ‘tenant on watch’ register.
Derwent London plc
Report and Accounts 2023
Governance
157
RISK COMMITTEE REPORT
continued
Property and market
Development risks
The Committee regularly reviewed the key risks aﬀecting our
major on-site developments. In addition, the Committee
received updates on the wider factors which could impact on
our developments, including construction cost inﬂation, supply
chain disruption, site security and material/labour shortages
(see page 97).
Planning risk
The Committee requested that at each of its meetings,
the Development team provide an update on the progress
of planning applications for all major projects via the
Committee’s key risk indicator schedule.
Reinforced Autoclaved Aerated Concrete (RAAC)
The Committee reviewed the outcome of surveys conducted
to ensure RAAC was not present in our managed portfolio
(see page 160).
Subcontractor insolvency risk
The Committee received a presentation on the causes of
subcontractor insolvency and its consequences. The Group’s
mitigation strategies were also subject to review.
Lease expiries and breaks
The Committee monitored our lease expiry proﬁle throughout
the year. It was noted that due to our asset management
activities, our exposure for 2023 and 2024 had fallen.
Portfolio valuation
The Committee discussed the maximum percentage value
that the Group is willing to accept in respect of individual
buildings as a proportion of the Group’s property portfolio
for approval by the Board.
Energy Performance Certiﬁcates (EPCs)
The Committee received regular updates on the work performed
by the Sustainability, Development and Asset Management
teams to upgrade the EPC ratings of our buildings.
Strategic objectives:
1
2
4
Principal risks:
1
4
5
6A
6B
6C
8
Emerging risks:
A
D
E
Technology
Cyber security
Our cyber security controls have been strengthened considerably
in recent years in response to the increasing threat this poses
to businesses, and it remains an area that the Committee
keeps under continuous review (see pages 162 and 163).
Crisis Management Team (CMT)
On 3 November 2023, the CMT conducted a scenario exercise
facilitated by an external consultant. The aim of the exercise
was to test our procedures and identify improvement areas.
In addition, a full recovery test was conducted. The Committee
received an initial update on the tests outcome and will review
the full report in April 2024.
Vendor risk management and access controls
The Committee received a report on how we manage access
to our systems by third parties.
Phishing tests
The Committee received updates on the phishing tests
conducted by the DIT team throughout the year, which
sought to test the robustness of our training programme.
Security in our buildings
During 2023, we commissioned an independent consultancy
to conduct physical penetration tests across our high proﬁle
locations in the portfolio to ensure continuous improvement
in our perimeter security protocols. The Risk Committee also
received an update on the trauma ﬁrst aid and critical incident
training arranged for on-site teams in high proﬁle locations.
Power rationing test
The Committee reviewed the outcome of the power loss
scenario tests conducted in November and December 2022 in
response to the speculation of rolling power cuts to conserve
fuel supplies. The Committee noted the lessons learnt from
the exercise and the actions being implemented in response.
Strategic objectives:
3
4
Principal risks:
7A
7B
7C
Emerging risks:
A
B
Key activities of the Committee
During 2023, the Committee has focused its attention
on a variety of risks within four key categories.
158
People and environment
Health and safety
At each Committee meeting, a detailed update is provided on
health and safety matters and identiﬁed key risks, both in the
managed portfolio and development pipeline. During 2023,
all Executive Directors conducted Leadership Tours to reinforce
the Board’s commitment and visibility to health and safety.
Water management
During 2023, our water hygiene management procedures
were subject to independent review, which conﬁrmed they
were robust.
Fire safety
The Committee received an update on the frequency and
robustness of the Group’s:
• Fire risk assessments
•
Fire alarm and sprinkler system testing
• Fire strategies
Asbestos management
The Committee received an update on the asbestos registers
and asbestos management plans in place, which are reviewed
at least annually by an external consultancy. The Committee
noted that there are currently no high risk items requiring
encapsulation or removal. However, we will continue to
manage known asbestos as per guidance and survey for
potential asbestos where there is a known risk.
Net Zero Carbon risks
The Committee reviewed the risk register being monitored in
respect to the achievement of our Net Zero Carbon Pathway
and the mitigation and controls in place.
Collapse of the Thames Valley Water Barrier
The Committee reviewed the outcome of an undefended ﬂood
scenario, whereby the Thames Valley Water Barrier is fully
breached. It was noted that only a small proportion of our
portfolio was at risk under this scenario.
Strategic objectives:
3
4
Principal risks:
9
10
11
Emerging risks:
A
C
Compliance
Building Safety Act 2022
Of the ﬁve residential properties within our portfolio which
are ‘in-scope’ of the Act, one was sold in early 2023, three are
under the control of a third party ‘Accountable Person’, and
one is directly managed by Derwent London. During the year,
the Committee received an update on our responsibilities and
how we are ensuring our compliance.
Fire Safety (England) Regulations 2022
The Committee received updates on new regulations and our
actions to date, noting that of the 11 residential properties
within our portfolio, one property was sold and nine remain
in scope of the new Fire Safety Regulations.
Anti-bribery and corruption
At each meeting, the Committee reviews the Hospitality & Gift
Register which contains the returns prepared by all employees
(including Directors) on a quarterly basis. During 2023, the
Group’s Anti-Bribery & Corruption Policy and risk assessment
were subject to review and update. To assist in raising
awareness of the new policy, the mandatory compliance
training topic for Q3 was anti-bribery.
Compliance training
The Risk Committee agreed the 2023 and 2024 training
programme and monitored completion rates. Engagement
with the training continues to be high with on average 98% of
employees (including Directors) completing quarterly training
(see page 165).
Internal audits
Alongside the Audit Committee, the Risk Committee received
updates on the work performed by the outsourced internal
auditor, RSM. Further information on the audits conducted
during 2023 is on page 148.
Data protection
The Committee reviewed a report from the employee Data
Protection Committee on their work during 2023 to oversee
data protection risks and opportunities.
Strategic objectives:
3
4
Principal risks:
8
11
Emerging risks:
C
D
Strategic objectives
To optimise returns
and create value
from a balanced
portfolio
1
To grow recurring
earnings and
cash ﬂow
2
To attract, retain
and develop
talented
employees
3
To design, deliver
and operate
our buildings
responsibly
4
To maintain
strong and
ﬂexible ﬁnancing
5
Principal risks /
See page 94
Emerging risks /
See page 102
Derwent London plc
Report and Accounts 2023
Governance
159
RISK COMMITTEE REPORT
continued
Identiﬁcation
•
Top down approach to identify the principal risks that
could threaten the delivery of our strategy:
At the Board’s annual strategy reviews, scenarios for the
future are considered which assist with the identiﬁcation
of principal and emerging risks and how they could impact
on our strategy. The continuous review of strategy and our
environment ensures that we do not become complacent
and that we respond in a timely manner to any changes.
•
Bottom up approach at a departmental and functional
level:
Risks are identiﬁed through workshop debates
between the Executive Committee and members of senior
management, analysis, independent reviews and use of
historical data and experience. Risk registers are maintained
at a departmental/functional level to ensure detailed
monitoring of risks, where necessary. Risks contained on the
departmental registers are fed into the main Group Risk
Register depending on the individual risk probability and
potential impact.
Assessment
Following the identiﬁcation of a potential risk, the Executive
Committee undertakes a detailed assessment process to:
•
gain suﬃcient understanding of the risk to allow an
eﬀective and eﬃcient mitigation strategy to be determined;
•
allow the root cause of the risk to be identiﬁed;
•
estimate the probability of the risk occurring and the
potential quantitative and qualitative impacts; and
•
understand the Group’s current exposure to the risk and
the ‘target risk proﬁle’ (in accordance with the Board’s risk
tolerance) which will be achieved following the completion
of mitigation plans.
Where necessary, external assistance is sought to assess
potential risks and advise on mitigation strategies. Emerging
risks are kept under review at each Risk Committee meeting
and are reassessed during the Board’s annual strategy reviews.
Risk management framework
Our risk management procedures are regularly reviewed and strengthened to ensure
that all foreseeable and emerging risks are identiﬁed, understood and managed.
Our risk management framework is summarised below.
Identification
Assessment
Monitoring
Response
Reinforced Autoclaved Aerated Concrete
Reinforced Autoclaved Aerated Concrete (RAAC) was
commonly used in construction between the 1950s and
1990s. As a cost-eﬀective material, it was predominantly
used in government/institutional buildings, but this does
not preclude its use in the wider industry. RAAC is now
recognised as a deleterious material, with ﬁrst instances
of failure occurring in the 1990s.
Following the media reporting on failure of RAAC
installations in several buildings, we undertook an
independent review of our portfolio. An external
consultancy was commissioned to review and survey the
managed portfolio to conﬁrm if RAAC was present in any
of our buildings.
The portfolio was reviewed to identify sites which were
constructed within the timeframe that RAAC was
in use or had structural works undertaken within the
speciﬁed period, with 19 properties identiﬁed for further
investigation. Our investigations included:
• A site walk
•
‘Back of house’ inspection and identiﬁcation of
construction type
•
Review of visible concrete and removal of suspended
ceilings to access concrete behind
• Photographic survey
•
Identiﬁcation of further investigation required
The results of the surveys were presented to the Risk
Committee in November 2023 and conﬁrmed that RAAC
was not present in our managed portfolio.
Independent
assurance
160
‘Designing out’ risk in our developments
We endeavour to ensure that our development schemes
are designed to address and respond to the following
strategic risks:
•
Creating the right ‘product’ for the speciﬁc target
market and its location
•
Achieving adaptability for varying uses over the
long-term to avoid obsolescence
•
Designing for eﬃcient buildability and modern methods
of construction delivery
•
Designing for cost eﬀectiveness, material and carbon
eﬃciency
•
Enhancing our reputation for sustainable design
excellence in the marketplace
As a minimum, our development schemes are designed
to avoid or minimise the following risks:
•
Health and safety, and ﬁre safety risks
•
Town planning and conservation risk
•
Inclusive design risk (including ability discrimination)
•
Operation and maintenance risk (including access,
repair and replacement strategies)
•
Adverse impacts on the local community
We carry out our own research and innovation initiatives
across a broad spectrum of relevant subjects, that
inﬂuence our design thinking. This includes our work on
the Intelligent Building Programme. In February 2023, we
updated the British Council for Oﬃces (BCO) ‘Guidance
to Speciﬁcation’ criteria to include a recalibration of
occupancy densities and building performance to reﬂect
more accurately how buildings are occupied and used,
enabling them to meet net zero carbon targets.
Monitoring
Once a risk has been identiﬁed and assessed, a risk owner
is assigned who is considered to be in the best position to
inﬂuence and implement mitigation plans. In addition, under
the Board’s assurance framework, a control owner is assigned
who can monitor and assess the eﬀectiveness of the controls in
place to address each principal risk.
As part of our risk management procedures, the Executive
Committee and Risk Committee routinely conduct monitoring
exercises to ensure that risk management activities are
being consistently applied across the Group, that they
remain suﬃciently robust and identify any weaknesses or
enhancements which could be made to the procedures.
Monitoring activities include:
•
the regular review and updating of the Schedule of
Principal Risks, Schedule of Emerging Risks and the Group’s
Risk Register;
•
independent third party reviews of the risk management
process to provide further assurance of its eﬀectiveness;
•
alerting the Board to new emerging risks and changes to
existing risks;
•
monitoring how the risk proﬁle is changing for the Group;
and
•
providing assurance that risks are being managed
eﬀectively and where any assurance gaps exist, identiﬁable
action plans are being implemented.
Response
We implement controls and procedures in response to identiﬁed
risks with the aim of reducing our risk exposure, so that it is
aligned or below our risk tolerance. The successful management
of risk cannot be done in isolation without understanding how
risks relate and impact upon each other. The mitigation plans in
place for our principal risks are described on pages 94 to 101. We
use insurance to transfer risks which we cannot fully mitigate.
Insurance
Our comprehensive insurance programme covers all of our
assets and insurable risks. We are advised by insurance brokers,
who provide a report to the Risk Committee on an annual
basis. We have a long-standing relationship with our property
insurers, who perform regular reviews of our properties that
aim to identify risk improvement areas. Due to our proactive
risk management processes, Derwent London has a low claims
record which makes us attractive to insurers.
Independent assurance
The Group’s internal audit function performs periodic reviews
of key activities and controls which provides independent
assurance to the Board and Committee that risks are being
identiﬁed and eﬀectively managed. In addition, these reviews
highlight any recommendations for further action.
Assurance over external reporting /
See page 154 and 155
Network W1
Derwent London plc
Report and Accounts 2023
Governance
161
RISK COMMITTEE REPORT
continued
Digital security risks
Cyber security
We adopt a layered approach to cyber security which provides
multiple opportunities for threats to be identiﬁed before they
can cause harm. Our layered security approach consists of
the following:
Data
security
Application
security
Host security
Internal network
Perimeter security
Physical security
Policies, procedures,
and awareness
Our cyber security procedures are subject to regular
independent reviews and tests, the results of which are
presented to the Risk Committee, which monitors the
implementation of any arising actions. The Committee reviews
a dashboard of key risk indicators at each meeting which
includes information security and cyber risk-related KPIs.
During 2023, there was a 169% increase in the total number
of potential attacks when compared to 2022, none of which
resulted in a security incident. 99.98% of the attempts were
stopped before they reached the intended targets, with the
remaining attempts immediately being reported to our DIT
team. This highlights the robustness of our cyber security
posture and awareness campaigns.
Information security
We have robust procedures in place to safeguard the security
and privacy of information entrusted to us. As part of the
Committee’s key risk indicator schedule, we monitor the
number of ‘near miss’ data breaches and how these have
been addressed.
Our procedures ensure that we:
•
maintain the conﬁdentiality, integrity and availability of
data and safeguard the privacy of our customers and
employees, to ensure that the business retains their trust
and conﬁdence;
•
protect the Group’s intellectual property rights, ﬁnancial
interests and competitive edge;
•
maintain our reputation and brand value; and
•
comply with applicable legal and regulatory requirements.
We operate a Data Protection Steering Committee which
meets on a quarterly basis and is comprised of Data
Protection Champions from each department. Our DIT team
routinely conducts supplier information security due diligence
assessments as part of the on-boarding process for all new
suppliers of digital services to help provide assurance on
the security posture of our suppliers and reduce the risk of
supply chain attacks. Data Protection Impact Assessments
(DPIAs) are also completed for any new projects or changes
to processes that involve data processing, to help identify and
mitigate any data privacy risks.
Cyber awareness
As part of our ongoing commitment to protect our
employees and the business against cyber-attacks, we
launched a new Cyber Security compliance training
platform in 2023. The new platform allows for continuous
learning, with modules that are customisable, small and
frequent. Due to ever-evolving cyber threats, the platform
is capable of raising awareness of new and prevalent
attack methods in real time. Cyber awareness training
is mandatory for all employees including the Board of
Directors. Further information on training is available on
pages 136 and 165.
25 Savile Row W1
162
Digital strategy risks
As we increase the digitalisation of our business model through
our Intelligent Building Programme, our potential exposure to
digital risks will increase. A cyber attack on our buildings has
been identiﬁed as a principal risk for the Group, and our key
controls to mitigate these risks are detailed on page 99.
In alignment with our strategy and purpose, the Derwent
London Intelligent Building Programme seeks to enable
our buildings to be digitally monitored and operated more
eﬃciently, driving down equipment faults (and consequential
maintenance) and delivering energy and operational carbon
savings. During 2023, the Executive Committee monitored
the phased roll out of the Intelligent Building Programme. The
Committee will be kept updated on progress and its success.
The key indicators of success will be the cost savings to our
occupiers (due to early fault detection) and the operational
carbon savings for our occupiers and Derwent London.
Business continuity
On 3 November 2023, our Crisis Management Team (CMT)
conducted a scenario-based exercise to test the robustness
of our Incident Response Playbooks and Business Continuity
Plan. The exercise was externally facilitated by an independent
consultant.
The consultant’s feedback was that the group took the exercise
seriously, talked through each of the events in a logical manner
and handled the (theoretical) situation well. One of the actions
arising from the exercise was to add a representative from the
reception/front-of-house team to the CMT.
As part of this exercise, a full disaster recovery test was
completed which included a failover of all internal systems to
our backup data centre. All services were restored to 25 Savile
Row in a timely manner. In 2024, we intend to undertake a full
review of our Incident Response Playbooks and organise our
next simulation test.
Disaster recovery
Derwent London has formal procedures for use in the event of an emergency that disrupts our normal business operations and
consist of:
Business Continuity Plan
(BCP)
Crisis Management Team
(CMT)
Oﬀ-site disaster
recovery data centre
Testing and
review
The BCP serves as the
centralised repository for
the information, tasks and
procedures that would be
necessary to facilitate Derwent
London’s decision making
process and its timely response
to any disruption or prolonged
interruption to our normal
activities. The aim of the BCP
is to enable the recovery of
prioritised business operations
as soon as practicable.
The CMT is composed of key
personnel deemed necessary
to assist with the recovery
of the business. The BCP
empowers the CMT to make
strategic and eﬀective
decisions to support the
recovery of the business
until we are able to return
to normal working.
An oﬀ-site disaster recovery
data centre is available in the
event of an emergency, to
provide continued access to IT
services and data to our staﬀ.
The strength of our business
continuity and disaster
recovery plans are regularly
tested to ensure they are
continually reﬁned and
to reduce the potential
for failure.
Disaster recovery tests proposed for 2024/25
Test
Purpose
Date
IT component test
A technical test of the individual components required to carry
out a failover of IT services to our disaster recovery data centre.
Q2 2024
Business Continuity Plan
review
The CMT team meets regularly to review and update the
Business Continuity Plan and cascade list, review current
threat levels and agree on any action points.
Q2 & Q4 2024
Incident response
A tabletop group exercise to review our incident response
procedures (in respect of cyber threats) and rehearse various
disaster recovery scenarios to ensure we are adequately
prepared.
Q4 2024
Full IT disaster recovery test
A full IT systems failover from our 25 Savile Row oﬃce to our
disaster recovery data centre and testing that all IT functions
and business-related activities can be adequately performed.
Q3 2025
Derwent London plc
Report and Accounts 2023
Governance
163
Risk Committee
•
Monitors and reviews the Board’s risk registers
•
Works alongside the Board to set risk tolerance levels
•
Manages the internal audit process jointly with the
Audit Committee
•
Receives updates on key risks and monitors the Group’s
risk indicators
•
Determines the nature and extent of the principal and emerging
risks facing the Group
Executive Directors, with assistance from the Executive Committee
•
Ensures the design and implementation of appropriate risk
management and internal control systems that identify the
risks facing the Company and enable the Board to make a
robust assessment of the principal risks
•
Maintains the Group’s risk registers
•
Manages the Group’s risk management procedures
•
Reviews the operation and eﬀectiveness of key controls
Heads of Department
•
Provides guidance and advice to staﬀ on risk identiﬁcation and
mitigation plans
•
Engages with the Executive Directors and senior management
to identify risks
•
Allocates ‘risk managers’ and oversees their response
•
Risk management is devolved to the appropriate level
most capable of identifying and managing the risk
RISK COMMITTEE REPORT
continued
Risk management structure
In addition to the Risk Committee, the Board’s other principal committees
manage risks relevant to their areas of responsibility.
The Board
•
Overall responsibility for risk management and internal control
•
Sets strategic objectives and risk tolerance
•
Sets delegation of authority limits for senior management
•
Ensures that a healthy purposeful culture has been
embedded throughout the organisation
(with input from the Executive Directors)
•
Agrees the Group’s strategy to managing climate change
resilience, approving and monitoring progress against our
Net Zero Carbon Pathway (with input from the Responsible
Business Committee)
Audit
Committee
•
Reviews the assurance
received for the information
published in our ﬁnancial
statements and key
announcements
•
Manages the external
audit process and reviews
the internal auditor’s
reports jointly with
the Risk Committee
•
Monitors the internal
ﬁnancial control
arrangements, and
satisﬁes itself that they
are functioning eﬀectively,
and that corrective action
is being taken where
necessary
Remuneration
Committee
•
Ensures that remuneration
and reward arrangements
promote long-term
sustainable performance
and retention of key talent
•
Monitors the incentive
framework to ensure
it does not encourage
Executive Directors to
operate outside the
Board’s risk tolerance
Responsible Business
Committee
•
Oversees the Group’s
policies in respect of modern
slavery, the protection of
human rights, achieving our
Net Zero Carbon Pathway,
and employee satisfaction
and wellbeing etc.
•
Monitors the Group’s
corporate responsibility,
sustainability, and
stakeholder engagement
activities
•
Monitors the Group’s
diversity and inclusion
initiatives
Nominations
Committee
•
Ensures the Board (and
its committees) have the
correct balance of skills,
knowledge, and experience
•
Ensures that adequate
succession plans are in place
for the Board, Executive
Directors and the wider
talent pipeline
164
Anti-bribery and corruption
We are committed to the highest standards of ethical
conduct and integrity in our business practices and adopt
a zero-tolerance approach to bribery and corruption. The
Company has assessed the nature and extent of its exposure
to bribery and corrupt practices and, overall, considers
our residual exposure to be low. To address the risk areas
identiﬁed, and other risks that may arise from time to time,
the Company has established procedures which are designed
to prevent bribery and corrupt practices from occurring.
An overview of our policies and procedures in this area is
contained in the table below.
The greatest potential risk area for Derwent London is
in respect of our long supply chains. Our zero-tolerance
approach is communicated to all of our suppliers, contractors
and business partners. Before we enter into a new business
relationship, our due diligence procedures determine if a
third party has previous convictions under the Bribery Act.
All contracts with suppliers or contractors prohibit the
payment of bribes, or engaging in any corrupt practice,
and we have the right to terminate agreements in the
event a bribe is paid or other corrupt practice undertaken.
During 2023, our anti-bribery and corruption procedures
were subject to review and all employees (including the
Board) received refresher training as part of the mandatory
compliance training programme.
Compliance training
The Group operates a compliance training programme which
is mandatory for all employees and members of the Board.
The Risk Committee oversees the programme, agrees the topics
to be covered and receives an update on completion rates.
The programme covers a range of risk and compliance topics
(including anti-bribery and corruption, diversity and inclusion,
data protection, fraud and modern slavery).
At the launch of each training topic, an introductory email
is sent to participants advising them of why the training is
important and links to further information (including Company
policies and guidance notes). The topics covered over the past
two years are:
• reporting of wrongdoing;
• insider trading;
• disability awareness;
• modern slavery;
• competition law;
• conﬂicts of interest;
•
anti-bribery and corruption; and
• cyber fraud awareness.
The Committee was pleased with the level of engagement
from employees with, on average, c.98% of all participants
(inclusive of the Board) completing each training module.
Policy and procedures to prevent bribery and corruption
Corporate hospitality
Hospitality must be reasonable in value, appropriate to the occasion and provided openly and transparently.
It must not compromise, nor appear to compromise, the Group nor the business judgement of our staﬀ.
Business gifts
Generally, gifts should not be accepted unless valued at less than £50, are not cash or a cash
equivalent (e.g. gift certiﬁcate), are appropriate to the circumstances and are not given with the
intention of compromising or inﬂuencing the party to whom it is being given.
Hospitality and
Gift Returns
All staﬀ are required to complete quarterly Hospitality and Gift Returns which document all instances of
third party hospitality or gifts (given or received) over that three-month period if the value is in excess of £50
for hospitality and £10 for gifts. The Hospitality and Gift Returns are subject to review by the Risk Committee.
Political donations
The Company strictly prohibits any political donations being made on its behalf.
Charitable donations
Charitable donations are handled by the Sponsorships and Donations Committee. ‘Know your client’
procedures are applied to charitable organisations to ensure we are dealing with a valid body acting
in good faith and with charitable objectives.
Contractors and
suppliers
As detailed above.
Supply Chain
Responsibility Standard
Contains the minimum standards we expect from our major suppliers (further information on page 169).
Payments and
expenses
All payments made must be warranted, transparent and proper. All payments must be accurately
recorded through the normal accounting and ﬁnancial procedures without any deception or disguise
as to the recipient’s identity or the purpose of the payment in question. No one approves their own
expense claim. All expense claims must be approved by a Director or senior manager.
Facilitation payments
Facilitation payments are bribes and are strictly prohibited.
Conﬂicts of interest
All conﬂicts of interest or potential conﬂicts of interest must be notiﬁed to the Company Secretary
and a register of such notiﬁcations is maintained. The Corporate governance statement on page 128
explains our process for managing potential conﬂicts.
Training
We provide our employees with guidance notes and regular training on anti-bribery, corruption, ethical
standards and the prevention of the facilitation of tax evasion.
‘Speak up’ procedures
A conﬁdential helpline is available for staﬀ to report concerns anonymously (see page 128).
Derwent London plc
Report and Accounts 2023
Governance
165
RESPONSIBLE BUSINESS COMMITTEE REPORT
2024
Focus areas
•
Monitor the Group’s Net Zero Carbon Pathway and
receive regular updates on progress
•
Recruit new employee members during Q3 2024
•
Focus on the feedback from the Business Disability
Forum self-assessment framework and formulate a
Disability Inclusion Strategy
•
Continue to monitor the Group’s community,
charitable and sponsorship initiatives
Committee membership during 2023
Independent
Number of
meetings
Attendance
1
Cilla Snowball
Yes
2
100%
Claudia Arney
Yes
2
100%
Matt Massey
Employee
2
100%
Davina Smith
Employee
2
100%
Lucy Taylor
Employee
2
100%
Kirsty Williams
Employee
2
100%
Paul Williams
No
2
100%
1
Percentages are based on the meetings entitled to attend for the
12 months ended 31 December 2023.
Dame Cilla Snowball
Chair of the Responsible Business Committee
Dear Shareholder,
As the Chair of the Responsible Business Committee,
I am pleased to present our report for 2023.
Engagement with our stakeholders
Stakeholder engagement is a core priority in our business
and the Committee regularly reviews feedback from and
impact with our employees, occupiers, the supply chain
and communities. 2023 marked the 10th year of Derwent’s
Community Fund which over the decade has supported 164
projects with grants totalling over £1.1m. This is a key driver
of our Social Value Strategy which focuses on helping our
neighbours, communities and the local economy to thrive.
We were pleased with our strong performance in the Sunday
Times Best Places to Work Survey, with scores way above
industry averages on employee reward and recognition,
empowerment, wellbeing, pride, and job satisfaction (see
page 52). Similarly, in our 2023 Employee Survey we saw an
exceptional response rate and very high employee pride and
satisfaction levels. Importantly the Committee employee
members have played a key role in listening and responding
to any improvement actions arising from these surveys.
We engaged with suppliers to ensure compliance with our
Supply Chain Responsibility Standard and appointed Unseen
UK to undertake analysis of and best practice on modern
slavery risk mitigation. For further information see page 169.
Diversity and inclusion
The Committee was pleased to receive regular updates from
the Diversity & Inclusion (D&I) Working Group who reported
strong progress with the Business Disability Forum (BDF),
carrying out the ﬁrst disability survey and self-assessment,
with strategy and action plans in formulation, in line with
the BDF Framework. The Committee also approved the new
Parker Review target for ethnicity representation in senior
management by 2027 (see page 143).
Wider D&I impact and awareness is being felt within the
organisation which is positively impacting team performance,
inclusion and employee wellbeing. The Committee is grateful to
the D&I Working Group for the progress and momentum which
has been built over the year.
Net zero carbon
In its oversight role, the Committee was pleased to receive
dashboard updates on the Group’s progress towards being
net zero carbon by 2030, reviewing impacts to date and
progress to be made on reducing carbon emissions, renewable
energy, reducing embodied carbon and oﬀsetting residual
emissions. We reviewed progress on occupier engagement with
sustainability.
Employee members
The Board and Committee are grateful for the wise and
valuable contributions made by our employee members who
bring such insight, energy and momentum to our Committee
discussions and decisions. The Board truly values this interface.
Davina Smith concluded her three-year term in December 2023
and leaves the Committee with thanks for her wonderful work.
166
New employee members will be recruited in 2024 when the
other members’ terms are completed.
Further engagement
I would recommend that this report is read alongside the
Responsibility section on pages 44 to 61. If you wish to discuss
any aspect of the Committee’s activities, I will be available at
the 2024 AGM and would welcome your questions. I am also
available via our Company Secretary, David Lawler.
Telephone:
+44 (0)20 7659 3000
or
Email:
company.secretary@derwentlondon.com
Dame Cilla Snowball
Chair of the Responsible Business Committee
27 February 2024
Committee composition and performance
During 2023, our Committee consisted of two independent
Non-Executive Directors, the Chief Executive and four
employee members. As Claudia Arney steps down from
the Board at the 2024 AGM, Mark Breuer will join the
Committee. The Committee thanks Claudia for all her
valuable contributions and insight.
At the request of the Committee, members of the Executive
Committee, senior management team, other Board members
and external advisers were invited to attend all or part of
any meeting, as and when appropriate. During the year
under review, the Committee held two formal meetings
(in May and December) (2022: two meetings).
The Chair of the Committee is also the Group’s designated
NED for gathering the views of our workforce (see page 134).
The Committee’s role and responsibilities are set out
in the terms of reference, which were last updated in
December 2023 and are available on the Company’s website
at:
www.derwentlondon.com/investors/governance/
board-committees
The 2023 evaluation of the Board, its committees and
individual Directors was internally facilitated by Helen Gordon,
Senior Independent Director, in accordance with our three-year
cycle of evaluations (see page 137). The review conﬁrmed that
the Committee continues to operate very eﬀectively.
Employees on the Responsible Business Committee
Having employee members on a Board-level committee
enables the diverse voice of our employees to be brought
directly into our boardroom, providing invaluable insight.
The employee members are fully engaged in all aspects of
the Committee’s activities. Additionally, they extend the
Committee’s inﬂuence by meeting regularly with the HR team
to review initiatives and provide six-monthly updates to the
Executive Committee and wider workforce.
During 2023, the employee members continued to work closely
with teams across the business to receive and respond to
suggested areas of improvement which were highlighted by
employees directly and through the results of the 2022 ‘pulse
survey’. After three years as an employee member, Davina
Smith reached the end of her tenure on the Committee in
December 2023. The Committee is thankful for the level of
commitment Davina has shown in her role.
Davina Smith
Property Account
Manager
Appointment: October 2020
Kirsty Williams
Associate, Property
Management
Appointment: January 2022
Lucy Taylor
Senior Investment
Manager
Appointment: January 2022
Matt Massey
Head of Project
Management
Appointment: January 2022
Derwent London plc
Report and Accounts 2023
Governance
167
RESPONSIBLE BUSINESS COMMITTEE REPORT
continued
Key activities of the Committee during 2023
The Committee continued to strengthen the Board’s oversight
of environmental and social issues, and monitored the Group’s
corporate responsibility, sustainability and stakeholder
engagement activities.
During 2023, the Committee’s key activities included:
Responsible business
•
Reviewed the outcome of an independent review of
our modern slavery policies and practices and the
proposed action plan for implementing the best practice
recommendations (see page 169)
•
Engagement was sought with our major suppliers to ensure
compliance with our Supply Chain Responsibility Standard
•
Approved the development of a Modern Slavery Policy
Stakeholder engagement
•
Received regular updates on our community initiatives and
engagement (see pages 50 and 51)
•
Finalised the Social Value Strategic Framework
•
The Sponsorship & Donations Committee committed £339k
for a variety of causes to be supported throughout the year
Diversity and inclusion
•
Received regular updates on the D&I Working Group and its
activities and discussions (see page 53)
•
Conducted our ﬁrst internal disability survey following our
membership of the Business Disability Forum
•
Agreed the new Parker Review target for ethnicity in senior
management by December 2027 (see page 143)
•
Launched our ﬁrst diversity and inclusion (D&I) newsletter
to ensure wider communication of D&I initiatives
Employees
•
Reviewed the excellent results of the Sunday Times Best
Places to Work Survey
•
Reviewed the feedback from the biennial employee survey
conducted in October
•
Oﬀered a series of initiatives including 1:1 Health Checks for
all employees to support in proactively managing health
and wellbeing
•
Celebrated the careers and achievements of individual
employees through the ‘Monday Meets’ initiative
•
Organised a ‘meet the Board’ evening for a selection of
employees
Net zero carbon
•
Reviewed the revised Net Zero Carbon Dashboard which
will assist the Committee in monitoring the Group’s
progress to net zero
•
Discussed the engagement received from our occupiers on
sustainability
•
Reviewed the change in guidance and standards on
embodied carbon as well as our current embodied carbon
targets for 2025 and 2030
Diversity and inclusion
Having a diverse, highly talented and skilled group of
employees at all levels in Derwent London is vital to the
successful delivery of our strategy and long-term business
performance. Diversity and inclusion brings new ideas and
fresh perspectives which fuel innovation and creativity.
The Diversity and Inclusion Working Group
The Diversity and Inclusion Working Group (the D&I Working
Group) consists of 12 members and meets monthly to discuss
the progress being made towards the Group’s diversity and
inclusion vision, strategy and KPIs.
On an ad hoc basis and when deemed necessary, Executive
Directors and/or Heads of Departments are invited to join the
Group’s meetings, which provides insights into the diversity and
inclusion initiatives being discussed. The Committee received
updates on the work of the D&I Working Group at each
meeting during 2023 which included:
•
Business Disability Forum (BDF)
: Derwent London became
a member of the BDF from 1 March 2023. During the
year, the D&I Working Group prioritised stage one of the
Disability Smart Audit, in the form of a Business Disability
Self-Assessment. The feedback from the Self-Assessment
was used to develop an action plan for all 10 of the BDF
Framework areas. Each of the areas will continue to be
reviewed individually to ensure we are best placed to
communicate our Disability Strategy.
• Wellbeing initiatives:
During the year, all employees
were invited to attend a range of wellbeing initiatives.
The initiatives were well attended and included sessions
on Neurodiversity, Mental Health Awareness, Brain &
Heart Health and the Impact of the Change of Seasons.
Additionally, 1:1 Health Checks were oﬀered to support
employees in proactively managing their health and
wellbeing.
• Communication:
The importance of D&I has continued
to be communicated via staﬀ inductions, town halls
and the intranet. The ﬁrst D&I newsletter was launched
to all employees with positive engagement achieved. To
further share in the careers and achievements of individual
employees the D&I Working Group continued to post
‘Monday Meets’ via the Intranet and social media channels.
In 2024, the D&I Working Group will continue to focus on the
Business Disability Forum Framework and action plan, as well
as the ongoing wellbeing strategy and inclusive management
training. We have also committed to the #10,000 Interns
programme.
168
Supply Chain Responsibility Standard
The primary purpose of the Supply Chain Responsibility
Standard (the Standard) is to clearly set out our principles and
expectations in terms of the environmental, social, ethical and
governance issues which relate to our supply chains.
It renews our commitment to ensuring our supply chain
remains as engaged as we are in setting the highest standards.
All our suppliers are expected to read, acknowledge and
comply with the Standard.
Our Standard addresses the following headline themes:
• Governance
•
Employment and labour practices
• Modern Slavery
• Diversity and inclusion
• Payment practices
• Health and safety
• Environmental standards
• Community
In accordance with the Standard, all suppliers with whom
we spend more than £20,000 per annum are required to
periodically provide evidence of their compliance.
During 2023, we requested evidence that our major suppliers
were compliant with the Standard through a questionnaire.
This extends beyond basic compliance and requires our
suppliers to advise on how they are embedding best practice
into their working practices. Additionally, the Maru Group were
commissioned to assist in assessing supplier compliance with
both the Standard and other key policies. This review provided
valuable insight into other important areas outlined in the
questionnaire, such as diversity & inclusion and modern slavery.
Overall, the results of both the questionnaire and third party
review provided reassurance that our supply chain is in
alignment with the standards and expectations set out
in our Supply Chain Responsibility Standard.
Responsible payment practices
Derwent London is a signatory to the Oﬃce of the Small
Business Commissioner (OSBC) Prompt Payment Code, which
conﬁrms our commitment to best practice payment practices
and the fair and equal treatment of our suppliers.
Unless otherwise agreed, we aim to pay our suppliers within
30 days. We expect our suppliers to adopt similar practices
throughout their supply chains to ensure fair and prompt
treatment of all creditors.
In 2023, our average payment term was 19 days, which continues
to remain below our payment terms of 30 days and well below
the industry average.
Modern slavery
We endeavour to ensure that the risk of modern slavery and
human traﬃcking occurring in our activities, our supply chains or
in any part of our wider business is reduced as much as possible.
During the year, we continued to identify and implement ways
to strengthen our policies and procedures. In support of this, the
independent anti-slavery charity, Unseen UK, were commissioned
to conduct a detailed review of our procedures and identify
areas for further improvement. Through this review, we were
able to receive independent assurance that our procedures are
suﬃciently robust and in accordance with best practice.
Overall, the review provided us with useful insights to help
enhance our ability to prevent and detect modern slavery.
During 2024, our Community & Social Value Manager and
Company Secretarial team will work with the wider business
to implement the key recommendations, including the
development of a Modern Slavery Policy.
Our latest Modern Slavery Statement is available to view on
our website
www.derwentlondon.com
, with our key modern
slavery practices outlined below.
Risk
The potential greatest risk exists in
the supply chains of our construction
contractors as well as the property
management suppliers and maintenance
contractors used in our buildings.
Governance
The Modern Slavery Act 2015 requires
companies with an annual turnover of £36m
to provide a modern slavery statement.
Where legally required, our suppliers publish
a modern slavery statement. Regardless of
this threshold we encourage all suppliers to
adhere to the Act. Suppliers are expected to
provide modern slavery training to employees
and ensure they have provisions in place for
full compliance.
Policies
We have a number of internal policies
that promote our culture and expected
behaviours in accordance with the Act’s
objectives.
Engagement
We are clear on our zero-tolerance position
and all suppliers receive Derwent London’s
latest Modern Slavery Statement. Similarly,
modern slavery statements are obtained
from all suppliers. We expect our main
contractors to conduct due diligence within
their supply chains to ensure that the risk
of modern slavery or human traﬃcking
occurring is checked and minimised.
Eﬀectiveness
All new starters are required to complete
a ‘core skills’ programme which includes
training on modern slavery. Ongoing
training initiatives and our mandatory
compliance training programme ensures
that employees are kept up to date with
the latest requirements.
Derwent London plc
Report and Accounts 2023
Governance
169
RESPONSIBLE BUSINESS COMMITTEE REPORT
continued
Diversity focus areas
The Board has established clear focus areas which aim to build an inclusive culture that promotes, encourages and celebrates
the importance of diversity and inclusion at all stages, from attracting diverse and talented individuals through to retention and
career opportunities. Ensuring suﬃcient attention is being given to diversity continues to be a key focus area.
Focus
Actions taken during 2023
Further actions proposed in 2024
Attracting diverse,
highly skilled and
talented employees
•
Tackle any unconscious bias
•
All shortlists to have
due regard for diversity
considerations (not limited
to gender and ethnicity)
•
Recruit from a wide pool
of talent (including
women returning to work)
•
Continued to work closely with recruitment consultants
to ensure a diverse pool of candidates for all vacancies
•
Continued to promote our accreditation to the National
Equality Standard, our membership of the Business
Disability Forum and ‘Monday Meets’ posts which
celebrate the careers and achievements of individual
employees, via our website and social media channels
•
Ensured our recruitment guidelines are adhered to,
ensuring consistency across the business
•
Maintained our internal recruitment log to ensure data
and demographics are captured during the recruitment
process
•
Launched our Code of Conduct (internally and externally)
•
Established a Health, Safety & Accessibility Working Group
• Continue with current
initiatives including our social
responsibility messaging,
communicating our culture
and inclusive values to the
market
•
Continue to make it a
requirement for recruitment
consultants to provide a
diverse pool of candidates
•
To focus on our wellbeing
strategy for 2024 taking into
account the feedback from
our internal disability survey
Retaining the best talent
•
Focus on supporting women
returning to work
• Promote the importance
of wellbeing initiatives
• Prioritise training and
development
•
Equal opportunities for all
•
Maintain high levels of
employee satisfaction
•
Inclusive social events were held more regularly and open
to everyone to support in building relationships across the
business
•
Arranged a number of ‘Lunch and Learns’ relating to
mental health and wellbeing, including 1:1 Health Checks
•
Acted on the feedback from the October 2022 employee
‘pulse survey’ and implemented recommendations
•
Held a training session for line managers on devising and
using Personal Development Plans & Strengths Proﬁles
•
Rolled out our ﬁfth full employee survey in October 2023
run by an independent provider
•
Focused on succession planning across the business
•
Continued to review and get feedback on our Smart
Working Policy
•
Core skills programme was varied and included topics on
‘inclusive and collaborative working’ and ‘leading from
any seat in the room’
•
Analyse the feedback from our
ﬁfth biennial employee survey,
hold focus groups and agree
an action plan
• Review the performance
appraisal process
•
Further training for all line
managers on how to upskill
with the tools needed to
manage diverse teams
inclusively
•
Launch our core skills
programme for 2024 including,
but not limited to, emotional
intelligence and thriving
personally and professionally
Promoting diversity
• Gender balance within
our internships and work
experience placements
•
Aim to attract more
women to the construction
and property industry
•
Heads of Departments to
demonstrate that we are
an inclusive employer
•
Participated in careers and volunteering events
•
The importance of diversity and inclusion was regularly
reinforced in our induction programme, town halls and
via our intranet and guest speakers
•
Continued to engage with, and learn from, external
specialists e.g. Business Disability Forum
•
The D&I Working Group have continued to meet
monthly to share best practice and ensure the lines of
communication internally and externally remain open
through a newsletter and town halls
•
All employees were required to complete compliance
training on disability awareness
•
Rolled out an internal disability survey to provide us
with a greater understanding of our employee base
and enable us to provide the necessary support or
adjustments
• Host four individuals
through the #10,000 Interns
programme in the summer
of 2024
•
Continue to participate in
community, careers and
volunteering events
•
Continue to work through
the Business Disability
Assessment Framework
and recommendations
170
The Group’s composition and diversity
The information below provides a breakdown of our diversity as at 31 December 2023. Further information on the Board’s
composition is shown on page 136. The variance between genders in response to employee surveys is taken into account by the
Remuneration Committee when determining the annual bonus payout for Executive Directors in relation to the staﬀ satisfaction
metric (see page 191).
Length of service
Employees by age
Years
Under 3
85
3–5
29
5–10
37
10–15
21
15–20
14
20+
13
Years
20–29
32
30–39
72
40–49
50
50–59
24
60+
21
Gender diversity and ethnic origin
5
Total employees
1
Executive Committee
& its direct reports
2
Board
3
Senior positions
on the Board
4
Number
%
Number
%
Number
%
Number
Gender
Men
95
48%
40
55.6%
5
50%
3
Women
104
52%
32
44.4%
5
50%
1
Other
–
–
–
–
–
–
–
Not speciﬁed/ prefer not to say
–
–
–
–
–
–
–
199
72
10
4
Ethnicity
White British/ White Other
143
71.8%
63
87.5%
9
90%
4
Mixed/Multiple Ethnic Groups
12
6.03%
2
2.8%
–
–
–
Asian/Asian British
21
10.5%
3
4.2%
1
10%
–
Black/African/Caribbean/Black British
16
8.0%
2
2.8%
–
–
–
Other Ethnic Group
6
3.0%
2
2.8%
–
–
–
Not speciﬁed/prefer not to say
1
0.5%
–
–
–
–
–
Total
199
72
10
4
1
Total employees include the Board of Directors.
2
Includes the Executive Committee and its direct reports (excluding administrative and support staﬀ).
3
The Board includes the Chairman, Executive Directors and Non-Executive Directors.
4
Senior positions on the Board include the CEO, CFO, Chairman and Senior Independent Director.
5
The information disclosed, and the format of the table, is prescribed by Listing Rule 9.8.6R(10).
52
%
total number of female employees
as at 31 December 2023
36.8
%
of new recruits during 2023 were
from an ethnic minority group
44.4%
of the Executive Committee &
its direct reports are women
50
%
of the Board are women
Diversity key performance indicators (KPIs)
Derwent London plc
Report and Accounts 2023
Governance
171
REMUNERATION COMMITTEE REPORT
2024
Focus areas
•
Ensure a smooth transition as Sanjeev Sharma
succeeds Claudia Arney as Chair of the Remuneration
Committee following the 2024 AGM (see page 174)
•
Continue to keep wider workforce remuneration
arrangements under review, taking these
into account when considering remuneration
arrangements for Executive Directors
•
Operation of the 2024 annual bonus and grant of
2024 Performance Share Plan (PSP) awards
•
Continue to keep under review the eﬀectiveness and
relevance of the Remuneration Policy along with
performance measures and comparator groups for
variable remuneration
•
Consideration of the revised UK Corporate
Governance Code and updated shareholder guidance
Committee membership during 2023
Independent
Number of
meetings
1
Attendance
2
Claudia Arney
Yes
4
100%
Lucinda Bell
Yes
4
100%
Helen Gordon
Yes
4
100%
Sanjeev Sharma
Yes
4
100%
1
The Committee attended four scheduled meetings with an
additional ad hoc meeting being held in March. Due to prior
business arrangements Lucinda Bell and Helen Gordon were unable
to attend the ad hoc meeting but had the opportunity to provide
views to the Committee Chair on the matters discussed.
2
Percentages are based on the meetings entitled to attend for the
12 months ended 31 December 2023.
Claudia Arney
Chair of the Remuneration Committee
Dear Shareholder,
As Chair of the Remuneration Committee and on
behalf of the Board, I am pleased to present our
report on Directors’ remuneration for 2023.
The Annual report on remuneration, describing how the
Remuneration Policy has been applied for the year ended
31 December 2023 and how we intend to implement the Policy
for 2024, is provided on pages 176 to 197. Our Remuneration
Policy was approved by shareholders at the AGM held on
12 May 2023, and received 95% of votes cast in favour. We
have provided a summary of the Policy on pages 178 to 181.
A copy of the complete Remuneration Policy can be found
on our website at:
www.derwentlondon.com/investors/
governance/board-committees
Linking Executive Directors’ remuneration with our
purpose, values and strategy
Our Remuneration Policy is designed to be simple and
transparent and to promote eﬀective stewardship in the
context of the nature of the sector in which we operate.
Further details, including how remuneration aligns with our
purpose, values and strategy and how our KPIs are embedded
within the incentive framework, are set out on page 177.
The Committee strives to provide clarity on how pay and
performance is reported at Derwent London and how decisions
made by the Committee support our purpose and values and
strategic direction of the Group and take into account the
experience of key stakeholders. During the year, the Committee
considers that our Remuneration Policy has operated as
intended in terms of supporting the delivery of the strategy
and aligning outcomes with Company performance.
Performance outcomes in 2023
Based on performance against the ﬁnancial and strategic
targets, the incentive outcomes for 2023 were as follows:
•
Annual bonus outcome of 31.0% of the maximum
opportunity (equivalent to 46.5% of base salary) based on
the outcome of the relative total return and total property
return performance metrics and strategic objectives
(see pages 190 and 191).
•
The PSP award granted in 2021 will lapse in full based on the
outcome of the relative total shareholder return and relative
total property return performance metrics (see page 192).
The Committee considered the formulaic vesting outcomes
against broader perspectives including: underlying business
performance and aﬀordability; the experience of shareholders;
and the experience of employees and other stakeholders.
The Group has continued to perform strongly relative to
central London oﬃce-based real estate peers (the Group’s
total property return performance was -7.3% compared to
the MSCI Quarterly Oﬃces Index of -7.9%) in the face of a
subdued market and continued economic uncertainty, which
is testament to the execution of the strategy over multiple
years, the quality of our portfolio, and the performance and
commitment of our Executive leadership team.
Annual statement
172
The Group raised the 2023 interim dividend by 2.1% to 24.5p per
share and the proposed 2023 ﬁnal dividend has been increased
by 0.9% to 55.0p per share. The Committee also recognises
that shareholders have been impacted by the Group’s absolute
share price performance during the last couple of years.
A dedicated section is included within this report which
incorporates several disclosures to demonstrate the
Committee’s belief that remuneration arrangements for
Executive Directors are fair and appropriate in the context
of pay policies and practice across the wider workforce
(see pages 184 to 187). In particular, it is noted that all eligible
employees received a bonus for 2023.
On balance taking into account these factors, the Committee
considered the vesting outcome of the annual bonus and PSP
awards to be appropriate and no discretion was applied to
adjust the formulaic outcome.
2022 annual bonus outcome update
37.5% of the annual bonus is subject to relative total return
performance. A robust methodology for assessing the Group’s
total return performance against the comparator group
has been applied for several years which includes, for some
comparators, an estimate of performance to 31 December.
As disclosed in the 2022 Report & Accounts, in light of volatility
and uncertainty in respect of property valuations, the
Committee decided to delay the assessment of the total
return performance of the comparator group until more
published data was available to provide a more robust
assessment of performance.
Subsequent to the ﬁnalisation of the 2022 Report & Accounts,
the Committee determined the Group’s relative total return
performance and vesting outcome of the proportion of the
2022 annual bonus subject to relative total return performance.
Derwent’s total return performance for 2022 was -6.3%
compared to a comparator group median of -9.8% (for which
22.5% of the award would vest) and a comparator group upper
quartile of -4.6% (for which 100% of the award would vest).
Based on this performance, the Committee determined
that 28% of the 37.5% of the 2022 annual bonus subject to
relative total return performance was earned. Accordingly,
the total 2022 annual bonus earned was 83.1% of maximum
(equivalent to 124.7% of salary) when also taking into account
the outcome of the total property return and strategic
performance measures (which are disclosed in the 2022
Report & Accounts).
The Committee considered the overall vesting outcome of the
2022 annual bonus to be appropriate and no discretion was
applied to adjust the formulaic outcome. In accordance with
our previous Remuneration Policy, the proportion of the 2022
annual bonus earned in excess of 100% of salary was deferred
into shares for three years.
Implementation in 2024
Base salaries
The Committee awarded the Executive Directors (with the
exception of Emily Prideaux) a 4.0% salary increase with
eﬀect from 1 January 2024. Therefore, Paul Williams’ salary
was increased to £707,200 and Damian Wisniewski’s and
Nigel George’s salaries were increased to £545,500.
The average increase for the wider workforce was 6.2%.
Emily Prideaux was appointed to the Board on 1 March 2021
with a base salary of £410,000. As disclosed in the 2021 and
2022 Report & Accounts, Emily’s salary was positioned below
that of the other Executive Directors’ salaries to reﬂect that she
was stepping into an Executive Director role; with the intention
that Emily’s salary would align with the other Executive
Directors’ salaries over three years as her role and experience
develops. A phased approach to the salary increases was
considered to be in line with good governance.
Emily’s salary was increased to £450,000 and £492,500 with
eﬀect from 1 January 2022 and 1 January 2023, respectively.
Emily continues to perform to a very high standard and
has taken on additional responsibility for both the asset
management and letting departments whilst taking an
important role in the design of our development pipeline.
The Committee therefore agreed to align her salary with
Damian Wisniewski’s and Nigel George’s salaries with eﬀect
from 1 January 2024 (being £545,000).
Annual bonus and PSP
The annual bonus and PSP opportunities and performance
measures remain largely unchanged for 2024. Minor changes
have been made to the strategic targets which make up 25%
of the bonus (see page 180).
Embodied carbon and energy intensity reduction performance
measures were introduced within the 2023 PSP awards at a
10% weighting.
As disclosed in the 2022 Report & Accounts, the Committee
intended to increase the weighting of the embodied carbon
and energy intensity reduction performance measures to
20% within the 2024 PSP awards. The Committee has further
considered this approach as it is mindful that the Group is
still embedding a robust approach to managing embodied
carbon and energy data and measuring performance against
the UKGBC-aligned targets set under our Net Zero Carbon
Pathway. In the current environment the Committee also
wants to ensure that suﬃcient focus is retained on delivering
total property return and total shareholder return performance.
Therefore, after careful reﬂection, the Committee considers it
appropriate to retain the weighting of the embodied carbon
and energy intensity reduction performance measures at 10%
within the 2024 PSP awards. The Committee still intends to
increase the weighting of the embodied carbon and energy
intensity reduction performance measures to 20% in the future.
Staying ahead of the sustainability curve and delivering on
its net zero carbon commitments remains a fundamental
part of Derwent London’s long-term strategy. The Committee
strongly believes that, whilst it is appropriate for a proportion
of PSP awards to be subject to embodied carbon and energy
intensity performance metrics, the Executive Directors are fully
committed to delivering our sustainability strategy regardless
of this link to the incentive framework. Furthermore, the Board
believes that strong sustainability performance will ultimately
enhance the Group’s total returns and total property returns
over the longer term, both of which are performance measures
within the incentive framework.
Derwent London plc
Report and Accounts 2023
Governance
173
REMUNERATION COMMITTEE REPORT
continued
Committee Chair succession
Sanjeev joined the Derwent London Board in 2021 and
has been a member of the Remuneration Committee
since 1 March 2022. Sanjeev has a wealth of experience in
governance, human resources and the real estate sector.
Sanjeev is on the Patrons Committee of Real Estate
Balance and is a Trustee Director of the Prudential Staﬀ
Charitable Trust.
Sanjeev will succeed Claudia Arney as Chair of the
Remuneration Committee following the conclusion of the
2024 AGM. Sanjeev has more than 12 months’ experience
on our Remuneration Committee before his succession
to Committee Chair, in accordance with the 2018 UK
Corporate Governance Code.
Sanjeev Sharma
Non-Executive Director
Incoming Chair of Remuneration Committee
Amendment to energy intensity performance targets for
the 2023 PSP awards
We have revised our methodology for calculating energy
intensity which has resulted in the Group’s energy intensity
reduction pathway being reﬁned. The Committee considered it
appropriate to amend the energy intensity targets for the 2023
PSP awards so that they align with the Group’s reﬁned energy
intensity reduction pathway (see page 49 for details).
Non-Executive Chairman and Non-Executive Director fees
The Non-Executive Chairman’s annual fee was set at £250,000
at the time of his appointment (1 February 2021) in line with
the annual fee for the previous Non-Executive Chairman. The
Committee reviewed the Non-Executive Chairman’s annual
fee during the year and decided to increase it from £250,000
to £280,000 with eﬀect from 1 January 2024 (12% increase).
The Committee considers this fee level to be appropriate
for a company of our size and complexity, noting that the
fee is reasonably positioned compared to the FTSE 250 and
real estate companies of a similar size, and reﬂecting the
experience and calibre of the Non-Executive Chairman.
The fee increase is equivalent to an annual compounded
increase of 3.8% over three years since Mark Breuer’s
appointment. By comparison, the average annual compounded
salary increase for the wider workforce over the last three years
is c.4.9%.
The Board reviewed the Non-Executive Director fees during
the year (without the Non-Executive Directors being present)
and decided to increase, with eﬀect from 1 January 2024, the
base fee from £52,500 to £57,000 (8.6% increase), the Audit
Committee Chair fee from £10,000 to £12,500 (to reﬂect the
role’s increased workload and responsibilities) and the Senior
Independent Director fee from £10,000 to £12,500.
The Board considers these fee levels to be appropriate for
a company of our size and complexity, noting that the fees
are reasonably positioned compared to the FTSE 250 and
real estate companies of a similar size. The base fee increase
is equivalent to annual compounded increase of 4.2% over
two years noting that the last increase to the Non-Executive
Director base fee was with eﬀect from 1 January 2022. By
comparison, the average annual compounded salary increase
for the wider workforce over the last two years is c.4.6%. The
last increase to the Senior Independent Director fee was with
eﬀect from 1 January 2019.
Going forward, the fees payable to the Chairman and Non-
Executive Directors will be reviewed annually with increases
awarded by reference to the average salary increase for the
wider workforce, unless circumstances for a particular year
warrant no fee increase or an exceptional increase.
Further engagement
I look forward to receiving your support at our 2024 AGM,
where Sanjeev Sharma (my Remuneration Committee Chair
successor) and I will be available to respond to any questions
shareholders may have on this report or in relation to any of
the Committee activities. In the meantime, if you would like
to discuss any aspect of our Remuneration Policy or incentive
framework, please feel free to contact me through the
Company Secretary, David Lawler (telephone: +44 (0)20 7659
3000 or email: company.secretary@derwentlondon.com).
The Directors’ remuneration report has been approved by the
Board of Directors and signed on its behalf by:
Claudia Arney
Chair of the Remuneration Committee
27 February 2024
Annual statement
continued
174
Remuneration at a glance
Our Remuneration Policy is designed to be simple and transparent and to promote
eﬀective stewardship that is vital to the delivery of the Group’s purpose and strategy.
Wider stakeholder considerations
The Committee considers pay policies
and practices for employees, as well as
feedback from key stakeholders, when
making remuneration decisions for
Executive Directors.
+
6.2
%
average salary increase for the wider
workforce eﬀective from 1 January 2024
+
1.3
%
increase to the dividend (2022 to 2023)
95
%
of votes cast in favour of our revised
Remuneration Policy at the 2023 AGM
14:1
CEO pay ratio at 50th percentile
(median) for 2023 (see page 187)
£
339
k
amounts committed by the Sponsorship
and Donations Committee in 2023
1
Strong link between performance against strategy and KPIs and reward.
2
Supports long-term stewardship.
3
Takes into account risk management.
Reward linked to performance
Annual bonus earned by Executive Directors
Measure
Threshold
%
Maximum
%
Actual
%
Bonus earned
% max
Relative TR
37.5%
(2.8)
3.3
(11.7)
0.0
Relative TPR
37.5%
(7.85)
(5.85)
(7.30)
16.5
Strategic
25%
14.5
Total
31.0
PSP earned by Executive Directors
Measure
Threshold
%
Maximum
%
Actual
%
PSP earned
% max
Relative TSR
50%
(5.0)
4.6
(24.4)
0.0
Relative TPR
50%
1.65
3.65
(1.63)
0.0
Total
0.0
We provide further information on how our remuneration arrangements align
with our purpose, values and strategy on page 177.
Component
Key features3
Base salary and beneﬁts
Attract and retain high calibre executives
Pension
In line with the contributions available for the majority
of the wider workforce (currently 15% of salary)
Annual bonus1
Maximum opportunity of 150% of salary
Any bonus earned in excess of 75% of salary is
deferred into shares over three years
LTIP1
Maximum opportunity of 200% of salary
Three-year performance period plus two-year
holding period
Shareholding guidelines2
200% of salary for all executives
Post-employment guidelines apply
Fixed pay
Base salary | Beneﬁts | Pension
Variable pay
Annual bonus | Long-term incentive
Performance-based
Total remuneration
Remuneration Policy Summary – 2024
Derwent London plc
Report and Accounts 2023
Governance
175
REMUNERATION COMMITTEE REPORT
continued
Annual report on remuneration
(unaudited unless otherwise indicated)
The annual report on remuneration (pages 176 to 197) explains how we have implemented our Remuneration
Policy during 2023. The Remuneration Policy in place for the year was approved by shareholders at the 2023
AGM and is available to download from our website at:
www.derwentlondon.com/investors/governance/
board-committees
Attract, retain and motivate
Support an eﬀective pay for performance culture which enables the Company to attract,
retain and motivate Executive Directors who have the skills and experience necessary to
deliver the Group’s purpose.
Clarity and simplicity
Ensure that remuneration arrangements are simple and transparent to key stakeholders
and take account of pay policies for the wider workforce.
Alignment to strategy
and culture
Align remuneration with the Group’s objectives and long-term strategy and reﬂect our
culture through a balanced mix of short- and long-term performance-related pay and
ensure that performance metrics remain eﬀectively aligned with strategy.
Risk management
Promote long-term sustainable performance through suﬃciently stretching performance
targets, whilst ensuring that the incentive framework does not encourage Executive
Directors to operate outside the Group’s risk appetite (see page 93). Further information
on risk management within our remuneration structures is on pages 182 and 183.
Stewardship
Promote long-term shareholdings by Executive Directors that support alignment with
long-term shareholder interests. Executive Directors are subject to within-employment
and post-employment shareholding guidelines. Once PSP awards have vested there is a
two-year holding period during which Executive Directors are not able to sell their shares
(net of tax) to support sustainable decision making.
Predictability
Details of the maximum potential values that may be earned through the remuneration
arrangements are set out in the summary of our Remuneration Policy on pages 178 to 181.
Proportionality and fairness
Total remuneration should fairly reﬂect the performance delivered by the Executive
Directors and the Group. The Committee takes into account underlying business
performance and the experience of shareholders, employees and other stakeholders when
determining vesting outcomes, ensuring that poor performance is not rewarded. The
Committee considers the approach to wider workforce pay and policies when determining
the Remuneration Policy to ensure that it is appropriate in this context.
Structure of the annual report on remuneration
The Committee has structured this report to demonstrate that
the remuneration arrangements for Executive Directors are fair
and appropriate in the context of pay policies and practices
across the wider workforce, mitigating risk and rewarding
genuine outperformance. Key sections include:
•
Aligning remuneration with our purpose, values and strategy
(page 177)
•
Overview of our Remuneration Policy and its
implementation in 2024 (pages 178 to 181)
•
Risk management (pages 182 and 183)
•
Remuneration decisions in context (pages 184 to 187)
•
Executive Director remuneration in 2023 (pages 188 to 196)
Role of the Remuneration Committee
The role of the Committee is to determine and recommend to
the Board the Remuneration Policy for Executive Directors, and
set the remuneration for the Chairman, Executive Directors
and Executive Committee (including the Company Secretary).
In doing so, the Committee has due regard for the
remuneration arrangements available to the entire workforce
and ensures that our Remuneration Policy supports our
strategy, the achievement of our purpose, and is aligned with
our values. We detail the Group’s key remuneration principles,
which inform our remuneration structure, in the table below.
Our remuneration principles
The Committee ensures that the remuneration arrangements for Executive Directors are aligned with our key remuneration
principles which are detailed below, as well as taking into account the principles of clarity, simplicity, risk, predictability,
proportionality and alignment to culture set out in the 2018 UK Corporate Governance Code.
176
Non-ﬁnancial
Reversionary percentage
Development potential
B
Tenant retention
B
Void management
B
BREEAM ratings
Energy Performance Certiﬁcates (EPCs)
Energy intensity
P
Embodied carbon intensity
P
Accident Frequency Rate (AFR)
B
Staﬀ satisfaction
B
Aligning remuneration with our purpose, values and strategy
Remuneration that aligns with our values
Our core values are reﬂected in our remuneration arrangements in the following ways:
We build long-term relationships
We seek to create long-term collaborative
relationships with our occupiers and
employees. The annual bonus contains
strategic targets for tenant retention
and staﬀ satisfaction. A staﬀ satisfaction
metric helps the Committee, and the
Board, monitor the wellbeing of the wider
workforce and gauge our ability to retain
key talent.
Environmental
As delivering on our net zero carbon
commitments is a fundamental part of
Derwent London’s long-term strategy,
sustainability performance metrics
(embodied carbon reduction and energy
intensity reduction) are included within
the Executive Directors’ long-term
incentive plan awards (PSP).
We lead by design
Our Remuneration Policy has been designed
to reﬂect our key remuneration principles
(page 176). Incentive arrangements reward
genuine out performance and progress
against our strategic objectives. The
structure of our Remuneration Policy is kept
under routine review.
Social
All employees receive at least the London
Living Wage. Our generous beneﬁt
package includes a 15% company pension
contribution. We continue to invest
signiﬁcantly in our employees to ensure that
everyone thrives in their roles, feels valued,
supported and has the opportunity of
continuous growth and development.
We act with integrity
Total remuneration fairly reﬂects the
performance delivered by the Executive
Directors and the Group. The Committee
takes into account underlying business
performance and the experience of
shareholders, employees and other
stakeholders when determining vesting
outcomes, ensuring that poor performance
is not rewarded.
Governance
Risk management is factored into the design
of our remuneration arrangements and the
setting of targets. We seek to ensure fairness
and transparency in our disclosures, and
voluntarily report on our CEO pay ratio on
page 187.
Remuneration that supports our strategy and helps us to achieve our purpose
We seek to create above average long-term returns for our shareholders, retain and develop our talented workforce, design
‘long-life, low carbon’ space, and work towards achieving our net zero carbon ambitions.
Our Remuneration Policy has been designed to support our strategy by aligning our performance-based pay with our strategic
objectives and Net Zero Carbon Pathway. Our ability to provide above average returns to our shareholders is a substantial element
of our PSP (see page 179). Our total shareholder return is ranked against the FTSE 350 Super Sector Real Estate Index and vesting
of this element only occurs if we reach or exceed median. Further information on the rationale for the Committee’s chosen
strategic performance targets is on page 182.
Sustainability is an integral part of the Group’s strategy; it diﬀerentiates us from our peers and ensures we continue to adapt.
We have ESG-related metrics within both elements of variable remuneration for Executive Directors (annual bonus and PSP).
KPIs
Financial
Total return
B
Total property return
1
P
B
Total Shareholder Return (TSR)
P
EPRA Earnings Per Share (EPS)
Gearing & available resources
Interest Cover Ratio (ICR)
How our KPIs are embedded within the executive remuneration framework
Success against our strategic objectives is measured using a range of ﬁnancial and non-ﬁnancial key performance indicators
(KPIs), which are largely embedded within the executive remuneration framework as illustrated by the chart below.
1
Total Property Return (TPR) performance for the annual bonus is measured
against the MSCI Quarterly Central London Oﬃces Total Return Index
(see page 191) whereas performance under the Performance Share Plan
is our annualised TPR versus the MSCI Quarterly UK All Property Index
measured over three years (see page 192).
B
Annual Bonus
P
Performance Share Plan
Derwent London plc
Report and Accounts 2023
Governance
177
REMUNERATION COMMITTEE REPORT
continued
We always seek to engage with shareholders when considering material changes to our remuneration policies or practices.
In 2022, the Remuneration Committee consulted on the Remuneration Policy with 20 of our largest shareholders, representing
approximately 64% of our issued share capital. The Committee was extremely pleased with the level of shareholder support
at the 2023 AGM in respect of the Remuneration Policy and the annual report on remuneration.
Annual report on remuneration
(2023 AGM)
Remuneration Policy
(2023 AGM)
Votes cast in favour
89.7m
93.5%
91.6m
95.0%
Votes cast against
6.3m
6.5%
4.8m
5.0%
Votes withheld
0.0m
0.0%
0.0m
0.0%
Total votes cast
96.0m
100%
96.4m
100%
The Committee did not consult with shareholders in the lead up to the 2024 AGM as no material changes to our remuneration
policies or practices have been proposed for 2024. We have provided a summary of the key elements of the Remuneration Policy
for Executive Directors and Non-Executive Directors approved by shareholders at the 2023 AGM on pages 178 to 181. In addition, we
have set out how the Remuneration Policy will be implemented in 2024. Our full Remuneration Policy can be found on our website
at:
www.derwentlondon.com/investors/governance/board-committees
Executive Directors
The summary table below sets out the key elements of the remuneration package for Executive Directors.
Element
How operated
Maximum opportunity
Implementation for 2024
Base salary
Normally reviewed annually. Any
increase is normally eﬀective from
1 January.
Factors taken into account in the
review include:
•
the role, experience and
performance of the individual and
the Company;
•
pay and conditions throughout the
business; and
•
practice in companies with similar
business characteristics.
No maximum, but increases will
normally be consistent with the policy
applied to the workforce generally
(in percentage of salary terms).
Increases above this level may be
awarded in certain circumstances
such as, but not limited to:
•
where there is a change in role
or responsibility;
•
an Executive Director’s
development or performance in
role (e.g. to align a new hire’s
salary with the market over
time); and
•
where there is a signiﬁcant
change in the size and/or
complexity of the Group.
With eﬀect from 1 January 2024,
Executive Directors’ salaries (excluding
Emily Prideaux) were increased by 4.0%.
The average increase received by the
wider workforce was 6.2%.
Executive
Director
2023 salary
(£’000)
2024 salary
(£’000)
Paul Williams
680.0
707.2
Damian
Wisniewski
524.5
545.5
Nigel George
524.5
545.5
Emily Prideaux
492.5
545.5
The Committee approved a 10.8%
increase to Emily Prideaux’s salary from
1 January 2024, as part of a phased
alignment with the other Executive
Directors’ salaries. Further information
is on page 173.
Beneﬁts
Beneﬁts include, but are not limited
to, private medical insurance, car and
fuel allowance and life assurance.
Executive Directors may participate
in the Sharesave Plan and any other
all-employee plans on the same basis
as other employees up to HMRC
approved limits.
Set at a level which the Committee
considers to be appropriate taking
into account relevant factors
including but not limited to the
overall cost to the Company in
securing the beneﬁts, individual
circumstances, beneﬁts provided
to the wider workforce and market
practice.
Beneﬁts will continue to include a fully
expensed car or car allowance, fuel
allowance, private medical insurance
and life assurance.
Pension
Executive Directors may receive cash
payments in lieu of contributions
where considered appropriate
(for example where contributions
would exceed either the lifetime
or annual contribution limits).
The maximum Company
contribution or cash supplement
(or a mix of both) for Executive
Directors is aligned with the
contribution available to the
majority of the wider workforce
(currently 15% of salary).
Company pension contribution and/
or cash supplement for the Executive
Directors is aligned with the majority
of the wider workforce (currently at 15%
of salary).
Summary of Remuneration Policy
Annual report on remuneration
continued
178
Element
How operated
Maximum opportunity
Implementation for 2024
Annual bonus
At least 75% of the annual bonus
will be based on ﬁnancial measures
with up to 25% based on strategic
objectives.
Bonuses up to 75% of salary are paid
as cash. Amounts in excess of 75% are
deferred into shares for three years
subject to continued employment.
Dividend equivalents may accrue on
deferred shares. Such amounts will
normally be paid in shares.
Malus and clawback provisions apply
(see table on page 182).
The Committee has discretion to
adjust the payment outcome if it is
not deemed to reﬂect the underlying
ﬁnancial or non-ﬁnancial performance
of the business, the performance of
the individual or the experience of
shareholders or other stakeholders
over the performance period.
Maximum opportunity of up to 150%
of salary may be awarded in respect
of a ﬁnancial year.
The maximum bonus potential for
Executive Directors is 150% of salary.
In line with recent years, bonuses for
2024 are subject to the following
performance metrics:
•
Total return
(weighting: 37.5%).
Performance measured against a
comparator group of real estate
companies. Targets and amounts
vesting for threshold and maximum
performance are outlined on page 191.
•
Total property return
(weighting:
37.5%). Performance measured
against the MSCI Quarterly Central
London Oﬃces Total Return Index.
Targets and amounts vesting for
threshold and maximum performance
are outlined on page 191.
•
Strategic targets
(weighting: 25.0%).
The strategic targets, ranges and
weightings are outlined on page 180.
Long-term
incentives
Award of performance shares
which vest after three years subject
to performance measures set by
the Committee and continued
employment.
Awards will be subject to a two-year
post-vesting holding period.
Dividend equivalents may accrue on
performance shares. Such amounts
will normally be paid in shares.
Malus and clawback provisions apply
(see table on page 182).
The Committee has discretion to
adjust the vesting outcome if it is not
deemed to reﬂect appropriately the
underlying ﬁnancial or non-ﬁnancial
performance of the business, the
performance of the individual or the
experience of shareholders or other
stakeholders over the performance
period.
Maximum opportunity of up to
200% of salary may be awarded
in respect of a ﬁnancial year.
The Committee reviewed the Group’s
share price performance prior to
determining the award levels for the
2024 PSP award. As the share price on
23 February 2024 was not materially
diﬀerent to the share price at the time
the 2023 PSP awards were granted
(£24.32), the Committee considered
it appropriate to award a maximum
opportunity of 200% of salary to
Executive Directors.
PSP awards for 2024 are subject to the
following performance metrics:
•
Total Shareholder Return (50%)
•
Total Property Return (40%)
•
Embodied carbon (5%)
•
Energy intensity reduction (5%)
The targets for Total Shareholder Return
and Total Property Return remains
the same as for the 2023 PSP awards
detailed on page 193.
The embodied carbon and energy
intensity reduction targets are based on
the business’ UKGBC-aligned milestone
targets to achieve net zero by 2030 and
are detailed on page 180.
Service contracts
Executive Directors’ service contracts do not have a ﬁxed expiry date; however, they are terminable either by the Company
providing 12 months’ notice or by the executive providing six months’ notice.
Date of service contract
Paul Williams
22 November 2018
Damian Wisniewski
10 July 2019
Nigel George
10 July 2019
Emily Prideaux
26 February 2021
Executive Directors may accept a non-executive role at another company with the approval of the Board (see page 135).
The Executive Director is entitled to retain any fees paid for these services.
Derwent London plc
Report and Accounts 2023
Governance
179
REMUNERATION COMMITTEE REPORT
continued
Performance targets for 2024
Annual bonus strategic targets
The strategic targets for the 2024 annual bonus are broadly the same as those used for the 2023 annual bonus (see page 191).
For the 2024 annual bonus we have amended our accident rate measure to capture signiﬁcant (Direct) RIDDOR injuries and
incidents (see footnote 3).
Performance measure
Link to
strategic
objectives
1
Target
range
2
Weighting
% of bonus
Void management
This is measured by the Group’s EPRA vacancy rate for the year calculated as the average
of each quarter end ﬁgure.
1
2
10% to 2%
5.0%
Tenant retention
This is measured by the percentage of tenants that remain in their space when their lease
expires or the space is re-let during the reporting period.
1
2
50% to 75%
5.0%
Staﬀ satisfaction
Staﬀ surveys are used to assess this measure. In assessing this target the Committee will
consider any variance in staﬀ satisfaction scores between genders.
3
80% to 90%
4.0%
Accident rate
The Group’s RIDDOR Accident Frequency Rate (AFR) is calculated based on signiﬁcant
(‘Direct’) RIDDOR injuries and incidents during the year3, multiplied by 1,000,000 and
divided by ‘total work exposure hours’. This target is also conditional on each Executive
Director completing, during 2024, an annual health and safety leadership tour.
4
4.0 to 1.0
4.0%
Portfolio development potential
4
This is measured by the percentage of the Group’s portfolio by area where a potential
development scheme has been identiﬁed, including committed acquisitions.
1
35% to 50%
7.0%
25%
1
The references above show the link between our strategic objectives and our annual bonus targets (see pages 32 to 36).
2
Payout accrues on a broadly straight-line basis, between threshold and maximum performance.
3
The RIDDOR reportable injuries that we capture in our Accident Frequency Rate are all HSE-reportable accidents or incidents which result in a fatality or ‘speciﬁed
injuries’ (such as fractures, serious burns etc). In addition, we will include all injuries caused to members of the public, where we may have contributed to the
causation and where they are taken directly to hospital, and injuries to our employees which result in them being unable to return to work for seven consecutive
days. Our key health and safety statistics are available on page 55.
4
The target range for portfolio development potential includes Old Street Quarter.
Long-term incentives
The PSP targets for total shareholder return and total property return remain the same as for the 2023 PSP awards detailed on
page 193. Our embodied carbon and energy intensity targets are based on the business’ UKGBC-aligned milestone targets to
achieve net zero by 2030 and are as follows:
Measure
Weighting % of PSP
Threshold
Maximum
4
Embodied carbon intensity
1,3
(new build commercial oﬃce)
5%
600 kg CO
2
e/m
2
500 kg CO
2
e/m
2
Energy intensity
2,3
(managed properties)
5%
average energy intensity of 127 kWh/m
2
across 2024, 2025 and 2026
average energy intensity of 124 kWh/m
2
across 2024, 2025 and 2026
1
Calculated based on an overall weighted average embodied carbon performance for all live projects during the performance period.
2
Energy intensity is assessed based on the end of year energy (gas and electricity) consumption of the managed portfolio.
3
The purchasing of carbon oﬀsets will not aﬀect the outcome of the embodied carbon or energy intensity reduction performance measures.
4
Vesting accrues on a straight-line basis, between threshold (22.5% of maximum) and maximum performance.
Our embodied carbon and energy intensity performance will be independently assured by an external third party.
Annual report on remuneration
continued
180
Chairman and Non-Executive Directors
Operation
Implementation for 2024
Chairman
The remuneration of the Chairman is set by the
Remuneration Committee.
The Chairman receives an annual fee and may be
eligible to receive beneﬁts including, but not limited to,
secretarial provision and travel costs. Non-signiﬁcant
beneﬁts may be provided if considered appropriate.
The Chairman does not receive pension or participate
in incentive arrangements.
Mark Breuer’s inclusive Chairman fee for 2024
is £280,000 per annum (2023: £250,000).
Further information on page 174.
Non-Executive
Directors
The remuneration for Non-Executive Directors is set by
the Executive Directors and Non-Executive Chairman.
Non-Executive Directors receive a base fee plus
additional fees for committee chairmanship,
committee membership and for the Senior
Independent Director. Additional fees may be paid to
reﬂect additional Board or committee responsibilities
or time commitment as appropriate.
Non-Executive Directors may be eligible to receive
beneﬁts including, but not limited to, secretarial
provision and travel costs.
Non-Executive Directors do not receive pension
contributions or participate in incentive arrangements.
The fees payable to Non-Executive Directors
were increased eﬀective from 1 January 2024
(further information on page 174).
(£’000)
2023
2024
Base fee
52.5
57.0
Audit Committee Chair
10.0
12.5
Other Committee Chairs
10.0
10.0
Senior Independent Director
10.0
12.5
Committee membership
5.0
5.0
In addition to their chairmanship fee, a Committee
Chair also receives the Committee membership fee.
Letters of appointment
The Chairman and Non-Executive Directors do not have service contracts but are appointed for initial three-year terms which
thereafter may be extended, subject to re-election, at each AGM. Details are set out in the table below. Further information on
Non-Executive Director tenure and succession is on pages 141 and 142 of the Nominations Committee report.
Date of latest appointment letter
Latest appointment letter expiry date
Mark Breuer
3 November 2023
1 February 2027
Claudia Arney
1
5 May 2021
18 May 2024
Dame Cilla Snowball
9 August 2021
31 August 2024
Helen Gordon
3 November 2023
31 December 2026
Lucinda Bell
9 November 2021
1 January 2025
Sanjeev Sharma
6 August 2021
1 October 2024
1
Claudia Arney will step down as a Director at the 2024 AGM upon reaching her ninth anniversary of appointment. Further information on Non-Executive Director
succession is on page 142.
Strategic objectives
To optimise returns
and create value
from a balanced
portfolio
1
To grow recurring
earnings and
cash ﬂow
2
To attract, retain
and develop
talented employees
3
To design, deliver and
operate our buildings
responsibly
4
To maintain
strong and
ﬂexible ﬁnancing
5
Derwent London plc
Report and Accounts 2023
Governance
181
REMUNERATION COMMITTEE REPORT
continued
Risk management
Choice of performance measures
The performance measures used for the annual bonus and PSP awards reﬂect the short- and long-term ﬁnancial and strategic
priorities of the business, and are aligned with performance measures used by our real estate sector peers. A signiﬁcant proportion
of annual bonus and PSP awards are subject to performance relative to the real estate sector. This helps support an incentive
framework whereby Executive Directors may be fairly and equitably rewarded for outperforming peers and protecting and
delivering shareholder value in a cyclical market. For relative performance measures, performance targets are set each year
relative to the real estate comparator group.
For strategic measures, targets are set taking into account the Group’s strategic plan. Maximum vesting will only occur for what
the Committee considers to be outstanding performance. Details of the performance measures for the 2024 annual bonus and
PSP awards are set out on page 180. When setting the targets to be achieved, the Committee aims to ensure that they are
suﬃciently stretching so as to reward genuine out performance without promoting inappropriate risk taking outside of the Board’s
risk appetite (see page 93).
Malus and clawback
It is a condition of the grant of any awards that the Executive Directors agree to terms of the relevant Plan rules and, in particular,
the operation of malus and clawback provisions. A summary of our malus and clawback provisions is provided below.
Malus
Clawback
Annual bonus
To such time as payment is made.
Up to two years following payment.
Deferred bonus
To such time as the award vests.
No clawback provisions apply (as malus provisions
apply for three years from the date of award).
PSP awards
To such time as the award vests.
Up to two years following vesting.
The circumstances in which malus and clawback provisions could be applied:
1. Material misstatement of ﬁnancial results.
2. An error in assessing performance conditions which has led to an overpayment.
3. Serious or gross misconduct.
4. Serious reputational damage.
5. Corporate failure.
A clawback period of two years following payment of an annual bonus and vesting of PSP awards is considered appropriate on the
basis that:
•
It is reasonable to assume that a material misstatement of ﬁnancial results relating to the performance period, an error in
assessing performance conditions, or an event act or omission which occurred during the performance period resulting in
serious reputational damage, or corporate failure, would be discovered within a two-year period.
•
It is considered a reasonable period to support the enforceability of clawback.
•
It is aligned with market practice across the FTSE 250.
The Company has not needed to use the malus and clawback provisions in the last ﬁve years (including the latest reporting period).
Discretion
The Committee has discretion to adjust the annual bonus or PSP award outcome if it is not deemed to reﬂect the underlying
ﬁnancial or non-ﬁnancial performance of the business, the performance of the individual or the experience of shareholders or
other stakeholders over the performance period.
We are transparent about our pay practices which aim to incentivise our employees to achieve our strategy and generate
sustainable value for our stakeholders. Risk management is a key remuneration principle and has been incorporated into our
remuneration policy, principally through:
Stretching performance
targets
Suﬃciently stretching
performance targets which
promote long-term sustainable
performance
Malus and clawback
provisions
Enables the Committee
to recover sums paid, or
cancel awards, in speciﬁc
circumstances
Discretion
The Committee has the
means to apply discretion
and judgement to vesting
outcomes
Shareholding
guidelines
Requirement to build up
and retain a shareholding in
Derwent London during and
post employment
Annual report on remuneration
continued
182
Shareholding guidelines
Our Remuneration Policy promotes long-term shareholdings by Executive Directors through within-employment and post-employment
shareholding guidelines.
Within-employment
Executive Directors are expected to build up and retain a shareholding equal to 200% of salary. Until
the shareholding guideline is met, 50% of any deferred bonus awards or PSP awards vesting (net of
tax) normally must be retained. Once PSP awards have vested there is a two-year holding period during
which Executive Directors are not able to sell their shares to support sustainable decision making.
Post-employment
Executive Directors who step down from the Board are normally expected to retain a holding in
‘guideline shares’1 equal to 200% of salary (or their actual shareholding at the point of stepping down
if lower) for the ﬁrst 12 months following stepping down as an Executive Director. Then, 100% of salary
(or their actual shareholding at the point of stepping down if lower) for the subsequent 12 months.
The Committee retains discretion to waive this guideline if it is not considered to be appropriate in the
speciﬁc circumstance.
1
‘Guideline shares’ do not include shares that the Executive Director has purchased or which have been acquired pursuant to deferred share awards or PSP awards
which vested before 1 January 2020. Unless the Committee determines otherwise, an Executive Director or former Executive Director shall be deemed to have
disposed of shares which are not ‘guideline shares’ before ‘guideline shares’.
As at 31 December 2023, all Executive Directors have exceeded the within-employment shareholding guideline, except Emily Prideaux
who was appointed an Executive Director from 1 March 2021. Emily Prideaux is working towards achieving the within-employment
shareholding guideline.
Executive Directors
Beneficially
held shares
2023 salary
1
Target
Achieved
Value of beneficially
held shares
2
% of base salary
Paul Williams
95,497
£680,000
200%
331%
£2,253,729
Damian Wisniewski
69,095
£524,500
200%
311%
£1,630,642
Nigel George
100,046
£524,500
200%
450%
£2,361,086
Emily Prideaux
6,081
£492,500
200%
29%
£143,512
1
The base salaries shown in the table above are as at 31 December 2023. Further information on ﬁxed pay during 2023 is provided on page 189.
2
The value of the Executive Directors’ beneﬁcially held shares has been calculated using the average closing share price during the year ended 31 December 2023
of £23.60.
All other employees granted PSP awards are expected to work towards holding shares in Derwent London plc equivalent to 50% of
base salary. The share ownership guidelines for all PSP recipients (including Executive Directors) require them to retain at least half
of any deferred bonus shares or performance shares which vest (net of tax) until the guideline is met. Only wholly-owned shares
will count towards the guideline. There is no shareholding guideline for Non-Executive Directors.
Due to the relatively large shareholdings of our Executive Directors, a small change in our share price would have a material
impact on their wealth. For example, a 5% drop in our share price would result in a loss of value for our Chief Executive, Paul
Williams, equivalent to approximately 17% of his base salary.
Independent advice
The Committee has authority to obtain the advice of external independent remuneration consultants. Deloitte LLP have been
appointed as the Committee’s principal consultants since July 2018, following a competitive tender process. The Committee
has been fully briefed on Deloitte’s compliance with the voluntary code of conduct in respect of the provision of remuneration
consulting services. During the year under review, Deloitte provided independent assistance to the Committee in respect of,
among other things, the following matters:
•
Performance assessment against annual bonus and PSP targets.
•
Benchmarking of Chairman and Non-Executive Director remuneration.
•
Market practice and corporate governance updates.
The fees paid to Deloitte for their services to the Committee during the year, based on time and expenses, amounted to £69,000.
Separate teams at Deloitte LLP also provided sustainability and health and safety limited assurance under the ISAE 3000 (Revised)
standard, corporate tax consultancy and employment tax consultancy services to the Group.
The Committee took this work into account and, due to the nature and extent of the work performed, concluded that it did not
impair Deloitte’s ability to advise the Committee objectively and free from inﬂuence. It is the view of the Committee that the
Deloitte engagement team which provides remuneration advice to the Committee does not have connections with Derwent
London or its Directors that may impair its independence. The Committee therefore deems Deloitte capable of providing
appropriate, objective and independent advice.
Derwent London plc
Report and Accounts 2023
Governance
183
REMUNERATION COMMITTEE REPORT
continued
The Committee is kept informed of salary increases for the wider workforce, as well as any signiﬁcant changes in practice or policy,
which is taken into consideration when making remuneration decisions for Executive Directors. The Committee has introduced
this dedicated section (pages 184 to 187) which incorporates several disclosures to demonstrate the Committee’s belief that
remuneration arrangements for Executive Directors are fair and appropriate in the context of pay policies and practices across
the wider workforce.
Investing in our employees
We recognise that our employees are our brand ambassadors
and vital to the successful delivery of our strategy and long-
term business performance. We continue to invest signiﬁcantly
in our employees to ensure that everyone thrives in their roles,
feels valued, supported and has the opportunity of continuous
growth and development.
We run a detailed induction programme, hold CEO led monthly
town halls, provide a series of core skills workshops, internal
technical workshops, mandatory compliance training and
various management and leadership initiatives (including 1:1 and
team coaching). In addition, we support and sponsor further
professional qualiﬁcations and encourage internal and external
personal development opportunities wherever possible. This is
coupled with six-monthly performance reviews and optional
Personal Development Plans, alongside regular dialogues
with line managers to discuss performance, identify training
requirements and understand individual career aspirations.
Engaging with our employees
We have an open, collaborative and inclusive management
structure and engage regularly with our employees on a variety
of issues. We do this through a range of one-way and two-way
channels including appraisals, employee surveys, our intranet
site, Company presentations, awaydays and our wellbeing
programme.
During 2023, the Committee introduced an ‘engagement’
section within the explanatory booklet of the wider employee
incentive plan, ESOP, which details our remuneration strategy
and principles. This page also provides further information on
the diﬀerences between the executive and wider employee
incentive arrangements (PSP and ESOP).
Our employees are provided with the means to engage
on a range of matters, including the Group’s approach to
executive remuneration, how executive remuneration aligns
with the Group’s pay policy and how the structure of executive
remuneration compares to wider workforce remuneration.
The Committee considers pay across the Group, as well as
any employee feedback, when making decisions on executive
remuneration.
Further information on the remuneration structure for our
wider workforce is on the following pages:
Sharesave Plan /
See page 196
Employee Share Option Plan /
See pages 185 and 227
Our people /
See page 52
Derwent London has been London Living
Wage Foundation accredited since 2017
Relative importance of the Company’s spend on pay
In order to give shareholders an understanding of how total expenditure on remuneration (for all employees) compares to certain
core ﬁnancial dispersals of the Company, the table below demonstrates the relative importance of the Company’s spend on
employee pay for the period 2022 to 2023.
£m
2023
2022
% change
Staﬀ costs
1
28.8
26.0
10.8
Distributions to shareholders
88.7
87.0
2.0
Net asset value attributable to equity shareholders
2
3,508
4,076
(13.9)
1
Staﬀ costs includes salaries, employer pension contributions, social security costs and share-based payment expenses relating to equity settled schemes.
2
Net asset value attributable to equity shareholders was chosen as it is a key determinate of the Group’s total return and is used by management to measure
our progress. We base our total return calculation on EPRA net tangible assets (NTA).
Annual report on remuneration
continued
Remuneration decisions in context
184
Remuneration structure
The remuneration structure for our wider workforce is similar to that of our Executive Directors3 and contains both ﬁxed and
performance-based elements (see below).
Total remuneration
Fixed pay
Base salary
We value and appreciate our employees and aim to provide
market competitive remuneration and beneﬁt packages in
order to continue to be seen as an employer of choice. Base
salaries are reviewed annually and any increases normally
become eﬀective from 1 January.
Eﬀective from 1 January 2024:
•
Average wider workforce salary increases of 6.2%
•
Executive Director salary increase of 4.0%
(excluding Emily Prideaux1)
Beneﬁts
2
All employees (including the Executive Directors) receive:
• Private medical insurance;
• Dental care; and
•
The option of joining a non-contractual healthcare
cash plan which oﬀers an aﬀordable way to help with
everyday healthcare costs.
We also operate a:
•
Cycle to Work scheme; and
•
Electric Car Salary Sacriﬁce Scheme which allows any
member of staﬀ to lease a new electric car in a tax
eﬃcient way.
A car allowance is payable to Executive Directors (see page
189), members of the Executive Committee, Heads of
Departments and other senior managers. Other employees
may receive a car allowance depending on the nature of
their role.
Pension and life assurance2
All employees (including Executive Directors) are eligible to
receive an employer pension contribution equal to 15% of
salary per annum. Employees who opt to participate in the
pension scheme also receive:
•
a lump sum Death in Service insurance beneﬁt of 4x
their base annual salary; and
•
an additional Death in Service pension beneﬁt of
one-third of base salary paid to their nominated
dependant(s).
Variable pay (performance-based)
Annual bonus
We enrol all of our employees into an annual discretionary
bonus scheme. We reward our wider workforce based on
their individual performance and their contribution to the
performance of the Group. In 2023, 100% of our workforce
below Board level (not subject to probation) received an
annual bonus (2022: 100%).
The Executive Directors’ discretionary bonus is based
on strategic (non-ﬁnancial) and ﬁnancial performance
targets (see page 191) and is subject to deferral for three
years, if in excess of 75% of salary. Executive Directors’
bonuses are subject to malus and clawback provisions and
can be adjusted if pay-out does not align with the wider
stakeholder experience (see page 182).
Long-term incentives
In order to align the interests of our employees and those
of our shareholders, we operate an Employee Share Option
Plan (ESOP). The ESOP grants options which are exercisable
after three years at a pre-agreed option price.
In 2023, we granted 331,850 options to eligible employees
below the Board and Executive Committee (2022: 249,950
options).
Executive Directors and the Executive Committee can be
granted awards under the Performance Share Plan (PSP).
PSP awards are subject to a two-year holding period,
stretching performance targets, shareholding guidelines
and malus and clawback provisions (see page 182 and 183).
Sharesave Plan
To encourage Group-wide share ownership, the Company
operates an HMRC tax eﬃcient Sharesave Plan which was
approved by shareholders at the 2018 AGM. The ﬁfth grant
under the Sharesave Plan was made on 21 September 2023,
with employees saving on average £204 per month.
1
The Committee approved a 10.8% increase to Emily Prideaux’s salary from 1 January 2024, as part of a phased alignment with the other Executive Directors’
salaries. Further information is on page 173.
2
All beneﬁts are subject to the terms and conditions of the insurance policy in force.
3
A summary of our Remuneration Policy for Executive Directors is on page 178 to 180. Further information on the remuneration received by Executive Directors
during 2023 is on pages 188 to 196.
Derwent London plc
Report and Accounts 2023
Governance
185
REMUNERATION COMMITTEE REPORT
continued
Percentage change in remuneration
The table below shows the annual percentage change in the salary or fees, beneﬁts and annual bonus, for each of the Directors
compared to that for an average employee, from 2020 to 2023. The Directors’ remuneration used to calculate the percentage
change is taken from the ‘single ﬁgure’ table on page 188.
As noted on page 173, the vesting outcome of the relative total return element of the 2022 annual bonus was determined after the
publication of the 2022 Report & Accounts. As a result, the 2021 to 2022 bonus ﬁgure for the Executive Directors has been restated
in the table below to reﬂect the actual bonus outcome. Full details of the total bonus earned in respect of 2022 is disclosed on
page 188.
2022 to 2023
2021 to 2022
2020 to 2021
2019 to 2020
% change
Salary/
fees
Benefits
7
Bonus
Salary/
fees
Benefits
Bonus
(restated)
Salary/
fees
Benefits
Bonus
Salary/
fees
Benefits
Bonus
Average
employee
1,2
+2.6
(1.5)
(27.1)
+1.4
(9.9)
(24.5)
+0.3
(3.7)
+22.5
+4.7
(6.2)
(21.0)
Executive
Directors
Paul Williams
3
+7.8
+7.1
(59.8)
+3.0
(7.0)
+177
+2.0
(0.2)
(52.5)
+10.5
+0.1
(24.4)
Damian
Wisniewski
+4.0
+3.8
(61.2)
+3.0
+1.0
+177
+2.0
(0.2)
(52.5)
+3.7
(1.4)
(29.0)
Nigel George
+4.0
+3.6
(61.2)
+3.0
+0.7
+177
+2.0
(0.0)
(52.5)
+3.7
(3.9)
(29.0)
Emily Prideaux
4
+9.4
+1.1
(59.2)
+9.8
+20.0
+253
n/a
n/a
n/a
n/a
n/a
n/a
Non-Executive
Directors
6
Mark Breuer
0
–
–
0
–
–
n/a
–
–
n/a
–
–
Claudia Arney
0
–
–
+16.2
–
–
0
–
–
0
–
–
Cilla Snowball
5
+3.0
–
–
+15.7
–
–
0
–
–
0
–
–
Helen Gordon
0
–
–
+10.7
–
–
+3.0
–
–
0
–
–
Lucinda Bell
0
–
–
+16.2
–
–
0
–
–
+6.0
–
–
Sanjeev Sharma
0
–
–
+13.5
–
–
n/a
–
–
n/a
–
–
Former
Non-Executive
Directors
Richard Dakin
6
n/a
–
–
+15.7
–
–
0
–
–
0
–
–
Average employee calculation
1
The annual percentage change for the average employee is calculated based on the mean employee pay for employees of Derwent London plc, the parent
company of the Group, and not those employed by other subsidiary companies, on a full-time equivalent basis. The average employee salary increase includes
employees who were not eligible for a salary increase (i.e. new joiners and leavers, depending on the date of joining or leaving the Group).
2
The average employee salary ﬁgures have been impacted by the 8% increase in our workforce from 2022 to 2023 (from 184 to 199 employees). The average actual
increase in base salaries for all employees eﬀective from 1 January 2023 was 6.1%.
Executive Director base salaries and annual bonuses
3
Since Paul Williams’ appointment to CEO in May 2019, the Committee had disclosed its commitment to keep Paul’s salary level under review as he developed
and gained experience in the role with a view to moving his salary level closer to the market rate over time. As a result of its review during 2022, the Committee
approved a 7.8% increase to Paul’s salary from 1 January 2023.
4
Emily Prideaux was appointed an Executive Director on 1 March 2021 with a base salary of £410,000, to reﬂect that she was stepping into an Executive Director role,
with the intention that Emily’s salary would align with the other Executive Directors’ salaries over three years as her role and experience develops (see page 189).
Emily Prideaux’s percentage change in annual bonus from 2021 to 2022 also reﬂects that her 2021 annual bonus was for the period 1 March to 31 December 2021 only.
Non-Executive Director fees
5
Cilla Snowball’s percentage change in fee for ‘2022 to 2023’ relates to her appointment as an Audit Committee member with eﬀect from 1 August 2023.
6
Richard Dakin stepped down from the Board on 28 February 2023. Richard Dakin received his normal fees for the period 1 January 2023 until his leaving date.
There was no payment for loss of oﬃce in respect of Richard Dakin’s departure.
Beneﬁts
7
There has been no change in the beneﬁts received by the average employee or the Executive Directors. The change in the annual cost is due to the cost
of purchasing private medical and life insurance. Non-Executive Directors and the Chairman did not receive taxable beneﬁts during the relevant years.
Annual report on remuneration
continued
186
Chief Executive pay ratio
As Derwent London has less than 250 employees, we are not required to disclose the CEO pay ratio. However, given our
commitment to high standards of transparency and corporate governance, the Committee considers it appropriate to disclose the
CEO pay ratio voluntarily. For the years ended 31 December 2018 to 31 December 2023, the Chief Executive’s total remuneration as
a ratio against the full-time equivalent remuneration of UK employees is detailed in the table below.
As noted on page 173, the vesting outcome of the relative total return element of the 2022 annual bonus was determined after
the publication of the 2022 Report & Accounts. As a result, the 2022 CEO pay ratios and the total remuneration ﬁgure for the Chief
Executive have been restated in the table below to reﬂect the actual bonus outcome. Full details of the total bonus earned in
respect of 2022 is disclosed on page 188.
Employee remuneration
6
Base salary
Total remuneration
CEO pay ratio
7
Year ended 31 December 2023
1,2
25th percentile
£51,750
£63,380
18:1
50th percentile
£58,750
£80,512
14:1
75th percentile
£90,000
£127,822
9:1
Year ended 31 December 2022
3
25th percentile
£45,219
£60,909
25:1
50th percentile
£56,000
£81,266
19:1
75th percentile
£80,000
£124,481
12:1
Year ended 31 December 2021
25th percentile
£48,500
£67,908
19:1
50th percentile
£63,750
£90,289
14:1
75th percentile
£91,750
£143,168
9:1
Year ended 31 December 2020
4
25th percentile
£47,000
£62,499
35:1
50th percentile
£64,000
£86,463
26:1
75th percentile
£95,266
£137,452
16:1
Year ended 31 December 2019
5
25th percentile
£40,993
£63,211
40:1
50th percentile
£68,462
£89,274
28:1
75th percentile
£67,500
£153,828
17:1
Year ended 31 December 2018
25th percentile
£45,057
£58,237
38:1
50th percentile
£59,250
£76,842
29:1
75th percentile
£75,000
£148,867
15:1
1
Employee remuneration at each percentile has been impacted by a 8% increase in our workforce (from 184 to 199 employees) in the year ended 31 December 2023.
2
Chief Executive remuneration for the year ended 31 December 2023 is Paul Williams’ 2023 ‘single ﬁgure’ (see page 188).
3
Chief Executive remuneration for the year ended 31 December 2022 is Paul Williams’ restated 2022 ‘single ﬁgure’ (see page 188).
4
Chief Executive remuneration for the year ended 31 December 2020 is Paul Williams’ 2020 ‘single ﬁgure’ (see page 181 of the 2021 Report & Accounts), before the
voluntary 20% salary waiver.
5
Chief Executive remuneration for the year ended 31 December 2019 is based on the aggregated total remuneration earned by John Burns and Paul Williams in
respect of their tenures as Chief Executive during 2019.
6
The workforce comparison is based on the payroll data for the period 1 January to 31 December for all employees (including the Chief Executive but excluding the
Non-Executive Directors) and includes salary, employer pension contributions, life assurance and the healthcare cash plan, annual bonuses earned in respect of
the year and one-oﬀ gains received through the exercise of options granted under the Employee Share Option Plan (see pages 185 and 227).
7
The CEO pay ratio has been rounded to the nearest whole number.
A substantial proportion of the CEO’s remuneration is performance related and delivered in shares. The CEO pay ratio will therefore
depend signiﬁcantly on the CEO’s annual bonus and PSP outcomes and may ﬂuctuate year-on-year. The CEO’s total remuneration
for 2023 was less compared to 2022 primarily as a result of a lower 2023 bonus outcome compared to 2022. Consequently, the
CEO pay ratio for 2023 has fallen compared to 2022. For each year, the Company has calculated the ratio in line with the reporting
regulations using ‘Method A’ (determine total full-time equivalent remuneration for all UK employees for the relevant ﬁnancial
year as at 31 December; rank the data and identify employees whose remuneration places them at the 25th, 50th and 75th
percentile). This method was used due to being the most accurate way of calculating the ratio. The Board has conﬁrmed that the
ratio is consistent with the Company’s wider policies on employee pay, reward and progression.
Derwent London plc
Report and Accounts 2023
Governance
187
REMUNERATION COMMITTEE REPORT
continued
Total remuneration (audited)
The table below sets out the remuneration paid to each Director for the ﬁnancial years ended 31 December 2023 and 31 December
2022 as a single ﬁgure. A full breakdown of ﬁxed pay and pay for performance in 2023 can be found on pages 188 to 196. As noted on
page 173, the vesting outcome of the relative total return element of the 2022 annual bonus was determined after the publication of
the 2022 Report & Accounts. As a result, the 2022 ﬁgures have been updated in the table below to reﬂect the actual bonus outcome.
Executive Directors
Fixed pay
Pay for performance
Salary
Taxable
benefits
Pension
and life
assurance
Subtotal
Bonus
Performance
LTIPs
1
Subtotal
Other items in
the nature of
remuneration
2
Total
remuneration
(£’000)
Cash
Deferred
2023
Paul Williams
680
23
111
814
316
–
–
316
3
1,133
Damian Wisniewski
525
24
85
634
244
–
–
244
1
879
Nigel George
525
23
87
635
244
–
–
244
3
882
Emily Prideaux
493
19
80
592
229
–
–
229
3
824
2022
Paul Williams
630
22
109
761
630
156
–
786
2
1,549
Damian Wisniewski
504
23
86
613
504
125
–
629
2
1,244
Nigel George
504
22
88
614
504
125
–
629
2
1,245
Emily Prideaux
450
19
76
545
450
111
–
561
2
1,108
Non-Executive Directors
2023
2022
(£’000)
Fees
Taxable
benefits
Total
Fees
Taxable
benefits
Total
Mark Breuer
250
–
250
250
–
250
Claudia Arney
83
–
83
83
–
83
Cilla Snowball
80
–
80
78
–
78
Helen Gordon
86
–
86
77
–
77
Lucinda Bell
83
–
83
83
–
83
Sanjeev Sharma
73
–
73
72
–
72
Former Director
Richard Dakin
3
13
–
13
78
–
78
1
Performance LTIPs for 2023 relate to the 2021 PSP awards for which the performance conditions related to the year ended 31 December 2023. As the performance
conditions have not been satisﬁed, the 2021 PSP awards will lapse on 12 March 2024 (see page 192).
2
Included in the column for ‘other items in the nature of remuneration’ is the grant under the Derwent London Sharesave Plan made on 21 September 2023. These
have been calculated based on the middle market share price on the date of grant being £19.33 minus the value of the awards at the option price which was
£14.87. Further information on the Derwent London Sharesave Plan is on page 196.
3
Richard Dakin stepped down from the Board on 28 February 2023. The fees for 2023 shown in the table above are the actual fees paid to Richard Dakin for the
period 1 January 2023 to 28 February 2023.
Payments to former Directors and for loss of oﬃce
No payments were made to past Directors or in respect of loss of oﬃce during 2023. As disclosed in the 2022 Report & Accounts,
Simon Silver was employed as an adviser reporting to Paul Williams and was paid a salary of £50,000 during 2023. Simon Silver’s
employment with Derwent London ended on 31 December 2023. PSP awards granted on 12 March 2021 to former Executive
Director David Silverman remained capable of vesting. As disclosed on page 172, the 2021 PSP grant will not vest and therefore
David’s award will lapse in full. David Silverman has no further PSP awards outstanding.
Annual report on remuneration
continued
Executive Directors’ remuneration in 2023
188
Fixed pay
Base salaries and fees (audited)
Salaries for the Executive Directors (excluding Paul Williams and Emily Prideaux) were increased by 4.0% to £524,500 with eﬀect
from 1 January 2023. The average salary increase for the wider workforce was 6.2%. As disclosed in the 2022 Report & Accounts
(pages 191 and 192), the Committee approved a 7.8% increase to Paul Williams’ salary from 1 January 2023. The Committee
approved a 9.4% increase to Emily Prideaux’s salary from 1 January 2023, as part of a phased alignment with the other Executive
Directors’ salaries. Emily’s salary has been fully aligned with the other Executive Directors’ salaries from 1 January 2024, reﬂecting
her development in role and performance (see page 173).
2023 base salary/fee
2022 base salary/fee
Executive Directors
Paul Williams
£680,000
£630,400
Damian Wisniewski
£524,500
£504,300
Nigel George
£524,500
£504,300
Emily Prideaux
£492,500
£450,000
Non-Executive Directors
Mark Breuer
£250,000
£250,000
Claudia Arney
£82,500
£82,500
Cilla Snowball
1
£79,583
£77,500
Helen Gordon
2
£85,833
£76,666
Lucinda Bell
£82,500
£82,500
Sanjeev Sharma
£72,500
£71,666
Former Director
Richard Dakin
3
£12,917
£77,500
1
Cilla Snowball was appointed a member of the Audit Committee on 1 August 2023.
2
From 1 March 2023, Helen Gordon succeeded Richard Dakin as Chair of the Risk Committee.
3
Richard Dakin stepped down from the Board on 28 February 2023. The fees for 2023 shown in the table above are the actual fees paid to Richard Dakin for the
period 1 January 2023 to 28 February 2023.
Beneﬁts (audited)
Executive Directors are entitled to a fully expensed car or car allowance, fuel allowance, private medical insurance and life
assurance. Further details of the taxable beneﬁts paid in 2023 can be found in the table below.
Car allowance1
Private medical insurance
Total 2023 taxable benefits
Executive Directors
Paul Williams
£16,000
£7,412
£23,412
Damian Wisniewski
£16,000
£7,886
£23,886
Nigel George
£16,000
£7,115
£23,115
Emily Prideaux
£16,000
£2,934
£18,934
1
Damian Wisniewski and Emily Prideaux participate in the Electric Car Salary Sacriﬁce Scheme and as such sacriﬁce a signiﬁcant proportion of their car allowance
in return for leasing an electric car.
Pension and life assurance (audited)
All of the Executive Directors paid into the Group’s deﬁned contribution scheme, being the Fidelity Master Trust pension scheme,
with the remainder of their entitlement paid as a cash supplement. No other Directors are accruing beneﬁts under a money
purchase pension scheme.
Paid into defined
contribution
scheme
Pension cash
supplement
Total pension
Life assurance1
Total 2023 pension
and life assurance
Executive Directors
Paul Williams
£4,167
£97,025
£101,192
£9,386
£110,578
Damian Wisniewski
£7,500
£70,872
£78,372
£6,976
£85,348
Nigel George
£7,500
£70,872
£78,372
£8,713
£87,085
Emily Prideaux
£8,500
£65,375
£73,875
£5,661
£79,536
1
There was no change in the life assurance beneﬁts received by the Executive Directors in 2023. The change in the annual cost is due to changes in premiums.
Derwent London plc
Report and Accounts 2023
Governance
189
REMUNERATION COMMITTEE REPORT
continued
Pay for performance
Annual bonus (audited)
Determination of 2023 annual bonus outcome
The performance measures set for the year under review were a combination of ﬁnancial-based metrics (worth 75% of the bonus
potential) and strategic targets (worth 25% of the bonus potential). The maximum bonus potential for Executive Directors is 150%
of salary. Based on actual 2023 performance, the annual bonus payout for Executive Directors is 31.0% of the maximum potential
(2022: 83.1%; 2021: 30.9%). Further information is available on page 191.
The Committee considered the formulaic performance outcome alongside broader perspectives including: underlying business
performance and aﬀordability; the experience of shareholders; and the experience of employees and other stakeholders. Points
speciﬁcally considered are set out in the Chair’s Annual statement on pages 172 and 173. The Committee determined that it was
not appropriate to apply discretion to adjust the formulaic outcome.
The total bonus for each Executive Director based on performance is therefore:
Bonus payable
as % of salary
Cash bonus payable
£’000
Deferred bonus
£’000
% of salary
Executive Directors
Paul Williams
46.5%
316.2
–
–
Damian Wisniewski
46.5%
243.9
–
–
Nigel George
46.5%
243.9
–
–
Emily Prideaux
46.5%
229.0
–
–
Outstanding deferred bonus awards
In accordance with our previous Remuneration Policy, the proportion of the 2022 annual bonus earned in excess of 100% of salary
was deferred into shares on 4 April 2023 and will be released on 4 April 2026, subject to continued employment. The annual
bonus deferral requirements have been strengthened under the current Remuneration Policy. Going forward, the proportion of
annual bonuses earned in excess of 75% of salary are deferred into shares and released after three years, subject to continued
employment. Details of the deferred bonus shares held by Directors and employees are set out in the table below:
At grant
During the year (number)
Date of
award
Market
price at
date of
grant
1
£
Original
grant
1 January
2023
Deferred
Released
31 December
2023
Market
price at
date of
release
£
Value at
release
£’000
Release date
Executive
Directors
Paul
Williams
04/04/2023
23.70
6,570
–
6,570
–
6,570
–
–
04/04/2026
6,570
–
6,570
–
6,570
–
–
Damian
Wisniewski
04/04/2023
23.70
5,256
–
5,256
–
5,256
–
–
04/04/2026
5,256
–
5,256
–
5,256
–
–
Nigel
George
04/04/2023
23.70
5,256
–
5,256
–
5,256
–
–
04/04/2026
5,256
–
5,256
–
5,256
–
–
Emily
Prideaux
04/04/2023
23.70
4,690
–
4,690
–
4,690
–
–
04/04/2026
4,690
–
4,690
–
4,690
–
–
Other
employees
04/04/2023
23.70
562
–
562
–
562
–
–
04/04/2026
562
–
562
–
562
–
–
Total
22,334
–
22,334
–
22,334
–
–
1
The share price on the dealing day immediately preceding the grant date.
Annual report on remuneration
continued
190
2023 Annual bonus outcome
Bonus payable for ﬁnancial-based performance
16.5% out of 75%
Bonus payable for strategic target performance
14.5% out of 25%
Financial-based metrics
Performance measure
Weighting %
of bonus
Basis of calculation
Threshold
2
%
Maximum
3
%
Actual
%
Payable
%
Total return
37.5
Total return versus other
major real estate companies
1
(2.8)
3.3
(11.7)
0.0
Total property return
(TPR)
37.5
Versus the MSCI Quarterly
Central London Oﬃce Total
Return Index
(7.85)
(5.85)
(7.30)
16.5
Total bonus payable for ﬁnancial-based metrics
16.5
1
The major real estate companies contained in the comparator group for the 2023 annual bonus are: Big Yellow Group plc, The British Land Company plc, CLS
Holdings plc, Great Portland Estates plc, Hammerson plc, Helical plc, Landsec plc, LondonMetric Property plc, Segro plc, Shaftesbury Capital plc, UK Commercial
Property, Unite Group plc and Workspace Group plc. The comparator group remains unchanged for the 2024 annual bonus.
2
For achieving the threshold performance target, i.e. at the MSCI Index or median total return against our sector peers, 22.5% of the maximum bonus opportunity
will become payable.
3
Total return payout accrues on a straight-line basis between the threshold level for median performance and maximum payment for upper quartile performance
or better. For TPR, the payout accrues on a straight-line basis between the threshold level for Index performance and maximum payment for Index +2%.
Strategic targets
Performance measure
Link to
strategic
objectives
1
Target
range
2
Maximum
award
2023
achievement
Proportion
awarded for
2023
%
Void management
This is measured by the Group’s EPRA vacancy rate
for the year calculated as the average of each quarter
end ﬁgure
3
.
1
2
10% to 2%
5.0%
4.3%
3.6
Tenant retention
This is measured by the percentage of tenants that
remain in their space when their lease expires or the
space is re-let during the reporting period.
1
2
50% to 75%
5.0%
64.7%
2.9
Staﬀ satisfaction
Staﬀ surveys are used to assess this measure. In
assessing this target the Committee will consider any
variance in staﬀ satisfaction scores between genders
4
.
3
80% to 90%
4.0%
87.5%
3.0
Accident rate
The Group’s Accident Frequency Rate which is calculated
based on total development, construction projects and
managed portfolio RIDDOR injuries and incidents during
the year, multiplied by 1,000,000, and divided by ‘total
work exposure hours’. This target is also conditional on
each Executive Director completing a health and safety
leadership tour during 2023
5
.
4
4.4 to 2.1
4.0%
3.81
1.0
Portfolio development potential
This is measured by the percentage of the Group’s
portfolio by area where a potential development scheme
has been identiﬁed, including committed acquisitions.
1
35% to 50%
7.0%
43.6%
4.0
25%
14.5
1
Success against our strategic objectives is measured using our KPIs (see pages 37 to 41) and rewarded through our incentive schemes and annual bonus.
The references above show the link between our strategic objectives and our annual bonus targets (further information on our ﬁve strategic objectives can
be found on pages 32 to 36).
2
Payout accrues on a straight-line basis, between threshold and maximum performance.
3
We have clariﬁed within the performance measure description how we calculate the yearly average (calculated as the average of each quarter-end).
4
The variance between genders in response to employee surveys is taken into account by the Committee when determining the payout for staﬀ satisfaction.
In 2023, the results showed a 7% variance between genders, with female satisfaction being at 97% and male satisfaction at 90%.
5
All Executive Directors completed health and safety leadership tours during 2023. There were no work-based fatalities during 2023 (see page 55).
Derwent London plc
Report and Accounts 2023
Governance
191
REMUNERATION COMMITTEE REPORT
continued
Annual report on remuneration
continued
Performance Share Plan (PSP) (audited)
Vesting of PSP awards
The Group granted share-based awards under the PSP on 12 March 2021. The grant was subject to performance conditions over a
three-year performance period which ended on 31 December 2023. As shown in the table below, the PSP awards granted in 2021
will not vest, and will lapse in full on 12 March 2024.
Performance
measure
Weighting
% of award
Basis of calculation
Threshold
2
%
Maximum
3
%
Actual
%
% vesting/
estimated
vesting
Total property
return (TPR)
50
MSCI Quarterly UK All Property Total
Return Index
1.65
3.65
(1.63)
0.0
Total shareholder
return (TSR)
50
FTSE 350 Super Sector Real Estate Index
1
(5.0)
4.6
(24.4)
0.0
1
The constituents of the FTSE 350 Super Sector Real Estate Index as at the start of the Performance Period (i.e. 1 January 2021).
2
For achieving the threshold performance target, i.e. at the MSCI Index or median TSR against our sector peers, 22.5% of the maximum award will vest.
3
For TSR (which is calculated based on a three-month weekday average Return Index excluding UK public holidays ended on: (1) the day before the performance
period start date; and (2) the performance period end date) vesting accrues on a straight-line basis between the threshold level for median performance and
maximum level for upper quartile performance or better. For TPR, vesting accrues on a straight-line basis between the threshold level for Index performance and
maximum level for Index +2%.
The Committee determined that it was not appropriate to apply discretion to adjust the formulaic outcome. Therefore, the vesting
for each executive will be:
Number of
awards granted
Number of shares vesting
based on performance (0.0%)
Executive Director
Paul Williams
36,911
–
Damian Wisniewski
29,529
–
Nigel George
29,529
–
Emily Prideaux
24,728
–
Former Executive Director
David Silverman1
29,529
–
1
As disclosed in the 2021 Report & Accounts, PSP awards granted on 12 March 2021 to former Executive Director David Silverman remained capable of vesting,
subject to performance. David Silverman has no further PSP awards outstanding.
Holding period
In accordance with the PSP rules, vested awards are subject to a two-year holding period whereby at least the after-tax number of
vested shares must be retained by the executive for a minimum of two years from the point of vesting. The 2020 and 2021 grants
have been removed from the table below as they both lapsed in full.
Grant
Grant date
Performance period
Vesting date
Holding period
Holding period ceases
2019 Grants
12 March 2019
14 August 2019
1 January 2019 to
31 December 2021
12 March 2022
14 August 2022
Two years
12 March 2024
14 August 2024
2022 Grant
9 March 2022
1 January 2022 to
31 December 2024
9 March 2025
Two years
9 March 2027
2023 Grant
14 March 2023
1 January 2023 to
31 December 2025
14 March 2026
Two years
14 March 2028
192
Grant of PSP awards
On 14 March 2023, the Committee made an award under the Group’s 2014 PSP to Executive Directors on the following basis:
Executive Directors
Number of
shares awarded
Face value of award
£
Paul Williams
55,921
1,359,999
Damian Wisniewski
43,133
1,048,995
Nigel George
43,133
1,048,995
Emily Prideaux
40,501
984,984
Awards were granted as nil-cost options and equivalent to 200% of base salary, with 22.5% of the award vesting at threshold
performance. The share price used to determine the level of the awards was the closing share price on the day immediately
preceding the grant date of £24.32. The performance period will run over three ﬁnancial years ending on 31 December 2025 and,
dependent upon the achievement of the performance conditions, the awards will vest on 14 March 2026 and will be subject to a
two-year holding period as outlined in the table on page 192.
The Committee has discretion to reduce the extent of vesting in the event that it considers that performance against either
measure is inconsistent with underlying ﬁnancial performance and/or the experience of key stakeholders. At least the after-
tax number of vested shares must be retained for a minimum holding period of two years. To the extent that awards vest, the
Committee has discretion to allow the Executive Directors to receive the beneﬁt of any dividends paid over the vesting period
in the form of additional vesting shares.
The balance of performance metrics reﬂects Derwent London’s continued focus on delivering above average long-term returns
to shareholders, together with our commitment to sustainability and ambition to be a net zero carbon business by 2030. The
performance conditions for the 2023 Awards are:
Metric
Basis of calculation
Weighting of PSP
Threshold
1
Maximum
Total shareholder
return (TSR)
Position of the Company’s TSR against the TSR of
the ranked members of the FTSE 350 Super Sector
Real Estate Index assessed over the three-year
performance period ending 31 December 2025
50%
Median
Upper quartile
and above
Total property
return (TPR)
The Company’s annualised TPR relative to the MSCI
Quarterly UK All Property Total Return Index assessed
over the three-year performance period ending
31 December 2025
40%
At Index
Index +2%
Embodied carbon
intensity
Weighted average embodied carbon for all Projects
during the three-year performance period ending
31 December 2025
5%
600 kgCO
2
e/m
2
500 kgCO
2
e/m
2
Energy intensity
Average energy intensity for 2023, 2024 and 2025,
assessed based on total end of year electricity and
gas consumption across the managed portfolio
5%
134 kWh/m
2
131 kWh/m
2
1
For achieving the threshold performance target, 22.5% of the maximum award will vest.
The threshold and maximum energy intensity targets for the 2023 PSP awards were originally set at 129 kWh/m
2 and 1
26 kWh/m
2,
respectively. These aligned with the Group’s energy intensity reduction pathway in place at the time the 2023 PSP awards were
granted. We have subsequently revised our methodology for calculating energy intensity which has resulted in the Group’s energy
intensity reduction pathway being reﬁned. Our ultimate target of achieving the 2030 UKGBC energy intensity target of 90 kWh/m
2
remains unchanged. However, our 2019 baseline, and consequently intervening milestone targets, have been rebased (see page 49).
The Committee considered it appropriate to amend the energy intensity targets for the 2023 PSP awards so that they align with
the Group’s reﬁned energy intensity reduction pathway. The amended targets are not considered to be materially more or less
diﬃcult to satisfy and they continue to achieve their original purpose of incentivising the Executive Directors to deliver energy
intensity reduction in line with the Group’s energy intensity reduction pathway. The amended energy intensity targets are disclosed
in the table above.
Derwent London plc
Report and Accounts 2023
Governance
193
REMUNERATION COMMITTEE REPORT
continued
Annual report on remuneration
continued
Outstanding PSP awards
The outstanding PSP awards held by Directors and employees are set out in the table below:
At grant
During the year (number)
Market
price at
date of
vesting
£
Value vested
(inclusive
of dividend
equivalents)
£’000
Date of award
Market
price at
date of
grant
1
£
1 January
2023
Granted
2
Vested
Lapsed
3
31
December
2023
Earliest
vesting date
Executive Directors
Paul
Williams
13/03/2020
33.14
36,210
–
–
(36,210)
–
–
–
13/03/2023
12/03/2021
33.16
36,911
–
–
–
36,911
–
–
12/03/2024
09/03/2022
29.36
42,942
–
–
–
42,942
–
–
09/03/2025
14/03/2023
24.32
–
55,921
–
–
55,921
–
–
14/03/2026
116,063
55,921
–
(36,210)
135,774
–
–
Damian
Wisniewski
12/03/2019
32.53
5,253
–
–
–
5,253
–
–
12/03/2022
13/03/2020
33.14
28,968
–
–
(28,968)
–
–
–
13/03/2023
12/03/2021
33.16
29,529
–
–
–
29,529
–
–
12/03/2024
09/03/2022
29.36
34,352
–
–
–
34,352
–
–
09/03/2025
14/03/2023
24.32
–
43,133
–
–
43,133
–
–
14/03/2026
98,102
43,133
–
(28,968)
112,267
–
–
Nigel
George
13/03/2020
33.14
28,968
–
–
(28,968)
–
–
–
13/03/2023
12/03/2021
33.16
29,529
–
–
–
29,529
–
–
12/03/2024
09/03/2022
29.36
34,352
–
–
–
34,352
–
–
09/03/2025
14/03/2023
24.32
–
43,133
–
–
43,133
–
–
14/03/2026
92,849
43,133
–
(28,968)
107,014
–
–
Emily
Prideaux
13/03/2020
33.14
9,052
–
–
(9,052)
–
–
–
13/03/2023
12/03/2021
33.16
24,728
–
–
–
24,728
–
–
12/03/2024
09/03/2022
29.36
30,653
–
–
–
30,653
–
–
09/03/2025
14/03/2023
24.32
–
40,501
–
–
40,501
–
–
14/03/2026
64,433
40,501
–
(9,052)
95,882
–
–
Former Executive Directors
–
–
David
Silverman
13/03/2020
33.14
28,968
–
–
(28,968)
–
–
–
13/03/2023
12/03/2021
33.16
29,529
–
–
–
29,529
–
–
12/03/2024
58,497
–
–
(28,968)
29,529
–
–
Simon
Silver
13/03/2020
33.14
35,063
–
–
(35,063)
–
–
–
13/03/2023
35,063
–
–
(35,063)
–
–
–
Other
employees
13/03/2020
33.14
34,843
–
–
(34,843)
–
–
–
13/03/2023
12/03/2021
33.16
31,654
–
–
–
31,654
–
–
12/03/2024
09/03/2022
29.36
61,199
–
–
–
61,199
–
–
09/03/2025
14/03/2023
24.32
–
116,698
–
–
116,698
–
–
14/03/2026
127,696
116,698
–
(34,843)
209,551
–
–
Total
592,703
299,386
–
(202,072)
690,017
–
–
1
The share price on the dealing day immediately preceding the grant date.
2
The PSP awards granted on 14 March 2023 will vest on 14 March 2026. The performance targets attached to these awards are detailed on page 193.
3
The PSP awards granted on 13 March 2020 lapsed in full during 2023. The weighted average exercise price of awards that lapsed in 2023 was £nil (2022: £nil).
31/12/2023
31/12/2022
31/12/2021
Weighted average exercise price of PSP awards
–
–
–
Weighted average remaining contracted life of PSP awards
1.20 years
1.19 years
1.20 years
194
Pay for performance comparison
The graph below shows the value on 31 December 2023 of £100 invested in Derwent London on 31 December 2013, compared
to that of £100 invested in the FTSE 350 Super Sector Real Estate Index. The other points plotted are the values at intervening
ﬁnancial year ends. This index has been chosen by the Committee as it is considered the most appropriate benchmark against
which to assess the relative performance of the Company for this purpose.
Total shareholder return (TSR)
Derwent London
FTSE United Kingdom 350 Super Sector Real Estate Index
100
125
150
175
200
31 Dec
2013
31 Dec
2014
31 Dec
2015
31 Dec
2016
31 Dec
2017
31 Dec
2018
31 Dec
2019
31 Dec
2020
31 Dec
2021
31 Dec
2022
31 Dec
2023
Source: Datastream (Thomson Reuters)
Note: The TSR chart data is based on the 30 day average over the period 2 December to 31 December for each year.
Remuneration of the Chief Executive
The table below shows the remuneration earned by the Chief Executive over the past ten years. As noted on page 173, the vesting
outcome of the relative total return element of the 2022 annual bonus was determined after the publication of the 2022 Report &
Accounts. As a result, the 2022 total remuneration and annual bonus earned (% of maximum) ﬁgures for the Chief Executive have
been restated in the table below to reﬂect the actual bonus outcome. Full details of the total bonus earned in respect of 2022 is
disclosed on page 188.
Financial
year ended
31/12/2014
31/12/2015
31/12/2016
31/12/2017
31/12/2018
31/12/2019
1,2
31/12/2020
31/12/2021
31/12/2022
31/12/2023
Chief Executive
John
Burns
John
Burns
John
Burns
John
Burns
John
Burns
John
Burns
Paul
Williams
Paul
Williams
Paul
Williams
Paul
Williams
Paul
Williams
Total
remuneration
(single ﬁgure)
(£’000)
2,648
2,529
1,403
1,681
2,219
1,399
2,100
2,214
1,238
1,549
1,133
Annual bonus
(% of maximum)
92.6
74.2
23.3
53.6
68.5
97.0
97.0
66.3
30.9
83.1
31.0
Long-term
variable pay
(% of maximum)
50.0
65.7
24.9
26.5
46.0
65.75
65.75
81.6
18.1
0.0
0.0
1
Paul Williams’ 2019 total remuneration is in respect of his tenure as Chief Executive from 17 May 2019. His salary, bonus and PSP were subject to a pro rata time
reduction.
2
The annual bonus (% of maximum) and long-term variable pay (% of maximum) for John Burns in 2019 is based on remuneration in the role of the Chief Executive.
Derwent London plc
Report and Accounts 2023
Governance
195
REMUNERATION COMMITTEE REPORT
continued
Annual report on remuneration
continued
Sharesave Plan (audited)
Grant of Sharesave options
To encourage Group-wide share ownership, the Company has operated an HMRC tax eﬃcient Sharesave Plan since the 2018 AGM.
On 21 September 2023, the Company granted options under the Derwent London Sharesave Plan. The three-year contract for the
Options started on 1 November 2023. These Options are exercisable at a price of £14.87 per share from 1 November 2026 and are
not subject to any performance conditions.
Executive Directors
Monthly saving
amount
Number of shares
under option
Option price
Market price
at grant
Value of award
1
Paul Williams
£250
623
£14.87
£19.33
£2,779
Damian Wisniewski
£125
311
£14.87
£19.33
£1,387
Nigel George
£250
623
£14.87
£19.33
£2,779
Emily Prideaux
£250
623
£14.87
£19.33
£2,779
1
The value of the award is based on the middle market share price on the grant date minus the option price.
Outstanding Sharesave options
The outstanding Sharesave options held by Directors and employees are set out in the table below:
At grant
During the year (number)
Market price
at date of
exercise
£
Value of
award at
exercise
£’000
Date of
award
Option
price
£
1 January
2023
Granted
Exercised
Lapsed
1
31 December
2023
Maturity
date
Executive Directors
Paul
Williams
09/04/2020
27.53
326
–
–
(326)
–
01/06/2023
–
–
21/09/2022
19.61
458
–
–
–
458
01/11/2025
–
–
21/09/2023
14.87
–
623
–
–
623
01/11/2026
–
–
784
623
–
(326)
1,081
–
–
Damian
Wisniewski
09/04/2020
27.53
163
–
–
(163)
–
01/06/2023
–
–
15/04/2021
25.93
173
–
–
–
173
01/06/2024
–
–
21/09/2022
19.61
458
–
–
–
458
01/11/2025
–
–
21/09/2023
14.87
–
311
–
–
311
01/11/2026
–
–
794
311
–
(163)
942
–
–
Nigel
George
09/04/2020
27.53
326
–
–
(326)
–
01/06/2023
–
–
21/09/2022
19.61
458
–
–
–
458
01/11/2025
–
–
21/09/2023
14.87
–
623
–
–
623
01/11/2026
–
–
784
623
–
(326)
1,081
–
–
Emily
Prideaux
15/04/2021
25.93
347
–
–
(347)
–
01/06/2024
–
21/09/2022
19.61
458
–
–
–
458
01/11/2025
–
–
21/09/2023
14.87
–
623
–
–
623
01/11/2026
–
–
805
623
–
(347)
1,081
–
–
Other
employees
30/04/2019
25.80
139
–
–
(139)
–
01/06/2022
–
–
09/04/2020
27.53
14,711
–
–
(14,711)
–
01/06/2023
–
–
15/04/2021
25.93
9,270
–
–
(4,434)
4,836
01/06/2024
–
–
21/09/2022
19.61
32,217
–
–
(4,635)
27,582
01/11/2025
–
–
21/09/2023
14.87
–
48,738
–
(623)
48,115
01/11/2026
–
–
56,337
48,738
–
(24,542)
80,533
–
–
Total
59,504
50,918
–
(25,704)
84,718
–
–
1
On 1 June 2023, the options granted on 9 April 2020 became capable of exercise at a price of £27.53 per share. As the option price was higher than the market
value of the shares, the options were deemed to be ‘underwater’ and lapsed at the end of the exercise period (on 1 December 2023).
196
Directors’ interests in shares (audited)
Details of the Directors’ (and their connected persons) interests in shares are provided in the table below.
Number at 31 December 2023
Number at 31 December 2022
Beneficially
held
1
Deferred
shares
2
Conditional
shares
3
Share
options
4
Total
Beneficially
held
Deferred
shares
Conditional
shares
Share
options
Total
Executive
Directors
Paul Williams
95,497
6,570
135,774
1,081
238,922
95,497
–
116,063
784
212,344
Damian
Wisniewski
69,095
5,256
112,267
942
187,560
69,095
–
98,102
794
167,991
Nigel George
100,046
5,256
107,014
1,081
213,397
100,046
–
92,849
784
193,679
Emily Prideaux
6,081
4,690
95,882
4,001
110,654
6,081
–
64,433
3,725
74,239
Total
270,719
21,772
450,937
7,105
750,533
270,719
–
371,447
6,087
648,253
Non-Executive
Directors
Mark Breuer
7,000
–
–
–
7,000
7,000
–
–
–
7,000
Claudia Arney
2,500
–
–
–
2,500
2,500
–
–
–
2,500
Cilla Snowball
–
–
–
–
–
–
–
–
–
–
Helen Gordon
1
990
–
–
–
990
961
–
–
–
961
Lucinda Bell
1,000
–
–
–
1,000
1,000
–
–
–
1,000
Sanjeev Sharma
1,261
–
–
–
1,261
1,261
–
–
–
1,261
Total
12,751
–
–
–
12,751
12,722
–
–
–
12,722
There have been no other changes to the above interests between 31 December 2023 and 27 February 2024.
1
There was no change in the shares beneﬁcially held by the Directors during the year ended 31 December 2023, except for Helen Gordon, who reinvested her
dividend to purchase an additional 29 shares.
2
The 2022 annual bonus in excess of 100% of salary was deferred into shares on 4 April 2023 and will be released on 4 April 2026, subject to continued employment.
Further information on the deferred bonus is on page 190.
3
Conditional shares are those which are subject to performance conditions. For further information on the Performance Share Plan see pages 192 to 194.
4
Share options principally relate to the Sharesave Plan (see page 196) and are unvested. For Emily Prideaux only, she also has outstanding Employee Share Option
Plan (ESOP) awards which were granted in respect of her role prior to being appointed an Executive Director.
Managing shareholder dilution
The table below sets out the available dilution capacity for the Company’s employee share plans based on the limits set out in the
rules of those plans that relate to issuing new shares.
2023
Total issued share capital as at 31 December 2023
112.3m
Investment Association share limits (in any consecutive 10-year period):
Current dilution for all share plans
2.5%
Headroom relative to 10% limit
7.5%
5% for executive plans – current dilution for discretionary (executive) plans
1.1%
Headroom relative to 5% limit
3.9%
Derwent London plc
Report and Accounts 2023
Governance
197
DIRECTORS’ REPORT
The Directors’ report for the ﬁnancial year ended
31 December 2023 is set out on pages 198 to 202.
Additional information, which is incorporated into this
Directors’ report by reference, including information
required in accordance with the Companies Act 2006
and Listing Rule 9.8.4R of the Financial Conduct
Authority’s Listing Rules, can be located by page
reference in the body of this Directors’ report and
on the following pages:
Page
Future business developments
5 to 117
Stakeholder engagement
131
Diversity and inclusion
53
Charitable donations
50
Going concern & viability
86 to 89
The Section 172(1) Statement
130 to 133
Monitoring purpose, values and culture
129
Training
136 & 165
Review of the 2023 Report & Accounts
145
Internal ﬁnancial control
148 to 149
Risk management and internal controls
94 to 101
Rewarding our employees
185
Total remuneration in 2023
188
Long-term incentive schemes
192 to 194
Interest capitalised
225
Financial instruments
243
Financial risk management
251
Credit, market and liquidity risks
251 to 252
Related party disclosures
262
David Lawler
Company Secretary
The Directors present their Report &
Accounts and audited ﬁnancial statements
for the year ended 31 December 2023.
This Report & Accounts contains certain forward-looking
statements. By their nature, any statements about the
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. Each forward-looking statement speaks only as
of the date of that particular statement. No representation or
warranty is given in relation to any forward-looking statements
made by Derwent London, including as to their completeness
or accuracy. Nothing in this report and accounts should be
construed as a proﬁt forecast.
Both the Strategic report and the Directors’ report have been
drawn up and presented in accordance with and in reliance
upon applicable English company law, and the liabilities of the
Directors in connection with that report shall be subject to the
limitations and restrictions provided by such law.
Corporate governance arrangements
During the year ended 31 December 2023, we have applied the
principles and complied with the provisions of good governance
contained in the UK Corporate Governance Code 2018 (the
Code). Our Compliance Statement for 2023 is on page 121.
Further details on how we have applied the Code can be found
in the Governance section on pages 118 to 197. The Board will
ensure the requirements of the new Code are addressed in
advance of the applicable dates. The Code can be found in
the Corporate Governance section of the Financial Reporting
Council’s website:
www.frc.org.uk
Amendment of Articles of Association
Unless expressly speciﬁed to the contrary in the Company’s
Articles of Association (the Articles), the Articles may
be amended by a special resolution of the Company’s
shareholders.
In accordance with the Company’s Articles, the maximum
aggregate fees payable to Non-Executive Directors is currently
£800,000 a year. During the year under review, the Board
reviewed the fees payable to the Non-Executive Directors and
Non-Executive Chairman (see page 174) and agreed that,
going forward, their fees would be reviewed on an annual
basis and increased in alignment with the wider workforce. To
provide the Board with suﬃcient future headroom, shareholder
approval will be sought at the 2024 AGM to raise the aggregate
maximum fees payable to Non-Executive Directors by £175,000
to £975,000 a year. The Board considers these fee levels to be
appropriate for a company of our size and complexity, noting
that the fees are reasonably positioned compared to the
FTSE 250 and real estate companies of a similar size.
Company status and branches
Derwent London plc is a Real Estate Investment Trust (REIT)
and the holding company of the Derwent London group of
companies which includes no branches. It is a public limited
company on the London Stock Exchange main market with a
premium listing and is registered and domiciled in England and
Wales (company number 01819699).
198
Key stakeholders
The long-term success of the Group is dependent on its relationships with its key stakeholders. On pages 130 to 133, we outline the
ways in which we have engaged with all of our key stakeholders to understand their material concerns and factor them into our
decision making.
Substantial shareholders
The table below shows the holdings in the Company’s issued share capital which had been notiﬁed to the Company pursuant to
the Financial Conduct Authority’s Disclosure Guidance and Transparency Rules. The information below was correct at the date of
notiﬁcation. It should be noted that these holdings may have changed since the Company was notiﬁed. However, notiﬁcation of
any change is not required until the next notiﬁable threshold is crossed.
31 December 2023
27 February 2024
Direct/ indirect
Number of
shares (m)
%
Direct/ indirect
Number of
shares (m)
%
Norges Bank
Direct
9.9
8.9
Direct
9.9
8.9
BlackRock Investment Management
(UK) Ltd
Indirect
6.0
5.4
Indirect
6.0
5.4
Resolution Capital Limited
Direct
5.4
4.9
Direct
5.6
5.0
Ameriprise Financial Inc
(Columbia Threadneedle)
Indirect
4.9
4.8
Indirect
4.9
4.8
Lady Jane Rayne
Direct
4.1
3.6
Direct
4.1
3.6
Canada Pension Plan Investment Board
Direct
3.5
3.1
Direct
3.5
3.1
APG Asset Management N.V.
Direct
5.3
5.1
Direct
5.3
5.1
Employees
The Board recognises the importance of attracting, developing
and retaining the right people. In accordance with best
practice, we have employment policies in place which provide
equal opportunities for all employees, irrespective of sex,
race, colour, disability, sexual orientation, religious beliefs or
marital status. Dame Cilla Snowball is the designated Director
responsible for gathering the views of the workforce. Further
information on the Board’s methods for engaging with the
workforce is on pages 130 and 131.
Greenhouse gas emissions
In line with our commitment to transparent and best practice
reporting, we have included our streamlined energy and
carbon reporting (SECR) disclosures on pages 60 and 61 of
the Responsibility section, which includes our annual GHG
(greenhouse gas) emissions footprint and an intensity ratio
appropriate for our business, which fulﬁl the requirements of
the Companies Act 2006 (Strategic and Directors’ report)
Regulations 2013. For further analysis and detail on our GHG
emissions, please see our latest Responsibility Report, which
can be found at:
www.derwentlondon.com/responsibility/
publications
Directors
The Directors of the Company are set out on pages 122 and 123
all of which were in oﬃce during the year under review.
The Board is required to consist of no fewer than two Directors
and not more than 15. Shareholders may vary the minimum
and/or maximum number of Directors by passing an ordinary
resolution. Copies of the Executive Directors’ service contracts
are available to shareholders for inspection at the Company’s
registered oﬃce and at the Annual General Meeting (AGM).
Details of the Directors’ remuneration and service contracts
and their interests in the shares of the Company are set out on
pages 172 and 197.
Directors’ indemnity
The Company maintains appropriate Directors’ and Oﬃcers’
liability insurance cover in respect of any potential legal
action brought against its Directors. The Company has also
indemniﬁed each Director to the extent permitted by law
against any liability incurred in relation to acts or omissions
arising in the ordinary course of their duties. The indemnity
arrangements were in force throughout the year (and at
the date of approval of the ﬁnancial statements) and are
qualifying indemnity provisions under the Companies Act 2006.
Our indemnity arrangements were subject to a best practice
review with our lawyers during 2021.
Powers of the Directors
Subject to the Company’s Articles of Association, the Companies
Act 2006 and any directions given by special resolution, the
business of the Company is managed by the Board, who may
exercise all the powers of the Company, whether relating to
the management of the business of the Company or not.
In particular, the Board may exercise all the powers of the
Company to borrow money, to guarantee, to indemnify,
to mortgage or charge any of its undertakings, property,
assets (present and future) and uncalled capital and to issue
debentures and other securities and to give security for any
debt, liability or obligation of the Company or of any third party.
Directors’ training and development
Details of the training that has been provided to the Executive
and Non-Executive Directors during the year can be found on
page 136.
Derwent London plc
Report and Accounts 2023
Governance
199
DIRECTORS’ REPORT
continued
Appointment and replacement of Directors
Directors may be appointed by ordinary resolution of the
shareholders, or by the Board. Appointment of a Director from
outside the Group is on the recommendation of the Nominations
Committee, whilst internal promotion is a matter decided by the
Board unless it is considered appropriate for a recommendation
to be requested from the Nominations Committee.
At every AGM of the Company, any of the Directors who have
been appointed by the Board since the last AGM shall seek
election by the members.
Notwithstanding provisions in the Company’s Articles of
Association, the Board has agreed, in accordance with the
Code and in line with previous years, that all of the Directors
wishing to continue will retire and, being eligible, oﬀer
themselves for re-election by the shareholders at the 2024 AGM.
All Directors who held oﬃce during the ﬁnancial year under
review (except Claudia Arney) will be putting themselves
forward for re-election at the 2024 AGM. After serving
nine years on the Board, Claudia Arney will not be seeking
re-election and will step down from the Board at the
conclusion of the AGM.
Signiﬁcant agreements
There are no agreements between the Company and its
Directors or employees providing for compensation for loss
of oﬃce or employment that occurs because of a takeover
bid, except that, under the rules of the Group’s share-based
remuneration schemes some awards may vest following a
change of control.
Some of the Group’s banking and ﬁnancial arrangements are
terminable upon a change of control of the Company. As a
REIT, a tax charge may be levied on the Company if it makes a
distribution to another company which is beneﬁcially entitled
to 10% or more of the shares or dividends in the Company
or controls 10% or more of the voting rights in the Company
(a substantial shareholder), unless the Company has taken
reasonable steps to avoid such a distribution being made.
The Company’s Articles of Association give the Directors power
to take such steps, including the power to:
•
identify a substantial shareholder;
•
withhold the payment of dividends to a substantial
shareholder; and
•
require the disposal of shares forming part of a substantial
shareholding.
There is no person with whom the Group has a contractual
or other arrangement that is essential to the business of
the Company.
Annual General Meeting (AGM)
At the 2023 AGM, we were delighted to receive in excess of
88% votes in favour of all resolutions. In total, 86.4% of our
shareholders (voting capital) voted.
The 40th AGM of Derwent London plc will be held in DL/78
at 78 Charlotte Street, London W1T 4QS on 10 May 2024 at
10.30am. The Notice of Meeting together with explanatory
notes is contained in the circular to shareholders that
accompanies the Report & Accounts.
In the event we receive 20% or more votes against a
recommended resolution at a general meeting, we would
announce the actions we intend to take to engage with our
shareholders to understand the result in accordance with the
Code. We would follow this announcement with a further
update within six months of the meeting, with an overview of
our shareholders’ views on the resolutions and the remedial
actions we have taken. All announcements made via RNS are
available to shareholders on our website.
To date, the Board has not been required to follow these
procedures due to the high level of support received from
shareholders.
Voting
Shareholders will be entitled to vote at a general meeting
whether on a show of hands or a poll, as provided in the
Companies Act 2006. Voting at the 2024 AGM will be via poll.
Where a proxy is given discretion as to how to vote on a show
of hands this will be treated as an instruction by the relevant
shareholder to vote in the way in which the proxy decides to
exercise that discretion. This is subject to any special rights or
restrictions as to voting which are given to any shares or upon
which any shares may be held at the relevant time and to the
Articles of Association.
If more than one joint holder votes (including voting by proxy),
the only vote which will count is the vote of the person whose
name is listed ﬁrst on the register for the share.
Restrictions on voting
Unless the Directors decide otherwise, a shareholder cannot
attend or vote shares at any general meeting of the Company
or upon a poll or exercise any other right conferred by
membership in relation to general meetings or polls if they
have not paid all amounts relating to those shares which
are due at the time of the meeting, or if they have been
served with a restriction notice (as deﬁned in the Articles
of Association) after failure to provide the Company with
information concerning interests in those shares required
to be provided under the Companies Act 2006.
The Company is not aware of any agreements between
shareholders that may result in restrictions on voting rights.
Our 40th AGM
10 May 2024
200
Capital structure
As at 27 February 2024, the Company’s issued share
capital comprised a single class of 5p ordinary shares
(ISIN: GB0002652740) and equalled an amount of
£5,614,546.45 divided into 112,290,929 ordinary shares.
The market price of the 5p ordinary shares at 31 December
2023 was £23.60 (2022: £23.68). During the year, they traded in
a range between £17.66 and £27.50 (2022: £17.83 and £35.80).
Details of the ordinary share capital and shares issued during
the year can be found in note 30 to the ﬁnancial statements.
Rights and restrictions attaching to shares
Subject to the Articles of Association, the Companies Act 2006
and other shareholders’ rights, shares in the Company may
be issued with such rights and restrictions as the shareholders
may by ordinary resolution decide, or if there is no such
resolution, as the Board may decide provided it does not
conﬂict with any resolution passed by the shareholders.
These rights and restrictions will apply to the relevant shares
as if they were set out in the Articles of Association. Subject
to the Articles of Association, the Companies Act 2006 and
other shareholders’ rights, unissued shares are at the disposal
of the Board.
Variation of rights
The rights attached to any class of shares can be amended
if approved, either by 75% of shareholders holding the issued
shares in that class by amount, or by special resolution passed
at a separate meeting of the holders of the relevant class
of shares.
Every member and every duly appointed proxy present at a
general meeting or class meeting has, upon a show of hands,
one vote and every member present in person or by proxy has,
upon a poll, one vote for every share held by him or her. No
person holds securities in the Company carrying special rights
with regard to control of the Company.
Restrictions on transfer of securities in the Company
There are no speciﬁc restrictions on the transfer of securities in
the Company, which is governed by its Articles of Association
and prevailing legislation. The Company is not aware of
any agreements between shareholders that may result in
restrictions on the transfer of securities.
Directors’ interests in shares /
See page 197
Managing shareholder dilution /
See page 197
Disapplication of pre-emption rights
At the 2024 AGM, the Company will seek approval from its
shareholders to disapply pre-emption rights in accordance with
the Pre-Emption Group’s 2022 Statement of Principles. Special
resolutions 16 and 17 will seek authority to:
•
disapply pre-emption rights on up to a nominal amount
of £561,455 (representing 10% of our issued share capital),
with a further disapplication for up to 2 per cent to be used
only for the purposes of a follow-on oﬀer; and
•
disapply pre-emption rights for an additional 10 per cent
for transactions which the Board determines to be either
an acquisition or a speciﬁed capital investment as deﬁned
by the Statement of Principles, with a further disapplication
for up to 2 per cent to be used only for the purposes of a
follow-on oﬀer.
The Company conﬁrms its intention to comply with the
‘letter and spirit’ of the Pre-Emption Group’s Statement of
Principles in respect of the use of the annual disapplication
of pre-emption rights.
Powers in relation to the Company issuing or buying
back its own shares
At the 2023 AGM, shareholders authorised the Company to
allot relevant securities:
(i) up to a nominal amount of £1,871,324; and
(ii)up to a nominal amount of £3,743,210, after deducting
from such limit any relevant securities allotted under (i),
in connection with an oﬀer by way of a rights issue.
This authority is renewable annually. An ordinary resolution
will be proposed at the 2024 AGM to grant a similar authority
to allot:
(i)
up to a nominal amount of £1,871,328 (being one-third of
the issued share capital of the Company); and
(ii)up to a nominal amount of £3,743,218, after deducting
from such limit any relevant securities allotted under
(i), in connection with an oﬀer by way of a rights issue
(being two-thirds of the issued share capital).
A further special resolution will be proposed to renew the
Directors’ authority to repurchase the Company’s ordinary
shares in the market. The authority will be limited to a
maximum of 11,229,093 ordinary shares and the resolution sets
the minimum and maximum prices which may be paid. The
Directors will only purchase the Company’s shares in the market
if they believe it is in the best interests of shareholders generally.
Derwent London plc
Report and Accounts 2023
Governance
201
DIRECTORS’ REPORT
continued
Derwent London shares held by the Group
As at 31 December 2023, the Group holds 33,000 Derwent London shares in order to deliver vesting shares under the Performance
Share Plan (PSP) to participants, allot dividend equivalents as additional vesting shares and deliver deferred bonus shares when
the deferral periods expire. Movements on the holding of these shares are detailed below. The shares held as at 31 December
2023 include the 22,334 deferred bonus shares purchased on 4 April 2023 (see page 190) and Damian Wisniewski’s vested but
unexercised PSP 2019 award (5,253 shares). The outstanding balance (5,413 shares) will be utilised for dividend equivalents in
respect of the PSP (see page 194).
During the year
1 January 2023
Acquired
Allotted
Disposal
31 December 2023
Deferred bonus
–
22,334
–
–
22,334
Performance Share Plan
10,666
–
–
–
10,666
Total
10,666
22,334
–
–
33,000
Price (£)
23.70
Percentage of issued share capital
0%
Results and dividends
The ﬁnancial statements set out the results of the Group for
the ﬁnancial year ended 31 December 2023 and are shown on
pages 214 to 282. The Directors recommend a ﬁnal dividend
of 55.00p per ordinary share for the year ended 31 December
2023. When taken together with the interim dividend of
24.50p per ordinary share paid in October 2023, this results
in a total dividend for the year of 79.50p (2022: 78.50p) per
ordinary share. Subject to approval by shareholders of the
recommended ﬁnal dividend, the dividend to shareholders for
2023 will total £61.7m. If approved, the Company will pay the
ﬁnal dividend on 31 May 2024 to shareholders on the register
of members at 26 April 2024.
PID and non-PID dividends
As a REIT, Derwent London must distribute at least 90% of the
Group’s income proﬁts from its tax-exempt property rental
business by way of a dividend, which is known as a property
income distribution (PID). These distributions can be subject to
withholding tax at 20%. Dividends from proﬁts of the Group’s
taxable residual business are non-PID and will be taxed as an
ordinary dividend.
Fixed assets
The Group’s portfolio was professionally revalued at
31 December 2023, resulting in a deﬁcit of £583.3m, before
accounting adjustments of £11.8m and share of joint venture
of £9.3m. The portfolio is included in the Group balance sheet
at a carrying value of £4,657.5m. Further details are given in
note 16 of the ﬁnancial statements.
Post-balance sheet events
There are no post balance sheet events requiring disclosure.
Political donations
There were no political donations during 2023 (2022: nil).
Audit exemption
For the year ending 31 December 2023, a number of the
Group’s wholly owned subsidiaries are entitled to exemption
from audit, under section 479A of the Companies Act 2006.
We have identiﬁed in the table on pages 261 and 262 which
subsidiaries intend to utilise the audit exemption. As the
sole member of these companies, Derwent London plc has
unanimously agreed to the adoption of the exemptions and to
the granting of a guarantee in accordance with section 479C
of the Companies Act 2006.
Auditors
PricewaterhouseCoopers LLP were appointed in 2014. In
accordance with the current regulation that requires a tender
every 10 years (see pages 150 to 151) a competitive tender
process for the role of Group Auditor was conducted during
2023, for the 2024 year end audit.
Following an in-depth discussion the Board decided to
reappoint PwC as the Group’s external auditors. The
reappointment of PwC is to be approved at the 2024 AGM
under resolutions 13 and 14 as set out in the Notice of Meeting.
The Directors who held oﬃce at the date of approval of this
Directors’ report conﬁrm that, so far as they are each aware,
there is no relevant audit information of which the Company’s
Auditor is unaware and that each Director has taken all the
steps that they ought to have taken as a Director to make
themselves aware of any relevant audit information and ensure
that the Auditor is aware of such information.
The Strategic report and Directors’ report have been approved
by the Board of Directors and signed by order of the Board by:
David Lawler
Company Secretary
27 February 2024
202
STATEMENT OF DIRECTORS’
RESPONSIBILITIES
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.
Directors’ conﬁrmations
The Directors consider that the annual Report & Accounts,
taken as a whole, is fair, balanced and understandable and
provides the information necessary for shareholders to assess
the Group’s and Company’s position and performance,
business model and strategy.
Each of the Directors, whose names and functions are listed on
pages 122 to 123 conﬁrm that, to the best of their knowledge:
•
the Group and Company ﬁnancial statements, which have
been prepared in accordance with UK-adopted international
accounting standards, give a true and fair view of the
assets, liabilities and ﬁnancial position of the Group and
Company, and of the loss of the Group; and
•
the Strategic report includes a fair review of the development
and performance of the business and the position of the
Group and Company, together with a description of the
principal risks and uncertainties that it faces.
The Directors are responsible for preparing the Annual Report and the
ﬁnancial statements in accordance with applicable law and regulation.
On behalf of the Board
Paul Williams
Damian Wisniewski
Chief Executive
Chief Financial Oﬃcer
27 February 2024
Soho Place W1
Derwent London plc
Report and Accounts 2023
Governance
203
Financial
statements
45 Whitﬁeld Street W1
204
206
Independent Auditors’ report
214
Group income statement
215
Group statement of
comprehensive income
216
Balance sheets
217
Statements of changes in equity
218
Cash flow statements
219
Notes to the financial statements
Other information
277
Ten-year summary
278
EPRA summary
281
Principal properties
283
List of definitions
287
Shareholder information
288
Awards & recognition
The retroﬁt exposes the
weight and materiality
of the robust concrete
structure and original
detailing, whilst introducing
warmth, colour and
carefully curated ﬁnishes
to reinforce its identity.
Joshua Scott
dMFK
Financial statements
205
Derwent London plc
Report and Accounts 2023
INDEPENDENT AUDITORS’ REPORT
to the members of Derwent London plc
Report on the audit of the ﬁnancial statements
Opinion
In our opinion, Derwent London plc’s group ﬁnancial statements and company ﬁnancial statements (the “ﬁnancial statements”):
•
give a true and fair view of the state of the group’s and of the company’s aﬀairs as at 31 December 2023 and of the group’s loss
and the group’s and company’s cash ﬂows for the year then ended;
•
have been properly prepared in accordance with UK-adopted international accounting standards as applied in accordance with
the provisions of the Companies Act 2006; and
•
have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the ﬁnancial statements, included within the Report and Accounts 2023 (the “Annual Report”), which comprise:
the Balance sheets as at 31 December 2023; the Group income statement, the Group statement of comprehensive income,
the Cash ﬂow statements, and the Statements of changes in equity for the year then ended, and the notes to the ﬁnancial
statements, comprising material accounting policy information and other explanatory information.
Our opinion is consistent with our reporting to the Audit Committee.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our
responsibilities under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the ﬁnancial statements
section of our report. We believe that the audit evidence we have obtained is suﬃcient and appropriate to provide a basis for
our opinion.
Independence
We remained independent of the group in accordance with the ethical requirements that are relevant to our audit of the ﬁnancial
statements in the UK, which includes the FRC’s Ethical Standard, as applicable to listed public interest entities, and we have
fulﬁlled our other ethical responsibilities in accordance with these requirements.
To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC’s Ethical Standard were not provided.
Other than those disclosed in note 10 to the ﬁnancial statements, we have provided no non-audit services to the company or its
controlled undertakings in the period under audit.
Our audit approach
Overview
Audit scope
•
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the ﬁnancial
statements as a whole, taking into account the geographic structure of the group, the accounting processes and controls, and
the industry in which the group operates.
•
The group’s properties are spread across a number of statutory entities, with the group ﬁnancial statements being a
consolidation of these entities, the company and the group’s joint ventures. All work was carried out by the group audit team.
Key audit matters
•
Valuation of investment properties (group)
•
Compliance with REIT guidelines (group)
•
Valuation of investments in and loans to subsidiaries (parent)
Materiality
•
Overall group materiality: £50.2 million (2022: £55.0 million) based on 1% of Total assets.
•
Speciﬁc group materiality: £5.7 million (2022: £6.0 million) based on 5% of Proﬁt Before Tax after removing revaluation of
investment properties (whether held directly or through joint ventures), proﬁt on disposal and fair value movements on
derivatives, which is applied to the group income statement except for these removed items.
•
Overall company materiality: £46.0 million (2022: £41.1 million) based on 1% of Total assets.
•
Performance materiality: £37.6 million (2022: £41.2 million) (group) and £34.5 million (2022: £30.8 million) (company).
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the ﬁnancial statements.
206
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most signiﬁcance in the audit of the
ﬁnancial statements of the current period and include the most signiﬁcant assessed risks of material misstatement (whether
or not due to fraud) identiﬁed by the auditors, including those which had the greatest eﬀect on: the overall audit strategy; the
allocation of resources in the audit; and directing the eﬀorts of the engagement team. These matters, and any comments we
make on the results of our procedures thereon, were addressed in the context of our audit of the ﬁnancial statements as a whole,
and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
This is not a complete list of all risks identiﬁed by our audit.
Accounting for the expected credit loss (ECL) provision (group) and revenue recognition (group), which were key audit matters
last year, are no longer included because of the decrease in complexity and subjectivity surrounding these areas. We have removed
revenue recognition due to the decrease in complexity as there have not been new material lease incentives in the year. We have
removed the ECL provision as we have downgraded the accounting for the ECL from an elevated to normal risk due to the group’s
recovery post COVID-19 and return to pre pandemic collection rates.
Otherwise, the key audit matters below are consistent with last year.
Key audit matter
How our audit addressed the key audit matter for 2024
Valuation of investment properties (group)
Refer to the Audit Committee report (Signiﬁcant ﬁnancial
judgements, key assumptions and estimates), note 3
(Signiﬁcant judgements, key assumptions and estimates)
and note 16 (Property portfolio) to the ﬁnancial statements.
The group has investment properties totalling £4,551.4 million
(2022: £5,002.0 million).
The group’s property portfolio is held directly or through
joint ventures and principally consists of oﬃces and
commercial space within central London. The remainder of
the portfolio represents a retail park, cottages and strategic
land in Scotland.
Valuations are carried out by third party valuers (the
‘Valuers’) in accordance with the Royal Institution of
Chartered Surveyors (‘RICS’) Valuation – Global Standards
2022, International Accounting Standard 40 (Investment
Property) and International Financial Reporting Standard 13
(Fair Value Measurement).
There are signiﬁcant judgements and estimates to be
made in relation to the valuation of the group’s investment
properties. Where available, the valuations take into
account evidence of market transactions for properties
and locations comparable to those of the group.
The central London investment property portfolio mainly
features oﬃce accommodation and includes:
Standing investments: These are existing properties
that are currently let. They are valued using the income
capitalisation method.
Development projects: These are properties currently under
development or identiﬁed for future development. They
have a diﬀerent risk and investment proﬁle to the standing
investments. These are valued using the residual appraisal
method (i.e. by estimating the fair value of the completed
project using the income capitalisation method less
estimated costs to completion and a risk premium).
Given the inherent subjectivity involved in the valuation of the
property portfolio, and therefore the need for deep market
knowledge when determining the most appropriate assumptions
and the technicalities of valuation methodology, we engaged our
internal valuation experts to assist us in our audit of this matter.
Assessing group’s external Valuers’ expertise and
objectivity
The Valuers used by the group are Knight Frank for the central
London portfolio and Savills for the investment property
portfolio in Scotland. They are well-known ﬁrms, with suﬃcient
experience of the group’s market. We assessed the competence
and capabilities of the Valuers and veriﬁed their qualiﬁcations
by discussing the scope of their work and reviewing the terms of
their engagements for unusual terms or fee arrangements. Based
on this work, we are satisﬁed that the Valuers remain objective
and competent and that the scope of their work was appropriate.
Testing the valuations assumptions and capital
movement
We obtained details of each property held by the group and
set an expected range for yield and capital value movement,
determined by reference to published benchmarks and using
our experience and knowledge of the market. We obtained
and read the Valuers’ valuation reports covering all of the
group’s investment properties and conﬁrmed that the valuation
approach was in accordance with RICS standards.
We held meetings with management and the Valuers, at which
the valuations and the key assumptions therein were discussed. We
focused on the largest properties, development properties, and any
outliers (where the assumptions used and/or year on year capital
value movement were out of line with our range of assumptions
developed using externally published market data for the relevant
sector). Where assumptions did not fall within our expected range,
we assessed whether additional evidence presented in arriving
at the ﬁnal valuations was appropriate. We also challenged the
Valuers as to the extent to which recent market transactions and
expected rental values which they made use of in deriving their
valuations took into account the impact of climate change and
related ESG considerations. Speciﬁcally, we challenged the Valuers
on their consideration of any Energy Performance Certiﬁcate
related costs identiﬁed by management and how that was
reﬂected within the underlying property valuations.
Financial statements
207
Derwent London plc
Report and Accounts 2023
INDEPENDENT AUDITORS’ REPORT
continued
to the members of Derwent London plc
Key audit matter
How our audit addressed the key audit matter for 2024
Valuation of investment properties (group)
continued
The most signiﬁcant estimates aﬀecting the valuation
included yields and estimated rental value (“ERV”) growth
(as described in note 16 of the ﬁnancial statements). For
development projects, other assumptions included costs to
completion and risk premium assumptions are also factored
into the valuation.
The existence of signiﬁcant estimation uncertainty, coupled
with the fact that only a small percentage diﬀerence in
individual property valuations when aggregated could result
in material misstatement, is why we have given speciﬁc
audit focus and attention to this area.
Information and standing data
We tested the data inputs underpinning the investment property
valuation for a sample of properties, including rental income,
acquisitions and capital expenditure, by agreeing the inputs to
the underlying property records held by the group to assess the
reliability, completeness and accuracy of the underlying data used
by the Valuers. The underlying property records were assessed for
reliability by obtaining signed and approved lease contracts or
sale/purchase contracts and by inspecting approved third party
invoices and tracing back to bank statements on a sample basis.
For development properties, we agreed the costs to date included
within development appraisals to quantity surveyor reports and
capitalised expenditure was tested on a sample basis to invoices.
We agreed the total forecasted cost of upgrading buildings
to Energy Performance Certiﬁcate B to a third party report
commissioned by the group.
We considered reasons why the market capitalisation was lower
than the net asset value of the group.
We have no matters to report in respect of this work.
Compliance with REIT guidelines (group)
Refer to the Audit Committee report (Signiﬁcant ﬁnancial
judgements, key assumptions and estimates) and note 3
(Signiﬁcant judgements, key assumptions and estimates).
The UK REIT regime grants companies tax exempt status
provided they meet the rules within the regime. The rules
are complex and the tax exempt status has a signiﬁcant
impact on the ﬁnancial statements. The complexity of the
rules creates a risk of an inadvertent breach and the group’s
proﬁt becoming subject to tax.
The obligations of the REIT regime include requirements to
comply with balance of business, dividend and income cover
tests. The group’s status as a REIT underpins its business
model and shareholder returns. For this reason, it warrants
special audit focus.
We conﬁrmed our understanding of management’s approach to
ensuring compliance with the REIT regime rules.
We obtained management’s calculations and supporting
documentation, checking their accuracy by verifying the inputs
and calculations. We involved our internal taxation experts
to verify the accuracy of the application of the rules and to
re-perform the REIT compliance tests.
We have no matters to report in respect of this work.
Valuation of investments in and loans to
subsidiaries (parent)
Refer to notes 19 (Investments) and 21 (Trade and other
receivables) to the ﬁnancial statements.
The company has investments in subsidiaries of £2,189.8
million (2022: £2,224.7 million) and loans to subsidiaries of
£2,327.3 million (2022: £1,759.2 million) as at 31 December
2023. This is following the recognition of a £169.9 million
(2022: £130.1 million) net provision for impairment on
investments in subsidiaries and an expected credit loss
impairment of £nil (2022: £nil) recognised on loans to
subsidiaries in the year.
The company’s accounting policy for investments and loans
is to hold them at cost less any impairment. Impairment
of the loans is calculated in accordance with International
Financial Reporting Standard 9 (Financial Instruments).
Investments in subsidiaries are assessed for impairment in
line with International Accounting Standard 36 (Impairment
of Assets).
Given the inherent judgement and complexity in assessing
both the carrying value of a subsidiary company and the
expected credit loss of intercompany receivables, this was
identiﬁed as a key audit matter.
We obtained management’s impairment assessment for the
recoverability of investments in and loans to subsidiaries as at
31 December 2023.
We assessed the accounting policy for investments and loans
to subsidiaries to ensure they were compliant with UK-adopted
International Accounting Standards. We veriﬁed that the
methodology used by management in arriving at the carrying
value of each subsidiary, and the expected credit loss for
intercompany receivables, was compliant with UK-adopted
International Accounting Standards.
We identiﬁed the key judgement within the requirement for
impairment of both the investments and loans to subsidiaries
to be the underlying valuation of investment property held by
the subsidiaries. For details of our procedures over investment
property valuations please refer to the group key audit matter
above.
We have no matters to report in respect of this work.
208
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the ﬁnancial
statements as a whole, taking into account the structure of the group and the company, the accounting processes and controls,
and the industry in which they operate.
The group’s properties are spread across a number of statutory entities, with the group ﬁnancial statements being a consolidation
of these entities, the company and the group’s joint ventures. All work was carried out by the group audit team.
The impact of climate risk on our audit
In planning our audit, we made enquiries with management to understand the extent of the potential impact of climate change
risk on the ﬁnancial statements. Our evaluation of this conclusion included challenging key judgements and estimates in areas
where we considered that there was greatest potential for climate change impact. We particularly considered how climate change
risks would impact the assumptions made in the valuation of investment properties as explained in our key audit matter above.
We also considered the consistency of the disclosures in relation to climate change made within the Annual Report, the ﬁnancial
statements and the knowledge obtained from our audit. We assessed the consideration of the cost of delivering the group’s
climate change and sustainability strategy within the going concern and viability forecasts.
Materiality
The scope of our audit was inﬂuenced by our application of materiality. We set certain quantitative thresholds for materiality.
These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and
extent of our audit procedures on the individual ﬁnancial statement line items and disclosures and in evaluating the eﬀect of
misstatements, both individually and in aggregate on the ﬁnancial statements as a whole.
Based on our professional judgement, we determined materiality for the ﬁnancial statements as a whole as follows:
Financial statements – group
Financial statements – company
Overall materiality
£50.2 million (2022: £55.0 million).
£46.0 million (2022: £41.1 million).
How we determined it
1% of Total assets
1% of Total assets
Rationale for
benchmark applied
The primary measurement attribute of
the group is the carrying value of property
investments. On this basis, we set an overall
group materiality level based on total assets.
The primary measurement attribute of the
company is the carrying value of investments
in subsidiaries. On this basis, we set an overall
company materiality level based on total assets.
We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and
undetected misstatements exceeds overall materiality. Speciﬁcally, we use performance materiality in determining the scope of
our audit and the nature and extent of our testing of account balances, classes of transactions and disclosures, for example in
determining sample sizes. Our performance materiality was 75% (2022: 75%) of overall materiality, amounting to £37.6 million
(2022: £41.2 million) for the group ﬁnancial statements and £34.5 million (2022: £30.8 million) for the company ﬁnancial statements.
In determining the performance materiality, we considered a number of factors - the history of misstatements, risk assessment
and aggregation risk and the eﬀectiveness of controls - and concluded that an amount at the upper end of our normal range
was appropriate.
In addition, we set a speciﬁc group materiality level of £5.7 million (2022: £6.0 million) which is calculated based on 5% of Proﬁt
Before Tax after removing revaluation of investment properties (whether held directly or through joint ventures), proﬁt on disposal
and fair value movements on derivatives, and which is applied to the group income statement except for these removed items.
We agreed with the Audit Committee that we would report to them misstatements identiﬁed during our audit above £2.5 million
(group audit) (2022: £2.7 million) and £2.3 million (company audit) (2022: £2.0 million) as well as misstatements below those
amounts that, in our view, warranted reporting for qualitative reasons.
Financial statements
209
Derwent London plc
Report and Accounts 2023
INDEPENDENT AUDITORS’ REPORT
continued
to the members of Derwent London plc
Conclusions relating to going concern
Our evaluation of the directors’ assessment of the group’s and the company’s ability to continue to adopt the going concern basis
of accounting included:
•
Agreed the underlying cash ﬂow projections to Board approved forecast and assess how this forecast is compiled;
•
Considered management’s forecasting accuracy by comparing how the forecast made at the half year compares to the actual
performance in the second half of the year;
•
Tested the integrity of the underlying formulas and calculations within the going concern and cash ﬂow models;
•
Understood and assessed the appropriateness of the key assumptions used in the base case and in the severe but plausible
downside scenarios, including assessing whether we considered the downside sensitivities to be appropriately severe;
•
Performed sample testing over the data and information of the properties used in the forecast made by the MRI forecasting
system to the supporting documents to gain comfort over the accuracy of the data and information in the MRI forecasting
system;
•
Assessed the consideration of the cost of delivering the group’s climate change and sustainability strategy within the underlying
going concern and viability forecasts;
•
Evaluated whether the directors’ conclusion, that suﬃcient liquidity and covenant headroom existed to continue trading
operationally throughout the going concern period under the base and severe but plausible scenarios, is appropriate; and
•
Reviewed the disclosures provided relating to the going concern basis of preparation and found that these provided an
explanation of the directors’ assessment that was consistent with the evidence we obtained.
Based on the work we have performed, we have not identiﬁed any material uncertainties relating to events or conditions that,
individually or collectively, may cast signiﬁcant doubt on the group’s and the company’s ability to continue as a going concern for
a period of at least twelve months from when the ﬁnancial statements are authorised for issue.
In auditing the ﬁnancial statements, we have concluded that the directors’ use of the going concern basis of accounting in the
preparation of the ﬁnancial statements is appropriate.
However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the group’s and the
company’s ability to continue as a going concern.
In relation to the directors’ reporting on how they have applied the UK Corporate Governance Code, we have nothing material to
add or draw attention to in relation to the directors’ statement in the ﬁnancial statements about whether the directors considered
it appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of
this report.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the ﬁnancial statements and our auditors’
report thereon. The directors are responsible for the other information. Our opinion on the ﬁnancial statements does not cover the
other information and, accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this
report, any form of assurance thereon.
In connection with our audit of the ﬁnancial statements, our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with the ﬁnancial statements or our knowledge obtained
in the audit, or otherwise appears to be materially misstated. If we identify an apparent material inconsistency or material
misstatement, we are required to perform procedures to conclude whether there is a material misstatement of the ﬁnancial
statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there
is a material misstatement of this other information, we are required to report that fact. We have nothing to report based on
these responsibilities.
With respect to the Strategic report and Directors’ report, we also considered whether the disclosures required by the UK
Companies Act 2006 have been included.
Based on our work undertaken in the course of the audit, the Companies Act 2006 requires us also to report certain opinions and
matters as described below.
Strategic report and Directors’ report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic report and
Directors’ report for the year ended 31 December 2023 is consistent with the ﬁnancial statements and has been prepared in
accordance with applicable legal requirements.
In light of the knowledge and understanding of the group and company and their environment obtained in the course of the audit,
we did not identify any material misstatements in the Strategic report and Directors’ report.
210
Directors’ Remuneration
In our opinion, the part of the Remuneration Committee report to be audited has been properly prepared in accordance with the
Companies Act 2006.
Corporate governance statement
The Listing Rules require us to review the directors’ statements in relation to going concern, longer-term viability and that part of
the corporate governance statement relating to the company’s compliance with the provisions of the UK Corporate Governance
Code speciﬁed for our review. Our additional responsibilities with respect to the corporate governance statement as other
information are described in the Reporting on other information section of this report.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate
governance statement is materially consistent with the ﬁnancial statements and our knowledge obtained during the audit, and
we have nothing material to add or draw attention to in relation to:
•
The directors’ conﬁrmation that they have carried out a robust assessment of the emerging and principal risks;
•
The disclosures in the Annual Report that describe those principal risks, what procedures are in place to identify emerging risks
and an explanation of how these are being managed or mitigated;
•
The directors’ statement in the ﬁnancial statements about whether they considered it appropriate to adopt the going concern
basis of accounting in preparing them, and their identiﬁcation of any material uncertainties to the group’s and company’s
ability to continue to do so over a period of at least twelve months from the date of approval of the ﬁnancial statements;
•
The directors’ explanation as to their assessment of the group’s and company’s prospects, the period this assessment covers
and why the period is appropriate; and
•
The directors’ statement as to whether they have a reasonable expectation that the company will be able to continue in
operation and meet its liabilities as they fall due over the period of its assessment, including any related disclosures drawing
attention to any necessary qualiﬁcations or assumptions.
Our review of the directors’ statement regarding the longer-term viability of the group and company was substantially less in
scope than an audit and only consisted of making inquiries and considering the directors’ process supporting their statement;
checking that the statement is in alignment with the relevant provisions of the UK Corporate Governance Code; and considering
whether the statement is consistent with the ﬁnancial statements and our knowledge and understanding of the group and
company and their environment obtained in the course of the audit.
In addition, based on the work undertaken as part of our audit, we have concluded that each of the following elements of the
corporate governance statement is materially consistent with the ﬁnancial statements and our knowledge obtained during
the audit:
•
The directors’ statement that they consider the Annual Report, taken as a whole, is fair, balanced and understandable, and
provides the information necessary for the members to assess the group’s and company’s position, performance, business
model and strategy;
•
The section of the Annual Report that describes the review of eﬀectiveness of risk management and internal control systems;
and
•
The section of the Annual Report describing the work of the Audit Committee.
We have nothing to report in respect of our responsibility to report when the directors’ statement relating to the company’s
compliance with the Code does not properly disclose a departure from a relevant provision of the Code speciﬁed under the Listing
Rules for review by the auditors.
Responsibilities for the ﬁnancial statements and the audit
Responsibilities of the directors for the ﬁnancial statements
As explained more fully in the Statement of Directors’ responsibilities, the directors are responsible for the preparation of the
ﬁnancial statements in accordance with the applicable framework and for being satisﬁed that they give a true and fair view.
The directors are also responsible for such internal control as they determine is necessary to enable the preparation of ﬁnancial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the ﬁnancial statements, the directors are responsible for assessing the group’s and the company’s ability to continue
as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting
unless the directors either intend to liquidate the group or the company or to cease operations, or have no realistic alternative but
to do so.
Financial statements
211
Derwent London plc
Report and Accounts 2023
INDEPENDENT AUDITORS’ REPORT
continued
to the members of Derwent London plc
Auditors’ responsibilities for the audit of the ﬁnancial statements
Our objectives are to obtain reasonable assurance about whether the ﬁnancial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a
high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to inﬂuence the economic decisions of users taken on the basis of these ﬁnancial
statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which
our procedures are capable of detecting irregularities, including fraud, is detailed below.
Based on our understanding of the group and industry, we identiﬁed that the principal risks of non-compliance with laws and
regulations related to compliance with the Real Estate Investment Trust (REIT) status Part 12 of the Corporation Tax Act 2010 and
the UK regulatory principles, such as those governed by the Listings Rules, and we considered the extent to which non-compliance
might have a material eﬀect on the ﬁnancial statements. We also considered those laws and regulations that have a direct
impact on the ﬁnancial statements such as the Companies Act 2006. We evaluated management’s incentives and opportunities
for fraudulent manipulation of the ﬁnancial statements (including the risk of override of controls), and determined that the
principal risks were related to posting inappropriate journal entries to increase revenue, and management bias in accounting
estimates and judgemental areas of the ﬁnancial statements such as the valuation of investment properties. Audit procedures
performed by the engagement team included:
•
Discussions with management, including the Company Secretary, as well as those charged with governance, over their
consideration of known or suspected instances of non-compliance with laws and regulation and fraud;
•
Understanding and evaluating management’s controls designed to prevent and detect irregularities;
•
Reviewing the reports made by internal audit;
•
Assessment of matters reported through the group’s whistleblowing helpline and the results of management’s investigation of
such matters where relevant;
•
Review of tax compliance with the involvement of our tax experts in the audit;
•
Procedures relating to the valuation of investment properties described in the related key audit matter above;
•
Reviewing relevant meeting minutes, including those of the Board of Directors, Risk Committee and the Audit Committee; and
•
Identifying and testing journal entries, in particular any journal entries posted with unusual account combinations, those that
contained unusual words, those posted after the general ledger was closed, journals posted to revenue in the last week of the
year, or posted by unexpected users.
There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-
compliance with laws and regulations that are not closely related to events and transactions reﬂected in the ﬁnancial statements.
Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from
error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion.
Our audit testing might include testing complete populations of certain transactions and balances, possibly using data auditing
techniques. However, it typically involves selecting a limited number of items for testing, rather than testing complete populations.
We will often seek to target particular items for testing based on their size or risk characteristics. In other cases, we will use audit
sampling to enable us to draw a conclusion about the population from which the sample is selected.
A further description of our responsibilities for the audit of the ﬁnancial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities
. This description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the company’s members as a body in accordance with
Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume
responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save
where expressly agreed by our prior consent in writing.
212
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
•
we have not obtained all the information and explanations we require for our audit; or
•
adequate accounting records have not been kept by the company, or returns adequate for our audit have not been received
from branches not visited by us; or
•
certain disclosures of directors’ remuneration speciﬁed by law are not made; or
•
the company ﬁnancial statements and the part of the Remuneration Committee report to be audited are not in agreement
with the accounting records and returns.
We have no exceptions to report arising from this responsibility.
Appointment
Following the recommendation of the Audit Committee, we were appointed by the directors on 14 May 2014 to audit the ﬁnancial
statements for the year ended 31 December 2014 and subsequent ﬁnancial periods. The period of total uninterrupted engagement
is ten years, covering the years ended 31 December 2014 to 31 December 2023.
Other matter
As required by the Financial Conduct Authority Disclosure Guidance and Transparency Rule 4.1.14R, these ﬁnancial statements
form part of the ESEF-prepared annual ﬁnancial report ﬁled on the National Storage Mechanism of the Financial Conduct
Authority in accordance with the ESEF Regulatory Technical Standard (‘ESEF RTS’). This auditors’ report provides no assurance over
whether the annual ﬁnancial report has been prepared using the single electronic format speciﬁed in the ESEF RTS.
Sandra Dowling (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
27 February 2024
Financial statements
213
Derwent London plc
Report and Accounts 2023
GROUP INCOME STATEMENT
for the year ended 31 December 2023
Note
2023
£m
2022
£m
Gross property and other income
5
265.9
248.8
Net property and other income
5
190.5
194.6
Administrative expenses
(39.1)
(36.4)
Revaluation deﬁcit
16
(581.5)
(422.1)
Proﬁt on disposal
6
1.2
25.6
Loss from operations
(428.9)
(238.3)
Finance income
7
0.9
0.3
Finance costs
7
(40.4)
(39.7)
Movement in fair value of derivative ﬁnancial instruments
(2.1)
5.8
Financial derivative termination income/(costs)
8
1.8
(0.3)
Share of results of joint ventures
9
(7.2)
(7.3)
Loss before tax
10
(475.9)
(279.5)
Tax charge
15
(0.5)
(1.0)
Loss for the year
(476.4)
(280.5)
Basic loss per share
40
(424.25p)
(249.84p)
Diluted loss per share
40
(424.25p)
(249.84p)
The notes on pages 219 to 276 form part of these ﬁnancial statements.
214
GROUP STATEMENT OF
COMPREHENSIVE INCOME
for the year ended 31 December 2023
Note
2023
£m
2022
£m
Loss for the year
(476.4)
(280.5)
Actuarial losses on deﬁned beneﬁt pension scheme
14
(0.7)
(2.0)
Revaluation (deﬁcit)/surplus of owner-occupied property
16
(3.9)
0.7
Deferred tax credit/(charge) on revaluation
29
1.0
(0.2)
Other comprehensive expense that will not be reclassiﬁed to proﬁt or loss
(3.6)
(1.5)
Total comprehensive expense relating to the year
(480.0)
(282.0)
The notes on pages 219 to 276 form part of these ﬁnancial statements.
Financial statements
215
Derwent London plc
Report and Accounts 2023
BALANCE SHEETS
as at 31 December 2023 (Registered No. 1819699)

|  | Group | Company
|  | 2023 | 2022 | 2023 | 2022
| Note | £m | £m | £m | £m
Non-current assets |  |  |  |  |
Investment property | 16 | 4,551.4 | 5,002.0 | – | –
Property, plant and equipment | 17 | 49.9 | 54.3 | 19.1 | 21.0
Investments | 19 | 35.8 | 43.9 | 2,189.8 | 2,224.7
Derivative ﬁnancial instruments | 25 | 2.9 | 5.0 | 2.9 | 5.0
Deferred tax | 29 | – | – | 2.6 | 3.0
Pension scheme surplus | 14 | 2.0 | 1.2 | 2.0 | 1.2
Other receivables | 20 | 201.0 | 188.1 | – | –
|  | 4,843.0 | 5,294.5 | 2,216.4 | 2,254.9
Current assets |  |  |  |  |
Trading property | 16 | 60.0 | 39.4 | – | –
Trading stock | 18 | 8.9 | 2.3 | – | –
Trade and other receivables | 21 | 42.7 | 42.4 | 2,359.1 | 1,788.0
Corporation tax asset |  | 0.4 | – | 0.3 | –
Cash and cash equivalents | 34 | 73.0 | 76.6 | 24.8 | 67.3
|  | 185.0 | 160.7 | 2,384.2 | 1,855.3
Non-current assets held for sale | 22 | – | 54.2 | – | –
Total assets |  | 5,028.0 | 5,509.4 | 4,600.6 | 4,110.2
Current liabilities |  |  |  |  |
Borrowings | 25 | 102.9 | 19.7 | 82.9 | –
Leasehold liabilities | 25 | 0.4 | 0.5 | 1.3 | 1.3
Trade and other payables | 23 | 148.0 | 148.1 | 2,009.6 | 1,707.5
Corporation tax liability |  | – | 0.9 | – | 0.9
Provisions | 24 | 0.1 | – | 0.1 | –
|  | 251.4 | 169.2 | 2,093.9 | 1,709.7
Non-current liabilities |  |  |  |  |
Borrowings | 25 | 1,233.2 | 1,229.4 | 1,053.6 | 1,048.4
Leasehold liabilities | 25 | 34.2 | 34.5 | 20.3 | 21.6
Provisions | 24 | 0.3 | 0.2 | 0.3 | 0.2
Deferred tax | 29 | 0.1 | 0.6 | – | –
|  | 1,267.8 | 1,264.7 | 1,074.2 | 1,070.2
Total liabilities |  | 1,519.2 | 1,433.9 | 3,168.1 | 2,779.9
Total net assets |  | 3,508.8 | 4,075.5 | 1,432.5 | 1,330.3
Equity |  |  |  |  |
Share capital | 30 | 5.6 | 5.6 | 5.6 | 5.6
Share premium | 31 | 196.6 | 196.6 | 196.6 | 196.6
Other reserves | 31 | 939.3 | 941.9 | 926.2 | 925.9
Retained earnings 1 | 31 | 2,367.3 | 2,931.4 | 304.1 | 202.2
Total equity |  | 3,508.8 | 4,075.5 | 1,432.5 | 1,330.3

1
Retained earnings for the Company include proﬁt for the year of £189.6m (2022: £34.3m).
The ﬁnancial statements were approved by the Board of Directors and authorised for issue on 27 February 2024.
Paul Williams
Damian Wisniewski
Chief Executive
Chief Financial Oﬃcer
The notes on pages 219 to 276 form part of these ﬁnancial statements.
216
STATEMENTS OF CHANGES IN EQUITY
for the year ended 31 December 2023

|  |  |  | Retained |
| Share capital | Share premium | Other reserves 1 | earnings | Total equity
| £m | £m | £m | £m | £m
Group |  |  |  |  |
At 1 January 2023 | 5.6 | 196.6 | 941.9 | 2,931.4 | 4,075.5
Loss for the year | – | – | – | (476.4) | (476.4)
Other comprehensive expense | – | – | (2.9) | (0.7) | (3.6)
Share-based payments | – | – | 0.3 | 1.7 | 2.0
Dividends paid | – | – | – | (88.7) | (88.7)
At 31 December 2023 | 5.6 | 196.6 | 939.3 | 2,367.3 | 3,508.8
At 1 January 2022 | 5.6 | 195.4 | 941.1 | 3,299.7 | 4,441.8
Loss for the year | – | – | – | (280.5) | (280.5)
Other comprehensive income/(expense) | – | – | 0.5 | (2.0) | (1.5)
Share-based payments | – | 1.2 | 0.3 | 1.2 | 2.7
Dividends paid | – | – | – | (87.0) | (87.0)
At 31 December 2022 | 5.6 | 196.6 | 941.9 | 2,931.4 | 4,075.5
Company |  |  |  |  |
At 1 January 2023 | 5.6 | 196.6 | 925.9 | 202.2 | 1,330.3
Proﬁt for the year | – | – | – | 189.6 | 189.6
Other comprehensive expense | – | – | – | (0.7) | (0.7)
Share-based payments | – | – | 0.3 | 1.7 | 2.0
Dividends paid | – | – | – | (88.7) | (88.7)
At 31 December 2023 | 5.6 | 196.6 | 926.2 | 304.1 | 1,432.5
At 1 January 2022 | 5.6 | 195.4 | 925.6 | 255.7 | 1,382.3
Proﬁt for the year | – | – | – | 34.3 | 34.3
Other comprehensive expense | – | – | – | (2.0) | (2.0)
Share-based payments | – | 1.2 | 0.3 | 1.2 | 2.7
Dividends paid | – | – | – | (87.0) | (87.0)
At 31 December 2022 | 5.6 | 196.6 | 925.9 | 202.2 | 1,330.3

1
See note 31.
The notes on pages 219 to 276 form part of these ﬁnancial statements.
Financial statements
217
Derwent London plc
Report and Accounts 2023
CASH FLOW STATEMENTS
for the year ended 31 December 2023

|  | Group | Company
|  |  | 2022 |  | 2022
|  | 2023 | Restated 1 | 2023 | Restated 1
| Note | £m | £m | £m | £m
Operating activities |  |  |  |  |
Cash generated from/(used in) operations | 28 | 135.3 | 148.7 | (33.7) | (29.8)
Interest received |  | 0.8 | 0.3 | 0.8 | 0.2
Interest and other ﬁnance costs paid |  | (38.1) | (37.1) | (29.2) | (28.9)
Distributions from joint ventures |  | 0.3 | – | – | –
Tax paid in respect of operating activities |  | (1.3) | (0.5) | – | –
Net cash from/(used in) operating activities |  | 97.0 | 111.4 | (62.1) | (58.5)
Investing activities |  |  |  |  |
Acquisition of properties |  | (3.8) | (137.6) | – | –
Capital expenditure 2 |  | (151.5) | (120.7) | – | –
Disposal of investment properties |  | 65.4 | 206.7 | – | –
Investment in joint ventures |  | – | (0.3) | – | –
Repayment of joint venture loans |  | 0.6 | – | – | –
Purchase of property, plant and equipment |  | (0.7) | (2.0) | (0.4) | (0.6)
VAT movement |  | (8.0) | 2.2 | – | –
Net cash used in investing activities |  | (98.0) | (51.7) | (0.4) | (0.6)
Financing activities |  |  |  |  |
Net movement in intercompany loans |  | – | – | 22.9 | 131.8
Net movement in revolving bank loans | 27 | 84.0 | (10.1) | 84.0 | (10.1)
Proceeds from other loan |  | 0.3 | 7.4 | – | –
Financial derivative termination income/(costs) | 8 | 1.8 | (0.3) | 1.8 | (0.3)
Net proceeds of share issues | 30 | – | 1.2 | – | 1.2
Dividends paid | 33 | (88.7) | (86.8) | (88.7) | (86.8)
Net cash (used in)/from ﬁnancing activities |  | (2.6) | (88.6) | 20.0 | 35.8
Decrease in cash and cash equivalents in the year |  | (3.6) | (28.9) | (42.5) | (23.3)
Cash and cash equivalents at the beginning of the year | 34 | 76.6 | 105.5 | 67.3 | 90.6
Cash and cash equivalents at the end of the year | 34 | 73.0 | 76.6 | 24.8 | 67.3

1
Prior year ﬁgures have been restated for changes in accounting policies. See note 2 for additional information.
2
Finance costs of £6.5m (2022: £7.0m) are included in capital expenditure (see note 7).
The notes on pages 219 to 276 form part of these ﬁnancial statements.
218
Financial statements
219
NOTES TO THE FINANCIAL STATEMENTS
Derwent London plc
Report and Accounts 2023
for the year ended 31 December 2023
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,
including the severe but plausible downside case.
•
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 2023 of 27.9%, the interest cover ratio of 414%, the £480m total of undrawn facilities
and cash and the fact that the average maturity of borrowings was 5.0 years at 31 December 2023. The impact of the current
economic situation, the increases to interest rates and cost inﬂation on the business and its occupiers have been considered.
Oﬃce occupation rates are also gradually increasing. The likely impact of climate change has been incorporated into the Group’s
forecasts which have also taken account of a programme of EPC upgrades across the portfolio as space becomes available. In
total, at 31 December 2023 the estimated EPC upgrade costs is £95m. Based on the Group’s forecasts, rental income would need
to decline by 65% and property values would need to fall by 53% before breaching its ﬁnancial covenants. Further information is
provided in the Group’s viability statement on page 86.
The £83m ﬁxed rate loan, which matures in October 2024, is now a current liability and therefore the Group is in a net current
liabilities position. However, as noted above, the Group has access to £480m of available undrawn facilities and cash to meet all
current liabilities as they fall due.
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 and the Company have 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 principal accounting policies are described in note 43 and are consistent with those applied in the Group’s ﬁnancial
statements for the year to 31 December 2022, 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.
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;
IAS 12 (amended) – International Tax Reform – Pillar Two Model Rules;
IFRS 17 (amended) – Insurance Contracts;
IFRS 17 (amended) and IFRS 9 – Comparative Information.
220
NOTES TO THE FINANCIAL STATEMENTS
continued
for the year ended 31 December 2023
2
Changes in accounting policies
continued
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.
IAS 1 (amended) – Classiﬁcation of liabilities as current or non-current, Non-current Liabilities with Covenants;
IFRS 10 and IAS 28 (amended) – Sale or Contribution of Assets between an Investor and its Associate or Joint Venture;
IFRS 16 (amended) – Lease Liability in a Sale and Leaseback;
IAS 7 and IFRS 7 (amended) – Supplier Finance Arrangements;
IAS 21 (amended) – Lack of Exchangeability.
Restatement – Presentation of the Statement of Cash Flows – Change from the direct method to the
indirect method
The Group and Company has made a voluntary change to its accounting policy in relation to the presentation of the cash
ﬂow statements and, as a result, the operating cash ﬂows will now be presented using the ‘indirect’ method as set out in IAS 7
Statement of Cash Flows. The alternative presentation allowed under IAS 7 known as the ‘direct’ method has been used previously.
The indirect method contains a number of adjustments including non-cash items included within the income statement and also
sets out the main working capital movements. As a result, it provides a clearer understanding of the linkages between the proﬁt/
loss from operations and the cash ﬂow from operations. It aligns more closely with practice within the real estate industry and
provides more relevant information to users of the accounts.
The Group and Company cash ﬂow statements for the year ended 31 December 2022 have been restated as shown in the table below.
There is no impact upon the main categories of cash within the cash ﬂow statements as a result of this change in presentation.

| 2022
| Group | Company
Direct method | £m | £m
Operating activities |  |
Rents received | 193.7 | –
Surrender premiums and other property income | 0.7 | –
Property expenses | (22.5) | –
Costs recoverable from tenants | (1.9) | –
Service charge balance inﬂows | 64.5 | –
Service charge balance outﬂows | (61.5) | –
Tenant deposit inﬂows | 13.9 | –
Tenant deposit outﬂows | (4.2) | –
Cash paid to and on behalf of employees | (25.1) | (25.0)
Other administrative expenses | (8.0) | (8.0)
Interest received | 0.3 | 0.2
Interest paid | (33.7) | (26.6)
Other ﬁnance costs | (3.4) | (2.3)
Other income | 4.2 | 3.2
Disposal of trading properties | 3.0 | –
Expenditure on trading properties /stock | (9.7) | –
Tax paid in respect of operating activities | (0.5) | –
VAT movement | 1.6 | –
Net cash from/(used in) operating activities | 111.4 | (58.5)

Financial statements
221
Derwent London plc
Report and Accounts 2023

| 2022 restated
| Group | Company
Indirect method | £m | £m
Operating activities |  |
Cash generated from/(used in) operations (note 28) | 148.7 | (29.8)
Interest received | 0.3 | 0.2
Interest and other ﬁnance costs paid | (37.1) | (28.9)
Tax paid in respect of operating activities | (0.5) | –
Net cash from/(used in) operating activities | 111.4 | (58.5)

| 2022 restated
| Group | Company
Note 28. Cash generated from operations | £m | £m
Loss from operations | (238.3) | (12.3)
Adjustment for non-cash items: |  |
Revaluation deﬁcit | 422.1 | –
Depreciation | 1.0 | 2.1
Lease incentive/cost spreading | (21.7) | –
Share-based payments | 2.1 | 2.2
Ground rent adjustment | (0.6) | –
Adjustment for other items: |  |
Proﬁt on disposal | (25.6) | –
Changes in working capital: |  |
Increase in receivables balance | (0.5) | (22.4)
Increase in payables balance | 19.3 | 0.6
Increase in trading property and trading stock | (9.1) | –
Cash generated from/(used in) operations | 148.7 | (29.8)

3
Significant judgements, 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. The Group’s signiﬁcant accounting policies are stated in note 43. 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 the consolidated 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. Where reasonable and measurable, the eﬀects and consequences of climate change are reﬂected
in these ﬁnancial statements and valuations. Knight Frank LLP were appointed to value the whole London-based portfolio as at
31 December 2022. More information is provided in note 16.
222
NOTES TO THE FINANCIAL STATEMENTS
continued
for the year ended 31 December 2023
3
Significant judgements, key assumptions and estimates
continued
Key sources of estimation uncertainty
continued
Impairment testing of trade receivables and lease incentive receivables
Trade receivables and accrued rental income recognised in advance of receipt are subject to impairment testing under IFRS 9
and IAS 36, respectively. 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 testing remains a key area of estimation
for the Group.
Impairment calculations have been carried out and the result is a £0.4m reduction in the provision to £4.6m. Taking account of
receivable balances written oﬀ of £2.4m, the total charge to the income statement for 2023 was £2.0m, compared to the £1.0m
credit recognised in 2022. In arriving at these estimates, the Group considered the tenants at higher risk, particularly in the retail
or hospitality sectors, those in administration or CVA, the top 50 tenants by size and also considered the remaining balances
classiﬁed by sector.
The impairment provisions are included within ‘Other receivables (non-current)’ (see note 20) and ‘Trade and other receivables’
(see note 21) as shown below:

| Other | Trade and other |
| receivables | receivables |
| (non-current) | (current) | Total
| £m | £m | £m
Lease incentive receivables before impairment | 176.8 | 20.8 | 197.6
Impairment of lease incentive receivables | (2.2) | (0.5) | (2.7)
Write-oﬀ | (0.7) | (0.1) | (0.8)
Net lease incentive included within accrued income | 173.9 | 20.2 | 194.1
Trade receivables before impairment | – | 13.9 | 13.9
Impairment of trade receivables | – | (1.0) | (1.0)
Service charge provision | – | (0.9) | (0.9)
Write-oﬀ | – | (1.6) | (1.6)
Net trade receivables | – | 10.4 | 10.4

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 £2.7m and against
trade receivable balances was £1.9m.

| Lease incentive | Lease incentive | Trade
| receivables | receivables | receivables
| (non-current) | (current) | (current)
| £m | £m | £m
Balance before impairment |  |  |
Low risk | 168.7 | 17.8 | 8.8
Medium risk | 2.8 | 1.9 | 1.8
High risk | 4.6 | 1.0 | 1.7
| 176.1 | 20.7 | 12.3
Impairment |  |  |
Low risk | – | – | –
Medium risk | (0.1) | (0.1) | (0.2)
High risk | (2.1) | (0.4) | (1.7)
| (2.2) | (0.5) | (1.9)
| 173.9 | 20.2 | 10.4

A 10% increase/decrease to the absolute probability rates of tenant default used in the impairment calculations in the year would
increase/decrease the Group’s loss for the year by £1.3m and £0.9m, respectively. This sensitivity has been performed on tenants
deemed to be medium and high risk.
Financial statements
223
Derwent London plc
Report and Accounts 2023
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 2023 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.
In July 2023, it was conﬁrmed that the Group has maintained its low risk rating following a detailed review carried out by HMRC,
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 11 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 40. 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 operating segment in that its performance is
monitored individually.
The Group’s property portfolio includes investment property, owner-occupied property and trading property and comprised 96%
oﬃce buildings
1
by value at 31 December 2023 (2022: 97%). The Directors consider that these individual properties have similar
economic characteristics and therefore have been aggregated into a single reportable segment. The remaining 4% (2022: 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

| 2023 | 2022
| Office buildings | Other | Total | Office buildings | Other | Total
| £m | £m | £m | £m | £m | £m
West End central | 123.7 | 1.7 | 125.4 | 118.3 | 1.5 | 119.8
West End borders/other | 17.3 | – | 17.3 | 16.3 | – | 16.3
City borders | 65.2 | 0.5 | 65.7 | 67.2 | 0.5 | 67.7
Provincial | – | 4.5 | 4.5 | – | 4.6 | 4.6
Gross property income (excl. joint venture) | 206.2 | 6.7 | 212.9 | 201.8 | 6.6 | 208.4
Share of joint venture gross property income | 2.2 | – | 2.2 | 2.1 | – | 2.1
| 208.4 | 6.7 | 215.1 | 203.9 | 6.6 | 210.5

A reconciliation of gross property income to gross property and other income is given in note 5.
224
NOTES TO THE FINANCIAL STATEMENTS
continued
for the year ended 31 December 2023
4
Segmental information
continued
Property portfolio

| 2023 | 2022
| Office buildings | Other | Total | Office buildings | Other | Total
| £m | £m | £m | £m | £m | £m
Carrying value |  |  |  |  |  |
West End central | 2,945.4 | 99.2 | 3,044.6 | 3,123.9 | 81.2 | 3,205.1
West End borders/other | 302.3 | – | 302.3 | 356.9 | – | 356.9
City borders | 1,228.8 | 6.7 | 1,235.5 | 1,494.5 | 10.4 | 1,504.9
Provincial | – | 75.1 | 75.1 | – | 78.7 | 78.7
Group (excl. joint venture) | 4,476.5 | 181.0 | 4,657.5 | 4,975.3 | 170.3 | 5,145.6
Share of joint venture | 34.0 | – | 34.0 | 42.6 | – | 42.6
| 4,510.5 | 181.0 | 4,691.5 | 5,017.9 | 170.3 | 5,188.2
Fair value |  |  |  |  |  |
West End central | 3,068.1 | 109.5 | 3,177.6 | 3,234.9 | 86.3 | 3,321.2
West End borders/other | 318.4 | – | 318.4 | 376.6 | – | 376.6
City borders | 1,266.3 | 6.7 | 1,273.0 | 1,534.2 | 10.4 | 1,544.6
Provincial | – | 75.7 | 75.7 | – | 79.4 | 79.4
Group (excl. joint venture) | 4,652.8 | 191.9 | 4,844.7 | 5,145.7 | 176.1 | 5,321.8
Share of joint venture | 33.8 | – | 33.8 | 42.4 | – | 42.4
| 4,686.6 | 191.9 | 4,878.5 | 5,188.1 | 176.1 | 5,364.2

A reconciliation between the fair value and carrying value of the portfolio is set out in note 16.
5
Property and other income

| 2023 | 2022
| £m | £m
Gross rental income | 212.8 | 207.0
Surrender premiums received | 0.1 | 1.1
Other property income | – | 0.3
Gross property income | 212.9 | 208.4
Trading property sales proceeds 1 | – | 1.6
Service charge income 1 | 48.5 | 34.6
Other income 1 | 4.5 | 4.2
Gross property and other income | 265.9 | 248.8
Gross rental income | 212.8 | 207.0
Movement in impairment of receivables | (2.0) | 1.0
Movement in impairment of prepayments | (0.6) | –
Service charge income 1 | 48.5 | 34.6
Service charge expenses | (55.1) | (39.7)
| (6.6) | (5.1)
Property costs | (17.4) | (14.4)
Net rental income | 186.2 | 188.5
Trading property sales proceeds 1 | – | 1.6
Trading property cost of sales | – | (1.4)
Proﬁt on trading property disposals | – | 0.2
Other property income | – | 0.3
Other income 1 | 4.5 | 4.2
Surrender premiums received | 0.1 | 1.1
Dilapidation receipts | 0.1 | 0.5
Write-down of trading property | (0.4) | (0.2)
Net property and other income | 190.5 | 194.6

1
In line with IFRS 15 Revenue from Contracts with Customers, the Group recognised a total of £53.0m (2022: £40.4m) of other income, trading property sales
proceeds and service charge income within gross property and other income.
Financial statements
225
Derwent London plc
Report and Accounts 2023
Gross rental income includes £5.9m (2022: £20.3m) 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.
6
Profit on disposal

| 2023 | 2022
| £m | £m
Investment property |  |
Gross disposal proceeds | 66.3 | 209.6
Costs of disposal | (0.7) | (3.2)
Net disposal proceeds | 65.6 | 206.4
Carrying value | (64.0) | (180.8)
Adjustment for lease costs and rents recognised in advance | (0.4) | –
Proﬁt on disposal | 1.2 | 25.6

Included within gross disposal proceeds for 2023 is £54.0m relating to the disposal of the Group’s freehold interest in
19 Charterhouse Street EC1 in January 2023, £6.8m relating to the disposal of the Group’s freehold interest in 12-16 Fitzroy Street
W1 in April 2023, and £2.8m relating to the disposal of the Group’s leasehold interest in 216-218 Blackfriars Road SE1 in May 2023.
7
Finance income and finance costs

| 2023 | 2022
| £m | £m
Finance income |  |
Net interest received on deﬁned beneﬁt pension scheme asset | (0.1) | –
Bank interest receivable | (0.8) | (0.2)
Other | – | (0.1)
Finance income | (0.9) | (0.3)
Finance costs |  |
Bank loans | 1.1 | 1.1
Non-utilisation fees | 2.2 | 2.1
Unsecured convertible bonds | 3.9 | 3.9
Unsecured green bonds | 6.7 | 6.7
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 | 2.6
Amortisation of the fair value of the secured bonds | (1.5) | (1.4)
Obligations under headleases | 1.3 | 1.1
Other | 0.3 | 0.3
Gross ﬁnance costs | 46.9 | 46.7
Less: interest capitalised | (6.5) | (7.0)
Finance costs | 40.4 | 39.7

Finance costs of £6.5m (2022: £7.0m) 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 2023 were £44.6m
(2022: £44.1m) of which £6.5m (2022: £7.0m) out of a total of £151.5m (2022: £120.7m) was included in capital expenditure on the
property portfolio in the Group cash ﬂow statement under investing activities.
226
NOTES TO THE FINANCIAL STATEMENTS
continued
for the year ended 31 December 2023
8
Financial derivative termination income/(costs)
The Group beneﬁtted from net receipts of £1.8m in the year to 31 December 2023 (2022: incurred costs of £0.3m) deferring
or terminating interest rate swaps. Included in this is £1.8m (2022: £0.3m) of receipts and £nil (2022: £0.6m) of costs.
9
Share of results of joint ventures

| 2023 | 2022
| £m | £m
Net property income | 2.2 | 2.1
Administrative expenses | (0.2) | (0.1)
Revaluation deﬁcit | (9.2) | (9.3)
| (7.2) | (7.3)

The share of results of joint ventures for the year ended 31 December 2023 includes the Group’s 50% share in the Derwent Lazari
Baker Street Limited Partnership. See note 19 for further details of the Group’s joint ventures.
10 Loss before tax

| 2023 | 2022
| £m | £m
This is arrived at after charging: |  |
Depreciation | 1.1 | 1.0
Rent payable under headleases | 2.3 | 1.7
Auditor’s remuneration: |  |
Audit – Group 1 | 0.5 | 0.5
Audit – subsidiaries | 0.1 | 0.2

1
The Group audit fee in relation to the year ended 31 December 2022 has been restated to include a cost overrun of £97,800.
In 2023, audit fees for the Group were £501,000 (2022: £497,800) and for the subsidiaries £118,500 (2022: £159,000). The prior year
comparatives include additional fees billed for scope changes and cost overruns. Fees for non-audit services, relating to the half
year review, were £70,500 (2022: £64,000) and other non-audit services were £nil (2022: £nil).
Details of the Auditor’s independence are included on page 152.
11 Directors’ emoluments

| 2023 | 2022
| £m | £m
Remuneration for management services | 3.3 | 4.1
Share-based payments | – | 0.5
Post-employment beneﬁts | 0.4 | 0.4
| 3.7 | 5.0
National insurance contributions | 0.5 | 0.7
| 4.2 | 5.7

An amount of £0.9m (2022: £0.6m) relating to the Directors is included within share-based payments expense of £2.5m (2022: £1.9m)
relating to equity-settled schemes in note 12. This is in accordance with IFRS 2 Share-based Payment.
Details of the Directors’ remuneration awards under the long-term incentive plan and options held by the Directors under
the Group share option schemes are given in the report of the Remuneration Committee on pages 172 to 197. The only key
management personnel are the Directors.
12 Employees

| Group |  | Company |
| 2023 | 2022 | 2023 | 2022
| £m | £m | £m | £m
Staﬀ costs, including those of Directors: |  |  |  |
Wages and salaries | 19.9 | 18.8 | 20.2 | 18.8
Social security costs | 2.9 | 2.7 | 2.7 | 2.6
Other pension costs | 2.6 | 2.6 | 2.3 | 2.4
Share-based payments expense relating to equity-settled schemes | 2.5 | 1.9 | 2.5 | 1.9
| 27.9 | 26.0 | 27.7 | 25.7

The monthly average number of employees in the Group during the year, excluding Directors, was 178 (2022: 166). The monthly
average number of employees in the Company during the year, excluding Directors, was 142 (2022: 140). All were employed in
administrative or support roles. Of the Group’s employees, there were 59 (2022
1
: 56) whose costs were recharged or partially
recharged to tenants via service charges.
1
The prior year number of employees whose costs were recharged or partially recharged has been adjusted from 37 to 56.
13 Share-based payments
Details of the options held by Directors under the Performance Share Plan (PSP) are given in the report of the Remuneration
Committee on page 194.
Group and Company – equity-settled option scheme
The Employee Share Option Plan (ESOP) is designed to incentivise and retain eligible employees. The ESOP is separate to the PSP
disclosed in the report of the Remuneration Committee. The Directors are not entitled to any awards under the ESOP.

| Exercise | Adjusted |  | Movement in options |  |  |
| price | exercise price 1 | Outstanding at |  |  |  | Outstanding at
Year of grant | £ | £ | 1 January | Granted | Exercised | Lapsed | 31 December
For the year to 31 December 2023 |  |  |  |  |  |  |
2013 | 21.99 | 21.09 | 250 | – | (250) | – | –
2014 | 27.39 | 26.27 | 13,443 | – | – | (1,969) | 11,474
2015 | 34.65 | 33.23 | 31,050 | – | – | (4,425) | 26,625
2016 | 31.20 | 29.93 | 33,987 | – | – | (4,946) | 29,041
2017 | 28.93 | 27.75 | 63,550 | – | – | (5,882) | 57,668
2018 | 30.29 | 29.57 | 84,417 | – | – | (5,886) | 78,531
2019 | 32.43 | 32.43 | 108,825 | – | – | (8,310) | 100,515
2020 | 30.02 | 30.02 | 147,358 | – | – | (11,172) | 136,186
2021 | 33.28 | 33.28 | 182,414 | – | – | (16,785) | 165,629
2022 | 31.10 | 31.10 | 243,341 | – | – | (20,341) | 223,000
2023 | 22.86 | 22.86 | – | 331,850 | – | (7,000) | 324,850
|  |  | 908,635 | 331,850 | (250) | (86,716) | 1,153,519
For the year to 31 December 2022 |  |  |  |  |  |  |
2013 | 21.99 | 21.09 | 4,158 | – | (3,908) | – | 250
2014 | 27.39 | 26.27 | 17,050 | – | (3,607) | – | 13,443
2015 | 34.65 | 33.23 | 35,062 | – | – | (4,012) | 31,050
2016 | 31.20 | 29.93 | 37,635 | – | (3,648) | – | 33,987
2017 | 28.93 | 27.75 | 70,553 | – | (5,212) | (1,791) | 63,550
2018 | 30.29 | 29.57 | 91,835 | – | (4,609) | (2,809) | 84,417
2019 | 32.43 | 32.43 | 124,025 | – | (5,000) | (10,200) | 108,825
2020 | 30.02 | 30.02 | 165,975 | – | – | (18,617) | 147,358
2021 | 33.28 | 33.28 | 200,829 | – | – | (18,415) | 182,414
2022 | 31.10 | 31.10 | – | 249,950 | – | (6,609) | 243,341
|  |  | 747,122 | 249,950 | (25,984) | (62,453) | 908,635

Financial statements
227
Derwent London plc
Report and Accounts 2023
228
NOTES TO THE FINANCIAL STATEMENTS
continued
for the year ended 31 December 2023
13 Share-based payments
continued
Group and Company – equity-settled option scheme
continued

| 31 December | 31 December | 1 January
| 2023 | 2022 | 2022
Number of shares: |  |  |
Exercisable | 440,040 | 335,522 | 256,293
Non-exercisable | 713,479 | 573,113 | 490,829
Weighted average exercise price of share options: |  |  |
Exercisable | £30.33 | £30.46 | £29.37
Non-exercisable | £27.86 | £31.52 | £31.96
Weighted average remaining contracted life of share options: |  |  |
Exercisable | 4.53 years | 4.72 years | 4.92 years
Non-exercisable | 8.47 years | 7.47 years | 7.30 years
Weighted average exercise price of share options that lapsed: |  |  |
Exercisable | £30.31 | £31.87 | £33.23
Non-exercisable | £30.58 | £31.51 | £31.56

1
In 2018, following the payment of the special dividend of 75 pence per share, the Remuneration Committee exercised their discretion and adjusted the number of
outstanding unapproved ‘B’ options and their option price, to ensure participants were not disadvantaged by the payment to shareholders of the special dividend.
The weighted average share price at which options were exercised during 2023 was £25.00 (2022: £33.02).
The weighted average fair value of options granted during 2023 was £5.71 (2022: £6.85).
The following information is relevant in the determination of the fair value of the options granted during 2023 and 2022 under the
equity-settled employee share plan operated by the Group.

| 2023 | 2022
Option pricing model used | Binomial lattice | Binomial lattice
Risk-free interest rate | 3.4% | 1.5%
Volatility | 28.0% | 25.0%
Dividend yield | 3.4% | 2.5%

For both the 2023 and 2022 grants, additional assumptions have been made that there is no employee turnover and 50% of
employees exercise early when the share options are 20% in the money and 50% of employees exercise early when the share
options are 100% in the money.
The volatility assumption, measured as the standard deviation of expected share price returns, is based on a statistical analysis
of daily prices over the last four years.
Group and Company – Save As You Earn scheme
The Save As You Earn (SAYE) is designed to allow employees (including Directors) to purchase shares in the Company in a tax
eﬃcient manner. The SAYE plan is an HMRC approved scheme. Employees can participate on an annual basis and save up to
£250 per month per grant. Further details are given in the report of the Remuneration Committee on page 196.
Financial statements
229
Derwent London plc
Report and Accounts 2023
14 Pension costs
The Group and Company operate both a deﬁned contribution scheme and a deﬁned beneﬁt scheme. The latter was acquired as
part of the acquisition of London Merchant Securities plc in 2007 and is closed to new members. All new employees are entitled
to join the deﬁned contribution scheme. The assets of the pension schemes are held separately from those of Group companies.
Deﬁned contribution plan
The total expense relating to this plan in the current year was £2.3m (2022: £2.3m).
Deﬁned beneﬁt plan
The Group sponsors the scheme which is a funded deﬁned beneﬁt arrangement. This is a separate trustee-administered fund
holding the pension scheme assets to meet long-term pension liabilities for past employees. The Scheme closed to future beneﬁt
accrual on 31 July 2019. The level of retirement beneﬁt is principally based on basic salary at the last scheme anniversary of
employment prior to leaving active service and increases at 5% pa in deferment.
The trustees of the scheme are required to act in the best interest of the scheme’s beneﬁciaries. The appointment of the trustees
is determined by the scheme’s trust documentation. It is policy that one third of all trustees should be nominated by the members.
A full actuarial valuation was carried out as at 31 October 2022 in accordance with the scheme funding requirements of the
Pensions Act 2004 and the funding of the scheme is agreed between the Group and the trustees in line with those requirements.
The funding valuation requires the surplus/deﬁcit to be calculated using prudent actuarial assumptions, as opposed to best
estimate assumptions required for pensions accounting purposes.
The 2022 actuarial valuation showed a deﬁcit of £2.8m. The Group agreed with the trustees that it will aim to eliminate the deﬁcit
over a period of three years and two months from 31 October 2022 by three payments of £1.4m payable by 31 December 2022,
31 December 2023 and the ﬁnal contribution by 31 December 2026. In addition, the Group has agreed with the trustees that the
Group will meet expenses of running the scheme and levies to the Pension Protection Fund separately. The estimated amount of
total employer contributions expected to be paid to the scheme during the year to 31 December 2024 is £nil (31 December 2023
actual: £1.4m).
For the purposes of IAS 19 the actuarial valuation as at 31 October 2022, which was carried out by a qualiﬁed independent actuary,
has been updated on an approximate basis to 31 December 2023.
Amounts included in the balance sheet

| 2023 | 2022 | 2021
| £m | £m | £m
Fair value of plan assets | 39.6 | 42.2 | 62.7
Present value of deﬁned beneﬁt obligation | (37.6) | (41.0) | (60.9)
Net asset | 2.0 | 1.2 | 1.8

The present value of the scheme liabilities is measured by discounting the best estimate of future cash ﬂows to be paid out by the
scheme. The value calculated in this way is reﬂected in the net asset in the balance sheet as shown above.
All actuarial gains and losses are recognised in the year in which they occur in the Group statement of comprehensive income.
Reconciliation of the impact of the asset ceiling
We have considered the application of IFRIC 14 and deemed it to have no material eﬀect on the IAS 19 ﬁgures.
Reconciliation of the opening and closing present value of the deﬁned beneﬁt obligation

| 2023 | 2022
| £m | £m
At 1 January | 41.0 | 60.9
Interest cost | 1.9 | 1.1
Actuarial gains due to scheme experience | (3.0) | –
Actuarial gains due to changes in demographic assumptions | (0.8) | –
Actuarial losses /(gains) due to changes in ﬁnancial assumptions | 1.2 | (18.4)
Beneﬁts paid, death in service premiums and expenses | (2.7) | (2.6)
At 31 December | 37.6 | 41.0

There have been no scheme amendments, curtailments or settlements in the year.
230
NOTES TO THE FINANCIAL STATEMENTS
continued
for the year ended 31 December 2023
14 Pension costs
continued
Reconciliation of opening and closing values of the fair value of plan assets

| 2023 | 2022
| £m | £m
At 1 January | 42.2 | 62.7
Interest income | 2.0 | 1.1
Return on plan assets (excluding amounts included in interest income) | (3.3) | (20.4)
Contributions by the Group | 1.4 | 1.4
Beneﬁts paid, death in service premiums and expenses | (2.7) | (2.6)
At 31 December | 39.6 | 42.2

The actual return on the plan assets including interest income over the year was a loss of £1.3m (2022: loss of £19.3m).
Deﬁned beneﬁt income recognised in the income statement

| 2023 | 2022
| £m | £m
Net interest income | (0.1) | –
Deﬁned beneﬁt income recognised in the income statement | (0.1) | –

Amounts recognised in other comprehensive income

| 2023 | 2022
| £m | £m
Loss on plan assets (excluding amounts recognised in net interest cost) | (3.3) | (20.4)
Experience gains arising on the deﬁned beneﬁt obligation | 3.0 | –
Gain from changes in the demographic assumptions underlying the present value of the deﬁned |  |
beneﬁt obligation | 0.8 | –
(Loss)/gain from changes in the ﬁnancial assumptions underlying the present value of the |  |
deﬁned beneﬁt obligation | (1.2) | 18.4
Total loss recognised in other comprehensive income | (0.7) | (2.0)

Fair value of plan assets

| 2023 | 2022 | 2021
| £m | £m | £m
UK equities | – | – | 0.6
Overseas equities | – | – | 0.6
LDI | 13.8 | 4.5 | 6.2
Buy and maintain credit | – | 2.7 | 4.1
Cash | 0.1 | 1.2 | 1.4
Other | – | 4.2 | 9.3
Insured assets | 25.7 | 29.6 | 40.5
Total assets | 39.6 | 42.2 | 62.7

Financial statements
231
Derwent London plc
Report and Accounts 2023
The £nil (2022: £4.2m) in the ‘other’ asset class is made up of holdings of £nil (2022: £2.7m) in equity-linked bonds, £nil (2022: £nil)
in global funds and £nil (2022: £1.5m) in sterling liquidity funds.
The scheme’s assets are held exclusively within instruments that are valued with inputs other than quoted prices in active markets,
but which are observable, with the exception of the holdings in insurance policies and the trustee’s bank account. The insured
assets have been set equal to the value of the insured liabilities but before allowance has been made for the impact of equalising
beneﬁts for the diﬀerent eﬀects of Guaranteed Minimum Pensions for males and females.
The scheme does not invest directly in property occupied by the Group or in ﬁnancial securities issued by the Group.
It is the policy of the trustees and the Group to review the investment strategy at the time of each funding valuation. The trustees’
investment objectives and the processes undertaken to measure and manage the risks inherent in the plan investment strategy
are illustrated by the asset allocation at 31 December 2023.
Signiﬁcant actuarial assumptions

| 2023 | 2022 | 2021
| % | % | %
Discount rate | 4.5 | 4.8 | 1.9
Inﬂation (RPI) | n/a | n/a | n/a
Salary increases | n/a | n/a | n/a
Allowance for commutation of pension for cash at retirement | 75% of Post | 75% of Post | 75% of Post
| A Day Pension | A Day Pension | A Day Pension

The mortality assumptions adopted at 31 December 2023 are 85% of the standard tables S3NXA_L, year of birth, no age rating for
males and females, projected using CMI 2022 converging to 1.25% p.a. These imply the following life expectancies:

Life expectancy at age 65 | Years
Male retiring in 2023 | 24.4
Female retiring in 2023 | 26.2
Male retiring in 2043 | 25.6
Female retiring in 2043 | 27.5

Analysis of the sensitivity to the principal assumptions of the present value of the deﬁned beneﬁt obligation

| Change in assumption | Change in liabilities
Discount rate | Decrease of 0.25% pa | Increase by 3.0%
Rate of mortality | Increase in life expectancy of one year | Increase by 5.0%

The sensitivities shown above are approximate. Each sensitivity considers one change in isolation. The average duration of the
deﬁned beneﬁt obligation at the year ended 31 December 2023 is 12 years (2022: 12 years) for the scheme as a whole or 20 years
(2022: 22 years) when only considering non-insured members.
The scheme typically exposes the Group to actuarial risks such as investment risk, interest rate risk, salary growth risk, mortality
risk and longevity risk. A decrease in corporate bond yields or an increase in life expectancy would result in an increase to the
scheme’s liabilities. This would detrimentally impact the balance sheet position and may give rise to increased charges in the
income statement. This eﬀect would be partially oﬀset by an increase in the value of the scheme’s LDI and gilt holdings.
The best estimate of contributions to be paid by the Group to the plan for the year commencing 1 January 2024 is £nil.
232
NOTES TO THE FINANCIAL STATEMENTS
continued
for the year ended 31 December 2023
15 Tax charge

| 2023 | 2022
| £m | £m
Corporation tax |  |
UK corporation tax and income tax in respect of results for the year | – | 0.5
Other adjustments in respect of prior years’ tax | – | 0.4
Corporation tax charge | – | 0.9
Deferred tax |  |
Origination and reversal of temporary diﬀerences | 0.5 | 0.1
Deferred tax charge | 0.5 | 0.1
Tax charge | 0.5 | 1.0

In addition to the tax charge of £0.5m (2022: charge of £1.0m) that passed through the Group income statement, a deferred
tax credit of £1.0m (2022: charge of £0.2m) relating to the revaluation of the owner-occupied property at 25 Savile Row W1 was
recognised in the Group statement of comprehensive income.
The eﬀective rate of tax for 2023 is lower (2022: lower) than the standard rate of corporation tax in the UK. The diﬀerences are
explained below:

| 2023 | 2022
| £m | £m
Loss before tax | (475.9) | (279.5)
Expected tax credit based on the standard rate of corporation tax in the UK of 23.50% (2022: 19.00%) 1 | (111.8) | (53.1)
Diﬀerence between tax and accounting proﬁt on disposals | 6.1 | (3.1)
REIT exempt income | (20.8) | (16.0)
Revaluation deﬁcit attributable to REIT properties | 131.7 | 78.6
Expenses and fair value adjustments not allowable for tax purposes | 2.1 | 0.4
Capital allowances | (7.6) | (6.5)
Other diﬀerences | 0.8 | 0.3
Tax charge in respect of loss before tax | 0.5 | 0.6
Adjustments in respect of prior years’ tax | – | 0.4
Tax charge | 0.5 | 1.0

1
Changes 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 enacted tax rate and this is reﬂected in these ﬁnancial
statements.
Financial statements
233
Derwent London plc
Report and Accounts 2023
16 Property portfolio

|  |  | Total | Owner- | Assets |  | Total
|  |  | investment | occupied | held for | Trading | property
| Freehold | Leasehold | property | property | sale | property | portfolio
| £m | £m | £m | £m | £m | £m | £m
Group |  |  |  |  |  |  |
Carrying value |  |  |  |  |  |  |
At 1 January 2023 | 3,700.5 | 1,301.5 | 5,002.0 | 50.0 | 54.2 | 39.4 | 5,145.6
Acquisitions | 3.8 | – | 3.8 | – | – | – | 3.8
Capital expenditure | 59.8 | 72.5 | 132.3 | – | – | 20.0 | 152.3
Interest capitalisation | 1.1 | 4.2 | 5.3 | – | – | 1.0 | 6.3
Additions | 64.7 | 76.7 | 141.4 | – | – | 21.0 | 162.4
Disposals | (7.3) | (2.5) | (9.8) | – | (54.2) | – | (64.0)
Revaluation | (477.4) | (104.1) | (581.5) | (3.9) | – | – | (585.4)
Write-down of trading property | – | – | – | – | – | (0.4) | (0.4)
Movement in grossing up of headlease liabilities | – | (0.7) | (0.7) | – | – | – | (0.7)
At 31 December 2023 | 3,280.5 | 1,270.9 | 4,551.4 | 46.1 | – | 60.0 | 4,657.5
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
Adjustments from fair value to carrying value |  |  |  |  |  |  |
At 31 December 2023 |  |  |  |  |  |  |
Fair value | 3,450.0 | 1,278.8 | 4,728.8 | 46.1 | – | 69.8 | 4,844.7
Revaluation of trading property | – | – | – | – | – | (9.8) | (9.8)
Lease incentives and costs included in receivables | (169.5) | (41.5) | (211.0) | – | – | – | (211.0)
Grossing up of headlease liabilities | – | 33.6 | 33.6 | – | – | – | 33.6
Carrying value | 3,280.5 | 1,270.9 | 4,551.4 | 46.1 | – | 60.0 | 4,657.5
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
Reconciliation of fair value |  |  |  |  |  |  |
|  |  |  |  | 2023 |  | 2022
|  |  |  |  | £m |  | £m
Portfolio including the Group’s share of joint ventures |  |  |  |  | 4,878.5 |  | 5,364.2
Less: joint ventures |  |  |  |  | (33.8) |  | (42.4)
IFRS property portfolio |  |  |  |  | 4,844.7 |  | 5,321.8

234
NOTES TO THE FINANCIAL STATEMENTS
continued
for the year ended 31 December 2023
16 Property portfolio
continued
The property portfolio is subject to semi-annual external valuations and was revalued at 31 December 2023 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 2023 were carried out by Knight Frank LLP.
Knight Frank valued properties at £4,807.9m (2022: £5,285.6m) and other valuers at £36.8m (2022: £36.2m), giving a combined
value of £4,844.7m (2022: £5,321.8m). Of the properties revalued, £46.1m (2022: £50.0m) relating to owner-occupied property
was included within property, plant and equipment and £69.8m (2022: £44.2m) 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.
Net zero carbon and EPC compliance
The Group published its pathway to net zero carbon in July 2020 and has set 2030 as its target date to achieve this. £102.4m
(year to 31 December 2022: £99.9m) of eligible ‘green’ capital expenditure, in accordance with the Group’s Green Finance
Framework, was incurred in the year to 31 December 2023 on the major developments at 80 Charlotte Street W1, Soho Place W1,
The Featherstone Building EC1, 25 Baker Street W1 and Network W1. In addition, the Group continues to hold carbon credits to
support certain externally validated green projects to oﬀset embodied carbon.
To quantify the impact of climate change on the valuation, an independent third-party assessment was carried out in 2021.
Following a review of the latest scope changes in building regulation, subsequent inﬂation, disposals, and work carried out
to date, the estimated amount was £95m at the end of 2023. Of this amount, a speciﬁc deduction of £48m was included in
the 31 December 2023 external valuation. In addition, further amounts have been allowed for in the expected costs of future
refurbishment projects. Any committed capital expenditure has been included in note 35.
Reconciliation of revaluation deﬁcit

| 2023 | 2022
| £m | £m
Total revaluation deﬁcit | (583.3) | (401.8)
Less: |  |
Share of joint ventures | 9.3 | 9.2
Lease incentives and costs | (5.8) | (23.2)
Assets held for sale selling costs | – | (2.5)
Trading property revaluation adjustment | (5.2) | (3.3)
Other | (0.8) | –
IFRS revaluation deﬁcit | (585.8) | (421.6)
Reported in the: |  |
Revaluation deﬁcit | (581.5) | (422.1)
Write-down of trading property | (0.4) | (0.2)
Group income statement | (581.9) | (422.3)
Group statement of comprehensive income | (3.9) | 0.7
| (585.8) | (421.6)

Valuation process
The valuation reports produced by the external valuers are based on information provided by the Group such as current rents,
terms and conditions of lease agreements, service charges and capital expenditure. This information is derived from the Group’s
ﬁnancial and property management systems and is subject to the Group’s overall control environment. In addition, the valuation
reports are based on assumptions and valuation models used by the external valuers. The assumptions are typically market
related, such as yields and discount rates, and are based on their professional judgement and market observation and take
into account the impact of climate change and related Environmental, Social and Governance considerations. Each property is
considered a separate asset class based on the unique nature, characteristics and risks of the property.
Financial statements
235
Derwent London plc
Report and Accounts 2023
Members of the Group’s investments team, who report to the Executive Director responsible for the valuation process, verify all
major inputs to the external valuation reports, assess the individual property valuation changes from the prior year valuation
report and hold discussions with the external valuers. When this process is complete, the valuation report is recommended to the
Audit Committee, which considers it as part of its overall responsibilities.
Valuation techniques
The fair value of the property portfolio has been determined using an income capitalisation technique, whereby contracted and
market rental values are capitalised with a market capitalisation rate. The resulting valuations are cross-checked against the
equivalent yields and the fair market values per square foot derived from comparable recent market transactions on arm’s
length terms.
For properties under construction, the fair value is calculated by estimating the fair value of the completed property using the
income capitalisation technique less estimated costs to completion and a risk premium.
These techniques are consistent with the principles in IFRS 13 Fair Value Measurement and use signiﬁcant unobservable inputs such
that the fair value measurement of each property within the portfolio has been classiﬁed as Level 3 in the fair value hierarchy.
There were no transfers between Levels 1 and 2 or between Levels 2 and 3 in the fair value hierarchy during either 2023 or 2022.
Gains and losses recorded in proﬁt or loss for recurring fair value measurements categorised within Level 3 of the fair value
hierarchy amount to a loss of £581.5m (2022: loss of £422.1m) and are presented in the Group income statement in the line item
‘revaluation deﬁcit’. The revaluation loss for the owner-occupied property of £3.9m (2022: surplus of £0.7m) was included within
the Group statement of comprehensive income.
All gains and losses recorded in proﬁt or loss in 2023 and 2022 for recurring fair value measurements categorised within Level 3
of the fair value hierarchy are attributable to changes in unrealised gains or losses relating to investment property held at
31 December 2023 and 31 December 2022, respectively.
Quantitative information about fair value measurement using unobservable inputs (Level 3)

| West End | West End | City | Provincial | Provincial |
At 31 December 2023 | central | borders/other | borders | commercial | land | Total
Valuation technique | Income | Income | Income | Income | Income |
| capitalisation | capitalisation | capitalisation | capitalisation | capitalisation |
Fair value (£m) 1 | 3,211.5 | 318.4 | 1,272.9 | 38.8 | 36.9 | 4,878.5
Area (‘000 sq ft) | 2,999 | 429 | 1,641 | 325 | – | 5,394
Range of unobservable inputs 2 : |  |  |  |  |  |
Gross ERV (per sq ft pa) |  |  |  |  |  |
Minimum | £32 | £23 | £37 | £nil | n/a 3 |
Maximum | £103 | £59 | £74 | £13 | n/a 3 |
Weighted average | £67 | £52 | £54 | £13 | n/a 3 |
Net initial yield |  |  |  |  |  |
Minimum | 3.0% | 6.4% | 2.6% | 9.5% | 0.0% |
Maximum | 8.3% | 8.3% | 6.6% | 9.5% | 1.5% |
Weighted average | 3.4% | 6.2% | 4.8% | 9.5% | 1.3% |
Reversionary yield |  |  |  |  |  |
Minimum | 3.2% | 4.6% | 3.3% | 7.2% | 0.0% |
Maximum | 10.2% | 9.0% | 7.5% | 7.2% | 1.5% |
Weighted average | 5.4% | 6.5% | 6.4% | 7.2% | 1.3% |
True equivalent yield |  |  |  |  |  |
(EPRA basis) |  |  |  |  |  |
Minimum | 3.2% | 4.3% | 5.2% | 10.5% | 0.0% |
Maximum | 6.8% | 6.9% | 6.8% | 10.5% | 0.0% |
Weighted average | 5.1% | 6.5% | 6.1% | 10.5% | 0.0% |

1
Includes the Group’s share of joint ventures.
2
Costs to complete are not deemed a signiﬁcant unobservable input by virtue of the high percentage that is already ﬁxed.
3
There is no calculation of gross ERV per sq ft pa. The land totals 5,500 acres.
236
NOTES TO THE FINANCIAL STATEMENTS
continued
for the year ended 31 December 2023
16 Property portfolio
continued
Quantitative information about fair value measurement using unobservable inputs (Level 3)
continued

| West End | West End | City | Provincial | Provincial |
At 31 December 2022 | central | borders/other | borders | commercial | land | Total
Valuation technique | Income | Income | Income | Income | Income |
| capitalisation | capitalisation | capitalisation | capitalisation | capitalisation |
Fair value (£m) 1 | 3,363.7 | 376.6 | 1,544.5 | 43.0 | 36.4 | 5,364.2
Area (‘000 sq ft) | 3,002 | 429 | 1,703 | 326 | – | 5,460
Range of unobservable inputs 2 : |  |  |  |  |  |
Gross ERV (per sq ft pa) |  |  |  |  |  |
Minimum | £28 | £23 | £30 | £nil | n/a 3 |
Maximum | £100 | £59 | £69 | £13 | n/a 3 |
Weighted average | £64 | £52 | £53 | £13 | n/a 3 |
Net initial yield |  |  |  |  |  |
Minimum | 2.8% | 2.2% | 2.3% | 8.5% | 0.0% |
Maximum | 6.4% | 6.1% | 6.4% | 8.5% | 1.3% |
Weighted average | 3.1% | 5.3% | 4.1% | 8.5% | 1.3% |
Reversionary yield |  |  |  |  |  |
Minimum | 2.8% | 4.1% | 3.4% | 6.8% | 0.0% |
Maximum | 7.1% | 6.6% | 6.3% | 6.8% | 1.3% |
Weighted average | 4.9% | 5.5% | 5.4% | 6.8% | 1.3% |
True equivalent yield |  |  |  |  |  |
(EPRA basis) |  |  |  |  |  |
Minimum | 2.8% | 3.8% | 4.1% | 9.3% | 0.0% |
Maximum | 6.4% | 5.7% | 5.7% | 9.3% | 0.0% |
Weighted average | 4.6% | 5.4% | 5.1% | 9.3% | 0.0% |

1
Includes the Group’s share of joint ventures.
2
Costs to complete are not deemed a signiﬁcant unobservable input by virtue of the high percentage that is already ﬁxed.
3
There is no calculation of gross ERV per sq ft pa. The land totals 5,500 acres.
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.
Financial statements
237
Derwent London plc
Report and Accounts 2023
A sensitivity analysis has been performed to ascertain the impact of a 25 basis point shift in true equivalent yield and a £2.50
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 |  | Provincial |
| central 1 | borders/other | City borders | commercial | Total
At 31 December 2023 |  |  |  |  |
True equivalent yield |  |  |  |  |
+25bp | (4.7%) | (3.7%) | (3.9%) | (2.3%) | (4.3%)
- 25bp | 5.2% | 4.0% | 4.3% | 2.4% | 4.7%
ERV |  |  |  |  |
+£2.50 psf | 3.8% | 4.8% | 4.6% | 18.8% | 4.3%
- £2.50 psf | (3.8%) | (4.8%) | (4.6%) | (18.8%) | (4.3%)
At 31 December 2022 |  |  |  |  |
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 |  |  |  |  |
+£2.50 psf | 3.9% | 4.8% | 4.7% | 19.3% | 4.4%
- £2.50 psf | (3.9%) | (4.8%) | (4.7%) | (19.3%) | (4.4%)

1
Includes the Group’s share of joint ventures.
Historical cost

| 2023 | 2022
| £m | £m
Investment property | 3,602.6 | 3,469.0
Owner-occupied property | 19.6 | 19.6
Assets held for sale | – | 42.5
Trading property | 81.8 | 60.8
Total property portfolio | 3,704.0 | 3,591.9

Historical cost for 2022 has been re-presented to reclassify £9.0m from assets held for sale to trading property. In addition, £9.3m
has been reclassiﬁed from investment property to trading property. This re-presentation has no impact on the total 2022 historical
cost amount previously disclosed.
238
NOTES TO THE FINANCIAL STATEMENTS
continued
for the year ended 31 December 2023
17 Property, plant and equipment

| Owner- |  |  |  |
| occupied | Right-of-use |  |  |
| property | asset | Artwork | Other | Total
| £m | £m | £m | £m | £m
Group |  |  |  |  |
At 1 January 2023 | 50.0 | – | 0.8 | 3.5 | 54.3
Additions | – | – | – | 0.6 | 0.6
Depreciation | – | – | – | (1.1) | (1.1)
Revaluation | (3.9) | – | – | – | (3.9)
At 31 December 2023 | 46.1 | – | 0.8 | 3.0 | 49.9
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
Net book value |  |  |  |  |
Cost or valuation | 46.1 | – | 0.8 | 8.4 | 55.3
Accumulated depreciation | – | – | – | (5.4) | (5.4)
At 31 December 2023 | 46.1 | – | 0.8 | 3.0 | 49.9
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
Company |  |  |  |  |
At 1 January 2023 | – | 16.8 | 0.8 | 3.4 | 21.0
Additions | – | – | – | 0.4 | 0.4
Depreciation | – | (1.2) | – | (1.1) | (2.3)
At 31 December 2023 | – | 15.6 | 0.8 | 2.7 | 19.1
At 1 January 2022 | – | 18.0 | 0.8 | 3.8 | 22.6
Additions | – | – | – | 0.6 | 0.6
Depreciation | – | (1.2) | – | (1.0) | (2.2)
At 31 December 2022 | – | 16.8 | 0.8 | 3.4 | 21.0
Net book value |  |  |  |  |
Cost or valuation | – | 21.5 | 0.8 | 8.1 | 30.4
Accumulated depreciation | – | (5.9) | – | (5.4) | (11.3)
At 31 December 2023 | – | 15.6 | 0.8 | 2.7 | 19.1
Net book value |  |  |  |  |
Cost or valuation | – | 21.5 | 0.8 | 7.7 | 30.0
Accumulated depreciation | – | (4.7) | – | (4.3) | (9.0)
At 31 December 2022 | – | 16.8 | 0.8 | 3.4 | 21.0

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 2023 was £0.9m (2022: £0.9m) and £0.9m (2022: £0.9m) in
the Company. See note 16 for the historical cost of owner-occupied property and IFRS 13 Fair Value Measurement disclosures.
Financial statements
239
Derwent London plc
Report and Accounts 2023
18 Trading stock

| Group | Company
| 2023 | 2022 | 2023 | 2022
| £m | £m | £m | £m
Trading stock | 8.9 | 2.3 | – | –

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.
19 Investments
Group
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.

| 2023 | 2022
| £m | £m
At 1 January | 43.9 | 51.1
Additions | – | 0.1
Revaluation deﬁcit | (9.2) | (9.3)
Other proﬁt from operations | 2.0 | 2.0
Repayment of joint venture loans | (0.6) | –
Distributions received | (0.3) | –
At 31 December | 35.8 | 43.9

The Group’s share of its investments in joint ventures is represented by the following amounts in the underlying joint venture entities.

| 2023 | 2022
| Joint ventures | Group share | Joint ventures | Group share
| £m | £m | £m | £m
At 1 January | 85.0 | 42.5 | 100.4 | 50.2
Additions | 1.3 | 0.6 | 3.2 | 1.6
Revaluation | (18.4) | (9.2) | (18.6) | (9.3)
Non-current assets 1 | 67.9 | 33.9 | 85.0 | 42.5
Current assets | 7.2 | 3.6 | 5.0 | 2.5
Current liabilities | (2.8) | (1.4) | (2.7) | (1.4)
Non-current liabilities | (121.0) | (60.5) | (121.0) | (60.5)
Net liabilities | (48.7) | (24.4) | (33.7) | (16.9)
Loans provided to joint ventures |  | 60.2 |  | 60.8
Total investment in joint ventures |  | 35.8 |  | 43.9
Net property income | 4.4 | 2.2 | 4.2 | 2.1
Administrative expenses | (0.4) | (0.2) | (0.3) | (0.1)
Revaluation deﬁcit | (18.4) | (9.2) | (18.5) | (9.3)
Loss for the year | (14.4) | (7.2) | (14.6) | (7.3)

1
Non-current assets for the year ended 31 December 2022 has been re-presented to provide more detail and has no impact on the total amount disclosed.
240
NOTES TO THE FINANCIAL STATEMENTS
continued
for the year ended 31 December 2023
19 Investments
continued
Company

| Subsidiaries
| £m
At 1 January 2022 | 1,749.8
Additions | 605.0
Reversal of impairment | 3.9
Impairment | (134.0)
At 31 December 2022 | 2,224.7
Additions | 135.0
Reversal of impairment | 0.2
Impairment | (170.1)
At 31 December 2023 | 2,189.8

At 31 December 2023, the carrying values of the investment in wholly owned subsidiaries were reviewed in accordance with IAS 36
Impairment of Assets on both a ‘value in use’ and ‘fair value less costs to sell’ basis. The Company’s accounting policy is to carry
investments in subsidiary undertakings at the lower of cost and recoverable amount and recognise any impairment, or reversal
thereof, in the income statement. As a result, the Company recognised a net impairment charge of £169.9m (2022: £130.1m). This
was due to property revaluation deﬁcits charged to the income statement in a number of the property investment subsidiaries
held directly or indirectly by the Company. Investment properties are held by the property investment subsidiaries with any
surpluses or deﬁcits on revaluation being reported in the income statement of those subsidiaries. The Group uses the valuation
carried out by external valuers as the fair value of its property portfolio. See note 3 for further details.
20 Other receivables (non-current)

| Group | Company
| 2023 | 2022 | 2023 | 2022
| £m | £m | £m | £m
Rents recognised in advance | 173.9 | 165.2 | – | –
Initial direct letting costs | 14.5 | 13.8 | – | –
Prepayments | 12.6 | 9.1 | – | –
Prepayments and accrued income | 201.0 | 188.1 | – | –

Prepayments and accrued income include £173.9m (2022: £165.2m) after impairments 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, £14.5m (2022: £13.8m)
relates to the spreading eﬀect of the initial direct costs of letting over the same term. Together with £22.6m (2022: £26.1m), which
was included as accrued income within trade and other receivables (see note 21), these amounts totalled £211.0m at 31 December
2023 (2022: £205.1m).
Prepayments represent £12.6m (2022: £9.1m) of costs incurred in relation to Old Street Quarter EC1. This was after a £0.6m (2022:
£nil) impairment in accordance with IAS 36 Impairment of Assets. 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 (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:

| 2023 | 2022
| £m | £m
At 1 January | 188.8 | 167.0
Amounts taken to income statement | 5.9 | 20.4
Capital incentives granted | – | 0.6
Lease incentive reversal | 0.5 | 1.0
Disposal of investment properties | (0.3) | –
Write oﬀ to bad debt | (0.8) | (0.2)
| 194.1 | 188.8
Amounts included in trade and other receivables (see note 21) | (20.2) | (23.6)
At 31 December | 173.9 | 165.2

Financial statements
241
Derwent London plc
Report and Accounts 2023
21 Trade and other receivables

| Group | Company
| 2023 | 2022 | 2023 | 2022
| £m | £m | £m | £m
Trade receivables | 10.4 | 4.9 | – | –
Amounts owed by subsidiaries | – | – | 2,327.3 | 1,759.2
Other receivables | 2.0 | 5.8 | 1.0 | 4.2
Prepayments 1 | 6.9 | 3.8 | 2.6 | 2.5
Other taxes | – | – | 4.0 | –
Accrued income 2 |  |  |  |
Rents recognised in advance | 20.2 | 23.6 | – | –
Initial direct letting costs | 2.4 | 2.5 | – | –
Other 1 | 0.8 | 1.8 | 24.2 | 22.1
| 42.7 | 42.4 | 2,359.1 | 1,788.0

1
Other accrued income for the Company for the year ended 31 December 2022 has been re-presented to include a reclassiﬁcation of £22.1m from prepayments.
2
Accrued income for the Group for the year ended 31 December 2022 has been re-presented to provide more detail and has no impact on the total amount disclosed.

| 2023 | 2022
| £m | £m
Group trade receivables are split as follows: |  |
less than three months due | 10.3 | 4.9
between three and six months due | 0.1 | –
| 10.4 | 4.9

Group trade receivables are stated net of impairment.
Amounts owed by subsidiaries are unsecured, have no ﬁxed date of repayment and are repayable on demand. These balances
have been considered as part of the full expected credit loss assessment under IFRS 9 and no impairments were determined to be
required (2022: £nil).
In response to the Group’s climate change agenda, costs of £1.1m (2022: £0.7m) 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.
The Group has £4.6m of provision for bad debts as shown below. £1.9m is included in trade receivables, £0.5m in accrued income
and £2.2m in prepayments and accrued income within other receivables (non-current) (note 20).

| 2023 | 2022
| £m | £m
Provision for bad debts |  |
At 1 January | 5.0 | 8.3
Trade receivables provision | 0.5 | (0.8)
Lease incentive provision | – | (0.2)
Service charge provision | 0.7 | (0.2)
Released | (1.6) | (2.1)
At 31 December | 4.6 | 5.0
The provision for bad debts are split as follows: |  |
less than three months due | 0.7 | 2.2
between three and six months due | 0.3 | 0.1
between six and twelve months due | 0.8 | 0.3
over twelve months due | 2.8 | 2.4
| 4.6 | 5.0

242
NOTES TO THE FINANCIAL STATEMENTS
continued
for the year ended 31 December 2023
22 Non-current assets held for sale

| 2023 | 2022
| £m | £m
Transferred from investment properties (see note 16) | – | 54.2
| – | 54.2

23 Trade and other payables

| Group | Company
| 2023 | 2022 | 2023 | 2022
| £m | £m | £m | £m
Trade payables | 0.7 | 0.4 | 0.4 | –
Amounts owed to subsidiaries | – | – | 1,992.2 | 1,685.3
Other payables 1 | 3.6 | 2.2 | 0.4 | 0.3
Other taxes | 3.3 | 11.8 | – | 4.8
Accruals | 30.5 | 35.8 | 16.4 | 16.4
Deferred income | 50.8 | 48.2 | 0.2 | 0.7
Tenant rent deposits | 27.0 | 27.3 | – | –
Service charge balances 1 | 32.1 | 22.4 | – | –
| 148.0 | 148.1 | 2,009.6 | 1,707.5

1
Other payables for the year ended 31 December 2022 has been re-presented to disaggregate service charge balances and has no impact on the total trade and
other payables amount disclosed.
Deferred income primarily relates to rents received in advance.
24 Provisions

| Group | Company
| £m | £m
At 1 January 2023 | 0.2 | 0.2
Provided in the income statement | 0.2 | 0.2
Utilised in year | – | –
At 31 December 2023 | 0.4 | 0.4
Due within one year | 0.1 | 0.1
Due after one year | 0.3 | 0.3
| 0.4 | 0.4
At 1 January 2022 | 0.6 | 0.6
Provided in the income statement | (0.2) | (0.2)
Utilised in year | (0.2) | (0.2)
At 31 December 2022 | 0.2 | 0.2
Due within one year | – | –
Due after one year | 0.2 | 0.2
| 0.2 | 0.2

The provisions in both the Group and the Company relate to national insurance that is payable on gains made by employees on
the exercise of share options granted to them. The eventual liability to national insurance is dependent on:
•
the market price of the Company’s shares at the date of exercise;
•
the number of equity share options that are exercised; and
•
the prevailing rate of national insurance at the date of exercise.
Financial statements
243
Derwent London plc
Report and Accounts 2023
25 Net debt and derivative financial instruments

| Group | Company
| 2023 | 2022 | 2023 | 2022
| £m | £m | £m | £m
Current liabilities |  |  |  |
Other loans | 20.0 | 19.7 | – | –
3.99% secured loan 2024 | 82.9 | – | 82.9 | –
| 102.9 | 19.7 | 82.9 | –
Non-current liabilities |  |  |  |
1.5% unsecured convertible bonds 2025 | 172.1 | 170.1 | – | –
6.5% secured bonds 2026 | 179.6 | 181.0 | – | –
1.875% unsecured green bonds 2031 | 346.8 | 346.4 | 346.8 | 346.4
2.68% unsecured private placement notes 2026 | 54.9 | 54.9 | 54.9 | 54.9
3.46% unsecured private placement notes 2028 | 29.9 | 29.9 | 29.9 | 29.9
4.41% unsecured private placement notes 2029 | 24.9 | 24.9 | 24.9 | 24.9
2.87% unsecured private placement notes 2029 | 92.8 | 92.7 | 92.8 | 92.7
2.97% unsecured private placement notes 2031 | 49.8 | 49.8 | 49.8 | 49.8
3.57% unsecured private placement notes 2031 | 74.8 | 74.7 | 74.8 | 74.7
3.09% unsecured private placement notes 2034 | 51.8 | 51.8 | 51.8 | 51.8
4.68% unsecured private placement notes 2034 | 74.6 | 74.6 | 74.6 | 74.6
3.99% secured loan 2024 | – | 82.7 | – | 82.7
Unsecured bank loans | 81.2 | (4.1) | 81.2 | (4.1)
Intercompany loan | – | – | 172.1 | 170.1
| 1,233.2 | 1,229.4 | 1,053.6 | 1,048.4
Borrowings | 1,336.1 | 1,249.1 | 1,136.5 | 1,048.4
Leasehold liabilities – current | 0.4 | 0.5 | 1.3 | 1.3
Leasehold liabilities – non-current | 34.2 | 34.5 | 20.3 | 21.6
Derivative ﬁnancial instruments – non-current | (2.9) | (5.0) | (2.9) | (5.0)
Gross debt | 1,367.8 | 1,279.1 | 1,155.2 | 1,066.3
Reconciliation to net debt: |  |  |  |
Gross debt | 1,367.8 | 1,279.1 | 1,155.2 | 1,066.3
Derivative ﬁnancial instruments | 2.9 | 5.0 | 2.9 | 5.0
Cash at bank excluding restricted cash (see note 34) | (13.9) | (26.9) | (11.6) | (26.4)
Net debt | 1,356.8 | 1,257.2 | 1,146.5 | 1,044.9

1.5% unsecured convertible bonds 2025
In June 2019 the Group issued £175m of convertible bonds. The unsecured instruments pay a coupon of 1.5% until June 2025 or the
conversion date, if earlier. The initial conversion price was set at £44.96 per share. In accordance with IAS 32, the equity and debt
components of the bonds are accounted for separately and the fair value of the debt component has been determined using the
market interest rate for an equivalent non-convertible bond, deemed to be 2.3%. As a result, £167.3m was recognised as a liability
in the balance sheet on issue and the remainder of the proceeds, £7.7m, which represents the equity component, was credited
to reserves. The diﬀerence between the fair value of the liability and the principal value is being amortised through the income
statement from the date of issue. Issue costs of £4.0m were allocated between equity and debt and the element relating to the
debt component is being amortised over the life of the bonds. The issue costs apportioned to equity of £0.2m were not amortised.
The fair value was determined by the ask-price of £95.25 per £100 as at 31 December 2023 (2022: £91.75 per £100), representing
Level 1 fair value measurement as deﬁned by IFRS 13 Fair Value Measurement. The carrying value at 31 December 2023 was £172.1m
(2022: £170.1m).
244
NOTES TO THE FINANCIAL STATEMENTS
continued
for the year ended 31 December 2023
25 Net debt and derivative financial instruments
continued
1.5% unsecured convertible bonds 2025
continued
Reconciliation of nominal value to carrying value:

| £m
Nominal value | 175.0
Fair value adjustment on issue allocated to equity | (7.7)
Debt component on issue | 167.3
Unamortised issue costs | (0.9)
Amortisation of fair value adjustment | 5.7
Carrying amount included in borrowings | 172.1

6.5% secured bonds 2026
As a result of the acquisition of London Merchant Securities plc in 2007, the secured bonds 2026 were included at fair value less
unamortised issue costs. This diﬀerence between fair value at acquisition and principal value is being amortised through the
income statement. The fair value at 31 December 2023 was determined by the ask-price of £101.77 per £100 (2022: £102.67
per £100), representing Level 1 fair value measurement. The carrying value at 31 December 2023 was £179.6m (2022: £181.0m).
1.875% unsecured green bonds 2031
In November 2021, the Group issued £350m of green bonds on a 10-year term maturing in 2031. The unsecured instrument pays
a coupon of 1.875% and the eﬀective interest rate is 1.934%. This represents an issue discount of £1.8m. The unsecured green
bonds 2031 are accounted for at amortised cost. The fair value at 31 December 2023 was determined by the ask-price of £79.71 per
£100 (2022: £70.63 per £100), representing Level 1 fair value measurement. The carrying value at 31 December 2023 was £346.8m
(2022: £346.4m). The £350m green bonds are used to fund qualifying ‘green’ expenditure in accordance with the Group’s Green
Finance Framework.
2.68% unsecured private placement notes 2026, 2.87% unsecured private placement notes 2029,
2.97% unsecured private placement notes 2031 and 3.09% unsecured private placement notes 2034
In October 2018, the Group arranged unsecured private placement notes, comprising £55m for 7 years, £93m for 10 years, £50m
for 12 years and £52m for 15 years. The funds were drawn on 31 January 2019. The fair values were determined by discounting
the contractual cash ﬂows by the replacement rate. The replacement rate is the sum of the current underlying gilt rate plus the
market implied margin. These represent Level 2 fair value measurement. The carrying values at 31 December 2023 were £54.9m
(2022: £54.9m), £92.8m (2022: £92.7m), £49.8m (2022: £49.8m) and £51.8m (2022: £51.8m), respectively.
3.46% unsecured private placement notes 2028 and 3.57% unsecured private placement notes 2031
In February 2016, the Group arranged unsecured private placement notes, comprising £30m for 12 years and £75m for 15 years.
The funds were drawn on 4 May 2016. The fair values were determined by discounting the contractual cash ﬂows by the
replacement rate. The replacement rate is the sum of the current underlying gilt rate plus the market implied margin. These
represent Level 2 fair value measurement. The carrying values at 31 December 2023 were £29.9m (2022: £29.9m) and £74.8m
(2022: £74.7m), respectively.
4.41% unsecured private placement notes 2029 and 4.68% unsecured private placement notes 2034
In November 2013, the Group arranged unsecured private placement notes, comprising £25m for 15 years and £75m for 20 years. The
funds were drawn on 8 January 2014. The fair values were determined by discounting the contractual cash ﬂows by the replacement
rate. The replacement rate is the sum of the current underlying gilt rate plus the market implied margin. These represent Level 2 fair
value measurement. The carrying values at 31 December 2023 were £24.9m (2022: £24.9m) and £74.6m (2022: £74.6m), respectively.
3.99% secured loan 2024
In July 2012, the Group arranged a 12¼-year secured ﬁxed rate loan. The loan was drawn on 1 August 2012. The fair value was
determined by discounting the contractual cash ﬂows by the replacement rate. The replacement rate is the sum of the current
underlying gilt rate plus the market implied margin. This represents Level 2 fair value measurement. The carrying value at
31 December 2023 was £82.9m (2022: £82.7m).
Financial statements
245
Derwent London plc
Report and Accounts 2023
Unsecured bank loans
Unsecured bank borrowings are accounted for at amortised cost. At 31 December 2023, there was £84.0m (2022: £nil) drawn on
the revolving credit facility (RCF) and the unamortised arrangement fees were £2.8m (2022: £4.1m), resulting in the carrying value
being an £81.2m credit balance (2022: debit balance of £4.1m).
The main corporate £450m RCF includes a £300m ‘green tranche’ to fund qualifying ‘green’ expenditure in accordance with the
Group’s Green Finance Framework.
As all main corporate facilities were reﬁnanced or amended recently, the fair values of the Group’s bank loans are deemed to be
approximately the same as their carrying amount, after adjusting for the unamortised arrangement fees, and represent Level 2
fair value measurement.
Undrawn committed bank facilities – maturity proﬁle

| < 1 | 1 to 2 | 2 to 3 | 3 to 4 | 4 to 5 | > 5 |
| year | years | years | years | years | years | Total
| £m | £m | £m | £m | £m | £m | £m
Group |  |  |  |  |  |  |
At 31 December 2023 | – | – | 383.5 | 82.5 | – | – | 466.0
At 31 December 2022 | – | – | – | 450.0 | 100.0 | – | 550.0
Company |  |  |  |  |  |  |
At 31 December 2023 | – | – | 383.5 | 82.5 | – | – | 466.0
At 31 December 2022 | – | – | – | 450.0 | 100.0 | – | 550.0

Other loans
Other loans consist of a £20.0m 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 £nil at 31 December 2023 (2022: £nil).
The carrying value of the loan at 31 December 2023 was £20.0m (2022: £19.7m).
Intercompany loans
The terms of the intercompany loan in the Company mirror those of the unsecured convertible bonds 2025. As with the convertible
bonds, debt and equity components of the intercompany loan have been accounted for separately, and the fair value of the debt
components is identical to that of the bonds. The carrying value of this loan at 31 December 2023 was £172.1m (2022: £170.1m).
Derivative ﬁnancial instruments
The derivative ﬁnancial instruments consist of interest rate swaps, the fair values of which represent the net present value of the
diﬀerence between the contracted ﬁxed rates and the ﬁxed rates payable if the swaps were to be replaced on 31 December 2023
for the period to the contracted expiry dates. These represent Level 2 fair value measurement.
The Group has a £20m forward-starting interest rate swap eﬀective from 2 January 2024. This swap is not included in the
31 December 2023 ﬁgures in the table below. The Group also has three interest rate swaps of £25m, £20m and £10m, respectively
which are eﬀective at 31 December 2023.
The fair values of the Group’s outstanding interest rate swaps have been estimated 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.

| Group | Company
|  | Weighted |  |  | Weighted |
|  | average |  |  | average |
| Principal | interest rate | Average life | Principal | interest rate | Average life
| £m | % | Years | £m | % | Years
At 31 December 2023 |  |  |  |  |  |
Interest rate swaps | 55.0 | 1.36 | 1.3 | 55.0 | 1.36 | 1.3
At 31 December 2022 |  |  |  |  |  |
Interest rate swaps | – | – | – | – | – | –

246
NOTES TO THE FINANCIAL STATEMENTS
continued
for the year ended 31 December 2023
25 Net debt and derivative financial instruments
continued
Secured and unsecured debt

| Group | Company
| 2023 | 2022 | 2023 | 2022
| £m | £m | £m | £m
Secured |  |  |  |
6.5% secured bonds 2026 | 179.6 | 181.0 | – | –
3.99% secured loan 2024 | 82.9 | 82.7 | 82.9 | 82.7
| 262.5 | 263.7 | 82.9 | 82.7
Unsecured |  |  |  |
1.5% unsecured convertible bonds 2025 | 172.1 | 170.1 | – | –
1.875% unsecured green bonds 2031 | 346.8 | 346.4 | 346.8 | 346.4
Unsecured private placement notes 2026 – 2034 | 453.5 | 453.3 | 453.5 | 453.3
Unsecured bank loans | 81.2 | (4.1) | 81.2 | (4.1)
Other loans | 20.0 | 19.7 | – | –
Intercompany loan | – | – | 172.1 | 170.1
| 1,073.6 | 985.4 | 1,053.6 | 965.7
Borrowings | 1,336.1 | 1,249.1 | 1,136.5 | 1,048.4

As at 31 December 2023, the Group’s secured bonds 2026 were secured by a ﬂoating charge over a number of the Group’s
subsidiary companies which contained £395.9m (2022: £448.8m) of the Group’s properties.
At 31 December 2023, the Company’s 3.99% secured loan 2024 was secured by a ﬁxed charge over £246.6m (2022: £272.8m) of
the Group’s properties.
Fixed interest rate and hedged debt
At 31 December 2023 and 31 December 2022, the Group’s ﬁxed rate and hedged debt included the unsecured convertible bonds,
the unsecured green bonds, the secured bonds, a secured loan, the unsecured private placement notes and other loans.
At 31 December 2023 and 31 December 2022, the Company’s ﬁxed rate and hedged debt included the unsecured green bonds,
a secured loan, the unsecured private placement notes and the intercompany loans.
Financial statements
247
Derwent London plc
Report and Accounts 2023
Interest rate exposure
After taking into account the various interest rate hedging instruments entered into by the Group and the Company, the interest
rate exposure of the Group’s and Company’s borrowings were:

|  |  |  |  | Weighted | Weighted
| Floating |  | Fixed |  | average | average
| rate | Hedged | rate | Borrowings | interest rate 1 | life
| £m | £m | £m | £m | % | Years
Group |  |  |  |  |  |
At 31 December 2023 |  |  |  |  |  |
1.5% unsecured convertible bonds 2025 | – | – | 172.1 | 172.1 | 2.30 | 1.4
6.5% secured bonds 2026 | – | – | 179.6 | 179.6 | 6.50 | 2.2
1.875% unsecured green bonds 2031 | – | – | 346.8 | 346.8 | 1.88 | 7.9
Unsecured private placement notes 2026 – 2034 | – | – | 453.5 | 453.5 | 3.42 | 6.6
3.99% secured loan 2024 | – | – | 82.9 | 82.9 | 3.99 | 0.8
Unsecured bank loans | 28.0 | 53.2 | – | 81.2 | 3.71 | 3.0
Other loans 2 | – | – | 20.0 | 20.0 | – | –
| 28.0 | 53.2 | 1,254.9 | 1,336.1 | 3.29 | 5.0
At 31 December 2022 |  |  |  |  |  |
1.5% unsecured convertible bonds 2025 | – | – | 170.1 | 170.1 | 2.30 | 2.4
6.5% secured bonds 2026 | – | – | 181.0 | 181.0 | 6.50 | 3.2
1.875% unsecured green bonds 2031 | – | – | 346.4 | 346.4 | 1.93 | 8.9
Unsecured private placement notes 2026 – 2034 | – | – | 453.3 | 453.3 | 3.42 | 7.7
3.99% secured loan 2024 | – | – | 82.7 | 82.7 | 3.99 | 1.8
Unsecured bank loans | (4.1) | – | – | (4.1) | – | –
Other loans | – | – | 19.7 | 19.7 | – | –
| (4.1) | – | 1,253.2 | 1,249.1 | 3.26 | 6.2
Company |  |  |  |  |  |
At 31 December 2023 |  |  |  |  |  |
1.875% unsecured green bonds 2031 | – | – | 346.8 | 346.8 | 1.88 | 7.9
Unsecured private placement notes 2026 – 2034 | – | – | 453.5 | 453.5 | 3.42 | 6.6
3.99% secured loan 2024 | – | – | 82.9 | 82.9 | 3.99 | 0.8
Unsecured bank loans | 28.0 | 53.2 | – | 81.2 | 3.71 | 3.0
Intercompany loan | – | – | 172.1 | 172.1 | 2.30 | 1.4
| 28.0 | 53.2 | 1,055.3 | 1,136.5 | 2.84 | 5.5
At 31 December 2022 |  |  |  |  |  |
1.875% unsecured green bonds 2031 | – | – | 346.4 | 346.4 | 1.93 | 8.9
Unsecured private placement notes 2026 – 2034 | – | – | 453.3 | 453.3 | 3.42 | 7.7
3.99% secured loan 2024 | – | – | 82.7 | 82.7 | 3.99 | 1.8
Unsecured bank loans | (4.1) | – | – | (4.1) | – | –
Intercompany loan | – | – | 170.1 | 170.1 | 2.30 | 2.4
| (4.1) | – | 1,052.5 | 1,048.4 | 2.78 | 6.7

1
The weighted average interest rates are based on the nominal amounts of the debt facilities.
2
Other loans shown above are interest free and have no ﬁxed repayment date. For further detail, see ‘Other loans’ section above.
248
NOTES TO THE FINANCIAL STATEMENTS
continued
for the year ended 31 December 2023
25 Net debt and derivative financial instruments
continued
Contractual undiscounted cash outﬂows
IFRS 7 Financial Instruments: Disclosure, requires disclosure of the maturity of the Group’s and Company’s remaining contractual
ﬁnancial liabilities. The tables below show the contractual undiscounted cash outﬂows arising from the Group’s gross debt.

| < 1 | 1 to 2 | 2 to 3 | 3 to 4 | 4 to 5 | > 5 |
| year | years | years | years | years | years | Total
| £m | £m | £m | £m | £m | £m | £m
Group |  |  |  |  |  |  |
At 31 December 2023 |  |  |  |  |  |  |
1.5% unsecured convertible bonds 2025 | – | 175.0 | – | – | – | – | 175.0
6.5% secured bonds 2026 | – | – | 175.0 | – | – | – | 175.0
1.875% unsecured green bonds 2031 | – | – | – | – | – | 350.0 | 350.0
Unsecured private placement notes 2026 – 2034 | – | – | 55.0 | – | 30.0 | 370.0 | 455.0
3.99% secured loan 2024 | 83.0 | – | – | – | – | – | 83.0
Unsecured bank loans | – | – | 66.5 | 17.5 | – | – | 84.0
Other loans | – | 20.0 | – | – | – | – | 20.0
Total on maturity | 83.0 | 195.0 | 296.5 | 17.5 | 30.0 | 720.0 | 1,342.0
Leasehold liabilities | 1.7 | 1.7 | 1.7 | 1.7 | 1.8 | 209.6 | 218.2
Interest on borrowings | 42.9 | 37.5 | 25.4 | 21.1 | 20.0 | 54.3 | 201.2
Eﬀect of interest rate swaps | (2.4) | (0.4) | – | – | – | – | (2.8)
Gross loan commitments | 125.2 | 233.8 | 323.6 | 40.3 | 51.8 | 983.9 | 1,758.6
At 31 December 2022 |  |  |  |  |  |  |
1.5% unsecured convertible bonds 2025 | – | – | 175.0 | – | – | – | 175.0
6.5% secured bonds 2026 | – | – | – | 175.0 | – | – | 175.0
1.875% unsecured green bonds 2031 | – | – | – | – | – | 350.0 | 350.0
Unsecured private placement notes 2026 – 2034 | – | – | – | 55.0 | – | 400.0 | 455.0
3.99% secured loan 2024 | – | 83.0 | – | – | – | – | 83.0
Other loans | – | – | 19.7 | – | – | – | 19.7
Total on maturity | – | 83.0 | 194.7 | 230.0 | – | 750.0 | 1,257.7
Leasehold liabilities | 1.8 | 1.7 | 1.7 | 1.7 | 1.8 | 211.3 | 220.0
Interest on borrowings | 39.4 | 38.8 | 34.8 | 27.1 | 20.7 | 80.3 | 241.1
Eﬀect of interest rate swaps | (1.8) | (2.4) | (1.1) | – | – | – | (5.3)
Gross loan commitments | 39.4 | 121.1 | 230.1 | 258.8 | 22.5 | 1,041.6 | 1,713.5

Financial statements
249
Derwent London plc
Report and Accounts 2023
Reconciliation to borrowings:

|  | Adjustments |
| Gross loan | Interest on | Effect of interest | Leasehold | Non-cash |
| commitments | gross debt | rate swaps | liabilities | amortisation | Borrowings
| £m | £m | £m | £m | £m | £m
Group |  |  |  |  |  |
At 31 December 2023 |  |  |  |  |  |
Maturing in: |  |  |  |  |  |
< 1 year | 125.2 | (42.9) | 2.4 | (1.7) | (0.1) | 82.9
1 to 2 years | 233.8 | (37.5) | 0.4 | (1.7) | – | 195.0
2 to 3 years | 323.6 | (25.4) | – | (1.7) | (5.4) | 291.1
3 to 4 years | 40.3 | (21.1) | – | (1.7) | 4.1 | 21.6
4 to 5 years | 51.8 | (20.0) | – | (1.8) | (0.1) | 29.9
> 5 years | 983.9 | (54.3) | – | (209.6) | (4.4) | 715.6
| 1,758.6 | (201.2) | 2.8 | (218.2) | (5.9) | 1,336.1
At 31 December 2022 |  |  |  |  |  |
Maturing in: |  |  |  |  |  |
< 1 year | 39.4 | (39.4) | 1.8 | (1.8) | – | –
1 to 2 years | 121.1 | (38.8) | 2.4 | (1.7) | (0.3) | 82.7
2 to 3 years | 230.1 | (34.8) | 1.1 | (1.7) | (4.9) | 189.8
3 to 4 years | 258.8 | (27.1) | – | (1.7) | 2.5 | 232.5
4 to 5 years | 22.5 | (20.7) | – | (1.8) | (0.7) | (0.7)
> 5 years | 1,041.6 | (80.3) | – | (211.3) | (5.2) | 744.8
| 1,713.5 | (241.1) | 5.3 | (220.0) | (8.6) | 1,249.1

| < 1 | 1 to 2 | 2 to 3 | 3 to 4 | 4 to 5 | > 5 |
| year | years | years | years | years | years | Total
| £m | £m | £m | £m | £m | £m | £m
Company |  |  |  |  |  |  |
At 31 December 2023 |  |  |  |  |  |  |
1.875% unsecured green bonds 2031 | – | – | – | – | – | 350.0 | 350.0
Unsecured private placement notes 2026 – 2034 | – | – | 55.0 | – | 30.0 | 370.0 | 455.0
3.99% secured loan 2024 | 83.0 | – | – | – | – | – | 83.0
Unsecured bank loans | – | – | 66.5 | 17.5 | – | – | 84.0
Intercompany loan | – | 175.0 | – | – | – | – | 175.0
Total on maturity | 83.0 | 175.0 | 121.5 | 17.5 | 30.0 | 720.0 | 1,147.0
Leasehold liability | 2.1 | 2.1 | 2.1 | 2.1 | 2.1 | 16.8 | 27.3
Interest on debt | 31.5 | 26.1 | 23.0 | 21.1 | 20.0 | 54.3 | 176.0
Eﬀect of interest rate swaps | (2.4) | (0.4) | – | – | – | – | (2.8)
Gross loan commitments | 114.2 | 202.8 | 146.6 | 40.7 | 52.1 | 791.1 | 1,347.5
At 31 December 2022 |  |  |  |  |  |  |
1.875% unsecured green bonds 2031 | – | – | – | – | – | 350.0 | 350.0
Unsecured private placement notes 2026 – 2034 | – | – | – | 55.0 | – | 400.0 | 455.0
3.99% secured loan 2024 | – | 83.0 | – | – | – | – | 83.0
Intercompany loan | – | – | 175.0 | – | – | – | 175.0
Total on maturity | – | 83.0 | 175.0 | 55.0 | – | 750.0 | 1,063.0
Leasehold liability | 2.1 | 2.1 | 2.1 | 2.1 | 2.1 | 18.9 | 29.4
Interest on debt | 28.1 | 27.4 | 23.4 | 21.4 | 20.7 | 80.3 | 201.3
Eﬀect of interest rate swaps | (1.8) | (2.4) | (1.1) | – | – | – | (5.3)
Gross loan commitments | 28.4 | 110.1 | 199.4 | 78.5 | 22.8 | 849.2 | 1,288.4

250
NOTES TO THE FINANCIAL STATEMENTS
continued
for the year ended 31 December 2023
25 Net debt and derivative financial instruments
continued
Contractual undiscounted cash outﬂows
continued
Reconciliation to borrowings:

|  | Adjustments |
|  |  | Effect of |  |  |
| Gross loan | Interest on | interest | Leasehold | Non-cash |
| commitments | gross debt | rate swaps | liabilities | amortisation | Borrowings
| £m | £m | £m | £m | £m | £m
Company |  |  |  |  |  |
At 31 December 2023 |  |  |  |  |  |
Maturing in: |  |  |  |  |  |
< 1 year | 114.2 | (31.5) | 2.4 | (2.1) | (0.1) | 82.9
1 to 2 years | 202.8 | (26.1) | 0.4 | (2.1) | – | 175.0
2 to 3 years | 146.6 | (23.0) | – | (2.1) | (5.4) | 116.1
3 to 4 years | 40.7 | (21.1) | – | (2.1) | (0.5) | 17.0
4 to 5 years | 52.1 | (20.0) | – | (2.1) | (0.1) | 29.9
> 5 years | 791.1 | (54.3) | – | (16.8) | (4.4) | 715.6
| 1,347.5 | (176.0) | 2.8 | (27.3) | (10.5) | 1,136.5
At 31 December 2022 |  |  |  |  |  |
Maturing in: |  |  |  |  |  |
< 1 year | 28.4 | (28.1) | 1.8 | (2.1) | – | –
1 to 2 years | 110.1 | (27.4) | 2.4 | (2.1) | (0.3) | 82.7
2 to 3 years | 199.4 | (23.4) | 1.1 | (2.1) | (4.9) | 170.1
3 to 4 years | 78.5 | (21.4) | – | (2.1) | (3.5) | 51.5
4 to 5 years | 22.8 | (20.7) | – | (2.1) | (0.7) | (0.7)
> 5 years | 849.2 | (80.3) | – | (18.9) | (5.2) | 744.8
| 1,288.4 | (201.3) | 5.3 | (29.4) | (14.6) | 1,048.4

Derivative ﬁnancial instruments cash ﬂows
The following table provides an analysis of the anticipated contractual cash ﬂows for the derivative ﬁnancial instruments using
undiscounted cash ﬂows. These amounts represent the gross cash ﬂows of the derivative ﬁnancial instruments and are settled as
either a net payment or receipt.

| 2023 | 2022
| Receivable | Payable | Receivable | Payable
| £m | £m | £m | £m
Group |  |  |  |
Maturing in: |  |  |  |
< 1 year | 3.4 | (1.0) | 2.5 | (0.7)
1 to 2 years | 0.7 | (0.3) | 3.4 | (1.0)
2 to 3 years | – | – | 1.6 | (0.5)
3 to 4 years | – | – | – | –
4 to 5 years | – | – | – | –
> 5 years | – | – | – | –
Gross contractual cash ﬂows | 4.1 | (1.3) | 7.5 | (2.2)
Company |  |  |  |
Maturing in: |  |  |  |
< 1 year | 3.4 | (1.0) | 2.5 | (0.7)
1 to 2 years | 0.7 | (0.3) | 3.4 | (1.0)
2 to 3 years | – | – | 1.6 | (0.5)
3 to 4 years | – | – | – | –
4 to 5 years | – | – | – | –
> 5 years | – | – | – | –
Gross contractual cash ﬂows | 4.1 | (1.3) | 7.5 | (2.2)

Financial statements
251
Derwent London plc
Report and Accounts 2023
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. Further information on risk
as required by IFRS 7 is given on pages 90 to 117.
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 27.9% as at 31 December 2023, but remains low relative to the UK REIT sector.
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 lease incentive receivables, applying IFRS 9 and IAS 36,
respectively. 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 50 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 an increase of £0.1m (2022: £nil) or
decrease of £0.1m (2022: £nil).
252
NOTES TO THE FINANCIAL STATEMENTS
continued
for the year ended 31 December 2023
25 Net debt and derivative financial instruments
continued
General objectives, policies and processes
continued
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 2023, the proportion of
ﬁxed debt held by the Group was above this range at 98% (2022: 100%). During both 2023 and 2022, 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 2023, the Group’s strategy, which was unchanged from 2022, 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 on pages 284
and 285 and are derived in note 42.
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 £4.2bn (2022: £4.6bn) of uncharged
property as at 31 December 2023.
Financial statements
253
Derwent London plc
Report and Accounts 2023
26 Financial assets and liabilities and fair values
Categories of ﬁnancial assets and liabilities

| Fair value | Financial | Financial |
| through profit | assets held at | liabilities held at | Total
| and loss | amortised cost | amortised cost | carrying value
| £m | £m | £m | £m
Group |  |  |  |
Financial assets |  |  |  |
Cash and cash equivalents | – | 73.0 | – | 73.0
Other assets – current 1 | – | 13.2 | – | 13.2
| – | 86.2 | – | 86.2
Financial liabilities |  |  |  |
1.5% unsecured convertible bonds 2025 | – | – | (172.1) | (172.1)
6.5% secured bonds 2026 | – | – | (179.6) | (179.6)
1.875% unsecured green bonds 2031 | – | – | (346.8) | (346.8)
Unsecured private placement notes 2026 – 2034 | – | – | (453.5) | (453.5)
3.99% secured loan 2024 | – | – | (82.9) | (82.9)
Bank borrowings due after one year | – | – | (81.2) | (81.2)
Other loans | – | – | (20.0) | (20.0)
Leasehold liabilities | – | – | (34.6) | (34.6)
Derivative ﬁnancial instruments | 2.9 | – | – | 2.9
Other liabilities – current 2 | – | – | (93.9) | (93.9)
| 2.9 | – | (1,464.6) | (1,461.7)
At 31 December 2023 | 2.9 | 86.2 | (1,464.6) | (1,375.5)
Financial assets |  |  |  |
Cash and cash equivalents | – | 76.6 | – | 76.6
Other assets – current 1 | – | 12.5 | – | 12.5
| – | 89.1 | – | 89.1
Financial liabilities |  |  |  |
1.5% unsecured convertible bonds 2025 | – | – | (170.1) | (170.1)
6.5% secured bonds 2026 | – | – | (181.0) | (181.0)
1.875% unsecured green bonds 2031 | – | – | (346.4) | (346.4)
Unsecured private placement notes 2026 – 2034 | – | – | (453.3) | (453.3)
3.99% secured loan 2024 | – | – | (82.7) | (82.7)
Bank borrowings due after one year | – | – | 4.1 | 4.1
Other loans | – | – | (19.7) | (19.7)
Leasehold liabilities | – | – | (35.0) | (35.0)
Derivative ﬁnancial instruments | 5.0 | – | – | 5.0
Other liabilities – current 2, 3 | – | – | (88.1) | (88.1)
| 5.0 | – | (1,372.2) | (1,367.2)
At 31 December 2022 | 5.0 | 89.1 | (1,372.2) | (1,278.1)

1
In 2023, other assets includes all amounts shown as trade and other receivables in note 21 except lease incentives and costs; sales and social security taxes; and
prepayments of £29.5m (2022: £29.9m) for the Group. All amounts are non-interest bearing and are receivable within one year.
2
In 2023, other liabilities include all amounts shown as trade and other payables in note 23 except deferred income and sales and social security taxes of £54.1m
(2022: £60.0m) for the Group. All amounts are non-interest bearing and are due within one year.
3
Other liabilities – current for the Group for the year ended 31 December 2022 has been adjusted to include £27.3m of tenant rent deposits (see note 23).
254
NOTES TO THE FINANCIAL STATEMENTS
continued
for the year ended 31 December 2023
26 Financial assets and liabilities and fair values
continued
Categories of ﬁnancial assets and liabilities
continued

| Fair value | Financial | Financial |
| through profit | assets held at | liabilities held at | Total carrying
| and loss | amortised cost | amortised cost | value
| £m | £m | £m | £m
Company |  |  |  |
Financial assets |  |  |  |
Cash and cash equivalents | – | 24.8 | – | 24.8
Other assets – current 1 | – | 2,352.5 | – | 2,352.5
| – | 2,377.3 | – | 2,377.3
Financial liabilities |  |  |  |
1.875% unsecured green bonds 2031 | – | – | (346.8) | (346.8)
Unsecured private placement notes 2026 – 2034 | – | – | (453.5) | (453.5)
3.99% secured loan 2024 | – | – | (82.9) | (82.9)
Bank borrowings due after one year | – | – | (81.2) | (81.2)
Intercompany loan | – | – | (172.1) | (172.1)
Leasehold liabilities | – | – | (21.6) | (21.6)
Derivative ﬁnancial instruments | 2.9 | – | – | 2.9
Other liabilities – current 2 | – | (1,992.2) | (17.2) | (2,009.4)
| 2.9 | (1,992.2) | (1,175.3) | (3,164.6)
At 31 December 2023 | 2.9 | 385.1 | (1,175.3) | (787.3)
Financial assets |  |  |  |
Cash and cash equivalents | – | 67.3 | – | 67.3
Other assets – current 1,3 | – | 1,785.5 | – | 1,785.5
| – | 1,852.8 | – | 1,852.8
Financial liabilities |  |  |  |
1.875% unsecured green bonds 2031 | – | – | (346.4) | (346.4)
Unsecured private placement notes 2026 – 2034 | – | – | (453.3) | (453.3)
3.99% secured loan 2024 | – | – | (82.7) | (82.7)
Bank borrowings due after one year | – | – | 4.1 | 4.1
Intercompany loan | – | – | (170.1) | (170.1)
Leasehold liabilities | – | – | (22.9) | (22.9)
Derivative ﬁnancial instruments | 5.0 | – | – | 5.0
Other liabilities – current 2 | – | (1,685.3) | (16.7) | (1,702.0)
| 5.0 | (1,685.3) | (1,088.0) | (2,768.3)
At 31 December 2022 | 5.0 | 167.5 | (1,088.0) | (915.5)

1
In 2023, other assets includes all amounts shown as trade and other receivables in note 21 except lease incentives and costs; sales and social security taxes; and
prepayments of £6.6m (2022: £2.5m) for the Company. All amounts are non-interest bearing and are receivable within one year.
2
In 2023, other liabilities include all amounts shown as trade and other payables in note 23 except deferred income and sales and social security taxes of £0.2m
(2022: £5.5m) for the Company. All amounts are non-interest bearing and are due within one year.
3
Other assets – current for the Company for the year ended 31 December 2022 has been adjusted to include £22.1m of accrued income (see note 21).
Reconciliation of net ﬁnancial assets and liabilities to gross debt

| Group | Company
| 2023 | 2022 | 2023 | 2022
| £m | £m | £m | £m
Net ﬁnancial assets and liabilities | (1,375.5) | (1,278.1) | (787.3) | (915.5)
Other assets – current 1 | (13.2) | (12.5) | (2,352.5) | (1,785.5)
Other liabilities – current 2 | 93.9 | 88.1 | 2,009.4 | 1,702.0
Cash and cash equivalents | (73.0) | (76.6) | (24.8) | (67.3)
Gross debt | (1,367.8) | (1,279.1) | (1,155.2) | (1,066.3)

1
Other assets – current for the Company for the year ended 31 December 2022 has been adjusted to include £22.1m reclassiﬁed from prepayments (see note 21).
2
Other liabilities – current for the Group for the year ended 31 December 2022 has been adjusted to include £27.3m of tenant rent deposits (see note 23).
Financial statements
255
Derwent London plc
Report and Accounts 2023
Fair value measurement
The table below shows the fair values, where applicable, of borrowings and derivative ﬁnancial instruments held by the Group,
together with a reconciliation to net ﬁnancial assets and liabilities. Details of inputs and valuation methods used to derive the fair
values are shown in note 25.

| Group | Company |
| Carrying value | Fair value | Carrying value | Fair value | Fair value
| £m | £m | £m | £m | hierarchy
At 31 December 2023 |  |  |  |  |
1.5% unsecured convertible bonds 2025 | (172.1) | (164.7) | – | – | Level 1
6.5% secured bonds 2026 | (179.6) | (178.1) | – | – | Level 1
1.875% unsecured green bonds 2031 | (346.8) | (279.0) | (346.8) | (279.0) | Level 1
Unsecured private placement notes 2026 – 2034 | (453.5) | (399.0) | (453.5) | (399.0) | Level 2
3.99% secured loan 2024 | (82.9) | (81.8) | (82.9) | (81.8) | Level 2
Bank borrowings due after one year | (81.2) | (84.0) | (81.2) | (84.0) | Level 2
Other loans | (20.0) | (20.0) | – | – | Level 2
Intercompany loan | – | – | (172.1) | (164.7) | Level 2
Derivative ﬁnancial instruments | 2.9 | 2.9 | 2.9 | 2.9 | Level 2
| (1,333.2) | (1,203.7) | (1,133.6) | (1,005.6) |
Amounts not fair valued: |  |  |  |  |
Cash and cash equivalents | 73.0 |  | 24.8 |  |
Other assets – current | 13.2 |  | 2,352.5 |  |
Leasehold liabilities | (34.6) |  | (21.6) |  |
Other liabilities – current | (93.9) |  | (2,009.4) |  |
Net ﬁnancial assets and liabilities | (1,375.5) |  | (787.3) |  |
At 31 December 2022 |  |  |  |  |
1.5% unsecured convertible bonds 2025 | (170.1) | (157.2) | – | – | Level 1
6.5% secured bonds 2026 | (181.0) | (179.7) | – | – | Level 1
1.875% unsecured green bonds 2031 | (346.4) | (247.3) | (346.4) | (247.3) | Level 1
Unsecured private placement notes 2026 – 2034 | (453.3) | (410.4) | (453.3) | (410.4) | Level 2
3.99% secured loan 2024 | (82.7) | (80.6) | (82.7) | (80.6) | Level 2
Bank borrowings due after one year | 4.1 | – | 4.1 | – | Level 2
Other loans | (19.7) | (19.7) | – | – | Level 2
Intercompany loan | – | – | (170.1) | (157.2) | Level 2
Derivative ﬁnancial instruments | 5.0 | 5.0 | 5.0 | 5.0 | Level 2
| (1,244.1) | (1,089.9) | (1,043.4) | (890.5) |
Amounts not fair valued: |  |  |  |  |
Cash and cash equivalents | 76.6 |  | 67.3 |  |
Other assets – current 1 | 12.5 |  | 1,785.5 |  |
Leasehold liabilities | (35.0) |  | (22.9) |  |
Other liabilities – current 2 | (88.1) |  | (1,702.0) |  |
Net ﬁnancial assets and liabilities | (1,278.1) |  | (915.5) |  |

1
Other assets – current for the Company for the year ended 31 December 2022 has been adjusted to include £22.1m of accrued income (see note 21).
2
Other liabilities – current for the Group for the year ended 31 December 2022 has been adjusted to include £27.3m of tenant rent deposits (see note 23).
The fair values of the following ﬁnancial assets and liabilities are the same as their carrying values:
•
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 2023 or 2022.
256
NOTES TO THE FINANCIAL STATEMENTS
continued
for the year ended 31 December 2023
27 Net debt to cash flow reconciliation
Net debt reconciliation
The table below shows net debt movement during the year as a result of cash ﬂows and other non-cash movements.

|  |  | Non-cash changes |
|  |  | Impact of |  |  |  |
|  |  | issue and |  |  | Transfer from |
|  |  | arrangement | Fair value | Unwind of | non-current |
| 2022 | Cash flows | costs | adjustments | discount | to current | 2023
| £m | £m | £m | £m | £m | £m | £m
Group |  |  |  |  |  |  |
Current liabilities |  |  |  |  |  |  |
Borrowings | 19.7 | 0.3 | 0.1 | – | – | 82.8 | 102.9
Leasehold liabilities | 0.5 | – | – | – | (0.1) | – | 0.4
Non-current liabilities |  |  |  |  |  |  |
Borrowings | 1,229.4 | 84.0 | 2.5 | 0.1 | – | (82.8) | 1,233.2
Leasehold liabilities | 34.5 | – | – | – | (0.3) | – | 34.2
Total liabilities from ﬁnancing activities | 1,284.1 | 84.3 | 2.6 | 0.1 | (0.4) | – | 1,370.7
Cash at bank 1 | (26.9) | 13.0 | – | – | – | – | (13.9)
Net debt | 1,257.2 | 97.3 | 2.6 | 0.1 | (0.4) | – | 1,356.8
Company |  |  |  |  |  |  |
Current liabilities |  |  |  |  |  |  |
Borrowings | – | – | 0.1 | – | – | 82.8 | 82.9
Leasehold liabilities | 1.3 | – | – | – | – | – | 1.3
Non-current liabilities |  |  |  |  |  |  |
Borrowings | 1,048.4 | 84.0 | 2.4 | 1.6 | – | (82.8) | 1,053.6
Leasehold liabilities | 21.6 | – | – | – | (1.3) | – | 20.3
Total liabilities from ﬁnancing activities | 1,071.3 | 84.0 | 2.5 | 1.6 | (1.3) | – | 1,158.1
Cash at bank 1 | (26.4) | 14.8 | – | – | – | – | (11.6)
Net debt | 1,044.9 | 98.8 | 2.5 | 1.6 | (1.3) | – | 1,146.5

1
Cash at bank excluding restricted cash (see note 34).
Financial statements
257
Derwent London plc
Report and Accounts 2023
28 Cash generated from operations
The cash ﬂow statements have been restated, with operating cash ﬂows now being presented using the ‘indirect’ method as set
out in IAS 7 Statement of Cash Flows. See note 2 Changes in accounting policies for more information.

| Group | Company
|  | 2022 |  | 2022
| 2023 | Restated 1 | 2023 | Restated 1
| £m | £m | £m | £m
Loss from operations | (428.9) | (238.3) | (12.7) | (12.3)
Adjustment for non-cash items: |  |  |  |
Revaluation deﬁcit | 581.5 | 422.1 | – | –
Depreciation | 1.1 | 1.0 | 2.3 | 2.1
Lease incentive/cost spreading | (6.6) | (21.7) | – | –
Share-based payments | 2.5 | 2.1 | 2.5 | 2.2
Ground rent adjustment | 0.3 | (0.6) | – | –
Adjustment for other items: |  |  |  |
Proﬁt on disposal | (1.2) | (25.6) | – | –
Changes in working capital: |  |  |  |
Increase in receivables balance | (3.7) | (0.5) | (24.3) | (22.4)
Increase in payables balance | 17.5 | 19.3 | (1.5) | 0.6
Increase in trading property and trading stock | (27.2) | (9.1) | – | –
Cash generated from/(used in) operations | 135.3 | 148.7 | (33.7) | (29.8)

1
Prior year ﬁgures have been restated for changes in accounting policies. See note 2 for additional information.
Group cash generated from operations includes £nil (2022: £3.0m) inﬂow from disposal of trading properties and £24.7m
(2022: £9.7m) outﬂow in relation to expenditure on trading properties and stock.
29 Deferred tax

| Revaluation | Other | Total
| £m | £m | £m
Group |  |  |
At 1 January 2023 | 3.7 | (3.1) | 0.6
Charged to the income statement | 0.1 | 0.4 | 0.5
Credited to other comprehensive income | (1.0) | – | (1.0)
At 31 December 2023 | 2.8 | (2.7) | 0.1
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
Company |  |  |
At 1 January 2023 | – | (3.0) | (3.0)
Charged to the income statement | – | 0.4 | 0.4
At 31 December 2023 | – | (2.6) | (2.6)
At 1 January 2022 | – | (3.6) | (3.6)
Credited to the income statement | – | (0.1) | (0.1)
Charged to equity | – | 0.7 | 0.7
At 31 December 2022 | – | (3.0) | (3.0)

258
NOTES TO THE FINANCIAL STATEMENTS
continued
for the year ended 31 December 2023
29 Deferred tax
continued
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.
Where applicable, deferred tax assets in the Company have been recognised in respect of all tax losses and other temporary
diﬀerences where the Directors believe it is probable that these assets will be recovered.
30 Share capital
The movement in the number of 5p ordinary shares in issue is shown in the table below:

Number of shares in issue fully paid | Number
At 1 January 2022 | 112,208,510
Issued as a result of awards vesting under the Group’s Performance Share Plan | 39,614
Issued as a result of the exercise of share options 1, 2 | 42,555
At 31 December 2022 | 112,290,679
Issued as a result of the exercise of share options 1 | 250
At 31 December 2023 | 112,290,929

1
Proceeds from these issues were £nil (2022: £1.2m).
2
The number of shares issued as a result of the exercise of share options in 2022 has been re-presented to include an additional 16,571 shares issued in relation to SAYE.
The number of outstanding share options and other share awards granted are disclosed in the report of the Remuneration
Committee and note 13.
31 Reserves
The following describes the nature and purpose of each reserve within shareholders’ equity:

Reserve Description and purpose |
Share premium | Amount subscribed for share capital in excess of nominal value less directly attributable issue costs.
Other reserves: |
Merger | Premium on the issue of shares as equity consideration for the acquisition of London Merchant Securities plc (LMS).
Revaluation | Revaluation of the owner-occupied property and the associated deferred tax.
Other | Equity portion of the convertible bonds for the Group and intercompany loans for the Company.
| Fair value of equity instruments granted but not yet exercised under share-based payments.
Retained | Cumulative net gains and losses recognised in the Group income statement together with other items such
earnings as dividends. |

| Group | Company
| 2023 | 2022 | 2023 | 2022
Other reserves | £m | £m | £m | £m
Merger reserve | 910.5 | 910.5 | 910.5 | 910.5
Revaluation reserve | 13.1 | 16.0 | – | –
Equity portion of the convertible bonds | 7.5 | 7.5 | – | –
Equity portion of long-term intercompany loan | – | – | 7.5 | 7.5
Fair value of equity instruments under share-based payments | 8.2 | 7.9 | 8.2 | 7.9
| 939.3 | 941.9 | 926.2 | 925.9

Financial statements
259
Derwent London plc
Report and Accounts 2023
32 Profit for the year attributable to members of Derwent London plc
Company retained earnings includes a proﬁt of £189.6m (2022: £34.3m) for the year. The Company has taken advantage of the
exemption allowed under section 408 of the Companies Act 2006 and has not presented its own income statement in these
ﬁnancial statements.
33 Dividend

|  | Dividend per share |  |
| Payment | PID | Non-PID | Total | 2023 | 2022
| date | p | p | p | £m | £m
Current year |  |  |  |  |  |
2023 ﬁnal dividend 1 | 31 May 2024 | 39.00 | 16.00 | 55.00 | – | –
2023 interim dividend | 13 October 2023 | 24.50 | – | 24.50 | 27.5 | –
|  | 63.50 | 16.00 | 79.50 | 27.5 | –
Prior year |  |  |  |  |  |
2022 ﬁnal dividend | 2 June 2023 | 38.50 | 16.00 | 54.50 | 61.2 | –
2022 interim dividend | 14 October 2022 | 24.00 | – | 24.00 | – | 26.9
|  | 62.50 | 16.00 | 78.50 | 61.2 | 26.9
2021 ﬁnal dividend | 1 June 2022 | 35.50 | 18.00 | 53.50 | – | 60.1
Dividends as reported in the Group |  |  |  |  |  |
statement of changes in equity |  |  |  |  | 88.7 | 87.0
2023 interim dividend withholding tax | 12 January 2024 |  |  |  | (3.7) | –
2022 interim dividend withholding tax | 13 January 2023 |  |  |  | 3.7 | (3.7)
2021 interim dividend withholding tax | 14 January 2022 |  |  |  | – | 3.5
Dividends paid as reported in the Group |  |  |  |  |  |
cash ﬂow statement |  |  |  |  | 88.7 | 86.8

1
Subject to shareholder approval at the AGM on 10 May 2024.
34 Cash and cash equivalents

| Group | Company
| 2023 | 2022 | 2023 | 2022
| £m | £m | £m | £m
Cash at bank | 13.9 | 26.9 | 11.6 | 26.4
Cash held in restricted accounts: |  |  |  |
Tenant rent deposits | 27.0 | 27.3 | 8.3 | 27.3
Service charge balances | 32.1 | 22.4 | 4.9 | 13.6
| 73.0 | 76.6 | 24.8 | 67.3

35 Capital commitments
Contracts for capital expenditure entered into by the Group at 31 December 2023 and not provided for in the accounts relating
to the construction, development or enhancement of the Group’s investment properties amounted to £156.0m (2022: £147.3m),
whilst that relating to the Group’s trading properties amounted to £77.6m (2022: £87.9m). At 31 December 2023 and 31 December
2022, there were no material contractual obligations for the purchase, repair or maintenance of investment or trading properties.
260
NOTES TO THE FINANCIAL STATEMENTS
continued
for the year ended 31 December 2023
36 Contingent liabilities
In May 2022, Derwent London exchanged a conditional contract to acquire the freehold of the Old Street Quarter site, the existing
site of the Moorﬁelds Eye Hospital and the UCL Institute of Ophthalmology. Consideration for the site has been agreed as £239m
before costs, subject to receipt of ﬁnal Treasury approval (received in February 2023), delivery of the new hospital at St Pancras
and subsequent vacant possession of the Old Street Quarter island site.
In 2021, the Group entered into a 50:50 joint venture with Lazari Investments Limited, Derwent Lazari Baker Street Limited
Partnership (see note 19). Subject to receiving planning on a scheme which includes the three leasehold properties within the joint
venture and a fourth property owned by the freeholder, and a regear of the headlease, up to £7.3m of additional consideration is
payable to Lazari Investments Limited upon certain minimum planning areas being achieved.
The Company and its subsidiaries are party to cross guarantees securing certain bank loans. At 31 December 2023 and
31 December 2022, there was no liability that could arise for the Company from the cross guarantees.
37 Leases

| 2023 | 2022
| £m | £m
Operating lease receipts |  |
Minimum lease receipts under non-cancellable operating leases to be received: |  |
not later than one year | 205.6 | 200.8
later than one year and not later than ﬁve years | 676.2 | 642.3
later than ﬁve years | 809.6 | 884.1
| 1,691.4 | 1,727.2

| Group | Company
| 2023 | 2022 | 2023 | 2022
| £m | £m | £m | £m
Headlease obligations |  |  |  |
Minimum lease payments under headleases that fall due: |  |  |  |
not later than one year | 1.7 | 1.8 | 2.1 | 2.1
later than one year and not later than ﬁve years | 6.9 | 6.9 | 8.4 | 8.4
later than ﬁve years | 209.6 | 211.3 | 16.8 | 18.9
| 218.2 | 220.0 | 27.3 | 29.4
Future ﬁnance charges on headleases | (183.6) | (185.0) | (5.7) | (6.5)
Present value of headlease liabilities | 34.6 | 35.0 | 21.6 | 22.9
Present value of minimum headlease obligations: |  |  |  |
not later than one year | 0.4 | 0.5 | 1.3 | 1.3
later than one year and not later than ﬁve years | 1.8 | 1.7 | 5.7 | 5.5
later than ﬁve years | 32.4 | 32.8 | 14.6 | 16.1
| 34.6 | 35.0 | 21.6 | 22.9

The Group has approximately 644 leases granted to its tenants. These vary dependent on the individual tenant and the respective
property and demise but typically are let for a term of ﬁve to 20 years, at a market rent with provisions to review to market rent
every ﬁve years. Standard lease provisions include service charge payments and recovery of other direct costs. The weighted
average lease length of the leases commencing during 2023 was 8.6 years (2022: 8.1 years). Of these leases, on a weighted
average basis, 84% (2022: 94%) included a rent-free or half-rent period.
Financial statements
261
Derwent London plc
Report and Accounts 2023
38 List of subsidiaries and joint ventures
A full list of subsidiaries and joint ventures as at 31 December 2023 is set out below.
Audit exemption taken for subsidiaries
Certain UK subsidiaries are exempt from the requirement of the Companies Act 2006 relating to the audit of individual accounts
by virtue of Section 479A of the Act. These subsidiaries are identiﬁed in the table below (superscript/footnote 2):

| Company number | Ownership 3 | Principal activity
Subsidiaries |  |  |
Asta Commercial Limited | 09644973 | 100% | Property investment
Bargate Quarter Limited | 04307168 | 65% | Investment company
BBR Property Limited 1 | 08486476 | 100% | Dormant
Caledonian Properties Limited 2 | 00669924 | 100% | Property investment
Caledonian Property Estates Limited 2 | 07412270 | 100% | Property investment
Caledonian Property Investments Limited 2 | 00669923 | 100% | Property investment
Carlton Construction & Development Company Limited | 00538216 | 100% | Dormant
Central London Commercial Estates Limited | 00656914 | 100% | Property investment
Charlotte Apartments Limited 2 | 09642563 | 100% | Property investment
80 Charlotte Street Limited 1, 2 | 10579271 | 100% | Property investment
Derwent Asset Management Limited 1, 2 | 07325387 | 100% | Property management
Derwent Central Cross Limited 1, 2 | 07320070 | 100% | Property investment
Derwent Henry Wood Limited 1 | 07412653 | 100% | Property investment
Derwent London Angel Building Limited | 13247175 | 100% | Property investment
Derwent London AD Limited 1 | 13227143 | 100% | Dormant
Derwent London Asta Limited | 09643005 | 100% | Property trading
Derwent London Asta Residential Limited | 11253423 | 100% | Property investment
Derwent London Baker Street Limited | 00806862 | 100% | Property investment
Derwent London BH Limited 1, 2 | 13136439 | 100% | Property investment
Derwent London Brixton Limited 1, 2 | 12405614 | 100% | Property investment
Derwent London BSP Limited 2 | 13635308 | 100% | Property investment
Derwent London Capital No. 3 (Jersey) Limited 1 | 00129106 | 100% | Finance company
Derwent London Development Services Limited 1 | 09850541 | 100% | Development services
Derwent London Farringdon Limited 1 | 09310500 | 100% | Property investment
Derwent London Featherstone Limited 1, 2 | 11296132 | 100% | Property investment
Derwent London Gallery Limited 1, 2 | 12752908 | 100% | Property investment
Derwent London George Street Limited 1 | 13034088 | 100% | Property trading
Derwent London Green Energy Limited 1, 2 | 12824452 | 100% | Energy production
Derwent London Holden House Limited 1, 2 | 11325906 | 100% | Property investment
Derwent London Holford Works Limited 1, 2 | 13302967 | 100% | Property investment
Derwent London Horseferry Limited 1, 2 | 13136399 | 100% | Property investment
Derwent London KSW Limited 1 | 08802313 | 100% | Property investment
Derwent London Member Services Limited 2 | 14958936 | 100% | Events & catering services
Derwent London No.2 Limited 1, 2 | 13136412 | 100% | Property investment
Derwent London No.4 Limited 1 | 13655681 | 100% | Property investment
Derwent London No.5 Limited 1, 2 | 13906854 | 100% | Property investment
Derwent London No.6 Limited 1 | 14009618 | 100% | Property investment
Derwent London Oliver’s Yard Limited 1 | 10775826 | 100% | Property investment
Derwent London Page Street (Nominee) Limited | 07540717 | 100% | Dormant
Derwent London Page Street Limited 1, 2 | 07540699 | 100% | Property investment
Derwent London Savile Row Limited 1, 2 | 12902975 | 100% | Property investment
Derwent London White Chapel Limited 1 | 13136446 | 100% | Property investment
Derwent London White Collar Limited 1, 2 | 13136415 | 100% | Property investment

262
NOTES TO THE FINANCIAL STATEMENTS
continued
for the year ended 31 December 2023

| Company number | Ownership 3 | Principal activity
Subsidiaries continued |  |  |
Derwent London Whitﬁeld Street Limited 1 | 10775868 | 100% | Property investment
Derwent Valley Central Limited 1 | 00205226 | 100% | Property investment
Derwent Valley Employee Trust Limited 1, 2 | 04177132 | 100% | Employee trust
Derwent Valley Finance Limited 2 | 05622597 | 100% | Investment holding
Derwent Valley Limited | 00445037 | 100% | Holding company
Derwent Valley London Limited 1 | 00229333 | 100% | Property investment
Derwent Valley Property Developments Limited 1 | 02148266 | 100% | Property investment
Derwent Valley Property Investments Limited 1, 2 | 01885847 | 100% | Property investment
Derwent Valley Property Trading Limited 1 | 03087749 | 100% | Property trading
Derwent Valley Railway Company 1 |  | 100% | Dormant
Derwent Valley West End Limited 1, 2 | 02035801 | 100% | Property investment
Kensington Commercial Property Investments Limited | 00590078 | 100% | Property investment
LMS (City Road) Limited 2 | 05642456 | 100% | Property investment
LMS Finance Limited 2 | 05622669 | 100% | Investment holding
LMS Oﬃces Limited 2 | 05308784 | 100% | Property investment
London Merchant Securities Limited 1 | 00007064 | 100% | Holding company
The New River Company Limited | 00085094 | 100% | Property investment
Urbanﬁrst Limited | 02213216 | 100% | Investment holding
West London & Suburban Property Investments Limited | 00538148 | 100% | Property investment
Joint ventures |  |  |
Derwent Lazari Baker Street GP Limited | 13644777 | 50% | Management company
Derwent Lazari Baker Street Limited Partnership | LP022112 | 50% | Property investment
Dorrington Derwent Holdings Limited | 02355611 | 50% | Holding company
Dorrington Derwent Investments Limited | 02359387 | 50% | Investment company
Prescot Street GP Limited | 09347783 | 50% | Management company
Prescot Street Limited Partnership | LP016484 | 50% | Property investment
Prescot Street Nominees Limited | 09347776 | 50% | Dormant
Primister Limited | 02068292 | 50% | Property investment

1
Indicates subsidiary undertakings held directly.
2
Exempt from the requirement of the Companies Act 2006 relating to the audit of individual accounts by virtue of Section 479A of the Act.
3
All holdings are of ordinary shares.
The Company controls 50% of the voting rights of its joint ventures, which are accounted for and disclosed in accordance with
IFRS 11 Joint Arrangements.
All of the entities above are incorporated and domiciled in England and Wales, with the exception of Derwent London Capital
No. 3 (Jersey) Limited which is incorporated and domiciled in Jersey. In addition, all the entities are registered at 25 Savile Row,
London, W1S 2ER, with the exception of:
•
Derwent London Capital No. 3 (Jersey) Limited, which is registered at 47 Esplanade, St Helier, JE1 0BD, Channel Islands;
•
Dorrington Derwent Holdings Limited and Dorrington Derwent Investments Limited, which are registered at 16 Hans Road,
London, SW3 1RT; and
•
Primister Limited, which is registered at Quadrant House, Floor 6, 4 Thomas More Square, London, E1W 1YW.
39 Related party disclosure
Details of Directors’ remuneration are given in the report of the Remuneration Committee on pages 172 to 197 and note 11.
Details of transactions with joint ventures are shown in note 19. A full list of subsidiaries and joint ventures is given in note 38.
Other related party transactions are as follows:
Group
The Group earned fees of £0.5m (2022: £0.5m) in relation to development management, asset management and administration
of the Derwent Lazari Baker Street Limited Partnership.
Financial statements
263
Derwent London plc
Report and Accounts 2023
Company
The Company received interest from and paid interest to some of its subsidiaries during the year. These transactions are
summarised below:

| Interest income/(expense) | Balance receivable/(payable)
| 2023 | 2022 | 2023 | 2022
| £m | £m | £m | £m
Related party |  |  |  |
80 Charlotte Street Limited | 10.3 | 9.3 | 271.0 | 270.7
Derwent Asset Management Limited | – | – | (1.0) | (1.1)
Derwent Central Cross Limited | 6.6 | 6.6 | 171.5 | 174.3
Derwent Henry Wood Limited | – | (0.2) | (1.3) | (3.5)
Derwent London AD Limited | – | – | (5.0) | (5.0)
Derwent London Angel Building Limited | – | – | (4.8) | –
Derwent London BH Limited | (1.3) | (0.3) | (21.4) | (45.8)
Derwent London Brixton Limited | 0.6 | 1.1 | 15.0 | 12.1
Derwent London BSP Limited | 1.4 | 1.3 | 37.1 | 35.7
Derwent London Capital No. 3 (Jersey) Limited 1 | (3.9) | (3.9) | (172.2) | (170.2)
Derwent London Development Services Limited | 3.7 | 2.1 | 158.9 | 30.4
Derwent London Farringdon Limited | (1.0) | (0.7) | (28.7) | (24.8)
Derwent London Featherstone Limited | 1.2 | 1.0 | 27.4 | 34.6
Derwent London Gallery Limited | – | – | 0.8 | 0.4
Derwent London George Street Limited | – | (0.1) | 11.6 | 8.1
Derwent London Green Energy Limited | – | – | (3.5) | (3.9)
Derwent London Holden House Limited | 1.5 | 3.1 | 29.9 | 46.1
Derwent London Holford Works Limited | 0.5 | 0.6 | 11.1 | 16.2
Derwent London Horseferry Limited | 2.3 | – | 123.2 | –
Derwent London KSW Limited | (4.3) | (4.1) | (114.9) | (110.6)
Derwent London No.2 Limited | 1.7 | 3.4 | 33.5 | 56.3
Derwent London No.4 Limited | 1.4 | 1.3 | 35.1 | 37.0
Derwent London No.5 Limited | (0.1) | – | (20.2) | (17.3)
Derwent London No.6 Limited | 0.2 | – | 4.9 | 3.1
Derwent London Oliver’s Yard Limited | 0.3 | 2.6 | (1.2) | 18.1
Derwent London Savile Row Limited | – | – | – | (0.5)
Derwent London White Chapel Limited | 2.1 | 1.2 | 40.9 | 64.6
Derwent London White Collar Limited | 4.4 | – | 229.0 | (2.0)
Derwent London Whitﬁeld Street Limited | 1.6 | 1.7 | 44.8 | 45.5
Derwent Valley Central Limited | (2.8) | 3.6 | (99.6) | (20.0)
Derwent Valley London Limited | 7.4 | 4.4 | 238.5 | 150.5
Derwent Valley Property Developments Limited | (6.6) | (8.1) | (128.0) | (223.1)
Derwent Valley Property Investments Limited | (5.1) | (4.8) | (137.3) | (131.2)
Derwent Valley Property Trading Limited | 0.1 | 0.1 | 4.8 | 2.5
Derwent Valley Railway Company 2 | – | – | (0.2) | (0.2)
Derwent Valley West End Limited | (0.1) | (0.1) | (4.0) | (3.8)
London Merchant Securities Limited 3 | (17.7) | (10.9) | (582.7) | (339.5)
| 4.4 | 10.2 | 163.0 | (96.3)

1
The payable balance at 31 December 2023 includes the intercompany loan of £172.1m (2022: £170.1m) included in note 25.
2
Dormant company.
3
Balance owed includes subsidiaries which form part of the LMS sub-group.
The Company has not made any provision for bad or doubtful debts in respect of related party debtors. Intercompany balances
are repayable on demand except the loan from Derwent London Capital No. 3 (Jersey) Limited, the payment and repayment
terms of which mirror those of the convertible bonds.
Interest is charged on the on-demand intercompany balances at an arm’s length basis.
264
NOTES TO THE FINANCIAL STATEMENTS
continued
for the year ended 31 December 2023
40 EPRA performance measures and core recommendations
Unaudited unless stated otherwise.
Summary table of EPRA performance measures

| 2023 | 2022
|  | Pence |  | Pence
|  | per share |  | per share
|  | p |  | p
EPRA earnings (audited) | £114.5m | 101.97 | £119.7m | 106.62
EPRA Net Tangible Assets (audited) | £3,522.1m | 3,129 | £4,083.7m | 3,632
EPRA Net Disposal Value (audited) | £3,649.6m | 3,243 | £4,236.2m | 3,768
EPRA Net Reinstatement Value (audited) | £3,852.9m | 3,423 | £4,447.4m | 3,956
EPRA Cost Ratio (including direct vacancy costs) | 27.3% |  | 23.3% |
EPRA Cost Ratio (excluding direct vacancy costs) | 22.3% |  | 19.5% |
EPRA Net Initial Yield | 4.3% |  | 3.7% |
EPRA ‘topped-up’ Net Initial Yield | 5.2% |  | 4.6% |
EPRA Vacancy Rate | 4.0% |  | 6.4% |

The deﬁnition of these measures can be found on pages 283 and 284.
Number of shares

| Earnings per share | Net asset value per share
| Weighted average | At 31 December
| 2023 | 2022 | 2023 | 2022
| Audited | Audited | Audited | Audited
| ‘000 | ‘000 | ‘000 | ‘000
For use in basic measures | 112,291 | 112,270 | 112,291 | 112,291
Dilutive eﬀect of share-based payments | 243 | 142 | 257 | 138
For use in diluted measures | 112,534 | 112,412 | 112,548 | 112,429

The £175m unsecured convertible bonds 2025 (‘2025 bonds’) have an initial conversion price set at £44.96.
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 2022 and 2023, 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.
B –
Revaluation movement on investment property, in joint ventures and other interests, write-down of trading property and
associated deferred tax.
C –
Fair value movement and termination costs relating to derivative ﬁnancial instruments.
Financial statements
265
Derwent London plc
Report and Accounts 2023
Earnings and earnings per share

|  | Adjustments |
| IFRS | A | B | C | EPRA basis
| £m | £m | £m | £m | £m
Year ended 31 December 2023 (audited) |  |  |  |  |
Net property and other income | 190.5 | – | 1.0 | – | 191.5
Total administrative expenses | (39.1) | – | – | – | (39.1)
Revaluation deﬁcit | (581.5) | – | 581.5 | – | –
Proﬁt on disposal of investments | 1.2 | (1.2) | – | – | –
Net ﬁnance costs | (39.5) | – | – | – | (39.5)
Movement in fair value of derivative ﬁnancial |  |  |  |  |
instruments | (2.1) | – | – | 2.1 | –
Financial derivative termination income | 1.8 | – | – | (1.8) | –
Share of results of joint ventures | (7.2) | – | 9.2 | – | 2.0
Loss before tax | (475.9) | (1.2) | 591.7 | 0.3 | 114.9
Tax charge | (0.5) | – | 0.1 | – | (0.4)
(Loss)/earnings attributable to equity shareholders | (476.4) | (1.2) | 591.8 | 0.3 | 114.5
(Loss)/earnings per share | (424.25p) |  |  |  | 101.97p
Diluted (loss)/earnings per share | (424.25p) |  |  |  | 101.75p

The diluted loss per share for the period to 31 December 2023 was restricted to a loss of 424.25p per share, as the loss per share
cannot be reduced by dilution in accordance with IAS 33 Earnings per Share.

|  | Adjustments |
| IFRS | A | B | C | EPRA basis
| £m | £m | £m | £m | £m
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)
(Loss)/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 2022 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.
266
NOTES TO THE FINANCIAL STATEMENTS
continued
for the year ended 31 December 2023
40 EPRA performance measures and core recommendations
continued
EPRA Net Asset Value metrics

| 2023 | 2022
| Audited | Audited
| £m | £m
Net assets attributable to equity shareholders | 3,508.8 | 4,075.5
Adjustment for: |  |
Revaluation of trading properties | 9.8 | 4.8
Deferred tax on revaluation surplus 1 | 1.4 | 1.9
Fair value of derivative ﬁnancial instruments | (2.9) | (5.0)
Fair value adjustment to secured bonds | 5.0 | 6.5
EPRA Net Tangible Assets | 3,522.1 | 4,083.7
Per share measure – diluted | 3,129p | 3,632p
Net assets attributable to equity shareholders | 3,508.8 | 4,075.5
Adjustment for: |  |
Revaluation of trading properties | 9.8 | 4.8
Fair value adjustment to secured bonds | 5.0 | 6.5
Mark-to-market of ﬁxed rate debt | 133.4 | 159.5
Unamortised issue and arrangement costs | (7.4) | (10.1)
EPRA Net Disposal Value | 3,649.6 | 4,236.2
Per share measure – diluted | 3,243p | 3,768p
Net assets attributable to equity shareholders | 3,508.8 | 4,075.5
Adjustment for: |  |
Revaluation of trading properties | 9.8 | 4.8
Deferred tax on revaluation surplus | 2.8 | 3.7
Fair value of derivative ﬁnancial instruments | (2.9) | (5.0)
Fair value adjustment to secured bonds | 5.0 | 6.5
Purchasers’ costs 2 | 329.4 | 361.9
EPRA Net Reinstatement Value | 3,852.9 | 4,447.4
Per share measure – diluted | 3,423p | 3,956p

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.
Financial statements
267
Derwent London plc
Report and Accounts 2023
Cost ratio (unaudited)

| 2023 | 2022
| £m | £m
Administrative expenses | 39.1 | 36.4
Write-oﬀ/impairment of receivables | 2.0 | (1.0)
Other property costs | 15.2 | 12.7
Dilapidation receipts | (0.1) | (0.5)
Net service charge costs | 6.6 | 5.1
Service charge costs recovered through rents but not separately invoiced | (0.9) | (0.7)
Management fees received less estimated proﬁt element | (4.5) | (4.2)
Share of joint ventures’ expenses | 0.4 | 0.5
EPRA costs (including direct vacancy costs) (A) | 57.8 | 48.3
Direct vacancy costs | (10.4) | (7.9)
EPRA costs (excluding direct vacancy costs) (B) | 47.4 | 40.4
Gross rental income | 212.8 | 207.0
Ground rent | (2.2) | (1.7)
Service charge components of rental income | (0.9) | (0.7)
Share of joint ventures’ rental income less ground rent | 2.4 | 2.5
Adjusted gross rental income (C) | 212.1 | 207.1
EPRA cost ratio (including direct vacancy costs) (A/C) | 27.3% | 23.3%
EPRA cost ratio (excluding direct vacancy costs) (B/C) | 22.3% | 19.5%

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.

| 2023 | 2022
| £m | £m
Property portfolio at fair value (D) | 4,844.7 | 5,321.8
Portfolio cost ratio (A/D) | 1.2% | 0.9%

The Group has not capitalised any overheads in either 2023 or 2022.
268
NOTES TO THE FINANCIAL STATEMENTS
continued
for the year ended 31 December 2023
40 EPRA performance measures and core recommendations
continued
Net Initial Yield and ‘topped-up’ Net Initial Yield (unaudited)

| 2023 | 2022
| £m | £m
Property portfolio – wholly owned | 4,844.7 | 5,321.8
Share of joint ventures | 33.8 | 42.5
Less non-EPRA properties 1 | (488.3) | (364.4)
Completed property portfolio | 4,390.2 | 4,999.9
Allowance for: |  |
Estimated purchasers’ costs | 298.5 | 340.0
EPRA property portfolio valuation (A) | 4,688.7 | 5,339.9
Annualised contracted rental income, net of ground rents | 204.9 | 201.6
Share of joint ventures | 2.5 | 2.6
Less non-EPRA properties 1 | (0.7) | (0.6)
Add outstanding rent reviews | 0.1 | 3.1
Less estimate of non-recoverable expenses | (6.6) | (7.5)
| (7.2) | (5.0)
Current income net of non-recoverable expenses (B) | 200.2 | 199.2
Contractual rental increases across the portfolio | 44.6 | 46.4
Contractual rental increases across the EPRA portfolio | 44.6 | 46.4
‘Topped-up’ net annualised rent (C) | 244.8 | 245.6
EPRA net initial yield (B/A) | 4.3% | 3.7%
EPRA ‘topped-up’ net initial yield (C/A) | 5.2% | 4.6%

Vacancy rate (unaudited)

| 2023 | 2022
| £m | £m
Annualised estimated rental value of vacant premises | 10.8 | 17.3
Portfolio estimated rental value | 314.0 | 307.7
Less non-EPRA properties 1 | (46.0) | (38.0)
| 268.0 | 269.7
EPRA vacancy rate | 4.0% | 6.4%

1
In accordance with EPRA best practice guidelines, deductions are made for development properties, land and long-dated reversions.
Financial statements
269
Derwent London plc
Report and Accounts 2023
Like-for-like rental growth (unaudited)

| Like-for-like | Development | Acquisitions and |
| portfolio | property | disposals | Total
| £m | £m | £m | £m
2023 |  |  |  |
Gross rental income | 190.3 | 20.5 | 2.0 | 212.8
Other property expenditure | (18.2) | (5.0) | (0.8) | (24.0)
Write-oﬀ/impairment of receivables | (1.3) | (0.6) | (0.1) | (2.0)
Impairment included in prepayments (see note 20) | – | – | (0.6) | (0.6)
Net rental income | 170.8 | 14.9 | 0.5 | 186.2
Other | 4.7 | (0.4) | – | 4.3
Net property and other income | 175.5 | 14.5 | 0.5 | 190.5
2022 |  |  |  |
Gross rental income | 187.2 | 13.2 | 6.6 | 207.0
Other property expenditure | (14.2) | (5.1) | (0.2) | (19.5)
Write-oﬀ/impairment of receivables | 0.2 | 0.6 | 0.2 | 1.0
Net rental income | 173.2 | 8.7 | 6.6 | 188.5
Other | 6.1 | (0.2) | 0.2 | 6.1
Net property and other income | 179.3 | 8.5 | 6.8 | 194.6
Change based on: |  |  |  |
Gross rental income | 1.7% |  |  | 2.8%
Net rental income | (1.4%) |  |  | (1.2%)
Net property and other income | (2.1%) |  |  | (2.1%)

Property-related capital expenditure (unaudited)

| 2023 | 2022
| Group (excl. | Joint ventures | Total | Group (excl. | Joint ventures | Total
| Joint ventures) | (50% share) | Group | Joint ventures) | (50% share) | Group
| £m | £m | £m | £m | £m | £m
Acquisitions | 3.8 | – | 3.8 | 133.0 | – | 133.0
Development | 127.3 | 0.6 | 127.9 | 94.7 | 1.6 | 96.3
Investment properties |  |  |  |  |  |
Incremental lettable space | – | – | – | 0.9 | – | 0.9
No incremental lettable space | 25.0 | – | 25.0 | 18.5 | – | 18.5
Tenant incentives | – | – | – | 0.8 | – | 0.8
Capitalised interest | 6.3 | – | 6.3 | 6.9 | – | 6.9
Total capital expenditure | 162.4 | 0.6 | 163.0 | 254.8 | 1.6 | 256.4
Conversion from accrual to cash basis | 12.1 | 0.1 | 12.2 | 11.1 | 0.1 | 11.2
Total capital expenditure on a cash basis | 174.5 | 0.7 | 175.2 | 265.9 | 1.7 | 267.6

270
NOTES TO THE FINANCIAL STATEMENTS
continued
for the year ended 31 December 2023
41 Total return (unaudited)

| 2023 | 2022
| p | p
EPRA Net Tangible Assets on a diluted basis |  |
At end of year | 3,129 | 3,632
At start of year | (3,632) | (3,959)
Decrease | (503) | (327)
Dividend per share | 79 | 78
Decrease including dividend | (424) | (249)
Total return | (11.7%) | (6.3%)

42 Gearing and interest cover
NAV gearing

| 2023 | 2022
| £m | £m
Net debt | 1,356.8 | 1,257.2
Net assets | 3,508.8 | 4,075.5
NAV gearing | 38.7% | 30.8%

Loan-to-value ratio

| 2023 | 2022
| £m | £m
Group loan-to-value ratio |  |
Net debt | 1,356.8 | 1,257.2
Fair value adjustment of secured bonds | (5.0) | (6.5)
Unamortised discount on unsecured green bonds | 1.5 | 1.7
Unamortised issue and arrangement costs | 7.4 | 10.1
Leasehold liabilities | (34.6) | (35.0)
Drawn debt net of cash (A) | 1,326.1 | 1,227.5
Fair value of property portfolio (B) | 4,844.7 | 5,321.8
Loan-to-value ratio (A/B) | 27.4% | 23.1%
Proportionally consolidated loan-to-value ratio |  |
Drawn debt net of cash (A) | 1,326.1 | 1,227.5
Share of cash and cash equivalents in joint ventures | (2.2) | (1.6)
Drawn debt net of cash including Group’s share of joint ventures (C) | 1,323.9 | 1,225.9
Fair value of property portfolio (B) | 4,844.7 | 5,321.8
Share of fair value of property portfolio of joint ventures | 33.8 | 42.4
Fair value of property portfolio including Group’s share of joint ventures (D) | 4,878.5 | 5,364.2
Proportionally consolidated loan-to-value ratio (C/D) | 27.1% | 22.9%
EPRA loan-to-value ratio |  |
Drawn debt net of cash including Group’s share of joint ventures (C) | 1,323.9 | 1,225.9
Debt with equity characteristics | (20.0) | (19.7)
Adjustment for hybrid debt instruments | 2.0 | 3.3
Net payables adjustment | 57.2 | 74.1
Adjusted debt (E) | 1,363.1 | 1,283.6
Fair value of property portfolio including Group’s share of joint ventures (D) | 4,878.5 | 5,364.2
EPRA loan-to-value ratio (E/D) | 27.9% | 23.9%

Financial statements
271
Derwent London plc
Report and Accounts 2023
Net interest cover ratio

| 2023 | 2022
| £m | £m
Group net interest cover ratio |  |
Net property and other income | 190.5 | 194.6
Adjustments for: |  |
Other income | (4.5) | (4.2)
Other property income | – | (0.3)
Surrender premiums received | (0.1) | (1.1)
Write-down of trading property | 0.4 | 0.2
Proﬁt on disposal of trading properties | – | (0.2)
Adjusted net property income | 186.3 | 189.0
Finance income | (0.9) | (0.3)
Finance costs | 40.4 | 39.7
| 39.5 | 39.4
Adjustments for: |  |
Finance income | 0.9 | 0.3
Other ﬁnance costs | (0.3) | (0.3)
Amortisation of fair value adjustment to secured bonds | 1.5 | 1.4
Amortisation of issue and arrangement costs | (2.6) | (2.6)
Finance costs capitalised | 6.5 | 7.0
Net interest payable | 45.5 | 45.2
Group net interest cover ratio | 409% | 418%
Proportionally consolidated net interest cover ratio |  |
Adjusted net property income | 186.3 | 189.0
Share of joint ventures’ net property income | 2.2 | 2.1
Adjusted net property income including share of joint ventures | 188.5 | 191.1
Net interest payable | 45.5 | 45.2
Proportionally consolidated net interest cover ratio | 414% | 423%

Net debt to EBITDA

| 2023 | 2022
| £m | £m
Net debt (A) | 1,356.8 | 1,257.2
Loss for the year | (476.4) | (280.5)
Add back: tax charge | 0.5 | 1.0
Loss before tax | (475.9) | (279.5)
Add back: net ﬁnance charges | 39.5 | 39.4
Add back: movement in fair value of derivative ﬁnancial instruments | 2.1 | (5.8)
Add back: ﬁnancial derivative termination (income)/costs | (1.8) | 0.3
| (436.1) | (245.6)
Add back: proﬁt on disposal of investment property | (1.2) | (25.6)
Add back: revaluation deﬁcit | 581.5 | 422.1
Add back: share of joint venture revaluation deﬁcit (note 9) | 9.2 | 9.3
Add back: depreciation | 1.1 | 1.0
EBITDA (B) | 154.5 | 161.2
Net debt to EBITDA (A/B) | 8.8 | 7.8

272
NOTES TO THE FINANCIAL STATEMENTS
continued
for the year ended 31 December 2023
43 Material accounting policies
Basis of consolidation
The Group ﬁnancial statements incorporate the ﬁnancial statements of Derwent London plc and all of its subsidiaries, together
with the Group’s share of the results of its joint ventures.
Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when
the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to aﬀect those
returns through its power over the entity. Subsidiaries are consolidated from the date on which control is transferred to the Group.
They are no longer consolidated from the date that control ceases.
Joint ventures are those entities over whose activities the Group has joint control, established by contractual agreement.
Interests in joint ventures are accounted for using the equity method of accounting as permitted by IFRS 11 Joint Arrangements,
and following the procedures for this method set out in IAS 28 Investments in Associates and Joint Ventures. The equity method
requires the Group’s share of the joint venture’s post-tax proﬁt or loss for the year to be presented separately in the income
statement and the Group’s share of the joint venture’s net assets to be presented separately in the balance sheet.
Intra-group balances and any unrealised gains and losses arising from intra-group transactions are eliminated in preparing the
consolidated ﬁnancial statements. Unrealised gains arising from transactions with joint ventures are eliminated to the extent of
the Group’s interest in the joint venture concerned. Unrealised losses are eliminated in the same way, but only to the extent that
there is no evidence of impairment.
Gross property income
Gross property income arises from two main sources:
(i)
Rental income
– This arises from operating leases granted to tenants. An operating lease is a lease other than a ﬁnance lease.
A ﬁnance lease is one whereby substantially all the risks and rewards of ownership are passed to the lessee.
Rental income is recognised in the Group income statement on a straight-line basis over the term of the lease in accordance
with IFRS 16 Leases. This includes the eﬀect of lease incentives given to tenants, which are normally in the form of rent-free or
half-rent periods or capital contributions in lieu of rent-free periods, and the eﬀect of contracted rent uplifts and payments
received from tenants on the grant of leases. Where the total consideration due under a lease is modiﬁed, the revised total
amount due under the lease is recognised on a straight-line basis over the remaining term of the lease. Where rent demanded
is forgiven for periods that have passed, these amounts are assessed under IFRS 9 and written oﬀ. Where rent is forgiven for
future periods, this is considered a lease modiﬁcation and spread on a straight-line basis over the remaining lease term in
accordance with IFRS 16.
For income from property leased out under a ﬁnance lease, a lease receivable asset is recognised in the balance sheet at an
amount equal to the net investment in the lease, as deﬁned in IFRS 16 Leases. Minimum lease payments receivable, again
deﬁned in IFRS 16, are apportioned between ﬁnance income and the reduction of the outstanding lease receivable so as to
produce a constant periodic rate of return on the remaining net investment in the lease. Contingent rents, being the diﬀerence
between the rent currently receivable and the minimum lease payments when the net investment in the lease was originally
calculated, are recognised in property income in the years in which they are receivable.
(ii)
Surrender premiums
– Payments received from tenants to surrender their lease obligations are recognised immediately in the
Group income statement. In circumstances where surrender payments received relate to speciﬁc periods, they are deferred
and recognised in those periods.
Other income
Other income consists of commissions, fees charged to tenants for the management of certain Group properties and
administration services provided to joint ventures. Other income is recognised in the Group income statement in accordance with
the delivery of services as required by IFRS 15 Revenue from Contracts with Customers.
Service charges
Service charge income relates to expenditure that is directly recoverable from tenants, excluding management fees which are
included in ‘other income’. Service charge income is recognised as revenue in the period to which it relates as required by IFRS 15
Revenue from Contracts with Customers.
Expenses
(i)
Lease payments
– For leasehold investment properties held, a right of use asset is recognised at commencement date of
the lease within the investment property carrying value. The initial cost includes the lease liabilities recognised, initial direct
costs incurred and any lease payments made at commencement adjusted for any lease incentives received. In addition, a
corresponding lease liability is also included on the balance sheet. Minimum lease payments are apportioned between the
ﬁnance charge and the reduction of the outstanding liability so as to produce a constant periodic rate of interest on the
remaining lease liability.
Financial statements
273
Derwent London plc
Report and Accounts 2023
(ii)
Dilapidations
– Dilapidations monies received from tenants in respect of their lease obligations are recognised immediately
in the Group income statement, unless they relate to future capital expenditure. In the latter case, where the costs are
considered to be recoverable they are capitalised as part of the carrying value of the property.
(iii)
Reverse surrender premiums
– Payments made to tenants to surrender their lease obligations are charged directly to the
Group income statement unless the payment is to enable the probable redevelopment of a property. In the latter case, where
the costs are considered to be recoverable they are capitalised as part of the carrying value of the property.
(iv)
Other property expenditure
– Vacant property costs and other property costs are expensed in the year to which they relate,
with the exception of the initial direct costs incurred in negotiating and arranging leases which are, in accordance with IFRS 16
Leases, added to the carrying value of the relevant property and recognised as an expense over the lease term on the same
basis as the lease income.
Employee beneﬁts
(i)
Share-based remuneration
Equity-settled
– The Company operates a long-term incentive plan and share option scheme. The fair value of the conditional
awards of shares granted under the long-term incentive plan and the options granted under the share option scheme are
determined at the date of grant. This fair value is then expensed on a straight-line basis over the vesting period, based on
an estimate of the number of shares that will eventually vest. At each reporting date, the non-market based performance
criteria of the long-term incentive plan are reconsidered and the expense is revised as necessary. In respect of the share option
scheme, the fair value of the options granted is calculated using a binomial lattice pricing model.
(ii)
Pensions
Deﬁned contribution plans
– Obligations for contributions to deﬁned contribution pension plans are recognised as an expense
in the Group income statement in the period to which they relate.
Deﬁned beneﬁt plans
– The Group’s net obligation in respect of deﬁned beneﬁt post-employment plans, including pension
plans, is calculated separately for each plan by estimating the amount of future beneﬁt that employees have earned in
return for their service in the current and prior periods. That beneﬁt is discounted to determine its present value, and the fair
value of any plan assets is deducted. The discount rate is the yield at the balance sheet date on AA credit rated bonds that
have maturity dates approximating the terms of the Group’s obligations. The calculation is performed by a qualiﬁed actuary
using the projected unit credit method. Any actuarial gain or loss in the period is recognised in full in the Group statement of
comprehensive income.
Business combinations
Business combinations are accounted for under the acquisition method. Any excess of the purchase price of business combinations
over the fair value of the assets, liabilities and contingent liabilities acquired and resulting deferred tax thereon is recognised as
goodwill. Any discount is credited to the Group income statement in the period of acquisition. Goodwill is recognised as an asset
and reviewed for impairment. Any impairment is recognised immediately in the Group income statement and is not subsequently
reversed. Any residual goodwill is reviewed annually for impairment.
Investment property
(i)
Valuation
– Investment properties are those that are held either to earn rental income or for capital appreciation or both,
including those that are undergoing redevelopment. Investment properties are measured initially at cost, including related
transaction costs. After initial recognition, they are carried in the Group balance sheet at fair value adjusted for the carrying
value of leasehold interests and lease incentive and letting cost receivables. Fair value is the price that would be received to
sell an investment property in an orderly transaction between market participants at the measurement date. The valuation is
undertaken by independent valuers who hold recognised and relevant professional qualiﬁcations and have recent experience in
the locations and categories of properties being valued.
Surpluses or deﬁcits resulting from changes in the fair value of investment property are reported in the Group income
statement in the year in which they arise.
The Group leases out investment properties under operating leases with rents generally payable monthly or quarterly. The
Group is exposed to changes in the residual value of properties at the end of current lease agreements, and mitigates this risk
by actively managing its tenant mix in order to maximise the weighted average lease term, minimise vacancies across the
portfolio and maximise exposure to tenants with strong ﬁnancial characteristics. The Group also grants lease incentives to
encourage high quality tenants to remain in properties for longer lease terms.
(ii)
Capital expenditure
– Capital expenditure, being costs directly attributable to the redevelopment or refurbishment of
an investment property, up to the point of it being completed for its intended use, are capitalised in the carrying value of
that property. In addition, in accordance with IAS 23 Borrowing Costs, ﬁnance costs that are directly attributable to such
expenditure are capitalised using the Group’s average cost of borrowings during each quarter.
274
NOTES TO THE FINANCIAL STATEMENTS
continued
for the year ended 31 December 2023
43 Material accounting policies
continued
Investment property
continued
(iii)
Disposal
– Properties are treated as disposed when the Group transfers the signiﬁcant risks and rewards of ownership to
the buyer. Generally this would occur on completion of contract. On disposal, any gain or loss is calculated as the diﬀerence
between the net disposal proceeds and the carrying value at the last year end plus subsequent capitalised expenditure during
the year. Where the net disposal proceeds have yet to be ﬁnalised at the balance sheet date, the proceeds recognised reﬂect
the Directors’ best estimate of the amounts expected to be received. Any contingent consideration is recognised at fair value
at the balance sheet date. The fair value is calculated using future discounted cash ﬂows based on expected outcomes with
estimated probabilities taking account of the risk and uncertainty of each input.
(iv)
Development
– When the Group begins to redevelop an existing investment property for continued use as an investment
property or acquires a property with the subsequent intention of developing as an investment property, the property is
classiﬁed as an investment property and is accounted for as such. When the Group begins to redevelop an existing investment
property with a view to sale, the property is transferred to trading properties and held as a current asset. The property is
remeasured to fair value as at the date of transfer with any gain or loss being taken to the income statement. The remeasured
amount becomes the deemed cost at which the property is then carried in trading properties.
Trading property and trading stock
Trading property relates to property being developed for sale. Trading stock relates to development expenditure which is due to be
disposed of to third parties under development agreements. In accordance with IAS 2 Inventories, trading property and trading
stock are held at the lower of cost and net realisable value. Proceeds from sale are recognised in the Group’s income statement
when title has been transferred to the purchaser as required by IFRS 15 Revenue from Contracts with Customers.
Prepayment (non-current)
Acquisition and capital expenditure costs incurred in advance of ownership of a property are initially included as a prepayment
in the Group’s balance sheet and measured at cost. This asset is then tested for impairment under IAS 36 Impairment of Assets
and carried at the higher of (a) fair value less costs to sell and (b) value in use. On completion of the purchase, the asset will be
transferred to either investment property or trading property as appropriate.
Property, plant and equipment
(i)
Owner-occupied property
– Owner-occupied property is stated at its revalued amount, which is determined in the same
manner as investment property. It is depreciated over its remaining useful life (40 years) with the depreciation included in
administrative expenses. On revaluation, any accumulated depreciation is eliminated against the gross carrying amount of
the property concerned, and the net amount restated to the revalued amount. Subsequent depreciation charges are adjusted
based on the revalued amount for each property. Any diﬀerence between the depreciation charge on the revalued amount
and that which would have been charged under historic cost is transferred, net of any related deferred tax, between the
revaluation reserve and retained earnings as the property is utilised. Surpluses or deﬁcits resulting from changes in the fair
value are reported in the Group statement of comprehensive income. The land element of the property is not depreciated.
(ii)
Artwork
– Artwork is stated at revalued amounts on the basis of open market value.
(iii)
Other
– Plant and equipment is depreciated at a rate of between 10% and 25% per annum which is calculated to write oﬀ the
cost, less estimated residual value of the individual assets, over their expected useful lives.
Investments
Investments in joint ventures, being those entities over whose activities the Group has joint control, as established by contractual
agreement, are included in the Group’s balance sheet at cost together with the Group’s share of post-acquisition reserves, on a
net equity basis. Investments in subsidiaries and joint ventures are included in the Company’s balance sheet at the lower of cost
and recoverable amount. Any impairment is recognised immediately in the income statement.
Non-current assets held for sale
Non-current assets are classiﬁed as held for sale if their carrying value will be recovered through a sale transaction rather than
through continuing use. This condition is regarded as met if the sale is highly probable, the asset is available for immediate sale in
its present condition, being actively marketed and management is committed to the sale which should be expected to qualify for
recognition as a completed sale within one year from the date of classiﬁcation.
Non-current assets, including related liabilities, classiﬁed as held for sale are measured at the lower of carrying value and fair value
less costs of disposal.
Financial statements
275
Derwent London plc
Report and Accounts 2023
Financial assets
(i)
Cash and cash equivalents
– Cash at bank comprises cash in hand and on-demand deposits. Cash at bank comprises short-
term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insigniﬁcant
risk of changes in value.
Tenant rent deposits are subject to contractual restrictions and meet the deﬁnition of ‘cash and cash equivalents’ under IAS 7
and are recognised as restricted cash.
Cash collected on behalf of tenants to fund service charges of properties in the portfolio meet the deﬁnition of ‘cash and cash
equivalents’ under IAS 7 and are recognised as restricted cash.
(ii)
Trade receivables
– Trade receivables are recognised and carried at the original transaction value. This balance is subject to
impairment testing under IFRS 9 using the forward-looking, simpliﬁed approach to the expected credit loss model.
Lease incentive receivables
In accordance with IFRS 16, rental income is recognised in the Group income statement on a straight-line basis over the term of
the lease. This includes the eﬀect of lease incentives given to tenants (in the form of rent-free periods, half-rent periods or capital
contributions in lieu of rent-free periods) and any contracted rental uplifts granted at lease inception. The result is included within
accrued income in the balance sheet. This balance is subject to impairment testing under IAS 36.
Financial liabilities
(i)
Bank loans and ﬁxed rate loans
– Bank loans and ﬁxed rate loans are included as ﬁnancial liabilities on the balance sheets at
amortised cost. Interest payable is expensed as a ﬁnance cost in the year to which it relates.
Where there has been a change to the terms of a debt agreement, such as the applicable interest rate or benchmark rate, this
is assessed under IFRS 9 using quantitative and qualitative assessments to determine if the debt modiﬁcation is considered
substantial enough to be deemed an extinguishment. It is common for loan facilities agreements to include extension options
which extend the loan maturity out by one year. When these options are exercised as per the agreement, with no changes to
other terms, this is deemed to be a modiﬁcation of the loan and not an extinguishment.
(ii)
Non-convertible bonds
– These are included as a ﬁnancial liability on the balance sheet net of the unamortised discount
and costs on issue. The diﬀerence between this carrying value and the redemption value is recognised in the Group income
statement over the life of the bond on an eﬀective interest basis. Interest payable to bond holders is expensed in the year to
which it relates.
(iii)
Convertible bonds
– The fair value of the liability component of a convertible bond is determined using the market
interest rate for an equivalent non-convertible bond. This amount is recorded as a liability on an amortised cost basis until
extinguished on conversion or maturity of the bonds. The remainder of the proceeds is allocated to the conversion option. This
is recognised and included in shareholders’ equity, net of income tax eﬀects and is not subsequently remeasured. Issue costs
are apportioned between the liability and the equity components of the convertible bonds based on their carrying amounts at
the date of issue. The portion relating to the equity component is charged directly against equity. The issue costs apportioned
to the liability are amortised over the life of the bond. The issue costs apportioned to equity are not amortised.
(iv)
Finance lease liabilities
– Finance lease liabilities arise for those investment properties held under a leasehold interest and
accounted for as investment property. The liability is initially calculated as the present value of the minimum lease payments,
reducing in subsequent years by the apportionment of payments to the lessor, as described above under the heading for lease
payments.
(v)
Interest rate derivatives
– The Group uses derivative ﬁnancial instruments to manage the interest rate risk associated with
the ﬁnancing of the Group’s business. No trading in ﬁnancial instruments is undertaken.
At each reporting date, these interest rate derivatives are measured at fair value, being the estimated amount that the Group
would receive or pay to terminate the agreement at the balance sheet date, taking into account current interest rates and
the current credit rating of the counterparties. The gain or loss at each fair value remeasurement is recognised in the Group
income statement because the Group does not apply hedge accounting.
(vi)
Trade payables
– Trade payables are recognised and carried at the original transaction value.
276
NOTES TO THE FINANCIAL STATEMENTS
continued
for the year ended 31 December 2023
43 Material accounting policies
continued
Deferred tax
Deferred tax is the tax expected to be payable or recoverable on diﬀerences between the carrying amounts of assets and
liabilities in the ﬁnancial statements and the corresponding tax bases used in the tax computations, and is accounted for using
the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary diﬀerences and
deferred tax assets are recognised to the extent that it is probable that taxable proﬁts will be available against which deductible
temporary diﬀerences can be utilised. In respect of the deferred tax on the revaluation surplus, this is calculated on the basis of
the chargeable gains that would crystallise on the sale of the investment portfolio as at the reporting date. The calculation takes
account of available indexation on the historical cost of the properties.
Deferred tax is calculated at the tax rates that are expected to apply in the period, based on Acts substantially enacted at the
year end, when the liability is settled or the asset is realised. Deferred tax is included in proﬁt or loss for the period, except when
it relates to items recognised in other comprehensive income or directly in equity.
Cash ﬂow
Transactions in the cash ﬂow statement under operating, investing and ﬁnancing activities have been prepared net of value
added tax in order to reﬂect the true cash inﬂows and outﬂows of the Group.
Dividends
Dividends payable on the ordinary share capital are recognised in the year in which they are declared.
TEN-YEAR SUMMARY
(unaudited)
2023
£m
2022
£m
2021
£m
2020
£m
2019
£m
2018
£m
2017
£m
2016
£m
2015
£m
2014
£m
Income statement
Gross property income
212.9
208.4
200.9
205.2
192.7
196.0
172.2
156.0
152.0
138.4
Net property income and other
income
190.5
194.6
187.2
183.5
182.6
185.9
164.8
149.2
148.6
136.1
Proﬁt on disposal of properties
and investments
1.2
25.6
10.4
1.7
13.8
5.2
50.3
7.5
40.2
30.2
(Loss)/proﬁt before tax
(475.9)
(279.5)
252.5
(83.0)
280.6
221.6
314.8
54.5
779.5
753.7
Earnings and dividend per share
EPRA earnings
114.5
119.7
121.7
109.6
115.1
126.1
105.0
85.7
78.7
58.6
EPRA earnings per share (p)
101.97
106.62
108.53
97.93
103.09
113.07
94.23
76.99
71.34
57.08
Dividend paid (p)
79.00
77.50
75.45
73.45
67.75
136.50
107.83
44.66
40.60
37.40
Interim/ﬁnal dividend for the
year (p)
79.50
78.50
76.50
74.45
72.45
65.85
59.73
52.36
43.40
39.65
Special dividend paid (p)
–
–
–
–
–
–
75.00
52.00
–
–
Net asset value
Net assets
3,508.8
4,075.5
4,441.8
4,315.1
4,476.9
4,263.4
4,193.2
3,999.4
3,995.4
3,075.7
Net asset value per share (p) –
undiluted
3,125
3,629
3,959
3,808
3,956
3,767
3,703
3,530
3,528
2,931
EPRA NTA per share (p) – diluted
3,129
3,632
3,959
3,812
3,957
3,775
3,714
3,550
3,532
2,906
EPRA NDV per share (p) – diluted
3,243
3,768
3,884
3,682
3,847
3,696
3,617
3,450
3,463
2,800
EPRA NRV per share (p) – diluted
3,423
3,956
4,301
4,138
4,290
4,092
4,011
3,852
3,825
3,163
Total return (%)
(11.7)
(6.3)
5.8
(1.8)
6.6
5.3
7.7
1.7
23.0
30.1
Property portfolio
Property portfolio at fair value
1
4,844.7
5,321.8
5,646.3
5,355.5
5,475.2
5,190.7
4,850.3
4,942.7
4,954.5
4,168.1
Revaluation (deﬁcit)/surplus
(585.4)
(421.4)
134.8
(194.3)
154.6
84.1
149.7
(42.6)
651.4
671.9
Cash ﬂow statement
Cash ﬂow
2
(89.7)
(27.1)
(142.0)
(63.4)
(22.3)
(245.9)
247.8
19.6
(43.6)
(57.3)
Net cash (used in)/from
ﬁnancing activities
(2.6)
(88.6)
74.7
(27.2)
(16.6)
25.2
(298.2)
(57.0)
2.0
23.4
Gearing and debt
Net debt
1,356.8
1,257.2
1,251.5
1,049.1
981.6
956.9
657.9
904.8
911.7
1,013.3
NAV gearing (%)
38.7
30.8
28.2
24.3
21.9
22.4
15.7
22.6
22.8
32.9
Loan-to-value ratio (%)
3
27.9
23.9
22.3
18.4
16.9
17.2
13.2
17.7
17.8
24.0
Net interest cover ratio (%)
414
423
464
446
462
491
454
370
362
286
1
Excludes share of joint ventures.
2
Cash ﬂow is the net cash from operating and investing activities less the dividend paid.
3
Presented on an EPRA basis since 2021.
A list of deﬁnitions is provided on pages 283 to 286.
Other information
277
Derwent London plc
Report and Accounts 2023
EPRA SUMMARY
(unaudited)
EPRA Performance Measures
EPRA measure
Definition
2023
2022
EPRA earnings
Earnings from operational activities
£114.5m
£119.7m
EPRA undiluted earnings
per share
EPRA earnings divided by the weighted average number of ordinary
shares in issue during the ﬁnancial year
101.97p
106.62p
EPRA Net Tangible Assets
(NTA)
Assumes that entities buy and sell assets, thereby crystallising
certain levels of unavoidable deferred tax
£3,522.1m
£4,083.7m
EPRA diluted NTA
per share
EPRA NTA divided by the number of ordinary shares in issue at
the ﬁnancial year end adjusted to include the eﬀects of potential
dilutive shares issuable under the Group’s share option schemes and
the convertible bonds
3,129p
3,632p
EPRA Net Disposal Value
(NDV)
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
£3,649.6m
£4,236.2m
EPRA diluted NDV
per share
EPRA NDV divided by the number of ordinary shares in issue at
the ﬁnancial year end adjusted to include the eﬀects of potential
dilutive shares issuable under the Group’s share option schemes and
the convertible bonds
3,243p
3,768p
EPRA Net Reinstatement
Value (NRV)
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
£3,852.9m
£4,447.4m
EPRA diluted NRV
per share
EPRA NRV divided by the number of ordinary shares in issue at
the ﬁnancial year end adjusted to include the eﬀects of potential
dilutive shares issuable under the Group’s share option schemes and
the convertible bonds
3,423p
3,956p
EPRA cost ratio
(including direct
vacancy costs)
Administrative & operating costs (including costs of direct vacancy)
divided by gross rental income
27.3%
23.3%
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
4.3%
3.7%
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)
5.2%
4.6%
EPRA vacancy rate
Estimated rental value (ERV) of immediately available space divided
by the ERV of the EPRA portfolio
4.0%
6.4%
EPRA loan-to-value ratio
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
27.9%
23.9%
278
EPRA Sustainability Performance Measures
Environmental Sustainability Performance Measures
EPRA measure
Definition
2023
2022
Landlord grid electricity consumption
Electricity use across our managed portfolio
(landlord/common areas)– annual kWh
13,236,503
12,144,621
1
Onsite renewable electricity
consumption
Electricity use across our managed portfolio
(onsite renewables)– annual kWh
97,440
81,367
DL occupied grid electricity
consumption
Electricity use across our managed portfolio
(landlord occupied areas)– annual kWh
262,094
201,771
1
Tenant grid electricity consumption
Electricity use across our total managed portfolio
(tenant occupied areas)– annual kWh
26,642,461
22,926,293
1
Total electricity consumption
Electricity use across our total managed portfolio
40,238,497
35,354,052
1
Like-for-like landlord grid electricity
consumption
Energy use across our like-for-like portfolio
(landlord/common areas)– annual kWh
11,663,397
11,782,011
1
Like-for-like onsite renewable
electricity consumption
Electricity use across our like-for-like portfolio
(onsite renewables)– annual kWh
60,933
46,324
Like-for-like DL occupied grid electricity
consumption
Electricity use across our like-for-like portfolio
(landlord occupied areas)– annual kWh
244,947
200,908
1
Like-for-like tenant grid electricity
consumption
Electricity use across our like-for-like portfolio
(tenant occupied areas)– annual kWh
22,228,322
21,936,319
1
Total like-for-like electricity
consumption
Electricity use across our like-for-like portfolio
34,197,599
33,965,562
1
Total fuel consumption
Fuel use (gas, oil, biomass) across our managed
portfolio (landlord/common areas) – annual kWh
16,424,375
15,027,749
1
Like-for-like total fuel consumption
Fuel use (gas, oil, biomass) use across our like-for-like
portfolio (landlord/common areas) – annual kWh
12,498,270
13,381,560
1
Building energy intensity
Energy use across our total managed portfolio
(landlord/common areas) – kWh per m
2
76
74
1
Building energy intensity
Energy use across our total managed portfolio
(landlord & tenants) – kWh per m
2
149
142
1
Total direct greenhouse gas (GHG)
emissions
Total managed portfolio emissions (landlord
inﬂuenced portfolio emissions); a total of gas Scope 1
emissions – annual metric tonnes CO
2
e
4,364
3,062
1
Total indirect greenhouse gas (GHG)
emissions
Total managed portfolio emissions (landlord
inﬂuenced portfolio emissions); Scope 2 energy use –
annual metric tonnes CO
2
e
2,795
2,388
1
Like-for-like total direct greenhouse
gas (GHG) emissions
Like-for-like emissions (landlord inﬂuenced portfolio
emissions, building related only); Scope 1 energy use –
annual metric tonnes CO
2
e
3,646
2,761
1
Like-for-like total indirect greenhouse
gas (GHG) emissions
Like-for-like emissions (landlord inﬂuenced portfolio
emissions, building related only); Scope 2 energy use –
annual metric tonnes CO
2
e
2,466
2,317
1
Greenhouse gas (GHG) intensity from
building energy consumption
Intensity (Scopes 1 & 2) per m
2
– tCO
2
e/m
2
/year
0.018
0.015
Greenhouse gas (GHG) intensity from
building energy consumption
Intensity (Scopes 1 & 2) per m
2
/£m fair market value
1.47
1.02
Greenhouse gas (GHG) intensity from
building energy consumption
Intensity (Scopes 1 & 2) per m
2
/£m turnover
34
27
1
Total water consumption
Water use across our total managed portfolio
(excluding retail consumption) – annual m
3
179,627
139,410
1
Like-for-like total water consumption
Water use across our like-for-like portfolio
(excluding retail consumption) – annual m
3
151,266
133,919
1
Other information
279
Derwent London plc
Report and Accounts 2023
EPRA SUMMARY
continued
(unaudited)
EPRA measure
Definition
2023
2022
Building water intensity
Water use across our total managed portfolio
(excluding retail consumption) – m
3
/m
2
/year
0.44
0.37
Total weight of waste by disposal route
Waste generated across our total managed portfolio –
annual metric tonnes and proportion by disposal route
2,227
1,847
Like-for-like total weight of waste by
disposal route
Waste generated across our like-for-like portfolio –
annual metric tonnes and proportion by disposal route
1,984
1,803
1
1
2022 ﬁgures have been restated. Please refer to the Environmental Basis of Reporting in the 2023 Responsibility Report for further details.
Social Performance Measures
EPRA measure
Definition
Employee gender diversity
Percentage of male and female employees in the organisation’s
governance bodies (committees or boards responsible for the
strategic guidance of the organisation)
See page 171
Gender pay ratio
Ratio of the basic salary and/or remuneration of men to
women. As we have less than 250 employees we are not
obliged by the Equality Act 2010 (Gender Pay Gap Information)
Regulations 2017 to disclose our gender pay gap information.
Employee turnover and retention
Total number and rate of new employee hires and employee
turnover during the reporting period
See page 52
Employee health and safety
Occupational health and safety performance with relation to
direct employees
See pages 54 and 55
Asset health and safety assessments
Proportion of assets controlled for which health and safety
impacts have been reviewed or assessed for compliance or
improvement
See pages 54 and 55
Asset health and safety compliance
Any incidents of non-compliance with regulations and/or
voluntary standards concerning the health and safety impacts
of assets assessed during the reporting period
See pages 54 and 55
Employee training and development
Average hours of training that the organisation’s employees
have undertaken in the reporting period
See the EPRA
Reporting section
in our 2023
Responsibility Report
Employee performance appraisals
Percentage of total employees who received regular
performance and career development reviews during the
reporting period
Community engagement, impact
assessments and development
programs
Percentage of assets under operational control that have
implemented local community engagement, impact
assessments and/or development programmes
Governance Performance Measures
EPRA measure
Definition
Composition of the highest governance
body
Number of Executive Board members, number of independent/
Non-Executive Board members, average tenure of the
governance body and number of independent /Non-Executive
Board members with competencies relating to environmental
and social topics
See pages 122 to 123,
136, 141, 143 and 171
Process for nominating and selecting
the highest governance body
Nomination and selection process for the highest governance
body and its members, and the criteria used to guide the
nomination and selection process
See pages 140 to 143
Process for managing conﬂicts of
interest
Process for the highest governance body to ensure conﬂicts of
interest are avoided and managed
See page 128
EPRA Sustainability Performance Measures
continued
Environmental Sustainability Performance Measures
continued
280
Value
banding
£m
Offices (O),
Retail/restaurant (R),
Residential (Re),
Industrial (I),
Leisure (L)
Freehold (F),
Leasehold (L)
BREEAM rating
Approximate
net area
sq ft
West End: Central (66%)
Fitzrovia (34%)
80 Charlotte Street W1
1
300+
O/R/Re
F
Excellent
347,600
1-2 Stephen Street & Tottenham Court Walk W1
200-300
O/R/L
F
Very Good
265,800
250 Euston Road NW1
100-200
O
F
165,900
Network, 10 Howland Street W1
50-100
O/R
F
*Outstanding
139,000
90 Whitﬁeld Street W1
100-200
O/R/Re
F
103,100
Holden House, 54-68 Oxford Street W1
50-100
O/R
F
90,600
Henry Wood House, 3-7 Langham Place W1
50-100
O/R/L
L
79,800
Middlesex House, 34-42 Cleveland Street W1
50-100
O
F
Very Good
66,500
Charlotte Building, 17 Gresse Street W1
25-50
O
L
47,200
88-94 Tottenham Court Road W1
25-50
O/R
F
45,900
3-10 Rathbone Place W1
25-50
O/R/Re/L
L/F
45,500
80-85 Tottenham Court Road W1
25-50
O/R
F
44,500
60 Whitﬁeld Street W1
50-100
O
F
36,200
43 and 45-51 Whitﬁeld Street W1
25-50
O
F
28,700
171-174 Tottenham Court Road W1
0-25
O/R
F
15,800
1-5 Maple Place W1
0-25
O
F
11,500
76-78 Charlotte Street W1
0-25
O
F
11,200
19-23 Fitzroy Street W1
0-25
O
F
8,100
50 Oxford Street W1
2
0-25
O/R
F
6,100
Victoria (9%)
Horseferry House, Horseferry Road SW1
100-200
O
F
162,700
Greencoat and Gordon House, Francis Street SW1
50-100
O
F
138,300
1 Page Street SW1
50-100
O
F
Excellent
127,800
Francis House, 11 Francis Street SW1
50-100
O
F
51,800
6-8 Greencoat Place SW1
25-50
O
F
32,400
Soho/Covent Garden (7%)
1 Soho Place W1
300+
O/R
L
Outstanding
225,400
Marylebone (7%)
25 Baker Street W1
300+
O/R/Re
L
*Outstanding,
*Very Good
298,000
50 Baker Street W1 JV (50% share)
25-50
O/R
L
61,100
Paddington (7%)
Brunel Building, 2 Canalside Walk W2
300+
O/R
L
Excellent
243,400
Mayfair (2%)
25 Savile Row W1
50-100
O/R
F
Very Good
43,000
PRINCIPAL PROPERTIES
(unaudited)
Other information
281
Derwent London plc
Report and Accounts 2023
PRINCIPAL PROPERTIES
continued
(unaudited)
Value
banding
£m
Offices (O),
Retail/restaurant (R),
Residential (Re),
Industrial (I),
Leisure (L)
Freehold (F),
Leasehold (L)
BREEAM rating
Approximate
net area
sq ft
West End: Borders/Other (6%)
Islington/Camden (6%)
Angel Building, 407 St. John Street EC1
200-300
O/R
F
Excellent
268,300
4 & 10 Pentonville Road N1
25-50
O
F
Very Good
53,400
Holford Works, Cruikshank Street WC1
0-25
O/I
F
41,600
401 St. John Street EC1
0-25
O
F
12,300
Brixton (–)
Blue Star House, 234-244 Stockwell Road SW9
25-50
O/R
F
53,400
City: Borders (26%)
Old Street (12%)
White Collar Factory, Old Street Yard EC1
300+
O/R/Re
F
Outstanding,
Excellent,
Very Good
294,600
1 Oliver’s Yard EC1
100-200
O/R
F
185,900
The Featherstone Building, 66 City Road EC1
100-200
O/R
F
Outstanding
124,000
Shoreditch/Whitechapel (7%)
The White Chapel Building E1
100-200
O/L
F
274,400
Tea Building, 56 Shoreditch High Street E1
200-300
O/R/L
F
272,200
Clerkenwell (6%)
20 Farringdon Road EC1
100-200
O/R/L
L
166,300
88 Rosebery Avenue EC1
50-100
O
F
103,700
Morelands, 5-27 Old Street EC1
50-100
O/R
L
Outstanding
88,400
Turnmill, 63 Clerkenwell Road EC1
50-100
O/R
F
Excellent,
Very Good
70,300
Southbank (1%)
230 Blackfriars Road SE1
25-50
O
L
60,100
Provincial (2%)
Scotland (1%)
Strathkelvin Retail Park, Bishopbriggs, Glasgow
25-50
R/L
F
325,500
Land, Bishopbriggs, Glasgow
25-50
–
F
5,500 acres
1
Excludes sold residential.
2
Includes 36-38 and 42-44 Hanway Street W1.
*
On track for Post Completion target.
()
Percentages weighted by valuation.
282
LIST OF DEFINITIONS
(unaudited)
Better Buildings Partnership (BBP)
The BBP is a collaboration of the UK’s leading commercial
property owners who are working together to improve the
sustainability of existing commercial building stock.
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.
Carbon emissions Scopes 1, 2 and 3
Scope 1 – direct emissions;
Scope 2 – indirect emissions; and
Scope 3 – other indirect emissions.
CDP
The CDP is an organisation which works with shareholders and
listed companies to facilitate the disclosure and reporting of
climate change data and information.
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.
Department for Environment, Food and Rural Aﬀairs
(DEFRA)
The government department responsible for environmental
protection, food production and standards, agriculture,
ﬁsheries and rural communities in the United Kingdom.
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.
EBITDA
Earnings before interest, tax, depreciation and amortisation.
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.
Other information
283
Derwent London plc
Report and Accounts 2023
LIST OF DEFINITIONS
continued
(unaudited)
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.
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.
Global Real Estate Sustainability Benchmark (GRESB)
The Global Real Estate Sustainability Benchmark is an initiative
set up to assess the environmental and social performance of
public and private real estate investments and allow investors
to understand their performance.
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.
ISS-Oekom
ISS-Oekom is an ESG rating service that provides corporate
and country ESG research and ratings that enables its clients
to identify material social and environmental risks and
opportunities.
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. Performance measured against
them is referenced in the Annual Report.
Leadership in Energy and Environmental Design
(LEED)
LEED is a US-based environmental impact assessment method
for buildings. Performance is measured across a series of
ratings – Certiﬁed, Silver, Gold and Platinum.
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)
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 to 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.
284
Net debt
Borrowings plus bank overdraft less unrestricted cash and
cash equivalents.
Net debt to EBITDA
Net debt to EBITDA is the ratio of gross debt less unrestricted
cash to earnings before interest, tax, depreciation and
amortisation (EBITDA).
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).
Renewable Energy Guarantees of Origin (REGO)
The REGO scheme administered by Ofgem provides
transparency to consumers about the proportion of electricity
that suppliers source/provide from renewable generation.
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.
Reporting of Injuries, Diseases and Dangerous
Occurrences Regulations (RIDDORs)
The regulations place a legal duty on employers to report
work-related deaths, major injuries or over-three-day
injuries, work related diseases and dangerous occurrences
(near miss accidents) to the Health and Safety Executive.
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.
Science Based Targets initiative (SBTi)
The Science Based Targets initiative (SBTi) is a collaboration
between CDP, the United Nations Global Compact, World
Resources Institute (WRI) and the World Wide Fund for Nature
(WWF). The SBTi deﬁnes and promotes best practice in
science-based target setting and independently assesses and
approves companies’ targets. Science-based targets provide
companies with a clearly deﬁned pathway to future-proof
growth by specifying how much and how quickly they need
to reduce their greenhouse gas emissions.
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.
Streamlined energy and carbon reporting (SECR)
The SECR regulations were introduced in April 2019 and require
companies incorporated in the UK to undertake enhanced
disclosures of their energy and carbon emissions in their
ﬁnancial reporting.
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.
Other information
285
Derwent London plc
Report and Accounts 2023
LIST OF DEFINITIONS
continued
(unaudited)
‘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 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.
Yields
Net initial yield
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
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 year. Yield compression is a commonly
used term for a reduction in yields.
286
SHAREHOLDER INFORMATION
Our Registrar
Enquiries relating to shareholders, such as queries concerning
notiﬁcation of change of address, dividend payments and lost
share certiﬁcates, should be made to the Company’s registrar,
Equiniti (EQ).
The Company has a share account, management and dealing
facility for all shareholders via Equiniti Limited. This oﬀers
shareholders secure access to their account details held
on the share register, to amend address information and
payment instructions directly, as well as providing a simple and
convenient way of buying and selling the Company’s ordinary
shares. For internet services visit:
www.shareview.co.uk
The Shareview Dealing service is also available by telephone on
+44 (0) 3456 037 037 between 8.00am and 4.30pm, Monday
to Friday (excluding public holidays in England and Wales).
The best way to ensure that dividends are received as quickly
as possible is to instruct the Company’s registrars to pay them
directly into a bank or building society account; tax vouchers
are then mailed to shareholders separately. This method also
avoids the risk of dividend cheques being delayed or lost
in the post. Dividend mandate forms are available from the
registrars, either from their website at:
www.shareview.co.uk
or by telephone on the Equiniti general shareholder helpline
number.
Shareholder enquiries
Financial and dividend calendar – 2024
Our forthcoming ﬁnancial and dividend calendar for
2024 is provided below. These dates are provisional and
subject to change. For up to date information, refer
to the ﬁnancial calendar on our corporate website at:
www.derwentlondon.com/investors/calendar
Financial calendar
Final results announced
28 February
Q1 Business update
09 May
Annual General Meeting
10 May
Interim results announced
08 August
Q3 Business update
07 November
Dividend calendar
Final dividend
Interim dividend
Ex-dividend date
25 April
05 September
Record date
26 April
06 September
Dividend paid
31 May
11 October
Company information
As at 27 February 2024, the Company’s issued share capital
consisted of 112,290,929 ordinary shares of 5 pence each
with voting rights (ISIN: GB0002652740).
The Company is a public limited company, which is listed on
the London Stock Exchange and incorporated and domiciled
in the UK. Financial information about the Company,
including annual reports, public announcements and share
price data, is available from the Company’s website at:
www.derwentlondon.com
Useful contact information
Equiniti (EQ)
Equiniti Limited
Aspect House
Lancing Business Park, Lancing
West Sussex BN99 6DA
United Kingdom
Equiniti general shareholder helpline:
Calling from the UK:
0371 384 2192
Calling from overseas:
+44 (0) 371 384 2192
Lines are open 8.30am to 5.30pm, Monday to Friday
(excluding public holidays in England and Wales)
Derwent London plc
For Company Secretarial or Investor enquiries:
David Lawler
Company Secretary
Telephone:
+44 (0)20 7659 3000
Email:
company.secretary@derwentlondon.com
Robert Duncan
Head of Investor Relations & Strategic Planning
Telephone:
+44 (0)20 7659 3000
Email:
ir@derwentlondon.com
Other information
287
Derwent London plc
Report and Accounts 2023
AWARDS AND RECOGNITION
Estates Gazette –
Employer of the Year
EPRA BPR –
Gold Award 2023
European Real Estate
Brand Award – UK Developers
Oﬃce 2023
RoSPA Gold Award
The Sunday Times –
Best Places to Work list 2023
BCO Awards – Test of Time,
White Collar Factory
British Construction Industry
Awards – Best Commercial
Property, Soho Place
OAS Awards – New Build
West End, Soho Place
OAS Awards – Developer
of the Year
Westminster Business Council –
Employer of the Year
Greenstar status, ‘A’ rated
public disclosure (100/100),
Development 5 Star
(97/100), Standing Assets
4 Star (84/100)
CDP 2023 –
Climate Change: A-rating
MSCI – AAA rating
EPRA Sustainability BPR –
Gold Award 2023
ISS Oekom – Prime status
Derwent London won numerous awards for its achievements
and buildings in 2023, a sample of which are shown below.
Corporate
Buildings
Sustainability
288
Printed on material from well-managed, FSC
®
certiﬁed forests and other controlled sources.
This publication was printed by an FSC
®
certiﬁed printer that holds an ISO 14001 certiﬁcation.
100% of the inks used are vegetable oil based, 95% of press chemicals are recycled for
further use and, on average 99% of any waste associated with this production will be
recycled and the remaining 1% used to generate energy.
The paper is Carbon Balanced with World Land Trust, an international conservation charity,
who oﬀset carbon emissions through the purchase and preservation of high conservation
value land. Through protecting standing forests under threat of clearance, carbon is
locked-in that would otherwise be released.
Derwent London plc
Registered oﬃce: 25 Savile Row, London W1S 2ER
T: +44 (0)20 7659 3000
www.derwentlondon.com
Registered No: 1819699