Derwent London plc
Report and Accounts 2022
Derwent London plc / Report and Accounts 2022
THE LARGEST
LONDON OFFICE-
FOCUSED REIT
WITH A DISTINCTIVE
5.5 MILLION SQ FT
PORTFOLIO
Soho Place W1
VISION
We craft inspiring and distinctive
space where people thrive.
PURPOSE
We design and curate long-life,
low carbon, intelligent offices that
contribute to London’s position as
a leading global city, while aiming
to deliver above average long-term
returns for all our stakeholders.
VALUES
• We build long-term relationships
• We lead by design
• We act with integrity
CULTURE
• Dedicated and adaptable
• A passion to improve London’s
office spaces
• Strong customer focus
• Progressive and pragmatic
• ‘Open door’ and inclusive
• Collaborative and supportive
BUSINESS MODEL / See page 36
Introduction
01
CONTENTS
STRATEGIC REPORT
04 Our year in review
04 Management focus
GOVERNANCE
128 Introduction from the Chairman
129 Governance at a glance
04 Operational highlights
130 Our stakeholders
05 Performance highlights
131 The section 172(1) statement
05 Debt highlights
134 Board of Directors
06 Strategic highlights
136 Executive management team
07 ESG highlights
08 Stakeholder focus
10 Our portfolio
12 Pipeline
16 Chairman’s statement
18 Chief Executive’s statement
22 Focusing on the fundamentals
22 Design-led development
24 Occupier-focused solutions
26 Net zero carbon
28
A dynamic and inclusive team
30 Strong capital management
32 Central London office market
36 Our business model
38 Our strategy
45 Measuring our performance
50 Responsibility
52 Environmental
57 Social
65 Governance
86 Property review
87 Valuation
90 Acquisitions & disposals
91
Leasing, asset management
& property management
138 Corporate Governance
statement
152 Nominations Committee report
156 Audit Committee report
170 Risk Committee report
182 Responsible Business
Committee report
190 Remuneration Committee report
224 Directors’ report
229 Statement of Directors’
responsibilities
FINANCIAL STATEMENTS
232 Independent Auditors’ report
242 Group income statement
243 Group statement of
comprehensive income
244 Balance sheets
245 Statements of changes in equity
246 Cash flow statements
247 Notes to the financial
statements
Other information
305 Ten-year summary
306 EPRA summary
95
Development & refurbishment
309 Principal properties
98 Finance review
311 List of definitions
108 Going concern and viability
315 Shareholder information
112 Managing risks
316 Awards & recognition
02
Derwent London plc / Report and Accounts 2022
Francis House SW1
Strategic report
03
“ A former Army and Navy depository and store, the building
has been remodelled to provide maximum light penetration,
generously sized workspaces and double height volumes. The
original grand staircases and a magnificent lift shaft have been
exposed with designs that celebrate the building’s history and
Victorian craft.”
TIM GLEDSTONE
PARTNER, SQUIRE & PARTNERS
STRATEGIC REPORT
04 Our year in review
04 Management focus
04 Operational highlights
05 Performance highlights
05 Debt highlights
06 Strategic highlights
07 ESG highlights
08 Stakeholder focus
10 Our portfolio
12 Pipeline
32 Central London office market
36 Our business model
38 Our strategy
45 Measuring our performance
50 Responsibility
52 Environmental
57 Social
65 Governance
86 Property review
87 Valuation
16 Chairman’s statement
90 Acquisitions & disposals
18 Chief Executive’s statement
22 Focusing on the fundamentals
22 Design-led development
24 Occupier-focused solutions
26 Net zero carbon
91
Leasing, asset management
& property management
95
Development & refurbishment
98 Finance review
108 Going concern and viability
28
A dynamic and inclusive team
112 Managing risks
30 Strong capital management
04
Derwent London plc / Report and Accounts 2022
OUR YEAR
IN REVIEW
MANAGEMENT FOCUS
The flight to quality in London offices gathered pace in 2022
with prime buildings continuing their relative outperformance
in occupational and investment markets.
Real estate valuation yields, however,
came under pressure in the second
half of the year as global events led to
higher inflation and tighter monetary
conditions. As a consequence, the
cost of capital increased, leading to a
fall in capital values across the sector.
Many businesses recognise the
important role offices play in retaining
and attracting talent. We remain
focused on the fundamentals of
designing and curating amenity-rich,
‘long-life, low carbon, intelligent’
offices that contribute to London’s
position as a leading global city
and which appeal to an ever more
discerning occupier base.
In 2021, we made the decision to
retain more of our greener and
recently regenerated buildings where
we see further outperformance
over the next few years. However,
we continue to recycle capital and,
in 2022 we sold £206m of assets
above book value where we identified
lower growth opportunities, helping
maintain net debt at £1.3bn. Proceeds
have been recycled into development
capex and longer term development
opportunities, keeping our LTV
ratio low.
The strength of our capital structure
and the high quality of our balanced
portfolio, coupled with the positive
prospects for central London, give
us confidence in our positioning.
We have the financial capacity to
deliver our committed programme,
with a pipeline of major projects
that extends to more than 1.8m sq
ft of prime offices, while remaining
opportunistic regarding potential
acquisitions to restock our pipeline.
As a total return business, we
recognise the importance of
balancing value creation and
earnings. This has helped us to
continue to grow our covered
dividend each year.
A summary of our performance
for 2022 is presented here.
We look forward to delivering
further high quality offices meeting
today’s occupier needs and thereby
generating above average long-term
returns for our shareholders.
REASONS TO INVEST
Focusing on the fundamentals
DESIGN-LED
DEVELOPMENT
See page 22
OCCUPIER-FOCUSED
SOLUTIONS
See page 24
NET ZERO CARBON
See page 26
A DYNAMIC &
INCLUSIVE TEAM
See page 28
STRONG CAPITAL
MANAGEMENT
See page 30
OPERATIONAL
HIGHLIGHTS
WAULT (TOPPED UP)
7.2 years
weighted average unexpired
lease term after adjusting for
‘topped-up’ rents and pre-lets
NEW LETTINGS
£9.8m
agreed in 2022 on 163,000 sq ft,
13.0% above Dec 2021 ERV
VACANCY RATE
6.4%
our EPRA vacancy rate
increased during the year
EMPLOYEE SATISFACTION
88%
based on our 2022
employee survey
ENERGY INTENSITY
-4%
annual reduction
to 123 kWh/sqm
Strategic report
05
PERFORMANCE
HIGHLIGHTS
NET RENTAL INCOME
£188.5m
6.0%
2021: £177.9m1
EPRA EARNINGS PER SHARE (EPS)
DIVIDEND PER SHARE
106.6p
1.8%
2021: 108.5p1
78.5p
2.6%
2021: 76.5p
TOTAL PROPERTY RETURN
EPRA NET TANGIBLE ASSETS (NTA)
PER SHARE
TOTAL RETURN
-3.4%
9.7%
2021: +6.3%
3,632p
8.3%
2021: 3,959p
-6.3%
12.1%
2021: +5.8%
TOTAL RETURN INDEX
Total return index (31 Dec 2012 = 100)
TOTAL DIVIDEND PER SHARE
Pence (excluding special dividends)
300
250
200
150
100
50
Total return: 8.8% p.a. 10-year average
0
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
80
70
60
50
40
30
20
10
0
8.8% p.a. 10-year average increase
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
EPRA LOAN-TO-VALUE RATIO
CASH AND UNDRAWN FACILITIES
DEBT
HIGHLIGHTS
NET INTEREST COVER
423%
2021: 463%1
23.9%
2021: 22.3%
AVERAGE SPOT INTEREST RATE
(CASH BASIS)
FIXED RATE DEBT
AS % OF TOTAL
3.14%
2021: 3.14%
100%
2021: 99%
1 Restated – see note 2 on pages 247 to 250.
£577m
2021: £608m
AVERAGE MATURITY
OF BORROWINGS
6.2 years
2021: 7.2 years
06
Derwent London plc / Report and Accounts 2022
OUR YEAR IN REVIEW continued
STRATEGIC HIGHLIGHTS
KEY PROGRESS IN 2022
Despite the economic and geopolitical events in 2022, we have stayed focused on delivering our
business strategy by continuing to develop prime, green buildings which remain in high demand,
and expanding our customer offering, whilst also ensuring we kept our strong financial position.
COMPLETED 450,500 SQ FT
OF MAJOR PROJECTS
With the completion of three major
projects, we delivered 450,500 sq ft of
high quality new space. The largest of
these was Soho Place W1, a complex
development encompassing office, retail
and the first new-build theatre in London’s
West End for over 50 years. Together these
projects deliver a combined rental value
of £32.7m to the business after the sale of
2-4 Soho Place (site B).
PROGRESSED NEXT WAVE
OF DEVELOPMENT PROJECTS
We remained focused on the execution
of our next wave of major projects, with
demolition works completing at Network
W1 and Laing O’Rourke commencing
construction works at 25 Baker Street W1
under a fixed price contract.
RECYCLED £206m
OF CAPITAL
During the year we recycled £206m
of capital through strategic disposals,
providing funds to re-invest in the
portfolio. This included Bush House WC2
for £85m which enabled us to crystallise
development profits early without the
inherent project risks.
MAINTAINED STRONG
FINANCIALS
Whilst market interest rates rose
significantly during the year, this had
minimal impact on our overall cost of
borrowing given our very high proportion of
fixed rate debt. Investment in the portfolio
continued but, through disciplined capital
recycling, our net debt was stable, ensuring
leverage remains conservative and providing
plenty of financial headroom.
ENHANCED CUSTOMER
OFFERING
Following the success of DL/78 and its
first full year of operations, we committed
to opening another amenity hub for our
customers, DL/28, at our newly developed
The Featherstone Building EC1. In addition,
during 2022 we continued to drive enhanced
service for our customers through increased
third party member discounts and an
extensive programme of events.
PRIORITIES IN 2023
During 2023 we will further advance our pipeline and continue to explore other opportunities
within our portfolio to add value while we maximise income and drive earnings growth.
PROGRESS ON-SITE SCHEMES
AND SECURE PRE-LETS
We will progress on-site activities at
25 Baker Street and Network, with a
combined floor area of 435,000 sq ft,
and also seek to de-risk these projects by
securing pre-lets on some of the space.
IDENTIFY FURTHER PORTFOLIO
OPPORTUNITIES
We will continue to explore further
opportunities to add value through
regeneration of our buildings, including
asset repositioning and EPC upgrades,
increasing our ‘Furnished + Flexible’ offering
and exploring Life Sciences possibilities.
ADVANCE PLANNING
FOR FUTURE PROJECTS
During 2023 we will progress planning
applications for our next generation of
major projects. This includes 50 Baker
Street W1 (jointly owned with Lazari
Investments) and Old Street Quarter EC1,
which collectively have the potential to
deliver c.1m sq ft of high quality space.
In addition, we will seek a refreshed
planning permission for Holden House W1.
DELIVER DL/28 AT THE
FEATHERSTONE BUILDING
We are committed to delivering DL/28 at
The Featherstone Building during 2023.
Once complete, this will enable us to
provide our customers with access to two
strategically located amenity hubs – one in
the west in Fitzrovia and one in the east in
Old Street.
PROACTIVE ASSET
MANAGEMENT
The Asset Management team will
proactively manage upcoming breaks and
expiries to retain and maximise income in
order to drive earnings growth.
MAINTAIN FINANCIAL
STRENGTH
Through robust capital management we
will continue to maintain a strong financial
position, ensuring we keep good headroom
on our covenants.
Strategic report
07
ESG HIGHLIGHTS
KEY PROGRESS IN 2022
2022 saw us make further progress on our journey to net zero carbon by 2030. Our workforce remains
highly engaged in this area and we continued to invest in delivering social value for our stakeholders.
REDUCTION IN ENERGY
INTENSITY AHEAD OF TARGET
The energy intensity of the managed
portfolio reduced 4% to 123 kWh/sqm
(2021: 128 kWh/sqm). This is ahead of
our 1.50C aligned target for the fourth year
in a row, which for 2022 was 139 kWh/sqm.
See page 56 for more details.
MEETING EMBODIED
CARBON TARGETS
Three major net zero carbon projects
completed in the year: Soho Place W1,
The Featherstone Building EC1 and
Francis House SW1. Significant work
was undertaken to minimise the residual
embodied carbon through innovative use
of lower carbon materials and construction
methods. These offices achieved our 2025
embodied carbon target of ≤600 kgCO2e/sqm.
See page 56 for more details.
SOLAR PARK
PLANNING CONSENT
Resolution to grant planning consent was
received for a c.100 acre, 18.4MW 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. See page 55 for
more details.
ENGAGED
WORKFORCE
Of the 94% of respondents to our 2022
internal ‘pulse survey’, 91% agreed they
are ‘proud to work for Derwent London’.
See page 28 for more details.
CO-FOUNDED CROSS-SECTOR
HEALTH AND SAFETY (H&S) DATA
As part of our robust and transparent
approach to H&S, we co-founded the
cross-sector Real Estate Benchmarking
Group for H&S data sharing.
SUPPORTING
COMMUNITIES
As part of our ongoing package of
community support, our annual community
fund distributions increased 20% to
£120,000. In addition, we have been
working with a specialist consultant
to define and develop our social value
framework. See page 17 for more details.
PRIORITIES IN 2023
In 2023, we will look to make further progress on our journey to net zero with a focus on occupier
engagement. We will ensure that we continue to create value responsibly and maximise the positive
impact upon the communities in which we invest.
WORK WITH OCCUPIERS TO
REDUCE ENERGY CONSUMPTION
Occupier engagement is key to managing
down Scope 3 emissions by bringing
greater focus to their energy usage and
providing guidance on ways to proactively
lower it. See page 54 for more details.
PROGRESS SCOTTISH
SOLAR PARK
Construction works are expected to
commence through 2023, subject to
finalisation of planning consent. Our
current expectation is to complete
development in 2024. See page 55
for more details.
FURTHER EXPLORE CARBON
REDUCTION INITIATIVES
We will continue to explore appropriate
alternative lower carbon materials and
methods of construction. See page 53
for more details.
CONTINUE TO EMBED
DIVERSITY AND INCLUSION
We will continue to raise awareness
around diversity and inclusion, with a
particular focus on disability, to ensure
we remain an employer of choice.
See page 60 for more details.
PROGRESS SOCIAL
VALUE FRAMEWORK
Having started the process of formally
developing our social value framework,
we expect to complete and implement
our approach in 2023. See page 17 for
more details.
08
Derwent London plc / Report and Accounts 2022
OUR YEAR IN REVIEW continued
STAKEHOLDER FOCUS
OCCUPIERS
EMPLOYEES
LOCAL COMMUNITIES
& OTHERS
OUR APPROACH
Our Asset and Property Management
teams maintain an ongoing dialogue
with our occupiers. We provide high
quality amenity, such as our occupier
hub at DL/78, have a dedicated
Customer Experience team who run
a series of occupier events, and aim
to take a collaborative approach
to sustainability.
We recognise that the success of
the business stems from having high
performing and engaged employees.
We undertake annual employee
questionnaires, alternating each year
between full and short ‘pulse surveys’.
Our staff receive training on a variety
of topics and are kept informed of
business activities through monthly
CEO-led town hall meetings and
our intranet.
Our buildings are an integral part
of the communities in which they
sit and our engagement with them
takes many forms. This can be both
financial and non-financial. Employee
volunteering, work experience
opportunities and building open days
all contribute to establishing and
maintaining effective connections.
READ MORE / See page 24
READ MORE / See pages 28
READ MORE / See pages 57 to 58
and 59 to 62
PRIORITIES FOR 2023
• Further promote the DL/App and
DL/78, and the associated benefits
• Deliver DL/28 at The Featherstone
Building EC1 and drive occupier
awareness
• Ongoing engagement and
• Maintain a programme of training to
ensure appropriate skills throughout
the business
• Analyse 2022 ‘pulse survey’
results with appropriate action
to address opportunities
education around service charge
and utilities cost inflation
• Design and run our fifth biennial
employee survey in October 2023
• Work with occupiers to help further
reduce their energy consumption
• Further embed diversity and
inclusion, with a particular focus
on disability
• Provide continued funding for our
two community funds and publicise
the improvements we made to the
application process in 2022
• Complete and embed our new
social value framework into our
portfolio-wide community work
Strategic report
09
SUPPLIERS
CENTRAL &
LOCAL GOVERNMENT
SHAREHOLDERS &
DEBT PROVIDERS
We seek to partner with like-
minded businesses. Through
regular correspondence and update
meetings, 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,
continuously working to treat our
suppliers fairly.
We maintain proactive relationships
with local and central government
departments where we engage across
a variety of levels including local
planners, local action groups and HMRC.
The Group seeks to positively impact
policy through involvement in various
bodies, such as the Westminster
Property Association (WPA).
Our transparent approach to
engagement with shareholders
and debt providers is premised
on the value we see in long-term
relationships. Through the year, 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).
READ MORE / See pages 132 to 133
READ MORE / See pages 132 to 133
READ MORE / See pages 132 to 133
• Ensure ongoing compliance
with our Supply Chain
Responsibility Standard
• Continue to focus on paying
our suppliers promptly
• Issue our annual Modern Slavery
statement for 2023
• Demonstrate our approach to social
value as part of progressing planning
applications for 50 Baker Street W1
and Old Street Quarter EC1
• Work towards further regeneration
of Oxford Street East partnering
with WPA and New West End
Company (NWEC)
• Continue to represent the real
estate sector at the Sustainable
Markets Initiative (SMI)
• Maintain conservative financing
with a focus on interest cover
and rigorous forward planning
• Ensure green finance is used
to fund green projects with
consistent application of our
Green Finance Framework
• Maintain an open dialogue
through a series of individual
and group events
RESPONSIBLE BUSINESS
THE SECTION 172(1) STATEMENT /
COMMITTEE REPORT / See page 182
See page 131
10
Derwent London plc / Report and Accounts 2022
OUR PORTFOLIO
99% OF OUR PORTFOLIO IS
LOCATED IN 14 LONDON ‘VILLAGES’
Our portfolio weighting by villages
West End Central
Fitzrovia & North of Oxford Street 33%
Victoria
Soho/Covent Garden
Paddington
Marylebone
Mayfair
West End Borders & Other
Islington and Camden
Brixton
City Borders
Old Street
Clerkenwell
Shoreditch & Whitechapel
Southbank
Scotland
9%
8%
7%
4%
2%
6%
1%
12%
9%
7%
1%
1%
VALUATION
£5.4bn
BUILDINGS
70
TENANTS
379
FLOOR AREA
5.5m sq ft
PADDINGTON
Paddington
MARYLEBONE
Farringdon
Barbican
Liverpool Street
Whitechapel
Marylebone
Bond Street
MAYFAIR
Blackfriars
Fenchurch Street
River Thames
Cannon Street
Tower
Gateway
DLR
Waterloo
London
Bridge
Angel
King’s Cross
St. Pancras
Euston
Tottenham
Court Road
Victoria
Elephant and Castle
s
e
m
a
h
T
r
e
v
i
R
Vauxhall
Pimlico
Wandsworth Road
Brixton
Strategic report
11
ISLINGTON
Angel
King’s Cross
St. Pancras
Euston
FITZROVIA
MARYLEBONE
NORTH OF OXFORD STREET
CLERKENWELL
OLD STREET
SHOREDITCH
Farringdon
Barbican
Liverpool Street
Whitechapel
Paddington
Marylebone
Bond Street
Tottenham
Court Road
HOLBORN
THE CITY
MAYFAIR
SOHO/
COVENT GARDEN
Blackfriars
Fenchurch Street
River Thames
Cannon Street
WHITECHAPEL
Tower
Gateway
DLR
Waterloo
SOUTHBANK
London
Bridge
s
e
m
a
h
T
r
e
v
i
R
Victoria
VICTORIA
Elephant and Castle
Pimlico
Key
Vauxhall
BRIXTON
Villages
Properties
Tech Belt
Knowledge Quarter
Disposal completed in 2023
Conditional acquisition
Wandsworth Road
Brixton
12
Derwent London plc / Report and Accounts 2022
PIPELINE
MAJOR PROJECTS
We typically invest £150m to £250m of capex into the portfolio each year across projects
of varying size. Our aim is to have two to three major projects on site at any one time.
ON-SITE (435,000 sq ft)
MEDIUM-TERM (c.390,000 sq ft)
25 BAKER STREET W1
TARGET COMPLETION H1 2025
NETWORK W1
TARGET COMPLETION H2 2025
50 BAKER STREET W1
TARGET COMMENCEMENT 2024
298,000 sq ft
137,000 sq ft
c.240,000 sq ft
DEVELOPMENT
(108% area uplift)
DEVELOPMENT
(96% area uplift)
DEVELOPMENT (at 100%)
(96% area uplift)
Green finance: Elected
Green finance: Elect in 2023 (target)
Existing: 122,300 sq ft (at 100%)
BREEAM: Outstanding (target)
BREEAM: Outstanding (target)
Planning: Submitted Q4 2022
NABERS: 4 Star + (target)
NABERS: 4 Star + (target)
Architect: AHMM
Architect: Hopkins
Architect: Piercy&Company
• The scheme comprises 218,000
sq ft of Grade A offices with
28,000 sq ft of retail and 52,000
sq ft of residential (including
affordable), creating a new
design-led destination in the
heart of Marylebone, including an
impressive landscaped courtyard
• Demolition is complete and sub
and super-structure works are
progressing well
• Embodied carbon: c.600 kgCO2e/
sqm (mid-Stage 5 estimate)
• Total capex: £283m, plus estimated
overage of £18m
• On-site works commenced in
Q2 2022 for this project which
incorporates 132,000 sq ft of offices
and 5,000 sq ft of amenity retail
• Demolition is complete
• Negotiations are advanced with
our preferred contractor regarding
the main building contract
• Embodied carbon: c.530 kgCO2e/
sqm (Stage 4 design estimate)
• Total capex: £125m
• Acquired 50% interest in Q4 2021
from Lazari Investments to form
a 50:50 JV
• This site has potential for an
office-led regeneration scheme
of double the existing floor area
• Vacant possession is expected in
late 2024 which broadly coincides
with the target completion at
25 Baker Street
2022
2024
2026
2028
2030+
25 BAKER STREET
NETWORK
50 BAKER STREET
HOLDEN HOUSE
OLD STREET QUARTER
230 BLACKFRIARS ROAD
Strategic report
13
LONG-TERM (950,000+ sq ft)
HOLDEN HOUSE W1
TARGET COMMENCEMENT 2025
OLD STREET QUARTER EC1
TARGET COMMENCEMENT 2027/8
230 BLACKFRIARS ROAD SE1
TARGET COMMENCEMENT 2030
c.150,000 sq ft
750,000+ sq ft
200,000+ sq ft
DEVELOPMENT
(c.67% area uplift)
Existing: 90,000 sq ft
Planning: Consented
Architect: DSDHA
DEVELOPMENT
DEVELOPMENT
Existing: c.400,000 sq ft
Existing: 60,400 sq ft
Planning: Application expected 2023
Architect: AHMM
• A planning consent for a retail-led
retained façade project was granted
in late-2017
• A design competition was held in
2022 and newly appointed architect
DSDHA is working on a refreshed
scheme which we anticipate will
have a higher office weighting and
stronger sustainability credentials
• Conditional contract to acquire
2.5-acre island site for £239m
on receipt of vacant possession
(expected 2027)
• First condition was satisfied on
24 February 2023 with the receipt
of final Treasury approval
• Good engagement with London
Borough of Islington
• Office-led mixed-use campus
regeneration with Life Science/
Lab-enabled space
• Leasehold interest acquired
Q1 2022 for £55m at a 3.5%
initial yield
• 30 surface car parking spaces
contribute to potential floor
area increase
• Post-acquisition lettings have
strengthened medium-term
income profile
In addition, we carry out smaller refurbishment schemes to upgrade buildings including EPC compliance.
We expect the level of spend on these smaller projects to increase over the medium term.
FOR CASE STUDY EXAMPLE SEE RETROFITTING SMALLER BUILDINGS / See page 53
On completion, buildings move into the core income portion of our portfolio where they continue
to generate attractive returns for shareholders supported by our asset management strategy.
SEE HOW WE ADD VALUE / See page 39
14
Derwent London plc / Report and Accounts 2022
PIPELINE continued
FURTHER REGENERATION OPPORTUNITIES
In addition to our major developments (see pages 12 and 13),
there are other regeneration opportunities within the portfolio.
These properties tend to sit in the ‘Under appraisal’ or ‘Future appraisal’
section of our balanced portfolio (see page 39). Some of these buildings
will require investment to meet future Energy Performance Certificates
(EPC) requirements, but simultaneously provide an opportunity to
reposition the property with enhanced amenity and general upgrades
which grow income and future-proof asset value.
We have typically spent c.£15-25m each year across the portfolio on
smaller projects of this nature. Recent examples of completed upgrades
include Francis House SW1, which incorporated a range of energy
performance improvements, and 43 Whitfield Street W1 (see case
study on page 53). The number of these regeneration projects is likely
to increase over the medium term as we accelerate our investment to
ensure EPC compliance by 2030.
Four examples of buildings with future regeneration potential, including EPC
upgrade plans, are presented here.
EPC upgrades
REFURBISHMENTS
20 FARRINGDON ROAD EC1
166,300 sq ft
OFFICES AND RETAIL
• In 2021 a third party report identified £97m of works to achieve 2030
Average office rent: £53.55 psf1
EPC compliance across our London commercial portfolio.
• This has since been updated to reflect the latest scope (change in
building regulations) and 2022 cost inflation, increasing to £107m by
the year end.
• Following the sale of 19 Charterhouse Street EC1 in January 2023, this
has subsequently decreased to £99m.
• Some of this cost may be recoverable through the service charge.
• In their December 2022 external valuation, Knight Frank made a
specific deduction of £58.4m for identified EPC upgrade works across
the portfolio. In addition, further amounts have been allowed for general
upgrades between assumed tenant vacancies.
• 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. A good example is our
‘Green Tea’ project at Tea Building EC1.
https://teabuilding.co.uk/
Potential office ERV: £80.00+ psf
WAULT: 1.2 yrs1
EPC rating: 82%2 B or above
• Prominent corner property
• Conveniently located next to
Farringdon Elizabeth line station
• Opportunity to reposition with
new street entrance, enlarged
reception, improved terraces and
enhanced amenity
• The four buildings shown here represent c.40% of the total identified
EPC costs.
1 Topped up basis.
2 By ERV.
• Following the works, these properties are expected to achieve higher
rents, thereby adding value and increasing cash flow.
The graph shown on page 15 demonstrates our progress during 2022
towards EPC compliance with 65.3% by estimated rental value (ERV)
now 2030 compliant including on-site projects, up 4.3% from 61.0% at
December 2021.
Strategic report
15
1-2 STEPHEN STREET W1
OLIVER’S YARD EC1
266,200 sq ft
OFFICES AND RETAIL
186,000 sq ft
OFFICES, FURNISHED +
FLEXIBLE AND RETAIL
GREENCOAT & GORDON
HOUSE SW1
138,300 sq ft
OFFICES
Average office rent: £63.85 psf1
Average office rent: £56.35 psf1
Average office rent: £58.60 psf1
Potential office ERV: £75.00+ psf
Potential office ERV: £60.00+ psf
Potential office ERV: £73.00+ psf
WAULT: 4.0 yrs1
WAULT: 6.7 yrs1
WAULT: 2.7 yrs1
EPC rating: 11%2 B or above
EPC rating: 2%2 B or above
EPC rating: 5%2 B or above
• Centrally located near Tottenham
• Located within our Old Street cluster
• Two adjacent Victorian character
Court Road station and a short walk
to DL/78
• Plans to improve energy efficiency of
building through the installation of
new low-energy heat pump systems
and window improvements in
conjunction with amenity upgrades
• Opportunity to capture rental
growth since previous letting cycle
• Building will benefit from close
buildings
proximity to DL/28 when it opens
• Located next to Francis House
• Opportunity to upgrade building
entrance, reception, courtyard and
amenities as well as carrying out
EPC upgrade works
and Greencoat Place, both recently
refurbished and successfully let at
strong rents
• Full refurbishment opportunity with
flexibility to connect floorplates
between the buildings
Portfolio EPC compliance
London commercial portfolio (%)
2023 compliant
2027 compliant
2030 compliant
99.9
100.0
78.9
85.7
61.0
65.3
0
10
20
30
40
50
60
70
80
90
100
Dec 2021
Dec 2022
16
Derwent London plc / Report and Accounts 2022
CHAIRMAN’S
STATEMENT
Derwent London aims to add value to its portfolio through a combination of
major projects and refurbishment schemes, while recycling capital out of
assets where we see lower forward returns. We are committed to delivering
high quality and sustainable offices through the economic cycle.
MARK BREUER
Chairman
Global events in 2022 caused a marked
increase in uncertainty. However,
we have seen confidence return to
the market in recent months as the
economic outlook has improved.
Following the decision in 2021 to
retain our larger modern developments
for longer and to dispose of non-
core properties, the business made
good progress against this strategic
objective and has seen relative
outperformance against its property
benchmarks. This, together with
our objective of operating with low
leverage, gives us firepower for
further development and future
investment opportunities.
Estimated rental values across our
portfolio rose by 1.3% over 2022 but the
rapid outward movement in property
yields seen in the second half took our
portfolio fair value to £5.36bn after
a revaluation deficit for the year of
£430.9m, including our share of joint
ventures. This was a reversal from the
£73.0m revaluation surplus seen at the
half year and took the Group’s EPRA net
tangible asset (NTA) value to 3,632p
at 31 December 2022. This equates to
an 8.3% decrease over the year from
3,959p in December 2021.
Gross rental income rose 6.0% to
£207.0m for the year. EPRA earnings
were marginally lower than 2021
at 106.6p per share (2021 restated:
108.5p) but, after deducting premiums
received in both years, underlying EPRA
earnings were slightly up year on year.
We propose raising the final dividend
by 1.0p to 54.5p, in line with our
progressive and well covered dividend
policy. It will be paid on 2 June 2023
to shareholders on the register of
members at 28 April 2023.
Strategic report
17
Old Street Yard EC1
SOCIAL VALUE FRAMEWORK
Being a responsible business is
of central importance to Derwent
London. We understand the positive
impact our investments can have on
local communities. It is increasingly
accepted across the real estate sector
that social value should be integrated
into our everyday business.
We must carefully consider how this
impact is measured while ensuring
that the value created is both
sustainable and long-term.
Working with a third party social
impact consultancy, we are developing
a framework that outlines what social
value means to us and provides a set
of guiding principles that will further
help us design, deliver and monitor
the impact of our engagement. It
will ensure that our supply chain
and occupiers are involved while
complementing our corporate
objectives and community strategy.
This takes the full year’s dividend to
78.5p, an annual increase of 2.6%.
EPRA earnings covered the 2022
interim and final dividends 1.4 times.
In 2022, we refreshed our Vision,
Purpose and Values:
• Vision: We craft inspiring and
distinctive space where people thrive.
• Purpose: We design and curate long-
life, low carbon, intelligent offices
that contribute to London’s position
as a leading global city, while aiming
to deliver above average long-term
returns for all our stakeholders.
• Values: We build long-term
relationships. We lead by design.
We act with integrity.
Derwent London is an inclusive
employer. Our people remain highly
engaged and in our recent employee
survey, 91% of respondents said they
were ‘proud to work for Derwent
London’. I would like to thank all the
staff at Derwent London for their
continued hard work and commitment.
In recognition of the challenges
faced in the uncertain economic
environment, we made a one-off cost of
living payment to eligible employees.
After nine years on the Board, Richard
Dakin is stepping down from his
position as a Non-Executive Director
of the Company and Chair of the Risk
Committee. The Board thanks Richard
for his significant contribution to
the business and wishes him every
success in the future. Helen Gordon,
who is the Senior Independent Director
and a member of the Risk Committee,
will become Committee Chair.
MARK BREUER
Chairman
18
Derwent London plc / Report and Accounts 2022
CHIEF EXECUTIVE’S
STATEMENT
We have an opportunity-rich pipeline, underpinned by
our high quality core portfolio. Our balance sheet remains
strong helped by another year of active capital recycling.
At the start of 2022, confidence
levels in London were strong. In
Q1, occupational and investment
markets both recorded high levels
of activity. The outlook weakened as
the year progressed following the
invasion of Ukraine and its economic
impact globally, as well as changes
in the UK political landscape. In
more recent months, the outlook for
the UK economy has improved and
confidence is recovering.
London is very busy again. The
opening of the Elizabeth line has
increased capacity across the
transport network, contributing to
substantially higher footfall around the
central stations, benefitting offices,
shops and restaurants.
The flight to quality for London offices
continues to gather pace. Data from
CBRE show a clear divergence in
demand for new versus secondhand
space as businesses recognise
the important role design-led,
amenity-rich, low carbon offices
play in attracting and retaining
talent. The hybrid working model is
now established and occupiers are
planning for peak occupancy with
lower occupational densities.
Letting progress
The 163,000 sq ft of leases signed in
2022, with a combined annual rent
of £9.8m, were agreed on average
13.0% above December 2021 ERV. As
well as long leases, our letting activity
included seven ‘Furnished + Flexible’
lettings – also at substantial premiums
– bringing our total of these smaller
units to 27 across 63,600 sq ft.
PAUL WILLIAMS
Chief Executive
Strategic report
19
@SOHOPLACE THEATRE
The design and construction of Soho
Place W1 is a technological tour
de force. The scheme incorporates
Soho’s first new theatre for 50 years
and public realm, in addition to
209,000 sq ft of best in class offices.
Founded at the intersection of the
Elizabeth line, it embodies Derwent
London’s commitment to great design
and a bespoke response to the
uniqueness of place.
Resulting from the site’s constraints
and intended uses, 2-4 Soho Place is
in fact four separate but connected
buildings: the theatre, the auditorium,
the rehearsal hall and the three floors
of offices above.
Each structure requires its own
access and steel frames, resting on
acoustic anti-vibration rubber mounts.
These serve to isolate them from the
four underground storeys of concrete
and infrastructure.
Adding to the challenge, this
underground structure is perforated
by a complex geometry of escalators
and tube tunnels, plus a pocket tower
of ventilation fans rising six storeys
high which can generate as much
noise as a 747 on landing.
Activity has accelerated in 2023
with 10 new leases agreed totalling
£14.7m of rent, 7.7% above December
2022 ERV on average. The two key
transactions are:
• PIMCO (the investment
management company) has pre-let
106,100 sq ft at 25 Baker Street
W1 at a rent of £11.0m, well above
December 2022 ERV on a 15-year
lease with no breaks (commercial
element 56% pre-let/sold ahead of
completion in H1 2025); and
• Buro Happold (a global engineering
consultancy) has leased 31,100 sq
ft at The Featherstone Building
EC1 at a rent of £2.3m in line with
December 2022 ERV on a 15-year
lease with a break at year 10.
We are in detailed negotiations with
a number of other occupiers across
the portfolio.
New leases signed in 2022 had a
weighted average unexpired lease term
to break (WAULT) of 5.7 years and our
‘topped-up’ WAULT at year end was 7.2
years. This will increase with post-year
end activity and we see good demand
for both long and short-term leases.
Our tenant retention rate remains high,
and 79% of space subject to break or
expiry in 2022 was retained or re-let.
Completion of The Featherstone Building
EC1, Soho Place W1 and other smaller
refurbishments led to an increase in our
EPRA vacancy rate to 6.4%, from 1.6% at
31 December 2021. Following lettings in
2023, proforma vacancy would reduce
to 5.0%.
Property valuations
Portfolio ERV growth was 1.3%
in 2022, in the middle of our
guidance range. However, there
was a broad range of outcomes.
Buildings with a capital value above
£1,000 psf saw ERVs up 2.5%, while
those below £1,000 psf saw ERVs up
0.3%, the latter often being the raw
material for future regeneration.
The portfolio’s true equivalent yield
increased 38bp in 2022 to 4.88%,
a level last seen in 2014. Yields
moved down 4bp in H1 and up 42bp
in H2. Our portfolio outperformed the
market with a total property return of
-3.4% compared to the MSCI Central
London Office Index down 8.0%,
endorsing our strategy of keeping
our recently completed high quality
buildings for longer.
The outward yield shift resulted in
underlying values reducing 6.8% in
the year and a revaluation deficit
of £430.9m (including share of
joint ventures).
20
Derwent London plc / Report and Accounts 2022
CHIEF EXECUTIVE’S STATEMENT continued
Market overview
London office investment volumes
totalled £11.2bn, 12% higher than in
2021, but this was 71% weighted to
the first half. There was a significant
pause in Q4 which comprised just 6%
of the annual total.
London is recognised as a leading
global city which appeals to a diverse
range of businesses. Many sectors
continue to grow and expand in
the capital, including professional
services, artificial intelligence (AI),
fintech, education and life sciences.
London office take-up reached 12.3m
sq ft in the year, evenly split between
H1 and H2, up 29% from 2021 and
in line with the 10-year average. The
West End outperformed the City
with take-up 23% above the 10-year
average at 4.9m sq ft, while the City
was in line at 5.1m sq ft.
We have seen an acceleration in the
number of companies committing
to moving from outer London to the
centre, particularly in the West End.
Following an increase in 2020 and
2021, central London vacancy reduced
slightly but remains elevated at 8.2%.
Looking in more detail, there are two
notable trends. First, vacancy is not
evenly spread. West End vacancy
at 3.7% is in line with the 10-year
average while in the City it is nearly
double its long-term average at 11.9%.
Secondly, the availability of prime
space is very constrained, with 64%
of supply being secondhand including
tenant-controlled space.
There is increasing occupier focus
on the overall service and amenity
offering. As well as the amenity
provided within our individual
buildings, all our occupiers are given
exclusive access to shared lounges
at DL/78 and DL/28 (due to open in
Old Street in Q4 2023). These offer a
shared space in which to work, meet
and socialise, as well as bookable
meeting rooms, private hire space
and events.
Strong balance sheet
with low leverage
Despite a volatile market backdrop,
2022 was an active year for capital
recycling. We invested £133.0m on
acquisitions and £121.8m in capex
(including capitalised interest), and
were pleased to sell several non-core
assets above book value for £206.4m
(excluding trading properties), with
a further £53.6m sold in 2023. We
have now made disposals of more
than £700m since the start of the
pandemic three years ago.
Our balance sheet remains very strong
with high interest cover of 423% for
the year and low EPRA LTV of 23.9%
at 31 December 2022. We also have
a strong liquidity position with cash
and undrawn facilities at year end of
£577m (excluding restricted cash).
The Group has no current exposure
to market interest rates, with 100% of
borrowings at fixed rates. Our average
interest rate is 3.14% on a cash basis.
We have little to refinance in the near-
term, with our first maturity being
an £83m 3.99% secured facility in
October 2024. The average maturity
of our drawn debt is 6.2 years.
OUR APPROACH TO FLEXIBLE OFFICE SPACE
We recognise there is increasing market demand for more flexible real estate
solutions and understand the importance of delivering the right product for the
sub-market in line with occupier demand. Our response has been to make a
range of different options available to our customers:
• Flexibly designed space – Our ‘long-life, low carbon’ approach means that our
spaces are designed to be adaptable to the varying needs of a diverse range
of occupiers.
• ‘Furnished + Flexible’ workspace – This is our fully furnished product which
is ready for quick and seamless occupation and is let on flexible lease
terms. Currently totalling 63,600 sq ft, with a further 34,100 sq ft on site or
committed, we will continue to convert more of our smaller units, typically
less than 10,000 sq ft, to fully furnished as and when they become available.
• Shared amenity space (DL/Lounges) – Becoming an occupier in our portfolio
gives our customers (our ‘members’) exclusive access to our shared amenity
hubs (DL/78 and soon to be DL/28), offering a curated environment in which
to work, meet and socialise, as well as meeting rooms and private event
space. During 2022 we had 7,500 customer visits at DL/78.
• Flexible office providers – We lease space to several third-party serviced office
providers across 177,000 sq ft of area within our portfolio, which provide our
occupiers with the ability to sign up to additional amenities and workspace to
meet changing space requirements.
READ MORE / See page 24
DL/78.Fitzrovia W1
Strategic report
21
Recognising employee
performance
We were delighted to recognise
high performance with 17 internal
promotions in 2022, including four
new appointments to the Executive
Committee. Philippa Davies, Head of
Leasing, joined the Committee from
1 July 2022 and there were a further
two appointments with effect from
1 January 2023: Katy Levine, Head
of Human Resources; and Robert
Duncan, Head of Investor Relations
and Strategic Planning. Executive
Committee member Jay Joshi was
also promoted to Group Financial
Controller from Group Treasurer.
Outlook
We expect average ERV growth across
our portfolio in 2023 of 0% to +3%,
with our higher quality properties
continuing to outperform. We anticipate
rental growth accelerating for the
best buildings over the medium-term,
particularly in the West End.
The ongoing weight of global
capital looking to invest in London,
combined with the recent reduction
in volatility across financial markets,
is encouraging. This is supported
by London’s attractive yield relative
to other European cities. Upward
pressure on yields is easing and
we expect our portfolio to be more
resilient than the wider London
office market.
Derwent London has a well-positioned
portfolio, delivering the right product
to meet diverse occupier demand. We
have an exciting regeneration pipeline
and the balance sheet capacity
to take advantage of acquisition
opportunities that may emerge.
PAUL WILLIAMS
Chief Executive
Developments and
refurbishments
At year end, our portfolio was split
57% ‘core income’ and 43% ‘future
opportunity’. We continue to deliver
best in class space that meets
the evolving requirements of our
occupiers. In 2022, we completed
three substantial projects delivering
an average 27% profit on cost
at practical completion. We are
on site at two major projects, 25
Baker Street W1 (298,000 sq ft;
commercial element 56% pre-let/
sold) and Network W1 (137,000 sq ft;
speculative), both due for completion
in 2025.
We have submitted a planning
application for a c.240,000 sq ft
scheme at our 50 Baker Street
W1 50:50 joint venture with Lazari
Investments, and are refreshing
our planning for Holden House W1
(c.150,000 sq ft).
We are working on longer term plans
for Old Street Quarter EC1 which has
potential for a 750,000+ sq ft mixed-
use campus. Our acquisition of the site
for £239m is expected to complete
from 2027. In addition, we are planning
to increase the volume of major
refurbishment projects in the coming
years where we see the opportunity
to substantially raise ERVs reflecting
increased quality, energy efficiency
and sustainability credentials.
In 2022, build cost inflation rose
to c.11% but is now settling and is
expected to moderate in 2023 and
2024. As previously outlined, at 25
Baker Street we have fixed 97% of the
office element build costs (c.80% of
overall) and we are close to agreeing
the contract sum at Network.
Sustainability
We made good further progress in
2022 reducing energy consumption
and thus operational carbon. Energy
intensity across our managed
portfolio fell 4% year-on-year to 123
kWh/sqm, a 22% reduction compared
to our 2019 baseline, ahead of our
science-based targets for the third
consecutive year. This resulted in
a 7% reduction in the operational
carbon intensity across our managed
portfolio to 31.4 kgCO2e/sqm.
At our projects, we account for
100% of the embodied carbon in
the year of completion, at which
point any residual is offset using
high quality, verified schemes. In
2022, we completed two major
developments (412,300 sq ft), one
large refurbishment (38,200 sq ft)
and several small refurbishments. The
weighted average embodied carbon
intensity for the major projects was
589 kgCO2e/sqm. This is below the
target set by the Greater London
Authority (GLA) of ≤600 kgCO2e/sqm.
While our regeneration activity leads
to the creation of embodied carbon,
a project can take four to five years
to deliver and the building will have
an extended design life of over 60
years. In addition, the buildings are
designed to be more energy efficient,
and thus generate lower operational
carbon in use, with maximum future
flexibility and adaptability.
We were pleased to receive resolution
to grant planning consent for a
c.100-acre, 18.4MW solar park on
our Scottish land which we expect
will generate more than 40% of
the electricity needs of our London
managed portfolio.
At 31 December 2022, our portfolio
was fully compliant with forthcoming
changes to EPC legislation which
require a rating of E or higher. These
rules are due to become stricter in
2027 with a minimum rating of C
or better. From 2030, it is expected
that there will be a further change
to a minimum of B. Including on-site
projects, our portfolio is 85.7% 2027
compliant by ERV (2021: 78.9%) and
65.3% 2030 compliant (2021: 61.0%).
In 2021, we commissioned a third party
report that identified c.£97m of works
to achieve 2030 EPC compliance
across our London commercial
portfolio. This has since been updated
to c.£107m reflecting the latest scope
and 2022 cost inflation. Following
the sale of 19 Charterhouse Street
EC1 in January 2023, the figure
reduces to c.£99m. Our external
valuers have made a specific
deduction of c.£58m for identified
EPC works across the portfolio, plus
further amounts for general upgrades
on assumed vacancies.
22
Derwent London plc / Report and Accounts 2022
The Featherstone Building EC1
Strategic report
23
FOCUSING ON THE FUNDAMENTALS
DESIGN-LED
DEVELOPMENT
Design excellence has always been at the core of our thinking
when it comes to providing our customers – the occupiers
of our workspace – with the very best places to work.
It is only through the pursuit of design excellence that our
buildings can succeed in attracting discerning occupiers.
In turn, these desirable workplaces support our customers
in attracting and retaining the best talent whilst providing
them with an environment that fosters collaboration
and productivity.
We strive to create spaces that inspire creativity, promote
collaboration and drive productivity, whilst being truly
sustainable – in other words – “Distinctly Derwent”.
Our mantra is ‘long-life, low carbon’. Our approach to
sustainable thinking is comprehensive, as illustrated by
the diagram below. It incorporates the physical attributes
of a building with the integration of digital innovation
and considers the overall impact on people and the
environment. With this approach, we aim to achieve the
optimum design solution – providing ‘quality and delight’.
Important in our approach to design are influences and
inspiration from the past, including learning from the
modernist masters of the early 20th Century: Mies Van Der
Rohe, Le Corbusier and Louis Kahn among others. Equally
important is our desire to seek out innovation and future
thinking, whether in new low carbon recycled materials,
new construction techniques or the intelligent systems
within our buildings.
Our design-led approach, alongside our customer focus
and extensive understanding of occupier needs, ensures
our product is well positioned to capture London’s
diverse demand.
PIPELINE / See page 12
Through thought leadership we endeavour to
deliver design excellence with every scheme,
always pushing the boundaries and disrupting
the accepted norms of the market.
SUSTAINABLE THINKING
PHYSICAL
Building
Bricks & Mortar
Intelligent
Buildings
Customer
Experience
DL
DESIGN
QUALITY
Data
DIGITAL
Technology
Infrastructure
AI
Wellbeing
CULTURAL
DL/App
People
We work through the
complex challenges
of architectural design,
engineering and materiality
(the ‘physical’), integrating
technology and intelligent
systems (the ‘digital’)
with aspects of health,
wellbeing and socialisation
(the ‘cultural’).
24
Derwent London plc / Report and Accounts 2022
FOCUSING ON THE FUNDAMENTALS
OCCUPIER-FOCUSED
SOLUTIONS
DL/78.Fitzrovia W1
We understand there is more to creating a successful
workspace than just the physical bricks and mortar.
Offering a high quality service and building strong, long-
term relationships with our occupiers is key to everything
we do and fundamental to our ongoing business strategy.
Occupiers are becoming ever more discerning, so
understanding and pre-empting the changing needs of
our audience is crucial. Throughout this collaborative
journey, we have developed a bespoke and exclusive
membership package which all Derwent London
occupiers can fully enjoy.
“ We have been impressed with the beautiful
space and fantastic team at DL/78.
Our staff members often seek out the
comfortable surroundings for quiet focus
work or private meetings away from
our nearby offices on Whitfield Street.”
Employees of our occupiers across the portfolio
automatically receive membership and complimentary
access is provided to:
Community spaces at DL/78 in Fitzrovia and the
forthcoming DL/28 in Old Street
• DL/78, our first members’ lounge, was launched in
October 2021 for the exclusive use of Derwent London
members as a place to connect and collaborate.
Following its success, we are opening a second lounge,
DL/28, in Old Street in late-2023.
DL/App
• The DL/App provides a digital space for our member
community to meet, while enabling a number of features
and benefits: tap-through access to DL/78, third party
exclusive discounts and booking facilities for events and
DL/78 meeting rooms.
Experience team
• Derwent London members have access to a dedicated
Experience team focused on ensuring the best
experience for all those occupying our buildings.
They organise and host a diverse and inclusive line-up
of events throughout the year across our portfolio.
Bridging the gap between the physical and digital
landscape, these benefits provide market-leading,
innovative, high quality and value-add amenity. Having
the ability to communicate directly with occupiers at
all levels, we are building a thriving community across
a broad demographic.
Our customer and member-centric approach is also
focused on reimagining the traditional relationship
between landlord and occupier. Our aspiration is to break
the barrier of anonymity. Through offering a personalised
service we strive to encourage loyalty and drive retention,
which over time we expect will contribute to structurally
lower portfolio voids.
BEA KERLIN
SINE Digital at 43 Whitfield Street W1
As our occupiers grow, we want them to grow
with us.
Strategic report
25
80 Charlotte Street W1
E 26
Derwent London plc / Report and Accounts 2022
25 Baker Street W1
Strategic report
27
FOCUSING ON THE FUNDAMENTALS
NET ZERO CARBON
Derwent London began its journey to become net zero
several years ago. In July 2020, we formalised this
intention with the publication of our Net Zero Carbon
Pathway. The Group’s commitment covers carbon
emissions from all activities and across Scopes 1, 2 and 3:
• Operational carbon from landlord and occupier energy
and water consumption, as well as our corporate
activities (Scopes 1, 2 and 3); and
• Embodied carbon from new developments,
refurbishments and managed fit-outs (Scope 3).
To achieve our goal, we need to reduce energy consumption
and associated greenhouse gas (GHG) emissions in line with
a science-based 1.5OC climate warming scenario.
Our targets require a 4% annual reduction in the energy
intensity of our managed portfolio to 108 kWh/sqm in 2027,
and 90 kWh/sqm by 2030. When compared to our 2019
baseline, energy intensity in 2022 has reduced 22% to
123 kWh/sqm which is ahead of target.
We are in a strong position to engage with our occupiers
to support them in achieving their own sustainability
aspirations, whilst reducing energy consumption across
our investment portfolio. Collaboration with occupiers
and the wider supply chain is essential to achieve
collective success.
A critical part of our pathway is investment in the
generation of additional renewable energy. In 2022 we
received resolution to grant planning consent for an
18.4MW solar park on c.100 acres of our Scottish land at
Lochfaulds which is expected to produce in excess of 40%
of the electricity needs of our London managed portfolio
upon delivery.
Regeneration is at the core of our business model, through
refurbishment (retrofitting) or development. Reducing the
associated embodied carbon is essential. We have set
a two-stage target for our Commercial Office New Build
developments, aligned with the GLA’s aspirations, for
schemes completing from:
• 2025: <600 kgCO2e/sqm
• 2030: <500 kgCO2e/sqm
Where we cannot eliminate residual emissions, we have
committed to offset these through verified schemes.
We are making good progress on our journey to
net zero, with performance ahead of target for
key metrics.
28
Derwent London plc / Report and Accounts 2022
FOCUSING ON THE FUNDAMENTALS
A DYNAMIC &
INCLUSIVE TEAM
One of our core strengths is creating and encouraging
inclusive team dynamics. Ensuring that every employee has
the opportunity to put their knowledge and skills to use, is
engaged and feels valued, is important to us. We know that
diverse teams are smarter. However, we also appreciate
that inclusion means more than just having a seat at the
table. We seek to give our people a voice and to make sure
that voice is heard, by empowering our employees to lead
presentations, chair meetings, share ideas, challenge the
status quo and participate in constructive dialogues.
Our people respect each other and work collaboratively
across teams towards a common purpose, providing
mutual support, brainstorming ideas and listening to
others. We make it clear from the outset that we want
everyone to be able to bring their authentic selves to
work and to treat each other fairly and respectfully. For
this reason, when it comes to diversity and inclusion
we go beyond the traditional attributes, such as gender
and ethnicity, and include individuals’ personality,
communication and work styles. Our work on diversity
and inclusion within the business enabled us to achieve
the National Equality Standard accreditation in 2021 and
we have continued to embed this in our culture through
various training programmes (such as unconscious bias,
inclusive leadership and disability awareness) and other
initiatives such as the 10,000 Black Interns programme.
Our Directors operate an ‘open door’ policy, facilitating
regular, two-way communication. Monthly CEO-led town
hall meetings provide a forum for teams to update the
business on projects, focus areas and initiatives which
help ensure communication channels remain open and
our activities and strategy are clear. We host technical
workshops for company-wide knowledge sharing and
biennial staff awaydays, involving motivational guest
speakers and team activities, where employees are
encouraged to work with and get to know their colleagues
in an informal environment.
In addition, the Derwent London Social Committee
arranges a variety of inclusive and fun events on a
regular basis to provide opportunities for networking
and relationship building.
We recognise that diversity enriches our
creativity and adds value for our stakeholders.
READ MORE / See pages 59 to 62
Staff awayday 2022
STAFF SURVEY
84%
agreed
2021: 82%
“ Derwent London
is an inclusive
place to work.”
88%
agreed
2021: 87%
“ I would recommend
Derwent London as a
great place to work.”
91%
agreed
2021: 94%
“ I am proud
to work for
Derwent London.”
Strategic report
29
Derwent London Staff
30
Derwent London plc / Report and Accounts 2022
Brunel Building W2
Strategic report
31
FOCUSING ON THE FUNDAMENTALS
STRONG CAPITAL
MANAGEMENT
We have always taken a disciplined and long-term
approach to capital management. This starts with
maintaining conservative levels of leverage, with generous
interest cover being our key focus, in order to meet our
financial obligations. This focus has ensured the business
has remained resilient through many economic cycles.
We partner for the long-term with a diverse group of
lenders. Flexibility is key so we use a combination of
flexible revolving bank facilities, which give us the ability to
draw down funds as we need them, balanced with longer-
term fixed rate debt that provides robust future visibility
and protection against interest rate fluctuations.
Maintaining substantial headroom under our facilities
is a vital part of our approach. This provides us with the
liquidity to move quickly when opportunities arise and
comfort that we have the financial capacity to deliver our
committed developments. Our regular internal business
forecasts give us visibility on future funding needs so we
can plan cash flow requirements well ahead.
Disciplined recycling of capital through disposals
enables us to generate returns through the execution
of a development programme whilst keeping our debt
levels conservative.
In our ongoing commitment to sustainability, we operate
our Green Finance Framework (GFF). This has been
developed to demonstrate how the Group uses Green
Financing Transactions to fund projects that will deliver
environmental benefits, which is in line with our business
strategy and purpose.
We recognise that dividend income is important to our
shareholders. Our policy is to pay a progressive dividend
which is well covered by EPRA earnings.
Our financial discipline helps ensure the
business remains robust throughout property
and economic cycles.
Tenant fit-out at Brunel Building W2
Borrowings, gearing and financial headroom
£m
2,000
1,800
1,600
1,400
1,200
296
336
1,000
800
600
400
200
511
476
383
269
274
523
968
1,030
899
901
911
730
1,248
1,238
985
1,041
%
50
45
608
577
40
35
30
25
20
15
10
5
0
0
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Loan-to-value ratio (%)
Borrowings (£m)
Cash & undrawn facilities (£m)
“ HSBC has a long-established relationship
with Derwent London having helped
arrange a number of the Group’s financing
transactions over many years. This includes
supporting them on their green financing
journey with their Green RCF in 2019 and
their Green Bond issuance in 2021.”
READ MORE / See page 44
DANIEL HATHAWAY
Relationship Director, Large Corporates, HSBC
32
Derwent London plc / Report and Accounts 2022
CENTRAL LONDON
OFFICE MARKET
Occupational market
Letting activity in 2022 was in line with the 10-year
average. The flight to quality is well established and
gathering pace, with nearly 80% of take-up being of new or
good quality space, while availability of secondary remains
elevated, in part due to heightened occupier focus on
sustainability credentials. The constrained development
pipeline, alongside occupiers being focused on high
quality buildings in more central locations, is leading to an
increase in pre-letting activity. Together with limited prime
supply, we see good reason for rental growth on higher
quality buildings.
Central London take-up of 12.3m sq ft was 29% higher than
in 2021 reflecting continued re-engagement by businesses
with longer term occupational strategies. This was focused
on best quality product, with 39% of the total being new
(including pre-lets) and 40% was Grade A secondhand. In
the West End 4.9m sq ft of space was leased, up 36% year-
on-year and 23% ahead of the 10-year average. In the City,
take-up of 5.1m sq ft rose 33% compared to 2021, in line
with the 10-year average.
Availability remains elevated across central London, with
vacancy of 8.2% down 0.4% on the prior year, but this
average masks a significant divergence between the West
End and City. Strong demand in the West End led to a 1.1%
decline to 3.7% (10-year average 3.4%). City availability
also reduced, but by only 0.3% to 11.9%, nearly double the
10-year average (6.4%).
The amount of available secondhand space nearly doubled
at the start of the pandemic to a peak of 19.2m sq ft at Q1
2021 and finished 2022 at 16.4m sq ft. The volume of tenant-
controlled space remains high at 28% of total availability.
Overall secondhand availability remains elevated at 64% of
the total, but this compares to a peak of 77% at Q1 2021.
Knight Frank estimate that there will be an 11m sq ft supply
shortage of best quality buildings over the next four years,
assuming normal levels of annual take-up. The committed
central London development pipeline between 2023
and 2025 totals 12.7m sq ft with 7.1m sq ft scheduled to
complete in 2023 of which 28% is pre-let or under offer.
Deliveries in 2024 and 2025 are significantly below
historic levels.
Businesses with large space requirements over the
medium-term are engaging at an increasingly early stage
of development in order to secure space that meets their
requirements. Pre-lets comprised 24% of total take-up
in 2022 and accounted for the nine largest transactions.
We are also seeing signs of recentralisation with demand
more focused on central and well-connected locations.
London is well recognised as a leading global city with
broad appeal to a diverse range of occupiers. The key
sectors taking space in 2022 were banking & finance
(28%), and professional and creative industries (17% each).
This diversity is also seen in the active demand figures,
with banking & finance, business services and creative
industries together accounting for 71% in total.
Businesses continue to adjust to more hybrid solutions but
whilst working patterns may have changed, the power and
function of the office seems to be more understood now
than ever. Occupiers are making decisions based on peak
occupancy with lower occupational densities, whilst also
ensuring it is the right space to support their talent and
overall business productivity.
Our experience is that long leases remain important for
large occupiers given high fit-out costs and business
continuity. For pre-lets, pre-completion expansion/
contraction options are becoming more common.
For smaller occupiers and in particular those in high
growth mode, shorter leases provide the flexibility
they need to adapt their real estate to their rapidly
evolving requirements.
One Oxford Street W1
Strategic report
33
Central London
office stock
City
33%
West End
39%
Midtown
11%
Docklands 9%
Southbank 8%
Source: CBRE
There is 235m sq ft of office space across central
London. 72% is concentrated in the City and the West End
(see chart). Our portfolio is principally in the West End and
the Tech Belt. We have no buildings in the City core and
Docklands, and only one building in Mayfair, the traditional
heart of the West End.
London’s office cycle
(1980=100)
400
350
300
250
200
150
100
50
0
0
8
9
1
5
8
9
1
0
9
9
1
5
9
9
1
0
0
0
2
5
0
0
2
0
1
0
2
5
1
0
2
2
2
0
2
Capital growth
Rental value growth
Source: MSCI
London’s office market had three major cycles between
1980 and 2009 (see chart), when strong growth was
followed by a sudden decline. These events were typically
associated with recessions and rising interest rates, often
exacerbated by oversupply and distressed sales. Growth
rates peaked in the current cycle in 2015 before stabilising
until 2021. In 2022, the rapid rise in market interest rates
linked to an inflationary spike caused yields to rise. Quality
supply is constrained, however, and rents have risen,
reducing the impact of yield expansion on capital values.
Breakdown of available space
Available space (million sq ft)
30
27
24
21
18
15
12
9
6
3
0
9
0
0
2
0
1
0
2
1
1
0
2
2
1
0
2
3
1
0
2
4
1
0
2
5
1
0
2
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
1
2
0
2
2
2
0
2
%
100
90
80
70
60
50
40
30
20
10
0
Docklands, Midtown & Southbank
City
West End
Source: CBRE
Secondhand %
Tenant controlled %
Overall vacancy in London remains high at 8.2%, down
0.4% in the year. There are two key trends. First, availability
is concentrated in the City and Docklands which together
comprise 57% compared to the West End at 24%. City vacancy
is 11.9% (10-year average 6.4%) vs the West End at 3.7%
(10-year average 3.4%). Secondly, supply is dominated by
secondhand space at 64% of the total. In the flight to quality,
secondhand space is sticking on the market for longer.
Sustainability credentials, high quality design, amenity,
customer service and experience all remain high on the
agenda for occupiers when it comes to making real estate
decisions. That is why we focus on delivering best in class,
design-led and sustainable buildings.
Macro backdrop
2022 was characterised by a spike in global inflation,
a rapid increase in borrowing costs and a cost of living
crisis in the UK. Towards the end of the year, inflationary
pressures began to ease, partly driven by a reduction in
both energy and food costs, which has led to expectations
of a lower peak in interest rates than was expected at the
height of the political and economic instability.
Following a strong post-pandemic bounce in 2021, UK
GDP was 4.0% in 2022 albeit weighted to Q1. The latest
forecasts from Oxford Economics and others are for both
the UK and London to experience a short-lived and mild
recession in 2023 as households and businesses respond
to the increase in input costs from higher costs of materials
and utilities, and interest rates. The economy is then
expected to return to growth from 2024, with London to
maintain its outperformance.
Job creation is an important indicator for London offices.
Forecasts from Oxford Economics show a small contraction
in the number of office based jobs in 2023, before a return
to growth from 2024. These forecasts should be viewed,
however, in the context of the last two years during which a
combined c.280,000 net new office-based jobs were created.
The opening of the Elizabeth line, which has added c.10%
capacity to London’s rail transport network, has driven a
surge in footfall around the central stations along the route.
According to Transport for London (TfL) data, more than
100m journeys have already been made since opening
and daily usage is above the expected level of c.600,000.
Tottenham Court Road is now in the top five most used
stations in the TfL network, with its usage increasing by more
than 80% since launch. Approximately 41% of our portfolio
is located in nearby Fitzrovia (including Soho Place).
34
Derwent London plc / Report and Accounts 2022
CENTRAL LONDON OFFICE MARKET continued
Central London office take-up
Take-up (million sq ft)
20
18
16
14
12
10
8
6
4
2
0 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022
West End
City
Docklands, Midtown & Southbank
European yields
Prime office yield (%)
7.0
6.5
6.0
5.5
5.0
4.5
4.0
3.5
3.0
2.5
2.0
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022
London – West End
London – City
Paris
Frankfurt
Central London development pipeline
Floor area (million sq ft)
Vacancy rate (%)
12
10
8
6
4
2
0
12
10
8
6
4
2
0
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026
Completed
Under construction let/under offer
Under construction available
Completed average
Vacancy rate
Central London office investment transactions
Investment transactions (£bn)
22
20
18
16
14
12
10
8
6
4
2
0 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22
Annual average
Source: CBRE
Office occupancy rose through 2022 according to data from
Remit Consulting, following an initial period of adjustment
when work from home guidance was lifted in mid-January.
West End office occupation has increased from c.10% to in
excess of 45%. By contrast, occupation levels in the City
continue to lag, reaching c.30% through Q4.
London remains an attractive place to live as well as to
work. In 2022, the population rose by 1.2% to 9.5m and is
forecast to increase to 9.6m in 2023. Over the longer term
to 2035, the UN is forecasting an annual increase of 0.8%
to 10.6m, an increase of more than 1m people over the next
13 years. This comes on the back of sustained growth since
the early-1980s when the population was 6.7m.
Long-term capital remains attracted to London
London remains an attractive location for domestic and
international investors and CBRE estimates there is
c.£33bn of potential investment demand targeting London
offices. The story of ‘the best versus the rest’ continues and
investor appetite is polarised.
Well-located and high quality buildings with strong ESG
credentials, let on long leases to strong covenants remain
in demand as do those with potential for regeneration into
prime. Investor appetite for secondary assets, however, is
very limited and these are likely to underperform.
Investment activity for 2022 was £11.2bn, 12% above
2021 and in line with the long-term average of £11.4bn.
Unsurprisingly, given the uncertain economic backdrop,
investment volumes were low in the last quarter of the
year, totalling just £0.7bn. Overseas capital dominated
investment activity, accounting for 80% of all transactions,
with investors from Asia the most active at 43%.
Underlying rates and credit spreads both increased
significantly in the year with prospective investors
appraising return requirements against the higher
borrowing costs. Consequently, investment yields came
under upward pressure through H2. The West End was
more resilient than the City, with prime yields rising c.50bp
to 3.75% compared to City yields up c.75bp to 4.5%.
The rise in yields combined with heightened risk awareness
from credit providers is expected to present potential
acquisition opportunities. Owners who are currently
actively marketing assets for sale are primarily driven by
a combination of upcoming refinancing events, future
vacancy risk and EPC/upgrade capex requirements.
Vendor pricing expectations are being reset as transactional
evidence starts to emerge and financial markets show signs
of stabilising. In contrast to previous market corrections,
both the development pipeline and the volume of debt
maturing in the short-term are relatively low, which is
expected to limit the magnitude of any market correction.
Strategic report
35
PORTFOLIO STATISTICS
CONTRACTED NET
RENTAL INCOME
£204.2m
2021: £178.4m
ESTIMATED RENTAL VALUE1
£304.6m
2021: £293.9m
EPRA NET INITIAL YIELD
3.7%
2021: 3.3%
TRUE EQUIVALENT YIELD
4.88%
2021: 4.50%
WEIGHTED AVERAGE UNEXPIRED
LEASE TERM (WAULT)
6.4 years
2021: 6.3 years
WAULT AFTER RENT-FREE
AND PRE-LETS
7.2 years
2021: 7.8 years
Central London office rent
‘Topped-up’ income
5.46m
sq ft
£0-£30 per sq ft
£30-£40 per sq ft
£40-£50 per sq ft
£50-£60 per sq ft
£60-£70 per sq ft
£70-£80 per sq ft
£80+ per sq ft
4%
9%
15%
25%
18%
16%
13%
Ten largest tenants
Tenant diversity
% of rental
income2
% of rental
income2
Expedia
G-Research
Public sector
Burberry
Boston Consulting
Group
The Office
Group/Fora
Arup
FremantleMedia
Group
VCCP
Apollo
7.5%
5.2%
4.7%
4.6%
3.3%
2.6%
2.5%
2.2%
2.0%
1.9%
Media
Business services
Online leisure
Fintech
Financial
Retail head office
Technology
Retail &
hospitality
Public sector
Flexible office
providers
Other
20%
18%
9%
9%
8%
8%
7%
7%
6%
4%
4%
1 After additional capex of £330m.
2 Based upon contracted net rental income of £204.2m.
36
Derwent London plc / Report and Accounts 2022
OUR BUSINESS MODEL
HOW WE ADD VALUE
Core activities
ASSET
MANAGEMENT
Understanding our occupiers
helps us tailor buildings and
leases to their needs thereby
reducing vacancy, growing our
income streams and adding value
See page 91
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 and
wellness facilities
See page 95
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
See page 90
DRIVEN BY
Vision
We craft inspiring and distinctive
space where people thrive.
Purpose
We design and curate long-life,
low carbon, intelligent offices that
contribute to London’s position as
a leading global city, while aiming
to deliver above average long-term
returns for all our stakeholders.
Values
• We build long-term relationships
with all our stakeholders
• We lead by design, crafting a brand of
amenity-rich, well-designed, flexible
and efficient buildings
• We act with integrity and foster an
open and progressive corporate culture
Strong governance and
risk management
See pages 112 and 127
IMPACTED BY
Environment
The London office market
and its wider context
See pages 32 to 35
Assets and resources
Properties
See page 10
Financial resources
See page 98
People and relationships
See page 59
The views of our stakeholders
Understanding their key issues
through effective engagement
See pages 8 and 130
Core activities
Strategic objectives
Outcomes
TO OPTIMISE RETURNS
AND CREATE VALUE FROM
A BALANCED PORTFOLIO
See page 40
TO GROW RECURRING
EARNINGS AND CASH
FLOW
See page 41
TO ATTRACT, RETAIN
AND DEVELOP TALENTED
EMPLOYEES
See page 42
TO DESIGN, DELIVER AND
OPERATE OUR BUILDINGS
RESPONSIBLY
See page 43
TO MAINTAIN STRONG
AND FLEXIBLE FINANCING
See page 44
PRIORITIES
Annual priorities are
set for each strategic
objective
See pages 40 to 44
RISKS
Risk management is
integral to the delivery
of our strategy
See page 112
KPIs &
REMUNERATION
Success against our
objectives is measured
using our KPIs and
rewarded through our
incentive schemes
See pages 45 and 190
Strategic report
37
VALUE CREATED
£29.6m
rent reviews, lease renewals and
lease regears agreed in 2022 on
516,900 sq ft
435,000 sq ft
on-site projects
8.8%
average annual ordinary
dividend growth over 10 years
8.8%
average annual total
return over 10 years
£474k
Community Fund plus amounts
committed by the Sponsorship
and Donations Committee
in 2022
Measured via our KPIs
See page 45
38
Derwent London plc / Report and Accounts 2022
OUR STRATEGY
Our strategy is well established and explains how we aim
to fulfil our purpose for the benefit of all our stakeholders.
STRATEGIC
OBJECTIVES
RISK
MANAGEMENT
PERFORMANCE MEASUREMENT
& REMUNERATION
Successful implementation of our
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:
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
STAKEHOLDER FOCUS / See page 8
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.
Preparation of an annual 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 pages 116 to 123
EMERGING RISKS /
See pages 124 to 125
Key Performance Indicators (KPIs)
help us measure our performance
and assess the effectiveness of
our strategy. These are listed on
page 45 for each objective, but the
three principal measures that we
apply to ascertain overall business
performance are shown below.
Total return (TR) – Combines our
dividends with the growth in net asset
value per share (measured using
the EPRA NTA metric) to provide an
overall return for the year, measured
against a peer group.
Total property return (TPR) – Measures
the income and growth in value from
our properties, measured against an
index of other relevant properties.
Total shareholder return (TSR) –
Compares our dividends and share price
movement with the relevant index.
These are the main performance
measures we use to determine the
majority of the variable elements of
executive remuneration to ensure
there is strong alignment between
the interests of shareholders and our
decision makers. There are also non-
financial targets representing 25% of
the potential bonus which measure
our success in meeting ESG and
climate change responsibilities and
the needs of other stakeholders.
Strategic report
39
We apply our asset management and regeneration skills to the Group’s 5.5m sq ft property portfolio
using our people, relationships and financial resources to add value and grow income while benefitting
the communities in which we operate and the wider environment.
At 31 December 2022, 43% of our portfolio (by floor area) was classified as either ‘With Potential’ or ‘Under Development’.
This portion of our portfolio represents buildings with potential to add further value through regeneration. This excludes
the proposed major development at Old Street Quarter EC1 as our ownership is conditional on completion of a purchase
contract which was signed in May 2022.
The remaining 57% are buildings where most of the repositioning activity has taken place but where our asset management
skills can continue to grow income and value. This is the ‘Core Income’ portion of our portfolio.
Stakeholder, climate change and wider ESG impacts form key considerations in the strategy we pursue for each
individual property.
Sell relatively lower returning
assets; capital recycled into
higher returning opportunities
L
C
Y
C
E
T : R
INVES T M E N
HOW WE ADD VALUE
C O R E ACTIVITIES
I N G
B A L A N C ED PORTFOLIO
INVESTMENT: ACQ
UISITIO
N
Buy properties with modest
capital values and potential to
upgrade and/or add floor area;
usually income-producing
43%
UNDER
DEVELOPMENT/
POTENTIAL
CORE INCOME
57%
5.5m
sq ft1
£204.2m
rent
57%
CORE
INCOME
A
S
S
E
T
M
A
N
A
G
E
M
E
N
T
Continue to add value through
satisfying occupier needs,
minimising voids, growing
income and further upgrades
FUTURE
APPRAISAL
27%
UNDER APPRAISAL
A
S
S
E
T
M
A
N
A
G
E
M
E
N
T
6%
N
TE
D 2
%
C
O
N
S
E
ON-SITE
SCHEMES
8%
E F U R BISH MENT
& D E V ELOP MENT
R
Explore best plan
for a building whilst
maintaining income;
agree landlord breaks
at future dates which
provide flexibility
over vacant possession
for regeneration
Secure planning consent; refurbish or redevelop,
adding floor area where possible; seek to de-risk
with pre-let(s) and fixed price contracts
1 Comprises 5.02m sq ft of existing buildings plus 0.44m sq ft of on-site developments and on-site refurbishments.
40
Derwent London plc / Report and Accounts 2022
OUR STRATEGY continued
TO OPTIMISE RETURNS AND CREATE
VALUE FROM A BALANCED PORTFOLIO
We aim 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 balance
is measured by reference to the
‘Derwent doughnut’ as set out on
page 39 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.
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.
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.
2022 PRIORITIES AND PROGRESS
Priorities
Progress
Complete development of Soho Place
W1 and The Featherstone Building
EC1 and let remaining space
Appoint main contractor
and progress the scheme
at 25 Baker Street W1
Both projects completed H1 2022. Soho
Place is 87% let or sold. The Featherstone
Building was 32% let at 31 December 2022,
now 59% after further lettings
Laing O’Rourke was appointed in January
2022 and on-site works are on track to
complete H1 2025
Commence on-site works at
Network W1
Demolition works are complete and the
main contractor has been identified
Progress plans for Bush House WC2,
50 Baker Street W1 (50:50 joint
venture) and Old Street Quarter EC1
Seek further opportunities within
the portfolio to upgrade or reposition
assets to maximise returns
Crystalised development profits on Bush
House by selling for £85m, and progressed
designs for both 50 Baker Street and Old
Street Quarter
New architect appointed at Holden House
W1 to refresh the scheme
Dispose of properties that no longer
meet our investment criteria
Sold New River Yard EC1 for £67.5m before
costs and rental top-ups
43%
of assets ‘Under development/
potential’ (by area) – see page 39
57%
of assets ‘Core income’ (by area)
Performance measures:
1 2 3 4 7 8 10
KPIs / See page 45
Principal risks:
1 2 3 4 5A 5B 5C 6A 6B
6C 7 8 9A
See page 116
Emerging risks:
B C F
See page 124
2023 PRIORITIES
• Progress 25 Baker Street and
Network and secure pre-lets
• Let remaining space at The
Featherstone Building and
Soho Place
• Progress planning applications
for 50 Baker Street (joint
venture) and Old Street Quarter
• Seek further opportunities
within the portfolio to upgrade
or reposition assets to maximise
returns, increase our ‘Furnished
+ Flexible’ offering and explore
Life Sciences possibilities
Strategic report
41
Achieved
In progress
Not achieved
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 on lease events such as rent
reviews, lease regears and other
forms of lease restructuring.
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 tenants
and consultants to arrive at
appropriate rent review outcomes;
• negotiating with our tenants
to extend leases or remove
break clauses;
• coordinating ‘block dates’ to gain
possession of buildings when a
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 a tenant; and
• trying to anticipate our tenants’
needs, thereby optimising income.
Examples are fixed or minimum
rental uplifts and a flexible
approach to dilapidations and
alienation clauses.
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.
2022 PRIORITIES AND PROGRESS
Priorities
Progress
Continue to enhance amenity
and customer experience across
the portfolio
Retain and grow income by
proactively managing voids and
expiries while both extending and
increasing income where viable
Look to upgrade existing stock
where opportunities arise to
maximise income
Approval given to proceed with DL/28,
our second customer amenity space,
located in The Featherstone Building,
and continued to develop our customer
events programme
Asset management activities on 516,900
sq ft delivered a 7.2% increase in rent
to £29.6m. 79% income was retained or
re-let on breaks/expiries. 163,000 sq ft of
new lettings captured £9.8m of income
Invested £20m of capex on smaller
upgrade projects across the portfolio
1.1%
increase in like-for-like gross
and net rental income in 2022
79%
tenant retention and reletting
rate for 2022
Performance measures:
1 2 3 4 7 9 10
KPIs / See page 45
Principal risks:
1 2 3 4 5A 5B 5C 6A 6B
6C 7 8 9A
See page 116
Emerging risks:
A B C D E F G H
See page 124
2023 PRIORITIES
• Deliver DL/28 and continue
to build on our customer
membership offering
• Proactively manage upcoming
expiries/breaks and vacancies
to retain or increase income
where viable
• Look to upgrade existing stock
where opportunities arise to
maximise income
42
Derwent London plc / Report and Accounts 2022
OUR STRATEGY continued
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, collaborative
and inclusive 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 46% 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. There
were 45 new employees onboarded
in 2022, of which approximately half
were new positions.
The Group’s reputation stems from
behaviours and values promoted by
the Board and Executive Committee
which 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 (2022: 94%). The
survey provides an important forum
for staff to provide feedback to help
us identify areas where we have
made a positive impact and areas
for future improvement.
We remain focused on embedding our diversity and inclusion
ambitions throughout the business.
2022 PRIORITIES AND PROGRESS
Priorities
Progress
Further embed diversity and inclusion
into the business
Establish focus group to review
staff survey results and put
forward recommendations to the
Executive Committee
Four interns completed the 10,000 Black
Interns programme, five apprenticeship
positions were created and Senior
Management undertook inclusion training
Employee focus groups reviewed key
areas of the staff survey. The roll out of
several new initiatives was approved,
including the launch of our ‘Smart
Working’ policy
Continue with health and wellbeing
initiatives with a strong focus on
mental health and work-life balance
A varied health and wellbeing programme
was rolled out which focused on both
mental and physical wellbeing
Continue regular town hall meetings
to retain high levels of communication
and collaboration
Monthly CEO-led town hall meetings
continued with various internal speakers
Hold our third all employee
company awayday
Conducted third off-site employee
awayday, with positive staff feedback
88%
overall employee satisfaction
91%
proud to work at Derwent London
88%
staff retention rate
Performance measures:
1 3 16
KPIs / See page 45
Principal risks:
1 5B 6A 6B 6C 7 8 9A 9B
See page 116
Emerging risks:
C D E G
See page 124
2023 PRIORITIES
• Further embed diversity and
inclusion, focusing on disability
• Maintain focus on future
succession planning
• Provide further health and
wellbeing initiatives
• Analyse ‘pulse survey’ results
and take appropriate action
• Run fifth biennial employee
survey (October 2023)
Strategic report
43
Achieved
In progress
Not achieved
TO DESIGN, DELIVER AND OPERATE
OUR BUILDINGS RESPONSIBLY
Delivering well-designed, adaptable,
occupier-focused buildings 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
(see pages 27 and 52 to 56), we
must develop buildings that are
increasingly energy efficient, powered
by renewable energy and with very
low embodied carbon footprints.
Likewise, we must reduce our
managed properties’ reliance on
natural gas and further lower their
energy consumption and associated
operational carbon footprints.
Our approach to becoming net zero
carbon is set out in further detail
on page 27, together with our full
TCFD (Task Force on Climate-related
Financial Disclosures) disclosure on
pages 72 to 85. A phased programme
of works to upgrade EPC ratings to
ensure compliance with evolving
Minimum Energy Efficiency Standards
(MEES) legislation in 2027 and 2030
has commenced.
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
buildings meet the standards
we set (see page 8).
We want to ensure our portfolio is fit for purpose over the long-term
and continues to generate the returns we expect.
65%
EPC A or B, including projects (by ERV)
-26%
reduction in managed portfolio energy
usage since 2019 baseline (kWh)
-37%
reduction in operational carbon
emissions (Scope 1, 2 and 3 excl.
embodied carbon) since 2019
baseline (tCO2e)
Performance measures:
1 3 11 12 13 14 15
KPIs / See page 45
2022 PRIORITIES AND PROGRESS
Priorities
Progress
Progress asset-specific net zero
carbon action plans, including future
EPC requirements
Review and commence
implementation of findings from
net zero carbon occupier survey
Progress our renewable energy
and carbon offset projects on our
Scottish land
Phased EPC upgrade programme ongoing,
aligned with asset management plans
Occupier engagement strategy was
established and positive responses
were received
Resolution to grant consent secured for
solar park
Continue to progress realigning our
Science-Based Targets in accordance
with emerging sector guidance
Initial mapping exercise to rebase our
target to 1.50C scenario is complete
and awaiting confirmation from SBTi
Continue to develop, refine
and embed our approach
to carbon accounting
Implement recommendations
from Chickenshed’s review of
our Community Fund
Internal workshops held to review
ways to measure carbon impact
(previously ‘carbon accounting’)
Implemented recommendations from
Chickenshed’s Community Fund review
to improve application process
Develop an approach to
measuring our social value
Work began with Envoy Partnership to
formalise our approach to social value
Principal risks:
1 5B 5C 6A 6B 6C 7 8 9A 9B
See page 116
Emerging risks:
A D E F G H
See page 124
2023 PRIORITIES
• Rebase our SBTi targets to
1.50C scenario
• Convert occupier engagement
into lower energy usage
• Progress EPC upgrade plans
• Align Net Zero Pathway with
UK’s Transition Plan Taskforce
• Further develop our carbon
impact measurement approach
• Complete and implement new
social value framework
44
Derwent London plc / Report and Accounts 2022
OUR STRATEGY continued
Achieved
In progress
Not achieved
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.
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 further interest
rate rises 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.
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.
2022 PRIORITIES AND PROGRESS
Priorities
Maintain or strengthen
available facilities
Maintain sufficient headroom
on financial covenants
Ensure, where reasonable, green
finance is used to fund eligible green
projects, and that the Green Finance
Framework is consistently applied
Progress
£100m Revolving Credit Facility with Wells
Fargo extended by one year to 2027
Interest cover remains strong at 423%;
property income could fall by 65% before
breaching the interest cover covenant. In
addition, the Group has cash and undrawn
facilities of £577m and the EPRA LTV ratio
is low at 23.9%
Green finance was used to fund £99.9m
of qualifying green expenditure in the year,
taking the cumulative total to £627.9m.
All major developments in 2022 were
eligible green projects, with the exception
of Network W1 which will be elected as an
eligible green project in 2023
OUR REIT STATUS
Derwent London plc has been
a Real Estate Investment Trust
(REIT) since July 2007. The
REIT regime (see page 313) 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 2022, £9.0m was paid to HMRC.
Performance measures:
1 3 5 6
KPIs / See page 45
Principal risks:
1 2 3 4 5A 6A 6B 6C 7
8 9A 9B
See page 116
Emerging risks:
B D H
See page 124
2023 PRIORITIES
• Maintain or strengthen
available facilities
• Maintain sufficient headroom
on financial covenants
• Review refinancing options for
the £83m 3.99% secured loan
due in 2024
• Continue to keep close to our
existing relationship lenders
Y P E R F O R MANCE INDICATORS
E
K
Strategic report
45
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
FINANCIAL
NON-FINANCIAL
Operational measures
Gearing measures
Operational measures
Responsibility measures
Total return
Gearing & available
Reversionary percentage
BREEAM ratings
Total property return
resources
Development potential
Energy Performance
Total shareholder return
Interest cover ratio
EPRA earnings per share
Tenant retention
Void management
Certificates
Energy intensity
Carbon intensity
Accident frequency rate
Staff satisfaction
Key to strategic objectives
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
A
A
R
Audited
Assured
Remuneration
STRATEGY / See page 38
46
Derwent London plc / Report and Accounts 2022
MEASURING OUR PERFORMANCE continued
FINANCIAL
1 TOTAL RETURN
Total return is EPRA NTA growth plus dividends paid during the year.
Our aim is to exceed the average of other major real estate
companies (our ‘benchmark’).
5.3%
6.6%
0.7%
2018
(3.9)%
2020
2019
(1.8)%
17.8%
5.8%
2021
2022
(6.3)%
2 TOTAL PROPERTY RETURN
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
6.0%
5.3%
7.4%
4.1%
6.3%
5.9%
0.3%
2022
(12.8)%
(14.1)%
2018
2019
2021
Derwent London
Weighted average of major UK real estate companies
Our performance
Total return in 2022 was -6.3%, against a benchmark of about
-14.1% based on current estimates.
Derwent London’s average annual return of 1.8% over the past five
years against a benchmark of -3.1% demonstrates the ability of our
business model to generate above average long-term returns.
Strategic objectives
A R
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.
36.3%
26.4%
27.2%
10.3%
0.9%
2020
2022
2019
2021
(9.2)%
2018
(14.1)%
(16.6)%
Derwent London
FTSE UK 350 Super Sector Real Estate Index
(28.2)%
(31.1)%
(2.4)%
2020
Derwent London
MSCI Central London Office Index
(3.4)%
(8.0)%
Three-year rolling
6.6%
7.1%
5.8%
5.6%
4.6%
4.7%
5.1%
1.6%
1.1%
1.7%
2018
2019
2020
2021
2022
Derwent London
MSCI UK All Property Index
Our performance
Good progress on delivery and de-risking of projects has resulted
in a 4.6% outperformance of MSCI Central London Office Index
during 2022.
Derwent’s three-year rolling average was 1.1% p.a., a 0.6%
underperformance against the MSCI UK All Property Index. This was
mainly due to the strength of the industrial sector in previous years.
Strategic objectives
R
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 293.
113.07
103.09
98.02
108.53
106.62
2018
2019
20201
20211
2022
Our performance
Our performance
The fall in the share price during the year resulted in a TSR
of -28.2%. Despite this decrease, in 2022 the Group slightly
outperformed its benchmark index.
£100 invested in Derwent London 10 years ago would, at the
end of 2022, have been worth £140, consistent with the
benchmark index.
EPRA EPS fell 1.8% to 106.62p per share in 2022. Gross rental
income was up in the year, mainly due to letting activity at
newly completed developments, but this was offset by higher
finance costs, and void costs incurred on the new developments.
Additionally, the prior year benefitted from material one-off
surrender premiums and other property income.
Strategic objectives
R
Strategic objectives
A
Strategic report
47
5 GEARING & AVAILABLE RESOURCES
6
INTEREST COVER RATIO (ICR)
The Group monitors capital on the basis of NAV gearing and
the EPRA LTV ratio. We also monitor our undrawn facilities
and cash, and the level of uncharged properties, to ensure we
have sufficient flexibility to take advantage of acquisition and
development opportunities.
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
debt facility agreements for our unsecured bank facilities.
Calculation of this measure can be found in note 42 on page 299.
EPRA LTV ratio
NAV gearing
Cash and undrawn facilities
Uncharged properties
Our performance
2021
2022
22.3%
28.2%
£608m
£4,769m
23.9%
30.8%
£577m
£4,600m
Cash and undrawn facilities, which excludes restricted cash
(tenant deposits and service charge balances), remained high
at £577m, with our revolving bank facilities fully undrawn at
the year end. The fall in property valuations has led to a slight
increase in the NAV gearing and LTV ratios, but both remain at
low levels.
Strategic objectives
A
491%
462%
446%
463%
423%
2018
2019
20201
20211
2022
Benchmark = 200%
Our performance
The ICR decreased in 2022 mainly due to increased finance
costs from higher average borrowings during the year. Despite
this, rental income would need to fall by a further 65% before the
main ICR covenant of 145% was breached.
Strategic objectives
A
NON-FINANCIAL
7 REVERSIONARY PERCENTAGE
8 DEVELOPMENT POTENTIAL
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.
We monitor the proportion of our portfolio with refurbishment
or redevelopment potential to ensure it contains sufficient
opportunities for future value creation.
2018
2019
2020
2021
2022
%
41
43
43
48
43
%
2018
72
2019
79
2020
54
2021
65
2022
49
Our performance
The Group’s ERV increased by £10.7m to £304.6m. This was
helped by commencing the scheme at Network W1, but is partly
offset by disposals during the year. The 2022 ERV included
potential reversion of £100.4m, 49% of the net passing rent of
£204.2m, of which 46% is contracted.
Strategic objectives
Our performance
At the end of 2022, on-site developments represented 8% of the
portfolio with a further 35% identified as potential schemes. This
excludes Old Street Quarter EC1.
We continue to seek opportunities to achieve the optimal
balance between core income and development potential.
Strategic objectives
R
1 Restated – see note 2 on pages 247 to 250.
48
Derwent London plc / Report and Accounts 2022
MEASURING OUR PERFORMANCE continued
NON-FINANCIAL continued
9 TENANT RETENTION
10 VOID MANAGEMENT
Maximising tenant retention, in the absence of redevelopment
plans, minimises void periods and contributes towards net
rental income.
2018
14.6
76
14
90
2019
2020
2021
2022
10.4
83
7
90
12.5
65
22
87
19.7
47
30
77
13.2
59
20
79
Exposure (£m p.a.)
Retention (%)
Re-let (%)
Total (%)
Our performance
Our retention and re-let rate was 79% in 2022, slightly below the
85% average over the past five years.
Strategic objectives
R
To optimise our rental income we plan to minimise the vacant
space immediately available for letting.
We aim for this to remain below 10% of the portfolio’s estimated
rental value (ERV).
6.4%
1.8%
2018
0.8%
2019
Our performance
1.8%
1.6%
2020
2021
2022
At the end of 2022, our EPRA vacancy rate was 6.4%. This
is partly due to the completion of two major developments,
The Featherstone Building and Soho Place, in the year.
Strategic objectives
R
11 BREEAM RATINGS
12 ENERGY PERFORMANCE CERTIFICATES
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
Soho Place W1
The Featherstone Building EC1
25 Baker Street W1
Network W1
H1 2022 Outstanding3
H1 2022 Outstanding3
H1 20251 Outstanding2
H2 20251 Outstanding1
1 Targeted.
2 Certified at Design Stage.
3 Certified final rating.
Our performance
Following completions during the year, The Featherstone
Building and Soho Place both received a BREEAM rating
of ‘Outstanding’.
25 Baker Street and Network, our two developments currently on
site, were rated or expected to be rated BREEAM ‘Outstanding’
at Design Stage.
Strategic objectives
(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
Soho Place W1
The Featherstone Building EC1
25 Baker Street W1
Network W1
H1 2022
H1 2022
H1 20251
H1 20251
B
A
A2
A1
1 Targeted.
2 Stretch target.
Our performance
Soho Place and The Featherstone Building received an EPC of B
and A, respectively.
25 Baker Street2 and Network, our two on-site developments, are
both targeting a certification of A.
Strategic objectives
Strategic report
49
13 ENERGY INTENSITY
14 CARBON INTENSITY
A measure of energy consumption (kWh) per square metre
of landlord-controlled floor area across our managed
like-for-like portfolio.
Our target is a decrease in the three-year rolling average of
between 2% and 4% per annum.
A measure of emissions intensity per square metre of landlord-
controlled floor area across our managed like-for-like portfolio.
Our target is a decrease in the three-year rolling average of
between 5% and 10% per annum.
1.1
1.0
0.9
0.8
0.7
0.6
0.5
2013
2015
2017
2019
2021
2023
2025
2027
1.2
1.0
0.8
0.6
0.4
0.2
0.0
2013
2015
2017
2019
2021
2023
2025
2027
Derwent London
IEA ETP emissions
Derwent London
IEA ETP emissions
Our performance
Our performance
In 2022 landlord energy intensity in the like-for-like portfolio
decreased by 7%. The decrease is in part due to a warmer
winter, as well as property management initiatives including
turning off gas boilers in summer. The 43% reduction achieved
since our base year of 2013 means we are on course to meet
our 2027 energy intensity target. The three-year rolling average
reduction is 13%.
In 2022 landlord (Scope 1 & 2) emissions intensity in the
like-for-like portfolio decreased by 10%. This is in part due to
decarbonisation of the electricity grid, but also a 13% reduction
in gas consumption. The 65% reduction achieved since our base
year of 2013 means we are on course to meet our 2027 emissions
target. The three-year rolling average reduction is 16%.
Strategic objectives
A R
Strategic objectives
A R
15 ACCIDENT FREQUENCY RATE (AFR)
16 STAFF SATISFACTION
This is calculated based on the number of RIDDOR injuries
during the year multiplied by 1,000,000 and divided by the
number of hours worked. This was a new KPI introduced in 2021.
We assess employee satisfaction through a staff survey.
We target a satisfaction rate above 80%.
2020
2.72
2021
2022
1.26
3.60
%
2018
90.4
2019
92.5
2020
96.3
2021
2022
90.5
88.4
%
Our performance
In 2022, the AFR was 3.60% with three RIDDORs reported. This
is an increase from 1.26% in 2021, in which two RIDDORs were
reported. A reduction in the working hours on site in 2022 has
also had an impact on the AFR.
Strategic objectives
A R
Our performance
Staff satisfaction remained high at 88% despite a marginal
fall in 2022. This strong level is testament to our collaborative
and supportive corporate culture and the pride our staff feel in
working for Derwent.
Strategic objectives
R
50
Derwent London plc / Report and Accounts 2022
RESPONSIBILITY
Derwent London is committed to ensuring our business demonstrates high standards of integrity,
transparency and safety, whilst ensuring our offices are designed, delivered and operated responsibly,
to minimise our carbon footprint.
ENVIRONMENTAL (PAGE 52)
The built environment has an important role to play
in addressing climate change, from design to delivery
and operational management
1. DESIGNING & DELIVERING
BUILDINGS RESPONSIBLY
Ensure a responsible approach is considered and
implemented at every stage of the design and delivery
of our projects, including a rigorous appraisal of retrofit
versus redevelopment
2. MANAGING OUR ASSETS RESPONSIBLY
Ensure our assets are managed and maintained in a
responsible manner in order to maximise their efficiency
SOCIAL (PAGE 57)
3. CREATING VALUE IN THE COMMUNITY
Develop and maintain strong relationships with the
communities in which we operate
4. ENGAGING & DEVELOPING OUR EMPLOYEES
Maintain a working environment that encourages
continuous personal development, promotes diversity
and recognises and nurtures high performance
5. ENSURE THE HIGHEST STANDARDS
OF HEALTH & SAFETY
Maintain and operate a robust approach to health, safety
and fire risk management
6. PROTECTING HUMAN RIGHTS
Ensure we support, respect and protect the human rights
of our employees, occupiers and those that work in our
buildings and supply chains
GOVERNANCE (PAGE 65)
7. SETTING THE HIGHEST STANDARDS
OF CORPORATE GOVERNANCE
Ensure we operate ethically and in a responsible manner
with high levels of transparency and accountability
WHY
Well-designed, thoughtfully delivered real estate
can have a positive impact on the environment
on a whole-life basis and on local communities.
Our portfolio energy reduction targets are
aligned with a 1.5oC climate scenario, minimising
our operational carbon footprint.
As a responsible business, we proactively seek
to comply with forthcoming environmental
legislation, gaining first mover advantage. This
is good business, as well as the right thing to
do. In addition, we partner with organisations
to progress initiatives such as the Westminster
City Council (WCC) Sustainable City Charter.
As a long-term investor, we recognise that the
success of our buildings and a collaborative
approach has a positive social impact and helps
support our communities.
Our employees are key to our success. Investing
in their wellbeing and progression as well as
nurturing the next generation of talent helps
our performance.
Working with our supply chain and industry
peers we are leading the way in minimising
risks and promoting a safe working environment.
Our Responsible Business Committee monitors
our corporate responsibility, sustainability and
stakeholder engagement activities.
Acting in a fair and responsible manner is a
core element of our business running through
all levels including the Board.
We are committed to:
• Stretching embodied carbon targets through intelligent design, innovative material
selection and outside-the-box thinking (‘long-life, low carbon’)
• Offsetting any residual with high quality carbon credits from projects that have a genuine,
positive and sustainable impact
We are:
• Collaborating with occupiers and our supply chain to reduce consumption
• Purchasing energy on green tariffs
• Investing in self-generation solar projects on our Scottish land
• Advancing green leases for responsibility and collaboration
We were the first UK REIT to:
22% since 2019
• Publish a Net Zero Carbon Pathway and have subsequently reduced energy intensity by
• Agree a Green Revolving Credit Facility and we have issued a £350m Green bond and
invested £627.9m in green capital expenditure
• Commission and implement a fully costed EPC upgrade strategy with a phased
programme of delivery now underway
We are committed to:
• Ongoing support for charities and social groups through our long-running community funds
and our Sponsorship and Donations Committee
• Increasing the social value created through our regeneration activities and publishing
social impact studies
• Proactively engaging with the GLA and other London boroughs to develop a leading
social value charter to monitor the post-development social impact
We provide:
• Ongoing vocational and compliance training as well as mentoring
• Opportunities for interns and students from diverse backgrounds to experience the
potential of a career in real estate
• Access to mental and physical wellbeing services
• Financial support for those experiencing hardship, e.g. a one-off cost of living payment in 2022
Our Health and Safety team has:
some of our peers
• Launched a cross-sector benchmarking and data sharing initiative in conjunction with
• Spearheaded a project to share best practice policies with our peer group
• Sought to empower employees and contractors to speak up and speak out
We act to ensure:
• Remuneration is clearly linked to sustainability outcomes
• Accountability is demonstrated throughout the organisation
• We proactively adopt new and emerging legislation
• The human rights of our supply chain are respected
• Our actions are independently reviewed through third party assurance
• Our staff have access to a whistleblowing system
Strategic report
51
OUR SEVEN ENVIRONMENTAL, SOCIAL & GOVERNANCE (ESG) PRIORITIES
Our Responsibility Policy and Strategy (available on our website) sets out what operating responsibly means to us.
There are seven long-term priorities intrinsic to our business and the needs of our stakeholders.
Well-designed, thoughtfully delivered real estate
can have a positive impact on the environment
on a whole-life basis and on local communities.
Our portfolio energy reduction targets are
aligned with a 1.5oC climate scenario, minimising
our operational carbon footprint.
As a responsible business, we proactively seek
to comply with forthcoming environmental
legislation, gaining first mover advantage. This
is good business, as well as the right thing to
do. In addition, we partner with organisations
to progress initiatives such as the Westminster
City Council (WCC) Sustainable City Charter.
As a long-term investor, we recognise that the
success of our buildings and a collaborative
approach has a positive social impact and helps
support our communities.
Our employees are key to our success. Investing
in their wellbeing and progression as well as
nurturing the next generation of talent helps
our performance.
Working with our supply chain and industry
peers we are leading the way in minimising
risks and promoting a safe working environment.
Our Responsible Business Committee monitors
our corporate responsibility, sustainability and
stakeholder engagement activities.
Acting in a fair and responsible manner is a
core element of our business running through
all levels including the Board.
HOW
We are committed to:
• Stretching embodied carbon targets through intelligent design, innovative material
selection and outside-the-box thinking (‘long-life, low carbon’)
• Offsetting any residual with high quality carbon credits from projects that have a genuine,
positive and sustainable impact
We are:
• Collaborating with occupiers and our supply chain to reduce consumption
• Purchasing energy on green tariffs
• Investing in self-generation solar projects on our Scottish land
• Advancing green leases for responsibility and collaboration
We were the first UK REIT to:
• Publish a Net Zero Carbon Pathway and have subsequently reduced energy intensity by
22% since 2019
• Agree a Green Revolving Credit Facility and we have issued a £350m Green bond and
invested £627.9m in green capital expenditure
• Commission and implement a fully costed EPC upgrade strategy with a phased
programme of delivery now underway
We are committed to:
• Ongoing support for charities and social groups through our long-running community funds
and our Sponsorship and Donations Committee
• Increasing the social value created through our regeneration activities and publishing
social impact studies
• Proactively engaging with the GLA and other London boroughs to develop a leading
social value charter to monitor the post-development social impact
We provide:
• Ongoing vocational and compliance training as well as mentoring
• Opportunities for interns and students from diverse backgrounds to experience the
potential of a career in real estate
• Access to mental and physical wellbeing services
• Financial support for those experiencing hardship, e.g. a one-off cost of living payment in 2022
Our Health and Safety team has:
• Launched a cross-sector benchmarking and data sharing initiative in conjunction with
some of our peers
• Spearheaded a project to share best practice policies with our peer group
• Sought to empower employees and contractors to speak up and speak out
We act to ensure:
• Remuneration is clearly linked to sustainability outcomes
• Accountability is demonstrated throughout the organisation
• We proactively adopt new and emerging legislation
• The human rights of our supply chain are respected
• Our actions are independently reviewed through third party assurance
• Our staff have access to a whistleblowing system
52
Derwent London plc / Report and Accounts 2022
ENVIRONMENTAL
INCORPORATING THE RIGHT ENVIRONMENTAL
AND CLIMATE CHANGE MEASURES ACROSS
OUR BUSINESS ENABLES US TO OPERATE
RESPONSIBLY.
2022 HIGHLIGHTS
• Energy intensity reduced 4%
in 2022 to 123 kWh/sqm
• We contributed to the BCO
report on changes to Building
Specification Guidelines
• We completed two major
projects designed as low
carbon buildings aligned
with 2025 embodied
carbon targets, plus several
smaller refurbishments
• We partnered with
Westminster City Council on
the launch of its Sustainable
City Charter
MORE INFORMATION CAN BE FOUND
IN THE RESPONSIBILITY REPORT
-4%
annual reduction in managed
portfolio energy intensity
-16%
annual reduction in managed
portfolio gas consumption
98%
managed portfolio on
REGO-backed electricity contracts
Climate change
Science Based Targets
Climate change is a material issue for
society, our sector and our business.
In 2020 we published our Net Zero
Carbon Pathway which is aligned to
the Better Building Partnership (BBP)
Climate Change Commitment. This
sets out how we intend to reduce
our impact on the climate, while
recognising it is not realistically
attainable to reduce our carbon
emissions to zero. Our 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. However, we
have set ambitious targets to reduce
our carbon footprint, minimising the
residual. We disclose in line with the
Task Force on Climate-related Financial
Disclosures (TCFD) recommendations
and reporting frameworks.
Net Zero Carbon Pathway
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
The Group reports annually on its
progress towards net zero by 2030.
A brief outline of our 2022 progress
is set out on page 56 and a more
detailed review can be found in our
Responsibility Report. Additionally,
since 2018, we have disclosed our
energy performance at portfolio
and individual asset levels, as well
as the embodied carbon of our
latest developments.
In line with our Net Zero Carbon
Pathway, we are looking to rebase
our existing corporate-level Science
Based Target initiative (SBTi)
approved targets to a 1.5°C climate
warming scenario. This will bring
them in line with our property-level
energy targets which are already
aligned to this scenario.
As part of this rebase, we will also
change our target from a Scope 1 and
2 like-for-like landlord emissions basis
to absolute (tenant and landlord)
consumption from our managed
portfolio. Our new targets will align
with UK Green Building Council
(UKGBC) targets, and consequently
will be compliant with Carbon Risk
Real Estate Monitor (CRREM) and
SBTi agreed real estate pathways.
The Group has made good progress
in emissions reductions to date. In
2022, emissions were 10% lower than
in 2021 and 65% lower than the 2013
baseline, both of which are ahead
of target.
Energy Performance Certificates
At 31 December 2022, our portfolio
was 100% compliant with forthcoming
changes to Minimum Energy
Efficiency Standards (MEES) which
require an EPC of E or higher. MEES
rules are due to become stricter in
2027 with a minimum requirement
of EPC C or better. From 2030, it is
expected that there will be a further
change to a minimum EPC B or
better. Including on-site projects, our
portfolio is 85.7% 2027 compliant by
ERV (2021: 78.1%) and 65.3% 2030
compliant (2021: 61.0%).
Our latest EPC upgrade cost estimate
to achieve 2030 compliance is £99m
after adjusting for post year end sales.
See page 14 for more details.
Strategic report
53
Development pipeline
Commitment
New developments and major refurbishments will be net
zero carbon on completion. The residual embodied carbon
produced in the development process that we cannot
manage out or eliminate through proactive use of lower
carbon materials and methods of construction, will be
offset using robust, verified carbon offset schemes. The
buildings will be operated using renewable energy via
tariffs and have appropriate energy reduction targets in
place, aligned with our Net Zero Carbon Pathway.
Progress
Our Responsible Development Framework was updated in
2021, setting out the minimum net zero requirements for
our developments.
Significant changes must be made by the whole industry
over the next decade if we are to meet our collective net zero
ambitions. When setting standards for our pipeline projects,
we therefore place substantial emphasis on stakeholder
engagement and collaboration to strengthen our impact.
• Operational carbon – We work with our building services
engineers and sustainability consultants to avoid over-
specification of buildings.
• Embodied carbon – We partner with smaller contractors
to advance the industry, in particular estimating
embodied carbon of building services.
• Industry bodies – In 2022 we sponsored a report by the
WPA, ‘Retrofit First, not Retrofit Only’, in which carbon
assessment is placed on an equal footing with other
design parameters to inform the optimal ‘retrofit versus
new build’ solution.
In 2022, we worked closely with the British Council
for Offices (BCO) to inform and update the key design
criteria in its Guide to Specification. These revisions
are intended to discourage overprovision and support
the shared drive towards net zero carbon. Two of the
proposed key specification changes are to: 1) reduce
base case workplace density from 8-10 sqm to 10 sqm
(lower embodied and operational carbon), and 2) lower
small power allowance from 100W per work setting to
60W (lower operational carbon).
Embodied carbon targets
The embodied carbon assessments of our projects are
performed using ‘Cradle-to-Completed Development
(A1-A5)’ methodology (refer to our Embodied Carbon
Assessment Brief at www.derwentlondon.com). The
‘Completed Construction’ stage of delivery can be either
‘Shell and Core’ or ‘Cat A’ depending on commercial
negotiations with occupiers and may differ by project.
A development’s embodied carbon, particularly the
building’s structure, comprises a significant part of our
overall carbon footprint. We work closely with our design
and construction teams to assess and reduce this, as well
as working with our supply chains, which we recognise
will need to adapt to fully achieve our aims. Our targets for
Commercial Office New Build developments, which align
with the Greater London Authority’s (GLA) targets, are
based on our own experiences and industry guidance, and
phased as follows:
• Completing from 2025: <600 kgCO2e/sqm
• Completing from 2030: <500 kgCO2e/sqm
Our on-site projects at 25 Baker Street W1 and Network W1
are being delivered to align with our 2025 target.
RETROFITTING SMALLER BUILDINGS
At 43 Whitfield Street W1, the Asset Management team
identified a Furnished + Flexible solution as being the
best opportunity when 11,000 sq ft across four floors
became vacant.
As well as fully fitting the office floors and enhancing
end of trip amenity provision, the retrofit has modernised
the building’s green credentials by taking the services
all electric and upgrading windows from single to triple
glazing. This resulted in an EPC rating improvement
from D to B, helping future-proof the space against
evolving environmental legislation.
The response from the leasing market was strong, with the
space fully let within two months of practical completion,
ahead of our appraisal assumptions. The letting terms also
outperformed expectation, with two new occupiers each
taking two floors on 10-year leases with breaks at year
5 and rents at an attractive premium to ERV. Feedback
from the occupiers confirmed that proximity and access to
DL/78 played an important part in their decision making.
54
Derwent London plc / Report and Accounts 2022
ENVIRONMENTAL continued
Investment portfolio
Commitment
Our investment portfolio will be operated on a net zero
carbon basis by 2030. This involves driving down our energy
consumption significantly, upgrading and retrofitting some
of our properties to remove gas use and improve efficiency,
as well as collaborating with our occupiers.
Progress
Scope 3 emissions (see glossary) form a significant part
of our carbon footprint. The results of our net zero carbon
occupier survey in 2021 showed clearly that our occupiers
are at different stages of their journeys. This survey was for
many the important first step in working together with us.
In 2022, we increased our occupier engagement strategy.
This details the process of how we aim to engage with new
and existing occupiers, building on the many relationships
our Asset and Property Management teams have with
tenants at all levels through their organisations.
The process of reaching out to occupiers who responded to
our net zero carbon survey is well underway, providing the
opportunity to improve collaboration and deliver outcomes
aligned with our mutual net zero aspirations.
2022 RATINGS
We are taking a tailored and flexible approach to support
our occupiers on their sustainability journey by:
• Progressively upgrading green lease clauses;
• Rolling out Intelligent Building infrastructure across our
managed portfolio;
• Providing energy data to occupiers alongside
recommendations to reduce energy usage;
• Organising Green Forums for occupiers, including best
practice sharing;
• Providing input into environmental certifications –
e.g. ‘B Corp’;
• Issuing guidance notes on energy and water reduction; and
• Holding behaviour change events such as Recycling
Awareness days.
In 2023, we will continue to develop engagement with
our occupiers to further reduce operational energy usage,
increase recycling levels throughout the portfolio and better
communicate good practice across the business.
As we embed sustainable practices across the business,
we have developed and rolled out a Net Zero Carbon Action
Plan for each building within the managed portfolio. These
plans provide a clear benchmark for measuring performance
against our energy, water and waste reduction targets, and
are designed to encourage building managers to take a
proactive approach to monitoring.
GRESB (Global Real Estate
Responsibility Benchmark) 2022 –
Green Star status, ‘A’ rated public
disclosure (100/100), Development 5 Star
(94/100), Standing Assets 4 Star (82/100)
MSCI – ‘AAA’ rating
CDP 2022 – Climate change
2022 ‘B’ rating
EPRA Sustainability
Reporting Award 2022 –
Gold award
ISS Oekom –
Prime status
PROPERTY MANAGEMENT ACTIVITIES
Supply chain awareness
Portfolio-wide energy reduction
Water management
Good sustainability practices among
the suppliers that help maintain our
properties is an important part of our
net zero pathway. In 2022, we worked
with our key services suppliers, such as
cleaning, front of house and security,
to embed sustainability standards
into our contracts. An example
of this is the requirement for our
cleaning suppliers to have ISO 14001
certification and evidence of their own
net zero pathways which includes
a commitment to using sustainable
cleaning products and energy efficient
equipment that can be responsibly
disposed of at the end of life.
In addition to building-specific works,
we have identified and are implementing
a number of portfolio-wide measures to
reduce energy consumption. Some of
these initiatives are the installation of
long-life, energy efficient LED lighting
sources in all common areas and
Passive Infrared (PIR) sensors to switch
off lighting when spaces are not in use.
We are also adjusting temperature
set points in common areas to reduce
consumption. We are carrying out
Building Management System energy
health checks across the portfolio to
identify other opportunities to improve
building energy efficiency.
Part of our journey to net zero carbon
is reducing water consumption. To
help keep managed portfolio annual
consumption below our target of
0.5m3 per sqm floor area, we have
introduced a Water Management
Guide that sets out our strategy for
reducing water consumption and
reviewing our performance.
Strategic report
55
Corporate activities
Commitment to offsetting
90 Whitfield Street W1
Commitment to renewable energy
Our commitment is to ensure that all the energy we procure,
both electricity and gas, is from renewable sources.
Progress
In 2021 and 2022, we procured 97% (restated for additional
data capture) and 98% Renewable Energy Guarantees of
Origin (REGO) backed electricity respectively. Following a
comprehensive contract review in 2022, 100% of contracts
up for renewal were switched to a Renewable Green
Gas Origin (RGGO) tariff and 79% of gas used in 2022
was procured on these tariffs. Together, 92% of energy
(electricity and gas combined) purchased in 2022 was on
green contracts.
A key milestone in 2022 was the receipt of resolution to
grant planning consent for an 18.4MW solar park on our
Scottish land at Lochfaulds Farm. Our appraisals suggest
this could provide in excess of 40% of the electricity needs
of our managed portfolio when operational based on 2019
consumption levels. We are currently finalising plans for
this exciting project.
Where we are unable to manage out or eliminate carbon
– operational or embodied – from our business activities,
these 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.
Progress
The following refurbishments, and their associated
embodied carbon value, were completed in 2022.
• Francis House SW1 – 1,280 tCO2e
• White Chapel Building E1 – 143 tCO2e
• Tea Building E1 – 172 tCO2e
• 43 Whitfield Street W1 – 94 tCO2e
• 90 Whitfield Street W1 – 230 tCO2e
The residual carbon was offset through our provider
Climate Impact Partners in a scheme related to
reforestation projects in East Africa which is validated
under the Verified Carbon Standard (VCS) and the Climate,
Community and Biodiversity Standard (CCB).
We are also looking at offsetting opportunities across our
Scottish portfolio. Having received the first carbon credits
last year from our 2015 tree planting scheme in Scotland,
we have progressed our tree planting feasibility study and
intend to plant c.85Ha 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.
56
Derwent London plc / Report and Accounts 2022
ENVIRONMENTAL continued
Environmental performance in 2022
Waste
Carbon
Our operational carbon footprint (location based – see
pages 69 and 70) has reduced by 7% from 2021. This is due
to active reductions across the portfolio, as well as further
decarbonisation of the grid.
We account for 100% of embodied carbon in the year an
eligible project completes. In 2022, we completed three
major projects and several smaller ones. Consequently, our
embodied carbon footprint was significant at 32,869 tCO2e.
This comprises the largest portion of our total carbon
footprint when included. Refer to page 53 for details on
how we are tackling embodied carbon.
Our total waste generated increased during the year, likely
as a result of increased occupancy. Our recycling rate
has improved to 68%. Whilst this is a 3% increase from
last year, it falls short of our corporate target (75%). We
are working closely with our waste contractor and our
occupiers to improve this. One such initiative is arranging
site visits to our contractor’s recycling facility. In buildings
where this has occurred, we are seeing an increase in the
recycling rate as a result of increased engagement. We
have also introduced clauses, as part of our sustainability
update to our leases this year, which encourage tenants to
utilise our supplier, as well as match on-floor provisions in
line with all landlord waste streams.
2023 PRIORITIES
• Progress all electric building transition programme
• Align Net Zero Carbon Pathway with UK’s Transition
Plan Taskforce
• Convert occupier engagement into reductions in
energy consumption
• Rebase our Science Based Target initiative (SBTi)
targets to 1.50C scenario
• Continue to develop our approach to measure our
carbon impact
See page 43
Energy
Overall energy consumption decreased by 3% from 2021,
with our managed portfolio energy intensity reducing by
4%. This means we have achieved our 1.50C aligned energy
intensity target for 2022. On a more granular level, our
gas consumption decreased by 16% year-on-year, which in
part is as a result of a generally warmer winter, but also a
significant effort to switch off gas boilers entirely during
summer months.
Our landlord electricity usage reduced by 1% from 2021,
due to commencing portfolio-wide initiatives such as rolling
out PIR sensors and LED lighting, as well as increasing
temperature set points during summer months and
reducing them in winter. Tenant electricity consumption
increased by 5%.
Water
Water consumption increased significantly from last year,
likely as the result of increased occupancy. Whilst this
remains a small part of our carbon footprint (<1%), we
will be looking to roll out water efficiency initiatives across
the portfolio.
Energy usage – electricity and gas
Operational carbon footprint – Scope 1, 2 & 3
kWh (millions)
tCO2e (thousands)
70
60
50
40
30
20
10
0
-26%
-3%
2019
2020
2021
2022
20.0
17.5
15.0
12.5
10.0
7.5
5.0
2.5
0
-37%
-7%
2019
2020
2021
2022
Electricity – tenant
controlled area
Electricity – landlord
controlled area
Gas – total building
Scope 3
Scope 2
Scope 1
Strategic report
57
SOCIAL
OUR COMMUNITIES, OCCUPIERS
AND OTHER STAKEHOLDERS.
We recognise that our buildings are an integral part of the communities they
sit within and we strive to create value where possible for all our stakeholders.
2022 HIGHLIGHTS
• Fitzrovia and Tech Belt
Community Fund distributions
up 20% year-on-year to £120k
(and will remain at this level
for two more years)
• Three-year funding
programme agreed with the
Fitzrovia Community Centre
• Worked with external
consultants to define our
social value framework
• Support given to those
affected by the conflict
in Ukraine
MORE INFORMATION CAN BE FOUND
IN THE RESPONSIBILITY REPORT
SOCIAL VALUE ADDED
+20%
increase in 2022 Community Fund
distributions to £120,000
13
Community Fund projects
supported in 2022
£354k
amounts committed by the
Sponsorship and Donations
Committee in 2022
Derwent London staff and occupier volunteering
Working with our
community stakeholders
The goal of our community
engagement is to support local
groups in the communities in which
we operate and ensure that our
business recognises the role it plays.
Our engagement takes many forms
to maximise the positive impact on
local communities.
Financial support, through our
corporate giving and community
funds, is important. We place equal
value on actively supporting and
being part of communities so we
can make a real impact. Employee
volunteering, work experience
opportunities and building open
days have all contributed to
establishing and maintaining
effective connections.
Engaging in collaborative
conversations with the organisations
we work with refreshes our focus
and ensures we are addressing the
aspirations of our communities in an
inclusive manner.
Social value framework
We recognise the positive impact
real estate can have on communities.
In 2022, we began working with
Envoy Partnership, an external social
value and impact management
consultancy, to formalise our social
value framework. We expect this work
will complete and be implemented in
2023. See our Responsibility Report
for more details.
Community funds
Derwent London operates two
community funds: Fitzrovia and West
End (founded in 2013) and the Tech
Belt (2016). The key priority of the
funds is to support and create value
in the local 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
local groups.
Since inception, we have been
introduced to many local groups
in both areas of London which has
helped broaden our perspectives and
better understand the issues affecting
local people. Total distributions to
date exceed £900,000, with c.150
different projects benefitting. All
selected projects aim to support
wellbeing, improve people’s futures
and equip them with skills for life.
58
Derwent London plc / Report and Accounts 2022
SOCIAL continued
In 2021, we asked Chickenshed’s Youth Taskforce to
review our processes and to refresh our thinking around
‘community’. Following this review, we implemented in
2022 a number of positive changes to the funds that
make the application process more flexible and inclusive,
bringing the beneficiary(s) into a more central role in the
project. Examples include:
• Removal of the £10,000 application cap for
registered charities;
• Increasing the number of ways to apply for funding
(application form, short film, electronic presentation,
etc.); and
• Demonstration that the proposed project is responding
to a need identified by the prospective beneficiary(s).
Teenage Cancer Trust (TCT) has been a long-term charity
partner for the Group and 2022 saw the return of the TCT
fundraising lunch, the first since 2016. As well as being
shown some of the hugely positive outcomes of the work
TCT does with teenage cancer patients, a total of £245,000
was raised including a corporate donation by the Group.
Support for Ukraine
The conflict in Ukraine has impacted the lives of many
people across our portfolio: our employees, our occupiers’
employees and the communities where we invest. In
March, we set up a JustGiving page to support the UK
Disasters Emergency Committee’s Ukraine appeal and
agreed to match donations from across our portfolio. A
total of £20,000 was raised from several initiatives, which
Derwent London matched.
In addition, we provided support to the Ukrainian Orthodox
Church in London. To facilitate its use as a refugee advice
and counselling centre, our development team advised on
the design and implementation of improvement works to
enable basement access. In addition, we provided space
within our buildings for use by projects linked to
Ukrainian refugees.
2023 PRIORITIES
• Continued funding for the community funds
• Complete our new social value framework and
embed this into our community work across
the portfolio
See page 17
SUPPORTING UKRAINIAN REFUGEES –
TRAFALGAR GIRLS
Trafalgar Girls is a volunteer project set up in
response to the conflict in Ukraine. It provides
a platform for information and practical help for
Ukrainians in Ukraine and Europe including the
United Kingdom. All the help is provided person-to-
person or volunteer to person/people.
A key initiative launched in July 2022 was a six-
month online mentoring project for newly arrived
Ukrainian refugees in all corners of the UK. In October
2022, Derwent London provided the rooftop space
at White Collar Factory EC1 for Trafalgar Girls to host
an in-person mentoring event. A total of 40 women,
split evenly between mentees and mentors, attended
with mentees highlighting the many benefits they
got from meeting their mentors and other women
experiencing similar situations face-to-face.
FITZROVIA COMMUNITY CENTRE
We have supported the Fitzrovia Community Centre
(FCC) through our Community Fund for several years,
whether that be the refurbishment of their courtyard
garden, their community arts projects or health and
wellbeing activities. In 2022, we entered into a new
three-year agreement with FCC, which celebrated
its 10th anniversary, recognising its commitment
to restoring community wellbeing and social
connections. We are pleased to be able to support
its ambitious plans, based on feedback from local
people, to place it at the heart of the community and
to welcome local residents of all ages to take part in
a variety of events such as arts and craft activities,
family play, dance and exercise classes.
“ We bring together people, organisations
and businesses to share, learn and
contribute to a brighter, more
connected future.”
DONNA YAY
Centre Director
Strategic report
59
OUR PEOPLE
We aim to attract, inspire and engage a talented and diverse workforce, one
that flourishes and is proud to work for Derwent London.
Attracting and optimising talent
We recognise that the success of
Derwent London, the execution of
our strategy and delivery of above
average long-term returns, stem from
the top talent we employ. We aim to
create a culture which enables our
exceptional and diverse workforce to
thrive and where people feel they can
be their authentic selves and have a
voice. Employee feedback and regular
performance conversations with line
managers are encouraged, in addition
to formal semi-annual reviews.
The Group supports our employees
with their ongoing development and
career progression. In 2022, there
were 17 internal promotions including
four new Executive Committee
appointments. There were also several
internal lateral moves as part of our
continued efforts to grow, upskill and
develop talent from within.
Employee retention, excluding
retirements, remains very high at 88%.
46% of our employees have been with
the Group for five or more years, and
24% for at least 10 years. This provides
the business with a high level of
continuity and knowledge, balanced
with fresh ideas, experience and skills.
In 2022, 45 people were recruited
externally, of which approximately half
were new positions.
We continue to focus on building
a long-term talent pipeline and, as
a result, have regular succession
planning discussions. To facilitate
this, we invest significantly in our
employees, with comprehensive
learning and development
programmes catering to behavioural
and technical needs at all levels.
These include a suite of core skills
training workshops, our induction
programme, internal technical
workshops, one-to-one coaching
and mandatory compliance training
(see page 171). These were well
received and we will continue to build
on this upskilling programme in 2023.
We believe that coaching is valuable
for individual development and is
something we have provided for a
number of years. In 2022, we decided
to expand this and engaged an
Executive Coach to work alongside
our Asset Management team –
see page 61 for further details.
It is not only about investing in
existing talent. For the real estate
industry to appeal to a broader cross-
section of society as a fulfilling place
to work, creating opportunities for
people from different backgrounds
is important. We created five
new apprenticeship positions
within our Building and Facilities
Management Teams and are using the
Apprenticeship Levy to support them
in achieving their Level 2 Certificate in
Facilities Services.
2022 HIGHLIGHTS
• Held third offsite
company awayday
• Five new apprentice
opportunities created
and recruited
• Strong results for internal
‘pulse survey’ measuring
employee satisfaction
and engagement
• Supported employees with
a financial awareness session
and a targeted cost of
living payment
17
internal promotions during 2022
88%
employee retention rate
91%
“I am proud to work
for Derwent London”
£1,000
one-off cost of living payment
for eligible employees
60
Derwent London plc / Report and Accounts 2022
SOCIAL continued
Health and wellbeing
Diversity and inclusion (D&I)
We believe that our people are most productive when they
are physically and mentally thriving and socially connected.
We work hard to ensure that our people continue to feel
supported. Alongside the suite of employment benefits
we offer, our Mental Health First Aiders and Employee
Assistance Programme, we have implemented more
practical frameworks and tools:
• Following feedback from our 2021 employee survey,
we launched a new ‘Smart Working’ policy in April
2022 which offers a framework that can flex to fit the
performance and business requirements of each team
and role.
• All employees were offered and encouraged to attend
various sessions covering mental and physical health
and financial awareness.
• A one-off £1,000 cost of living payment was made to
eligible employees.
• Our Social Committee events continued to provide
opportunities for employees to connect.
Employee health and wellbeing remains at the top of our
agenda for 2023.
Derwent London is a respectful employer that welcomes
diversity and promotes equality, acceptance and teamwork.
It is important that we create an inclusive workplace in which
our people can bring their whole selves to work, feel valued
and be able to make a genuine impact and contribution.
The Group’s belief in ‘diversity of thought’ extends beyond
the traditional facets of gender, ethnicity, age and sexual
orientation to include personality, communication and work
styles. We recognise that diversity enriches our creativity
and adds value for our stakeholders.
GENDER DIVERSITY DATA / See page 189
Building on our strong D&I foundation and achievement of
the National Equality Standard accreditation in 2021, the
Group ran a number of initiatives across three categories
during 2022 with the aim of further embedding D&I in
our culture:
• Levelling up – In addition to continued analysis of our
recruitment process outcomes, we participated in several
initiatives to promote D&I: 10,000 Black Interns programme
(four young people for six weeks); work experience (15
students, from a mix of gender, socio-economic background
and ethnicity, for two weeks); and apprenticeships (created
five new apprenticeship opportunities).
Participants of the 10,000 Black Interns programme
Strategic report
61
During 2022, we ensured open lines of communication
remained in place to enable our employees to stay
connected, whilst feeling valued and supported. Following
positive feedback, our CEO-led monthly town hall meetings
continued with ongoing knowledge sharing from speakers
around the business.
Annually, we use anonymous employee surveys to obtain
staff feedback, consisting of a short ‘pulse survey’ and a full
independent survey in alternating years. An employee focus
group, comprising individuals from varying departments,
gender, ethnicity, age and length of service, were invited
to review the results of the 2021 full survey and put
forward recommendations to the Executive Committee
against which regular progress updates were provided. We
achieved a 94% response rate to our 2022 ‘pulse survey’,
demonstrating our open culture, which indicated a high
satisfaction rate with 91% of respondents ‘proud to work
for Derwent London’, broadly in line with previous years. In
addition, 88% of respondents said they were ‘able to make
a valid contribution to the success of Derwent London’.
• Training – In addition to role-specific training, we
provided guidance and support on a variety of other
D&I-related topics, including unconscious bias training,
inclusive leadership and disability awareness.
• Employee support and wellbeing – We recognise that
our employees face a number of challenges, personally
and professionally, in the current climate. We provided
support in a number of different ways in 2022, including
a ‘Smart Working’ policy and various wellbeing sessions.
Following our focus in this area, we were encouraged to
see that 84% of respondents in our ‘pulse survey’ agreed
that ‘Derwent London is an inclusive place to work.’
The priorities for 2023 include disability awareness and a
focus on inclusion.
Employee engagement
Our culture stems from our values and is a key strength of
the business. Our long-term relationships with colleagues
and stakeholders are based on inclusivity, collaboration and
professionalism. Employee engagement and communication
is very important, facilitated by our ‘open-door’ policy. Having
82% of employees based at our head office, 25 Savile Row W1,
enables effective, regular face-to-face interaction. Together
with a range of formal and informal communication channels
(see page 144), we have a highly engaged workforce.
INVESTING IN TEAM COACHING
The Group has invested in individual coaching for
several years. In 2022, we added team coaching
to support our employees as they build internal
relationships and to help maximise collective potential.
The Asset Management team was offered the opportunity
to work with two external coaches. The modular
programme, which included using 360° feedback from
the team’s main stakeholders, sought to harness the
individual strengths in the team, whilst at the same
time identifying team objectives, opportunities and
encouraging a more distributed leadership approach.
The feedback was positive and further demonstrated the
value of continuous development and challenging the
status quo.
“ Introducing new team meeting behaviours was a first step in growing a sense of
psychological safety to promote more challenge and contribution. The team quickly took
collective responsibility for their effectiveness, leading to decisions being reached more
collaboratively while encouraging individuals to step up, take responsibility and challenge
the prevailing norms.”
GERALDINE GALLACHER
CEO at The Executive Coaching Consultancy
62
Derwent London plc / Report and Accounts 2022
SOCIAL continued
OUR AWAYDAY
We were delighted to be able to hold our third off site awayday in September 2022 from which employee feedback
was positive. The purpose was to promote cross-team collaboration, build relationships, welcome all new joiners and
hear an update from the CEO on business strategy and priorities.
The day was full of fun, interactive team building events and we were joined by an inspiring and motivational
guest speaker.
2023 PRIORITIES
• Further embed diversity and inclusion, with a particular focus on disability
• Continue to focus on future succession planning and building critical skills
• Provide further health and wellbeing initiatives
• Maintain monthly town hall meetings to ensure full integration of corporate vision, purpose and values
• Take appropriate actions to address opportunities identified from employee surveys
See page 42
Strategic report
63
HEALTH AND SAFETY
Ensuring the health and safety (H&S) of our employees and buildings is critical to our
business. We endeavour to ensure a safe and secure working environment for our people,
contractors and customers, through effective risk management.
2022 HIGHLIGHTS
• We jointly launched the cross-sector Real Estate
Benchmarking Group
• Issued an accessibility design standard for
inclusion in all future regeneration projects
• Introduced H&S Leadership Tour Programme with
contractors and service providers
• Introduced Continuous Improvement Group with
principal and main contractors
The ‘Derwent Way’
The ‘Derwent Way’ underlines our expectations and
standards in health and safety, covering a range of subject
matter. This was further developed in 2022 to support
the creation of a safety management system, ensuring
consistency and quality in procedures and policy.
People
Everyone we employ, or have a direct influence on at
work or with our business activities, deserves to feel
safe and healthy. Our culture is focused on the health,
safety and wellbeing of our staff, service partners and
contractors through a transparent, inclusive approach
and strong leadership. For our people to develop their
competencies, we have designed an H&S training matrix,
benchmarked against our peers, in consultation with
internal stakeholders to allocate specific H&S training
to job profiles.
Our staff are kept up to date with regular internal and
external training on H&S matters which in 2022 included
Legal Updates, Property Compliance, Working at Height,
Construction Design, Fire Safety, and a suite of e-learning
modules. Mishcon de Reya LLP also delivered bespoke
‘Legal Update for Directors’ training to our Board and
Senior Management team. Collectively 58.5 training
workdays were completed in 2022.
• 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 develop, our
people to ensure healthy and safe work environments.
Two members of staff were trained to become Mental
Health First Aiders, taking the total to 15, or one in 12.
We also have 12 further employees trained as Mental
Health First Aid Champions, which demonstrates our
strong direction in challenging the stigma surrounding
mental health and neurodiversity.
Real Estate Benchmarking Group
Assets
In April 2022, the cross-sector Real Estate Benchmarking
Group, which Derwent London co-founded in 2021,
shared its first H&S data peer analysis with its member
organisations. This provides valuable information in
assessing our position within the sector and for measuring
future progression.
Following transfer of the H&S reporting system to RiskWise
in 2021, our Scottish assets also adopted RiskWise in 2022,
ensuring a consistent approach across our portfolio. To
reflect the rural and agricultural activities of our Scottish
business, a separate suite of H&S Standards has been
developed called the ‘Caledonian Way’.
Further enhancing our compliance platform
Property H&S compliance remains a top priority. Our
current combined commercial and residential property
H&S compliance score is 98%, above our target
benchmark of >95%. In 2022, the compliance system was
updated to incorporate a new accident/incident module,
the development of an online permit to work system, whilst
also developing the ‘Golden Thread’ functionality to align
the high-rise residential/mixed-use properties with the
requirements of the Building Safety Act 2022.
Our H&S approach is centred around three key aspects –
people, assets and developments.
The Property Health Check template has now been
integrated into RiskWise, facilitating the annual review
process which includes a site health and safety check,
as well as traffic management and roof access surveys. All
of our directly-managed properties were reviewed in 2022.
Derwent London considers health, safety and wellbeing
at every stage of a building’s life cycle – from acquisition,
development, operational management, leasing and
disposal. This requires collaboration with other teams
in designing, building, maintaining and operating our
buildings safely in line with best practice.
64
Derwent London plc / Report and Accounts 2022
SOCIAL continued
Developments
2022 was a busy year for major schemes with 450,500 sq
ft of space completing and 435,000 sq ft on site at year
end. The RIDDOR accident frequency rate (AFR) increased
to 3.60 from 1.26 in 2021. However, this remains low and
our construction projects continue to adopt the highest
standards in health, safety and wellbeing.
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 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). In 2022, all our contractors
met or surpassed these targets.
We held our first two Continuous Improvement Group
(CIG) meetings with our ‘tier one’ and ‘tier two’ principal
contractors and will hold further meetings on a quarterly
basis. As well as reinforcing the Client H&S standards
expectation through the Derwent Way, the CIG provides a
forum for sharing construction best practice and education
in health, safety and wellbeing. We supported HSE
campaigns on mental health, musculoskeletal disorders
and respiratory health during 2022.
2023 FOCUS AREAS
• Deliver Fire Safety Management System in line with
updated legislation and guidance (Building Safety
Act 2022, BS9997 and the Fire Safety Act 2021)
• Develop building safety cases for residential
buildings in scope of the Building Safety Act 2022
• Set up Continuous Improvement Group (CIG)
for our architects, principal designers and
project managers
• Further embed suitable and sufficient H&S
competency in key operational aspects of
the business, through the Health & Safety
Training Matrix
• Develop, with Human Resources, a wellbeing
programme for Derwent London in 2023
• Set up an employee forum for disability, safety
and health, with representation from across the
business, as a member of the Business Disability
Forum from 1 March 2023
In July 2022, Build UK and the Civil Engineering
Contractors Association (CECA) introduced a new Common
Assessment Standard (CAS) to improve efficiency and
reduce cost in the construction pre-qualification system.
Derwent London was one of the first construction clients to
sign up to CAS and incorporate it as a requirement within
our tender process.
HEALTH AND SAFETY DATA
The table below details our key health and safety statistics
which has been assured (following the ISAE3000 (Revised)
standard) by Deloitte LLP to the reasonable level. This
data allows us to identify trends and highlights where we
should focus.
Person hours worked
Minor accidents
Near miss6
Lost time injuries6
RIDDORs
Dangerous occurrences
Fatalities
Improvement notices
Prohibition notices
Injury rate1, 5
Lost day rate2, 5
Severity rate3, 5
RIDDOR AFR4
Employees
Managed portfolio
Developments
2022
2021
2022
288,000
0
0
0
0
0
0
0
0
0.00
0.00
0.00
0.00
266,960
0
n/a
n/a
0
0
0
0
0
0.00
0.00
0.00
0.00
370,314
20
20
0
0
0
0
0
0
54.01
0.00
0.00
0.00
2021
31,960
9
n/a
n/a
0
0
0
0
0
0.00
0.00
0.00
0.00
2022
2021
833,258
18
17
2
3
0
0
0
0
21.60
2.40
0.11
3.60
1,591,416
42
n/a
n/a
2
0
0
0
0
26.39
5.66
0.31
1.26
Injury rate – (injuries excluding RIDDOR and lost time injuries)/(total hours worked) x 1,000,000.
1
2 Lost day rate – (lost time injuries excluding RIDDOR)/(total hours worked) x 1,000,000.
3 Severity rate – total number of lost work days (excluding RIDDORs)/total number of incidents.
4 RIDDOR accident frequency rate (AFR) – the number of RIDDORs/(total hours worked) x 1,000,000.
5 Deloitte LLP do not assure injury rate, lost day rate or severity rate for ‘Employees’.
6 Near miss and Lost time injuries are new statistics for 2022. No comparable prior year figures available.
Strategic report
65
GOVERNANCE
AT DERWENT LONDON, ACTING IN A FAIR
AND RESPONSIBLE MANNER IS A CORE
ELEMENT OF OUR BUSINESS PRACTICE.
2022 HIGHLIGHTS
• Publication of climate-related financial disclosures
consistent with the TCFD Recommendations as
required by the Listing Rule 9.8.6(8)(b)
• Consulted with shareholders representing c.64%
of our issued share capital on our proposed
amendments to the Remuneration Policy
• Reviewed the BEIS Response Statement on audit
and corporate governance reform and agreed our
approach to the new requirements
• Continued mandatory compliance training
programme for all employees (including Directors)
• Published our latest Modern Slavery Statement
• Updated our Code of Conduct & Business Ethics
• HMRC confirmed that our low risk status has been
extended to summer 2023
Our ESG Governance Framework
A responsible business
The oversight of ESG matters is critical. It not only allows
the Board to appreciate more holistically the 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.
ESG is overseen principally by the Board, Responsible
Business Committee and Sustainability Committee
(see our ESG Governance Framework).
Our Chief Executive, Paul Williams, is the designated Director
with overall accountability for ESG matters however, the
responsibility for overseeing its day-to-day management 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.
THE BOARD
Overall responsibility for ESG matters
Nominations
Committee
Audit
Committee
Risk
Committee
Remuneration
Committee
Ensures ESG skills,
knowledge and
experience is a
consideration when
assessing the
Board’s composition
and the identification
of any
skill gaps
Monitors assurance
and internal
financial control
arrangements.
Ensures ESG-
related expenditure
is appropriately
reflected in our
financial statements
Identifies and
evaluates
key ESG risks
(principal and
emerging),
ensuring they
are appropriately
managed
Ensures ESG
factors are included
in executive
remuneration (annual
bonus and long-term
incentive plans)
Responsible
Business
Committee
Monitors the
Group’s corporate
responsibility,
sustainability
and stakeholder
engagement
activities
EXECUTIVE DIRECTORS WITH ASSISTANCE FROM THE EXECUTIVE COMMITTEE
Responsibility for oversight of the Group’s ESG initiatives
Sustainability
Committee
Health and Safety
Committee
Sponsorship and Donations
Committee
Social
Committee
Responsible for
implementing the Board’s
ESG strategy
Responsible for
monitoring health and
safety management and
performance
Responsible for the Group’s
charitable activities and
donations
Aims to encourage team
working and collaboration
between departments
through social activities
66
Derwent London plc / Report and Accounts 2022
GOVERNANCE continued
Climate change governance
Supply chain 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 through our
science-based targets, which were independently validated
and approved by the Science-Based Targets initiative
(SBTi) in 2019. In addition, specific performance indicators
are assured by Deloitte LLP and these can be found in their
Independent Assurance Report in the Responsibility Report.
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 environmental and sustainability performance from
the Head of Sustainability. In addition, the Remuneration
Committee has further strengthened the alignment
between executive remuneration and our net zero carbon
ambition, by introducing sustainability performance
metrics within the LTIP as part of the revisions made
to the Group’s Remuneration Policy (see page 191).
It is important to us that our suppliers and construction partners
operate ethically 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 185
MATERIAL AND LABOUR SHORTAGES / See page 113
Ensuring our payment practices are ethical 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 and the potential impact
of recession on businesses.
RESPONSIBLE PAYMENT PRACTICES / See page 185
Green finance governance
Protecting human rights
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 and during the year, received training
in respect of climate-related reporting (see page 158).
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 Responsibility Report on our website.
OUR GREEN FINANCE FRAMEWORK / See page 108
£627.9m
cumulative Eligible Green Project
(EGP) capex at 31 December 2022
across four eligible projects
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
(within 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 Human Resources 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 140
Externally, we are active in ensuring our ESG standards are
clearly communicated to our supply chains, 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 low. Further information on our
efforts to prevent modern slavery occurring in our supply
chain is on page 185.
MODERN SLAVERY STATEMENT / www.derwentlondon.com/
investors/governance/modern-slavery-act
Strategic report
67
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. Our Head of
Tax also regularly engages with HMRC via his roles with the Chartered Institute of Tax and the British Property Federation
to support consultations or to seek legislative clarification in areas that could potentially impact our business. HMRC have
confirmed that our low risk status has been extended to summer 2023.
REPORTING FRAMEWORKS AND ESG DATA
Non-financial reporting
As we have fewer than 500 employees, the Non-Financial Reporting 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
Responsibility Report
reports.derwentlondon.com/
responsibility-2022
• Net Zero Carbon Pathway
• Science-based carbon targets
• United Nations Sustainable
Development Goals (UN SDG)
• Task Force on Climate-related
Financial Disclosures (TCFD)
• Streamlined Energy and Carbon
Reporting (SECR) disclosure
Social and
employee
aspects
• Volunteer Policy
• Equal Opportunities and
Diversity Policy
• Professional Development
and Training
• Shared Parental Leave
• Smart Working Policy
Our pathway to net zero carbon
Page 27
Climate change governance
Pages 66, 72 to 73
Risk management
Pages 81 to 83 and 114
Executive Directors’ annual bonus Page 216
Executive Directors’ LTIP 2023
Pages 191, 192 and 212
UN SDGs
TCFD
SECR
Community Fund
Our people
Page 68
Pages 72 to 85
Page 69
Page 57
Pages 59 to 62
Diversity and inclusion
Pages 60, 186 to 189
Employees on a committee
Page 184
The section 172(1) statement
Pages 131 to 133
Respect for
human rights
• Individual Rights Policy
Health and safety
• Health and Safety Policy Statement
Human rights
• Supply Chain Responsibility
Standard
• Modern Slavery Statement
• Code of Conduct & Business Ethics
Modern slavery
Supply Chain Responsibility
Standard
Page 63
Page 66
Page 185
Page 185
Anti-bribery
and corruption
issues
• Anti-bribery Policy
• Whistleblowing Policy
• Expenses Policy
• Money Laundering and
Terrorist Financing Policy
• Preventing Facilitation
of Tax Evasion Policy
Audit Committee report
Pages 156 to 169
Risk Committee report
Pages 170 to 181
Anti-bribery and corruption
Page 177
Our principal risks
Pages 116 to 123
Compliance training
Page 171
68
Derwent London plc / Report and Accounts 2022
GOVERNANCE continued
UNITED NATIONS SUSTAINABLE DEVELOPMENT GOALS (UN SDG) DISCLOSURES
The UN 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 which align most closely to our ESG priorities and which
are particularly significant to our business. These are set out in the table below along with a summary of our progress.
Our ESG priority
UN Goal
Creating
value in the
community and
for our wider
stakeholders
4.
Quality
education
Applicable
target
Applicable
indicator Our efforts
4.4
4.4.1
4.a
4.a.1
Through our Community Fund we invest in and support youth and adult ICT
education and skills training – both technical and vocational. A recent example of
this is our support for the work of Urban MBA which provides people aged between
19 to 25 with assistance to find employment. This is achieved through employability
programmes and best-of-breed business courses to help them develop their
ideas and start their own sustainable commercial and social businesses.
Similar to the above, through our Community Fund we invest in and support
projects which look to upgrade and improve youth education facilities. A
recent example of this is our support of Society Links and their Study Support
programme. Society Links is seen as a trusted hub within the community for
services users and families. This particular programme supports children outside
of school and targets low achievers helping them gain a strong grade in maths
and avoiding the need to re-sit the exam. This in turn increases their confidence
benefitting their success in other subjects.
Beyond any legislative requirement we are active in ensuring meaningful gender
equality in our business. In addition to making sure our business structure is
representative, we also seek to ensure our suppliers have the same policies
and approaches in their businesses. To help guide us, our Diversity & Inclusion
Working Group is tasked with reviewing best practice and to challenge our
business to ensure we address equality robustly and maintain our National
Equality Standard accreditation.
27% (32% in 2021) of the women within our business are in managerial
roles/positions.
Our aim is to ensure we purchase renewable energy for our portfolio. As at
31 December 2022, all the electricity contracts which supply our buildings are
REGO backed, and our gas supplies are RGGO backed. As part of our net zero
carbon programme we are looking to develop our own off-site renewable energy
generation capacity on our Scottish land. To date we have received resolution
to grant planning permission for a c.100-acre solar park. We will be working to
progress this in 2023.
In addition to our science-based targets we have specific energy intensity
reduction targets designed to help us improve the energy efficiency of our
managed properties.
We actively promote the inclusion of public spaces in and around our buildings
and ensure they are fully accessible to those with disabilities. In addition, we are
part of the London Mayor’s Business Climate Leaders Group which was set up to
help London become a net zero carbon city by 2030.
Protecting
human rights,
Engaging and
developing our
employees
5.
Gender
equality
5.1
5.1.1
5.5
7.2
5.5.2
7.2.1
7. Affordable
& clean
energy
Designing
and delivering
buildings
responsibly,
Managing
our assets
responsibly
7.3
7.3.1
11.7
11.7.1
Creating
value in the
community and
for our wider
stakeholders
11.
Sustainable
cities &
communities
Managing
our assets
responsibly
12.
Responsible
consumption
& production
12.5
12.6
12.5.1
12.6.1
We have established a portfolio-wide minimum recycling target of 75% and a no
waste to landfill policy.
We integrate comprehensive sustainability reporting information into our
company reporting cycles and public reporting.
13.2
13.2.2
13.
Climate
action
Designing
and delivering
buildings
responsibly,
Managing
our assets
responsibly
We have independently verified science-based carbon targets which are set
to a 2°C reduction scenario, and are currently awaiting new, property-specific
guidance from the SBTi such that we can re-base 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.
Strategic report
69
STREAMLINED ENERGY AND CARBON REPORTING (SECR) DISCLOSURE
In line with the SECR regulations, we present below our
disclosure which is comprised of our carbon emissions
across Scopes 1 and 2 together with an appropriate
intensity ratio – kgCO2e/sqm. We have also set out our
Scope 3 emissions and the global energy consumption
(kWh) used to calculate our emissions.
We recognise the embodied carbon emissions associated
with our asset regeneration activity, which is relevant
for inclusion in the capital goods category, in the year in
which projects complete. Three major and several smaller
schemes completed in 2022, a higher level of completions
than in 2021.
Energy efficiency actions
Average occupation levels across our buildings continued
to rise as pandemic lockdown measures were revoked.
Consequently, energy consumption levels are returning to
those associated with more normalised occupancy. We do
not expect energy consumption to return to pre-pandemic
levels, in part due to our proactive occupier engagement
which is helping raise awareness, whilst also providing
practical assistance and information to help them reduce
consumption on an ongoing basis. We have also continued
to invest in a range of energy efficiency measures across
the managed portfolio, including increasing/reducing
temperature set-points in summer/winter respectively and
continued roll out roof LED lighting in common areas and
PIR sensors.
Scope 1 and 2 emissions
Scope 1 (combustion of fuel)
Managed portfolio gas use and fuel
use in Derwent London owned vehicles
Scope 1 (operation of facilities)
Managed portfolio refrigerant loss
from air conditioning systems
Total Scope 1
Scope 2 (purchased electricity, heat,
steam and cooling for our own use)
Managed portfolio electricity use for
common parts and shared services
(landlord controlled areas) – no heat,
steam or cooling was/is purchased
Renewable REGO backed electricity
Total Scope 1 and 2 emissions
Total Scope 1 and 2 emissions intensity
(kgCO2e/sqm)
Proportion that is UK-based
tCO2e
2022
2022 vs 2021
change
tCO2e
2021
2021 vs 2020
change
tCO2e
2020
Location-based
2,676
-16%
3,185
-4% 3,326
Market-based
2,007
312
-32% 2,965
–
-10% 3,291
–
Location-based
Location-based
2,9881
1,5031
-6%
-10%
3,185
1,670
-4%
-14%
3,326
1,947
Market-based
Location-based
Market-based
Location-based
28
4,491
2,035
11.6
100%
-49%
55
-7% 4,855
-33% 3,020
12.6
-8%
0
-8% 5,273
-8% 3,291
14.6
-14%
100%
100%
1 Selected metrics were subject to independent reasonable assurance by Deloitte LLP – see Data notes on page 71.
70
Derwent London plc / Report and Accounts 2022
GOVERNANCE continued
Scope 3 emissions
Category
Purchased goods and services
Capital goods
Notes
N/A
Embodied carbon
emissions from
projects that
completed during
2022
N/A
Fuel and energy-related activities
Upstream transportation & distribution
Waste management
Water
Business travel
Employee commuting
Measured but
deemed to be
de minimus
Upstream leased assets
N/A
Downstream transportation & distribution N/A
N/A
Processing of sold products
N/A
Use of sold products
N/A
End-of-life treatment of sold products
Emissions from
Downstream leased assets
tenant electricity
consumption
N/A
N/A
Franchises
Investments
Total Scope 3 emissions
Total Scope 1,2 & 3
(excluding embodied carbon) emissions
Total Scope 1,2 & 3
(excluding embodied carbon) emissions
intensity (kgCO2e/sqm)
tCO2e
2022
2022 vs 2021
change
tCO2e
2021
2021 vs 2020
change
tCO2e
2020
32,8691
3,073%
1,036
-95% 19,790
2,711
-12% 3,065
45%
2,118
39
22
23
<5%
56%
38%
283%
25
16
6
<5%
0%
-57%
-57%
25
37
14
<5%
4,893
-4%
5,108
-8%
5,555
40,5571
338% 9,256
-66% 27,539
12,178
-7% 13,074
0% 13,022
31.4
-7%
33.8
8%
31.4
1 Selected metrics were subject to independent reasonable assurance by Deloitte LLP – see Data notes on page 71.
Global energy use
Gas (combusted on a whole building basis)
Electricity (consumption from landlord controlled areas)
Electricity (consumption from tenant controlled areas)
Total energy (consumption from landlord areas for
electricity and gas)
Total building energy (consumption from landlord
and tenant controlled areas and gas)
kWh
2022
Difference
kWh
2021
Difference
kWh
2020
14,633,956
7,853,915
25,302,791
17,351,169
-16%
-1%
7,914,239
5% 24,058,669
-4% 18,069,846
-6%
8,398,662
8% 22,315,697
22,487,872
-11% 25,265,408
-5% 26,468,508
47,790,663
-3% 49,324,077
1% 48,784,205
Strategic report
71
Data notes
Boundary (consolidation approach) Operational control, based on our corporate activities and managed property
portfolio all of which are in central London (UK) only.
Alignment with financial reporting
Reporting method
Emissions factor source
The only variation is that our GHG emission/energy data presented does
not account for single-let properties or properties for which we do not have
management control. This is because we have no control or influence over the
utility consumption in these buildings. However, the rental income of these
properties is included in our consolidated financial statements.
We arrange our GHG emissions reporting in line with the Greenhouse Gas (GHG)
Protocol Corporate Accounting and Reporting Standard. For further details on
our data calculation methodology please visit the data section of our annual
Responsibility Report, which can be found at reports.derwentlondon.com/
responsibility-2022/data-and-downloads#data-download.
DEFRA, 2021 & 2022 – https://www.gov.uk/government/collections/government-
conversion-factors-for-company-reporting for all emissions factors apart from the
Scope 2 market-based factor which is based on the provenance of our electricity
supplies which are from renewable sources.
Restated 2021 figures
2021 figures have been restated as a result of the following: Data availability for energy
which was not available at the time of reporting last year has now been stated.
Market-based emissions
Embodied carbon
Independent assurance
We have updated our energy intensity calculation. This is now normalised to the
length of time the property was in the portfolio for that year as per our updated
methodology, such that a more representative floor area for energy consumption
is reported.
2021: The market-based gas figures have been restated using corrected market-
based emissions factors for the portfolio which has subsequently been provided by
our gas suppliers.
2022: Buildings which were on REGO-backed tariffs have had market-based carbon
factors applied to them.
We report embodied carbon in the year a project completes. As such embodied
carbon showed a large increase in 2022, as two of our largest developments
completed in the year – The Featherstone Building EC1 and Soho Place W1.
Selected 2022 metrics were subject to independent reasonable assurance under
ISAE3000 (Revised) and ISAE3410 by Deloitte LLP. Their assurance opinion and
our Environmental Basis of Reporting can be found within the Responsibility Report
at reports.derwentlondon.com/responsibility-2022/data-and-downloads#data-
download.
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.
72
Derwent London plc / Report and Accounts 2022
GOVERNANCE continued
2022 TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES (TCFD)
Governance
(a) Describe the board’s oversight of climate-related risks and opportunities
Climate change is a material issue for our business. The Board has overall accountability for climate-related risks and
opportunities, which it factors into its strategy discussions. The Board’s governance framework allows for delegation of
specific matters to the appropriate committees. As the risks and opportunities arising from climate change are likely to
have an impact on various aspects of our business practices, all the Board’s sub-committees are involved in the oversight
of climate-related matters.
CLIMATE RISK GOVERNANCE FRAMEWORK
Board oversight
The Board
Overall accountability for climate-related risks and opportunities
Responsible Business Committee
Monitors the management of our climate-related risks and opportunities and meets at least twice
a year to ensure that the Board adequately reflects climate-related issues in its decision making
Nominations
Committee
Audit
Committee
Risk
Committee
Remuneration
Committee
Ensures climate-
related risks are
appropriately
identified, monitored
and managed. The
Committee typically
meets three times
per year
Ensures climate-
related aspects
are appropriately
included in executive
remuneration. The
Committee typically
meets at least twice
per year
Ensures climate
and environmental
skills, knowledge
and experience is
a consideration
when assessing
the Board’s
composition and
the identification of
any skills gaps. The
Committee meets as
required and at least
twice per year
Ensures climate-
related risks and
capital expenditure
are appropriately
reflected in
our financial
statements
and portfolio
revaluation.
The Committee
typically meets
three or four times
per year
Executive oversight
Executive Committee
Overall responsibility for oversight of climate-related risks and opportunities and typically
meets eight or nine times per year
Sustainability Committee
Day-to-day oversight of climate-related risks and opportunities and meets quarterly
Sustainability Team
Develops appropriate climate-related management measures for implementation across the
business and identifies climate risk and opportunities to inform the risk management process
Communication process
Effective oversight requires clear
lines of communication and
accountability.
Paul Williams (Chief Executive) and
John Davies (Head of Sustainability)
are members of the Executive and
Sustainability Committees and
provide regular updates to the Board,
Responsible Business Committee,
and the other principal committees on
climate-related risks and opportunities.
Climate-related reporting and
discussion is held as part of standing
agenda items on the Responsible
Business, Risk and Audit Committees
including updates on our net zero
carbon journey or Energy Performance
Certificate (EPC) reporting. Outputs
from these committees are fed
through to the Board, supported by the
updates provided by Paul and John as
mentioned above.
The Executive Committee, which has
oversight responsibility of climate-
related issues, receives updates
from the Sustainability Committee.
The Sustainability Committee
monitors the day-to-day progress
and performance of climate-related
issues across the business (e.g.,
climate risk, energy efficiency and
legislation such as the Minimum
Energy Efficiency Standards (MEES)).
A target performance and data
dashboard (inclusive of climate-
related targets/metrics) is produced
for discussion and analysis.
The Sustainability Committee
is comprised of key department
leaders, namely:
• Paul Williams – Chair
• Nigel George (Executive Director)
• John Davies (Head of Sustainability)
• David Lawler (Company Secretary)
• Richard Baldwin
(Director of Development)
• Katy Levine (Head of HR)
• Victoria Steventon
(Head of Property Management)
• Vasiliki Arvaniti
(Head of Asset Management)
• Philippa Davies (Head of Leasing)
• Jay Joshi
(Group Financial Controller)
Strategic report
73
(b) Describe management’s role in assessing and managing climate-related risks and opportunities
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). Paul Williams oversees
the review and performance as Chair of the Sustainability
Committee and as a member of the Board, Executive and
Responsible Business Committees. Nigel George also sits
on the Board, Executive and Sustainability Committees.
The Board is kept updated on climate-related issues through
Paul Williams, Nigel George and presentations from John
Davies and others within management.
• Victoria Steventon (Head of Property Management) –
is responsible for ensuring our properties are operated
efficiently e.g. building energy consumption is reducing
in line with our energy targets.
• Vasiliki Arvaniti (Head of Asset Management) –
is responsible (together with John Davies) for ensuring
EPCs are tracked and monitored across the investment
portfolio. Likewise, that our asset management plans
incorporate the necessary improvement measures and
budgets to facilitate our net zero carbon ambition and
compliance with the forthcoming legislation e.g. EPC
changes for 2030 under proposed MEES legislation.
John Davies has responsibility for developing and,
together with his team, implementing the business-wide
sustainability programme (inclusive of all climate-related
aspects). John Davies reports directly to Nigel George
and is a member of the Executive and Sustainability
Committees. As a result, both Nigel and John have a
comprehensive oversight of all our climate-related work.
As mentioned above, the Sustainability Committee
comprises key department leaders many of whom have a
responsibility for oversight and implementation of climate-
related issues within their department. These include:
• David Lawler (Company Secretary) – is responsible
for ensuring climate-related issues are adequately
reflected within our corporate governance structure
e.g. our risk management processes and Board and
committee agendas.
• Richard Baldwin (Director of Development) –
is responsible for ensuring our development schemes
embed the required climate-related and net zero carbon
aspects within their design and delivery programmes
e.g. high EPC and BREEAM ratings.
As set out above there is ‘top down, bottom up’ oversight of
climate-related aspects, from the Board to the Sustainability
Committee. Target performance and data dashboards
(inclusive of climate-related targets/metrics) are discussed
and analysed during the Sustainability Committee and
related sustainability performance meetings.
To embed a further level of oversight, we have linked climate-
related performance measures into our Remuneration Policy
for the Executive Directors’ LTIP (see pages 191, 192 and 212).
LOOKING AHEAD
In 2023 we will look to:
• Expand our climate-related remuneration to all levels
of the business
• Continue to build knowledge at Board level and
support Executive/Non-Executive Directors in
overseeing and addressing climate-related risks
• Continue to build knowledge at the executive and
heads of department level to ensure climate-related
risks and opportunities are better understood
GOVERNANCE ACTIONS DURING 2022
The Board
At the strategy awayday in June 2022, the Board received presentations on sustainability, ESG
leadership and our progress to net zero carbon. In addition, the awayday was held in Scotland
which allowed the Board to see first-hand how our Scottish assets are assisting with our
sustainability initiatives.
Responsible Business Committee
Reviewed progress of our Net Zero Carbon Pathway programme and targets, and the updates to
our transition and physical climate risk assessments carried out by Willis Towers Watson (WTW).
Risk Committee
Audit Committee
Remuneration Committee
Reviewed the latest position of the Group with regards to EPC compliance and our 2030 plans,
and the updates to our transition and physical climate risk assessments.
Reviewed the current progress of our green finance initiatives and the structure of our non-
financial assurance work and received training on the latest TCFD disclosure requirements. In
addition, the Committee (with members of the Responsible Business Committee) received training
on carbon accounting and the latest climate-related regulations applicable to our business.
Received a report on our carbon and energy intensity performance which was used to inform the
performance metrics within the Executive Director annual bonus calculation (see page 216). As
delivering on our net zero carbon commitments is a fundamental part of Derwent London’s long-
term strategy, the Committee considered it appropriate to introduce sustainability performance
metrics (embodied carbon reduction and energy intensity reduction) within the Executive
Directors’ long-term incentive plan awards (PSP) for 2023, further information is on page 212.
Executive Committee
The Board agreed on the appointment of John Davies to the Executive Committee, effective from
1 January 2022, strengthening its climate-related risk expertise and experience.
74
Derwent London plc / Report and Accounts 2022
GOVERNANCE continued
Strategy
(a) Describe the climate-related risks and opportunities the organisation has identified over the short,
medium and long-term
Within our business we consider short, medium and
long-term time horizons to be 0-5, 5-15 and 15+ years
respectively (aligned to our corporate risk management
approach), 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.
During 2022 we engaged Willis Towers Watson (WTW)
to re-run our climate risk assessment and scenario
analysis, which utilised a structured approach to identify
the transition (risks related to the transition to a low
carbon economy) and physical (risks related to the impact
of climate e.g. storm damage) risks and opportunities
applicable to our business and then apply three pre-defined
climate scenarios to test the resilience of our business,
strategy and financial planning.
Time horizon
& climate
scenario
Short-term
Low Carbon World
(~1.5°C)
Medium-term
Current Policies Scenario
(~2 to 3°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)
Long-term
Hot House World Scenario
(>4°C)
~4.2°C (mean, 2100, RCP8.5)
Sources
IEA – Energy Outlook 2021: NZE2050
IPCC, 2014: Synthesis Report: RCP2.6
SSP1
IEA – Energy Outlook 2021: STEPS
IPCC, 2014: Synthesis Report: RCP4.5
SSP2
IPCC, 2014: Synthesis Report: RCP8.5
SSP5
Transition risk
The risk impact and likelihood profiles
for these risks are unchanged in
this scenario/time horizon when
compared 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
1.
Windstorm – within this climate
scenario the current science is
inconclusive on any material shifts
to the intensity or frequency.
Therefore the risk profile has been
deemed to be broadly similar to
that in the short-term.
2. Flooding – all of our London
portfolio assets are either out of
risk zones or still protected by the
Thames Barrier. Four agricultural
assets in our Scottish portfolio
are in flood zones of <100 year
return period. As a result, flooding
presents itself moderately in
this scenario.
Transition risk
Not modelled in this scenario/
time horizon.
Physical risk
1.
Windstorm – within this climate
scenario the current science is
inconclusive on any material shifts
to the intensity or frequency.
Therefore the risk profile has been
deemed to be broadly similar to that
in the medium term.
2. Flooding – data suggests no change
to exposure in this scenario when
compared to the medium term.
3. Drought – our London portfolio
could see a moderate risk of
drought, between three to four
months per year. This is a notable
increase over today’s climate.
4. Subsidence – increased
susceptibility, with all the London
portfolio having ‘probable’ increases
and instability issues albeit current
data models are limited and make
it difficult to characterise its
overall impact.
Material
risks &
opportunities
identified
Transition risk
1.
EPC rating requirements –
increasingly stringent rating
requirements by 2030.
Opportunity
Improving buildings and spaces
to meet more stringent EPC
requirements and our net zero
requirements align with market
and customer demand for more
sustainable space leading to better
rental premiums. There are also
operational cost savings that can
be achieved from reduced energy
intensity of more efficient spaces.
2. Emission offsets – increasing
cost and constrained supply of
appropriate carbon offsets.
Opportunity
By extending the carbon removal
projects (e.g. tree planting) on our
Scottish portfolio we can reduce
our reliance on the voluntary
carbon market in the long-term
and also develop a tradable asset
base which could be sold on the
voluntary market. However, our
current strategy is to utilise these
offsets for our own purposes.
3. Planning requirements –
increasingly stringent planning
and design requirements.
4. Cost of raw materials – increasing
cost of raw materials used
in construction.
Physical risk
1.
Windstorm – our London portfolio
and Scottish land portfolios have
a moderate exposure to damage
and interruption from windstorm
damage in this scenario.
Strategic report
75
(a) Describe the climate-related risks and opportunities the organisation has identified over the short,
medium and long-term continued
The transition risks were identified and tested against
a ‘Low Carbon World’ (~1.5°C) climate scenario, whilst
the physical risks were assessed against the same Low
Carbon World and a ‘Hot House World’ scenario (>4°C).
These scenarios were selected because transition risk
is generally most severe under a low temperature rise
scenario whereby the world transitions to a low carbon
economy, whilst physical risks are most severe under a
high carbon world where the world fails to transition and
as a result experiences more physical risk. An additional
‘Current Policies’ (~2°C to 3°C) scenario was also used, to
understand the resilience of our business to both physical
and transition risk if the world follows the emissions
trajectory we are headed for based on current policies/
practice. The scenarios used for the physical risk modelling
drew on Representative Concentration Pathways (RCPs),
and the scenarios used for the transition risk assessment
drew on the Shared Socioeconomic Pathways (SSPs)
and the International Energy Agency (IEA) scenarios.
The transition risks have been assessed against a 2025
and 2030 time horizon, whilst physical risks have been
assessed against a current, 2030 and 2050 time horizon
because the most severe physical impacts are not
expected to occur until the longer term. Details of the
sources and key indicators of these are shown in the table
on page 74.
Physical risks were modelled using specific climate
risk assessment software/data models (see the Risk
Management section for further details on the models
used) using the scenarios mentioned above with input from
our business in terms of property characteristics, financial
data and energy consumption data. This process ultimately
reviewed nearly 20 transition and physical issues and
we have set out in the table below the material risks and
opportunities, in terms of impact, likelihood (transition risk)
and exposure (physical risk) as defined by and drawn from
the assessment.
(b) Describe the impact of climate-related risks and opportunities on the organisation’s businesses,
strategy, and financial planning
As a central London focused real estate investment
trust (REIT) we invest in, develop and manage property
in central London. We also have a portfolio of property
and land holdings north of Glasgow, Scotland. As such,
climate-related issues affect the way we develop new
buildings, refurbish and manage our standing portfolio, and
engage with our occupiers. This in turn affects the kinds
of suppliers and consultants we use in these activities
to ensure we have the requisite level of expertise. This is
driven by an ever-increasing demand from our occupiers
and other stakeholders wanting buildings with higher
sustainability credentials, as well as the regulatory
landscape becoming tougher and more demanding.
As a result, our business model, strategy and approach
to financial planning clearly recognises this and is
underpinned by our low carbon transition plan – our Net
Zero Carbon Pathway, which guides our approach and sets
the appropriate parameters for our business. Further detail
on our pathway can be found at www.derwentlondon.com.
From the risk/opportunity identification above in section (a)
we set out in the table below how those risks/opportunities
then might impact our business, strategy and subsequent
financial planning. Noting that as our business is based in
and solely focused on the UK the risks/opportunities are
not considered on an international and/or segmental basis.
MATERIAL RISK/OPPORTUNITY: EPC RATING REQUIREMENTS
Likelihood
and/or
exposure
Almost
certain
Articulation
Current environmental
regulation in the UK
prevents leasing
space with an
Energy Performance
Certificate (EPC)
rating of worse than
E. This is projected to
increase to a rating of
B by 2030. Given 65%
of our current portfolio
by ERV (as at 31 Dec
2022) is rated B or
better this could be a
significant risk.
Potential financial impact
on our business
In 2021 a third party report
identified £97m of works
to achieve 2030 EPC
compliance across our
London commercial portfolio.
This has since been updated
to reflect changes to Part L
of the building regulations
and 2022 cost inflation,
increasing to £107m by the
year end. Following the sale
of 19 Charterhouse Street
EC1 in January 2023, this
has subsequently decreased
to £99m.
Impact on strategy
Impact on financial planning
The outputs from the study have
been embedded into our asset
management planning to ensure
our strategy and decision making
accurately reflects the required
actions and investment. Likewise,
keeping up with market and
customer demand for properties
which have a low energy intensity
and are more efficient to operate.
The cost estimates were
analysed to identify potential
service charge items versus
direct capital expenditure,
and consideration was
given to costs reflected
in our forecasts. In their
December 2022 external
valuation, Knight Frank
made a specific deduction
of £58.4m for identified EPC
upgrade works across the
portfolio. In addition, further
amounts were allowed for
general upgrades. These
cost breakdowns are now
regularly monitored and
reported internally on
progress made.
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GOVERNANCE continued
MATERIAL RISK/OPPORTUNITY: EMISSION OFFSETS
Likelihood
and/or
exposure
Almost
certain
Articulation
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/
emissions first.
Potential financial impact
on our business
Scenario 1: lower estimate,
assuming residual Scope
1 and 2 emissions (for
gas and electricity) are a
combined 757 tCO2e i.e.
those emissions that remain
after considering renewable
electricity and gas use; that
embodied carbon targets are
met; and that other Scope
1 emissions e.g. refrigerant
emissions reduce:
In 2025: ~£450k per annum
In 2030: ~£800k per annum
Scenario 2: higher estimate,
based on possible more
stringent regulations
surrounding green tariffs and
assuming residual emissions
for gas and electricity are
each reduced by 24% in
2025 and by 44% in 2030
from 2019 levels; that other
Scope 1 emission types
reduce; and that embodied
carbon targets are met:
In 2025: ~£750k per annum
In 2030: ~£1.1m per annum
(The above are estimated
on projected IEA NZE2050
carbon prices used as a
conservative proxy: £62
per tonne in 2025 and £108
per tonne in 2030. Current
voluntary carbon market
prices for carbon removal
schemes as at 31 December
2022 range from £20-£40
per tonne.)
Impact on strategy
Impact on financial planning
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. In addition,
by investing in our own
offsetting we can reduce
our development-based
carbon expenditure over
the longer term.
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 (commercial
office new build developments
completing from 2025: ≤600
kgCO2e/m2 and completing from
2030: ≤500 kgCO2e/m2) which
aim to drive down the amount
of embodied carbon on scheme
completion and subsequently the
need for and cost of offsetting.
In reducing our reliance on the
voluntary market our strategy has
also been to utilise our Scottish
land to create our own offsets,
initially via tree planting schemes.
Nearly seven years ago we planted
over 30Ha 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.
We are currently reviewing
our offsetting strategy for the
operational emissions of our
investment portfolio which will
be described and quantified in
subsequent disclosures once
agreed. Like embodied carbon we
have put energy intensity reduction
targets in place 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. This will be further
strengthened when our energy
and embodied carbon targets
will be incorporated into our next
Performance Share Plan (PSP)
award grant in 2023.
Within the financial impact
analysis shown in the previous
column we did include operational
carbon to understand its likely
contribution/impact.
MATERIAL RISK/OPPORTUNITY: PLANNING REQUIREMENTS
Likelihood
and/or
exposure
Almost
certain
Potential financial impact
on our business
As the impact on cost
is primarily associated
with compliance, we are
assuming acceptance to
incorporate these costs into
our appraisals. Our current
estimations show that
approximately 5% to 10% of
our development costs are
associated with net zero
carbon ready items.
Articulation
It is highly 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.
Strategic report
77
Impact on strategy
Impact on financial planning
Our business strategy is aligned
to, and takes account of, the latest
changes and requirements, with
our Responsible Development
Framework and Net Zero Carbon
Pathway ensuring we set the right
design brief for our development
pipeline. They ensure that the
properties are more climate
resilient such that they are built
for a longer life, are more flexible
to occupy and operate, less reliant
on mechanical cooling and free
from fossil fuel use i.e. all electric
heating and cooling.
Our EPC 2030 study also
helps to inform the significant
asset management programme
we have which is also
governed by our Responsible
Development Framework.
The requirement to
be net zero ready 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 the right kind
of 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. In response, our Green
Finance Framework has
been specifically developed
to allow us to link our debt
to our net zero ambitions
by setting out performance
criteria and a governance
framework which clearly
show the link 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
– see pages 106 to 107 for
further details.
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GOVERNANCE continued
MATERIAL RISK/OPPORTUNITY: COST OF RAW MATERIALS
Likelihood
and/or
exposure
Almost
certain
Articulation
There is a risk
of increased
development cost
if the construction
value chain passes
the impact of carbon
pricing for high carbon
building materials
such as steel and
cement onto us.
Potential financial impact
on our business
If carbon taxation imposed
on raw materials suppliers
was passed through to us via
increased prices, two ‘pass
through’ scenarios were
mapped to provide a low and
high-cost range estimate:
By 2025: ~£200k – £400k
per annum
By 2030: £350k – £700k
per annum.
(The above are estimated on
projected IEA carbon prices
used as a conservative proxy:
£62 per tonne in 2025 and
£108 per tonne in 2030. The
lower figure in the range in
each year assumes 50% of
the tax impact is passed
through and the higher
figure assumes 100% is
passed through.)
Impact on strategy
Impact on financial planning
As mentioned above, our
Responsible Development
Framework and Net Zero Carbon
Pathway ensure we set the right
design brief for our development
pipeline. Included within this
are stringent embodied carbon
requirements and reduction
targets. These drive 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. However, we
recognise that the transition time
frame 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.
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 e.g.
availability, cost and supply
chain knowledge.
MATERIAL RISK/OPPORTUNITY: WINDSTORM
Articulation
Damage to our
buildings from
windstorm damage
primarily caused by
flying debris.
Likelihood
and/or
exposure
Moderate
to high
exposure
Potential financial impact
on our business
Expected losses could be
£2.6m with a 10% probability
in 10 years (based on a
1-in-100-year return period or
‘bad year’ event).
MATERIAL RISK/OPPORTUNITY: FLOODING
Articulation
Loss and damage to
our assets which are
located in high flood
risk zones.
Likelihood
and/or
exposure
Low to
moderate
exposure
Potential financial impact
on our business
Expected losses could be
£3.5m with a 10% probability
in 10 years, related to four
agricultural assets in our
Scottish portfolio (this only
occurs in a Hot House World
Scenario (>4°C).
Impact on strategy
Impact on financial planning
Overall, the impact of windstorms
on our portfolio does not impact
our business strategy, but instead
helps us to ensure we have the
right building maintenance and
management measures in place.
Whilst the probabilistic
modelling showed
a possible loss of
approximately £2.6m,
based on a 10% probability
over the next 10 years we
currently don’t believe
that it will impact our
financial planning. Any
recommendations from
the climate assessment
will then be fed into our
Property Management plans
and planned preventive
maintenance schedules.
Impact on strategy
Impact on financial planning
Like windstorm, 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.
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.
Note: drought and subsidence risks have not been included above due to there being no clear financial quantification models available within the datasets used.
Strategic report
79
(c) Describe the resilience of the organisation’s strategy, taking into consideration different climate-related
scenarios, including a 2°C or lower scenario
As a REIT our properties are subject to climate-related
risks such as increasing temperatures which could lead
to greater physical stresses. Our business model/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 have a significant 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. Ultimately, we do not
envisage having to make changes to our overall approach
when considering climate-related scenarios.
Like previous sections, the table below maps out the material
risks and opportunities drawn from our latest assessment
and the resilience of our strategy to the three different
climate scenarios used in the assessment. Of the risks
identified, none were deemed likely to have a substantial
impact such that the viability of our business would be
interrupted, although our cost profile could increase.
Long-term
Hot House World Scenario
(>4°C)
~4.2°C (mean, 2100, RCP8.5)
Transition risk
Not modelled in this
scenario/time horizon.
Physical risk
1.
Windstorm – within
this climate scenario
there was no scientific
evidence to suggest that
intensity or frequency
would increase
significantly, therefore
the risk profile has been
deemed to be broadly
similar to that in the
medium-term.
2. Flooding – data suggests
no change to exposure in
this scenario.
3. Drought – our London
portfolio could see a
moderate risk of drought,
between three to four
months per year, a
notable increase over
today’s climate.
4. Subsidence – there is
increased susceptibility
of subsidence, with all
the London portfolio
having ‘probable’
increases and instability
issues in line with the
wider London area.
Scenario
Material
risks &
opportunities
identified
Short-term
Low Carbon World
(~1.5°C)
~1.5°C (median, 2100, RCP2.6)
Medium-term
Current Policies Scenario
(~2 to 3°C)
~2.3°C (mean, 2100, RCP4.5)
Transition risk
EPC rating requirements
In this scenario, it is assumed the
minimum EPC rating of B will be in
place and it will cost us £107m out
to 2030 to ensure we meet these
requirements, although since the
year end this has reduced to £99m
after disposals.
Transition risk
EPC rating requirements
In this scenario, it is assumed there would be
no increase in EPC requirements. However, with
our strategy we would still look to retrofit and
improve our properties in line with our net zero
strategy and overall business model. Likewise, to
take advantage of market demand and occupier
preference opportunities.
Emission offsets
In this scenario, the price of voluntary offsets is
anticipated to rise as demand grows as some
companies seek to meet net zero targets by
offsetting residual emissions. However, the
assumption is that the price does not increase
by as much as under the Low Carbon World
scenario. The increase in pricing of voluntary
offsets is assumed to be in line with the
projected carbon price.
Using the IEA STEPS scenario and assuming the
UK implements a carbon price of $65 (£54) by
2030 in line with stated EU prices this could have
a projected impact of £400,000 to £570,000
per annum.
It is assumed the opportunities available on our
Scottish portfolio remain the same.
To address the impact of this risk
on our profit and loss, the EPC 2030
study we commissioned addressed
each affected property in the portfolio
and set a clear, costed plan on how
to achieve the new minimum rating.
However, there is a clear opportunity
in that market and occupier demand
for more sustainable space 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.
Emission offsets
In this scenario, UK net zero emissions
will be deemed to have been met by
2050. This could lead to a significant
increase in pricing of voluntary offsets
as demand grows as more companies
seek to meet net zero targets by
offsetting residual emissions.
Using projected IEA carbon prices
of £108 as a proxy for the price of a
carbon offset by 2030 this could have
a projected impact of £800,000 to
£1,100,000 per annum.
Over the long-term and to reduce the
impact on our balance sheet, extending
the carbon removal projects (e.g. tree
planting) on our Scottish portfolio
will help to reduce our reliance on the
voluntary carbon market. However,
in this scenario we are unlikely to
realise the full value straight away
given such projects take time to yield
a significant number of credits.
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GOVERNANCE continued
Scenario
Material
risks &
opportunities
identified
continued
Short-term
Low Carbon World
(~1.5°C)
~1.5°C (median, 2100, RCP2.6)
Medium-term
Current Policies Scenario
(~2 to 3°C)
~2.3°C (mean, 2100, RCP4.5)
Long-term
Hot House World Scenario
(>4°C)
~4.2°C (mean, 2100, RCP8.5)
Planning requirements
In this scenario, it is assumed that
the UK will need to increase the
stringency of building planning and
design requirements as part of its
efforts to meet its net zero targets.
Our strategy already reflects this
expected move – primarily via the
introduction of our Net Zero Carbon
Pathway back in July 2020. We
have estimated the cost impact of
our pathway on our developments
with approximately 5% to 10% of our
development costs associated with
net zero carbon requirements.
As described above there is a
clear opportunity in that market
and occupier demand for more
sustainable space is leading towards
better rental premiums. As a result,
we will look to take advantage of
this opportunity and ensure our
properties are aligned.
Cost of raw materials
In this scenario, there is expected
to be increased cost of high carbon
raw materials such as steel, cement
and glass, which would be further
impacted by a carbon tax.
Price increases set out in the table on
page 76 derive from the assumption
that suppliers pass on 50-100%
of their exposure to high carbon
taxation via increased prices.
Physical risk
1.
Windstorm – our London and
Scottish land portfolios have a
moderate exposure to damage
and interruption from windstorm
damage in this scenario.
Planning requirements
In this scenario, it assumes there are no changes
to existing planning requirements. Therefore,
whilst we will have to ensure we meet planning
regulations, there will be no new, more stringent
regulations introduced. However, we would still
intend to follow our Net Zero Carbon Pathway
and therefore the impact and likelihood of
this risk remains the same. In addition, this is
supported by market and occupier demand for
more efficient spaces which we would look to
take advantage of.
Cost of raw materials
In this scenario, the increase in cost of key
materials is anticipated to be substantially
lower than in the Low Carbon World scenario.
Price increases set out below derive from the
assumption that suppliers pass on 50-100%
of their exposure to high carbon taxation via
increased prices.
Using the IEA STEPS scenario and assuming
the UK implements a carbon price of $65 (£54)
by 2030 in line with stated EU prices this could
have a projected impact of £170,000 to £340,000
per annum.
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.
Physical risk
1.
Windstorm – within this climate scenario
there was no scientific evidence to suggest
that intensity or frequency would increase
significantly, therefore the risk profile has
been deemed to be broadly similar to that in
the short-term.
2. Flooding – all of 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 in flood
zones of <100-year return period. As a result,
flooding presents itself as a moderate risk in
this scenario.
STRATEGY ACTIONS DURING 2022
2030 EPC
assessment
Offsetting
Since undertaking our EPC 2030
study we have embedded the
suggested actions into our asset
management and refurbishment
programmes. We have also assessed
the proportion of costs which are
capex/service charge recoverable
and given consideration to the
costs included in our forecasts and
external valuations.
We continued our assessment of
further tree planting sites on our
Scottish portfolio, as well as other
carbon removal projects such as
peatland restoration.
LOOKING AHEAD
In 2023 we will look to:
• Expand and finalise our carbon removal projects in Scotland
• Continue with the detailed design and project management of
our proposed solar park
• Continue to refine our EPC 2030 actions and cost
apportionments to ensure we remain on track. This is
picked up through our five-year asset management strategies
which include plans for efficient operation and/or upgrade
of our assets
• Look to incorporate the physical risk analysis into the
appropriate property and asset management planning activities
Strategic report
81
Risk management
(a) Describe the organisation’s processes for identifying and assessing climate-related risks.
(b) Describe the organisation’s processes for managing climate-related risks.
(c) Describe how processes for identifying, assessing and managing climate-related risks are integrated into
the organisation’s overall risk management.
Owing to their complex nature, the identification and
assessment of climate-related risks and opportunities
are undertaken with the support of third party expertise.
During the year under review, Willis Towers Watson (WTW)
were engaged to perform an update to their climate risk
assessment and climate scenario analysis which was first
conducted in 2020.
Process
Transition risks were identified and assessed via a
workshop facilitated by WTW with senior cross-functional
representation from across Derwent London. The risks
were then identified, assessed and challenged in terms of
impact and likelihood, and then set into context based on
the latest regulatory updates and WTW’s experience with
the real estate sector. The financial impact (whether to the
balance sheet or income statement) was estimated, and
likelihoods assessed on an annualised basis and aligned to
our risk rating criteria (see page 174). High and low impact
estimates were assigned to applicable cost components,
depending on the success of planned mitigating actions,
and risks given a ‘1 to 5’ impact rating according to a
defined rating criterion. Working 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.
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 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 (i.e. scored 3 out of 5 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.
Once the risks and opportunities had been identified, they
were tested against various climate scenarios. The key
considerations in the scenario analysis were:
• 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 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.
Scope
The scope of the 2022 assessment included our entire
London-based investment portfolio (including our head
office) and our Scottish land. In our 2020 assessment,
we did not include our land in Scotland.
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GOVERNANCE continued
Climate scenarios (for both physical and transition risk), transition assumptions and physical risk data
sources used
Scenario Name
Temperature range
Low Carbon World
(~1.5°C)
1.4°C (median, 2100, IEA
NZE2050)
~1.5°C (median, 2100, RCP2.6)
Current Policies Scenario
(~2 to 3°C)
Hot House World Scenario
(>4°C)
2.6°C (median, 2100, IEA STEPS)
~4.2°C (mean, 2100, RCP8.5)
~2.3°C (mean, 2100, RCP4.5)
Sources
IEA – Energy Outlook 2021:
NZE2050
IEA – Energy Outlook 2021:
STEPS
IPCC, 2014: Synthesis Report:
RCP8.5
IPCC, 2014: Synthesis Report:
RCP2.6
IPCC, 2014: Synthesis Report:
RCP4.5
Narratives for SSPs*: SSP5
Narratives for SSPs*: SSP1
Narratives for SSPs*: SSP2
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
2050 (IEA NZE2050)
Not achieved before 2100
(IEA STEPS)
Not achieved
Global net zero
achieved by:
Carbon price
Building sector
policies
Advanced economies: 2025,
2030, 2040, 2050
$75/tonne; $130/tonne;
$205/tonne; $250/tonne
(IEA NZE2050)
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)
Social assumptions Assumes low growth in
material consumption and
increasing consumer pressure
on businesses to drive
sustainability. (SSP1)
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)
EU: 2030, 2040, 2050
No carbon pricing in existence
$65/tonne; $75/tonne;
$90/tonne
(IEA STEPS)
(SSP5)
Assumes current policies
promoting sustainability
are removed.
(SSP5)
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)
Little to no development
in low carbon technology.
(SSP5)
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)
The world follows a path in
which social, economic, and
technological trends do not
shift markedly from historical
patterns. Global and national
institutions work toward but
make slow progress in achieving
sustainable development
goals. (SSP2)
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
6th Carbon Budget and Industrial
Energy Transformation Fund
provides grant funding for energy
efficiency projects. (IEA STEPS)
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 of Climate Change (IPCC). For the
climate loss modelling the catastrophe model from RMS (Risk Management Solutions) was used.
Strategic report
83
How we integrate climate risk into our overall risk
management approach
We identify and monitor climate change risks as part of our
wider risk management procedures which are overseen by
the Board and its principal committees (see pages 114 and
174 to 175). 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 is most capable of overseeing
and managing the risks. Our risk management structure is
on page 176. 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 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. 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 2022
are on page 113). Climate-related topics are included on
the agenda of each meeting of the Responsible Business
Committee and the Sustainability Committee. The climate
risk governance framework on page 72 details the
frequency of the committee meetings.
RISK MANAGEMENT ACTIONS DURING 2022
Climate resilience has been classified as a principal risk
for the Group and is contained on our Schedule of Principal
Risks (see page 122). Emerging climate-related risks are
monitored via our Schedule of Emerging Risks (see pages
124 and 125). At 31 December 2022, we monitor three
climate-related emerging risks which relate to Energy
Performance Certificate (EPC) compliance, renewable
energy and the importance of ESG-related concerns to
our key stakeholders. We define an emerging risk as a
condition, situation or trend that could significantly impact
our financial strength, competitive position or reputation
within the next five years. Emerging risks can involve
a high degree of uncertainty and are therefore factored
into the Board’s viability assessment and strategic
planning process.
LOOKING AHEAD
In 2023 we will look to:
• Embed the results of the latest climate risk analysis
into our portfolio management
• Review the Group’s risk registers to ensure they reflect
all of the Group’s material climate-related risks
Oversight provided by the
Risk Committee
• Regular updates on Willis Towers Watson’s climate risk assessment.
• Received an update on the availability and cost of sourcing renewable energy (see page 125).
• Updated on the work performed by the Sustainability, Development and Asset Management teams to
upgrade the EPC ratings of our buildings.
Oversight provided by the
Audit Committee
• Considered the impact of ESG credentials and EPC capital expenditure on the portfolio valuation
(see page 158).
• Received an update from Deloitte on its assurance work performed on our key ESG data (see pages
158 and 163)
• Both the Risk and Audit Committee received training on climate-related disclosures provided by
Deloitte in November (see page 158).
84
Derwent London plc / Report and Accounts 2022
GOVERNANCE continued
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
We set out in the table below a range of metrics that reflect those highlighted in the TCFD buildings and materials group
selected metrics and indicators guidance. In addition, to enable our stakeholders to further understand our performance
with regards to climate-related issues, the data section within our annual Responsibility Report includes an extensive
range of consumption and intensity metrics for energy, carbon, waste and water.
Financial
category
Assets
Climate-related
category
Metric
Risk Adaptation
& Mitigation
Percentage of portfolio
with an EPC rating of A
Percentage of portfolio
with an EPC rating of B
Percentage of portfolio
with an EPC rating of C
Percentage of portfolio
with an EPC rating of D
Percentage of portfolio
with an EPC rating of E
Percentage of portfolio
with an EPC rating of F
Percentage of portfolio
with an EPC rating of G
Unit of
measure
% of ERV
% of ERV
% of ERV
% of ERV
% of ERV
% of ERV
% of ERV
Properties in development
% of ERV
Exempt/ under review/
outstanding
Percentage of portfolio
which is BREEAM certified
Percentage of portfolio
which is LEED certified
% of ERV
% by floor area
(total portfolio
NIA%)
% by floor area
(total portfolio
NIA%)
2022
9%
45%
20%
9%
4%
0%
0%
12%
1%
34%
2021
6%
35%
18%
14%
6%
0%
0%
19%
2%
30%
Applicable
risks and
opportunities
Risk
timescales
EPC rating
requirements
Short to
medium-term
2020
6%
31%
24%
21%
9%
1%
0%
0%
8%
32%
Planning
requirements
Short to
medium-term
13%
9%
9%
Expenditures Energy/Fuel
Total energy consumption
kWh
47,790,663
49,324,077
48,784,205
Proportion of energy consumed
from renewable sources
% of energy
92%
71%
63%
Energy/Fuel
Total electricity consumption kWh
33,156,7061
31,972,908
30,714,359
Short to
medium-term
Cost of raw
materials,
emission
offsets
GHG Emissions
Proportion of electricity
consumed from renewable
sources
% of energy
98%1
97%
100%
Total fuel consumption (gas)
kWh
14,633,9561
17,351,169
17,896,075
Proportion of fuel consumed
from renewable sources
% of energy
Total building energy intensity kWh/m2
GHG emissions intensity from
buildings (location-based)
tCO2e/m2
GHG emissions intensity from
buildings (market-based)
tCO2e/m2
79%1
1231
22%
128
1%
135
0.0234
0.0258
0.0300
0.0054
0.0081
0.00922
Water
Total water consumption
m3
Building water intensity
m3/m2
150,0721
107,864
0.411
0.29
95,719
0.26
Risk Adaptation
& Mitigation
Remuneration
Expenditures (capex) for
carbon offsets from the
voluntary carbon market
(carbon removals)
Percentage of Executive
Director annual bonus
calculation linked to
climate-related aspects
£
£410,863
£12,950
£247,375
% of bonus
7.5%
7%
5%
Drought,
flooding,
planning
requirements
Emission
offsets
Cost of raw
materials,
planning
requirements
Medium to
long-term
Short,
Medium to
long-term
Short to
medium-term
NB: the above utility/carbon-based data points relate to our managed property portfolio only. For further details on the make-up of this portfolio and our entire investment
portfolio please see our environmental data basis of reporting set out in our latest annual Responsibility Report.
1 Selected metrics were subject to independent reasonable assurance by Deloitte LLP.
In addition to the above metrics we also use our science-based carbon targets and Net Zero Carbon Pathway to support
us in the strategic planning of our portfolio and undertake future projections of carbon intensity reductions. For more
information on our progress against these please see pages 52 to 56 and our Responsibility Report.
Strategic report
85
(b) Disclose Scope 1, Scope 2, and, if appropriate,
Scope 3 greenhouse gas (GHG) emissions, and
the related risks
(c) Describe the targets used by the organisation to
manage climate-related risks and opportunities
and performance against targets
We publish a detailed data report which sets out our
environmental data performance. This includes extensive
carbon reporting across all scopes: Scopes 1, 2 and 3
calculated using the Greenhouse Gas (GHG) Protocol
Corporate Accounting and Reporting Standard. Likewise,
we provide at least three years to show progress/historical
performance and allow for trend analysis. Please refer to
the data report of our latest Responsibility Report which
also includes full details of the aggregation and calculation
methodology. Moreover, we publish a full breakdown of our
corporate carbon footprint (inclusive of Scopes 1, 2 & 3)
in our Streamlined Energy and Carbon Reporting (SECR)
disclosure on page 69.
In addition to the metrics and targets set out in section (a),
we developed a set of science-based carbon targets to
ensure our carbon reduction programme is aligned to
its objectives, as well as minimising our risk exposure to
climate change on our managed portfolio. These targets,
aligned with a 2.0°C climate warming scenario, were
verified by the Science Based Targets initiative (SBTi) in
2019 and are:
“To reduce Scope 1 and 2 GHG emissions by 55% per
square metre by 2027 from a 2013 base year” and
“To reduce Scope 3 GHG emissions 20% per square
metre by 2027 from a 2017 base year.”
To see the latest progress against these targets and the
progress across our Net Zero Carbon Pathway, please see
our latest Responsibility Report. As part of our net zero
ambition, we will be reviewing these targets to align them
with a 1.5°C climate warming scenario and we will provide
further updates when this is complete.
Compliance statement
In line with the Financial Conduct Authority Listing Rules, we believe our climate-related financial disclosures for
the financial year ended 31 December 2022 are consistent with all the Task Force on Climate-related Financial
Disclosures (TCFD) 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.
We also provide the same disclosures within our annual Responsibility Report reports.derwentlondon.com/
responsibility-2022 together with our more granular, detailed climate-related data sets and performance metrics
which we refer to within our disclosures on pages 72 to 85. The Responsibility Report provides the more granular
data behind the figures and methodology that are presented in this report and disclosure. 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.
Climate change is a material issue for our business as identified in our sustainability materiality matrix
reports.derwentlondon.com/responsibility-2022/about#materiality and is also included as a risk in our principal
risk register (see pages 116 to 123). We deem an issue to be ‘material’ when it is assessed as being sufficiently
important to both our business and our stakeholders. A formal four-step process – identification, prioritisation,
validation and review – is used to determine the issues within our sustainability materiality matrix which in turn
informs the population of our risk register. As a result we believe the disclosures we have provided on pages 72
to 85 are comprehensive within each of the four recommendations and 11 recommended disclosures.
86
Derwent London plc / Report and Accounts 2022
PROPERTY
REVIEW
OUR BUILDINGS
ARE OUR BRAND
Tea Building E1
87Valuation90 Acquisitions & disposals91 Leasing, asset management & property management95Development & refurbishment Strategic report
87
VALUATION
NIGEL GEORGE
Executive Director
As reported with our H1 2022 results, we have changed
our external valuer from CBRE to Knight Frank. At least half
of our London assets were valued by Knight Frank at H1
and for the year-end valuation they were appointed on all
the London assets. Our Scottish land, less than 1% of the
Group’s portfolio, continues to be valued by Savills.
The Group’s investment portfolio was valued at £5.36bn as
at 31 December 2022. There was a deficit for the year of
£401.8m which, after accounting adjustments of £29.1m,
produced a decline of £430.9m including our share of joint
ventures. On an underlying basis the portfolio decreased
6.8%, following a 3.5% uplift in 2021.
This primarily reflected the weakening economy, with
inflation and interest rates rising significantly in the second
half. This had a direct impact on the commercial property
sector with valuation yields moving out. Accordingly,
the positive H1 valuation of 1.4% reversed in H2 to an
8.0% decline. Rental values generally held up with office
occupiers seeking better quality, environmentally attractive
accommodation, which is in short supply.
By location, our central London properties, which represent
99% of the portfolio, declined by 6.8% with the West End
down 5.8% and City Borders 9.2%. The balance of the
portfolio, our Scottish holdings, was down 5.7%.
Our portfolio valuation movement outperformed both the
MSCI Quarterly Index for Central London Offices and the
wider UK All Property Index which were down by 10.9% and
12.8%, respectively.
Total property return
Total return (%)
18
15
12
9
6
3
0
(3)
(6)
(9)
6.0
5.3
6.0
7.4
4.1
1.2
0.3
(2.4)(2.3)
16.5
6.3 5.9
(3.4)
(8.0)(9.1)
(12)
2018
2019
2020
2021
2022
Derwent London
MSCI Central London Office1
MSCI UK All Property 1
1 Quarterly Index.
The quality of the portfolio, low vacancy rate, successful
development programme and active asset management
all contributed to this outperformance. The table shows
performance trends in more detail, with the higher capital
value (in £ psf) buildings outperforming.
Capital value and ERV performance
Capital value
£ psf banding
≥£1,500
£1,000 – £1,499
<£1,000
Underlying
Developments
Portfolio
Weighting
by value
Capital value
change
ERV
growth
21%
25%
39%
85%
15%
100%
-3.5%
-7.4%
-11.8%
-8.5%
4.8%
-6.8%
2.0%
2.9%
0.3%
1.4%
0.6%
1.3%
Our long-term development pipeline, which provides well
designed office space in central London, is well positioned,
with occupiers having a greater focus on high quality,
environmentally attractive space. This was reflected in our
EPRA rental values which moved up 1.3%, an improvement
on the 0.2% decline seen in 2021.
The portfolio’s true equivalent yield moved out 38bp from
4.50% to 4.88% over the year. The initial yield is 3.7%
(December 2021: 3.3%) which, after allowing for the expiry
of rent-frees and contractual uplifts, rises to 4.6% on a
‘topped-up’ basis (December 2021: 4.4%).
Derwent London’s total property return for 2022 was -3.4%,
which compares to the MSCI Quarterly Index of -8.0% for
Central London Offices and -9.1% for UK All Property.
Our major development completions in 2022 were Soho
Place W1 and The Featherstone Building EC1, and together
these were 71% let or sold at year end. On-site developments
are 25 Baker Street W1 and Network W1, both in the West
End. The latter commenced in June 2022. Both are due to be
delivered in 2025 and require £324m of capital expenditure
to complete. Together the four schemes were valued at
£790m at December 2022, representing 15% of the portfolio,
and saw a 4.8% valuation uplift after capital expenditure, as
development surpluses were released. Excluding these, the
portfolio valuation decreased by 8.5% on an underlying basis.
Further details on the progress of our projects are in the
‘Development and refurbishment’ section on page 95 and
additional guidance on the investment market is laid out in
the ‘Outlook’ section on page 21.
88
Derwent London plc / Report and Accounts 2022
PROPERTY REVIEW continued
VALUATION continued
Portfolio reversion
Our contracted annualised cash rent as at 31 December
2022 was £204.2m, a 14% increase over 12 months as
the pre-lets at our 2022 development completions came
through. With a portfolio ERV of £304.6m there is £100.4m
of potential reversion. Within this, £46.4m is contracted
through a combination of rent-free expiries and fixed
uplifts, the majority of which is already straight-lined in the
income statement under IFRS accounting standards. On-
site developments and refurbishments could add £33.0m.
The ERV of available space is £17.3m. Just over half of
this was at our recently completed developments: £5.9m
at The Featherstone Building and £3.2m at Soho Place
(retail). Since year end we have let £2.4m of this space.
The balance of the potential reversion of £3.7m comes
from future reviews and expiries less future fixed uplifts.
Valuation yields
Members of the Valuation and Investment team
Portfolio income potential
Rental income (£m)
400
300
200
100
Reversion (%)
100
75
50
25
0
0
-
c
e
D
1
0
-
c
e
D
2
0
-
c
e
D
3
0
-
c
e
D
4
0
-
c
e
D
5
0
-
c
e
D
6
0
-
c
e
D
7
0
-
c
e
D
8
0
-
c
e
D
9
0
-
c
e
D
0
1
-
c
e
D
1
1
-
c
e
D
2
1
-
c
e
D
3
1
-
c
e
D
4
1
-
c
e
D
5
1
-
c
e
D
6
1
-
c
e
D
7
1
-
c
e
D
8
1
-
c
e
D
9
1
-
c
e
D
0
2
-
c
e
D
1
2
-
c
e
D
2
2
-
c
e
D
0
2018
2019
2020
2021
2022
0
Contractual rent
Under refurbishment / development
Contractual rental uplifts (including pre-lets)
Rent reviews and lease renewals
Derwent London true equivalent yield
10-year Gilt
BBB yield
Available to occupy
Reversion %
True equivalent yield
%
6.0
(3)
5.5
(24)
5.0
(26)
25
(29)
6
(17)
(4)
Rental value growth
Rental growth (%)
5–year
movement:
+15 basis points
3
1
3
0
(4)
(6) (3)
42
(3)
(9)
(15)
(4)
15
10
5
0
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
(5)
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Derwent London H1 growth
Derwent London H2 growth
MSCI Central London Office annual growth
%
12
10
8
6
4
2
0
4.5
4.0
Strategic report
89
Portfolio statistics – valuation
Valuation
£m
Weighting
%
Valuation1
performance
%
Let
floor area2
‘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
Borders
City
Borders
Central London
3,363.7
376.6
3,740.3
1,544.5
5,284.8
Provincial
Total portfolio 2022
2021
79.4
5,364.2
5,696.7
1 Underlying – properties held throughout the year.
2
Includes pre-lets.
Rental income profile
63
7
70
29
99
1
100
100
(4.9)
(12.9)
(5.8)
(9.2)
(6.8)
(5.7)
(6.8)
3.5
2,485
411
2,896
1,446
4,342
314
4,656
4,733
81
18
99
248
347
12
359
146
32
0
32
9
41
0
41
236
Annualised contracted rental income, net of ground rents
Contractual rental increases across the portfolio
Letting 359,000 sq ft available floor area
Completion and letting 41,000 sq ft of refurbishments
Completion and letting 404,000 sq ft of developments
Anticipated rent review and lease renewal reversions
Future contracted growth above ERV
Portfolio reversion
Potential portfolio rental value
Portfolio statistics – rental income
404
0
404
0
404
0
404
459
Rental
uplift
£m
46.4
17.3
2.7
30.3
8.2
(4.5)
3,002
429
3,431
1,703
5,134
326
5,460
5,574
Rental
per annum
£m
204.2
100.4
304.6
West End
Central
Borders
City
Borders
Central London
Provincial
Total portfolio
2022
2021
Net contracted
rental income per
annum
£m
Average rental
income
£ per sq ft
Vacant space
rental value
per annum
£m
Lease reversion
per annum1
£m
Portfolio
estimated rental
value per annum
£m
Average
unexpired
lease length2
Years
110.6
21.2
131.8
68.0
199.8
4.4
204.2
178.4
45.83
51.82
46.69
47.88
47.09
14.15
44.86
38.10
38.5
0.4
38.9
11.2
50.1
0.2
50.3
41.1
39.9
0.5
40.4
9.6
50.0
0.1
50.1
74.4
189.0
22.1
211.1
88.8
299.9
4.7
304.6
293.9
7.6
6.4
7.4
4.8
6.5
2.5
6.43
6.3
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 7.2 years after adjusting for ‘topped-up’ rents.
90
Derwent London plc / Report and Accounts 2022
PROPERTY REVIEW continued
ACQUISITIONS & DISPOSALS
In 2021, the Group took the decision to retain its modern
and recently upgraded buildings for longer while reducing
its exposure to non-core properties with less repositioning
potential. This decision reflected our view that the flight to
quality would gather pace and that higher quality buildings
would deliver stronger returns.
We remain committed to owning a portfolio balanced
between core income properties and those that offer future
regeneration potential. At 31 December 2022, the portfolio
was split 57% ‘core income’ and 43% ‘future opportunity’
(excluding Old Street Quarter EC1, with an existing floor
area of c.400,000 sq ft, where our acquisition is expected
to complete from 2027 for £239m).
Since the start of 2022, we have made good further
progress against our objectives, actively recycling capital
out of several smaller non-core buildings above book
value, where there was limited capacity for extra floor
area and amenity.
Disposal proceeds have been recycled into our development
pipeline thereby maintaining conservative gearing, providing
firepower for future acquisition opportunities that may arise.
Committed capex relating to our two on-site major projects
totals £324m.
Net property investment
£m
500
400
300
200
100
0
(100)
(200)
(300)
(400)
2018
2019
2020
2021
2022
Acquisitions
Capital expenditure
Disposals
Acquisitions
Property
230 Blackfriars Road SE1
Soho Place W1 headlease
Other
Total 2022 acquisitions
Date
Q1 2022
Q1 2022
–
Area
sq ft
60,400
–
–
60,400
Total after
costs
£m
58.3
71.9
2.8
133.0
Net
yield
%
3.5
–
–
–
Net rental
income
£m pa
Net rental
income
£ psf
2.1
–
–
2.1
41.00
–
–
–
Disposals (excluding trading property)
Property
New River Yard EC1
2 & 4 Soho Place W1
Bush House WC2
Intermediate leasehold
interest at Soho Place W1
Other
Total 2022 disposals
2023 YTD
19 Charterhouse Street EC1
1 After deduction of rental top-ups and sale costs.
2 Office space.
Area
sq ft
Net proceeds
£m
Date
Q2 2022
Q3 2022
Q3 2022
Q3 2022
–
70,700
18,4002
103,700
–
1,600
194,400
Q1 2023
63,200
65.91
39.8
84.0
15.3
1.4
206.4
53.6
Net
yield
%
4.5
–
–
–
–
–
4.6
Net rental
income
£m pa
3.3
–
–
–
–
3.3
2.6
Strategic report
91
LEASING, ASSET
MANAGEMENT &
PROPERTY MANAGEMENT
EMILY PRIDEAUX
Executive Director
LETTINGS
£9.8m
of new rent at 13.0% above ERV
POST-YEAR END LETTING ACTIVITY
£14.7m
of new rent in 2023 YTD
Leasing activity in 2022 totalled £9.8m, across 46
transactions, of which £2.3m were pre-lets. These 163,000 sq
ft of lettings were signed on average 13.0% above December
2021 ERV. Nine transactions comprised 68% of the total.
Since the start of 2023, we have seen a noticeable increase
in letting activity. Ten new leases have been agreed
totalling £14.7m of rent on average 7.7% above December
2022 ERV. Key transactions include:
Demand for furnished space is also strong with occupiers
prepared to pay a premium to secure high quality, ready
to occupy units. This provides an excellent solution for
our smaller units and we currently operate 63,600 sq ft of
‘Furnished + Flexible’ space with a further 34,100 sq ft on
site or committed.
• PIMCO has pre-let 106,100 sq ft at 25 Baker Street W1
at a rent of £11.0m, well above December 2022 ERV
(commercial element now 56% pre-let/sold); and
• Buro Happold has leased 31,100 sq ft at The Featherstone
Building EC1 at a rent of £2.3m, in line with December
2022 ERV.
Leasing activity
H1 2022
H2 2022
2022
2023 YTD
1 Weighted average unexpired lease term (to break).
2 Performance against Dec 22 ERV.
Principal lettings in 2022
Property
Tenant
H1 2022
90 Whitfield Street W1
Michael Kors
The Featherstone Building EC1 Marshmallow
The Featherstone Building EC1 Dept Agency
White Collar Factory EC1
White Collar Factory EC1
Brainlabs
Adobe
Wandle Housing
Association
NewRiver REIT
Talon Outdoor
Pollination
Sine Digital
VCCP
230 Blackfriars Road SE1
80 Charlotte Street W1
Holden House W1
H2 2022
43 Whitfield Street W1
43 Whitfield Street W1
Gordon House SW1
Sub-total
Other
Total 2022 lettings
Area
sq ft
109,300
53,700
163,000
162,600
Let
Income
£m pa
7.1
2.7
9.8
14.7
WAULT1
yrs
6.1
4.2
5.7
13.4
Performance against
Dec 21 ERV
Overall
%
9.3
23.7
13.0
7.72
Area
sq ft
Total
annual rent
£m
Rent
£ psf
Lease term
Years
Lease break
Year
Rent-free equivalent
Months
18,850
16,220
11,450
11,540
10,180
7,290
4,090
5,120
5,930
5,090
7,380
103,140
59,860
163,000
72.50
71.50
85.25
71.70
70.00
49.50
70.00
49.50
85.00
86.00
52.50
71.75
40.10
60.40
1.4
1.2
1.0
0.8
0.7
0.4
0.3
0.3
0.5
0.4
0.4
7.4
2.4
9.8
10
10
10
6
10
7.5
5
5
10
10
3
–
24
15, plus 9 if no break
6
5 11.5, plus 11.5 if no break
–
10.4
12, plus 10 if no break
6
4
–
3.5
5
5
–
7, plus 6 if no break
11
6
5
6, plus 5 if no break
7
92
Derwent London plc / Report and Accounts 2022
PROPERTY REVIEW continued
LEASING, ASSET MANAGEMENT & PROPERTY MANAGEMENT continued
Principal lettings in 2023 YTD
Property
Tenant
Area
sq ft
Total
annual rent
£m
Rent
£ psf
Lease term
Years
25 Baker Street W1 PIMCO
The Featherstone
Building EC1
Tea Building E1
Other
2023 YTD
Buro Happold
Jones Knowles Ritchie
106,100
103.40
31,100
8,100
17,300
162,600
74.40
60.00
51.10
90.10
11.0
2.3
0.5
0.9
14.7
15
15
10
–
–
1 There is an additional break at year 5 on level eight subject to a 12-month rent penalty payable by the tenant.
ASSET MANAGEMENT
£29.6m
of transactions on average 5.3% above ERV
Lease break
Year
–
Rent-free equivalent
Months
37
101 24, plus 12 if no break
5 12, plus 12 if no break
–
–
By March 2022, most Covid-19 restrictions in the UK had
been lifted. As office occupancy levels have increased,
businesses have re-engaged with their long-term real
estate strategy and, as a result, we are seeing growing
demand for long-term solutions from the short-term
extensions and regears experienced through the pandemic.
We continually review our asset strategies as occupier
requirements evolve and align expiry profiles to facilitate
the refresh, upgrade and repositioning of our portfolio.
At the start of 2022, 9% of passing rent was subject to
break or expiry in the year. After adjusting for disposals and
space taken back for schemes, 79% of income exposed
to breaks and expiries were retained or re-let by year end.
This compares to our 10-year average retention/re-let rate
of 85%.
10% of passing rent is subject to break or expiry in 2023, a
reduction from the 15% potentially at risk six months earlier.
Rent reviews were settled 6.2% above December 2021 ERV
and delivered a 10.1% uplift over the previous income. The
majority of this activity was at White Collar Factory EC1
where rents increased between 14% and 16%.
Renewals were completed 12.5% above the previous rent
and 9.3% above December 2021 ERV. The main lease
renewal was the extension of Morningstar’s lease at
1 Oliver’s Yard EC1 to June 2027. They have agreed a rental
uplift reflecting an 18.8% premium to the previous rent.
Regears, excluding the impact of a landlord development
facilitation break clause, completed 0.2% above previous rent
and 1.6% above December 2021 ERV. The main regear was a
restructuring of Burberry’s break clause at 1 Page Street SW1.
Asset management activity 2022
Rent reviews
Lease renewals
Lease regears1
Total
1 Excludes single development-linked regear in Q1.
Number
Area
’000 sq ft
Previous rent
£m pa
New rent
£m pa
Uplift
%
New rent vs
Dec 21 ERV %
20
29
13
62
215.7
112.2
189.0
516.9
12.6
5.5
9.5
27.6
13.8
6.3
9.5
29.6
10.1
12.5
0.2
7.2
6.2
9.3
1.6
5.3
Strategic report
93
Members of the Leasing and Marketing team
Members of the Asset and Property Management teams
VACANCY
Retaining occupiers – lease expiry and break analysis
6.4%
at year end, 5.0% proforma for post-year end lettings
The portfolio EPRA vacancy rate increased to 6.4% at
31 December 2022 from 1.6% at the start of the year. The
increase primarily reflects development completions at
The Featherstone Building EC1 and Soho Place W1 as well
as refurbishment completions at Tea Building E1. Together
these three projects contributed 58% to the year end
vacancy. Letting activity since the start of 2023 would
reduce the EPRA vacancy to 5.0% on a proforma basis.
Percentage of income
100
90
80
70
60
50
40
30
20
10
0
12
14
74
11
11
8
27
10
44
26
35
10
14
10
7
83
76
63
63
57
45
13
22
65
23
21
20
30
59
47
3
1
0
2
4
1
0
2
5
1
0
2
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
1
2
0
2
2
2
0
2
Retained
Re-let
Vacant
Average retained/re-let (85%)
Ten-year vacancy trend
Vacancy rate (%)
Average unexpired lease length
Years
10
9
8
7
6
5
4
3
2
1
0
3
1
0
2
4
1
0
2
5
1
0
2
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
1
2
0
2
2
2
0
2
Derwent London (by rental value)
CBRE central London offices (by floorspace)
CBRE West End offices (floorspace)
12
10
8
6
4
2
0
7
0
0
2
8
0
0
2
9
0
0
2
0
1
0
2
1
1
0
2
2
1
0
2
3
1
0
2
4
1
0
2
5
1
0
2
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
1
2
0
2
2
2
0
2
West End
City Borders
Central London
94
Derwent London plc / Report and Accounts 2022
PROPERTY REVIEW continued
LEASING, ASSET MANAGEMENT & PROPERTY MANAGEMENT continued
Occupier survey
PROPERTY MANAGEMENT
In January 2023, we carried out an occupier survey.
41 tenants contributed with a combined ERV of £103m,
equivalent to 50% of ERV (excluding projects and
contracted uplifts). When asked whether any change in
the organisation’s real estate footprint was anticipated
over the next five years, 40% of respondents (by ERV) said
they expect either a small or significant increase and 34%
expect no change. Our occupier surveys (August 2020,
January 2021 and July 2021) show a clear upward trend
since the pandemic in the number of occupiers expecting
their real estate footprint to increase or remain the same.
Rent collection – At pre-pandemic levels
As outlined with our H1 2022 results, rent collection
continues to match pre-pandemic levels with 98% of the
December 2022 quarter rent collected. Similarly, service
charge collection remains strong at 96%.
As occupation continued to rise through 2022, the
Property Management team further engaged with our
customers hosting a series of events including workshops
and competitions, alongside initiatives to support
local communities.
Work has continued to support the Group’s journey to
net zero carbon with the development of a portfolio-
wide metering strategy to ensure more robust data
capture, supporting our energy reduction programme and
facilitating roll out of our Intelligent Building infrastructure.
The team also implemented a number of practical
measures, including a reduction in temperature set points,
smart lighting initiatives and adjustments to plant running
times, helping exceed our energy reduction targets.
The Featherstone Building EC1
Strategic report
95
DEVELOPMENT &
REFURBISHMENT
NIGEL GEORGE
Executive Director
PAUL WILLIAMS
Chief Executive
2022 PROJECT COMPLETIONS
450,500 sq ft
at an average 27% profit on cost at completion
In 2022 we completed three major projects:
• Soho Place W1 (285,000 sq ft development)
At 1 Soho Place, the offices were fully pre-let to
G-Research and Apollo Group at an average rent of
£93 psf and 15-year WAULT. The retail is available to
let but interest has strengthened following the opening
of the Elizabeth line. At 2 & 4 Soho Place, the theatre
and offices were pre-let to Nimax Theatres and Esselco
respectively and were sold in 2022. The profit on cost at
practical completion was 25% and the embodied carbon
intensity of 1 Soho Place was 550 kgCO2e/sqm.
• The Featherstone Building EC1
(127,300 sq ft development)
After lettings to Dept Agency and Marshmallow, and
following the lettings to Buro Happold and the 2,350
sq ft retail unit in early 2023, the building is 59% let by
floorspace. We are encouraged by the level of interest
in the remaining 53,000 sq ft of available space. The
profit on cost at practical completion was 30% and the
embodied carbon intensity was 539 kgCO2e/sqm.
• Francis House SW1 (38,200 sq ft refurbishment)
Pre-let to Edelman at an average rent of £76 psf on a
15-year lease with a break at year 10. The profit on cost
at completion was 31%.
MAJOR ON-SITE PROJECTS
435,000 sq ft
with an estimated 11% profit on cost
At the end of 2022, we were on site at two major projects
totalling 435,000 sq ft which we currently expect will
deliver an 11% development profit and 5.4% yield on cost
(excluding the pre-let to PIMCO at 25 Baker Street).
• 25 Baker Street W1 (298,000 sq ft)
This mixed-use project comprises 218,000 sq ft of offices,
plus residential and retail. As part of the leasehold regear
to a new 129-year headlease, we have agreed to sell the
courtyard retail and the smaller office block on Gloucester
Place to the freeholder, The Portman Estate. The impressive
landscaped retail courtyard forms an important part of
this design-led destination in the heart of Marylebone.
Demolition has completed and sub and super-structure
works are progressing well. 97% of construction costs of
the office element have been fixed (80% of total). Following
the post-year end pre-let to PIMCO, the commercial
element of the scheme is 56% pre-let/sold. The mid
stage 5 embodied carbon estimate is c.600 kgCO2e/sqm.
• Network W1 (137,000 sq ft)
Demolition works at this office-led scheme, adjacent
to 80 Charlotte Street W1 and DL/78.Fitzrovia, have
completed and negotiations are at an advanced stage
with our preferred main build contractor. Supply in
Fitzrovia is highly constrained and we are encouraged by
the level of early occupier interest. The stage 4 design
embodied carbon estimate is c.530 kgCO2e/sqm.
25 Baker Street W1 site
96
Derwent London plc / Report and Accounts 2022
PROPERTY REVIEW continued
DEVELOPMENT & REFURBISHMENT continued
FUTURE DEVELOPMENT PIPELINE
4 schemes
totalling c.1.3m sq ft
There are four key schemes that comprise our medium
and longer term development pipeline. Our medium-term
pipeline could deliver c.390,000 sq ft (at 100%) of high
quality office-led space. At 50 Baker Street W1 (c.240,000 sq
ft at 100%), which we own in a 50:50 joint venture with Lazari
Investments, we have submitted a planning application for
a project approximately double the existing floor area. This
leasehold property is on The Portman Estate and includes
another building in their ownership. A regear of the various
interests would be required to implement any scheme. At
Holden House W1 (c.150,000 sq ft), we are working on a
revised planning application with new architects which will
have a higher office weighting and stronger sustainability
credentials than the existing planning consent.
Over the longer term, we continue to progress plans for
Old Street Quarter EC1. Our current appraisals suggest the
2.5-acre island site has potential for a 750,000+ sq ft mixed
commercial use campus targeted at different occupier
sectors, including Life Sciences among others. We have
had constructive engagement with the London Borough
of Islington.
Our acquisition of the site is expected to complete from
2027, conditional on delivery of the new eye hospital at
St Pancras and subsequent vacant possession of the site.
At 230 Blackfriars Road SE1, our current plans assume a
2030 block date. Our early appraisals show the site has
capacity for a 200,000+ sq ft office-led development,
more than three times the existing floor area.
Refurbishments – an increasing capex component
Refurbishment projects will comprise an increasing
proportion of annual capital expenditure over the next
few years as we continue to upgrade the portfolio to meet
ever higher occupier requirements. These projects provide
the opportunity to enhance the ERV through improving
the amenity offer and overall quality. Smaller units will be
appraised for our ‘Furnished + Flexible’ product. Larger
refurbishments likely to commence over the near to
medium term include 1-2 Stephen Street W1, 20 Farringdon
Road EC1, 1 Oliver’s Yard EC1 and Greencoat & Gordon
House SW1. The floor area of these four buildings
is 756,800 sq ft.
Major on-site development pipeline
Project
Total
25 Baker Street W1
Network W1
Completion
Office (sq ft)
Residential (sq ft)
Retail (sq ft)
Total area (sq ft)
Est. future capex1 (£m)
Total cost2 (£m)
ERV (c.£ psf)
ERV (£m pa)
Pre-let/sold area (sq ft)
Embodied carbon intensity (kgCO2e/sqm)5
Target BREEAM rating
Target NABERS rating
Green Finance
1 As at 31 December 2022.
350,000
52,000
33,000
435,000
324
708
–
30.3
31,000
H1 2025
218,000
52,000
28,000
298,000
217
463
90
18.43
31,0004
c.600
Outstanding
4 Star or above
Elected
H2 2025
132,000
–
5,000
137,000
107
245
87.5
11.9
–
c.530
Outstanding
4 Star or above
Elect in 2023 (target)
2 Comprising book value at commencement, capex, fees and notional interest on land, voids and other costs. 25 Baker Street W1 includes a profit share to freeholder
The Portman Estate.
3 Long leasehold, net of 2.5% ground rent.
4 19,000 sq ft courtyard retail and 12,000 sq ft Gloucester Place offices.
5 Embodied carbon intensity estimate as at stage 4 or 5.
Strategic report
97
Members of the Development and Sustainability teams
Project summary – current projects
Property
On-site major projects
25 Baker Street W1
Network W1
Other – 2022 completions
Planning and design
Other
Total
Capitalised interest
Total including interest
Current net
income
£m pa
Pre-scheme
area
'000 sq ft
Proposed
area
'000 sq ft
2023
capex
£m
2024
capex
£m
2025+
capex
£m
Total capex
to complete
£m
Delivery
Current
office
date
c.ERV psf
H1 2025
H2 2025
£90.00
£87.50
–
–
–
–
–
–
–
–
–
143
70
–
213
–
–
213
–
213
298
137
–
435
–
–
435
–
435
104
35
6
145
10
45
200
7
207
82
52
–
134
3
31
168
13
181
31
20
–
51
–
24
75
4
79
2171
107
6
330
132
1003
443
24
467
1
2
3
Includes profit share payments and expenditure on trading property/stock.
Includes 50% share of 50 Baker Street W1 JV scheme and Old Street Quarter EC1.
Includes EPC upgrades and £15m capex for Strathkelvin Retail Park (under appraisal). Excludes major refurbishments not yet committed.
Project summary – future projects
Property
Consented
Holden House W1
Under appraisal1
Strathkelvin Retail Park2
50 Baker Street W1 JV2
Greencoat & Gordon House SW1
Blue Star House SW9
Consented and under appraisal
Future Appraisal3
Current Major Projects
Pipeline
Current net
income
£m pa
Pre-scheme
area
'000 sq ft
Proposed
area
'000 sq ft
Earliest
possession
year
4.2
4.2
0.9
2.6
5.6
0.7
9.8
14.0
51.6
–
65.6
91
91
108
61
138
53
360
451
2025
2023
2024
2025
2025
150
150
126
120
138
110
494
644
1,460
213
2,124
1,460
435
2,539
1 Areas proposed are estimated from initial studies.
2 Planning application submitted.
3
Includes refurbishment opportunities at 1 Oliver’s Yard EC1, 20 Farringdon Road EC1 and 1-2 Stephen Street W1.
98
Derwent London plc / Report and Accounts 2022
FINANCE
REVIEW
Derwent London’s capital allocation and funding strategies through the
last few years ensured that the Group ended 2022 with low leverage
combined with a long weighted average unexpired lease and debt profile.
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’
remuneration. Full reconciliations
between IFRS and EPRA figures
are provided in note 40 and all
the EPRA definitions are included
on pages 311 and 312. The main
financial EPRA measures have also
been audited this year.
Dec
2022
£4,075.5m
3,632p
3,768p
£5,321.8m
£248.8m
£188.5m
(£279.5m)
106.62p
78.50p
23.9%
30.8%
423%
Dec
2021
Restated
£4,441.8m
3,959p
3,884p
£5,646.3m
£241.3m
£177.9m
£252.5m
108.53p
76.50p
22.3%
28.2%
463%
DAMIAN WISNIEWSKI
Chief Financial Officer
Financial highlights
Total net assets
EPRA NTA per share
EPRA NDV per share
Property portfolio at fair value
Gross property and other income
Net rental income
IFRS (loss)/profit before tax
EPRA earnings per share (EPS)
Interim and final dividend per share
EPRA LTV ratio
NAV gearing
Net interest cover ratio
Strategic report
99
We have continued to balance value creation with resilient
earnings and dividend growth while delivering a high
quality product which appeals to today’s occupier with its
combination of location, design, amenity, flexibility in use
and customer focus.
The importance of a strong balance sheet and good long-term
planning became very evident through 2022 as the UK, like
most other major economies, experienced increasing costs
and a widespread upward yield shift. Covid-19’s impact, so
strongly felt in 2020 and to a lesser extent in 2021, reduced
further in 2022 but we then saw the major conflict in Ukraine,
increases to energy and food prices and the emergence
of other global tensions. These acted as a catalyst for the
inflation outlook to change significantly and caused capital
markets to re-look at interest rates and the pricing of credit
risk, particularly during the period of higher UK volatility in late
2022. This has also not been an easy time for businesses and
key public service providers in the UK who face staff shortages
and cost pressures while dealing with regulatory changes and
the long-term climate change and biodiversity emergencies.
Derwent London’s product differentiates us in a central
London office market where a flight towards quality combines
with relatively low relevant supply. This bifurcation looks
set to continue and we have the balance sheet capacity
and business model to deliver our major developments
while searching for new value-add opportunities. We also
expect to further upgrade amenities and energy efficiency
credentials within some of our more mature properties over
the next few years to help satisfy this occupier demand.
Financial overview
As noted in the Property Review, the Group’s property
valuation at 31 December 2022 was impacted by the
significant upward yield shift seen in H2 giving rise to an
8.2% decline in the Group’s total net assets over the year.
This took our total return over the year to -6.3% compared
to the +5.8% seen in 2021 with EPRA net tangible assets
(NTA) down 8.3% over 2022 to 3,632p per share.
EPRA Net Disposal Value (NDV), which takes account of
the £166m positive fair value movement on fixed rate debt,
was £4.24bn, equivalent to 3,768p per share. This is only
3.0% lower than the 3,884p per share recorded as at
31 December 2021.
EPRA NTA movement
Opening EPRA NTA
Revaluation movement
Profit on disposals
EPRA earnings
Ordinary dividends paid
Interest rate swap
termination costs
Share of joint venture
revaluation movement
Other
Closing EPRA NTA
2022
p
3,959
(373)
23
107
(78)
–
(8)
2
3,632
2021
Restated
p
3,812
119
9
109
(75)
(3)
(12)
–
3,959
We have continued to invest in the portfolio with acquisitions
and project spend totalling £258m but property disposal
proceeds in 2022 of £210m meant that our debt levels
were almost unchanged compared to December 2021. Our
gearing remains low, all of our year-end debt was at fixed
rates and our weighted average debt maturity was 6.2 years.
Overall estimated rental values rose by 1.3% in 2022 with the
highest quality buildings outperforming. Vacancy levels were
also higher in 2022 than in recent years, partly the result of
development completions. However, with the exception of
the property revaluation movement, our income statement
remained robust with EPRA earnings only marginally down
on 2021 at £119.7m or 106.6p per share. If the impact of
non-recurring surrender and rights-of-light premiums is
ignored, EPRA earnings per share were 1.9% higher than
2021 on an underlying basis.
Following new guidance issued by the IFRS Interpretations
Committee in October 2022, we have restated the results for
2020 and 2021 to reflect the writing off of Covid-19 concessions
such as rent forgiveness that related to historic receivable
balances; our previous accounting policy was to spread the
concession over the remaining life of the relevant lease. Where
related to a future lease obligation, the concession continues to
be amortised over the remaining life of the lease. None of the
adjustments are material but the re-presented figures follow the
new guidance and ensure proper comparability between years.
We have also grossed up cash balances within the balance
sheet to include cash held in tenant deposit accounts. These
cash balances are restricted and not generally available to
the Group but, as they are held within accounts which we
control, have been grossed up and the amounts re-presented.
‘Cash held in restricted accounts’ also now includes cash
within service charge bank accounts which was previously
disclosed within ‘trade and other receivables’. This change of
treatment follows guidance from IFRIC issued in March 2022.
EPRA net tangible assets per share
Pence
4,250
4,000
3,959
23
(78)
107
3,750
3,500
3,250
3,000
2,750
2,500
(373)
(8)
2
-8.3%
3,632
1
2
0
2
c
e
D
1
3
A
R
P
E
i
s
g
n
n
r
a
e
n
o
t
fi
o
r
P
l
a
s
o
p
s
i
d
d
i
a
p
s
d
n
e
d
i
v
i
D
n
o
i
t
a
u
l
a
v
e
R
l
s
u
p
r
u
s
/
)
t
i
c
fi
e
d
(
n
o
i
t
a
u
l
a
v
e
R
s
V
J
n
i
t
i
c
fi
e
d
r
e
h
t
O
2
2
0
2
c
e
D
1
3
2021:
3,812
109
9
(75)
119
(12)
(3)
3,959
100
Derwent London plc / Report and Accounts 2022
FINANCE REVIEW continued
Property portfolio and balance sheet
Our wholly-owned property portfolio was externally valued at £5.3bn as at 31 December 2022, allocated across the balance
sheet as follows:
Property portfolio
Investment property
Non-current assets held for sale
Owner-occupied property
Trading property
Property carrying value
Accrued income (non-current)
Accrued income (current)
Unamortised direct letting costs
Grossing up of headlease liabilities
Profit share due to TfL
Revaluation of trading property/other
Fair value of property portfolio
Fair value of properties held in joint venture (50%)
We continued to recycle capital within our property
holdings in 2022 with acquisitions totalling £133.0m,
capital expenditure of £114.8m, capitalised interest
of £7.0m and disposals with carrying values totalling
£182.1m. Interest capitalised in 2022 was considerably
lower than the £12.0m recognised in 2021 as the prior
year included two major projects close to completion with
correspondingly high cumulative development expenditure
while the current year includes two relatively new schemes
at 25 Baker Street W1 and Network W1.
Disposals included Bush House WC2, sold for £85m
(gross) in Q3 2022. At the beginning of 2022, we had
expected to carry out a comprehensive refurbishment of
this property. Selling it instead, for a price that captured
most of our expected development profit, substantially
reduced our capital expenditure requirement and helped
keep the Group’s gearing at lower levels than those
projected at the beginning of 2022.
Property, plant and equipment of £54.3m (2021: £54.0m)
includes the £50.0m owner-occupied property at 25 Savile
Row W1 and £4.3m of leasehold improvements, furniture,
equipment and artwork.
Investments of £43.9m (2021: £51.1m) are made up
almost entirely of the carrying value of our 50% holding
at 50 Baker Street W1, stated after a revaluation deficit of
£9.3m in the year and retained profits for 2022 of £2.0m.
The properties classified within ‘non-current assets held
for sale’ totalling £54.2m at 31 December 2022 were
19 Charterhouse Street EC1, the sale of which completed
in January 2023, and a small property at 13 Charlotte
Mews W1.
Dec 22
£m
5,002.0
54.2
50.0
39.4
5,145.6
165.2
26.1
13.8
(34.2)
–
5.3
5,321.8
42.4
Dec 21
Restated
£m
5,361.2
102.8
49.3
32.2
5,545.5
147.0
22.8
12.3
(70.4)
(14.8)
3.9
5,646.3
50.0
The £39.4m (2021: £32.2m) trading property at year
end comprised residential units under construction at
25 Baker Street for delivery in 2025 and Welby House
SW1, originally acquired as a potential site for affordable
housing and subject to a write-down in value of £0.2m
in 2022. Additional costs have also been incurred within
‘trading stock’; this is distinct from trading property as we
do not own an interest in the property itself but have an
agreement in place to deliver certain retail elements of the
25 Baker Street scheme upon completion to the freeholder,
The Portman Estate, at an agreed price. Completion of this
element of the scheme is expected in 2025.
Other receivables treated as non-current increased to
£188.1m from £159.3m in 2021. This includes £9.1m (2021:
£nil) of design and planning application costs relating to
the Old Street Quarter EC1 scheme which are recoverable
up to a capped amount of £13.0m in the unlikely event
that the vendor is unable to deliver vacant possession of
the site. Other receivables also include accrued income
from the ‘straight-lining’ of rental income under IFRS 16
to spread the effect of incentives and fixed uplifts over
the lease terms. The non-current element has increased
to £165.2m from a restated £147.0m in 2021. In addition,
£26.1m (restated 2021: £22.8m) is included under current
asset receivables as this accrued income is due to unwind
within a year. Unamortised letting and legal fees, which
are also included in receivables, increased to £13.8m
(2021: £12.1m) and are amortised over their respective
remaining lease terms.
Strategic report
101
Property income and earnings
Gross property and other income increased to £248.8m in
2022 from a restated £241.3m in the year to 31 December
2021. Gross rental income was up 6.0% to £207.0m from
£195.3m, largely due to new lettings at the two large
developments completed in the first half of 2022. Soho
Place W1 added £10.8m of income in 2022 and The
Featherstone Building EC1 £1.0m. Other lettings across the
portfolio provided a further £9.3m. We were very active
with acquisitions and disposals through 2021 and 2022
and the major acquisition at 250 Euston Road W1 in Q4
2021 increased gross rents by £3.9m compared to the prior
year, 230 Blackfriars SE1 added £1.8m and Holford Works
WC1 a further £0.5m. The disposals were at a lower overall
value but a higher yield; rental income reduced by £2.3m
year-on-year due to the sale of Angel Square EC1, £1.5m at
New River Yard EC1 and other disposals an additional £0.7m.
Lease surrender and rights-of-light premiums were
unusually high in 2021 at £5.6m but fell back in 2022 to a
more typical total of £1.4m. Property trading activity has
decreased now that all the Asta House W1 residential units
have been sold, the last one completing early in 2022 for
£1.6m. In 2021, the corresponding sales turnover was £6.7m
and, in 2020, was as high as £32.3m. The next apartments
for sale at our 25 Baker Street scheme are due to complete
in 2025 so trading property disposal proceeds are likely to
be very low for the next two years.
Service charges and energy costs have become a much
more significant issue for many of our tenants in 2022 with
energy costs, in particular, rising to unprecedented levels.
Our ability to manage energy tariffs has been impacted
too by our commitment to green energy. For example, we
were not able to move to ‘out of contract’ energy tariffs
when rates spiked in Q4 2022 as those do not support
renewable electricity.
Movement in gross rental income
£m
250
200
195.31
13.7
7.4
(11.1)
1.7
207.0
150
100
50
0
1
2
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e
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1
3
1 2021 figures have been restated – see note 2 on pages 247 to 250.
Typical cost per kWh for renewable electricity on six-
monthly contracts increased from around 31p at the
beginning of 2022 to about 108p at the end of the year but
is now falling back to below 40p. Gas has seen a similar
story, rates moving from about 7p to 25p and now back to
around 12p per kWh. We very much hope to be able to pass
on these lower costs to our tenants as soon as possible
and have offered some help with the smoothing out of this
price volatility where we can. One positive outcome is that
there is now even more focus on reducing energy use with
landlord and tenant seeking ways to co-operate further.
With our higher average vacancy rate through much of
2022, property costs borne by us have increased too,
irrecoverable property expenditure increasing from £11.8m
in 2021 to £14.4m in 2022. In addition, irrecoverable service
charges, due to units being vacant or where the tenant has
negotiated a capped service charge, increased by 50% to
£5.1m in 2022 from £3.4m.
Members of the Finance team
102
Derwent London plc / Report and Accounts 2022
FINANCE REVIEW continued
Salaries have risen both for our own staff and for those of
our many professional advisers and consultants. However,
increased headcount and salaries were offset by lower
staff bonus levels and reduced Directors’ remuneration.
As a result, administrative expenses were 1.9% lower than
the previous year at £36.4m compared with £37.1m. As in
previous years, we do not capitalise any of our overheads.
Lower impairment and administrative expenses have
seen our EPRA cost ratio move back down again in 2022.
Including direct vacancy costs, it fell to 23.3% from 24.9%
in 2021.
As noted above, property valuations fell in the second
half of 2022 with the main Group revaluation deficit being
£422.1m after accounting adjustments (2021: surplus of
£131.1m). Our share of the property revaluation deficit at 50
Baker Street was a further £9.3m (2021: deficit of £10.2m)
but our head office at Savile Row showed a valuation
rise of £0.7m, shown within the Group Statement of
Comprehensive Income rather than the Income Statement.
The profit on disposal of investment properties increased
to £25.6m in 2022 from £10.5m in 2021. Most of this came
from the sale of Bush House for proceeds of £85m in Q3
2022. Further proceeds of £55.8m was due to the disposal
of the Group’s leasehold interest in 2 & 4 Soho Place W1
and £67.2m from New River Yard EC1 in June 2022, both of
these two properties having been disclosed as ‘assets held
for sale’ in the December 2021 balance sheet.
Net finance costs increased to £39.4m from £28.1m in 2021.
This was due to higher average borrowings through 2022
but was also affected by capitalised interest falling from
£12.0m in 2021 to £7.0m in 2022.
Interest rate increases gave rise to a further £5.8m fair
value gain relating to our remaining interest rate swap.
Our joint venture with Lazari Investments relating to 50
Baker Street W1 properties has produced a loss for the
year of £7.3m, impacted by the £9.3m revaluation deficit
noted above.
The resulting IFRS loss for the year before tax was £279.5m
compared to a profit of £252.5m in the prior year. IFRS
earnings per share were -249.84p (2021: 224.99p).
A table providing a reconciliation of the IFRS results to EPRA
earnings per share is included in note 40 on page 293.
As noted above, we have revised the accounting treatment
for rent concessions granted in relation to historic
amounts due and these have now been written off in the
appropriate period (mainly in 2020 and 2021) where they
were previously being spread over their remaining lease
terms. The adjustments have been shown as a prior year
adjustment and, while none of the amounts is material,
these have been adjusted so that there is meaningful
comparison year-on-year.
We carry out full impairment testing of receivable balances
using the expected credit-loss model in accordance with
IFRS 9. This applies to trade receivables as well as the
balances created by the spreading of lease incentives, now
slightly reduced as a result of the change in accounting
policy. These have been carried out for each of our 64
largest tenants and for others where we believe the risk
is elevated, with the remaining balances considered
according to their sector. With improved conditions
affecting many of our tenants, particularly the smaller ones,
and partly because the more significant receivable risks
have now been written off or provided for, we saw a net
reversal in 2022 with a credit to the income statement of
£1.0m compared to restated charges of £2.2m in 2021 and
£16.1m in 2020.
As a result of these factors, net rental income increased
from a restated £177.9m in 2021 to £188.5m in 2022.
Including surrender premiums, dilapidation receipts, other
property income and management fees, net property
and other income increased 4.0% to £194.6m from
£187.2m in 2021.
EPRA earnings
£m
250
207.0
200
5.6
(19.0)
(36.4)
(39.4)
150
100
50
0
1.0
1.6
(0.7)
119.7
e
m
o
c
n
i
l
a
t
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r
s
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&
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m
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r
a
e
A
R
P
E
2021:
195.31
9.1
(14.3)
(37.1)
(28.1)
(2.2)1
(0.2)
(0.8)
121.71
1 2021 figures have been restated – see note 2 on pages 247 to 250.
Strategic report
103
EPRA like-for-like rental income
EPRA like-for-like (LFL) gross rental income was up 1.1% over the year, partly because the higher vacancy rate in 2022 came
mainly from recently completed developments which fall outside our EPRA LFL portfolio. EPRA LFL net rental income was
up by 1.1% over the year and EPRA LFL net property income, which takes account of the unusually high surrender premiums
received in 2021, was down by 1.0%.
EPRA like-for-like rental income
Increase/(decrease) based on gross rental income
Increase based on net rental income
(Decrease)/increase based on net property income
Internal controls, assurance and the regulatory
environment
We continue to focus on ensuring our internal controls
are robust and that we have a comprehensive approach to
assurance across our business, noting the particular interest
in this area from external stakeholders and regulators.
While the exact timing and scope of the forthcoming
BEIS reforms are yet to be finalised, we have commenced
a project to map our full assurance environment and
to undertake a risk-based project to enhance the
documentation and evidencing of internal controls.
Independent internal audits continue to have a beneficial
impact on our control environment and we have also
summarised our approach to obtaining other forms of
external assurance across the business. Our principal
sources of independent external assurance remain
consistent with last year and include the annual statutory
audit, internal audits carried out upon key risk areas
throughout the year, service charge audits and a twice-
yearly external valuation. In line with last year, we have
engaged with an independent external assurance provider
in relation to selected sustainability, health and safety and
green finance disclosures.
We are committed to ensuring high quality reporting that
stands up to scrutiny, both from within the business via
robust internal control mechanisms and from independent
review. Activity in this area will be scaled up in 2023 to
further strengthen the internal control environment and
ensure compliance with the new requirements as measures
and mechanisms for implementation are finalised.
2022
%
1.1
1.1
(1.0)
2021
Restated
%
(3.6)
3.4
6.6
Taxation
The corporation tax charge for the year ended 31 December
2022 was £0.9m. Almost all of our portfolio is within the
REIT regime but this charge relates to non-REIT activity,
mainly income arising from certain property development
and trading operations.
The movement in deferred tax for the year was a charge of
£0.9m, (2021: £0.8m credit) of which £0.1m was expensed
through the income statement. In addition, £0.6m was
charged through equity in relation to future tax deductions
for equity-settled share-based payments. A further £0.2m
was charged through ‘other comprehensive income’ in
relation to the owner-occupied property at Savile Row.
As well as other taxation paid during the year, in
accordance with our status as a REIT, £9.0m of tax was
paid to HMRC relating to tax withheld from shareholders
on property income distributions (PIDs).
Derwent London’s principles of good governance extend
to a responsible approach to tax. Our statement of tax
principles is available on our website www.derwentlondon.
com/investors/governance/tax-principles and is approved
by the Board in line with the Group’s long-term values,
culture and strategy. We have also provided more
information on our tax governance and risk management
on pages 67 and 115, respectively.
104
Derwent London plc / Report and Accounts 2022
FINANCE REVIEW continued
Borrowings, net debt and cash flow
Debt and financing
Rental income received from tenants increased to £194m
in 2022 from £187m in 2021. However, cash paid out on
property costs, administration and interest payments
increased by £18.4m over the 2021 equivalents. In terms
of capital movements, outflows of £258m for project
expenditure and additions were largely offset by £210m of
property disposal proceeds. As a result, Group borrowings
were almost unchanged at 31 December 2022 compared to
a year earlier.
Group borrowings at both year ends were £1.25bn,
the 2022 figure being about £300,000 less than 2021.
Leasehold liabilities reduced in 2022 with the payment
to TfL but long-term leasehold liabilities also increased to
£34.5m after the receipt of a premium from an intermediate
leaseholder. The net impact is that gross debt has fallen
from £1.32bn in December 2021 to £1.28bn in December
2022. After adjusting for unrestricted cash and derivatives,
net debt increased marginally over the year to £1.26bn.
On the new EPRA basis, our loan-to-value ratio increased
a little to 23.9% from 22.3% in December 2021, the main
reason for the increase being the property valuation
declines in 2022. Available cash and undrawn facilities
remained significant at £577m as at 31 December 2022
(£608m at 31 December 2021). Interest cover remained
strong too at 4.2 times in 2022 (2021: 4.6 times). Our main
debt covenant continues to be 1.45 times.
£m
700
450
Maturity profile of debt facilities
as at 31 December 2022
0
100
200
300
400
500
600
2023
2024
83
2025
2026
175
230
2027
100
2028
30
2029
118
2030
2031
2034
127
Fixed rate bonds and loans
Headroom
475
Conditions in the debt markets deteriorated markedly in
the second half of 2022 with central banks raising rates in
an effort to deal with rapid inflation increases. With rates at
that time expected to rise further and stay at these much
higher levels for longer, market rates across the curve
increased to levels not seen for many years. More recently,
we have seen markets calm down significantly but are still
some way ahead of where they were a year ago.
The UK 5-year swap rate peaked at around 5.4% in
September 2022 but has since fallen back to around 4%.
Similarly, the 10-year gilt increased to 4.6% at its peak but
has since moved back to about 3.6%.
At the same time as rates were rising sharply, there was a
sudden and significant increase in the credit spread that
lenders required to accept the risk associated with typical
corporate borrowers over and above the so-called ‘risk-free’
rate. Again, these spreads have been closing significantly
in 2023 but remain elevated compared to more typical
levels of recent years.
In these turbulent markets, we were helped by our high
level of refinancing activity in previous years. Our only debt
transaction in 2022 was the second one-year extension
of the unsecured £100m revolving credit facility provided
by Wells Fargo, taking its maturity to November 2027.
At a time when loan extensions of this sort are not taken
for granted, this was another indication of the strength
of our banking relationships and we are grateful for the
continuing strong support we have received from Wells
Fargo and all of our lenders throughout 2022.
We have one remaining interest rate swap contract,
providing a fixed rate of 1.36% to April 2025 on £75m of
borrowings. As we had no floating rate borrowings at the
balance sheet date, this contract has been deferred to
start post the year end. With rates having risen so much in
2022, the fair value of this swap increased by £5.8m during
the year.
Our next refinancing exposure arises in October 2024 on
the £83m secured debt currently attracting a coupon of
3.99%. We will look to refinance this in due course and
current expectations are that the cost of this will be a little
higher than the current level.
At the year end, the Group’s weighted average interest rate
on a cash basis was 3.14%, the same as a year earlier, and
3.26% (31 December 2021: 3.27%) on an IFRS basis which
adjusts for the convertible and green bonds. These figures
indicate the advantage of having all of our debt at fixed
rates as at the year end. The weighted average maturity
of our borrowings was 6.2 years at 31 December 2022
compared to 7.2 years at 31 December 2021.
Strategic report
105
Debt facilities and reconciliation to borrowings and net debt at 31 December 2022
Unsecured convertible bonds
Secured bonds
Unsecured green bonds
Unsecured private placement notes
Secured loan
Other loan
Non-bank debt
Club revolving credit – unsecured
Bilateral revolving credit – unsecured
Committed bank facilities
Debt facilities
Acquired fair value of secured bonds less amortisation
Unamortised discount on unsecured green bonds
Equity adjustment to convertible bonds less amortisation
Unamortised issue and arrangement costs
Borrowings
Leasehold liabilities
Cash at bank excluding restricted cash
Net debt
Debt: key stats
Hedging profile (%)
Fixed
Swaps
Percentage of debt that is unsecured (%)
Percentage of non-bank debt (%)
Weighted average interest rate – cash basis (%)
Weighted average interest rate – IFRS basis (%)
Weighted average maturity of facilities (years)
Weighted average maturity of borrowings (years)
Undrawn facilities and unrestricted cash (£m)
Uncharged properties (£m)
Dividend
We continue to operate a progressive but well covered
dividend policy, mindful also of our pension and other
stakeholder obligations and responsibilities. The Board
is recommending a 1.0p per share or 1.9% increase in the
final dividend to 54.5p. It will be paid in June 2023 with
38.5p as a PID and the balance of 16.0p as a conventional
dividend. The Company’s ISIN reference is GB0002652740.
Undrawn
£m
Total
£m
Maturity
–
–
–
–
–
–
–
450.0
100.0
550.0
550.0
2025
175.0
2026
175.0
350.0
2031
455.0 2026 – 2034
2024
n/a
2026
2027
83.0
19.7
1,257.7
450.0
100.0
550.0
1,807.7
Drawn
£m
175.0
175.0
350.0
455.0
83.0
19.7
1,257.7
–
–
–
1,257.7
6.5
(1.7)
(3.4)
(10.0)
1,249.1
35.0
(26.9)
1,257.2
2022
2021
100
–
100
79
100
3.14
3.26
5.5
6.2
577
4,600
99
–
99
79
99
3.14
3.27
6.5
7.2
608
4,769
After adding in the interim 2022 dividend, the total
dividend for the year amounts to 78.5p, 2.6% higher than
for 2021. Dividend cover remains sound with dividends
paid and declared in relation to 2022 earnings 1.36 times
covered by EPRA earnings.
106
Derwent London plc / Report and Accounts 2022
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 W11
Expected
completion date
Category for
eligibility
Completed in 2020
Completed in 2022
Completed in 2022
2025
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 (excludes
Site B – Theatre)
Green building, criterion
1 of section 3.1 of the
Framework
Green building, criterion
1 of section 3.1 of the
Framework (excludes
retail and refurbished
residential)
Impact reporting
indicator
Building certification
achieved (system & rating)
Building certification
achieved (system & rating)
Building certification
achieved (system & rating)
Building certification
achieved (system & rating)
Green
credentials2
Achieved:
BREEAM – Excellent
(post-construction)
EPC – B
Expected:
LEED – Gold, on target
1 Soho Place (Site A)
Achieved:
BREEAM – Outstanding
(post-construction)
EPC – B
LEED – Gold
2&4 Soho Place
(Site B) offices –
DISPOSED OF IN 2022
Achieved:
BREEAM – Excellent
(design stage)
EPC – B
Expected:
BREEAM – Excellent (post-
construction), on target
Achieved:
BREEAM – Outstanding
(post-construction)
EPC – A
Expected:
LEED – Platinum,
on target
Offices
Achieved:
BREEAM – Outstanding
(design stage)
Expected:
BREEAM – Outstanding
(post-construction)
LEED – Gold, on target
EPC – B, on target
Private residential
Expected:
Home Quality Mark –
4 Stars (design stage),
on target
1 Previously known as 19-35 Baker Street W1.
2 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.
Strategic report
107
Qualifying ‘green’ expenditure
The qualifying expenditure as at 31 December 2022 for each project is set out in the table below. This includes an element
of ‘look back’ capital expenditure on projects in which expenditure had been incurred prior to management’s approval of
the project as an EGP. This also includes capital expenditure on projects which had already been incurred as at the original
refinancing date in October 2019.
Soho Place W1 and The Featherstone Building EC1 both commenced on site in 2019 and reached practical completion in H1
2022. Soho Place Site B was disposed of in the year and, in accordance with section 3.3 of the Framework, the expenditure
allocated to Site B has therefore been removed from the qualifying expenditure.
The 25 Baker Street W11 scheme commenced on site in October 2021 and is due to reach practical completion in 2025.
Cumulative spend on each EGP as at the reporting date
EGP
80 Charlotte Street W1
Soho Place W1
The Featherstone Building EC1
25 Baker Street W11
1 Previously known as 19-35 Baker Street W1.
Subsequent spend
Look back
spend
£m
Q4 2019 –
FY 2021
£m
2022 spend
£m
Disposals
£m
185.6
66.3
29.1
26.5
307.5
51.6
137.6
60.3
5.8
255.3
0.9
55.2
7.3
36.5
99.9
–
(34.8)
–
–
(34.8)
Cumulative
spend
£m
238.1
224.3
96.7
68.8
627.9
After deducting all previously eligible expenditure on
Soho Place Site B of £34.8m, the cumulative qualifying
expenditure on EGPs was £627.9m. Total qualifying
expenditure incurred in 2022 was £99.9m.
Drawn borrowings from GFTs as at 31 December 2022 were
£350m, which comprised of the £350m Green Bonds with
£nil drawn under the green tranche of the RCF. Therefore,
there was £300.0m undrawn under the green tranche of
the Group’s RCF as at 31 December 2022, of which £277.9m
was available to fund future cash flow requirements of
the Group.
A requirement under the Framework and the facility
agreement is for there to be an excess of qualifying spend
on EGPs over the amount of drawn borrowings from all
GFTs which, as shown above, has been met.
Green borrowings and qualifying expenditure
£m
700
600
500
400
300
200
100
0
300
350
628
£300m
total
headroom
278
350
Green
facilities
Qualifying
expenditure
Drawn green
borrowings
Green RCF
Green bond
Green expenditure
Drawn green facilities
Available green headroom
MORE INFORMATION CAN BE FOUND IN THE RESPONSIBILITY REPORT
green
finance
framework
reports.derwentlondon.com/responsibility-2022
www.derwentlondon.com/greenfinance
108
Derwent London plc / Report and Accounts 2022
GOING CONCERN
& VIABILITY
INTRODUCTION
Material uncertainties or assumptions
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
2027) 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).
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 March
2024. The Directors’ assessment included consideration of:
• the Group’s current financial position;
• the higher levels of inflation seen in 2022;
• the latest rolling forecast for the next two years;
• the timing of repayment of existing financing facilities;
• potential sources of replacement financing; and
• any 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 estimation uncertainty in the next 12 months are
considered to be:
• Fall in property values: The impact of yield changes
on the Group’s financial covenants and performance
are monitored regularly 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, requiring
a fall of 60% in property values before our funding
covenants would be breached.
• Impairment review: Sentiment amongst our occupiers
improved through 2022, with rent collection levels across
the office portfolio close to pre-Covid levels. However,
due to the economic situation, rising interest rates and
inflation, there remains a heightened risk of financial
difficulty among some of our tenants. The methodology
and assumptions used to review our receivable balances
are subject to review by the external Auditors and Audit
Committee (see page 159).
Key accounting issues or judgements are monitored and
discussed with the Audit Committee throughout the year.
The table on page 159 provides information on the key
issues discussed in 2022 and the judgements adopted.
The Group is in a strong financial position. At 31 December
2022, the Group has:
Group’s risk register
• £577m of undrawn facilities and cash (2021: £608m);
• a low EPRA loan-to-value ratio of 23.9% (inc. share of
joint ventures);
• a low overall cost of debt with a weighted average
interest rate of 3.14% as at 31 December 2022;
• 100% of our borrowings either fixed or hedged;
• significant headroom on our financial covenants
(see page 110); and
• strong interest cover of 423% (inc. share of joint
ventures).
The Group has sufficient access to finance in the short-
term and medium-term. At 31 December 2022, our average
maturity of borrowings is 6.2 years and average maturity
of facilities is 5.5 years. In addition, the Group has no
immediate refinancing requirements, with the next loan
maturity being the £83m secured loan with Mass Mutual,
which matures in October 2024 (see page 104).
DEBT AND FINANCING / See pages 104 and 105
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 (see page 113) 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 March 2024.
Therefore, the Board continues to adopt the going
concern basis in preparing the financial statements.
Strategic report
109
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 2027 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; and
• our average maturity of borrowings is 6.2 years as at
31 December 2022.
As part of its assessment, the Board considered the
Group’s emerging risks (pages 124 to 125), 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
review and identify emerging risks is on pages 174 to 175.
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 2027.
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 (see page 138).
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;
• a property portfolio which remains approximately the
same size, at 5.46m sq ft (2021: 5.57m 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 both the investment and letting
markets. However, the Directors noted that occupier
demand remains good for the right product.
In the short-term, the Board agreed that no material change
was required to its strategy, which continued to generate
sustainable returns. Our strong financial position and
proactive stakeholder-focused approach will help us to
weather the economic and political uncertainty.
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.
The scenarios are amended each year as required, to
reflect the key areas of concern identified by the Board.
The six scenarios assessed were:
• a ‘base case’ scenario which was management’s best
estimate of market and business changes;
• three scenarios of varying negative movements in
property values based on higher yield and lower rental
growth assumptions, or a combination thereof;
• a ‘downside’ scenario which showed the impact of a 38%
fall in our portfolio property values; and
• an ‘upside’ scenario which showed the impact of a more
positive outlook on property values, rental growth and
letting assumptions.
In all scenarios, our net interest cover remained above 3.95
times and our EPRA loan-to-value ratio below 40%, 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 (see page 110).
110
Derwent London plc / Report and Accounts 2022
GOING CONCERN & VIABILITY continued
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 (see page 20);
• delivering well-designed, adaptable and amenity-rich
workspace. Our customer-focused approach led us to
initiatives such as DL/78 in Fitzrovia. Due to its success,
an equivalent shared amenity hub has been approved
at The Featherstone Building EC1 (see page 24); 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, and investing in
Intelligent Building infrastructure to create sustainable
spaces for our occupiers (see page 181).
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 2022, we have significant headroom over our
covenants, as shown below:
Covenant
31/12/2022
≤ 60%1
≤ 70%2
Loan to value
(specific assets)
Ratio of unencumbered
assets to unsecured net debt ≤ 1.6 times
≤ 145%
Group NAV gearing
> 145%
Consolidated interest cover3
39%
31%
4.6 times
30.8%
423%
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 £3.2bn
(or by 60%). 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 2022,
the Group benefits from:
• reasonable income visibility for the life of our leases
which on average are 7.2 years (including rent-frees and
pre-lets) with upward-only or contracted rent reviews.
In addition to 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 7% of total
rental income and relatively low exposure to the retail
and restaurant sectors.
Inflation
Inflation is classified as an emerging financial risk for the
Group. The Directors considered the current and forecasted
rate of inflation.
The Directors’ assessment highlighted that inflation is
likely to have an impact on the Group’s overheads and on
our ability to secure fixed price construction contracts in
the medium-term (see page 113). Our occupiers will also
be impacted by rising prices, including in respect of utility
and service charges. The Directors considered that inflation
was unlikely to compromise the Group’s viability over the
five-year period to 31 December 2027.
Viability of our operations
The Board received an update from the Chairs of the Audit
and Risk Committees on the work performed during 2022 in
respect to risk monitoring and reviewing the effectiveness
of internal controls (see pages 161 and 171). It was noted
that the Finance team were not aware of any significant
financial loss arising from a breakdown of internal
controls in the past three years and that during 2023, an
independent assessment will be conducted to determine
areas of focus for further strengthening of our controls.
Despite the political uncertainty arising from the conflict
in Ukraine, and the subsequent impact on supply chains
globally, 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.
Strategic report
111
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 in 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.
At the Board’s strategy awayday in June 2022, the Directors
had a tour of the Scottish assets and the location of our
future c.100-acre, 18.4MW solar park which is expected to
generate in excess of 40% of the electricity needs of our
managed London portfolio (see pages 7 and 55).
NET ZERO CARBON / See page 27
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 Buildings 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.
INTELLIGENT BUILDINGS / See page 181
We have a robust approach to cyber security which is
routinely subject to independent testing (see pages 180
and 181). 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 operational risks, the Board
considered planning permission risks and EPC compliance
to have the greatest potential impact on the Group in the
medium-term. The actions being taken by the Group, in
a market where the demand for high quality amenity-rich
buildings is increasing, are detailed on pages 23 to 24.
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 178
ATTRACTING AND OPTIMISING TALENT / See page 59
MANDATORY COMPLIANCE TRAINING / See page 171
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 2027.
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:
OUR STRATEGY / See page 38
OUR DEVELOPMENT PIPELINE / See page 12
VALUE CREATION AND PRESERVATION / See page 138
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 medium- and long-term resilience (see page 74).
112
Derwent London plc / Report and Accounts 2022
MANAGING RISKS
RISK IS INHERENT IN RUNNING ANY BUSINESS. OUR
RISK MANAGEMENT APPROACH CENTRES ON PROACTIVE
IDENTIFICATION, MITIGATION AND OVERSIGHT.
Wider risk environment
The risk profile of the Group
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, geopolitical and
property-related risks and uncertainties.
The chart below provides an overview of the key risks and
uncertainties which have impacted on the Group’s risk
profile during 2022, with links to further information.
The Group’s risk profile remained elevated during 2022
due to the political and economic uncertainty, although the
risks arising from the Covid-19 pandemic have lessened.
In our interim results announcement, the Board reinstated a
fall in property values as a principal risk for the Group. The
current economic conditions have had an adverse impact
on property yields, and there is a risk that property values
could fall further in 2023 (see page 87).
External
Inflation
Interest rates
Reduced
economic growth
Page 33
Page 33
Page 33
Climate change
Energy prices
Political
uncertainty
Page 52
Page 101
Page 33
Property-related
Fall in property
values
Vacancy rates
Energy
Performance
Certificates
Page 87
Page 93
Page 14
Planning
Changing work
practices
Health & safety
Page 113
Page 32
Page 63
External and property-related 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 109). The Risk Committee
receives an update on changes to the Group’s wider risk
profile at each meeting and monitors a schedule of key
risk indicators which, in addition to internal risk indicators,
include external risk metrics such as construction
cost inflation.
RISK DOCUMENTATION AND MONITORING / See page 174
We are operating in a changed interest rate environment
following a long period of historically low rates. At
31 December 2022, all of our borrowings were at fixed rates.
We also benefit from a £75m forward-start interest rate
swap at 1.36% expiring in April 2025. This is immediately
available against any floating rate debt drawn from our
revolving credit facilities. In the short-term the Group has
no immediate refinancing requirements (see page 105). At
31 December 2022, our average maturity of borrowings was
6.2 years and average maturity of facilities was 5.5 years.
As a consequence of inflation and economic uncertainty,
some of our occupiers may face a more challenging
financial situation, which could result in Derwent London
having higher future vacancy rates and/or reduced rent
receipts. The occupiers deemed to be most at risk are
those which rely heavily on consumer spending such as
retail and hospitality, which make up only 7% of the Group’s
income. Despite the economic uncertainty, London remains
resilient and occupier demand remains good for the right
product as the ‘flight to quality’ continues.
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, we are being proactive in finding solutions
to further reduce emissions and develop renewable energy
sources (see pages 7 and 52). There are concerns that
planning policies in London may become more challenging.
Planning authorities require development plans to
benchmark embodied carbon against refurbishment of the
existing building, which could lead to reduced development
returns in the future.
Responsible risk mitigation
The impact of risk and uncertainties on our key
stakeholders is factored into boardroom discussions and
the development of responsible mitigation plans. Beyond
the direct impact, the Board also considers the wider
implications for stakeholders, including our occupiers,
supply chain and local communities.
THE SECTION 172(1) STATEMENT / See pages 131 to 133
Strategic report
113
Development risks
The success of our development activities is reliant on
taking managed and carefully considered risk, which aims
to deliver the office space our occupiers desire when it is
needed. The Board and Risk Committee receives reports
from the Director of Development on the Group’s major
developments, which includes a detailed assessment of the
risks and risk mitigation plans in place.
Risk area
Comment
Inflation
Planning
Material
and labour
shortages
Inflation is putting pressure on construction
costs. Where possible, designs are diverted
away from materials attracting higher price
increases. We aim to fix most, if not all, of our
construction costs to reduce our exposure
to inflation. Due to the current economic
situation, our ability to secure fixed priced
contracts is likely to become increasingly
difficult which may impact on future
development returns. Due to the fixed price
nature of these contracts, the risk exposure
falls principally on our contractors. We have
continued to monitor this carefully during the
year. Industry consensus is that inflation is
settling and will normalise to c.3% for 2023
and 2024.
Local authorities are requiring a high level
of justification for demolition instead of
refurbishment. A detailed assessment of the
embodied energy of a new build versus a
refurbishment is now required for the majority
of schemes. There is a risk that this 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.
Material shortages have become more
noticeable in recent years due to rising
demand and supply chain disruption.
Although shortages are beginning to ease,
there is a risk that the supply of particular
elements, such as microchip supply and
other specialist components, will remain
challenging. Our strategies of early ordering
and strong supply chain relationships have
mitigated any major impact on our current
developments and the same strategy will be
adopted for our future development pipeline.
Derwent London uses ‘Tier 1’ contractors and
subcontractors for project delivery, providing
us with the best prospect of securing labour
and repeat business. During 2022, none
of our on-site projects experienced any
significant issues in respect to labour.
We provide further information on the status of our three
development-related principal risks on pages 118 and 119.
OUR PRINCIPAL & EMERGING RISKS
Principal risks
Our Directors have identified certain principal risks and
uncertainties that could prevent the Group from achieving
its strategic objectives and have assessed how these
risks could best be mitigated, where possible, through a
combination of internal controls, risk management and the
purchase of insurance cover.
We define a principal risk as one that is currently impacting
on the Group or could impact the Group over the next 12
months. These risks are reviewed and updated on a regular
basis and were last formally assessed by the Board in
February 2023.
The principal risks identified at 27 February 2023 are:
• Failure to implement the Group’s strategy
• Risk of occupiers defaulting or occupier failure
• Income decline
• Fall in property values (new)
• 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
• Non-compliance with health and safety legislation
• Other regulatory non-compliance
OUR PRINCIPAL RISKS / See pages 116 to 123
Emerging risks
An emerging risk is a condition, situation or trend 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
and are therefore factored into the Board’s viability
assessment and strategic planning process.
During 2022, the Risk Committee split the risk ‘Impact on
businesses arising from the UK’s commitment to be net zero
carbon by 2050’ into two separate emerging risks to enable
greater oversight: Energy Performance Certificate (EPC)
compliance and Renewable energy and related risks.
The emerging risks identified by the Board are:
• Nature of office occupation
• Inflation (new)
• Adoption of technology
• Energy Performance Certificate (EPC) compliance (new)
• Renewable energy provision and related risks (new)
• Planning permission risks
• The importance of ESG-related concerns to our key
stakeholders
• Shortage of electrical power (new)
OUR EMERGING RISKS / See pages 124 to 125
114
Derwent London plc / Report and Accounts 2022
MANAGING RISKS continued
Lease expiries and vacancies
To provide flexibility within our portfolio for project work,
and to secure the continuity of our income, we manage our
lease expiries/breaks so that a percentage expire each year.
At the start of 2022, 9% of passing rent was subject
to break or expiry in the year. After adjusting for space
taken back for schemes, 79% of breaks and expiries were
retained or re-let by year end. This compares to our 10-year
average retention/re-let rate of 85%.
In 2023, 10% of passing rent is subject to break or expiry, a
reduction from the 15% potentially at risk as at June 2022
following pre-emptive action by our Asset Management
team. The Risk Committee will continue to receive updates
on the work of the Asset Management team to reduce the
Group’s exposure, with lease expiries/breaks included on
its schedule of key risk indicators which is monitored at
each meeting.
Credit Committee
We hold weekly Credit Committee meetings to assess and
monitor the financial strength of potential and existing
occupiers. The Credit Committee is chaired by the CEO and
its members include Damian Wisniewski (CFO) and senior
members of the Finance, Leasing, Property and Asset
Management teams.
At 31 December 2022, the 20 occupiers included on the
‘tenants on watch’ register represented 2% of the Group’s
contracted net rental income, and mainly consist of
businesses operating in retail and hospitality sectors.
Derwent London brand
The Derwent London brand is well-regarded and respected
within our industry and we are recognised for innovation
and developing design-led buildings. The protection of our
brand and reputation is important to the future success of
the Group and is considered a principal risk. We detail on
page 121 the actions we have taken during 2022 to protect
our reputation.
We demonstrate our brand and values through our external
memberships and associations. For example, we are
founding supporters of Real Estate Balance, members of
the UK Green Building Council, Mayor of London’s Business
Climate Leaders, the Better Buildings Partnership and a
founding member of the Academy of Real Assets. We are
also signed up to RE100 to demonstrate our commitment to
100% renewable energy in our buildings.
Climate change risks
Climate change is a material issue for our business and society. The Board has overall accountability for climate-related
risks and opportunities, which it factors into its strategy and viability discussions. Climate change risks are identified
and monitored as part of our wider risk management procedures (see page 174 and the example below).
RENEWABLE ENERGY PROVISION AND RELATED RISKS (EMERGING RISK E) / See page 125
Identify
Assess
Monitor
Respond
Renewable energy is a
key element of our Net
Zero Carbon Pathway.
Ultimately our ambition
is to ensure that all the
energy we procure is from
renewable sources i.e.
both electricity and gas.
During the development of
our pathway, the potential
risks to its achievement
were identified through
discussions with third
party advisers and
internal workshops.
We sought independent
assistance with the
assessment of our
climate-related risks in
both 2020 and 2022 (see
page 74). The implications
on our ability to achieve
our pathway if we are
unable to source renewable
supplies was assessed,
including the financial
impact. During 2022, the
Risk Committee classified
renewable energy
provision as an emerging
risk for the Group.
The availability of fully
traceable ‘direct from
the source’ supplies
is being monitored by
the Sustainability team.
Oversight is provided
by the Responsible
Business Committee
and Risk Committee who
receive periodic updates.
The Risk Committee
received a presentation on
sustainable energy at its
meeting in August 2022.
At 31 December 2022,
100% of our electricity
and supplies are procured
from REGO-backed tariffs
and green gas tariffs,
respectively. In 2022, we
obtained resolution to
grant planning permission
for a solar park on our
Scottish land to generate
renewable energy.
We will continue to
research and assess
the opportunities
for renewable
energy generation.
FURTHER INFORMATION ON THE MANAGEMENT OF CLIMATE CHANGE RISK / See pages 72 to 83 and 122
Strategic report
115
Risk management
The Board has conducted a robust assessment of the Group’s emerging and principal risks (see pages 113 and 171) and
has ultimate responsibility for the Group’s overall approach to risk management. To ensure focused oversight, the Board
operates a separate Risk Committee (its report is on pages 170 to 181). In addition, all of the Board’s principal committees
are responsible for mitigating risk related to its activities, for example, the assumptions made in the preparation of the
Group’s financial statements (Audit Committee), the need for robust succession planning (Nominations Committee) and
the possibility of risk-taking beyond the Board’s risk appetite in our remuneration structures (Remuneration Committee).
Responsibility for implementing our risk management strategy rests with the Executive Directors, with assistance from the
Executive Committee. Our risk management structure is on page 176. Effective risk management requires all staff to adopt
an open communication attitude to identifying threats early enough to enable risks to be properly assessed and mitigating
strategies and controls to be implemented as necessary. We operate a mandatory compliance training programme for all
staff, including Directors, which aims to raise awareness of key risk areas and our obligations (see page 171).
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 on page 174.
Risk tolerance
The Group’s risk tolerance is set by the Board and is the level of risk we are willing to accept to achieve our strategic
objectives. Our overall risk tolerance is low and is contained in our Risk Appetite Statement (see the table below for an
overview of this statement). This tolerance, 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.
Category
Operational
Operational risks include, for example, health and safety risks, continuity of the IT
system and retention of the senior management team.
Financial*
Other than market driven movements that are beyond the Group’s immediate
control, the Group will not generally accept risks where it is probable that:
• Asset values decline by more than £100m from the Group’s annual budget.
• EPRA profit before tax deviates by more than £5m from the Group’s
annual budget.
• Cost overruns occur on capital projects of more than 5% of the approved
capex budget.
• The Group’s interest cover ratio will fall to within 20% of the level set in the
Group’s borrowing covenants.
It is recognised that inherent market risk may result in these financial tolerances,
in particular the assets limit, being exceeded. The Board accepts this market risk
but seeks to manage and mitigate its impact where possible.
Reputational
Risk tolerance
Health and safety
IT continuity
Staff retention
Zero
Low
Medium
Climate change resilience
Low
Other operational risks
Medium
REIT status
Credit rating
Decrease in asset value
(>£100m)
Profits (>£5m)
Cost overruns (>5%)
Interest cover (<20%)
Low
Low
Medium
Medium
Medium
Medium
The Group has a low tolerance for risk in connection with reputational risk. In
particular, this level of risk tolerance relates to any action that could adversely
affect the Derwent brand.
Brand value
Low
Regulatory
The Group’s tolerance for regulatory risk arising from statute or the UK Corporate
Governance Code and from adherence to ‘best practice’ guides.
Statutory
Governance
Zero
Low
* Financial amounts are measures of deviation from Group annual budget.
Zero
The Board has a zero-tolerance approach and is committed
to promoting full health & safety and statutory compliance
Medium
The Board is willing to take measured risks
if they are identified, assessed and controlled
Low
The Board is risk averse and is reluctant to take risks
High
The Board is willing to take significant risks
116
Derwent London plc / Report and Accounts 2022
MANAGING RISKS continued
OUR PRINCIPAL RISKS
The principal risks and uncertainties facing the Group in 2023 are set out on pages 116 to 123. We define a principal risk
as one that is currently impacting on the Group or could impact the Group over the next 12 months. 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
2023. The key controls identified were in operation during the year under review and up to the date the 2022 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
Key controls
Our actions
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 responding
to changing work practices, occupational
demand, economic and property cycles, and
London’s global appeal. The London office market
has generally been cyclical in recent decades,
with strong growth followed by sharp economic
downturns, precipitated by rising interest rates
and often coinciding with significant oversupply.
RISK TOLERANCE: LOW
The Board is risk averse and is reluctant to
take risks.
EXECUTIVE RESPONSIBILITY: Paul Williams (CEO)
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
STAKEHOLDERS: Could potentially impact on all
our stakeholders
4
3
2
5
1
TREND:
UK inflation rose substantially, peaking at c.11%,
during 2022. Interest rates increased from a
historically low 0.1% to 3.5% in 2022. Bond Yields
and Gilts have also risen sharply (albeit from
low bases). Given the political and economic
uncertainties, there has been a slowdown in
both investment and letting activities however,
occupier demand in London remains good for the
right product and the flight to quality continues.
• The Board approves the strategic plan and
significant projects, which includes the
development pipeline. The development
pipeline has a degree of flexibility that
enables plans for individual properties
to be changed to reflect prevailing
economic circumstances.
• An annual strategic review and budget is
prepared for Board approval alongside two-
year rolling forecasts which are prepared
three times a year. The Board considers the
sensitivity of the Group KPIs to changes in
the assumptions underlying our forecasts
in light of anticipated economic conditions.
If necessary, modifications are made.
• We develop properties in locations where
there is good potential for future demand,
such as near the Elizabeth line. We do not
have any properties in the City or Docklands.
• We maintain income from properties until
development commences and have an
ongoing strategy to extend income through
lease renewals and regears. We regularly
de-risk developments through pre-lets.
• The Credit Committee, chaired by either
the CEO or CFO, assesses and monitors
the financial strength of potential and
existing occupiers. The Group’s diverse
and high quality occupier base provides
resilience against occupier default. We also
maintain close and frequent contact with
our occupiers.
• We maintain sufficient headroom for all
the key ratios and financial covenants,
with a particular focus on interest cover.
Key performance indicators:
• Total return
• Total property return
• Total shareholder return
• EPRA earnings per share
In addition, we also consider inflation, interest
rates and yield changes.
2022
• The Board held its annual Strategy
Awayday on 16 June 2022 to discuss
the Group’s five-year strategy. The
Board’s strategy awayday included
discussions on:
– the sensitivity of our KPIs to changes
in underlying assumptions including
interest rates, timing of projects,
average rents, level of capital
expenditure and the extent of capital
recycling; and
– opportunities for acquisitions and
disposals to recycle capital.
• Monitored our portfolio for further asset
management activities and managed
the vacancy rate which has risen to 6.4%
from 1.6%.
• Monitored letting progress and demand
for our buildings.
• Progressed opportunities to self-generate
renewable energy from our land holdings
in Scotland and maintained dialogue
with our occupiers to align our net zero
carbon journeys.
• Received political and economic
updates from external advisers
throughout the year.
• Regularly liaise with occupiers to
ensure our buildings are meeting
their demands.
2023
• Examine opportunities for acquisitions
and, in order to recycle capital, identify
assets for disposal.
• Seek further opportunities within the
portfolio to upgrade or reposition
assets to maximise returns, increase
our ‘Furnished + Flexible’ offering and
exploring Life Sciences possibilities.
• Continue with our current controls and
mitigating actions, including operating
the business on a basis that balances
risk and income generation.
STRATEGIC OBJECTIVES
1
To optimise returns and create value from a balanced portfolio
2
3
To grow recurring earnings and cash flow
To attract, retain and develop talented employees
4
5
To design, deliver and operate our buildings responsibly
To maintain strong and flexible financing
TREND
Increased
Unchanged
Decreased
Strategic report
117
FINANCIAL
The main financial risk is that the Group becomes unable to meet its financial obligations, which is not currently a principal
risk. Financial risks can arise from movements in the financial markets in which we operate and inefficient management of
capital resources.
Risk
Key controls
Our actions
2. 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.
RISK TOLERANCE: MEDIUM
The Board is willing to take measured risks if they are identified,
assessed and controlled.
EXECUTIVE RESPONSIBILITY: Paul Williams (CEO)
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:
STAKEHOLDERS: Occupiers, shareholders and debt providers
4
3
2
5
1
TREND:
Due to the current economic conditions, our occupiers could be
facing increased financial difficulty. The energy pricing crisis, the
10.1% increase in the London Living Wage and inflation have placed
considerable pressure on our service charge operating levels.
Significant cost increases pose a greater risk of occupier default and
late payment.
3. INCOME DECLINE
Changes in macroeconomic factors may adversely affect London’s
office market. The Group is exposed to external factors which are
outside the Group’s control, such as future demand for office space,
the ‘cost of living’ crisis, the ‘grey’ market in office space (i.e. occupier
controlled vacant space), weaknesses in retail and hospitality
businesses, increase in hybrid working and the depth of a recession,
and subsequent rise in unemployment and/or interest rates.
RISK TOLERANCE: MEDIUM
The Board is willing to take measured risks if they are identified,
assessed and controlled.
EXECUTIVE RESPONSIBILITY: Paul Williams (CEO)
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:
STAKEHOLDERS: Shareholders and debt providers
4
3
2
5
1
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.
Restaurants and hospitality occupiers account for approximately 7% of
the Group’s portfolio income. During a recession, transactions can take
longer to finalise, occupiers tend to adopt a ‘wait-and-see’ approach
leading to a greater risk of aborted transactions.
• The Credit Committee,
chaired by either the CEO or
CFO, assesses and monitors
the financial strength of
potential and existing
occupiers, with detailed
reviews of all prospective
occupiers being performed.
• A ‘tenants on watch’ register
is maintained and regularly
reviewed by the Executive
Committee and the Board.
• Active rent collection,
with regular reports to the
Executive Committee on
day 1, 7, 14 and 21.
• We maintain close and
frequent contact with
our occupiers.
• Rent deposits are held where
considered appropriate.
Key performance indicators:
• Tenant retention
• Void management
In addition, we consider
our Lease Incentive Debtor
(LID) balance and level of
rent deposits.
• The Credit Committee
receives detailed reviews of
all prospective occupiers.
• A ‘tenants on watch’ register
is maintained and regularly
reviewed by the Executive
Committee and the Board.
• Ongoing dialogue is
maintained with occupiers
to understand their concerns
and requirements.
• The Group’s low loan-to-value
ratio reduces the likelihood
that falls in property values
have a significant impact on
our business continuity.
Key performance indicators:
• Reversionary percentage
• Tenant retention
• Void management
In addition, we consider the
amount of ‘grey space’ and
lease expiries/breaks.
2022
• 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 continue 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.
2023
• Continue with our current
controls and mitigating actions.
2022
• The Group produced a budget,
strategic review and three rolling
forecasts during the year which
contain detailed sensitivity
analyses including the effect
of changes to valuation yields.
• 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.
• We worked to reduce our lease
expiry exposure in 2022 through
asset management activities
and good relationships with
our occupiers.
• Quarterly management accounts
are provided to the Board.
2023
• Continue with our current
controls and mitigating actions,
including operating the business
on a basis that balances risk and
income generation.
118
Derwent London plc / Report and Accounts 2022
MANAGING RISKS continued
FINANCIAL continued
Risk
4. FALL IN PROPERTY VALUES
Key controls
Our actions
The potential adverse impact of the economic and political
environment on property yields has heightened the risk of a
fall in property values.
• The impact of yield changes is
considered when potential projects
are appraised.
RISK TOLERANCE: MEDIUM
The Board is willing to take measured risks if they are
identified, assessed and controlled.
EXECUTIVE RESPONSIBILITY: Nigel George (Director)
IMPACT: A fall in property values will have an impact on the
Group’s net asset value and gearing levels.
STRATEGIC OBJECTIVES:
STAKEHOLDERS: Occupiers, shareholders and debt providers
4
3
2
5
1
TREND:
A fall in property values was classified as a principal risk by
the Risk Committee in August 2022 and was published in our
interim statement. Since July, the MSCI Central London Office
Monthly Index has shown negative capital growth movements.
At 31 December 2022, the valuation of our portfolio had fallen
by 6.8%. It is anticipated that property values could fall further
in 2023. Despite the economic uncertainty, London remains
resilient and occupier demand remains good for the right
product and the flight to quality continues.
• The impact of yield changes on the
Group’s financial covenants and
performance is monitored regularly
and subject to sensitivity analysis to
ensure that adequate headroom
is preserved.
• The Group’s mainly unsecured
financing makes management of
our financial covenants
more straightforward.
• The Group’s low loan-to-value ratio
reduces the likelihood that falls in
property values have a significant
operational impact on our business.
Key performance indicators:
• Total property return
• Void management
• Reversionary percentage
In addition, we consider changes in
property yields.
NEW
2022
• 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 and
included the Group’s performance
against the financial covenants.
• Disposed of a combination of
assets above book value for
£206m (see page 4).
2023
• Continue to examine
opportunities for further
disposals to recycle capital.
• Continue with our current controls
and mitigating actions.
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
Key controls
Our actions
5A. REDUCED DEVELOPMENT RETURNS
Returns from the Group’s developments may be adversely
impacted due to: delays on site; increased construction costs;
material and labour shortages; and adverse letting conditions.
RISK TOLERANCE: MEDIUM
The Board is willing to take measured risks if they are
identified, assessed and controlled.
EXECUTIVE RESPONSIBILITY: Paul Williams (CEO)
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:
STAKEHOLDERS: Suppliers and occupiers
3
2
1
4
5
TREND:
Planning authorities have an increasing preference for
refurbishment instead of redevelopment. The Board is
monitoring the potential impact of a tighter planning
environment on our strategy and future development returns.
Energy prices in the UK have been directly impacted by
supply constraints to Europe of gas and oil from Russia and
the increased cost of energy is driving significant inflation
on many products – steel, cement, bricks, blocks and glass.
We have secured a fixed price for 97% of the costs for the
office element of 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.
• Our procurement process includes
the use of highly regarded firms of
quantity surveyors and is designed
to minimise cost uncertainty.
• Development costs are
benchmarked to ensure that the
Group obtains competitive pricing
and, where appropriate, fixed price
contracts are negotiated.
• Post-completion reviews are carried
out for all major developments to
ensure that improvements to the
Group’s procedures are identified,
implemented and lessons learned.
• Investment appraisals are
prepared and sensitivity analysis
is undertaken to judge whether
an adequate return is made in all
likely circumstances.
• The Group’s pre-letting strategy
reduces or removes the letting risk
of the development as soon
as possible.
Key performance indicators:
• Total return
• Total property return
• Development potential
In addition, we consider construction
cost inflation and project budget status.
2022
• We have a flexible development
pipeline and, where appropriate,
we deferred expenditure and
decisions on future projects
while keeping very close to
our contractors, professional
consultants and the project
teams on site.
• Monitored construction
cost inflation in relation to
future projects.
• The Board and Executive
Committee 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.
2023
• Progress planning applications for
50 Baker Street (joint venture) and
Old Street Quarter.
• Progress on-site activities at
25 Baker Street and Network.
Seek to de-risk these projects
by securing pre-lets on some of
the space.
4
5
To design, deliver and operate our buildings responsibly
To maintain strong and flexible financing
Strategic report
119
TREND
Increased
Unchanged
Decreased
STRATEGIC OBJECTIVES
1
To optimise returns and create value from a balanced portfolio
To grow recurring earnings and cash flow
To attract, retain and develop talented employees
2
3
Risk
5B. ‘ON-SITE’ RISK
If the Group fails to: (i) adequately appraise
investments prior to starting work on site, including
through taking into account contingencies and
inflationary cost increases; (ii) use a procurement
process that is properly designed (to minimise
uncertainty around costs) and that includes the
use of highly regarded quantity surveyors; (iii)
benchmark development costs; (iv) conduct thorough
site investigations to reduce the risk of unidentified
issues such as asbestos; (v) implement its pre-
letting strategy; or (vi) conduct detailed reviews
on construction projects to evaluate programme
forecasts made by contractors, development projects
may be significantly delayed and we could face a loss
of rental income and penalties.
RISK TOLERANCE: MEDIUM
The Board is willing to take measured risks if they are
identified, assessed and controlled.
EXECUTIVE RESPONSIBILITY: Paul Williams (CEO)
IMPACT: Risk of project delays and/or cost overruns
caused by unidentified issues.
Key controls
Our actions
• Regular monitoring of our contractors’
cash flows.
• Frequent meetings with key contractors and
subcontractors to review their work programme
and maintain strong relationships.
• Off-site inspection of key components to
ensure they have been completed to the
requisite quality.
• Prior to construction beginning on site, we
conduct site investigations including the
building’s history and various surveys to identify
any potential issues.
• Monthly reviews of supply chain issues for each
of our major projects, including in respect to
potential labour shortages.
• Strict Covid-19 protocols are maintained at all
of our on-site developments, in accordance
with Site Operating Procedures (published
by the Construction Leadership Council).
Key performance indicators:
• Accident Frequency Rate
• Total property return
2022
• Engage continuously with our
contractors, subcontractors
and supply chain to
understand the impact of the
Ukraine conflict and rising
inflation on their operations.
• The Board and Executive
Committee received
regular updates on our
principal developments.
• Final accounts have been
agreed for The Featherstone
Building and Soho Place.
• Quarterly cost reports
provided an update on
development progress
from a cost, profitability
and programme perspective.
2023
• Continue with our
current controls and
mitigating actions.
STRATEGIC OBJECTIVES:
STAKEHOLDERS: Suppliers and occupiers
3
2
1
4
5
• BREEAM ratings
In addition, we consider pre-lets in order to
mitigate letting risks.
TREND:
Inflationary pressures resulting largely from the
conflict in Ukraine and associated global supply chain
disruption, is putting construction budgets under
pressure.
5C. 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.
RISK TOLERANCE: MEDIUM
The Board is willing to take measured risks if they are
identified, assessed and controlled.
EXECUTIVE RESPONSIBILITY: Paul Williams (CEO)
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:
STAKEHOLDERS: Suppliers and occupiers
3
2
1
4
5
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. We have engaged
with our principal contractors to ensure they have
sufficient headroom under the fixed contracts to cope
with rising costs. In respect to Network Building W1,
we have liaised with our contractor, subcontractors
and supply chain at an earlier design stage so that the
developments programme and costs can be agreed
collaboratively. We will continue to actively monitor
the financial health of our main contractors
and subcontractors.
• We use known ‘Tier 1’ contractors with whom we
have established working relationships.
• Regular monitoring of our contractors, including
their project cash flows, is carried out.
• Key construction packages are acquired early in
the project’s life to reduce the risks associated
with later default.
• The financial standing of our main contractors is
reviewed prior to awarding the project contract.
• Our main contractors are responsible,
and assume the immediate risk, for
subcontractor default.
• Payments to contractors are in place to
incentivise the achievement of project timescales,
with damages agreed in the event of delay/
cost overruns.
• Regular on-site supervision by a dedicated Project
Manager who monitors contractor performance
and identifies problems at an early stage,
thereby enabling remedial action to be taken.
• Contractors are paid promptly and are
encouraged to pay subcontractors promptly.
Key performance indicators:
• Total return
• Total property return
In addition, we consider average payment days
to our suppliers, project delays and construction
cost inflation.
2022
• Engaged continuously with our
contractors, subcontractors
and supply chain to
understand the impact of the
Ukraine conflict and rising
inflation on their operations.
• Final accounts have been
agreed for The Featherstone
Building and Soho Place.
• Our suppliers were paid on
average within 22.6 days.
• Accepted early ordering of
materials ahead of their need
on site to accelerate cash flow
to our supply chain.
• The Board and Executive
Committee received regular
updates on our principal
developments.
• Quarterly cost reports
provided an update on
development progress from
a cost, profitability and
programme perspective.
2023
• Continue with our current
controls and mitigating actions.
120
Derwent London plc / Report and Accounts 2022
MANAGING RISKS continued
OPERATIONAL continued
Risk
6A. 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.
RISK TOLERANCE: LOW
The Board is risk averse and is reluctant to
take risks.
EXECUTIVE RESPONSIBILITY: David Lawler
(Company Secretary)
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
Russian cyber attacks amid escalating
tensions over the conflict in Ukraine. To
date, Derwent London has not experienced
a significant increase in cyber attacks. The
DIT team have been proactive in providing
regular guidance and refresher training to
all employees on cyber security matters.
6B. 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.
RISK TOLERANCE: LOW
The Board is risk averse and is reluctant to
take risks.
EXECUTIVE RESPONSIBILITY: David Lawler
(Company Secretary)
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:
Our Intelligent Building Programme has
completed its ‘Proof of Concept’ phase
and roll out of Phase 1 has commenced.
The project involves considerable input
from various teams across the business
including the DIT team. We have worked
alongside our portfolio IT partner to
conduct network and IT asset inventories
and cyber security assessments.
Key controls
Our actions
• The Group’s Business Continuity
Plan and cyber security incident
response procedures are regularly
reviewed and tested.
• Independent internal and external
penetration/vulnerability tests are
regularly conducted to assess the
effectiveness of the Group’s security.
• Multi-Factor Authentication exists
for remote access to our systems.
• Incident response and remediation
processes are in place, which are
regularly reviewed and tested.
• The Group’s data is regularly backed
up and replicated off-site.
• Our IT systems are protected by
anti-virus software, 24/7/365 threat
hunting, security incident detection
and response, security anomaly
detection and firewalls that are
frequently updated.
• Frequent staff awareness and
training programmes.
• Security measures are regularly
reviewed by the IT team.
Key performance indicators:
Could indirectly impact on a number of
our other KPIs.
In addition, we consider any security
issues raised and the results of
independent assurance reviews.
2022
• Remediated any key findings from the last point-in-
time vulnerability scan and introduced continuous
vulnerability monitoring and remediation.
• Conducted a simulated ‘phishing’ exercise as part of
the ongoing security awareness programme.
• Completed a business continuity technical test.
• IT Governance conducted a cyber response readiness
assessment and provided recommendations to
enhance our response playbooks and Business
Continuity Plan.
• Performed a detailed review of our ‘ransomware
security incident response playbook’ and completed
a ransomware tabletop exercise.
• Introduced 24/7/365 threat hunting, detection,
and response.
• We have arranged for a Sophos Rapid Response
team to be on retainer. The Sophos Rapid Response
team would provide unlimited support to our
Cyber Incident Response Team in the event of
a cyber attack.
• Enhanced our security patching and mobile device
management capabilities to support a hybrid
working model.
2023
• Continue to develop and implement our IT
governance framework.
• Review further training opportunities for our Cyber
Incident Response Team.
• Renewal of our Cyber Essentials accreditation.
• Our cyber security incident
management procedures are
regularly reviewed and tested.
• Physical segregation between the
building’s core IT infrastructure and
occupiers’ corporate IT networks.
• Physical segregation of IT
infrastructure between buildings
across the portfolio.
• Inclusion of Building Managers
in any cyber security awareness
training and phishing simulations.
• Sophos Rapid Response team
provide unlimited support to our
Cyber Incident Response Team in the
event of a cyber attack.
• Frequent staff awareness and
training programmes.
Key performance indicators:
Could indirectly impact on a number of
our other KPIs.
In addition, we consider any security
issues raised and the results of
independent assurance reviews.
2022
• Engaged with a portfolio IT partner to provide
additional support for our information and
communications technology (ICT) infrastructure and
cyber security assessments.
• Conducted security reviews on network designs for
any new buildings or refurbishments.
• Ensured that cyber security remains a key
consideration in the delivery of intelligent buildings
and digital initiatives.
• We have arranged for a Sophos Rapid Response
team to be on retainer. The Sophos Rapid Response
team would provide unlimited support to our Cyber
Incident Response Team in the event of a cyber attack.
• Continued to collaborate with the IoT Security
Foundation and other industry stakeholders on the
development of a set of intelligent buildings security
guidance documents.
• Sent phishing simulation tests to Building Managers.
• Completed mandatory security awareness training
for all staff, including Building Managers.
• Implemented further security controls to enhance our
layered defence model.
• Collaborated with our portfolio IT partner on
mitigating any cyber risks identified following cyber
security assessments.
2023
• Further develop our IT governance framework,
security monitoring and security incident
response procedures.
4
5
To design, deliver and operate our buildings responsibly
To maintain strong and flexible financing
Strategic report
121
TREND
Increased
Unchanged
Decreased
STRATEGIC OBJECTIVES
1
To optimise returns and create value from a balanced portfolio
To grow recurring earnings and cash flow
To attract, retain and develop talented employees
2
3
Risk
Key controls
Our actions
6C. SIGNIFICANT BUSINESS INTERRUPTION (FOR EXAMPLE, PANDEMIC, TERRORISM-RELATED EVENT OR OTHER 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.
RISK TOLERANCE: MEDIUM
The Board is willing to take measured risks if
they are identified, assessed and controlled.
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:
The risks arising from the Covid-19 pandemic
have reduced during 2022. Although
not classified as a significant business
interruption for Derwent London, the conflict
in Ukraine has elevated global supply chain
and market volatility.
7. 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.
RISK TOLERANCE: LOW
The Board is risk averse and is reluctant to
take risks.
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 external memberships and associations.
We value integrity and transparency.
• 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.
• The Group has comprehensive business
continuity and incident management
procedures both at Group level and for
each of our managed buildings which are
regularly reviewed and tested.
• Continuous review of property health and
safety statutory compliance.
• Government health guidelines are
maintained at all of our construction sites.
• Comprehensive property damage and
business interruption insurance which
includes terrorism.
• Robust security at our buildings, including
CCTV and access controls.
• Most of our employees are capable of
working remotely and have the necessary
IT resources.
Key performance indicators:
Could indirectly impact on a number of our
other KPIs.
In addition, we consider any downtime
incidences and the outcome of disaster
recovery testing.
2022
• Engaged with a portfolio IT partner to
provide additional support for
ICT infrastructure and cyber
security assessments.
• Remediated any 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.
• Provided additional employee awareness
training on social media and remote working
security best practice.
2023
• Continue to work with our external fire
consultants to be amongst the first UK
property companies to implement a
Fire Safety Management System in line
with BS9997.
• Continue with our current controls and
mitigating actions.
• Close involvement of senior management
in day-to-day operations and established
procedures for approving all external
announcements.
• All new members of staff benefit from an
induction programme and are issued with
our Group staff handbook.
• The Group employs a Head of Investor
Relations & Strategic Planning and retains
services of an external PR agency, both
of whom maintain regular contact with
external media sources.
• A Group whistleblowing system for
staff is maintained to report
wrongdoing anonymously.
• Social media channels are monitored.
• Ongoing engagement with local
communities in areas where the
Group operates.
2022
• Continued to implement a mandatory
compliance training programme for all
employees (including Directors).
• Maintaining regular engagement with
key stakeholders.
• Monitored investor views and
press comments.
• Worked alongside ELBA (East London
Business Alliance) to launch an appeal
aimed at offering urgent practical assistance
to refugees and displaced people. This
appeal is available on the DL/App so that
our occupiers can take part.
• Launched a direct appeal to help the UK
Disasters Emergency Committee with the
thousands of people fleeing the conflict in
Ukraine. The Derwent London Sponsorships
& Donations Committee matched donations.
• Staff training and awareness programmes.
• Published our Code of Conduct & Business
Key performance indicators:
• Total shareholder return
• Accident frequency rate
• Staff satisfaction
• Could indirectly impact on a number of our
other KPIs.
In addition, we consider compliance training
completion rates and feedback received from
employee and occupier ‘pulse surveys’.
Ethics to all employees.
• Revised our values to three ‘core’ values and
refined our purpose (see page 140).
2023
• Continue to communicate and listen to
our stakeholders.
• Support our staff’s training requirements.
• Continue with our current controls and
mitigating actions.
122
Derwent London plc / Report and Accounts 2022
MANAGING RISKS continued
OPERATIONAL continued
Risk
8. 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.
RISK TOLERANCE: LOW
The Board is risk averse and is reluctant to
take risks.
EXECUTIVE RESPONSIBILITY: Nigel George
(Director)
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:
The government has proposed increasing
the minimum EPC rating to B by 2030. An
increase in the minimum EPC rating will lead
to increased capital expenditure requirements
for the Group (see page 14). In addition,
there is a limited supply of renewable energy
sources and offset projects which is leading to
price escalation.
Key controls
Our actions
• The Board and Executive Committee
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.
• The Sustainability Committee monitors our
performance and management controls.
• Strong team led by an experienced Head
of Sustainability.
• The Group monitors its ESG (environmental,
social and governance) reporting against
various industry benchmarks.
• Production of an annual Responsibility
Report with key data and performance
points which are externally assured.
• In 2017 we adopted independently verified
science-based carbon targets which have
been approved by the Science-Based
Targets initiative (SBTi).
• Undertake periodic multi-scenario
climate risk assessments (physical
and transition risks).
Key performance indicators:
• Total shareholder return
• BREEAM ratings
• Energy Performance Certificates
• Energy intensity
• Carbon intensity
2022
• Published our annual Responsibility Report
in April 2022.
• Received resolution to grant planning
consent on a 18.4MW solar park on our
Scottish land and investigated planting a
further 425Ha of trees.
• Set embodied carbon targets for our
new-build commercial developments.
• Increased climate-related engagement
with occupiers to develop strategies on how
we could support our occupiers achieving
their goals.
• Agreed a strategy for the portfolio to achieve
an EPC B grade or above by 2030 following
the results of the feasibility and cost report.
• Updated our ‘green’ lease agreements
further to include more stringent clauses for
our occupiers on climate-related matters.
• Commissioned a further climate risk
scenario assessment performed by Willis
Towers Watson (WTW).
2023
• Align our SBTi targets to a more challenging
1.5°C climate scenario in line with our net
zero carbon ambition.
• Review the results of WTW’s climate risk
scenario assessment and agree mitigation
plans, as required.
• Continue with our current controls and
mitigating actions.
9A. NON-COMPLIANCE WITH HEALTH AND SAFETY LEGISLATION
An incident or breach of health and safety
legislation, including in respect of fire safety,
water hygiene, asbestos exposure, building
safety, construction design management etc.
RISK TOLERANCE: ZERO
The Board has a zero-tolerance approach and
is committed to promoting full health and
safety compliance.
EXECUTIVE RESPONSIBILITY: Paul Williams
(CEO)
IMPACT: A major health and safety incident
could cause significant business interruption
for the Group, a risk to life, 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:
The health and safety-related risks arising
from the Covid-19 pandemic have considerably
reduced during 2022. The business has
prepared for the implementation of a new Fire
Safety Management System aligned with the
requirements of the Fire Safety and Building
Safety Acts.
• All properties have the relevant health,
safety and fire management procedures
in place which are reviewed annually.
• The Group has a qualified Health and
Safety team whose performance is
monitored and managed by a Health &
Safety Committee, chaired by the CEO.
• Health and safety statutory compliance
within our managed portfolio is managed
and monitored using a software compliance
platform. This is supported by annual
property health checks.
• The Managed Portfolio Health and Safety
Manager supports our Portfolio and
Building Managers to ensure statutory
compliance.
• The Construction Health and Safety
Manager ensures our Construction
(Design and Management) Regulations
(CDM) client duties are executed and
monitored and reviews health, safety
and welfare on each construction site
on a monthly basis.
• The Board and Executive Committee
receive frequent updates and
presentations on health and safety.
Key performance indicators:
• Accident frequency rate
• Staff satisfaction
In addition, we consider feedback received
from employee and occupier ‘pulse surveys’.
2022
• The Board and the Executive Committee
received refresher health and safety training
in September 2022.
• Appointed a new Head of Health and Safety
and managed the transition period.
• Continued to improve our CDM procedures,
engaging with our internal and external
stakeholders through our new Continuous
Improvement Group.
• Performed detailed roof and traffic
management surveys of our
managed portfolio.
• Arranged webinars for our employees on
topics such as mental health awareness,
men’s health, menopause and sleep.
2023
• Deliver a Fire Safety Management System in
line with updated legislation and guidance
(Building Safety Act 2022, BS9997 and the
Fire Safety Act 2021).
• Develop building safety cases for residential
buildings in scope of the Building Safety
Act 2022.
• Embed health and safety competency in key
operational aspects of the business, through
a Health & Safety Training Matrix.
• Develop, with the Human Resources team,
the Wellbeing Strategy for Derwent London.
• Continue with our current controls and
mitigating actions.
4
5
To design, deliver and operate our buildings responsibly
To maintain strong and flexible financing
Strategic report
123
TREND
Increased
Unchanged
Decreased
STRATEGIC OBJECTIVES
1
To optimise returns and create value from a balanced portfolio
To grow recurring earnings and cash flow
To attract, retain and develop talented employees
2
3
Risk
Key controls
Our actions
9B. OTHER REGULATORY NON-COMPLIANCE
The Group breaches any of the legislation that
forms the regulatory framework within which
the Group operates.
RISK TOLERANCE: ZERO
The Board has a zero-tolerance approach and
is committed to promoting full health and
safety compliance.
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:
1
2
3
4
5
STAKEHOLDERS: Could potentially impact on
all our stakeholders
TREND:
The international response to the conflict in
Ukraine has resulted in significant, and rapidly
expanding, sanction lists which have resulted
in additional compliance risks. In addition,
with increased ESG-related reporting, the
risk of reputational and/or litigation has
risen if disclosures are misleading, or we are
non-compliant. Deloitte provide ‘reasonable
assurance’ on a significant amount of our
ESG-related data disclosures.
• We are proactive in adopting new and
emerging legislation.
• The Board and Risk Committee receive
regular reports prepared by the Group’s
legal advisers identifying upcoming
legislative/regulatory changes. External
advice is taken on any new legislation,
if required.
• Managing our properties to ensure they
are compliant with the Minimum Energy
Efficiency Standards (MEES) for Energy
Performance Certificates (EPCs).
• A Group whistleblowing system for staff
is maintained to report wrongdoing
anonymously (see page 139).
• Ongoing staff training and awareness
programmes. As part of staff performance
appraisals, all employees are required
to confirm they have reviewed and
understood Group policies.
• Group policies and procedures dealing
with all key legislation are available on the
Group’s intranet.
• Quarterly review of our anti-bribery
and corruption procedures by the
Risk Committee.
Key performance indicators:
• Total shareholder return
• 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 ‘pulse surveys’.
2022
• Our registrars monitored our share register
and we commissioned an independent
analysis of our nominee accounts to ensure
we are compliant with sanctions imposed in
response to the conflict in Ukraine.
• Sought legal guidance regarding our ‘know
your client’ procedures to ensure our full
compliance with sanction lists and money
laundering regulation.
• Reviewed the Government’s response to the
BEIS consultation on corporate governance
and audit reform to ensure we are prepared
for the new requirements when they become
applicable to Derwent London.
• Continued to implement a compliance training
programme, mandatory for all employees
including the Board (see page 171).
2023
• Review the revised UK Corporate
Governance Code, when published, to
determine any required actions to ensure
our continued compliance.
• Rebrand our Whistleblowing Policy and
procedures as ‘Speak-Up’.
• Continue with our current controls and
mitigating actions.
Members of the Building Management, Health and Safety and Facilities
teams at The Featherstone Building EC1, which completed in 2022
124
Derwent London plc / Report and Accounts 2022
MANAGING RISKS continued
OUR EMERGING RISKS
An emerging risk is a condition, situation or trend 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. During the year under review, the Directors identified four additional emerging risks. The methodology
used to review and identify emerging risks is on page 175.
STRATEGIC
Risk
A. NATURE OF OFFICE OCCUPATION
Occupiers are increasingly
demanding of their space, requiring
it to fulfil multiple functions.
Offices need to be design-led and
amenity-rich, and able to adapt
to a more agile workforce. Office
space which has fewer desks, more
collaboration space, meeting rooms,
video conference facilities and
other amenities is likely to be more
desirable to occupiers.
TREND
FINANCIAL
Risk
B. INFLATION
Impact
Our actions
The Group needs to ensure it is adequately
responding to occupier demands, so our product
remains attractive to occupiers, 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 enhanced
amenity, ‘Intelligent Building’ infrastructure, and
employee wellbeing at its core will exceed these
evolving requirements. We will continue to review
opportunities within the portfolio to enhance
our amenity offering and to adapt to changing
trends. Due to the success of DL/78 in Fitzrovia,
we are incorporating a similar scheme at The
Featherstone Building, DL/28.
STRATEGIC OBJECTIVES
1
2
3
4
5
STAKEHOLDERS
Occupiers and employees
Impact
Our actions
Inflation increased significantly
during 2022 and peaked at c.11%.
Although there are early indications
that inflation may be falling, there
is uncertainty as to whether
inflation will remain a risk factor
in the medium to long-term.
Our ability to secure fixed price construction
contracts will be more challenging in the medium-
term. In addition, inflation is likely to have an impact
on the Group’s overheads with rising costs putting
pressure on wages and professional fees. The costs
arising from the managed portfolio will increase
– although the majority of these increases can be
absorbed by the service charge.
TREND
STRATEGIC OBJECTIVES
1
2
3
4
5
STAKEHOLDERS
Could potentially impact
on all our stakeholders
NEW
In respect to construction, where possible, designs
are diverted away from materials attracting higher
price increases. Where possible, we will aim to fix
most, if not all, of our construction costs to reduce
our exposure to inflation. Historically, real estate
companies have been able to take advantage of
long-term rental growth opportunities arising from
inflation, with their assets being a good hedge
for investors.
OPERATIONAL
Risk
C. ADOPTION OF TECHNOLOGY
Impact
Our actions
With technology in the sector
advancing at a rapid pace
the Group needs to ensure it
is embracing these changes
sufficiently whilst making sure
that the Group’s strategy is driving
which technology is adopted
and not being driven by the
technology itself.
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
increasingly becoming ‘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.
TREND
STRATEGIC OBJECTIVES
1
2
3
4
5
STAKEHOLDERS
Could potentially impact
on all our stakeholders
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. Our
Intelligent Building project has completed its
‘Proof of Concept’ phase and roll out of Phase 1
has commenced.
STRATEGIC OBJECTIVES
1
To optimise returns and create value from a balanced portfolio
2
3
To grow recurring earnings and cash flow
To attract, retain and develop talented employees
4
5
To design, deliver and operate our buildings responsibly
To maintain strong and flexible financing
TREND
Increased
Unchanged
Decreased
Strategic report
125
Risk
Impact
Our actions
D. ENERGY PERFORMANCE CERTIFICATE (EPC) COMPLIANCE
NEW
The government has proposed
increasing the minimum EPC rating
to B by 2030. An increase in the
minimum EPC rating will lead to
increased capital expenditure
requirements for the Group.
In order to improve its older buildings, the Group may
need to commit to additional capital expenditure. In
2021, a third party report identified £97m of works.
Based on our latest estimates, which reflect cost
inflation, this has increased to £99m some of which
may be recoverable through the service charge (see
page 14). The Group may also be unable to lease
the space during the improvement phase, leading to
reduced rental income and longer void periods.
TREND
STRATEGIC OBJECTIVES
STAKEHOLDERS
1
2
3
4
5
Could potentially impact
on all our stakeholders
In accordance with our Net Zero Carbon Pathway,
new developments and major refurbishments
will achieve the required EPC ratings and will
be operated using renewable energy and have
appropriate energy reduction targets in place. Our
ongoing refurbishment programme is monitored
by the Directors and ensures that we continually
improve the energy efficiency of our buildings.
At 31 December 2022, our current portfolio is
fully compliant with EPC regulations for 2023
(see page 14).
E. RENEWABLE ENERGY PROVISION AND RELATED RISKS
NEW
Renewable energy is a key element
of our Net Zero Carbon Pathway.
Whilst we are purchasing green
tariffs, greater emphasis is being
placed on fully traceable ‘direct
from the source’ supplies which are
difficult to secure. In addition, the
supply of high quality offsets is
becoming constrained and leading
to price escalation.
There is a limited supply of renewable energy
sources and offset projects which are leading to
price escalation. Although capacity is increasing, it
is being absorbed by the industry as quickly as it is
being produced. Purchasing offsets from the open
market will cost more for the Group than in previous
instances. The current cost implications for our
development pipeline is relatively small at c.1% of
project cost.
TREND
STRATEGIC OBJECTIVES
STAKEHOLDERS
1
2
3
4
5
Could potentially impact
on all our stakeholders
We are driving down energy demand in our
buildings via our challenging energy reduction
targets. 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 2022, we received resolution to
grant planning permission for a c.100-acre solar
park on our Scottish land. Our tree planting efforts
will reduce reliance on market-based offsets but
it will be c.2029/2030 before we can start to
use them.
F. PLANNING PERMISSION RISKS
There are concerns that planning
in London may become more
challenging. Relevant factors include
local authorities requiring a high level
of justification for demolition instead
of refurbishment, the length of time
from application to approval, the
need for more affordable housing
and/or offices, coupled with the
need for the inclusion of a social
value requirement.
The rising cost and challenge of obtaining planning
permission could have an impact on the Group’s
ability to realise its development ambitions and could
result in increased capital expenditure during the
early stages of development planning, resulting in
lower development returns.
We liaise with each London authority to
understand their needs with the aim of building
a partnership and providing value to local
communities – for example via our Community
Fund, community initiatives and local employment
opportunities etc.
TREND
STRATEGIC OBJECTIVES
STAKEHOLDERS
1
2
3
4
5
Occupiers and suppliers
G. THE IMPORTANCE OF ESG-RELATED CONCERNS TO OUR KEY STAKEHOLDERS
Environmental, social and
governance concerns (including,
climate change and diversity and
inclusion) are important to Derwent
London, our stakeholders and the
general public.
If we do not give sufficient priority to these issues,
and fail to act as a responsible corporate entity, we
will be unprepared for the risks and opportunities
arising and it will, in turn, adversely impact on our
business and reputation.
TREND
STRATEGIC OBJECTIVES
STAKEHOLDERS
1
2
3
4
5
Could potentially affect all
of our key stakeholders
We recognise the importance of clear
communication and proactive engagement with all
of our stakeholders.
H. SHORTAGE OF ELECTRICAL POWER
Shortage of electrical power is a
risk for London, particularly in West
London. UKPN are the provider
in central London and cover all
Derwent London properties and
have put in place robust plans to
meet future load requirements.
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.
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.
NEW
TREND
STRATEGIC OBJECTIVES
STAKEHOLDERS
1
2
3
4
5
Could potentially impact
on all our stakeholders
126
Derwent London plc / Report and Accounts 2022
Soho Place W1
Governance
127
Reception
Theatre
“ Soho Place is the construction of a Swiss watch built on an
urban scale, intertwined with and sitting over an iceberg of
new Crossrail infrastructure. The major component is the new
ten-storey travertine and metal urban palazzo of office and
retail above Tottenham Court Road Underground station. This
fronts onto the new Soho Place, Soho’s first new address for
72 years, and opposite London’s first new theatre for 50 years.”
SIMON ALLFORD
Executive Director, AHMM
GOVERNANCE
128 Introduction from the Chairman
129 Governance at a glance
130 Our stakeholders
131 The section 172(1) statement
134 Board of Directors
136 Executive management team
138 Corporate Governance statement
152 Nominations Committee report
156 Audit Committee report
170 Risk Committee report
182 Responsible Business Committee report
190 Remuneration Committee report
224 Directors’ report
229 Statement of Directors’ responsibilities
128
Derwent London plc / Report and Accounts 2022
INTRODUCTION FROM THE CHAIRMAN
2023 FOCUS AREAS
• Ongoing review of the Group’s strategy and five-year plan
• Implement findings from the recent externally facilitated Board performance evaluation
• Continue to monitor the Group’s long-term succession and talent development pipeline
• During Q3 2023, begin the recruitment process for a new Non-Executive Director
UK Corporate Governance Code – Compliance statement 2022
The Board confirms that for the year ended 31 December 2022, the principles of
good corporate governance contained in the 2018 UK Corporate Governance Code
(the Code) have been consistently applied.
The FRC is currently reviewing the Code and is likely to publish a revised version.
We will monitor the changes being proposed to the Code and ensure our compliance.
Further information on the Code can be found on the Financial Reporting Council’s
website: www.frc.org.uk
Dear Shareholder,
On behalf of the Board, I am pleased to introduce the Group’s Corporate Governance statement
on pages 138 to 151.
The Board’s activities
Board changes
2022 has been an active and progressive year for the Group
(see pages 150 to 151). The Board’s 2022 strategy awayday
was extended over two days and was held in Scotland.
This enabled the Directors to have a tour of the Scottish
assets and to see first-hand how they were supporting
the business to achieve its net zero carbon ambitions.
Following the awayday, the Board agreed to review the
Company’s purpose.
The 2022 evaluation of the Board, its committees and
individual Directors was externally facilitated by Manchester
Square Partners LLP. We were pleased to receive external
confirmation that our Board and committees continue to
operate effectively with only minor focus areas identified for
2023 (further information on the process and outcome is on
page 149).
Shareholder engagement
Feedback from our key stakeholders is important and
informs the Board’s decision making and strategy
discussions. Following positive stakeholder feedback on
DL/78 in Fitzrovia, the Board approved a similar shared
amenity hub at The Featherstone Building (DL/28).
During the year, the Remuneration Committee engaged with
our top 20 shareholders on refinements to the Remuneration
Policy. The Committee, and the Board, are thankful to the
shareholders who engaged with us.
On page 168, Lucinda Bell, Audit Committee Chair, has
extended an invitation to our shareholders to engage on
the external audit tender which will commence in Q2 2023.
As Richard Dakin (Non-Executive Director) steps down from
the Board on 28 February 2023, the Board will ensure a
smooth transition of responsibility to Helen Gordon as Risk
Committee Chair.
The Nominations Committee continues to monitor the tenure
of Non-Executive Directors to effectively manage succession
planning. Claudia Arney will approach the end of her ninth
year on the Board in Q1 2024 and will be succeeded by
Sanjeev Sharma as Remuneration Committee Chair. During
Q3 2023, we will seek to recruit a new Non-Executive
Director (see page 154).
The Annual General Meeting (AGM)
The forthcoming AGM will be hosted at DL/78 on 12 May
2023. In accordance with the Code, all Directors (except
Richard Dakin) will be putting themselves forward for re-
election at the AGM. Following the external performance
evaluation, I can confirm that each Director’s performance
continues to be highly effective and demonstrates a high
level of commitment to their roles.
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 2023
Governance
129
GOVERNANCE AT A GLANCE
Transparency and accountability underpins
effective corporate governance and builds
stakeholder confidence in our business integrity.
94%
employee engagement
with ‘pulse survey’
60%
Board independence
(excluding the Chairman)
45.5%
female representation
on our Board
+2.6%
increase to the dividend
in 2022
UK Corporate Governance Code 2018
• Fully compliant during 2022
Key governance activities
The Board’s key governance activities during the year
have included:
• A comprehensive review of the Remuneration
Policy which included consulting with shareholders
representing c.64% of our issued share capital on
our proposed amendments
• Reviewed the Group’s talent pipeline and
Non-Executive Director succession plans
• Monitored the Group’s performance towards net
zero carbon (see page 56)
• Conducted employee and occupier ‘pulse surveys’
(see pages 59 and 92)
• Committed to becoming a member of the Business
Disability Forum (see page 186)
• Reviewed the Group’s vision, purpose and values
(see page 140)
Major Board decisions
The major Board decisions made in 2022 included:
• Exchanged a conditional contract to acquire the
freehold of Old Street Quarter, EC1
• Acquisition of 230 Blackfriars Road, £55m
before costs
• Disposal of New River Yard EC1, £67.5m before costs
• Disposal of Bush House WC2, £85m before costs
• Sale of Charterhouse Street EC1, £54m before costs
• Approved a new shared amenity hub at The
Featherstone Building (DL/28)
OUR COMPLIANCE STATEMENT / See page 128
KEY ACTIVITIES OF THE BOARD / See pages 150 to 151
OVERVIEW OF UK CORPORATE
GOVERNANCE CODE 2018
During the year under review, we have applied the
principles and complied with the provisions of good
corporate governance contained in the UK Corporate
Governance Code 2018 (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.
Effective Board
Value creation and preservation
Workforce policies and practices
Governance framework
Purpose, values and culture
Stakeholder engagement
Key activities of the Board in 2022
Page 138
Page 138
Page 139
Page 141
Page 140
Pages 142 to 143
Pages 150 to 151
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.
Board roles
Independence
Conflicts of interest
Other external appointments
Page 145
Page 146
Page 146
Page 146
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.
Board skills, experience and knowledge
Training
Board evaluation
Board and committee composition
Succession planning
Board diversity
Page 147
Page 148
Page 149
Page 153
Page 154
Page 155
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.
Financial reporting
Significant financial judgements
Internal financial controls
Assurance over external reporting
Internal and external audit
External audit tender
Risk management
Business continuity and disaster recovery
Cyber security
Page 157
Page 159
Pages 160 to 161
Pages 162 to 164
Pages 165 to 167
Pages 168 to 169
Pages 171, 174 to 176
Page 178
Pages 180 to 181
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.
Executive Director policy table
Alignment with strategy and performance
Shareholder voting and engagement
Remuneration decisions in context
Executive Directors’ remuneration in 2022
Pages 194 to 196
Page 205
Pages 198 and 204
Pages 207 to 209
Pages 213 to 221
130
Derwent London plc / Report and Accounts 2022
OUR STAKEHOLDERS
Proactive and positive stakeholder engagement secures our long-term success.
We recognise that we have a responsibility to all our stakeholders. Through effective engagement we are able to build
strong and sustainable relationships. The table below illustrates the value provided to Derwent London by our stakeholders
and the value we create in return.
By having an in-depth knowledge of our stakeholders, their concerns and priorities, we are able to work closely alongside
them to achieve our mutual goals, create value and, wherever possible, provide proactive support.
Our section 172(1) statement for the year ended 31 December 2022 is on pages 131 to 133 and demonstrates how our
stakeholders influenced some of the decisions taken by the Board in 2022.
STAKEHOLDER VALUE CREATION
Derwent London is committed to delivering long-term responsible value to all key stakeholders.
Local communities & others
Occupiers
We are committed to supporting the communities in which
we operate, including the NHS, local businesses, residents
and the wider public.
• Value received: feedback on the needs of local
communities and charitable organisations so that our
buildings can become an integral part of the community.
• Value created: enhancement of the local area surrounding
our buildings for the joint benefit of Derwent London,
our occupiers and local communities. We operate as a
responsible neighbour and member of the community.
Our success is dependent on our ability to understand and
respond to our occupiers’ changing needs and aspirations.
• Value received: invaluable feedback on changing occupier
trends and requirements. Collaboration on our net zero
carbon and community initiatives.
• Value created: design-led, amenity-rich ‘long-life,
loose-fit, low carbon’ space which helps to retain and
enrich talent. A community ‘village’ environment for
our occupiers.
Employees
We have an experienced, diverse
and dedicated workforce which
we recognise as a key asset of
our business.
• Value received: benefit of
their talent, skills and experience.
Receipt of new ideas and
perspectives.
• Value created: an inclusive,
fulfilling and high-performing
workplace. Initiatives that
support health and wellbeing.
Long-term relationships with our
occupiers, suppliers and other
key stakeholders.
STAKEHOLDER VALUE
CREATION
Central & local government
As a responsible business, we
are committed to engaging
constructively with central and
local government to ensure we
support the wider community.
• Value received: better
understanding of public policy
and regulatory frameworks.
• Value created: 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.
Suppliers
Debt providers
Shareholders
We outsource many of our activities
to third party suppliers. We develop
strong working relationships to
ensure we receive the best service.
• Value received: expertise and
service from our supply partners.
• Value created: sustainable
relationships built on trust and
mutual respect for human rights.
We maintain close and supportive
relationships with this group of
long-term stakeholders, characterised
by openness, transparency and
mutual understanding.
• Value received: availability of
long-term cost effective finance.
• Value created: maintenance of
our strong financial position and
return on investment to our debt
providers.
We adopt an open and transparent
approach with our investors with
frequent contact. They play an
important role in helping inform our
strategy and monitor our governance.
• Value received: long-term finance,
strategic input and stewardship.
• Value created: responsibly created,
above average long-term returns.
Governance
131
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.
Issues, factors and stakeholders
Methods used by the Board
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.
On pages 8, 9 and 132 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
b) the interests of
the Company’s
employees
c) the need to foster
the Company’s
business
relationships
with suppliers,
customers and
others
d) the impact of
the Company’s
operations on
the community and
the environment
e) the desirability
of the Company
maintaining a
reputation for
high standards of
business conduct
f) the need to act
fairly between
members of
the Company
Company purpose (page 1)
Central London office market (page 32)
Our business model (page 36)
Our strategy (page 38)
Our people (page 59)
Diversity and inclusion (page 60 and 186)
Non-financial reporting (page 67)
Employee engagement (page 144)
Occupier-focused solutions (page 24)
Social value strategy (page 17)
Responsible payment practices (page 185)
Modern slavery (page 185)
Supply Chain Responsibility Standard
(page 185)
Environmental (page 52)
Net zero carbon (page 27)
SECR and TCFD disclosures (pages 69
to 85)
Community Fund (page 57)
Derwent London brand (page 114)
Purpose, values and culture (page 140)
Whistleblowing (page 139)
Internal financial controls (page 160)
Risk management (page 171)
Anti-bribery and corruption (page 177)
Awards and recognition
(see inside back cover)
Shareholder engagement (page 143)
Annual General Meeting (page 226)
Remuneration Policy (page 194)
Rights attached to shares (page 227)
Voting rights (page 226)
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 182 to 189);
• assessing the potential impact of significant capital
expenditure decisions on our stakeholders;
• identifying the risk management procedures for the
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 pages
8 to 9 and 142 to 144);
• 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 page 148).
In addition to the main methods listed above, during the
year under review the Board also:
• held a strategy review meeting to ensure our strategy
remains fit for purpose (see page 138);
• consulted with shareholders on the proposed
refinements to the Remuneration Policy (see page 198);
• completed an external Board performance evaluation
aligned with the three-year cycle (see page 149);
• reviewed the Group’s vision, purpose and values with
support from an external consultant (see page 140); and
• conducted both employee and occupier ‘pulse surveys’
(see pages 61 and 94).
Public Interest Statement – 2022
As a business that designs and manages office space, 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 (see page 142), 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 1). We have detailed on pages 7 to 9, 24, 27, 50 to
85 and 132 to 133 how we have acted in the public interest during 2022.
132
Derwent London plc / Report and Accounts 2022
THE SECTION 172(1) STATEMENT continued
Stakeholder
Engagement methods
Engagement we received
Our response
Key to strategic objectives
Occupiers
Strategic objectives:
• Regular communication via our Asset and Property
Management teams
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
The impact of stakeholder
engagement on Board
decision making
We utilise various engagement
channels to receive informative
feedback from our key stakeholders
which can be factored into our
principal decisions and activities.
The key activities and principal
decisions undertaken by the Board
in 2022 are detailed on pages 150
to 151. For further information see:
OUR PEOPLE / See page 59
EMPLOYEE ENGAGEMENT /
See page 144
SHAREHOLDER ENGAGEMENT /
See page 143
OCCUPIER ENGAGEMENT /
See page 142
WIDER WORKFORCE REMUNERATION
CONSIDERATIONS / See page 207
• Dedicated Customer Engagement & Communications Managers
• Occupier-focused amenity (for example, DL/78) and events
• Interaction and use of the DL/App
• Constructive and collaborative discussions on sustainability
initiatives and achieving net zero carbon
• Occupier ‘pulse surveys’
Employees
Strategic objectives:
• Employee surveys and Employee Working Groups
• Employee awaydays and town hall meetings
• Health and wellbeing programmes
• Independent whistleblowing system
• A dedicated Non-Executive Director for gathering the views of
the workforce
• Employee members of the Responsible Business Committee
• Intranet for sharing news and achievements
Local communities
& others
Strategic objectives:
• Operation of our Community Fund
• Volunteering and charitable donations
• Provided employment and work experience opportunities
• Engagement throughout the planning and development process
• Engaged with Non-Governmental Organisations (NGOs),
Business Improvement Districts and industry bodies
Suppliers
Strategic objectives:
• Regular correspondence and update meetings
• Our Supply Chain Responsibility Standard and the request for
evidence of compliance
• Signatories to the CICM Prompt Payment Code
• Publication of our latest Modern Slavery Statement
Central & local
government
Strategic objectives:
• Derwent London is a member of London Borough of Islington’s
Living Wage Action Group
• Maintain proactive relationships through regular dialogue and
correspondence with government departments such as HMRC
• Ongoing engagement with local authorities to ensure high
quality planning applications are submitted
Shareholders &
debt providers
Strategic objectives:
• Annual General Meeting (AGM)
• Annual Bondholders Meeting
• Investor meetings, presentations and property tours
• Attendance of property conferences
• Shareholder consultations
• Regular announcements via RNS
• Our annual Report & Accounts
Since opening in 2021, our occupiers have provided
In response to the feedback, the Board approved the creation of a similar
valuable feedback on DL/78 in Fitzrovia, in respect to
shared amenity hub at The Featherstone Building (DL/28) which has been
the range of amenities available.
designed to reflect feedback from occupiers.
Our Property Management team are in regular contact
We assured our occupiers that we place our energy contracts via an
with our occupiers. Through discussions we were aware
independent energy consultant, to provide market competitive benchmarking.
that rising utility costs was of concern for many of
Due to the energy pricing crisis, we have undertaken a separate third party
our occupiers.
review of contract pricing to ensure that the prices offered are in line with the
wider market conditions. We have provided a breakdown of utility pricing to
our occupiers who have been affected by recent contract renewals and are
separately highlighting the utility charges within our managed portfolio service
charge budgets to ensure transparency.
The Board and Executive Committee were made
We provided additional financial help to employees for whom the economic
aware through various employee engagement channels
burden is most challenging, for further information see page 208. In addition,
that employees were concerned by the ‘cost of living
a ‘Financial Wellness’ seminar was organised for all employees which provided
crisis’ in particular rising inflation, interest rates and
practical tips on budgeting, debt, protection and savings.
utility costs.
There has been continuous improvement towards
diversity and inclusion (D&I) across the Company,
To further promote D&I across the business, Derwent introduced a reverse
mentoring initiative under the 10,000 Black Interns programme, involving the
senior leadership and Executive team. This was an initiative that provided the
however, the response from the latest Employee Survey
chance to listen and learn from the lived experiences of young black students.
showed that we can always strive to further increase
Following the disability awareness training modules, the D&I Working Group
the positive impact of D&I across the business.
made recommendations to Directors on initiatives the business could consider.
The Development team conduct a significant amount of
Following receipt of this feedback, the Directors of the Joint Venture decided
consultations as part of our development projects. For
to convert one of our proposed retail spaces on Broadstone Place to a new
the 50 Baker Street development (a Joint Venture with
community facility, which will be operated by BSQ for a peppercorn rent.
Lazari Investment), we engaged with local community
groups, including the Baker Street Quarter Partnership
(BSQ), who are currently based in one of the buildings
on the site. Through this engagement we were advised
that the local area would benefit greatly from a
community space/hub.
The new facility will provide a space for local exhibitions, pop-ups for local
entrepreneurs and fledgling businesses and wellbeing activities. We are
working alongside the BSQ to plan the space and are excited about the
prospects of delivering a vibrant community facility within our development.
As part of our Net Zero Carbon Pathway, we seek to
During design meetings on Network W1, Kier provided practical suggestions on
ensure we are designing buildings, and using efficient
how we could rationalise our design to improve carbon efficiency. In addition,
build methodology, to achieve our targets. For our
through supply chain engagement, feedback was received on materials and
Network W1 development, we appointed Kier to assist
methodology, for example cement replacement opportunities and use of
with this process with the aim of bringing our upfront
reused and recycled raised-access floor tiles. By acting on these suggestions,
carbon (A1-A5) below 600 kgCO2e/m2.
we have been able to agree a design which can achieve our carbon targets.
Paul Williams (CEO) is currently Chairman of the
Westminster Property Association (WPA), a not-
In 2022, WPA and Westminster City Council jointly launched London’s first
Sustainable City Charter, which provides a new framework for decarbonising
for-profit advocacy group, which focuses on policy,
the building environment.
research and maintaining excellent relationships with
Central London’s local authorities. As outlined in our
ESG disclosures, tackling climate change remains
a serious challenge and requires coordinated action
by all key stakeholders.
Paul Williams sits on the Terra Carta Sustainable Markets Initiative as its only
real estate representative and attended two events by invitation of HRH King
Charles at Buckingham Palace. The aim of the initiative is to put nature, people
and the planet at the heart of global value creation. In addition, as members
of the British Property Federation (BPF) and various industry panels, including
the Green Council and Better Building Partnership, we have engaged with best
practice guidance.
The Remuneration Committee consulted with
During consultation, a shareholder requested clarity on the impact of
shareholders representing c.64% of our issued share
purchasing carbon offsets on the new PSP performance metrics. We confirmed
capital on its proposed new Remuneration Policy.
that there would be no impact and ensured this was clear in our disclosures
Attendance at a debt provider forum generated capital
structure feedback from investors.
From shareholder meetings, we were advised that
(see page 212).
It was valuable to the Board to receive feedback from debt investors on their
preferences which can inform the Board’s future financing initiatives.
they would appreciate more frequent updates on our
We have introduced additional EPC-related disclosures into our interim,
portfolio’s Energy Performance Certificate (EPC) ratings
quarterly results announcements and results presentations.
and our progress to achieving the 2023 and (proposed)
2030 regulatory requirements.
Governance
133
Stakeholder
Engagement methods
Engagement we received
Our response
Occupiers
Strategic objectives:
Management teams
• Regular communication via our Asset and Property
• Dedicated Customer Engagement & Communications Managers
• Occupier-focused amenity (for example, DL/78) and events
• Interaction and use of the DL/App
• Constructive and collaborative discussions on sustainability
initiatives and achieving net zero carbon
• Occupier ‘pulse surveys’
Employees
Strategic objectives:
• Employee surveys and Employee Working Groups
• Employee awaydays and town hall meetings
• Health and wellbeing programmes
• Independent whistleblowing system
• A dedicated Non-Executive Director for gathering the views of
the workforce
• Employee members of the Responsible Business Committee
• Intranet for sharing news and achievements
Local communities
& others
Strategic objectives:
• Operation of our Community Fund
• Volunteering and charitable donations
• Provided employment and work experience opportunities
• Engagement throughout the planning and development process
• Engaged with Non-Governmental Organisations (NGOs),
Business Improvement Districts and industry bodies
Suppliers
Strategic objectives:
• Regular correspondence and update meetings
• Our Supply Chain Responsibility Standard and the request for
evidence of compliance
• Signatories to the CICM Prompt Payment Code
• Publication of our latest Modern Slavery Statement
Central & local
government
Strategic objectives:
• Derwent London is a member of London Borough of Islington’s
Living Wage Action Group
• Maintain proactive relationships through regular dialogue and
correspondence with government departments such as HMRC
• Ongoing engagement with local authorities to ensure high
quality planning applications are submitted
Shareholders &
debt providers
Strategic objectives:
• Annual General Meeting (AGM)
• Annual Bondholders Meeting
• Investor meetings, presentations and property tours
• Attendance of property conferences
• Shareholder consultations
• Regular announcements via RNS
• Our annual Report & Accounts
Since opening in 2021, our occupiers have provided
valuable feedback on DL/78 in Fitzrovia, in respect to
the range of amenities available.
In response to the feedback, the Board approved the creation of a similar
shared amenity hub at The Featherstone Building (DL/28) which has been
designed to reflect feedback from occupiers.
Our Property Management team are in regular contact
with our occupiers. Through discussions we were aware
that rising utility costs was of concern for many of
our occupiers.
We assured our occupiers that we place our energy contracts via an
independent energy consultant, to provide market competitive benchmarking.
Due to the energy pricing crisis, we have undertaken a separate third party
review of contract pricing to ensure that the prices offered are in line with the
wider market conditions. We have provided a breakdown of utility pricing to
our occupiers who have been affected by recent contract renewals and are
separately highlighting the utility charges within our managed portfolio service
charge budgets to ensure transparency.
The Board and Executive Committee were made
aware through various employee engagement channels
that employees were concerned by the ‘cost of living
crisis’ in particular rising inflation, interest rates and
utility costs.
There has been continuous improvement towards
diversity and inclusion (D&I) across the Company,
however, the response from the latest Employee Survey
showed that we can always strive to further increase
the positive impact of D&I across the business.
We provided additional financial help to employees for whom the economic
burden is most challenging, for further information see page 208. In addition,
a ‘Financial Wellness’ seminar was organised for all employees which provided
practical tips on budgeting, debt, protection and savings.
To further promote D&I across the business, Derwent introduced a reverse
mentoring initiative under the 10,000 Black Interns programme, involving the
senior leadership and Executive team. This was an initiative that provided the
chance to listen and learn from the lived experiences of young black students.
Following the disability awareness training modules, the D&I Working Group
made recommendations to Directors on initiatives the business could consider.
The Development team conduct a significant amount of
consultations as part of our development projects. For
the 50 Baker Street development (a Joint Venture with
Lazari Investment), we engaged with local community
groups, including the Baker Street Quarter Partnership
(BSQ), who are currently based in one of the buildings
on the site. Through this engagement we were advised
that the local area would benefit greatly from a
community space/hub.
Following receipt of this feedback, the Directors of the Joint Venture decided
to convert one of our proposed retail spaces on Broadstone Place to a new
community facility, which will be operated by BSQ for a peppercorn rent.
The new facility will provide a space for local exhibitions, pop-ups for local
entrepreneurs and fledgling businesses and wellbeing activities. We are
working alongside the BSQ to plan the space and are excited about the
prospects of delivering a vibrant community facility within our development.
As part of our Net Zero Carbon Pathway, we seek to
ensure we are designing buildings, and using efficient
build methodology, to achieve our targets. For our
Network W1 development, we appointed Kier to assist
with this process with the aim of bringing our upfront
carbon (A1-A5) below 600 kgCO2e/m2.
During design meetings on Network W1, Kier provided practical suggestions on
how we could rationalise our design to improve carbon efficiency. In addition,
through supply chain engagement, feedback was received on materials and
methodology, for example cement replacement opportunities and use of
reused and recycled raised-access floor tiles. By acting on these suggestions,
we have been able to agree a design which can achieve our carbon targets.
Paul Williams (CEO) is currently Chairman of the
Westminster Property Association (WPA), a not-
for-profit advocacy group, which focuses on policy,
research and maintaining excellent relationships with
Central London’s local authorities. As outlined in our
ESG disclosures, tackling climate change remains
a serious challenge and requires coordinated action
by all key stakeholders.
The Remuneration Committee consulted with
shareholders representing c.64% of our issued share
capital on its proposed new Remuneration Policy.
Attendance at a debt provider forum generated capital
structure feedback from investors.
From shareholder meetings, we were advised that
they would appreciate more frequent updates on our
portfolio’s Energy Performance Certificate (EPC) ratings
and our progress to achieving the 2023 and (proposed)
2030 regulatory requirements.
In 2022, WPA and Westminster City Council jointly launched London’s first
Sustainable City Charter, which provides a new framework for decarbonising
the building environment.
Paul Williams sits on the Terra Carta Sustainable Markets Initiative as its only
real estate representative and attended two events by invitation of HRH King
Charles at Buckingham Palace. The aim of the initiative is to put nature, people
and the planet at the heart of global value creation. In addition, as members
of the British Property Federation (BPF) and various industry panels, including
the Green Council and Better Building Partnership, we have engaged with best
practice guidance.
During consultation, a shareholder requested clarity on the impact of
purchasing carbon offsets on the new PSP performance metrics. We confirmed
that there would be no impact and ensured this was clear in our disclosures
(see page 212).
It was valuable to the Board to receive feedback from debt investors on their
preferences which can inform the Board’s future financing initiatives.
We have introduced additional EPC-related disclosures into our interim,
quarterly results announcements and results presentations.
134
Derwent London plc / Report and Accounts 2022
BOARD OF DIRECTORS
MARK BREUER
Chairman
Age 60
PAUL WILLIAMS
Chief Executive
Age 62
HELEN GORDON
Senior Independent Director
Age 63
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).
Appointed to the Board: 1998
Paul is a chartered surveyor who joined
the Group in 1987. He was appointed
Chief Executive in 2019. He 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 Westminster Property
Association and Board member of the New
West End Company (NWEC).
Committee:
Responsible Business.
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.
Committees:
Nominations, Remuneration, Risk.
DAMIAN WISNIEWSKI
Chief Financial Officer
Age 61
NIGEL GEORGE
Executive Director
Age 59
EMILY PRIDEAUX
Executive Director
Age 43
Appointed to the Board: 2010
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.
Other public appointments:
Trustee and member of the governing body
at the Royal Academy of Music and
Non-Executive Director at the ABRSM.
Appointed to the Board: 1998
Nigel is a chartered surveyor who joined
the Group in 1998. He is responsible for
leading Derwent’s investment acquisitions,
disposals and analysis. In addition,
his responsibilities include overseeing
the Group’s property development and
sustainability teams.
Other public appointments:
Director of the Chancery Lane
Association Limited.
Appointed to the Board: 2021
Emily has overall responsibility
for overseeing Leasing and Asset
Management transactions, building
on our excellent customer service and
relations, leading our marketing and digital
strategy, whilst continuing to ensure that
our future developments provide best in
class workspace for the next generation of
businesses. Emily is a chartered surveyor
and was previously Director of Investment
Management at CB Richard Ellis
North America.
Other public appointments:
Director of The Paddington Partnership.
Governance
135
CLAUDIA ARNEY
Non-Executive Director
Age 52
LUCINDA BELL
Non-Executive Director
Age 58
RICHARD DAKIN
Non-Executive Director
Age 59
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.
Committees:
Remuneration (Chair), Audit, Nominations,
Responsible Business.
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, and Non-Executive Director of Crest
Nicholson Holdings plc.
Committees:
Audit (Chair), Nominations,
Remuneration, Risk.
Appointed to the Board: 2013
Richard is the Managing Director of
Capital Advisors Limited, CBRE, since
2014. Previously, he had been employed at
Lloyds Bank since 1982 where he gained
an extensive knowledge of property
finance and the real estate sector. He is
a Fellow of the Royal Institution of
Chartered Surveyors.
Committees:
Risk (Chair), Audit, Nominations.
SANJEEV SHARMA
Non-Executive Director
Age 58
DAME CILLA SNOWBALL
Non-Executive Director
Age 64
Appointed to the Board: 2021
Sanjeev is an independent member of
the Estates Strategy Committee of King’s
College University London.
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:
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 £67.2bn
Private & Alternative Assets division.
Committees:
Audit, Nominations, Remuneration, Risk.
Other public appointments:
Governor of the Wellcome Trust, Director
of Genome Research Limited and Non-
Executive Director of Whitbread PLC.
Committees:
Responsible Business (Chair),
Nominations, Risk.
DAVID LAWLER1
Company Secretary
Joined Derwent London:
September 2017
Appointed to the Executive Committee:
September 2017
1 Member of the Executive team.
136
Derwent London plc / Report and Accounts 2022
EXECUTIVE MANAGEMENT TEAM
VASILIKI ARVANITI
Head of Asset Management
Joined Derwent London:
September 2019
RICHARD BALDWIN
Director of Development
Joined Derwent London:
January 2011
JOHN DAVIES
Head of Sustainability
Joined Derwent London:
January 2013
Appointed to Executive Committee:
January 2022
Appointed to Executive Committee:
January 2011
Appointed to Executive Committee:
January 2022
PHILIPPA DAVIES
Head of Leasing
Joined Derwent London:
April 2013
Appointed to Executive Committee:
July 2022
ROBERT DUNCAN
Head of Investor Relations
& Strategic Planning
Joined Derwent London:
September 2021
Appointed to Executive Committee:
January 2023
JAY JOSHI
Group Financial Controller
Joined Derwent London:
April 2012
Appointed to Executive Committee:
April 2021
KATY LEVINE
Head of Human Resources
Joined Derwent London:
September 2008
VICTORIA STEVENTON
Head of Property Management
Joined Derwent London:
December 2019
Appointed to Executive Committee:
January 2023
Appointed to Executive Committee:
January 2022
JENNIFER WHYBROW
Head of Financial Planning
& Analysis
Joined Derwent London:
June 2007
Appointed to Executive Committee:
January 2018
Governance
137
Senior Management
Lesley Bufton
Matt Cook
Richard Dean
Tim Hyman
Benjamin Lesser
Umar Loane
Matt Massey
Heethen Patel
Matt Peaty
Giles Sheehan
Jonathan Theobald
David Westgate
Head of Property Marketing
Head of Digital Innovation & Technology
Director of Investment
Group Architect
Head of Design & Innovation
Head of Property Accounts
Head of Project Management
Financial Controller
Head of Health & Safety
Head of Investment
Head of Investment Analytics
Group Head of Tax
Joined Derwent London
October 2003
November 2015
January 2023
September 2008
May 2010
February 2013
March 2014
January 2008
November 2022
February 2007
December 2012
January 2008
25 Savile Row W1
138
Derwent London plc / Report and Accounts 2022
CORPORATE GOVERNANCE STATEMENT
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) and illustrates how we have
applied the Code principles and complied with the provisions. Further information on the
Code and our compliance is on pages 128 and 129.
1. BOARD LEADERSHIP
AND COMPANY PURPOSE
Effective Board
Our Board is composed of highly skilled professionals
who bring a range of skills, perspectives and corporate
experience to our boardroom.
To ensure sufficient time for discussion, the Board utilises
its five principal committees to effectively manage its time
(see page 141). 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.
Value creation and preservation
In accordance with the Code, the role of the Board is
to promote the long-term sustainable success of the
Company, generate value for shareholders and contribute
to wider society. The appropriateness of our business
model is regularly reviewed by the Board at its strategy
review meetings to ensure it remains capable of generating
long-term sustainable value for our shareholders and other
key stakeholders. As a business, we continue to create
value responsibly through:
Sustainable initiatives
• Science-based targets for operational energy intensity
reduction across our managed portfolio.
BOARD BIOGRAPHIES / See pages 134 to 135
• Phased embodied carbon targets for office new
BOARD SKILLS AND EXPERIENCE / See page 147
BOARD TRAINING DURING 2022 / See page 148
The Board conducts a detailed annual review of our
strategy (including our purpose and strategic objectives).
This year, the strategy awayday was held in Scotland
and was extended over two days. The Board received a
tour of our Scottish assets and was able to gain a deeper
understanding of its contribution to our sustainability
initiatives. Some of the key aspects discussed by the
Board during its strategy discussions included:
• changes to the London office market and investment
market (see pages 32 to 35);
• nature of office occupation;
build developments.
• We commissioned a costed third party EPC
upgrade survey and the recommendations are now
being implemented.
• Obtained resolution to grant planning permission for a
c.100-acre, 18.4MW solar park on our Scottish land which
is expected to generate >40% of the electricity needs of
our managed London portfolio.
Conservative balance sheet
• At 31 December 2022, our EPRA loan-to-value ratio was
23.9% and our net interest cover ratio was 423% (inc.
share of joint ventures).
• Limited near-term refinancing: weighted average debt
maturity of 6.2 years. Next refinancing in October 2024.
• our aspirations, culture and purpose;
• 100% of drawn debt fixed or hedged at 31 December 2022.
• 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.
REASONS TO INVEST / See page 4
OUR STRATEGY / See pages 38 to 44
THE SECTION 172(1) STATEMENT / See pages 131 to 133
• £650m green debt facilities, comprising a £300m green
revolving credit facility and £350m 1.875% green bond,
issued in line with our Green Finance Framework.
In order for the business to continue to generate
long-term sustainable value, the Board’s actions during
2022 included:
• Continuing with our strategy of capital recycling
through the selling of assets with a lower forward return
profile and reinvesting proceeds into higher returning
opportunities, such as developments.
• Based on the feedback received from stakeholders
on DL/78 in Fitzrovia, the Board approved DL/28 an
equivalent shared amenity hub in The Featherstone
Building EC1.
• Monitored the phased roll out of the Intelligent Building
Programme, which will help to deliver further cost and
carbon efficiencies.
Governance
139
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 132);
• maintaining a sound system of risk oversight,
management and an effective suite of internal controls
(see pages 160 to 161 and 174 to 176);
• providing independent insight and knowledge from the
Non-Executive Directors; and
• facilitating the development and monitoring of key
performance indicators (see pages 45 to 49).
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 2022.
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:
Major property
acquisition or disposal
Major capital
expenditure project
Level of approval:
Valued above £40m
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.
We ensure that the information shared with our Board is of
sufficient depth to facilitate debate and to fully understand
the content without becoming unwieldy. We often invite the
preparer of the report to attend meetings so the Board can
question management directly. The agenda for upcoming
meetings is set by the Board Chairman, or Committee
Chair, with support from the Company Secretary.
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.
Workforce policies and practices
The Executive Directors, with assistance from members
of the Executive Committee, review and approve all key
policies and practices which could impact on our workforce
or influence their behaviours to ensure they support the
Group’s purpose and reflect our values (see page 140).
Policies are published on the intranet and where relevant
included in the employee handbook. Our employees are
required to confirm their understanding of these policies
upon recruitment and on an annual basis.
To ensure policies are embedded in our business practices,
we hold presentations to staff which highlight the key
messages and notify them of any changes. 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.
COMPLIANCE TRAINING / See page 171
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.
The register of potential conflicts of interest is regularly
reviewed to ensure it remains up to date (see page 146).
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 a whistleblowing system.
Our whistleblowing procedures are included within our
employee handbook, on our Group intranet and staff
noticeboards. Following receipt of a whistleblowing
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 whistleblowing system. During the
year under review, we did not receive any messages via
our whistleblowing system (2021: no messages). Due to
the ‘open door’ nature of our business, concerns are often
raised directly with management, the CEO or the HR team.
140
Derwent London plc / Report and Accounts 2022
CORPORATE GOVERNANCE STATEMENT continued
PURPOSE
Why we do what we do
VALUES
The qualities we embody
Our purpose communicates the Group’s strategic direction
and intentions to our employees, occupiers and wider
stakeholders. Due to its importance, it is regularly reviewed
by the Board.
During the year under review, the Board continued its
discussions on how best to streamline our purpose and
provide greater clarity to stakeholders on what is important
to Derwent London (our core values). With assistance
from third party advisers, the Board agreed its vision,
made refinements to the Group’s purpose and condensed
our values into three ‘core values’. Our progress towards
achieving our purpose during 2022 can be reviewed on the
following pages:
LONG-LIFE, LOW CARBON, INTELLIGENT BUILDINGS /
See page 23
DELIVERING ABOVE AVERAGE LONG-TERM RETURNS
FOR ALL OUR STAKEHOLDERS / See pages 46 and 205
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 Executive Directors have been delegated responsibility
for ensuring that policies and behaviours set at Board level
are effectively communicated and implemented across the
business. 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 2022.
A DYNAMIC AND INCLUSIVE TEAM / See page 28
DESIGN-LED DEVELOPMENT / See page 23
ESG HIGHLIGHTS / See page 7
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 is
seen in our employees’ engagement scores, retention rate and
levels of productivity. As the cultural tone of a business comes
from the boardroom, safeguarding our culture is a key factor in
the development of the Board’s succession plans.
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, monthly
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 2022, management
training covered allyship and inclusion, recognising and
supporting mental health concerns and unconscious bias.
Assessment and monitoring
The Board measures the culture 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 is 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.
These monitoring activities helped to inform the Board’s
discussions on our vision, purpose and values during 2022.
ATTRACTING AND OPTIMISING TALENT / See page 59
INVESTING IN TEAM COACHING / See page 61
Governance
141
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.
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 38
MANAGING RISKS /
See page 112
SECTION 172(1) STATEMENT /
See page 131
BOARD ACTIVITIES /
See page 150
The Board delegates certain matters to its five principal committees
Risk Committee
Audit Committee
Remuneration
Committee
Responsible Business
Committee
Reviews and monitors
the Group’s principal
and emerging risks
and the effectiveness
of the Group’s risk
management systems.
Oversees the Group’s
financial reporting,
maintains an
appropriate relationship
with the external
Auditor and monitor’s
the Group’s financial
internal controls.
Establishes the Group’s
Remuneration Policy
and ensures there is
a clear link between
performance and
remuneration.
Monitors the Group’s
corporate responsibility,
sustainability
and stakeholder
engagement activities.
Nominations Committee
Ensures the Board (and
its committees) have
the correct balance of
skills, knowledge and
experience and that
adequate succession
plans are in place.
REPORT /
See page 170
REPORT /
See page 156
REPORT /
See page 190
REPORT /
See page 182
REPORT /
See page 152
The terms of reference for each Board committee are available on the Group’s website at www.derwentlondon.com
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.
Executive Directors
CHIEF EXECUTIVE’S
STATEMENT /
See page 18
MEASURING OUR
PERFORMANCE /
See page 45
PROPERTY REVIEW /
See page 86
EXECUTIVE MANAGEMENT
TEAM /
See page 136
S
R
E
D
L
O
H
E
K
A
T
S
R
E
H
T
O
D
N
A
S
R
E
D
L
O
H
E
R
A
H
S
Supporting committees
The executives operate a number of supporting committees that
provide oversight on key business activities and risks.
CREDIT COMMITTEE /
See page 114
HEALTH AND SAFETY
COMMITTEE /
See page 65
SUSTAINABILITY
COMMITTEE /
See page 72
SPONSORSHIP AND
DONATIONS COMMITTEE /
See page 65
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 shareholders (see page 143),
employees (see page 144) and other key stakeholders are on pages 8 to 9.
142
Derwent London plc / Report and Accounts 2022
CORPORATE GOVERNANCE STATEMENT continued
STAKEHOLDER ENGAGEMENT
How do we engage with our occupiers?
Our Asset Management and Property Management teams
communicate with our occupiers with regular meetings
and ‘check-in’ calls with key contacts. We communicate
proactively, and keep our occupiers updated on matters
that affect their space and employees. Through our
‘villages’, we aim to build long-term relationships with our
occupiers and the creation of a collaborative atmosphere in
our buildings.
Other key engagement channels are:
• Occupier surveys: Typically conducted face-to-face, at
least annually, to facilitate open dialogue and allow for
relationship building and transparent discussions.
• Sustainability and Net Zero Carbon Pathway:
The importance of climate change, and the current
energy pricing crisis, has led to constructive and
collaborative discussions.
• Amenity and events: We schedule events (wellness
talks, social events, online auctions, speakers etc.) as
well as community initiatives for our occupiers and
other stakeholders.
• Technology: Through the DL/App we can communicate
and share benefits/offers with our occupiers. As we roll
out our Intelligent Building Programme to more buildings
across our portfolio, our tenants will hopefully benefit
from cost and carbon savings and greater access to
efficiency and usage data.
• Customer Engagement & Communications Managers:
The role of these dedicated managers is to ensure a
collaborative approach to all occupier communications
and engagement to further develop our close
relationships with occupiers.
OCCUPIER-FOCUSED SOLUTIONS / See page 24
We recognise the importance of clear communication
and proactive engagement with all of our stakeholders.
During the year under review, the Board utilised various
engagement channels to receive valuable feedback from
our key stakeholders (see page 132). Our stakeholder
engagement programmes are kept under routine review
by the Board.
We provide an explanation of how our stakeholders are
impacted on the Board’s discussions within our section
172(1) statement on pages 131 to 133.
The Board has appointed four employees to the
Responsible Business Committee, who are fully involved
in all aspects of the Committee’s activities (see page 184).
Having employees on a Board level committee enables our
employees to have direct involvement in decision making
and brings the voice of our employees directly to
the boardroom.
Further information is available on the following pages:
REMUNERATION POLICY / See page 198
EMPLOYEE SURVEY / See page 59
DL/28 (OLD STREET) / See page 24
COMMITTEE EMPLOYEE MEMBERS / See page 184
Stakeholder impact analysis
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 stakeholder impact analysis identifies:
• potential benefits and areas of concern for each
stakeholder group;
• the procedures and plans being implemented to mitigate
against any areas of concern; and
• who is responsible for ensuring the mitigation plans are
being effectively implemented.
CALENDAR OF OUR MAIN SHAREHOLDER EVENTS IN 2022
JAN
Property
conference
(London).
FEB
Published our
2021 Full Year
Results. Investor
roadshows in
London.
MAR
Roadshows.
Property
conferences
(Miami and
London).
APR
Notice of
AGM is sent to
shareholders.
MAY
Held our
AGM. Property
conferences
(London and
Amsterdam).
Property tours.
JUN
Payment of
the 2021 Final
Dividend.
Property tours.
JUL
AUG
SEP
OCT
NOV
DEC
Property tours.
Published our
interim results
Property
conferences
for 2022. Investor
(New York).
roadshows in
London.
Payment of the
2022 Interim
Dividend.
Property tours.
Property tours.
Property
conferences
(London).
Property tours.
Roadshows for
private investors
(Leeds).
Governance
143
• Property conferences: During 2022, we attended eight
property conferences (Amsterdam, London, Miami and
New York).
• AGM: The AGM provides an opportunity for private
shareholders, in particular, to question the Directors and
the chairs of each of the Board committees. Information
on the 2023 AGM is on page 226, including how we
would engage with shareholders in the event of a
significant vote against an AGM resolution. We ensure
that the Notice of AGM is issued at least 20 working days
in advance of the AGM date.
• Annual Report & Accounts: Our annual Report &
Accounts is available to all shareholders. Through our
electronic communication initiatives, we aim to make
our annual Report & Accounts as accessible as possible.
Shareholders can opt to receive a hard copy in the post
or PDF copies via email or from our website. Additionally,
if a shareholder holds their Derwent London shares via a
nominee account and encounters difficulty receiving our
annual Report & Accounts via their nominee provider,
they are welcome to contact the Company Secretary to
request a copy.
• Websites: Our website, www.derwentlondon.com, has
a dedicated investor section which includes our annual
Report & Accounts, results presentations (which are
made to analysts and investors at the time of the interim
and full year results) and our financial calendar for the
upcoming year. We also create websites for specific
developments which are used to explain the Group’s
current projects in greater detail.
INVESTOR MEETINGS
230
we engaged with c.72%
of our shareholder register
during 2022
How do we engage with our shareholders?
Shareholders play a valuable role in safeguarding the
Group’s governance through, for example, the annual
re-election of Directors, monitoring and rewarding their
performance and engagement and constructive dialogue
with the Board. The Group aims to be as transparent as
possible with the information it provides to investors and
welcomes face-to-face dialogue and engagement. Further
information on how we assure the information we publicly
disclose is on pages 162 to 164.
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).
If shareholders have any concerns, which the normal
channels of communication to the CEO, CFO or Chairman
have failed to resolve, or for which contact is inappropriate,
then our Senior Independent Director, Helen Gordon, is
available to address them. Helen Gordon can be contacted
via the Company Secretary whose contact details are on
page 315.
To engage with our shareholders, the Board utilises the
following engagement methods:
• Shareholder consultation: We will always seek to
engage with shareholders when considering material
changes to either our Board, strategy or remuneration
policies. In 2022, the Remuneration Committee
consulted with 20 of our largest shareholders,
representing approximately 64% of our issued share
capital (see page 198). During 2023, we will seek
engagement with shareholders on the external audit
tender (see page 168).
• Investor meetings, presentations and property tours:
Investor meetings are predominantly attended by our
CEO, CFO and at least one other senior executive.
During the year, these meetings focused on the Group’s
portfolio, strategy, capital structure, outlook for yields
and the occupational market backdrop. Where significant
views were expressed, either during or following the
meetings, these were recorded and circulated to all
Directors. During 2022, we hosted year end and interim
results presentations and 70 property tours.
JUL
AUG
SEP
OCT
NOV
DEC
Property tours.
Published our
interim results
for 2022. Investor
roadshows in
London.
Property
conferences
(New York).
Payment of the
2022 Interim
Dividend.
Property tours.
Property tours.
Property
conferences
(London).
Property tours.
Roadshows for
private investors
(Leeds).
CALENDAR OF OUR MAIN SHAREHOLDER EVENTS IN 2022
JAN
Property
conference
(London).
FEB
Published our
2021 Full Year
Results. Investor
roadshows in
London.
MAR
Roadshows.
Property
conferences
(Miami and
London).
APR
MAY
JUN
Notice of
AGM is sent to
shareholders.
Held our
AGM. Property
conferences
(London and
Amsterdam).
Property tours.
Payment of
the 2021 Final
Dividend.
Property tours.
144
Derwent London plc / Report and Accounts 2022
CORPORATE GOVERNANCE STATEMENT continued
HOW DO WE ENGAGE WITH OUR EMPLOYEES?
We have an experienced, diverse and dedicated workforce which is recognised as a key asset of our business. The Board
and its committees routinely invite members of the management team to join meetings to present on the matters being
discussed. In order to reach all employees, the Board utilises a combination of formal and informal engagement methods
which are detailed below.
Dedicated Non-Executive
Director
Responsible Business
Committee
Dame Cilla Snowball is the
dedicated Non-Executive
Director for gathering the views
of the workforce. As Chair
of the Responsible Business
Committee, Cilla oversaw
and received updates on our
employee engagement methods.
The Responsible Business
Committee has four employee
members which allows our
employees to have direct
involvement in decision making
and works to bring the voice of
our employees directly to
the boardroom.
FURTHER INFORMATION ON
CILLA’S ROLE / See page 145
See page 182
Town hall meetings
The CEO hosts
monthly town hall
meetings to ensure all
employees are kept
informed of business
activity. Employees
are encouraged to put
questions forward in
advance (anonymously
if they wish), which are
then answered during
the sessions.
HOW DO WE
ENGAGE WITH OUR
EMPLOYEES?
Whistleblowing
Our whistleblowing system
offers an anonymous reporting
line for employees to raise
any concerns directly with the
Board. The business continues
to have an ‘open door’ nature
where concerns are often raised
directly with management,
the CEO or HR team, and
appropriately investigated.
See page 139
Awayday
On 22 September we
held our employee
awayday which provided
an opportunity for our
CEO to share the vision
and strategy for the
future and encourage
collaboration across
the business.
See page 62
Intranet
Employee surveys
Working groups
A variety of social media
channels are utilised to enhance
engagement and the exchange
of information on the Company’s
activities to all stakeholders.
These channels include
Facebook, Twitter, Instagram,
the DL/App and our intranet.
The DL/App has been an active
channel during 2022 providing
information to our customers on
notices, meeting rooms
and events.
We gather feedback regularly
from our employees to assess
their levels of engagement.
We conduct a formal biennial
employee survey, designed
and developed in conjunction
with an independent provider.
A working group is established
after each formal employee
survey with the aim of making
recommendations to the
Executive Committee.
See page 59
The Group currently operates
a number of working groups
covering areas such as
diversity and inclusion,
innovation, and social events.
Feedback received from these
working groups are given to
the Responsible Business
Committee or the Executive
Directors, which is transferred
to the Board.
THE DIVERSITY AND
INCLUSION WORKING GROUP /
See page 186
Governance
145
2. 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 regularly reviewed 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
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
• 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
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
investors, alongside the CEO
Designated NED for gathering the views of our
workforce1, 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 whistleblowing system
from the Group’s employees
• Monitor the effectiveness of engagement programmes
established for employees
• Provide regular updates to the Board
• Monitor the outcome of employee surveys and provide input on
their design
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
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
investors, alongside the CEO
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
In addition, the Chairman ensures that all Directors continue to remain engaged with our employees, and challenge and contribute to discussions on workforce engagement.
146
Derwent London plc / Report and Accounts 2022
CORPORATE GOVERNANCE STATEMENT continued
Independence
The Board has identified on page 147 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 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 153).
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.
Independence
of the Board
(excluding the Chairman)
Status
Independent
Executive
60%
40%
Conflicts of interest
As a Non-Executive Director’s independence could be
impacted where a Director has a conflict of interest, the
Board operates a policy that restricts a Director from voting
on any matter in which they might have a personal interest
unless the Board unanimously decides otherwise.
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.
Richard Dakin will step down from the Board on 28 February
2023, however prior to his departure he had an active conflict
of interest which was mitigated by the Board by excluding
him from discussions relating to the Group’s valuation,
appointment of valuers and their fees. To accommodate this,
the Audit Committee held separate valuation meetings which
Richard did not attend. From 1 March 2023, the separate
valuation meetings will no longer be required.
RELATED PARTY DISCLOSURES / See page 290
Other external appointments
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 the year 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 134 and 135).
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.
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. The Board confirms that none of our Directors
are overcommitted and are capable of discharging
sufficient time to Derwent London. 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.
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 table on page 147 for Board meeting attendance).
Non-Executive Director
Board Chairman
Executive Director
Appointments
Mandates
Appointments
Mandates
Appointments
Mandates
Mark Breuer
Claudia Arney
Lucinda Bell
Richard Dakin
Helen Gordon
Sanjeev Sharma
Cilla Snowball
–
2
3
1
1
1
1
–
2
3
1
1
1
1
2
1
–
–
–
–
–
4
2
–
–
–
–
–
–
–
–
–
1
1
–
–
–
–
–
3
3
–
Total
Mandates1
4
4
3
1
4
4
1
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.
Governance
147
3. COMPOSITION, SUCCESSION AND EVALUATION
Board composition, skills, experience 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.
Independent
Number of
meetings
Attendance at Board
meetings1
Chairman
Mark Breuer
Executive Directors
Paul Williams
Damian Wisniewski
Nigel George
Emily Prideaux
David Silverman (until 14 April 2022)2
Non-Executive Directors
Claudia Arney
Lucinda Bell
Richard Dakin
Helen Gordon
Cilla Snowball
Sanjeev Sharma
Yes
No
No
No
No
No
Yes
Yes
Yes
Yes
Yes
Yes
7
7
7
7
7
1
7
7
7
7
7
7
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
1 Percentages based on the meetings entitled to attend for the 12 months ended 31 December 2022.
2 David Silverman stepped down from the Board on 14 April 2022.
The chart below provides an overview of the skills and experience of our Directors as at 31 December 2022. To be counted
for each skill area, a Director is required to have executive or senior management experience.
Skills and experience
Executive or strategic leadership (including prior Board experience)
Property development, construction or real estate management
CFO, accountancy or audit
Financial markets, investment banking or capital projects
Risk management
Health and safety
Environmental (including climate change)
Corporate responsibility, community relations or charitable bodies
Investor relations and engagement
Governance, legal or compliance
Remuneration Committee membership and/or experience
Technology, data or cyber security
Executive Director
Non-Executive Director
4
4
1
4
2
2
3
1
4
2
2
1
4
7
7
6
4
3
6
5
4
7
6
3
For the skill areas 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 134 to 135
148
Derwent London plc / Report and Accounts 2022
CORPORATE GOVERNANCE STATEMENT continued
Training
During 2022:
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.
Our Directors receive training on their duties under section
172(1) of the Companies Act 2006 as part of their induction
process from the Group’s corporate lawyers, Slaughter
& May LLP. The training is uploaded to the Board’s paper
portal for easy reference. In addition, at each meeting, the
Board’s pack of documents includes the codification of its
duties alongside the meeting agenda to ensure it is at the
forefront of discussions.
COMPLIANCE TRAINING / See page 171
• All Directors were provided with refresher training on
health and safety from external lawyers.
• All employees (including Directors) participated in
online compliance training courses on a range of topics
including disability awareness, modern slavery and
market abuse (further information on page 171).
• The Audit Committee received training on climate-
related reporting (see page 158) and the technology
used in our finance systems.
• The Risk Committee received a legal update from
Slaughter & May LLP in November.
• All Directors attended regular external briefing sessions
from the major accountancy firms.
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 152 to 155
provides further information on:
• Board composition and Non-Executive Director tenure;
• Board appointments and induction;
• succession planning; and
• diversity.
Members of the Company Secretarial team
Governance
149
ANNUAL BOARD EVALUATION
Evaluation for the year ended 31 December 2022
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.
YEAR 3
Internal evaluation
facilitated by
the Chairman
YEAR 1
Externally
facilitated
independent review
YEAR 2
Internal evaluation
facilitated by the Senior
Independent Director
Evaluation for the year ended 31 December 2021
The 2021 Board evaluation was internally facilitated
by Mark Breuer (Chairman) and was outlined in the
2021 Report & Accounts on page 141. As a result of this
evaluation, the Board identified a number of areas which
it wished to focus upon during 2022:
Focus area
Actions during 2022
Company
culture
Employee
development
and career
management
Board papers
With assistance from advisers, it was
ensured that the Group’s culture was
clearly understood by our employees
and key stakeholders
The Nominations Committee continued
to focus on employee development and
career management
Board papers were continued to be
streamlined and supporting papers
were included as appendices
Papers to committee members were
distributed a week prior to each meeting
Our external Board evaluation for the year ended
31 December 2022 was externally facilitated by Manchester
Square Partners LLP. When selecting a board evaluator,
each firm was required to provide a written proposal and
present to the Chairman, Senior Independent Director and
Company Secretary. The following factors were considered:
• The evaluator’s proposed method and approach
• Their experience, skills and references
• Any potential conflicts of interest
The evaluation process
The evaluation process was tailored to Derwent
London based on discussions with the Chairman,
Senior Independent Director and Company Secretary.
The Company Secretary provided the evaluator with
any requested information to facilitate the review. The
individual interviews with the Directors and the Company
Secretary were conducted during November/December
and typically lasted for one hour and 30 minutes.
Feedback from the 2022 Board evaluation
The evaluation confirmed that the Board is functioning
well, and governance is strong. It was recognised that
there was a good degree of trust, confidence and healthy
respect between the Executive and Non-Executive
Directors. The main recommendations are detailed below:
• Non-Executive Directors to meet privately at the end of
each Board meeting and to hold occasional one-to-one
meetings with the Chairman
• The Non-Executive Directors are to be provided with
more frequent updates on market trends, competitor
activity and the outcome of post-project reviews
• Arrange more site visits and ensure some Board
meetings are held at other Derwent London buildings
• Consider whether all Non-Executive Directors should
become members of each committee
• Continue to focus on succession and
talent development
• Review the Board skills matrix to further understand
the skills required before agreeing the plans for
Non-Executive Directors succession
Re-election of Directors
In accordance with the Code, the Directors will be putting
themselves forward for re-election at the AGM on 12 May
2023. Following the formal performance evaluation
(detailed above) and taking into account the Directors’
skills and experience (set out on pages 134, 135 and 147),
the Board believes that the re-election of each Director is
in the best interests of the Company.
Evaluation for the year ended 31 December 2023
In accordance with our three-year cycle, the performance
evaluation for the year ending 31 December 2023 will
be internally facilitated by Helen Gordon, our Senior
Independent Director.
150
Derwent London plc / Report and Accounts 2022
CORPORATE GOVERNANCE STATEMENT continued
KEY ACTIVITIES OF THE BOARD DURING 2022
OVERVIEW
The Board met seven 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
• Ongoing updates from the
Executive Directors on the
implementation of strategy
throughout the year, including a
Board strategy awayday in June
• Reviewed and approved
the Group’s five-year plan
and forecast
• Reviewed quarterly project
cost reports
• Approved the portfolio valuation
as at 30 June 2022
• Approved the new Remuneration
Policy ahead of the 2023 AGM
• Approved 2022 interim and
final dividends
• Approved the acquisition of 230
Blackfriars Road, SE1
• Approved the sale of:
– Bush House, WC2
– New River Yard, EC1
– Charterhouse Street, EC1
• Exchanged a conditional
contract to acquire the freehold
of Old Street Quarter, EC1
• Reviewed a project time plan for
Network W1
• Received regular updates on key
construction projects
• Regular updates from Asset
and Property Management on
the portfolio
• Appointed Knight Frank as the
Group’s external valuer
• Received regular updates
on lease expiries and
potential vacancies
• Approved DL/28 in Old Street
Risk management and
internal control
• Reviewed and approved
updates to the key risk
indicator schedule
• Updates from the Risk and Audit
Committee Chairs on the key
areas discussed
• Routinely considered the
Board’s conflict of interests
• Received an update on Cyber &
IT Security
• Regular reports received on
health and safety matters
• Followed up on
recommendations by the
outsourced internal auditors
• Received assurance reports
from Deloitte in respect to
environmental reporting
• Reviewed the compliance
training completion rates and
approved the 2022/2023
training programme
Strategic objectives
Strategic objectives
Strategic objectives
JAN
FEB
MAR
APR
MAY
JUN
AUG
SEP
OCT
NOV
DEC
Board and
committee
meetings
Key
announcements
Sale of New
River Yard, EC1
Audit
Committee
& Valuers
meeting
Executive
Committee
Main Board
Remuneration
Committee
Full year results
announcement
on 24 February
2022
Main Board
(strategy
awayday)
Nominations
Committee
Executive
Committee
Risk Committee
Report &
Accounts and
Notice of AGM
Annual General
Meeting
Executive
Committee
Main Board
Responsible
Business
Committee
Q1 Business
update
Old Street
Quarter EC1,
Exchange of
Contract
LMS Bondholders
meeting
Published results
of 2022 AGM
JUL
Executive
Committee
Audit Committee &
Valuers meeting
Executive
Committee
Remuneration
Committee
Main Board
Nominations
Committee
Risk Committee
Executive
Committee
Main Board
Remuneration
Committee
Audit Committee
Main Board
Executive
Committee
Risk Committee
Remuneration
Committee
Responsible
Business
Committee
Disposal of Bush
Unaudited interim
House WC2
results
Q3 Business
update
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
Governance
151
Corporate reporting and
performance monitoring
• Reviewed the rolling forecasts
and approved the 2023 budget
• Received updates on the
Group’s Net Zero Carbon
Pathway to 2030
• Approved the year end and
interim results
• Approved the Q1 and Q3
business updates
• Reviewed the 2022 Report &
Accounts to ensure it is fair,
balanced, and understandable
• Published our annual
Responsibility Report
• Reviewed and approved the half-
yearly valuations of the Group’s
property portfolio
Stakeholder engagement
Governance
• Hosted the Annual General
Meeting (AGM) on 13 May 2022
• Received updates from
the Responsible Business
Committee on the Group’s
sustainability and
stakeholder initiatives
• Received updates on our
investor engagement
programmes and regular
investor relations reports
• Engaged with shareholders in
advance of the 2023 AGM on
the Remuneration Policy
• Hosted a staff awayday that
prioritised employee collaboration
• Performed a review of the Board
committees’ memberships, led
by the Chairman
• Received regular governance
updates from the
Company Secretary
• Approved the 2022 Modern
Slavery Statement
• Appointed Manchester Square
Partners LLP to conduct the
2022 Board evaluation
• Reviewed the Group’s vision,
purpose and values
• Reviewed succession planning
and talent development across
the business
Strategic objectives
Strategic objectives
Strategic objectives
JAN
MAR
APR
MAY
JUN
Board and
committee
meetings
Executive
Committee
Risk Committee
Annual General
Main Board
(strategy
awayday)
Nominations
Committee
JUL
Executive
Committee
AUG
SEP
OCT
NOV
DEC
Audit Committee &
Valuers meeting
Executive
Committee
Main Board
Nominations
Committee
Risk Committee
Remuneration
Committee
Executive
Committee
Main Board
Remuneration
Committee
Audit Committee
Main Board
Executive
Committee
Risk Committee
Remuneration
Committee
Responsible
Business
Committee
Key
announcements
Sale of New
River Yard, EC1
Report &
Accounts and
Notice of AGM
Disposal of Bush
House WC2
Unaudited interim
results
Q3 Business
update
FEB
Audit
Committee
& Valuers
meeting
Executive
Committee
Main Board
Remuneration
Committee
Full year results
announcement
on 24 February
2022
Meeting
Executive
Committee
Main Board
Responsible
Business
Committee
Q1 Business
update
Old Street
Quarter EC1,
Exchange of
Contract
LMS Bondholders
meeting
Published results
of 2022 AGM
152
Derwent London plc / Report and Accounts 2022
NOMINATIONS
COMMITTEE REPORT
MARK BREUER
Chair of the Nominations Committee
2023 FOCUS AREAS
• Ensure a smooth transition of responsibility to Helen
Gordon as she succeeds Richard Dakin from 1 March
2023 as Risk Committee Chair
• Commence recruitment of a new Non-Executive
Director in Q3 2023, based on a review of the Board’s
composition, skills and diversity
• Continue to monitor the Group’s long-term
succession and talent development pipeline
COMMITTEE MEMBERSHIP DURING 2022
Independent
Number of
meetings1 Attendance2
Mark Breuer
Claudia Arney
Lucinda Bell
Richard Dakin
Helen Gordon
Sanjeev Sharma
Cilla Snowball
Yes
Yes
Yes
Yes
Yes
Yes
Yes
3
3
3
3
3
3
3
100%
100%
100%
100%
100%
100%
100%
1 The Committee attended three scheduled meetings with an additional ad
hoc meeting being held in February. Due to prior business arrangements
Claudia Arney and Cilla Snowball were unable to attend the ad hoc meeting.
2 Percentages are based on the meetings entitled to attend for the 12 months
ended 31 December 2022.
Dear Shareholder,
I am pleased to present an overview of the
Committee’s work during 2022. The Committee
has principally focused on succession planning
and talent development.
Succession planning
Richard Dakin (Non-Executive Director) will step down
from the Board on 28 February 2023. Helen Gordon, who
is currently a member of the Risk Committee, will take
over responsibility for chairing the Risk Committee from
1 March 2023.
The Committee monitors the tenure of Non-Executive
Directors to effectively manage succession planning (see
page 154). Claudia Arney will approach the end of her ninth
year on the Board in Q1 2024 and will be succeeded by
Sanjeev Sharma as Remuneration Committee Chair. During
Q3 2023 the Committee will lead the recruitment process
for a new Non-Executive Director in preparation of Cilla
Snowball approaching the end of her ninth year anniversary
on the Board in the second half of 2024.
Talent development
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. A number of key appointments to the senior
management team have been made during 2022, further
details are on page 154.
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 155). In
respect to ethnic diversity, we are mindful that this remains
a focus area so that we can further harness the benefits
of diversity. We intend to continue to support the diversity
and development of the Group’s talent pipeline.
Further engagement
If you wish to discuss any aspect of the Committee’s
activities, I will be attending the forthcoming AGM
on 12 May 2023 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 2023
Governance
153
Committee composition and performance
Our Committee consists of six independent Non-
Executive Directors as well as our independent Chairman
(biographies are available on pages 134 to 135). 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 three
meetings (2021: eight meetings). 2021 was a particularly
busy year for the Committee with the appointment of both
a new Non-Executive Director and Chairman, leading to a
higher number of meetings being held.
The Committee’s role and responsibilities are set out
in the terms of reference, which were last updated in
August 2022 and are on the Company’s website at:
www.derwentlondon.com/investors/governance/board-
committees
Board and committee composition
The 2022 evaluation of the Board, its committees
and individual Directors was externally facilitated by
Manchester Square Partners LLP, in accordance with
our three-year cycle of evaluations (see page 149).
The review confirmed that the Committee continues to
operate effectively, with no significant matters raised.
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.
The Committee did not identify any material skill gaps on
the Board or its committees. An overview of the Board’s
skills, experience and knowledge is on page 147.
The table below provides an overview of the composition of
the Board’s five principal committees as at 1 January 2023.
Further information on the Board’s diversity is on page 155.
Board and committee composition table
R
e
m
u
n
e
r
a
t
i
o
n
Chair
4
–
–
4
i
N
o
m
n
a
t
i
o
n
s
Chair
7
–
–
7
R
e
s
p
o
n
s
i
b
l
e
B
u
s
i
n
e
s
s
Chair
2
1
4
7
R
i
s
k
Chair
A
u
d
i
t
5
–
–
5
Chair
4
–
–
4
Mark Breuer
Richard Dakin
Claudia Arney
Cilla Snowball
Helen Gordon
Lucinda Bell
Sanjeev Sharma
Number of
independent NEDs:
Number of Executive
Directors:
Number of employee
representatives:
Total membership:
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.
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
Cilla Snowball
Helen Gordon
Lucinda Bell
Mark Breuer
Sanjeev Sharma
SUCCESSION PLANNING / See page 154
154
Derwent London plc / Report and Accounts 2022
NOMINATIONS COMMITTEE REPORT continued
SUCCESSION PLANNING
Senior management
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. The
Committee considers the Group’s succession planning on
a regular basis to ensure that changes to the Board are
proactively planned and coordinated.
Non-Executive Director succession
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.
Details of the Non-Executive Directors’ tenure is on
page 153.
Richard Dakin will step down from the Board on
28 February 2023. The extension of Richard’s appointment
from August 2022 to February 2023 facilitated an effective
handover of responsibility to Helen Gordon who will
succeed Richard Dakin as Risk Committee Chair from
1 March 2023.
The Committee is aware that both Claudia Arney and Dame
Cilla Snowball are approaching their ninth anniversary
on the Board. In preparation, Sanjeev Sharma joined the
Remuneration Committee during 2022 and has been fully
involved in the Remuneration Policy review. Sanjeev’s
appointment to the Committee ensures that he will have
served on a Remuneration Committee for 12 months prior
to succeeding Claudia Arney as Chair, in accordance with
the 2018 UK Corporate Governance Code. The Committee
will seek to recruit a new Non-Executive Director during
the second half of 2023 in advance of Dame Cilla Snowball
reaching her ninth anniversary on the Board.
Executive Committee
The Group’s talent pipeline has been strengthened through
a number of internal promotions. During the year, Philippa
Davies (Head of Leasing) joined the Executive Committee
and effective from 1 January 2023, Robert Duncan (Head
of Investor Relations & Strategic Planning) and Katy
Levine (Head of Human Resources) also became Executive
Committee members.
As at 1 January 2023, the composition of the Executive
Committee consists of four Executive Directors, the
Company Secretary and nine senior managers. The gender
diversity composition of the Executive Committee is now
42.9% female, achieving the FTSE 350 Women Leaders
Review target of 40% (see page 155).
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 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. During the year, these discussions led to
the creation of personal development plans for specific
individuals, coaching sessions and the appointment
of mentors.
Alongside a number of executive promotions there have
been external recruitments to strengthen teams further,
including the appointment of Richard Dean as Director of
Investments and Matt Peaty as Head of Health and Safety.
Board appointments
The Committee is responsible for leading the recruitment
process for new directors. Generally, the Committee
will utilise either open advertising or 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.
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 Chair of
the Committee. 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 and the Group intranet which provides easy
and immediate access to key documents.
Governance
155
BOARD DIVERSITY
Ethnic 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 were updated to 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
45.5% of our Board are
women
The Parker Review continues to monitor and champion
ethnic diversity on boards. During 2022, an updated
report of the Parker Review was published which
outlined the progress made to date. Within the FTSE
250, 128 companies had achieved the Parker Review’s
recommendations, which included Derwent London.
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 186.
At least one of the senior
Board positions is held by
a woman
At least one member of the
Board is from a minority
ethnic background
Helen Gordon is our Senior
Independent Director
Diversity of all Derwent
London employees
Sanjeev Sharma joined the
Board in October 2021
FTSE 350 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.
White British/White Other
Mixed/Multiple Ethnic Groups
Asian/Asian British
75.0%
4.9%
9.2%
Black/African/Caribbean/Black British
8.7%
Other Ethnic Group
2.2%
66.7%
45.5%
42.9%
52.6%
BOARD DIVERSITY
9.1%
of the Board (including
the Chairman) is from
an ethnic minority group
70%
60%
50%
40%
30%
20%
10%
0%
Women on
the Board1
Female
Non-Executive
Directors2
Women on
the Executive
Committee3
Female direct
reports of
the Executive
Committee4
Female representation
40% target
1 The Board, including the Chairman.
2
Independent Non-Executive Directors, excluding the Chairman.
3 The combined diversity balance of the Executive Committee and its direct reports
(excluding administrative and support staff) is 50.7% women.
4 Direct reports to the Executive Committee, excluding administrative and support
staff, is 52.6% women. Direct reports to the Executive Committee, including
administrative and support staff, is 59.4% women.
156
Derwent London plc / Report and Accounts 2022
AUDIT COMMITTEE
REPORT
Dear Shareholder,
I am pleased to provide you with an overview of
the Committee’s main activities and areas of focus
during the year.
Portfolio valuation
The Committee considers the valuation of the Group’s
property portfolio to be the principal area of judgement in
determining the accuracy of the financial statements (see
page 165). In 2022, we sought clarity on how the portfolio
valuation took into account climate-related risks, opportunities
and the cost of EPC upgrades (see page 158). The
Committee was satisfied with Knight Frank’s performance
at the half year and approved their appointment as valuer
for the entire London portfolio for the 2022 year end.
Climate change
Climate disclosures and emissions reporting can be
complex. The Committee continues to monitor developing
best practice, and seeks training and/or professional
guidance when required, to ensure we continue to oversee
reporting effectively in this area. During the year, we
received training from Deloitte and reviewed the outcome
of their ESG ‘reasonable assurance’.
External audit tender
PricewaterhouseCoopers (PwC) were appointed as the
Group’s external Auditors in 2014. In accordance with the
Competition and Markets Authority order, the Committee
will conduct a comprehensive audit tender during 2023.
The Committee has been preparing for the tender and
has outlined its proposed timetable on pages 168 to 169.
The Committee extends an invitation to all interested
shareholders to engage with us on the tender. Dialogue
with our shareholders is important to us and will inform
the Committee’s discussions and decisions. You can
reach me via our Company Secretary, David Lawler.
LUCINDA BELL
Chair of the Audit Committee
2023 FOCUS AREAS
• Conduct a competitive tender for our external Auditor
• Continue to monitor the development of BEIS audit,
reporting and governance reform and our response
• Monitor the assessment of Derwent London’s
internal financial controls against the Committee of
Sponsoring Organisation (COSO) Framework
• Continue to focus on climate change matters in
financial statements, including assurance from
Deloitte on ESG disclosures
• Monitor and approve the judgements and
assumptions adopted by management in the
preparation of the Group’s financial statements
• Review the model used for the provision of internal
audit services
COMMITTEE MEMBERSHIP DURING 2022
Independent
meetings Attendance1
Number of
Restoring trust through the key BEIS reforms
Lucinda Bell
Claudia Arney
Richard Dakin2
Sanjeev Sharma
Yes
Yes
Yes
Yes
3
3
3
3
100%
100%
100%
100%
1 Percentages are based on the meetings entitled to attend for the 12 months
ended 31 December 2022.
2 Richard Dakin steps down as a Director on 28 February 2023.
The BEIS Response Statement to the consultation on audit
and corporate governance reform was published on 31 May
2022. We sought assurance from management that the
business was being proactive in ensuring its preparedness,
particularly in respect to internal financial controls. During
2023, a thorough review of the Group’s internal financial
controls will be conducted, to identify improvements in the
documentation or evidencing of controls.
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 2023
Governance
157
Committee composition and performance
Restoring trust through the key BEIS reforms
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 134 and 135).
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 2022, the Committee held three scheduled
meetings (2021: four meetings) with two separate meetings
with the Group’s external property valuers. In addition,
the Risk Committee held three meetings during 2023
(see page 171). The Committee considers that the eight
meetings provided sufficient time to oversee financial,
audit and risk-related matters. Due to the external
audit tender being undertaken in 2023, it is anticipated
that the Committee will meet at least four times. The
Committee’s role and responsibilities are set out in the
terms of reference, which were last updated in February
2022 and are available on the Company’s website at:
www.derwentlondon.com/investors/governance/board-
committees
The 2022 evaluation of the Board, its committees
and individual Directors was externally facilitated by
Manchester Square Partners LLP, in accordance with
our three-year cycle of evaluations (see page 149).
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 299 to 304) including in respect to any
significant transactions during the year;
• material accounting assumptions and estimates made
by management (see note 3 on pages 250 to 252);
• significant judgements or key audit matters identified
by the external Auditor (see pages 233 to 236);
• the effectiveness and application of internal financial
controls (see pages 160 and 161); 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.
The BEIS Response Statement was published on 31 May
2022. Although the timescale for reform has not yet been
established, the reforms will be introduced through a
combination of primary and secondary legislation and
changes to the UK Corporate Governance Code.
Under the reforms, Derwent London plc is an existing
Public Interest Entity (PIE) that does not meet the new
size threshold. As a result, some of the new requirements,
including the additional reporting disclosures (e.g. Audit
& Assurance Policy, Resilience Statement etc.), are not
applicable to the Group. As the Committee welcomes
all developments which aim to improve transparency in
governance and trust in our disclosures, we intend to adopt
the following on a voluntary basis:
• Assurance: On pages 162 to 164, the Committee has
disclosed our approach to assuring the information we
externally disclose, and the level of assurance received
on key disclosures in the 2022 Report & Accounts.
• Resilience statement: On pages 108 to 111, we have
expanded our going concern and viability disclosures
to include the short-, medium- and long-term threats
to the Company’s resilience, as required by a
Resilience Statement.
• Fraud risk: In November 2022, the Committee
received fraud awareness training. A Fraud Risk
Management Framework has been developed, based
on the Committee of Sponsoring Organisation (COSO)
principles, which was reviewed by the Committee in
February 2023. Under the Framework, focus areas have
been agreed for 2023.
In respect to the reforms which apply to Derwent London,
the Committee has received updates from management on
how we are preparing for the new requirements.
Future requirement
Preparation
Boards to provide an
explicit statement on
the effectiveness of
internal control systems
(financial, operational
and compliance),
and a basis for the
directors’ assessment.
Increased accountability
of directors and minimum
standards for audit
committees on audit
tendering and monitoring
of audit quality.
Managed shared
audits for the FTSE
350 implemented on a
phased basis with the
Auditing, Reporting and
Governance Authority
(ARGA) able to
determine exemptions.
To further strengthen our internal
financial controls, we intend to
adopt the COSO Framework, a
recognised standard. A thorough
review will be conducted to identify
improvements in our controls and/or
the documentation of processes.
The Committee has reviewed the
proposed Minimum Standards
for Audit Committees contained
in the FRC’s consultation and will
monitor their development. Once
the FRC publishes its final Minimum
Standards for Audit Committees,
the Committee will revise its Terms
of Reference.
No preparation is currently required
as this will not become applicable
for Derwent London in the short- or
medium-term. The Committee will
continue to keep the development of
guidance on managed shared audits
under review.
158
Derwent London plc / Report and Accounts 2022
AUDIT COMMITTEE REPORT continued
Review of the 2022 Report & Accounts
CLIMATE CHANGE
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 2022 Report & Accounts
• Whether we provide sufficient disclosures on the
assurance of information reported within the annual
Report & Accounts (see pages 162 to 164).
• Whether we clearly explain the climate change-related
risks and opportunities facing the Group and our
progress against our Net Zero Carbon Pathway
(see pages 52 to 56 and 69 to 85).
• Whether our diversity policy and target disclosures
are consistent with the amendments to the Disclosure
Guidance and Transparency Rules within DTR 1B.1.5 R.
(see pages 155 and 189).
• Whether we provide sufficient disclosures on the impact
of the macroeconomic outlook, inflation and changing
rising interest rate environment.
The Committee paid particular attention to these changes
to ensure they did not impact on the balance and clarity of
the Report & Accounts.
Following its review, the Committee confirmed to the Board
that the 2022 Report & Accounts is fair, balanced and
provides sufficient clarity for shareholders to understand
our business model, strategy, position and performance.
The Group is committed to being 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 2022, the Committee requested training,
provided by Deloitte, on the following:
• FCA and FRC feedback on TCFD reporting
• How audit committees can review greenhouse gas
emissions and Streamlined Energy and Carbon Reporting
• Update on the International Sustainability Standards
Board (ISSB)
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. As ESG controls is an area of
evolving best practice, it will be a focus area for the Group
in 2023 and 2024.
At the request of the Committee, our Task Force on
Climate-related Financial Disclosures (TCFD) reporting
was reviewed. Although, the Group has used the TCFD
guidelines as part of its environmental reporting since
2018, it has only been mandatory since 2021. The outcome
of the review was shared with the Committee and the key
recommendations are incorporated into our reporting.
The Committee receives further assurance through
Deloitte’s ‘reasonable assurance’ of our selected ESG
metrics. Deloitte provided updates to the Committee on its
assurance reviews and, in 2021 and 2022, provided training
on how our level of assurance compares to our industry
peers. Further information on ESG assurance is on page 163.
Impact on the valuation
During the year, the Committee sought clarity on how the
valuation of our portfolio took into account climate-related
risks, opportunities and the cost of EPC upgrades. Knight
Frank confirmed that its valuers factor the potential impact
on value of ESG risks and sustainability credentials in line
with market best practice.
A feasibility and cost study conducted in 2021 concluded
that, to achieve the proposed minimum energy
performance certificate (EPC) rating of B by 2030, the
Group would need to spend approximately £97m. This
estimate has been updated to reflect cost inflation and
recent disposals of assets (further information on page 14).
In 2022, the Committee sought clarity on the proportion
of the required capital expenditure which was already
accounted for within the Group’s ongoing refurbishment
programme for the upgrading of our older buildings and
therefore, reflected in the valuation, and considered the
appropriate accounting treatment for the balance.
Governance
159
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 2022 and
the judgements adopted.
Issue
Assumptions or estimates
Judgement
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
(see note 16 on pages 264 and 265).
Borrowings and derivatives
The calculation of fair values for the
Group’s financial instruments, such
as the USPP notes, 2031 bonds, 2025
convertible bonds and interest rate swaps,
is a technical and complex area and the
amounts involved are significant.
The fair values of the Group’s borrowings
and interest rate swaps are provided
by an independent third party based on
information provided to them by the Group.
This includes the terms of each of the
financial instruments and data available
in the financial markets (see note 25 on
pages 272 to 281).
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 and 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.
The Committee noted that the valuations
were carried out by an independent third
party which had valued the instruments
in previous years and that the external
Auditor used its own treasury specialists to
re-perform the valuation and to assess the
reasonableness thereof. The external Auditor
subsequently confirmed that no issues
had arisen relating to the valuations. The
Committee was satisfied with the level of
assurance gained from these procedures.
Impairment review
Sentiment amongst our occupiers
continued to improve through 2022, with
rent collection levels across the office
portfolio close to pre-Covid levels. However,
due to the economic situation, rising
interest rates and inflation, there remains
a heightened risk of financial difficulty
among some of our tenants.
Climate change
We have a programme to upgrade the
energy efficiency of our older buildings
and have considered how the costs of
such retro-fitting should be reflected in
our financial statements, including our
property valuations.
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
effect on the financial statements.
Impairment testing of trade receivables and
accrued income recognised in advance of
receipt has been carried out in accordance
with IFRS 9 using the expected credit loss
model. This has required judgements to
be made in relation to recoverability and
estimated probability of default across
our whole portfolio. The overall probability
of default has been estimated as lower
compared with 31 December 2021.
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 2023 and was
subject to significant discussion.
During the year, the Committee sought
clarity on how the valuation was
impacted by EPC compliance and the
cost of converting buildings to meet
the Government’s proposed 2030
requirements. The Committee also
received further updates on the required
capital expenditure and how this would be
included within the financial statements.
Where any immediate action or expenditure
is needed, the relevant amounts would be
provided for but these costs are expected
to arise over several years as future
refurbishment plans are prepared. In many
cases, this could add value to the buildings
and are not considered to be current
capital commitments.
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 employs a qualified and
experienced Head of Tax whom 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, once
again, no further action was required.
160
Derwent London plc / Report and Accounts 2022
AUDIT COMMITTEE REPORT continued
INTERNAL FINANCIAL CONTROLS
While Derwent London is a large business in terms of the size of its balance sheet and market capitalisation, we are
relatively small when considering the number of people working directly in the business. Our internal financial control
structures allow the Company to safeguard its assets, prevent and detect material fraud and errors, ensure accuracy and
completeness of its accounting records which are used to produce reliable financial information.
Our procedures consider the risks and scenarios which could result in financial and tax fraud or errors. A risk register is
maintained by the Finance team which identifies the key controls in operation to mitigate these risks and identify any
residual risk or evidence of weaknesses in the controls.
Overview of internal financial controls
Governance framework
Our governance framework (see page 141) 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 authority and supporting committees.
Financial reviews and
internal procedures
Comprehensive systems of financial reporting and forecasting which are conducted
frequently and include both sensitivity and variance analysis. An annual budgeting exercise
is carried out with three rolling forecasts prepared. A five-year strategic review is prepared
annually. Breakeven and sensitivity analyses are included in both the five-year strategic
review and the rolling forecasts.
Treasury and tax
procedures
Risk identification
and monitoring
IT controls
Training and staff
awareness
External verification
Treasury is controlled by the Chief Financial Officer and Group Financial Controller. All
transactions are checked and monitored. All complex or large transactions are discussed in
advance with the Board and Executive Directors and are 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 internally by the Group Head of Tax and externally
by RSM. Other higher risk areas like VAT, PAYE and CIS (the Construction Industry Scheme
which requires us to deduct tax at source from the labour element of a subcontractor’s
invoice unless they are properly authorised by HMRC) is subject to thorough examination
and testing. We maintain an open relationship with HMRC and have a ‘low risk’ tax status.
Further information on tax risk and tax governance is on page 67.
The Risk Committee regularly reviews the Group’s risk registers, the schedule of key controls
and key risk indicators. The schedule of key controls provides evidence of how the controls
are being operated and their effectiveness. Our risk management procedures are robust and
include initiatives such as a ‘tenants on watch’ register and a back-up IT facility. The Risk
Committee’s report is on pages 170 to 181.
All financial transactions are recorded and, where required, approved utilising finance
systems or automated workflows which require dual authentication login. Role-based access
is in place for all financial solutions, managed by the Digital Innovation & Technology (DIT)
service desk. Data transfers between programs are either automated or imported with
minimal manual intervention to maintain the integrity of the data.
Staff are aware of the delegated authority limits set by the Board and confirm their
understanding of our internal policies which are contained on our Group intranet and in
our employee handbook. Staff have six-monthly performance reviews with any training
requirements identified and agreed within six months. The Group operates a whistleblowing
policy which includes access to an independent helpline for anonymous reporting of
concerns (see page 139).
The outsourced internal auditors, RSM, perform various assurance reviews as part of the
annual Internal Audit Plan. The implementation of recommendations arising from the RSM
reviews are monitored by the Audit Committee. The Group’s VAT procedures are subject to
ongoing periodic review by external advisers. Independent reviews of the Group’s financial
controls are undertaken with assistance from external advisers, as required. Regular
annual credit ratings, including risk assessments, are conducted. Each year, at renewal,
a comprehensive review of the Group’s insurance cover is prepared by its independent
insurance adviser.
Governance
161
The control environment and context in which the internal
financial controls operate
• Company culture: we have a defined set of values,
strategic objectives and practices which has created
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.
• Lean workforce: our flat structure and modest headcount
(relative to asset values) allows for the close supervision
and monitoring by members of the Executive Committee.
• Group structure: organised to be relatively simple and
transparent with few subsidiaries and joint ventures.
• Predictable 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 prior year and
budget, with unexpected variances investigated.
• Predictable capital costs: the largest costs incurred
relate to capital expenditure. All capex on investment
properties is approved, and subject to external
confirmation, before costs are incurred. These approved
budgets are monitored internally.
Strengthening of controls
On an annual basis, the Committee reviews the Group’s
fraud risk assessment prepared by management which
details the policies and processes which safeguard the
Company’s assets, prevent and detect fraud and errors.
The largest costs incurred by the Company relate to capital
expenditure or property transactions which are subject
to approval in accordance with the Board’s delegated
authority limits, before costs are incurred (by the Cost
Committee for costs up to £5m, the CEO and the Executive
Directors for costs up to £20m, and by the Board for any
capital expenditure over £20m). Approval is documented in
minutes which are required to be seen before the budgets
are assigned. The approved budgets are then subject
to internal monitoring to ensure they remain within the
approved limits.
The risks identified by the fraud risk assessment, in respect
to financial fraud and error, are mitigated through the
following key controls:
• A two-stage approval process is required for invoices and
transactions, either through the use of software or forms.
There is a further two-stage approval process for the
release of final payments.
• Sufficient support/evidence is required by the Finance
team which is subject to validation before payments
are made.
Actions taken during 2022 have included the following:
• Payroll is prepared by an experienced team and
• Cyber risk continues to be an area of focus and is subject
to independent testing (pages 180 and 181). During 2022,
the Digital Innovation & Technology (DIT) team conducted
an exercise with GRCI Law which assessed our capability
to detect and respond to cyber security incidents.
• Introduced a new electronic expense system to enable
automated checking against the Company’s travel and
expense policy.
• We utilise IT systems and automated workflows to manage
our financial processes. All BACS payment files are
encrypted on generation and access is monitored by our
security systems. During 2022, the Committee received
an update on the systems being used by the Finance team.
Non-financial internal controls
As training and staff awareness forms part of the Group’s
internal control framework, the Risk Committee receives
updates on the policies and procedures in place and how
these are being communicated to, and complied with, by
our staff. Further information on risk management and non-
financial internal controls is available on pages 115 and 171.
Effectiveness of the Group’s internal financial controls and
fraud risk assessment
The Committee receives detailed reports on the operation
and effectiveness of the internal financial controls from
members of the senior management team and the internal
auditors. In addition, the outcome of the external audit at
year end and the half-year review are considered in respect
to internal controls.
reviewed by the Head of HR and the Group Financial
Controller. Payment variance reports are prepared to
explain movements.
• Training is provided to staff to ensure they are aware of
the latest methods used by those attempting to defraud
the Company.
• Use of third parties to produce or review information,
including in respect to project monitoring agencies.
• The internal auditors, RSM, provide assurance that
controls operate effectively as designed.
• Preparation of a detailed budget and three rolling
forecasts against which actuals are compared.
• The process of producing the quarterly management
accounts involves detailed variance analysis to
prior periods and forecasts, as well as a number of
reconciliations of both balance sheet and income
statement items.
Following the Audit Committee’s and Risk Committee’s
reviews (see page 171), the Chairs of each Committee
confirmed to the Board that it is 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.
162
Derwent London plc / Report and Accounts 2022
AUDIT COMMITTEE REPORT continued
ASSURANCE OVER EXTERNAL REPORTING
OUR APPROACH TO ASSURANCE
To keep our shareholders and the wider market informed,
we release results on a quarterly basis. Our financial
calendar for 2023 can be found on page 315.
Q1
Q2
Q3
Q4
Preliminary announcement and Report & Accounts
Q1 Business update
Interim results
Q3 Business update
All announcements and disclosures are subject to internal
verification checks and, where significant or deemed of
particular importance to our stakeholders, our actions are
independently monitored through third party assurance.
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.
Our approach to assurance is
influenced by our low tolerance to
risk taking and our conservative
management style.
ASSURANCE OVER KEY DISCLOSURES
The table below provides an overview of our key reporting disclosures in the 2022 Report & Accounts and the level of
assurance we received. This is in addition to the detailed verification process adopted by the Executive 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
Key EPRA financial metrics1
International Standards on Auditing (UK)
and applicable law
PwC
PwC
Pages 242 to 305
Page 306
Portfolio valuation
External valuation in accordance with RICS
Valuation Global Standards and the Red Book
Knight Frank & PwC Pages 87 to 89
Key performance indicators2 Detailed internal review and external
assurance on specific KPIs from PwC
and Deloitte LLP
PwC & Deloitte LLP
Pages 45 to 49
Environmental,
energy and carbon
ISAE 3000 (Revised) and ISAE 3410
‘reasonable assurance’
Deloitte LLP
Pages 69 to 71
Task Force on
Climate-related Financial
Disclosures (TCFD)
Private review
–
Pages 72 to 85
Health and safety statistics
ISAE 3000 (Revised) ‘reasonable assurance’
Deloitte LLP
Page 64
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 106 and 107
1 EPRA earnings and EPRA NAV metrics (EPRA NRV, EPRA NTA and EPRA NDV).
2 The key performance indicators subject to external assurance from Deloitte and audit by PwC are identified on pages 45 to 49.
Governance
163
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 108 to 111. 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 pages 237 and 238).
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.
Environmental, social and governance (ESG)
We understand the importance of clear and accurate
reporting of key ESG data to our stakeholders. For a
number of years, we have therefore obtained ‘reasonable
assurance’ from Deloitte LLP, as determined by ISAE 3000R
(Revised) and ISAE 3410, in respect of our:
• Environmental, energy and carbon reporting (all Scope 1,
2 and 3 GHG emissions data, intensity ratio and
energy data)
• Health and safety statistics (all RIDDORs, fatalities, minor
accidents, 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 164).
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, the TCFD disclosures contained in the 2021
and 2022 Report & Accounts were subject to a third party
review, with their key recommendations incorporated.
Assurance over 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 and financial statements).
Our financial statements are subject to audit by our
external Auditor, PricewaterhouseCoopers LLP (PwC)
and the entire report is subject to a fair, balanced and
understandable review by both the Audit Committee and
the Derwent London Board (see page 158). In addition,
any key accounting issues or judgements made by
management are reviewed and agreed with the
Audit Committee.
INDEPENDENT AUDITOR’S REPORT / See page 232
SIGNIFICANT FINANCIAL JUDGEMENTS,
KEY ASSUMPTIONS AND ESTIMATES / See page 159
Valuation of the Group’s property portfolio
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
165). The valuation of our portfolio is a major component of
net asset value 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 key determinant of the
Group’s total return. Due to its significance, the biannual
valuation is also subject to a detailed internal review by
our Investment and Valuation team, which consists of
experienced and qualified professionals, and is overseen
by the Audit Committee.
In accordance with the Group’s Valuer Appointment
Policy, the Group’s external valuer will be tendered at least
every five years, subject to annual assessment of their
effectiveness and objectivity. Knight Frank succeeded CBRE
as the Group’s external valuer of the London portfolio in
December 2022, after performing 50% of the valuation in
June 2022.
Revenue recognition and impairment review
Due to the complexity of accounting for revenue
recognition and our expected credit loss (ECL) provision,
these disclosures are subject to extensive review by PwC
and our internal team.
As at 31 December 2022, our lease incentive and trade
debtors, including impairment, amounted to £193.7m
(2021 (restated): £173.9m) and an ECL provision of £5.0m
has been recorded (2021 (restated): £8.3m) as a provision
for bad debts (see pages 251, 268 to 270). Information
on how PwC audit revenue recognition and accounting
for the ECL provision is available on pages 234 and 235.
164
Derwent London plc / Report and Accounts 2022
AUDIT COMMITTEE REPORT continued
ASSURANCE OVER EXTERNAL REPORTING continued
Remuneration
Key disclosures in our Remuneration Committee report are
subject to independent audit by PwC, including the total
remuneration paid to our Directors during the year (see
page 213), incentive outcomes under the annual bonus
and PSP (pages 215 and 217), our Directors’ shareholdings
(page 222) and incentive awards (pages 219 to 221).
Our remuneration disclosures are also reviewed by Deloitte
to ensure they are aligned with best practice. Deloitte 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.
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
• Revenue recognition
• Accounting for the expected credit loss provision
• Compliance with REIT guidelines
• Valuation of investments in, and loans to, subsidiaries
Information on PwC’s audit of these disclosures is provided
on pages 234 to 236.
As part of our preparation for preparing this statement,
a review of the assurance we receive was conducted in
2021, which identified that the EPRA disclosures published
in our annual Report & Accounts were not subject to
external verification. Although a peer analysis confirmed
that this was frequent practice within our industry, as
these are important statistics for our stakeholders, the
Audit Committee agreed that for 2022 our key EPRA
financial metrics would be subject to audit by PwC and
encompassed by their external audit opinion on the annual
report. The EPRA financial metrics which have been
audited are:
• EPRA Earnings; and
• EPRA NAV metrics: EPRA NRV, EPRA NTA and EPRA NDV.
The Committee will consider whether further assurance is
required over our other EPRA disclosures during 2023.
Assurance over 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 RNS. Any additional
information is subject to detailed internal review.
Assurance over quarterly results announcement
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.
Assurance over 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
50). Certain 2022 environmental, health and safety, and
community metrics are subject to independent Assurance
under ISAE(UK)3000 and ISAE3410. This assurance
captures the data we disclose on utility usage, waste
generation and energy consumption, in addition to our
progress against our science-based targets.
In addition to TCFD (see page 72), we report in accordance
with the GRI Standards and the EPRA Best Practices
Recommendations on Sustainability Reporting. Disclosures
are prepared by the Sustainability team and subject to
detailed internal reviews.
Assurance over 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.
Governance
165
PORTFOLIO VALUATION
Effectiveness of the Group’s valuers
Our property portfolio is valued by external valuers for our
interim and year end results. As at 31 December 2022, it
was valued at £5.364bn (2021: £5.697bn) and principally
consists of 70 properties. Further information on our
valuation is on pages 87 to 89.
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 2022 was conducted in February
and August and considered the following:
Knight Frank succeeded CBRE as the Group’s external
valuer of the London portfolio in December 2022, after
performing 50% of the valuation in June 2022. Savills are
engaged to value our Scottish land which accounts for c.1%
of the Group’s portfolio.
• experience, qualification and objectivity of the
valuation team;
• quality of presentation and data; and
• robustness of the valuation.
In accordance with the Group’s Valuer Appointment
Policy, the Group’s external valuer will be tendered at least
every five years, subject to annual assessment of their
effectiveness and objectivity. This aspect was one of the
areas covered by the RICS ‘Independent Review of Real
Estate Investment Valuations’ performed by Peter Pereira
Gray in January 2022. The outcome of this exercise is now
under RICS consultation and a formal revised policy is
expected later this year. It is anticipated that it will require
valuer rotation between five and 10 years.
There are no contractual obligations which could
restrict the Group’s choice of valuer or a minimum
appointment period.
The valuation of the portfolio is a major component of
net asset value. Movements in that valuation is a key
determinant of the Group’s total return (a KPI and a
performance measure for our Executive Directors’ variable
remuneration – see page 205). Due to its significance, the
Committee monitors the objectivity and independence of
the external valuers’ work, and meets with the valuer in
February and July, prior to Audit Committee meetings.
Key matters discussed during the meetings in
2022 included:
• The transition in valuers from CBRE to Knight Frank.
It was noted that there was no material difference
between the valuations.
• The impact of the macroeconomy on the valuation.
• How the valuation was taking into account the costs of
converting buildings to meet the proposed 2030 EPC
legislation (see page 14) 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 that of the MSCI benchmark.
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.
IMPACT OF ESG ON VALUATION / See page 158
At both meetings it was concluded that the external valuers
performed to a high standard and the timetable for delivery
was achieved. As a result of the effectiveness review in
August, Knight Frank succeeded CBRE as the external
valuer for the December 2022 valuation.
INTERNAL AUDIT
RSM were appointed as the Group’s outsourced internal
audit function in December 2018 following a competitive
tender process and are considered by the Committee to
be independent. In addition to performing an internal audit
function, another team from RSM also reviews our year end
tax returns.
The Internal Audit Plan for 2022 was approved jointly by
the Risk and Audit Committees and included a combination
of risk-based audits and projects (see the table below). The
outcome of the audits were presented to the Risk and Audit
Committees and reported to the Board. The Committees
were pleased with the level of assurance received from
the audits.
The Committee receives a report on internal audit activity
at each meeting and monitors the status of internal audit
recommendations and management’s responsiveness to
their implementation. The other Board committees are kept
updated on the outcome of any reviews which fall within
their areas of responsibility.
Audits performed
during 2022
Proposed audits to be performed under the
Internal Audit Plan 2023
• Health and safety
• Cyber security
• Strategic planning
• Joint venture
governance
• Financial controls
• Service charge and cost recovery
• Intelligent buildings
• Energy Performance Certificate
(EPC) compliance
• Supplier selection and due
diligence
• Financial, IT and internal controls
166
Derwent London plc / Report and Accounts 2022
AUDIT COMMITTEE REPORT continued
Annual review of the internal audit function
A formal review of the effectiveness of the internal auditor
and the internal audit process was conducted in November
2022 and considered the following:
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 qualification and expertise of RSM’s team;
• the extent to which RSM have built an understanding
of our business and systems;
• depth of internal audits and ability to
challenge management;
• quality of reporting; and
• 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
• quality of planning and ability to meet deadlines.
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 159 and 234 to 236). Sandra
Dowling has been Lead Audit Partner since the 2020 half
year review. The Committee has been pleased with the
challenge raised by Sandra and her team during the year.
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.
After taking all of these matters into account, the
Committee concluded that PwC had performed their audit
effectively, efficiently, and to a high quality. Accordingly, the
Committee has recommended to the Board that PwC be
reappointed as Auditor to the Group for the year ending
31 December 2023, subject to reappointment at the
2023 AGM.
The ‘Independent Auditor’s report to the members of
Derwent London plc’ is available on pages 232 to 241, and
its audit opinion is consistent with the report received by
the Audit Committee.
The Committee concluded that the internal audit process
had been conducted effectively and that the additional
assurance received through internal audits had been
beneficial to the Committee and management. The Audit
and Risk Committees agreed to consider the model for
the provision of internal audit services during 2023.
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 will be
conducting a comprehensive tender process for the
2024 year end audit during 2023.
EXTERNAL AUDIT TENDER / See page 168
Annual review of the external Auditor
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 assessment considered:
• the qualification and expertise of the Lead Audit Partner
and the wider audit team;
• the availability of resources to perform a comprehensive
and timely audit;
• adherence to the Non-Audit Services Policy;
• quality of the audit plan, overall audit and
outcome report;
• quality of planning and ability to meet deadlines; and
• quality of audit in respect of key judgements
and estimates.
Governance
167
Non-audit services in 2022
The non-audit services provided by PwC during the year under review totalled £622,752. The Committee confirmed that it
does not believe that the level or nature of the non-audit services provided during 2022 have impacted on PwC’s actual or
perceived independence as Auditor.
Audit of Derwent London plc
and subsidiaries
Review of interim results
Other non-audit services
Total fees
2022
2021
2020
£’000
%
£’000
%
£’000
559
64
–
623
90
10
–
100
5302
60
901
680
78
9
13
100
494
44
–
538
%
92
8
–
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 2021 includes a cost overrun of £59,000.
When reviewing requests for permitted non-audit services,
the Audit 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 Audit
Committee would also assess whether it is probable that
an objective, reasonable and informed third party would
conclude independence is not compromised.
Non-Audit Services Policy
The objective of maintaining the Non-Audit Services Policy
is to ensure the independence of the external Auditor is not
compromised and that the provision of such services do
not impair the external Auditor’s objectivity.
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.
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 annual review:
Value
Approval required
prior to engagement
Up to £25,000
Chief Financial Officer
£25,000 to £100,000
At least two members of the
Audit Committee (including
the Committee Chair)
£100,001 and above
Board of Directors
168
Derwent London plc / Report and Accounts 2022
AUDIT COMMITTEE REPORT continued
EXTERNAL AUDIT TENDER
In accordance with current regulation that requires a tender every 10 years, the Committee intends to
conduct a competitive tender for the 2024 year end audit during 2023.
Invitation to engage
Ongoing dialogue with our shareholders is important
to us and informs the Board’s decision making.
Lucinda Bell, Audit Committee Chair, invites all
shareholders to engage with us as we prepare for
the tender process. In particular, we would be
keen to receive our shareholders’ input on the
following matters:
• Firms to be included on the ‘Long List’;
• Number and size of firms to involve; and
• Factors the Committee should consider
when selecting its ‘Short List’ and making its
final recommendation.
Any shareholder who wishes to provide input into the
tender, or wishes to receive updates on our progress,
can contact the Audit Committee Chair via our
Company Secretary, David Lawler.
Telephone: +44 (0)20 7659 3000 or
Email: company.secretary@derwentlondon.com
We request that all shareholders who wish to engage
with the Committee during the tender, contact the
Company Secretary before the 2023 AGM, on 12 May.
This is to ensure their comments are included in the
Committee’s decision making.
Timetable
PricewaterhouseCoopers (PwC) was appointed as the
Group’s external Auditor in 2014. In accordance with the
Competition and Markets Authority (CMA) order, we are
required to conduct a mandatory tender for our audit every
10 years. It is proposed that an audit tender is completed
during the second half of 2023, with the appointed (or
reappointed) firm in place to carry out the 2024 interim
review and year end audit, subject to shareholder approval
at the 2024 AGM. Our proposed timetable is below.
Preparation
In preparation for the tender, the Committee has performed
the following tasks:
• Reviewed best practice guidelines on external
audit tenders;
• Held high level discussions on the attributes and skills
we require from our external Auditor and the Lead
Audit Partner;
• Agreed a provisional timetable for the tender process
and identified the key steps; and
• Agreed that the Committee will seek to include four
firms on its ‘Long List’ to provide sufficient scope for
comparisons and breadth.
The Committee will have due regard to the FRC guidance
on audit tenders, the independence criteria, and the
contents of the recent consultation on the Minimum
Standards required of Audit Committees. The Committee’s
intention is the scope of the tender will be limited to the
statutory audit, however, during the Request for Proposals
(RFP) stage, the shortlisted firms will be asked to confirm
their ESG assurance capability.
Selecting firms to involve
Due to the general shortage of professional resource in the
audit industry, the Committee will carefully tailor its ‘Long
List’ to those firms that have the experience, track record
and capacity to perform a robust audit.
Outline of the proposed tender timetable
Shareholder
engagement
Agree ‘Long List’ of firms &
confirmation of independence
Agree Lead Audit Partner, agree
‘Short List’ of firms & send Requests
for Proposals (RFP)
2022 Report & Accounts
12 April 2023
2023 AGM
12 May 2023
By 31 July 2023
Governance
169
We will seek confirmation of independence from each firm
and require them to perform conflict of interest checks. To
gain an understanding of the FRC’s assessment of each
firm’s audit quality, the Committee will review the latest
FRC Audit Quality Reports.
Subject to a satisfactory response to its due diligence,
each firm will be asked to present at least two candidates
for Lead Audit Partner, who will meet with the Chair of the
Committee and CFO. The Committee has considered its
requirements and believe that the ideal Lead Audit Partner
will have the following skills and experience:
• FTSE 250 experience or larger plc experience;
• deep real estate experience;
• a technically strong track record; and
• ability to demonstrate professional skepticism and
to provide independent challenge to provide our Board
with confidence.
Request for Proposals (RFP)
In addition to any factors raised by our shareholders,
the Committee will consider the adjacent factors when
finalising its ‘Short List’. Each shortlisted firm will be invited
to meet with members of the Committee, and the senior
management team, to aid them in understanding our
requirements and preparing their proposal. A data room will
also be established. Presentations from each shortlisted
firm will be organised for September/October, following
which, the Committee will make its recommendations to
the Board.
Approach to fees
The Committee’s focus will be on securing a firm who will
provide a robust and independent audit. Fees will therefore
not be a focus during the ‘Long List’ or RFP stage of the
tender. The Committee will only consider fees prior to
making its final recommendations to the Board.
‘Short List’ 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 AQR
Audit approach
• Clear audit plan based on transparent risk
assessment of the business, including:
– identification and approach to key risks
– use of specialists
– audit timing and deliverables
– communication
– materiality
• 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 Audit Committee
Quality of deliverables
• Clarity and conciseness of proposal document
and presentation
• Behaviour of team: quality of interaction,
organisation and preparation
Approach to transition
• A clear and well thought out transition plan
is presented
Management meetings with
‘Short List’ presentations to the
Audit Committee
Recommendations
to the Board
Appointment of Auditor
by shareholders
September/October
2023
Board meeting
November/December 2023
2024 AGM
10 May 2024
Confirmed dates
Dates are provisional and subject to change
170
Derwent London plc / Report and Accounts 2022
RISK COMMITTEE
REPORT
RICHARD DAKIN
Chair of the Risk Committee
2023 FOCUS AREAS
• Ongoing monitoring of the Group’s principal and
emerging risks
• Monitor the risks arising from inflation and rising
energy costs
• Ensure health and safety risks are being effectively
managed across the Group
• Review results of a climate change risk analysis
being performed by Willis Towers Watson and the
portfolio’s compliance with EPC regulations
• Review the outcome of the power rationing tests
performed on the managed portfolio and the full
disaster recovery test scheduled for Q2 2023
• Continue to receive regular updates on the Group’s
Dear Shareholder,
I am pleased to present our Risk Committee report
for 2022 which describes our activities and areas
of focus during the year.
Risk profile of the Group
There has been significant political and economic
uncertainty during 2022. The macroeconomic environment
has deteriorated with rising inflation, upward pressure on
yields and the UK entering a downturn. As a predominantly
London-based Group, we are particularly sensitive to
factors that impact upon central London’s growth and
demand for office space.
Although the Group is well-placed to weather the uncertainty
due to our strong balance sheet and conservative leveraging,
some of our occupiers may face financial difficulty. The
occupiers deemed to be most at risk are those which rely
heavily on ‘footfall’ such as retail and hospitality, which make
up only 7% of the Group’s income. All occupiers, and the
wider UK, are being impacted by inflation and rising energy
costs. For the Group, this is putting considerable pressure
on our service charges (see page 103).
Independent assurance
An important part of our overall risk governance is to
review the results of independent reviews on a variety of
risks. During 2022, we received the following assurance,
in addition to the internal audits performed by RSM:
• Water hygiene: Our water hygiene management
procedures were independently reviewed and tested.
main development projects
• Health and safety: Outcome of Deloitte’s assurance and
COMMITTEE MEMBERSHIP DURING 2022
Independent
meetings Attendance1
Number of
Richard Dakin
Lucinda Bell
Sanjeev Sharma
Cilla Snowball2
Helen Gordon2
Yes
Yes
Yes
Yes
Yes
3
3
3
2
2
100%
100%
100%
66%
66%
1 Percentages are based on the meetings entitled to attend for the 12 months
ended 31 December 2022.
2 Cilla Snowball was unable to attend the Committee meeting in April due to
illness. Helen Gordon was appointed to the Committee from 1 March 2022
and, prior to her appointment, advised the Committee Chair she would be
unable to attend the first scheduled meeting in April. Both Cilla and Helen
provided the Chair with their comments on the items being discussed at the
meeting, which were raised on their behalf.
RSM’s internal audit.
• Climate change: Interim results of an independent risk
assessment of our key climate change-related risks.
• Cyber incidents: An independent cyber incident
assessment which tested the effectiveness of our
procedures (see page 179).
• Façade and fire safety: Reviewed the annual Planned
Preventive Maintenance surveys and risk assessments.
Further engagement
This will be my last report to you, as I step down as a
Director on 28 February 2023. It has been an honour to
serve as Risk Committee Chair at Derwent London since
August 2014. Helen Gordon, Senior Independent Director,
will be your Risk Committee Chair from 1 March 2023. The
forthcoming AGM is on 12 May 2023. Helen Gordon will
be available to answer any questions on the Committee’s
activities that you may have. If you wish to contact Helen,
she is available via our Company Secretary, David Lawler.
Telephone: +44 (0)20 7659 3000 or
Email: company.secretary@derwentlondon.com
RICHARD DAKIN
Chair of the Risk Committee
27 February 2023
Governance
171
Committee composition and performance
The Committee’s membership for the year under review
is detailed in the table below. Helen Gordon joined the
Committee as a member on 1 March 2022 and will
succeed Richard Dakin as Chair of the Committee from
1 March 2023.
In addition to the Committee members, the Board
Chairman, other Directors, senior management and the
internal or external Auditors, may be invited to attend all or
part of any meeting as and when appropriate or necessary.
During the year under review, the Risk Committee met
three times (2021: 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 165).
The Committee’s role and responsibilities are set out in
the terms of reference, which were last updated in August
2022, and are available on the Company’s website at:
www.derwentlondon.com/investors/governance/board-
committees
The 2022 evaluation of the Board, its committees
and individual Directors was externally facilitated by
Manchester Square Partners LLP, in accordance with
our three-year cycle of evaluations (see page 149). 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
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 116 to 123) 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 2022 are on page 113).
Further information on the Group’s risk registers subject to
review by the Risk Committee are detailed in the table on
page 174.
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
160. 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 it is 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.
Related information is on the following pages:
OUR RISK MANAGEMENT STRUCTURE / See page 176
INTERNAL FINANCIAL CONTROLS / See pages 160 and 161
ASSURANCE OVER EXTERNAL REPORTING /
See pages 162 to 164
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 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:
• insider trading;
• disability awareness;
• modern slavery;
• social media awareness;
• data privacy; and
• unconscious bias/respect in the workforce.
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.
MODERN SLAVERY / See page 185
HUMAN RIGHTS / See page 66
172
Derwent London plc / Report and Accounts 2022
RISK COMMITTEE REPORT continued
KEY ACTIVITIES OF THE COMMITTEE DURING 2022
The Committee has focused its attention on a variety of risks within four key categories: our business
and clients, economic and political, environmental, and technology. We have identified below some of
the Committee’s key focus areas during 2022.
Business and clients
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 180 to 181).
• Disaster recovery: The Committee was kept
apprised on the successful migration of the
Company’s disaster recovery suite to a new
off-site data centre (see page 179).
• Power shortage: The Committee received a
presentation from Arup on the shortage of
electrical power in London. The Committee
received assurance that the power allocation
and supply for our existing managed portfolio
was secure.
• Power rationing: Following the warnings issued
by The National Grid in respect of potential power
cuts, the Risk Committee requested a power
rationing test be performed (see page 179)
which would feed into the building’s infrastructure
risk register.
• Development risks: The Committee regularly
reviewed the risk registers maintained for each
of 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 and material/labour shortages
(see page 113).
• 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.
In addition, all Directors were provided with
refresher health and safety training.
• Protocols for appointing contractors: The
Committee received an update on the Health
and Safety team’s involvement in the Group’s
development projects from concept design to
post-occupancy health and safety evaluations.
• Water management: During 2022, our water
management procedures were subject to
independent review, which confirmed they
were robust.
• Competition risk: The Committee received
assurance that all Derwent London contracts
for demolition and asbestos removal have been
processed through a rigorous, competitive
procurement process, administered by
consultants. The Committee was advised that
no Derwent London contracts featured in the
list of contracts where the Competition Market
Authority (CMA) found evidence of collusion.
Strategic objectives:
Emerging risks: A
See page 124
Strategic objectives:
Emerging risks: C H
See pages 124 and 125
Principal risks:
1 2 3 5A 5B 5C 7 9A
See pages 116 to 122
Principal risks: 6A 6B 6C
See pages 120 and 121
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
Governance
173
Economic and political
Environmental
• Climate change: The Committee was provided
with updates on the progress of Willis Towers
Watson’s climate risk assessment and
temperature scenario analysis. The Committee
will review the final report in April 2023.
• Training: The Committee joined the Audit
Committee for training on climate-related
disclosures provided by Deloitte in November
(see page 125).
• Renewable energy: Renewable energy provision
(and related risks) is an emerging risk for the
Group (see page 125). The Committee received
an update on the availability and cost of sourcing
renewable energy.
• 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. The Group is fully
compliant with the 2023 EPC regulations. The
Committee will continue to monitor progress
towards the proposed 2030 regulations, which
may require a minimum EPC rating of B. During
2022, the Audit Committee considered the impact
of ESG credentials and EPC capital expenditure on
the valuation (see page 158).
• Planning risk: Planning risk is an emerging risk
for the Group (see page 125). 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.
• Geopolitical risks: The conflict in Ukraine, and
the international response, has contributed to
global supply chain disruption and commodity
price inflation. The Committee received updates
on the potential impact on our developments,
supply chain and managed portfolio. In
addition, the Committee received an update
on management’s procedures to ensure our
compliance with sanction lists.
• Recession risk: Due to the current economic
conditions, some of our occupiers could be
facing a more challenging financial situation.
The Committee was provided with updates on
the Group’s current default and arrears position,
the level of service charge costs (in particular
in relation to utility costs) and how we intend to
mitigate the risk of non-recovery.
• Inflation: The Committee reviewed the projected
impact of inflation on service charges. In addition,
the Committee was kept apprised of any budget
constraints due to construction cost inflation for
our development projects.
• Interest rates: The Committee was advised of the
impact of rising interest rates on Derwent London.
In the short-term the impact will be marginal. At
31 December 2022, all of our debt was at fixed
rates and we had £577m of cash and undrawn
facilities (excluding deposits).
Strategic objectives:
Emerging risks: B F
See pages 124 and 125
Principal risks:
1 2 3 4 5A
See pages 116 to 118
Strategic objectives:
Emerging risks: D E G H
See page 125
Principal risks:
7 8 9B
See pages 121 to 123
174
Derwent London plc / Report and Accounts 2022
RISK COMMITTEE REPORT continued
RISK MANAGEMENT FRAMEWORK
Assess
Monitor
Respond
Detailed assessment by
the Executive Committee
Emerging risks are
kept under review and
reassessed annually
Risk and control owners
assigned and Executive
Committee and Risk
Committee conduct
monitoring exercises
Introduce controls and
procedures to reduce
risk exposure and
understand how risks
relate and impact upon
each other
Identify
Top down
Board considers
future scenarios and
identifies principal and
emerging risks
Bottom up
Risks identified through
workshop debates
Risk documentation and monitoring
Schedule of
Principal Risks
(see pages 116
to 123)
Contains the risks which are classified as the Group’s main risks which are currently impacting on the
Group or could impact the Group over the next 12 months. The Schedule of Principal Risks includes
a comprehensive overview of the key controls in place to mitigate the risk and the potential impact
on our strategic objectives, KPIs and business model. 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 2022, the Schedule of Principal Risks contains 14 risks (2021: 13 risks).
Schedule of
Emerging Risks
(see pages 124
to 125)
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 2022, the Schedule of Emerging Risks contains eight
risks (2021: nine risks).
Group Risk
Register
Key risk
indicators
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 2022, the Group Risk Register contains
37 risks (2021: 34 risks).
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 tolerance framework (see page 115). 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.
Risk rating
We operate multiple risk registers depending on their potential impact on the business, from function-specific registers to
our Schedule of Principal Risks (see table above). 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. Risks which are graded ‘red’ on a net basis (after mitigation)
are included in the Group’s Schedule of Principal Risks.
1. Very low
2. Low
Impact
3. Medium
4. High
5. Very high
d
o
o
h
i
l
e
k
i
L
1. Almost certain
2. Highly probable
3. Possible
4. Unlikely
5. Very unlikely
Governance
175
How do we identify risks?
• 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.
• Independent assurance: the Group’s outsourced
internal audit function performs reviews of the Group’s
departments and key activities which provides assurance
to the Board and Committee that risks are being
identified and effectively managed. In addition,
these reviews highlight any recommendations for
further action.
How do we assess risk?
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 appetite) 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.
How do we monitor risks?
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.
How do we respond to risk?
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 appetite.
The successful management of risk cannot be done in
isolation without understanding how risks relate and
impact upon each other. At Derwent London, we consider
the interconnectivity between risks which allows us to
prioritise areas that require increased oversight and
remedial action. The mitigation plans in place for our
principal risks are described on pages 116 to 123. We use
insurance to transfer risks which we cannot fully mitigate.
Related information is on the following pages:
INTERNAL AUDIT / See page 165
EXTERNAL AUDIT / See page 166
ASSURANCE OVER EXTERNAL REPORTING / See page 162
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 longstanding 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.
176
Derwent London plc / Report and Accounts 2022
RISK COMMITTEE REPORT continued
OUR RISK MANAGEMENT STRUCTURE
On an annual basis the Risk Committee reviews the Group’s risk management structure as certain risk management
activities are delegated to the level that is most capable of overseeing and managing the risks.
The Board
• Overall responsibility for risk management and internal control
• Sets strategic objectives and risk appetite
• Sets delegation of authority limits for senior management
• Ensures that a healthy purposeful culture has been embedded
• 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)
throughout the organisation (with input from the Executive Directors)
• Manages the internal audit process jointly with the Audit Committee
Risk Committee
• Monitors and reviews the Board’s risk registers
• Works alongside the Board to set the risk tolerance levels for
• Receives updates on key risks and monitors the Group’s
risk indicators
the Group
• Determines the nature and extent of the principal and emerging
risks facing the Group
In addition to the Risk Committee, the Board’s other principal committees
manage risks relevant to their areas of responsibility.
Audit
Committee
Remuneration
Committee
Responsible Business
Committee
Nominations
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
• 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
• Oversees the Group’s
• 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
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
Executive Directors, with assistance from the Executive Committee
• Ensures the design and implementation of appropriate risk
• Responsible for internal and external communication on 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
management and internal controls
• 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
• Allocates ‘risk managers’ and oversees their response
• Risk management is devolved to the appropriate level most
• Engages with the Executive Directors and senior management
capable of identifying and managing the risk
to identify risks
Governance
177
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 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, the Group’s anti-bribery and corruption procedures will be subject to review and all employees (including
the Board) will receive refresher training on anti-bribery and corruption as part of the mandatory compliance training
programme (see page 171).
Policy and procedures:
Corporate hospitality
Business gifts
Hospitality and
Gift Returns
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.
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.
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 185).
Payments
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 146 explains our process for managing potential conflicts.
Training
Whistleblowing
procedures
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.
A confidential helpline is available for staff to report concerns anonymously (see page 139).
178
Derwent London plc / Report and Accounts 2022
RISK COMMITTEE REPORT continued
BUSINESS CONTINUITY AND DISASTER RECOVERY
Our last full disaster recovery test was successfully completed on 25 June 2021. This included a failover of all critical
IT infrastructure to our disaster recovery suite and all business applications were tested. The entire process, from the
failover to our disaster recovery suite, to restoring services at 25 Savile Row, took six hours and 25 minutes (a 20-minute
improvement on our previous full test completed in October 2018). The next full disaster recovery test is scheduled to take
place in Q2 2023.
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. An overview of the disaster recovery tests due to take place during 2023
are provided in the table below.
Derwent London has formal procedures for use in the event of an emergency that disrupts our normal business operations
which consist of:
Off-site disaster
recovery data
centre
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.
Testing and
review
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.
Crisis
Management
Team (CMT)
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.
Business
Continuity Plan
(BCP)
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.
Disaster recovery tests in 2023
Test
Purpose
IT component test
Business Continuity
Plan review
Full IT disaster recovery test
Tabletop exercise
A technical test of the individual components required to carry
out a failover of IT services to our disaster recovery data centre.
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.
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.
A tabletop group exercise to review our incident response procedures
and rehearse various disaster recovery scenarios to ensure we are
adequately prepared.
Date
Q1 2023
Q2 2023
Q3 2023
Q4 2023
Governance
179
Members of the Digital Innovation & Technology team
POWER RATIONING
During 2022, due to the energy crisis faced by the
UK, The National Grid announced the possibility
of a power rationing programme being introduced
across the UK which could result in rolling three-
hour power cuts. Implementation of any such
programme would be linked to cold weather
events, availability of gas imports and production
of renewable energy within the UK. Whilst
considered unlikely to occur, the Risk Committee
requested that the Property Management team
conduct power rationing scenarios based on a
total loss of power to test our portfolio business
continuity plans.
Controlled electrical shutdowns were undertaken
across the entire managed portfolio to test our
systems’ resilience and the outcomes captured
and recorded. The testing covered all operational
aspects of the building, with specific attention to
life safety systems, loss of communications and
security protocols.
Following completion of the shutdowns, disaster
recovery plans were prepared specific to each
site, and shared with occupiers, setting out the
procedures to be followed in the event of power
loss. It was agreed that a shortage of electrical
power, and the risk of power rationing, was
unlikely to have a significant impact on the
Group’s portfolio.
SHORTAGE OF ELECTRICAL POWER / See page 125
DISASTER RECOVERY CENTRE
During 2022, our disaster recovery suite was
successfully migrated to a new off-site data
centre. As a result, our Disaster Recovery Plan
was updated and we performed technical tests
to ensure the resilience of our IT infrastructure.
The new data centre benefits from:
100%
uptime record
100%
renewable energy
Fully accredited
with ISO 27001, Cyber Essentials Plus and PCI DSS
180
Derwent London plc / Report and Accounts 2022
RISK COMMITTEE REPORT continued
Key performance indicators (KPIs)
The Committee reviews a dashboard of key risk indicators
at each meeting which includes information security and
cyber risk-related KPIs. During 2022, there was a 36%
decrease in the total number of potential attacks when
compared to 2021, none of which resulted in a security
incident. 99.97% 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 due to
policy deviations 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.
The Committee receives annual updates on the work
being performed.
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.
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:
Policies, procedures,
and awareness
Physical security
Perimeter security
Internal network
Host security
Application
security
Data
security
Our cyber security procedures are subject to regular
independent reviews and tests, which are presented to
the Risk Committee, which monitors the implementation
of any arising actions (see case study on page 181). In
addition, PwC conducts annual IT control audits and
RSM, our outsourced internal audit function, audited
our cyber controls.
In February, our Digital Innovation & Technology (DIT)
team provided additional awareness training to all staff
in preparation for a potential increase in attacks arising
from the conflict in Ukraine. In response to the NCSC’s
advice for organisations to improve their resilience with the
cyber threat heightened, a number of additional controls
were implemented to bolster our defences and improve
our capability to detect and respond to cyber security
incidents. Throughout the month of October, our DIT
team also promoted Cybersecurity Awareness Month by
sharing weekly cyber security themed emails with tips and
guidance, posters and a quiz.
Related information is on the following pages:
CYBER-RELATED PRINCIPAL RISKS / See page 120
TECHNOLOGY-RELATED EMERGING RISKS / See page 124
DIGITAL STRATEGY RISKS
The digital risks relating to our strategy are currently low
as our reliance on data to operate our core business is
minimal. As we increase the digitalisation of our business
model, through our Intelligent Buildings Programme, our
potential exposure will increase. A cyber attack on our
buildings has been identified as a principal risk for the
Group, and our key controls are detailed on page 120.
Intelligent Buildings Programme
In alignment with our strategy and purpose, the Derwent
London Intelligent Buildings 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 2022, the Executive
Committee monitored the phased roll out of the Intelligent
Buildings 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.
The main challenges which have been encountered during
the initial roll out of the programme are network readiness
in buildings, building remedial work and upgrades, and
the need for additional building manager training. The DIT
team are supporting the programme by:
• working alongside external advisers to compile risk
registers for each building in our portfolio, in respect to
their cyber security resilience. The review will identify
whether there are risks outside of the Board’s tolerance
which will require rectification; and
• identifying how data can be collected from the Intelligent
Buildings Programme and made available on our tenant
portal to enable our occupiers to have greater access to
information on their spaces.
Related information is on the following pages:
NET ZERO CARBON / See page 27
ENGAGEMENT WITH OUR OCCUPIERS / See page 142
Governance
181
The Featherstone Building EC1 – our first Intelligent Building
CYBER SECURITY: OUR CAPABILITY
TO DETECT AND RESPOND
During 2022, we conducted a cyber incident response
tabletop exercise which was independently reviewed
to assess our ability to detect and respond to a given
cyber security incident.
The review tested various scenarios which enabled
the Digital Innovation & Technology (DIT) team
to apply their ‘playbooks’ and identify potential
improvements. The external assessor confirmed that
we have sufficient technical capability in place to deal
with the given scenarios and robust infrastructure that
should prevent and/or detect cyber attacks.
“ Derwent London have sufficient
technical capability in place to deal with
these scenarios. Employees are regularly
trained in cyber security and know how
to raise a cyber security issue to the
technical teams. Those that attended the
tabletop approached the scenarios in a
logical manner.”
Quote from independent external assessor
Extract from CIR Report
182
Derwent London plc / Report and Accounts 2022
RESPONSIBLE BUSINESS
COMMITTEE REPORT
DAME CILLA SNOWBALL
Chair of the Responsible Business Committee
2023 FOCUS AREAS
• Commence work with the Business Disability Forum
to help improve business practices
• Ensure adherence to the Group’s Net Zero Carbon
Pathway and receive regular updates on progress
• Continue to monitor the Group’s community,
charitable and sponsorship initiatives
• Review the composition of the Committee’s employee
members during Q2 2023, in advance of Davina Smith
reaching her three-year term in December 2023
COMMITTEE MEMBERSHIP DURING 2022
Independent
meetings Attendance1
Number of
Cilla Snowball
Claudia Arney
Matt Massey
Davina Smith2
Lucy Taylor
Kirsty Williams
Paul Williams
Yes
Yes
Employee
Employee
Employee
Employee
No
2
2
2
2
2
2
2
100%
100%
100%
100%
100%
100%
100%
1 Percentages are based on the meetings entitled to attend for the 12 months
ended 31 December 2022.
2 The composition of the employee members will be reviewed during Q2 2023
as Davina Smith comes to the end of her tenure on the Committee.
Dear Shareholder,
As the Chair of the Responsible Business
Committee, I am pleased to present our report
of the work of the Committee for 2022. I would
suggest that this report is read alongside the
Responsibility section on pages 50 to 85.
Engagement with our stakeholders
Building long-term relationships with our stakeholders is
essential to the delivery of our strategy. The Committee
has continued to examine the detail of our activities and
engagement with employees, communities, occupiers
and suppliers.
Over the year, the four employee Committee members have
worked hard to address the priority areas identified in the
2021 Employee Survey. As a result, an employee hub was
approved to signpost training and development, along with
allyship training, a new Smart Working Policy and a range
of wellbeing sessions on sleep, menopause, mental health
awareness and men’s health.
We were pleased to see that the 2022 ‘pulse survey’ showed
improved, and consistently high, employee engagement
levels across all metrics, with 91% of employees saying they
are ‘proud to work at Derwent London’.
The Committee received regular updates on the excellent
community engagement work that has been undertaken
over the year, including the Community Fund, sponsorships
and donations, staff volunteering and social value impact
measurement. A review of the Supply Chain Responsibility
Standard was undertaken, and policies and procedures
on the prevention of modern slavery were shared, with
training. The Committee recognises that the ‘cost of living’
challenges are impacting all of our stakeholders, and
the Committee is sensitive to the risks, and the need for
responsible mitigations.
Diversity and inclusion
The Committee received regular updates from the Diversity
and Inclusion Working Group (the ‘D&I Working Group’) on
its activities and discussions. With full National Equality
Standard accreditation, we were pleased to see the further
work being undertaken on disability awareness, including
membership of the Business Disability Forum, which
will audit and assess inclusion across our business. The
Committee also reviewed the latest report issued by the
Parker Review Committee on ethnic diversity. Participation
in the 10,000 Black Interns programme in 2022 provided
reverse mentoring, work experience and apprenticeships.
Employee members
The four employee members of the Committee continue to
add enormous value to our discussions and outputs, and
we thank Davina Smith, Matt Massey, Lucy Taylor and Kirsty
Williams for their hard work and contributions. In particular,
their work on the Employee Survey has ensured areas of
particular interest and priority to staff can be quickly
turned into action, strengthening our employee
engagement overall.
Governance
183
Net zero carbon
The Committee received regular updates on the Group’s
progress towards being net zero carbon by 2030,
including energy saving measures across the portfolio
and engagement with occupiers on a range of matters
including ‘Green Forums’, energy usage data, planning
assumptions and climate change risk.
Further engagement
If you wish to discuss any aspect of the Committee’s
activities, I will be available at the 2023 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 2023
Committee composition and performance
During 2022, our Committee consisted of two independent
Non-Executive Directors, the Chief Executive and four
employee members. At the request of the Committee,
members of the Executive Committee, senior management
team, other Board members 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 formal meetings (in May and December) (2021:
two meetings). In addition to the formal meetings, the
Committee holds ad hoc informal meetings. The Chair
of the Committee is also the Group’s designated NED
for gathering the views of our workforce (see page 145).
The Committee’s role and responsibilities are set out in
the terms of reference, which were last updated in May
2022 and are available on the Company’s website at:
www.derwentlondon.com/investors/governance/board-
committees
The 2022 evaluation of the Board, its committees
and individual Directors was externally facilitated by
Manchester Square Partners LLP, in accordance with
our three-year cycle of evaluations (see page 149).
The review confirmed that the Committee continues to
operate effectively, with no significant matters raised.
KEY ACTIVITIES OF THE COMMITTEE
DURING 2022
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 2022, the Committee’s keys activities were:
Responsible business
• Revised the Group’s Code of Conduct & Business Ethics
• Reviewed the Supply Chain Responsibility Standard to
ensure continued validity following 2021 publication
• Reviewed the Group’s modern slavery practices as well
as the 2022 Modern Slavery Statement
Stakeholder engagement
• Received regular updates on our community initiatives
and engagement (see page 57)
• Reviewed the feedback from the employee and occupier
‘pulse surveys’ (see pages 59 and 94)
• Received an update on how management are
addressing the recommendations arising from the 2021
Employee Survey (see page 59)
Diversity and inclusion
• Committed to becoming a member of the Business
Disability Forum
• Received regular updates on the D&I Working Group
and its activities and discussions (see page 186)
• Reviewed the latest report issued by the Parker Review
Committee on the progress towards ethnic diversity
• Responded to employee feedback from the 2021
Employee Survey by introducing a ‘reverse mentoring’
initiative in the 10,000 Black Interns programme (see
page 60)
Employees
• Approved the creation of an ‘employee hub’ to provide
easy access to information on training and development
opportunities, in addition to the intranet
• Arranged interactive allyship training for management
to create an even more inclusive and supportive
working environment
• Approved a re-branded Smart Working Policy, which was
well received by employees
Net zero carbon
• Monitored our progress to net zero carbon (see page 52)
• Reviewed Derwent London’s involvement in COP26 and
assessed key takeaways
• Received a verbal update on climate change risk
184
Derwent London plc / Report and Accounts 2022
RESPONSIBLE BUSINESS COMMITTEE REPORT
continued
EMPLOYEES ON THE RESPONSIBLE
BUSINESS COMMITTEE
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 2022, they participated in the Employee Survey
Working Group meetings, which review the results of the
latest Employee Survey and propose recommendations
to the Executive Committee to address areas of particular
interest or concern for staff (see page 59).
Davina Smith
Property Accounts Manager
Joined Derwent London in June 2015
Appointed to the Committee: October 2020
Expected term expiry: December 2023
Matt Massey
Head of Project Management
Joined Derwent London in March 2014
Appointed to the Committee: January 2022
Expected term expiry: December 2024
Lucy Taylor
Investment Manager
Joined Derwent London in March 2019
Appointed to the Committee: January 2022
Expected term expiry: December 2024
Kirsty Williams
Associate, Property Management
Joined Derwent London in February 2007
Appointed to the Committee: January 2022
Expected term expiry: December 2024
“ It is a privilege being an employee member
of the Responsible Business Committee.
I appreciate the opportunity to contribute
to meaningful Board discussions on behalf
of my colleagues. Responsible Business
Committee meetings are also a reminder of
the positive impact Derwent London strives
to make to local communities through our
social and environmental initiatives.”
DAVINA SMITH
Property Accounts Manager
Employee member of the Responsible
Business Committee
Committee employee members
Governance
185
SUPPLY CHAIN RESPONSIBILITY STANDARD
MODERN SLAVERY
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.
All suppliers with whom we spend more than £20,000
per annum are required to comply with, and provide
evidence of how, they are implementing the Standard.
Those suppliers with whom we spend less than £20,000
will still be expected to identify and address any significant
risks areas which we identify via an ESG risk analysis, last
conducted in Q4 2022.
During 2022, a review was conducted to ensure the
Standard remains valid following the publication of the
revised version in August 2021, which is available to view
on our website.
We endeavour to ensure that the risk of modern slavery
and human trafficking occurring in any of our activities,
our supply chains or in any part of our wider business is
reduced as much as possible. As a result of wider factors,
such as inflation and recession, many of the underlying
causes of modern slavery such as poverty, inequality and
unemployment have worsened.
During 2022, we continued to identify and implement
ways to strengthen our policies and procedures in respect
of the protection of human rights and prevention of
modern slavery. Modern slavery issues and updates were
included on the agenda of our ongoing Principal Contractor
Customer Improvement Groups led by the Health and
Safety team. Refresher training was also provided to all
employees (including the Board) on how to identify modern
slavery risks in the supply chain.
Biennially we request evidence that our major suppliers are
compliant via a questionnaire. This extends beyond basic
compliance and requires our suppliers to advise how they
are embedding best practice into their working practices.
During 2023, we will seek assurance that our suppliers have:
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, which
include cleaning and security services.
Governance We require our suppliers to adhere to our
• An equality, diversity and inclusion policy that aligns with
the Equality Act 2010 and is communicated to all staff.
• A policy to ensure that bullying, harassment, and
discrimination (based on all protected characteristics) is
not tolerated.
• A modern slavery policy that addresses items raised in
the Modern Slavery Act 2015 and training is provided on
the subject to all staff.
Following our review, all suppliers who have not confirmed
compliance with our Standard will be contacted.
Policies
Responsible payment practices
Derwent London is a signatory to the Chartered Institute
of Credit Management (CICM) 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 or otherwise will do so in accordance with
specified contract conditions. We expect our suppliers to
adopt similar practices throughout their supply chains to
ensure fair and prompt treatment of all creditors.
In 2022, our average payment term was 22.6 days, which
continues to remain below our payment terms of 30 days.
Supply Chain Responsibility Standard
which requires, as a minimum, that
suppliers comply with the Modern Slavery
Act 2015. In addition, we expect suppliers
to provide modern slavery training to
employees, and have provisions in place
that endeavour to ensure their supply chain
also adheres to the Act.
We have a number of internal policies
that promote our culture and expected
behaviours in accordance with the Act’s
objectives. This includes our newly revised
Code of Conduct & Business Ethics.
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.
Our latest Modern Slavery Statement is available on our
website: www.derwentlondon.com/investors/governance/
modern-slavery-act
186
Derwent London plc / Report and Accounts 2022
RESPONSIBLE BUSINESS COMMITTEE REPORT
continued
DIVERSITY AND INCLUSION
Diversity key performance indicators (KPIs)
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.
We are founding supporters of Real Estate Balance and we
are members of the City Women Network (CWN) which
provides membership to all our senior female employees.
The Diversity and Inclusion Working Group
The Diversity and Inclusion Working Group (the ‘D&I
Working Group’) consists of 13 members and meets
monthly to discuss the progress being made towards the
Group’s diversity and inclusion vision, strategy and KPIs.
Throughout the year, Executive Directors and/or Heads of
Departments are invited to join the D&I Working Group’s
meetings, which provides insights into the diversity and
inclusion initiatives being discussed. Management receive
an understanding of what the D&I Working Group are
aiming to achieve and offer support through a top
down approach.
The Committee received updates on the work of the D&I
Working Group at each meeting, during 2022 this included:
• Levelling up: As part of the 10,000 Black Interns
programme, four interns joined Derwent London on a
six-week placement, rotating around the business and
portfolio. Positive feedback was received from the trial
of reverse mentoring between the interns and members
of the Executive Committee (see page 60). Through
our work experience scheme, we continue to offer
opportunities to a broad range of students from varying
socio-economic backgrounds, ethnicities, and genders.
• Training: All Heads of Departments attended a
presentation on allyship and inclusion by the founder
and CEO of We Rise In, Faith Locken. Mental health
awareness training was offered to all employees with four
workshops being run as well as an online session. The
Group continued their work with Chickenshed providing
unconscious bias training to employees.
• Communication: We increased the use of our social
media channels to communicate the D&I strategy and
initiatives to all stakeholders. The Group has also been
contacted by a number of businesses to share how we
achieved all 35 competencies of the National Equality
Standard in 2021.
In 2023, the D&I Working Group will be rotating its
members and continue to raise awareness of all aspects of
diversity, inclusion and equality and work to further embed
our 2022 initiatives including signing up to the Business
Disability Forum from 1 March 2023.
The Board receives updates on our diversity focus areas
including the following diversity KPIs:
51.0%
total number of female employees
as at 31 December 2022
48.9%
of new recruits during 2022
were female
35.6%
of new recruits during 2022
were from an ethnic minority
group
77.3%
of new female recruits during
2022 were for professional or
managerial roles*
50.0%
of ethnic minority recruits during
2022 were for professional or
managerial roles*
*excludes administrative and support roles
MORE ON DIVERSITY AND INCLUSION / See page 60
BOARD’S APPOINTMENT POLICY / See page 154
Governance
187
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 in its fullest consideration
continues to be the key focus area.
Focus
Actions taken during 2022
Further actions required in 2023
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).
Retaining the best talent
• Focus on women
returning to work.
• Promote the importance
of Smart Working.
• Equal opportunities
for all.
Promoting diversity
• Gender balance within
our internships and work
experience placements.
• Aim to encourage more
females to be interested
in the construction
and property industry
and challenge harmful
gender stereotyping.
• Heads of Departments to
demonstrate that we are
an inclusive employer.
• Worked closely with recruitment consultants to ensure
• Continue with current initiatives
diversity shortlists are received for every vacancy.
• Promoted the achievement of the National Equality
Standard through our website, social media and during
the recruitment process.
• Ongoing recruitment log to ensure that the data and
demographics are analysed within a recruitment process
including candidate pool, interview pool and hires.
• Increased use of our social media channels with a focus on
actively promoting ourselves as an employer that embraces
diversity, equality and inclusivity.
• Continued with our compulsory unconscious bias training
alongside Chickenshed for all employees.
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.
• Sign up to the Business Disability
Forum (from 1 March 2023) and
complete the Smart Audit.
• Hosted our third employee awayday to build relationships and
• Continue to focus on mental health
encourage collaboration.
and wellbeing.
• Held an inclusive management session with Heads
of Departments.
• Continued with parental transition coaching for those
returning from a period of extended leave.
• Strong focus on supporting health and wellbeing.
• Launched our new Smart Working policy.
• Core Skills sessions and technical workshops continued.
• Rolled out mental health awareness training for all
employees, mental health and sleep, menopause and men’s
health sessions.
• Ran a number of inclusive social events for all employees.
• The importance of diversity, equality and inclusion was
emphasised in our induction programme by our CEO.
• Analyse and digest the feedback from
the October 2022 employee ‘pulse
survey’ and explore recommendations
and actions.
• Further training for all line managers
including coaching conversations,
personal development plans and
leading an inclusive team.
• Roll out our fifth full Employee Survey
run by an independent provider.
• To review the performance appraisal
process, succession plans and career
development opportunities that have
been identified for all employees.
• Hosted four interns under the 10,000 Black Interns
• Continue to participate in careers and
programme in the Summer of 2022.
• Arranged work experience placements from a variety of
backgrounds/disciplines.
• Our monthly town hall meetings, hosted by our CEO,
focused on diversity and inclusion on a regular basis.
• Our intranet and screensavers continued to create and
encourage discussion and awareness on diversity and
inclusion e.g. recognising and celebrating Black History
Month, religious holidays, Menopause Awareness Day,
national campaigns etc.
• All employees attended compulsory compliance training on
disability awareness.
• Working with Pathways to Property.
• The D&I Working Group has continued to meet monthly and
shared best practice with other companies.
• Engaged with external D&I specialist to ensure best
practice continues.
volunteering events during 2023.
• Continue to have gender and ethnic
balance within our internships and
work placements.
• Continue with training on diversity
and inclusivity e.g. allyship.
• Continue to use the town hall meetings,
intranet, email and guest speakers to
keep diversity and inclusivity initiatives
high on the agenda highlighting one
D&I related event/communication
per quarter.
• Continue to engage with and learn from
external specialists.
188
Derwent London plc / Report and Accounts 2022
RESPONSIBLE BUSINESS COMMITTEE REPORT
continued
THE GROUP’S COMPOSITION AND DIVERSITY
The information below provides a breakdown of our diversity as at 1 January 2023. Further information on the Board’s
composition as at 1 January 2023 is shown on page 147. The variance between genders in responses 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 216).
TOTAL NUMBER
OF EMPLOYEES
184
Headcount by department
Number
Board of Directors
Asset Management
Company Secretarial & HR
Development
Digital Innovation & Technology
Finance
Health & Safety
Investment
IR & Corporate Communications
Leasing & Property Marketing
Operational Support
Property Management
Sustainability
11
18
7
17
8
21
7
8
6
12
11
52
6
Length of service
Years
Under 3
3–5
5–10
10–15
15–20
20+
78
22
39
20
13
12
Employees by age
Years
20–29
30–39
40–49
50–59
60+
28
64
45
26
21
Governance
189
Senior
positions on
the Board4
%
Number
Gender diversity and ethnic origin
Total employees1
Executive Committee
& its direct reports2
Number
%
Number
%
Gender5
Men
Women
Other
Not specified/
prefer not to say
Ethnicity5
White British/
White Other
Mixed/Multiple
Ethnic Groups
Asian/Asian
British
Black/African/
Caribbean/Black
British
Other Ethnic
Group
Not specified/
prefer not to say
Total
90
94
–
–
184
49.0%
51.0%
–
–
138
75.0%
9
17
16
4
–
184
4.9%
9.2%
8.7%
2.2%
–
35
36
–
–
71
64
1
2
1
3
–
71
Board3
Number
6
5
–
–
11
54.5%
45.5%
–
–
49.3%
50.7%
–
–
90.1%
10
90.9%
1.4%
2.9%
1.4%
4.2%
–
–
1
–
–
–
11
–
9.1%
–
–
–
3
1
–
–
4
4
–
–
–
–
–
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).
2022 Facilities and Building
Management apprentices
190
Derwent London plc / Report and Accounts 2022
REMUNERATION
COMMITTEE REPORT
CLAUDIA ARNEY
Chair of the Remuneration Committee
2023 FOCUS AREAS
• Ensure the 2023 Remuneration Policy is effectively
implemented following shareholder approval in
May 2023
• Operation of the 2023 annual bonus and grant of
2023 Performance Share Plan (PSP) awards
• Continue to keep wider workforce remuneration
arrangements under review, taking these
into account when considering remuneration
arrangements for Executive Directors
• Continue to keep under review the effectiveness and
relevance of performance conditions and comparator
groups for variable remuneration
COMMITTEE MEMBERSHIP DURING 2022
Independent
meetings Attendance1
Number of
Claudia Arney
Lucinda Bell
Helen Gordon
Sanjeev Sharma2
Yes
Yes
Yes
Yes
4
4
4
3
100%
100%
100%
100%
1 Percentages are based on the meetings Directors were entitled to attend for
the 12 months ended 31 December 2022.
2 Sanjeev Sharma joined the Committee on 1 March 2022.
ANNUAL STATEMENT
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 2022.
This includes:
• My Annual statement as Chair of the Remuneration
Committee (pages 190 to 193);
• Our new Directors’ Remuneration Policy which will be
subject to a binding shareholder vote at the 2023 AGM
(pages 194 to 202); and
• The Annual report on remuneration (pages 203 to
223), describing how the Remuneration Policy has been
applied for the year ended 31 December 2022 and how
we intend to implement policy for 2023.
The Remuneration Committee report (excluding the
Directors’ Remuneration Policy) will be subject to an
advisory shareholder vote at the 2023 AGM.
Linking Executive Directors’ remuneration with our
purpose and strategy
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.
Further details, including how our KPIs are embedded
within the remuneration framework and how remuneration
aligns with our values, is set out on page 205. Derwent
London values openness and transparency. To this end
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
strategic direction of the Group and take into account the
experience of key stakeholders.
Performance outcomes in 2022
Annual bonus: In line with recent years, the annual bonus
is subject to relative total return performance (37.5%),
relative total property return performance (37.5%) and
strategic performance (25%).
Total return performance is measured against a comparator
group of real estate companies (see page 215 for details).
A robust methodology for assessing the Group’s total
return performance against the comparator group has
been applied consistently for a number of years which
includes, for a number of the comparators, an estimate
of performance to 31 December 2022. However, in
light of current volatility and uncertainty in respect of
property valuations, the Committee has decided to delay
the assessment of the performance of the total return
performance of the comparator group until more published
information is available. The Committee has therefore
not yet determined the Group’s relative performance
and vesting outcome as at the date of this report. The
Committee will determine the vesting outcome of the
relative total return element in the coming months, when
it has greater clarity in respect of comparator group total
return performance.
Governance
191
Full details of the vesting outcome of the total return
element (which may range between 0% and 100% of
maximum) and total bonus earned in respect of 2022
will be disclosed in the 2023 Report & Accounts.
The Group’s 2022 total property performance was -3.4%
compared to the MSCI Quarterly Central London Offices
Total Return Index of -8.02% and the relative total property
return element therefore vested in full (see page 215).
17.6% of the strategic element vested based on performance
against strategic targets (see page 216). The Executive
Directors therefore earned a bonus equal to 82.7% of salary
based on the relative total property return and strategic
elements only and this will be paid in March 2023. As
noted above, the relative total return element is still to
be assessed by the Committee. Therefore, the Executive
Directors may ultimately earn a bonus up to 139% of salary
depending on the vesting outcome of the relative total
return element.
Performance Share Plan: The PSP award granted in
2020 will lapse in full based on the outcome of the relative
total shareholder return and relative total property return
performance metrics. 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 in the
face of continued economic and geopolitical uncertainty.
The Group raised the 2022 interim dividend by 4.4% to
24p per share and the proposed 2022 final dividend has
been increased by 1.9% to 54.50p per share.
The Committee has introduced a dedicated section 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. The following is noted
in particular:
• All eligible employees received a bonus for 2022.
• In October 2022, the Directors approved the payment
of a one-off gross non-pensionable payment of £1,000
to all employees (not under notice) with a full-time
equivalent base salary of £55,000 or less. The payment
was aimed to offer additional help to employees where
it was believed the economic burden of the current
‘cost of living crisis’ would be most challenging.
The Group has continued to perform strongly in difficult
circumstances which is testament to the quality and
commitment of our executive leadership team. However,
the Committee also recognises that shareholders have
been impacted by the Group’s absolute share price
performance during the year. Therefore, on balance,
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.
Remuneration Policy review
Our current Remuneration Policy, which was approved
by shareholders at our 2020 AGM (with a vote in favour
of 95.5%), is approaching the end of its three-year
term. During 2022, the Committee has undertaken a
comprehensive review of the executive remuneration
framework which included consultation with 20 major
shareholders representing c.64% of our issued share
capital and three proxy agencies.
In its review, the Committee considered a range of
incentive frameworks including restricted shares.
The Committee concluded that the current Policy and
incentive framework (comprising an annual bonus and
PSP) continues to support our purpose, the delivery of
our business strategy and the creation of shareholder
value. Therefore, no significant changes are proposed.
One refinement has been proposed to the Policy which
is to strengthen the annual bonus deferral requirements.
Under the current Policy, Executive Directors are required
to defer any annual bonus earned above 100% of salary
into shares for three years. Under the new Policy, Executive
Directors will be required to defer any annual bonus
earned above 75% of salary into shares for three years.
This refinement means that any bonus earned above target
performance (i.e. 50% of maximum) will be deferred, with
50% of the bonus total deferred at maximum performance.
In addition, until the within-employment shareholding
guideline is met, Executive Directors are required to retain
at least half of any deferred bonus shares or PSP shares
which vest (net of tax).
The Committee considers that this approach strikes an
appropriate balance between moving more towards market
practice and recognising that Executive Directors already
have significant shareholdings in excess of 200% of salary
(with the exception of Emily Prideaux, who was appointed
as an Executive Director on 1 March 2021 and is working
towards achieving the within-employment shareholding
guideline of 200% of salary).
The Committee also considered the performance metrics
under the annual bonus and PSP as part of the Policy
review. Staying ahead of the sustainability curve and
delivering on its net zero carbon commitments is a
fundamental part of Derwent London’s long-term strategy.
The Committee therefore considers it appropriate to
introduce sustainability performance metrics (embodied
carbon reduction and energy intensity reduction) within
the PSP. Further details are provided on pages 192 and 212.
The Committee is very appreciative of the time taken by
shareholders to engage on the Policy review and proposed
salary increases for Paul Williams and Emily Prideaux,
and is pleased with the level of support received from
shareholders on the proposals.
192
Derwent London plc / Report and Accounts 2022
REMUNERATION COMMITTEE REPORT continued
ANNUAL STATEMENT continued
Implementation in 2023
Base salaries and fees: On promotion to Chief Executive
in May 2019, Paul Williams’ salary was set at £600,000.
His salary was positioned towards the lower end of market
practice for a company of our size and complexity and
below that of his predecessor. Paul’s salary on appointment
reflected that he was stepping up into the role of Chief
Executive. As noted in the 2019 Report & Accounts and
again in last year’s Report & Accounts, the Committee
committed 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.
Since appointment, Paul’s salary has been increased by
2% from 1 January 2021 and 3% from 1 January 2022,
which was in line with and below the increases awarded
to the wider workforce respectively. In light of the Covid-19
pandemic, the Committee did not consider that it was
appropriate to make a more material change at either of
these points in time.
The Board believes that Paul has performed very strongly
since his appointment, skilfully navigating the Group
through the Covid-19 pandemic and more latterly the
challenging economic environment, and the Board believes
that his experience and performance is comparable with an
experienced Chief Executive.
The Committee therefore increased Paul’s base salary from
£630,400 to £680,000 (7.8% increase) with effect from
1 January 2023. Paul’s salary is now positioned in line with
his predecessor’s salary from 2019 which was £677,000
when he stepped down from the role.
While this decision was not driven by benchmarking, the
Committee considered the salary positioning against
market data to ensure it was appropriate. Following
the increase, Paul’s salary and his total compensation
opportunity is positioned between lower quartile and
median compared to other FTSE 250 companies of
a similar size and complexity and at around median
compared to our real estate peers. The Committee
concluded that this positioning was appropriate.
Emily Prideaux was appointed to the Board on 1 March
2021 with a base salary of £410,000 and this increased
to £450,000 with effect from 1 January 2022. Emily’s
salary was positioned below that of the other Executive
Directors’ salaries to reflect that she was stepping up 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. Emily has continued to perform exceptionally
well in her role as an Executive Director and therefore
the Committee intends to align her salary with the other
Executive Directors’ salaries by 1 January 2024, subject to
continued strong performance.
As part of this alignment, the Committee increased Emily’s
salary to £492,500 (9.4% increase) with effect from
1 January 2023.
The Committee increased Damian Wisniewski’s and Nigel
George’s salaries from £504,300 to £524,500 (4% increase)
with effect from 1 January 2023. The average increase for
the wider workforce was 6.1%.
There will be no increase to the Non-Executive Director fees
in 2023.
Annual bonus: The annual bonus and PSP opportunities and
financial performance measures remain largely unchanged
for 2023. Minor changes have been made to the strategic
targets which make up 25% of the bonus (see page 211).
PSP: As noted on page 191, the Committee proposes to
introduce embodied carbon reduction and energy intensity
reduction performance metrics within the PSP (both of
which are major pillars in Derwent London’s Net Zero Carbon
Pathway), alongside relative total shareholder return and
total property return. The embodied carbon and energy
intensity reduction targets will align with the business’
science-based targets to achieve net zero by 2030.
The Committee is cognisant that key business decisions can
unintendedly impact embodied carbon and energy intensity
reduction performance, given there are various nuances to
measuring performance under the science-based targets
legislation. In recognition that we are still developing our
approach, it is intended that the performance metrics are
introduced on a phased basis as follows:
• 2023 PSP: Total Shareholder Return (50%), Total Property
Return (40%), embodied carbon and energy intensity
reduction (10%). See page 212 for details of targets.
• 2024 and 2025 PSP: Total Shareholder Return (50%),
Total Property Return (30%), embodied carbon and energy
intensity reduction (20%).
This 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 Committee reviewed the Group’s share price
performance prior to determining award levels for the 2023
PSP grant. As the share price on 24 February 2023 was
not materially different to the share price at the time the
2022 PSP awards were granted (£29.36), the Committee
considered it appropriate to award a maximum opportunity
of 200% of salary to Executive Directors (in line with the
maximum opportunity under the Remuneration Policy).
Governance
193
Further engagement
I look forward to receiving your support at our 2023 AGM,
where I will be available to respond to any questions
shareholders may have on this report. In the meantime, if
you would like to discuss any aspect of the Committee’s
activities, please 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 2023
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.
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
Alignment to strategy
and culture
Risk management
Stewardship
Ensure that remuneration arrangements are simple and transparent to key
stakeholders and take account of pay policies for the wider workforce. Details
of the maximum potential values that may be earned through the remuneration
arrangements are set out in the Remuneration Policy on pages 194 to 196.
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.
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 115). Malus
and clawback provisions apply to annual bonus and PSP awards, and the Committee
has the means to apply discretion and judgement to vesting outcomes.
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 to support sustainable decision making.
Predictability
The ‘Remuneration scenarios for Executive Directors’ on page 199 indicate the
potential values that may be earned through the remuneration structure.
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.
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 2021 to 2022.
£m
Staff costs1
Distributions to shareholders
Net asset value attributable to equity shareholders2
2022
26.0
87.0
4,076
2021
27.7
84.6
4,442
% change
(6.5%)
+2.8%
(8.2%)
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).
194
Derwent London plc / Report and Accounts 2022
REMUNERATION COMMITTEE REPORT continued
DIRECTORS’ REMUNERATION POLICY
The following part of the report sets out the Remuneration Policy for the Group (Policy). This Policy will be put forward
to shareholders for their binding approval at the AGM on 12 May 2023 and will apply to payments made from this date.
Further details regarding the operation of the Policy for the 2023 financial year can be found on pages 210 to 212.
Executive Director policy table
The policy table below sets out the key elements of the remuneration package for Executive Directors.
How operated
Maximum opportunity
Performance measures
Element
Base
salary
Purpose and
link to strategy
To recruit, retain
and motivate high
calibre executives.
Reflects experience
and importance to
the business.
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.
A broad assessment of
personal and corporate
performance is
considered as part
of the salary review.
None.
While there is no maximum
salary or salary increase,
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.
Whilst there is no prescribed
maximum cost of providing
benefits, the value of benefits
is 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.
None.
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).
Benefits
To provide a
market competitive
benefits package
to help recruit and
retain high calibre
executives
and to support
their wellbeing.
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.
In certain circumstances, the Committee
may also approve additional one-off or
ongoing allowances or benefits relating
to the relocation of an Executive Director
as may be required to perform the role.
The Committee has the ability to
reimburse reasonable business-related
expenses and any tax thereon. The
Committee may introduce other benefits
if it is considered appropriate to do so.
The Company operates a defined
contribution pension scheme. 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).
Pension
To provide an
appropriate level of
retirement benefit.
Governance
195
How operated
Maximum opportunity
Performance measures
Element
Annual
bonus
Purpose and
link to strategy
To incentivise the
annual delivery
of stretching
financial targets
and strategic
goals. Financial
performance
measures reflect
metrics relevant to
the business.
Bonus awards are based on performance
measures set by the Committee (typically
measured over a financial year) against
key financial measures and strategic
objectives, and continued employment.
Maximum opportunity of
up to 150% of salary may
be awarded in respect of a
financial year.
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.
The Committee may decide
to pay the entire bonus in
cash where the amount
to be deferred into shares
would, in the opinion of the
Committee, be so small it is
administratively burdensome
to apply deferral.
Dividend equivalents may
accrue on deferred shares.
Such amounts will normally
be paid in shares.
Malus and clawback
provisions apply (see table
on page 197).
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.
Long-term
incentives
To align the long-
term interests of
the executives with
those of the Group’s
shareholders.
To incentivise value
creation over the
long-term and
support stewardship.
Award of performance shares which vest
after three years subject to performance
measures set by the Committee and
continued employment.
Maximum opportunity of
up to 200% of salary may
be awarded in respect of a
financial year.
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 197).
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.
At least 75% of the
annual bonus will be
based on financial
measures with up
to 25% based on
strategic objectives.
Financial measures
Up to 22.5% of each
bonus element will be
payable for threshold
performance, with full
payout for maximum
performance. No
amount is payable
for achieving below
threshold performance.
Strategic objectives
Vesting will apply on
a scale between 0%
and 100% based on the
Committee’s assessment
of the extent to which
performance against the
strategic objectives has
been met.
Performance measures
are reviewed annually
reflecting the Group’s
strategy and metrics
relevant to the business.
Performance measures
and their weightings
are reviewed annually
reflecting the Group’s
strategy and metrics
relevant to the
business. Details of the
performance measures
for the 2023 awards are
set out on page 212.
Up to 22.5% of each
element of an award
vests for achieving
threshold performance,
with full vesting for
achieving maximum
performance. No award
vests for achieving below
threshold performance.
196
Derwent London plc / Report and Accounts 2022
REMUNERATION COMMITTEE REPORT continued
DIRECTORS’ REMUNERATION POLICY continued
Element
Share
ownership
guidelines
Purpose and
link to strategy
To provide
alignment with the
long-term interests
of shareholders
and support
stewardship.
How operated
Maximum opportunity
Performance measures
n/a
n/a
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.
Post-employment: Executive Directors
who step down from the Board are
normally expected to retain a holding in
‘guideline shares’ 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.
• 100% of salary (or their actual
shareholding at the point of stepping
down if lower) for the subsequent
12 months.
‘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’.
The Committee retains discretion to waive
this guideline if it is not considered to be
appropriate in the specific circumstance.
Non-Executive Director policy table
The policy table below sets out the key elements of the remuneration package for Non-Executive Directors.
Operation
Chairman
The remuneration of the Chairman is set by the Board
(excluding the Chairman).
Determination of fees
Fees are set taking
into account:
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 time commitment
and responsibilities
expected for the roles.
The Chairman does not receive pension or participate in
incentive arrangements.
Non-Executive
Directors
The remuneration for Non-Executive Directors is set by the
Executive Directors.
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.
• Pay and conditions
throughout the business.
• Practice in companies
with similar business
characteristics.
Fees are reviewed
periodically. Overall fees
paid to the Chairman and
Non-Executive Directors
will remain within the
limits set by the Company’s
Articles of Association.
Governance
197
Information supporting the Policy
Malus and clawback
Malus and clawback provisions apply to annual bonus, deferred bonus and performance shares over the following time periods:
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).
Performance shares
To such time as the award vests.
Up to two years following vesting.
Malus and clawback may apply in the following circumstances:
1. Material misstatement of financial results.
2.
An error in assessing performance conditions which
has led to an overpayment.
3. Dismissal due to gross misconduct.
4.
5. Corporate failure.
Serious reputational damage.
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 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 2023 annual
bonus and PSP awards are set out on pages 211 and 212.
The Committee retains the ability to adjust or set different
performance measures or targets if events occur (such
as a change in strategy, a material acquisition and/or
divestment of a Group business or a change in prevailing
market conditions) which cause the Committee to
determine that the performance measures and/or targets
are no longer appropriate and the amendment is required
so that they achieve their original purpose and are not
materially less difficult to satisfy.
Share awards may be adjusted in the event of a variation of
share capital or a demerger, delisting, special dividend or
other event that may affect the Company’s share price.
Legacy arrangements
The Committee retains discretion to make any
remuneration payment and/or payments for loss of office
(including exercising any discretions available to it in
connection with such payments) which are outside of the
Policy set out here:
• Where the terms of the payment were agreed before
16 May 2014 (the date the Company’s first
shareholder-approved policy came into force) or this
Policy came into effect (provided that the terms of the
payment were consistent with the shareholder approved
Directors’ Remuneration Policy in force at the time they
were agreed).
• Where the terms of the payment were agreed at a time
when the relevant individual was not a Director of the
Company (or other persons to whom the Policy set out
above applies), and in the opinion of the Committee,
the payment was not in consideration of the individual
becoming a Director of the Company or such other person.
• To satisfy contractual arrangements under legacy
remuneration arrangements.
For these purposes ‘payments’ includes the Committee
satisfying awards of variable remuneration and, in relation
to an award over shares, the terms of the payment are
‘agreed’ no later than at the time the award is granted. This
Policy applies equally to any individual who is required to
be treated as a Director under the applicable regulations.
The Executive Directors’ legacy arrangements include
unvested PSP awards (see page 219). Emily Prideaux holds
unexercised ESOP options which were granted to her prior
to her becoming an Executive Director (see page 222).
198
Derwent London plc / Report and Accounts 2022
REMUNERATION COMMITTEE REPORT continued
DIRECTORS’ REMUNERATION POLICY continued
Changes to the Directors’ Remuneration Policy and
summary of decision making process
The Committee has undertaken a comprehensive review of
the executive remuneration framework and concluded that
it continues to support the delivery of our business strategy
and the creation of shareholder value. Consequently, we are
not proposing any significant changes to the framework.
There is one refinement to the Policy which is to strengthen
the annual bonus deferral requirements. Under the Policy,
Executive Directors will be required to defer any annual
bonus earned above 75% of salary into shares for three
years. Under the 2020 Policy, Executive Directors were
required to defer any annual bonus earned above 100%
of salary into shares for three years. Other minor changes
have been made to the wording of the Policy to simplify
and aid its operation, to increase clarity and to align with
market practice.
In determining the Policy, the Committee followed a robust
process which included discussions on the content of the
Policy at four Remuneration Committee meetings during
2022. The Committee considered input from management
and our independent advisers, and consulted with
major shareholders.
Management did not take part in any decision making
discussions as regards changes to the Policy or executive
remuneration framework in order to avoid any conflicts
of interest.
Factoring our stakeholders into our decisions
Engaging with our shareholders
The Committee actively seeks dialogue with shareholders
and values their input. As part of the Policy review, a
comprehensive shareholder consultation was undertaken
and the Committee carefully considered the feedback
received from major shareholders and proxy voting
agencies as part of its decision making. The Committee
is very appreciative of the time taken by shareholders to
provide their feedback.
On an ongoing basis, any feedback received from
shareholders is considered as part of the Committee’s
annual review of remuneration. The Committee will also
discuss voting outcomes at the relevant Committee
meeting and will consult with shareholders if and
when making any significant changes to the way the
Remuneration Policy is implemented.
Component
2020 Remuneration Policy
2023 Remuneration Policy
Base salary
and benefits
Pension
Attract and retain high calibre executives
No change
In line with the contributions available
for the majority of the wider workforce
(currently 15% of salary)
No change
Annual
bonus
Maximum opportunity of 150% of salary
Linked to key financial and strategic KPIs:
No change
• 37.5% Relative TR
• 37.5% Relative TPR
• 25% Strategic
Any bonus earned in excess of 100%
of salary is deferred into shares over
three years
We are strengthening bonus deferral such that amounts
in excess of 75% of salary are deferred into shares over
three years
LTIP
Maximum opportunity of 200% of salary
Three-year performance period plus
two-year holding period
Performance metrics and weighting:
• 50% Relative TSR
• 50% Relative TPR
No change
Proposed performance metrics and weighting:
• 2023: Relative TSR (50%), Total Property Return (40%)
and embodied carbon reduction and energy intensity
reduction (10%).
• 2024 and 2025: Relative TSR (50%), Total Property
Return (30%) and embodied carbon reduction and
energy intensity reduction (20%).
Discretion is retained to vary the metrics as appropriate.
Shareholding
guidelines
200% of salary for all executives
No change
Post-employment guidelines apply
Governance
199
Engaging with our employees
Paul Williams (£’000)
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. Employees are
therefore 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.
Furthermore, we set out within the Remuneration
Committee report, the remuneration structure for the wider
workforce which is similar to that of our Executive Directors
and contains both fixed and performance-based elements
(see page 207). The Committee considers pay across the
Group, as well as any employee feedback, when making
decisions on executive remuneration.
EMPLOYEE ENGAGEMENT / See page 144
EMPLOYEES ON A COMMITTEE / See page 184
REMUNERATION IN CONTEXT / See page 207
REMUNERATION SCENARIOS
FOR EXECUTIVE DIRECTORS
The Committee aims to provide a significant part of the
Executive Directors’ total remuneration through variable
pay and the adjacent diagrams illustrate the remuneration
opportunity provided to the Executive Directors for various
indicative levels of performance.
£4,500
£4,000
£3,500
£3,000
£2,500
£2,000
£1,500
£1,000
£500
£0
£3,879
53%
26%
21%
£3,199
42%
32%
26%
£1,635
19%
31%
50%
£819
100%
Minimum
Target
Maximum
Maximum +
50%
Fixed Elements
Annual Variable Element
Long-Term Variable Element
Damian Wisniewski & Nigel George (£’000)
£3,000
£2,500
£2,000
£1,500
£1,000
£500
£0
£2,998
53%
£2,474
42%
32%
26%
26%
21%
£1,268
19%
31%
50%
£638
100%
Minimum
Target
Maximum
Maximum +
50%
Fixed Elements
Annual Variable Element
Long-Term Variable Element
For the purpose of this analysis, the following assumptions
have been made:
Emily Prideaux (£’000)
£3,000
£2,500
£2,000
£1,500
£1,000
£500
£0
£2,810
53%
£2,318
42%
32%
26%
£1,185
19%
31%
50%
26%
21%
£594
100%
Minimum
Target
Maximum
Maximum +
50%
Fixed Elements
Annual Variable Element
Long-Term Variable Element
Minimum performance Fixed remuneration only
On target
performance
Fixed remuneration
50% of the annual bonus is earned
Maximum
performance
Maximum
performance + 50%
share price growth
22.5% of the PSP vests
Fixed remuneration
100% of the annual bonus is earned
100% of the PSP vests
As per the maximum performance
illustration, but also assumes
for the purposes of the PSP that
share price increases by 50%
over the performance period
1
‘Fixed remuneration’ includes salary, pension and other benefits.
2 Salary levels applying on 1 January 2023.
3 Pension is based on the salary and pension policy applying from 1 January 2023.
4 Benefit levels are assumed to be the same as disclosed in the single figure for 2022.
200
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REMUNERATION COMMITTEE REPORT continued
DIRECTORS’ REMUNERATION POLICY continued
Recruitment and promotion policy
The remuneration of a new Executive Director will normally include salary, benefits, pension and participation in the annual
bonus and PSP arrangements in accordance with the policy for Executive Directors’ remuneration. In addition, the Committee
has discretion to include any other remuneration component or award which it feels is appropriate taking into account the
specific circumstances of the recruitment, subject to the principles and limits set out below. The key terms and rationale
for any such component would be disclosed as appropriate in the Directors’ remuneration report for the relevant year.
Policy
Salary
Salary will be set taking into account the individual’s experience and skills, prevailing market rates in
companies of comparable size and complexity and internal relativities.
Buy-out
awards
Where appropriate the Committee may set the initial salary below the market level (e.g. if the individual
has limited PLC board experience or is new to the role), with the intention to make phased pay
increases over a number of years, which may be above those of the wider workforce, to achieve the
desired market positioning. These increases will be subject to continued development in the role.
Where an individual forfeits outstanding variable pay opportunities or contractual rights at a previous
employer as a result of appointment, the Committee may offer compensatory payments or awards,
in such form as the Committee considers appropriate, taking into account all relevant factors
including the form of awards, expected value and vesting time frame of forfeited opportunities. When
determining any such ‘buy-out’, the guiding principle would be that awards would generally be on a
‘like-for-like’ basis unless this is considered by the Committee not to be practical or appropriate.
Where possible the buy-out award will be accommodated under the Company’s existing incentive
plans, but it may be necessary to utilise the exemption provided in the Listing Rules. Shareholders will
be informed of any such payments in the following year’s Annual report on remuneration.
Maximum level
of variable
remuneration
The Committee will not offer non-performance-related variable remuneration and the maximum level of
variable remuneration which may be granted (excluding buy-out awards) is 350% of salary, which is in
line with the current maximum limit under the annual bonus and PSP.
Other elements
of remuneration
Other elements may be included in the following circumstances:
• An interim appointment being made to fill an Executive Director role on a short-term basis.
• If exceptional circumstances require that the Chair or a Non-Executive Director takes on an executive
function on a short-term basis.
• If an Executive Director is recruited at a time in the year when it would be inappropriate to provide
an annual bonus or PSP award for that year. Subject to the limit on variable remuneration set out
above, the quantum in respect of the period employed during the year may be transferred to the
subsequent year.
• If the Executive Director is required to relocate, reasonable relocation, travel and subsistence
payments may be provided (either via one-off or ongoing payments or benefits).
In the case of an internal appointment, any ongoing remuneration obligations or variable pay element awarded in
respect of the prior role shall be allowed to continue according to its original terms, adjusted as relevant to take into
account the appointment.
Fees payable to a newly appointed Chair or Non-Executive Director will be in line with the fee policy in place at the time
of appointment.
Governance
201
Service contracts and compensation for loss of office
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. Further details are set out in the Annual
report on remuneration on page 202. The principles on which the determination of compensation for loss of office will be
approached are set out below.
Policy
Payments in
lieu of notice
Service contracts include a payment in lieu of notice clause which provides that payments may be
made in monthly phased payments throughout the notice period which include pro-rated salary,
benefits and pension only.
Payments in lieu of notice are subject to mitigation.
Annual bonus
The extent to which any bonus will be paid out will be determined in accordance with the annual bonus
plan rules. Executive Directors must normally be in employment on the payment date to receive an annual
bonus. However, if an Executive Director leaves as a ‘good leaver’, the Executive Director will normally be
considered for a bonus payment.
It is the Committee’s policy to ensure that any bonus payment reflects the departing Executive
Director’s performance. Unless the Committee determines otherwise, any bonus payment will be paid
at the usual time following the determination of performance measures and be subject to a pro rata
reduction for time served during the performance period.
Deferred bonus
shares
The extent to which any unvested awards will vest will be determined in accordance with the deferred
bonus plan rules.
Unvested awards will normally lapse on cessation of employment. However, if an Executive Director
leaves as a ‘good leaver’, the awards will continue and will normally vest at the normal vesting date.
In exceptional circumstances, the Committee may decide that the Executive Director’s deferred share
awards will vest at the date of cessation of employment.
PSP
The extent to which any unvested awards will vest will be determined in accordance with the PSP rules.
Unvested awards will normally lapse on cessation of employment. However, if an Executive Director
leaves as a ‘good leaver’, other than by reason of death, their unvested awards will continue and will
normally remain capable of vesting at the normal vesting date. To the extent that awards vest, a two-
year holding period would then normally apply. In exceptional circumstances, the Committee may
decide that the Executive Director’s awards will vest and be released early at the date of cessation of
employment or at some other time (e.g. following the end of the performance period).
If a participant dies, their unvested award will normally vest (and in the case of an award subject to a
holding period, be released) on the date of their death.
In all cases, vesting will depend on the extent to which the performance measures have been satisfied
and will be subject to a pro rata reduction of the awards for time served from the grant date to the date
of cessation of employment (although the Committee has discretion to disapply time pro rating if the
circumstances warrant it).
If an Executive Director leaves for any reason (other than summary dismissal) after an award has
vested but before it has been released (i.e. during a holding period), their award will ordinarily continue
to be released at the normal release date. In exceptional circumstances, the Committee may decide
that the participant’s award will be released early at the date of cessation of employment.
Deferred bonus shares will vest in full in the event of a change of control or substantial exit.
PSP awards will vest early in the event of change of control or substantial exit. The level of vesting will
be determined taking into account the extent to which performance measures are satisfied at the date
of the relevant event and, unless the Committee determines otherwise, awards will be pro rated for
time served from the grant date to the date of the relevant event.
Change of
control
Other payments
In appropriate circumstances, payments may also be made in respect of items such as accrued holiday,
outplacement and legal fees.
Awards under the Sharesave Plan may vest and, where relevant, be exercised in the event of cessation
of employment or change of control in accordance with the Sharesave Plan rules. The terms applying
to any buyout awards on cessation of employment or change of control would be determined when the
award is granted. Such terms would normally be consistent with the principles outlined above.
The Committee reserves the right to make payments by way of settlement of any claim arising in
connection with the cessation of employment.
‘Good leavers’ includes: cessation of employment by reason of death, retirement, injury, ill health, disability, redundancy,
transfer of employment outside of the Group, or any other reason as determined by the Committee.
202
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REMUNERATION COMMITTEE REPORT continued
DIRECTORS’ REMUNERATION POLICY continued
Chairman and Non-Executive Directors
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.
External appointments
Executive Directors may accept a non-executive role at another company with the approval of the Board (see page 146).
The Executive Director is entitled to retain any fees paid for these services.
Service contracts and letters of appointment
Executive Directors
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.
Paul Williams
Damian Wisniewski
Nigel George
Emily Prideaux
Non-Executive Directors
Date of service contract
22 November 2018
10 July 2019
10 July 2019
26 February 2021
Non-Executive Directors are appointed for initial three-year terms which thereafter may be extended, subject to re-election
at each AGM. Further information on Non-Executive Director tenure and succession is on pages 153 and 154 of the
Nominations Committee report.
Mark Breuer
Claudia Arney2
Dame Cilla Snowball
Helen Gordon
Lucinda Bell
Sanjeev Sharma
Date of latest appointment
letter
Latest appointment
letter expiry date
25 January 2021
5 May 2021
9 August 2021
4 November 2020
9 November 2021
6 August 2021
1 February 2024
18 May 2024
31 August 2024
31 December 2023
1 January 2025
1 October 2024
1 Richard Dakin will step down from the Board on 28 February 2023.
2 Claudia Arney intends to step down as a Director at the end of 2023 in advance of reaching her ninth anniversary on the Derwent London Board. Further information on
Non-Executive Director succession is on page 154.
Governance
203
REMUNERATION AT A GLANCE
We are transparent about our pay practices which aim to incentivise our employees to achieve our
strategy and generate sustainable value for our stakeholders.
Reward linked to performance
Wider stakeholder considerations
Annual bonus earned by Executive Directors
Measure
Relative TR
Relative TPR
Strategic
Total
37.5%
37.5%
25%
Threshold
Maximum
Actual
–
(8.0)
–
(6.0)
See note 1
(3.4)
Bonus earned
(% max)
See note 1
37.5
17.6
55.1
1 As noted on page 190 the vesting outcome of the total return element is still to be determined
by the Committee. Full details of the vesting outcome of the total return element and total
bonus earned in respect of 2022 will be disclosed in the 2023 Report & Accounts.
PSP earned by Executive Directors
Measure
Threshold
Maximum
Actual
Relative TSR
Relative TPR
50%
50%
(17.7)%
1.19%
(0.8)% (33.2)%
0.99%
3.19%
Total
PSP earned
(% max)
0.0
0.0
0.0
The Committee considers that these outcomes are fair in the
context of our underlying performance and the experience of our
shareholders and stakeholders. We provided further information
on how our remuneration arrangements align with our strategy,
purpose, values and performance on page 205.
Remuneration Policy review
During 2022, the Committee conducted a comprehensive review
of its remuneration arrangements to ensure it remains closely
aligned with the Company’s strategic aims, purpose, attitude
to risk and culture.
We engaged with 20 major shareholders representing c.64%
of our issued share capital. Following consultation, we are not
proposing any significant changes to our Remuneration Policy
(a summary of the proposed changes is on page 198).
Related information is on the following pages:
PURPOSE, CULTURE AND VALUES / See page 140
REMUNERATION POLICY REPORT / See page 194
Remuneration clearly linked to sustainability outcomes
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. Under the 2023 Remuneration Policy,
ESG-related metrics will be included in both elements of variable
remuneration for the Executive Directors (annual bonus and LTIP).
Further information on how remuneration supports our strategy and
helps us to achieve our purpose is on page 205.
Related information is on the following pages:
RESPONSIBILITY / See page 50
NET ZERO CARBON / See page 27
The Committee considers pay policies and
practices for employees, as well as feedback
from key stakeholders, when making
remuneration decisions for Executive Directors.
+6.1%
average increase for the wider workforce
effective from 1 January 2023
£1,000
one-off payment for eligible employees to
provide support with the ‘cost of living crisis’
+2.6%
increase to the dividend in 2022
97.5%
of votes cast in favour of our Annual
report on remuneration at the 2022 AGM
£354k
amounts committed by the Sponsorship
and Donations Committee in 2022
204
Derwent London plc / Report and Accounts 2022
REMUNERATION COMMITTEE REPORT continued
ANNUAL REPORT ON REMUNERATION
(unaudited unless otherwise indicated)
The Annual report on remuneration (pages 203 to 223) explains how we have implemented our Remuneration Policy
during 2022. The Remuneration Policy in place for the year was approved by shareholders at the 2020 AGM and is
available to download from our website at: www.derwentlondon.com/investors/governance/board-committees
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 senior management (including
the Company Secretary). In doing so, the Committee has
due regard for the remuneration arrangements available to
the entire workforce (see page 207) and ensures that our
Remuneration Policy supports our strategy, the achievement
of our purpose and is aligned with our values (see page
205). We detail the Group’s key remuneration principles,
which inform our remuneration structure, on page 193.
Committee composition and performance
None of the members who have served on the Committee
during the year had any personal interest in the matters
decided by the Committee and are all considered to be
independent (see page 190). The Company Secretary acted
as Secretary to the Committee.
Claudia Arney is approaching her ninth anniversary on the
Board and will step down as a Director in advance of the
2024 AGM. In preparation for the transition of Committee
Chairmanship to Sanjeev Sharma, Sanjeev joined the
Committee on 1 March 2022. As a result, Sanjeev will
have more than 12 months’ experience on a remuneration
committee prior to becoming Committee Chair, in
accordance with the 2018 UK Corporate Governance Code.
The 2022 evaluation of the Board, its committees
and individual Directors was externally facilitated by
Manchester Square Partners LLP, in accordance with
our three-year cycle of evaluations (see page 149). The
review confirmed that the Committee continues to operate
effectively, with no significant matters raised.
The Committee’s role and responsibilities are set out in the
terms of reference, which were last updated in February
2022 and are available on the Company’s website at:
www.derwentlondon.com/investors/governance/board-
committees
Shareholder voting
The Committee’s resolutions at the Company’s recent AGMs in
respect of the Remuneration Policy and the Annual report on
remuneration, received the following votes from shareholders:
The Committee was extremely pleased with the level of
shareholder support at the 2022 AGM. The Committee
encourages ongoing, open and constructive dialogue with
shareholders and their representative bodies. During the
year, the Committee conducted a comprehensive review of
its remuneration arrangements to ensure it remained fit for
purpose (see page 198).
Advisers to the Committee
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. Deloitte is one of the founding members of the
Remuneration Consulting Group. 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:
• Review of the Directors’ Remuneration Policy.
• Performance assessment against annual bonus and
PSP targets.
• Benchmarking of Chief Executive Officer 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 £124,500.
Separate teams at Deloitte LLP also provided sustainability
and health and safety assurance, 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
provide 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.
Votes cast in favour
Votes cast against
Votes withheld
Total votes cast
Annual report on remuneration
(2022 AGM)
Remuneration Policy
(2020 AGM)
93.6m
2.4m
0.0m
96.0m
97.5%
2.5%
0.0%
85.6m
4.0m
0.0m
89.6m
95.5%
4.5%
0.0%
Governance
205
ALIGNING REMUNERATION WITH STRATEGY AND PERFORMANCE
How remuneration supports our strategy and helps us to achieve our purpose
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.
Sustainability is an integral part of the Group’s strategy; it differentiates us from our peers and ensures we continue to
adapt. We seek to create above average long-term returns for our shareholders, retain and develop our talented workforce,
design ‘long-life, loose-fit, low carbon’ space, and work towards achieving our net zero carbon ambitions. Further
information on our strategy is on pages 38 to 44.
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 and is worth 50%. 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. We also have ESG-related metrics
within both elements of variable remuneration for Executive Directors (annual bonus and PSP). Further information on the
rationale for the Committee’s chosen strategic performance targets is on page 211.
How our remuneration aligns with our values
Our core values are reflected in our remuneration arrangements in the following ways:
We build long-term relationships
We lead by design
We act with integrity
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.
Leading the industry in achieving net
zero carbon is a fundamental part of
Derwent London’s long-term strategy.
The Committee has introduced
embodied carbon reduction and
energy intensity reduction performance
metrics into the PSP.
In the annual bonus, our staff
satisfaction metric includes a gender
variance underpin which links to the
Group’s diversity and inclusion focus.
The inclusion of a health and safety
target in the annual bonus strengthens
oversight and ensures that health and
safety standards continue to be
a priority.
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. Further information on our KPIs is on pages 45 to 49.
Financial
Non-financial
KPIs
B
P B
P
Reversionary percentage
Development potential
Tenant retention
Void management
BREEAM ratings
Energy Performance Certificates (EPCs)
Energy intensity
Carbon intensity
Accident Frequency Rate (AFR)
Staff satisfaction
B
B
B
P
P
B
B
Total return
Total property return1
Total shareholder return
EPRA earnings per share
Gearing & available resources
Interest cover ratio
B Annual Bonus P Performance Share Plan
1 Total Property Return (TPR) performance for the annual bonus is measured against
the MSCI Quarterly Central London Offices Total Return Index (see page 215)
whereas performance under the Performance Share Plan is our annualised
TPR versus the MSCI Quarterly UK All Property Index tested over three years
(see page 218).
Related information is on the following pages:
PURPOSE, CULTURE AND VALUES / See page 140
OUR PERFORMANCE / See page 45
OUR STRATEGY / See page 38
206
Derwent London plc / Report and Accounts 2022
REMUNERATION COMMITTEE REPORT continued
ANNUAL REPORT ON REMUNERATION continued
Pay for performance comparison
The graph below shows the value on 31 December 2022 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)
225
200
175
150
125
100
31 Dec
2012
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
Derwent London
FTSE United Kingdom 350 Super Sector Real Estate Index
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 last ten years. As noted on page 190 the
vesting outcome of the relative total return element of the 2022 annual bonus is still to be determined by the Committee.
The 2022 total remuneration and annual bonus earned (% of maximum) figures are therefore based on the vesting
outcome of the relative total property return and strategic elements of the 2022 bonus only. Full details of the vesting
outcome of the total return element (which may range between 0% and 100% vesting) and total bonus earned in respect of
2022 will be disclosed in the 2023 Report & Accounts.
Financial year
ending
Chief Executive
Total
remuneration
(single figure)
(£000)
Annual bonus
(% of maximum)
Long-term
variable pay
(% of maximum)
31/12/2013
31/12/2014
31/12/2015
31/12/2016
31/12/2017
31/12/2018
31/12/20191,2,3
31/12/2020
31/12/2021
31/12/2022
John
Burns
John
Burns
John
Burns
John
Burns
John
Burns
John
Burns
John
Burns
Paul
Williams
Paul
Williams
Paul
Williams
Paul
Williams
2,478
2,648
2,529
1,403
1,681
2,219
1,399
2,100
2,214
1,238
1,284
95.0
92.6
74.2
23.3
53.6
68.5
97.0
97.0
66.3
30.9
55.1
55.2
50.0
65.7
24.9
26.5
46.0
65.75
65.75
81.6
18.1
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.
3 Total remuneration for 2022 has been restated to reflect the actual number of 2019 PSP awards which vested on 14 March 2022 and 16 August 2022 using the actual share
prices on the day of vesting. The restated value for the March and August awards, based on the actual share prices of £30.91 and £27.14, respectively, provides a difference of
approximately £(2.99) and £(6.76) per vested share in comparison to the estimates contained in the 2021 Report & Accounts which were based on the average three-month
share price for the year ended 31 December 2021, which was £33.90. Further details of total remuneration is provided on page 213.
Governance
207
REMUNERATION DECISIONS IN CONTEXT
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 207 to 209) 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.
Executive Directors’ remuneration
Remuneration for Executive Directors comprise the following elements:
Total remuneration
Fixed pay
Variable pay
Base salary | Benefits | Pension
Annual bonus | Long-term incentive
Performance-based
Remuneration structure for the wider workforce
The remuneration structure for our wider workforce is similar to that of our Executive Directors and contains both fixed and
performance-based elements.
Element
How operated
Base
salary
Benefits
Pension
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.
All employees receive private medical insurance, dental care and are invited into a non-contractual
healthcare cash plan which offers an affordable way to help with everyday healthcare costs. In 2022,
we introduced an Electric Car Salary Sacrifice Scheme which allows any member of staff to lease a new
electric car in a tax efficient way.
All employees are eligible to participate in our non-contributory occupational pension scheme operated as
a Master Trust with Fidelity. Fidelity offers all employee members of the pension scheme ongoing support
and training opportunities in respect of their pension and investments. All employees (including Executive
Directors) are eligible to receive an employer pension contribution equal to 15% of salary per annum.
Annual
bonus
We enrol all of our employees into an annual discretionary bonus scheme. We reward our employees based
on their individual performance and their contribution to the performance of the Group. In 2022, 100% of our
workforce below Board level (not subject to probation) received an annual bonus (2021: 100%).
Long-term
incentive
In order to align the interests of our employees and those of our shareholders, we operate an Employee Share
Option Plan (ESOP). Employees, excluding the Directors, are eligible to join the ESOP subject to performance.
The ESOP grants options which are exercisable after three years at a pre-agreed option price. In 2022, we
granted 249,950 options to 93% of our employees below the Board and Executive Committee (2021: 198,800
options to 78% of our employees). Further information is on pages 257 and 258.
Sharesave
Plan
To encourage Group-wide share ownership, the Company operates a HMRC tax efficient Sharesave Plan
which was approved by shareholders at the 2018 AGM. The fourth grant under the Sharesave Plan was
made on 21 September 2022, with employees saving on average £118 per month. As at 1 January 2023,
127 employees are saving into our Sharesave Plan (c.72% of eligible employees).
Salary increases and cost of living considerations
Taking into account the inflationary increases in the UK, the average increase in base salaries for the wider workforce
was 6.1%, effective from 1 January 2023. In October 2022, the Directors approved the payment of a one-off gross non-
pensionable payment of £1,000 to all employees (not under notice) with a full-time equivalent base salary of £55,000
or less. The payment was aimed to offer additional help to employees where it was believed the economic burden of
the current ‘cost of living crisis’ would be most challenging. Derwent London has been London Living Wage Foundation
accredited since 2017.
208
Derwent London plc / Report and Accounts 2022
REMUNERATION COMMITTEE REPORT continued
ANNUAL REPORT ON REMUNERATION 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 2019 to 2022. The Directors’ remuneration used to calculate the
percentage change is taken from the ‘single figure’ table on page 213. As noted on page 190, the vesting outcome of the
relative total return element of the 2022 annual bonus is still to be determined by the Committee. The annual percentage
change in bonus between 2021 and 2022 has therefore been calculated based on the vesting outcome of the relative total
property return and strategic elements only for the 2022 bonus. Full details of the vesting outcome of the total return
element (which may range between 0% and 100% vesting) and total bonus earned in respect of 2022 will be disclosed in
the 2023 Report & Accounts.
% change
Salary/Fees
Benefits11
Bonus12 Salary/Fees
Benefits
Bonus Salary/Fees
Benefits
Bonus
2021 to 2022
2020 to 2021
2019 to 2020
Average employee1
Executive Directors
Paul Williams
Damian Wisniewski
Nigel George
Emily Prideaux4
Former Executive
Directors
David Silverman
Non-Executive
Directors6
Mark Breuer7
Richard Dakin
Claudia Arney
Cilla Snowball
Helen Gordon
Lucinda Bell
Sanjeev Sharma10
Average employee calculation
+1.4%2
(9.9)% (24.5)%
+0.3%
(3.7)% +22.5%
+4.7%
(6.2)%
(21.0)%
(7.0)%
+3.0%
+1.0%
+3.0%
+0.7%
+3.0%
+9.8% +20.0%
+84%
+84%
+84%
+133%
+2.0%
+2.0%
+2.0%
n/a
(0.2)% (52.5)% +10.5%3
+3.7%
(0.2)% (52.5)%
+3.7%
(0.0)% (52.5)%
n/a
n/a
n/a
+0.1% (24.4)%
(1.4)% (29.0)%
(3.9)% (29.0)%
n/a
n/a
n/a5
n/a
n/a
+2.0%
(0.2)% (52.5)%
+3.7%
(1.7)% (29.0)%
0%
+15.7%
+16.2%
+15.7%
+10.7%
+16.2%
+13.5%
–
–
–
–
–
–
–
–
–
–
–
–
–
–
n/a
0%
0%
0%
+3.0%8
0%
n/a
–
–
–
–
–
–
–
n/a
–
0%
–
0%
–
0%
–
–
0%
– +6.0%9
n/a
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
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 for 2021 to 2022 has been impacted by a 13% increase in our workforce (from 163 to 184 employees). The average actual increase in
base salaries for all employees effective from 1 January 2022 was c.3.2%.
Executive Director base salaries
3 Paul Williams’ salary was increased from £442,000 to £600,000 effective from his appointment as CEO on 17 May 2019.
4 Emily Prideaux was appointed an Executive Director on 1 March 2021 and therefore the percentage change in remuneration for 2019 to 2020 and 2020 to 2021 is not
applicable. Emily’s percentage change in annual bonus from 2021 to 2022 reflects that her 2021 annual bonus was for the period 1 March to 31 December 2021 only.
As detailed on page 177 of the 2021 Report & Accounts, Emily’s salary was increased by 9.8% to £450,000 with effect from 1 January 2022.
5 David Silverman did not receive a salary increase effective from 1 January 2022 as he stepped down from the Board on 14 April 2022.
Non-Executive Director fees
6 The fees payable to Non-Executive Directors were increased effective from 1 January 2022 (the previous increase to Non-Executive Director base fees was with effect from
1 January 2019 and the previous increase to the committee chair and membership fees were with effect from 1 January 2015).
7 Mark Breuer was appointed to the Board as Chairman Designate on 1 February 2021 and then took over the role of Chairman from 14 May 2021. Therefore, the percentage
change in remuneration for 2019 to 2020 and 2020 to 2021 is not applicable.
8 The percentage change in fee for 2020 to 2021 for Helen Gordon relates to her appointment as Senior Independent Director effective from 31 October 2021.
9 The percentage change in fee for 2019 to 2020 for Lucinda Bell relates to her appointment as Audit Committee Chair from 17 May 2019.
10 Sanjeev Sharma was appointed a Non-Executive Director on 1 October 2021 and therefore the percentage change in remuneration for 2019 to 2020 and 2020 to 2021 is not
applicable.
Benefits
11 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.
Bonus
12 The 24.5% reduction in annual bonus for employees from 2021 to 2022 is calculated based on the mean average. The actual 2022 bonus pot for employees was 8% lower
than in 2021. The percentage change in annual bonus has been impacted by the 13% increase in our workforce in 2022 (from 163 to 184 employees).
Governance
209
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 2022, 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 190 the vesting outcome of the relative total return element of the 2022 annual bonus is still to be
determined by the Committee. The 2022 total remuneration figure for the Chief Executive and CEO pay ratio is therefore
based on the vesting outcome of the relative total property return and strategic elements of the 2022 bonus only. Full
details of the vesting outcome of the total return element (which may range between 0% and 100% vesting) and total
bonus earned in respect of 2022 will be disclosed in the 2023 Report & Accounts.
Year ended 31 December 20221,2
25th percentile
50th percentile
75th percentile
Year ended 31 December 2021
25th percentile
50th percentile
75th percentile
Year ended 31 December 20203
25th percentile
50th percentile
75th percentile
Year ended 31 December 20194
25th percentile
50th percentile
75th percentile
Year ended 31 December 2018
25th percentile
50th percentile
75th percentile
Employee remuneration5
Base salary Total remuneration
CEO pay ratio6
£45,219
£56,000
£80,000
£48,500
£63,750
£91,750
£47,000
£64,000
£95,266
£40,993
£68,462
£67,500
£45,057
£59,250
£75,000
£60,909
£81,266
£124,481
£67,908
£90,289
£143,168
£62,499
£86,463
£137,452
£63,211
£89,274
£153,828
£58,237
£76,842
£148,867
21:1
16:1
10:1
19:1
14:1
9:1
35:1
26:1
16:1
40:1
28:1
17:1
38:1
29:1
15:1
1 Employee remuneration at each percentile has been impacted by a 13% increase in our workforce (from 163 to 184 employees) in the year ended 31 December 2022.
2 Chief Executive remuneration for the year ended 31 December 2022 is Paul Williams’ 2022 ‘single figure’ (see page 213).
3 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.
4 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.
5 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 207, 257 and 258).
6 The CEO pay ratio has been rounded to the nearest whole number.
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.
Further information on the remuneration structure for our wider workforce is on the following pages:
SHARESAVE PLAN / See page 220
EMPLOYEE SHARE OPTION PLAN / See pages 257 and 258
OUR EMPLOYEES / See page 59
210
Derwent London plc / Report and Accounts 2022
REMUNERATION COMMITTEE REPORT continued
ANNUAL REPORT ON REMUNERATION continued
IMPLEMENTATION OF REMUNERATION POLICY FOR 2023
Base salaries
With effect from 1 January 2023, the Executive Directors’ salaries (excluding Emily Prideaux and Paul Williams) were
increased by 4% to £524,500. The average salary increase for the wider workforce was 6.1%.
Since Paul Williams’ appointment to CEO in May 2019, the Committee has 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 latest review, the Committee approved a 7.8% increase to Paul’s salary from
1 January 2023. Further information in respect of the Committee’s rationale is on pages 191 and 192.
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. The Committee intends to fully align Emily’s salary with the other Executive
Directors’ salaries by 1 January 2024 subject to continued strong performance. Further information is on page 192.
Average employee
Executive Directors
Paul Williams
Damian Wisniewski
Nigel George
Emily Prideaux
2023 salary
£’000
2022 salary
£’000
% increase
680.0
524.5
524.5
492.5
630.4
504.3
504.3
450.0
6.1
7.8
4.0
4.0
9.4
Chairman and Non-Executive Director fees
Mark Breuer’s inclusive Chairman fee for 2023 is £250,000 per annum and remains unchanged from 2022. In light of the
changes made to Non-Executive Director fees effective from 1 January 2022, there will be no change to the Non-Executive
Director fees in 2023.
Board Chairman fee
Non-Executive Director fees
Base fee
Committee Chair
Senior Independent Director
Committee membership fee
2023 fee
£’000
250.0
2022 fee1
£’000
250.0
52.5
10.0
10.0
5.0
52.5
10.0
10.0
5.0
% increase
0.0
0.0
0.0
0.0
0.0
1 The fees payable to Non-Executive Directors were increased effective from 1 January 2022: the base fee increased by £5,000 to £52,500, the committee chair fee increased
by £2,500 to £10,000, and the committee membership fee increased by £1,000 to £5,000.
In addition to their chairmanship fee, a Committee Chair also receives the Committee membership fee. The Senior
Independent Director fee was last increased with effect from 1 January 2019.
Richard Dakin will step down from the Board on 28 February 2023. Richard will receive his normal fees for the period
1 January 2023 until his leaving date. There will be no payment for loss of office in respect of Richard’s departure.
Benefits and pension
Benefits will continue to include a fully expensed car or car allowance, private medical insurance and life assurance.
Company pension contribution and/or cash supplement for the Executive Directors remains aligned with the majority
of the wider workforce (currently at 15% of salary).
Governance
211
Annual bonus
The maximum bonus potential for Executive Directors for 2023 is 150% of salary. In line with recent years, bonuses are
subject to the following performance metrics:
Performance measure
Weighting %
of bonus
Targets
Total return
37.5
Total property return
37.5
Strategic targets
25.0
2023 strategic targets
Performance measured against a comparator group of real estate companies.
Targets and amounts vesting for threshold and maximum performance are outlined
on page 215.
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 215.
The Committee believes that the strategic targets (see table below) provide an
appropriate balance against strategic priorities which drive net rental income and
future development opportunities, and continued focus on health and safety and
workplace culture.
The number of strategic targets for 2023 have been reduced (compared to 2022) to simplify our remuneration
arrangements and to reflect that climate-related targets have been introduced within the PSP (see page 212).
Accident rate has been expanded to capture all of the Group’s activities including development, construction projects and
the managed portfolio and contains a ‘performance underpin’, whereby pay-out for this element will only be achieved if
each Executive Director completes a health and safety Leadership Tour during 2023.
Performance measure
Void management
This is measured by the Group’s average EPRA vacancy rate over the year.
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.
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.
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.
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.
Link to strategic
objectives1
Target range2 Maximum award
1.2.
10% to 2%
1.2.
50% to 75%
5.0%
5.0%
3.
80% to 90%
4.0%
4.
4.4 to 2.1
4.0%
1.
35% to 50%
7.0%
25%
1 Success against our strategic objectives is measured using our KPIs (see pages 45 to 49) 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 38 to 44).
2 Payout accrues on a broadly straight-line basis, between threshold and maximum performance.
Bonus deferral
Under the new Remuneration Policy, Executive Directors will be required to defer any annual bonus earned above 75% of
salary into shares for three years. This refinement means that any bonus earned above target performance (i.e. 50% of
maximum) will be deferred, with 50% of the bonus total deferred at maximum performance. In addition, until the within-
employment shareholding guideline is met, Executive Directors are required to retain at least half of any deferred bonus
shares or PSP shares which vest (net of tax).
212
Derwent London plc / Report and Accounts 2022
REMUNERATION COMMITTEE REPORT continued
ANNUAL REPORT ON REMUNERATION continued
Long-term incentives
The maximum PSP award potential for Executive Directors for 2023 is 200% of salary.
As noted on pages 191 and 192, staying ahead of the sustainability curve, and delivering on our net zero carbon
commitments, is a fundamental part of Derwent London’s long-term strategy. The Committee has therefore introduced
embodied carbon reduction and energy intensity reduction performance metrics into the PSP, alongside relative Total
Shareholder Return and Total Property Return as follows:
• Total Shareholder Return (50%)
• Total Property Return (40%)
• Embodied carbon and energy intensity reduction (10%)
This 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 targets for Total Shareholder Return and Total Property Return remains the same as for the 2022 PSP awards detailed
on page 218. However, for PSP awards granted in 2023 and subsequent years, the Committee will exclude agencies
and/or services-based organisations from the TSR comparator group, as they have different business models compared to
Derwent London and other real estate companies.
The embodied carbon and energy intensity reduction targets are aligned with the business’ science-based milestone
targets to achieve net zero by 2030 and are as follows:
Measure
Weighting % of PSP
Embodied carbon1 (new-build commercial office)
Energy intensity2 reduction (managed properties)
5%
5%
Threshold
600 kg CO2e/m2
average energy
intensity of 129 kWh/
m2 across 2023, 2024
and 2025
Maximum3
500 kg CO2e/m2
average energy
intensity of 126 kWh/
m2 across 2023, 2024
and 2025
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 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. During
consultation on the new Remuneration Policy, a shareholder requested clarity on the impact of carbon offsets on the new
performance metrics. We can confirm that the purchasing of carbon offsets would not affect the outcome of the embodied
carbon or energy intensive reduction performance metrics.
Related information is on the following pages:
NET ZERO CARBON / See page 27
STREAMLINED ENERGY AND CARBON REPORTING (SECR) DISCLOSURE / See page 69
ENVIRONMENTAL / See page 52
Governance
213
EXECUTIVE DIRECTORS’ REMUNERATION IN 2022
Total remuneration (audited)
The table below sets out the remuneration paid to each Director for the financial years ended 31 December 2022 and
31 December 2021 as a single figure. A full breakdown of fixed pay and pay for performance in 2022 can be found on
pages 214 to 221. As noted on page 190 the vesting outcome of the relative total return element of the 2022 annual bonus
is still to be determined by the Committee. The 2022 bonus figure is therefore based on the vesting outcome of the relative
total property return and strategic elements only. Full details of the vesting outcome of the total return element (which
may range between 0% and 100% vesting) and total bonus earned in respect of 2022 will be disclosed in the 2023 Report
& Accounts.
Executive Directors
Fixed pay
Pay for performance
Bonus
(£’000)
Salary
Taxable
benefits
Pension
and life
assurance
Subtotal
Cash
Deferred
Performance
LTIPs1,2,3
Subtotal
Other items in
the nature of
remuneration4
Total
remuneration
630
504
504
450
141
2022
Paul Williams
Damian Wisniewski
Nigel George
Emily Prideaux
Former Executive Director
David Silverman
2021
Paul Williams
Damian Wisniewski
Nigel George
Emily Prideaux5
David Silverman
612
490
490
342
490
Non-Executive Directors
(£’000)
Mark Breuer6
Richard Dakin
Claudia Arney
Cilla Snowball
Helen Gordon
Lucinda Bell
Sanjeev Sharma7
22
23
22
19
6
23
23
22
15
21
Fees
250
78
83
78
77
83
72
109
86
88
76
761
613
614
545
521
417
417
372
25
173
–
121
95
97
57
96
756
608
609
414
607
284
227
227
159
227
–
–
–
–
–
–
–
–
–
–
2022
Taxable
benefits
–
–
–
–
–
–
–
Total
250
78
83
78
77
83
72
–
–
–
–
–
198
162
162
44
162
Fees
173
67
71
67
57
71
15
521
417
417
372
–
482
389
389
203
389
2
2
2
2
–
–
1
–
3
–
2021
Taxable
benefits
–
–
–
–
–
–
–
1,284
1,032
1,033
919
173
1,238
998
998
620
996
Total
173
67
71
67
57
71
15
1 Performance LTIPs for 2022 relate to the 2020 PSP awards for which the performance conditions related to the year ended 31 December 2022. As the performance conditions
have not been satisfied, the 2020 PSP awards will lapse on 13 March 2023 (see page 217).
2
In the 2021 Report & Accounts, the potential value of 2019 PSP awards which vested on 14 March 2022 and on 16 August 2022, for which the performance conditions related
to the year ended 31 December 2021, was calculated using the average share price for the three months ended 31 December 2021, being £33.90. The 2021 Performance LTIPs
figures in the table above have been restated to reflect the actual number of 2019 PSP awards which vested during 2022 using the share price on the day of vesting. The
restated value for the March and August awards, based on the actual share prices of £30.91 and £27.14, respectively, provides a difference of £(2.99) and £(6.76) per vested
share in comparison to the estimates contained in the 2021 Report & Accounts. Further details of vesting is provided on page 219.
3 The share price for the March and August awards was £32.53 and £29.42, respectively. Between grant and the vesting dates of 14 March 2022 and 16 August 2022, the share
price had fallen to £30.91 and £27.14, respectively, which equated to a reduction in the value of each vesting share equivalent to £1.62 and £2.28. None of the value disclosed
in the single figure is therefore attributable to share price growth.
4
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 2022. These have been
calculated based on the middle market share price on the date of grant being £23.26 minus the value of the awards at the option price which was £19.61. Further information
on the Derwent London Sharesave Plan is on page 220.
5 Emily Prideaux was appointed an Executive Director on 1 March 2021. The remuneration for 2021 is the actual remuneration paid to Emily Prideaux for the period 1 March 2021
to 31 December 2021.
6 For the period 1 February 2021 to 14 May 2021, Mark Breuer as Chairman Designate received a base fee of £47,500 per annum and a committee membership fee of £4,000 per
annum. From 14 May 2021, Mark Breuer took over the role of Non-Executive Chairman. His inclusive Chairman fee from this date was £250,000 per annum.
7 Sanjeev Sharma was appointed a Non-Executive Director on 1 October 2021. The fees for 2021 shown in the table above are the actual fees paid to Sanjeev Sharma for the
period 1 October 2021 to 31 December 2021.
214
Derwent London plc / Report and Accounts 2022
REMUNERATION COMMITTEE REPORT continued
ANNUAL REPORT ON REMUNERATION continued
Payments to former Directors and for loss of office
No payments were made in respect of loss of office during 2022. As disclosed in the 2021 Report & Accounts, PSP awards
granted on 13 March 2020 to former Executive Directors Simon Silver and David Silverman remained capable of vesting
(see page 217). For the period 1 March 2021 to 31 December 2022, Simon Silver was employed as an adviser reporting
to Paul Williams and was paid a salary of £150,000 per annum for this role. Simon’s contract has been extended to
31 December 2023 for which he will receive a salary of £50,000 per annum.
Fixed pay in 2022 (audited)
Base salaries and fees
Salaries for the Executive Directors were increased by 3.0% with effect from 1 January 2022 (with the exception of Emily
Prideaux). All eligible employees received at least a 3.2% salary increase from 1 January 2022.
Emily Prideaux was appointed an Executive Director on 1 March 2021. Emily’s salary was positioned below the other
Executive Directors on appointment. As detailed on page 177 of the 2021 Report & Accounts, Emily’s salary was increased
by 9.8% to £450,000 (from £410,000) with effect from 1 January 2022. Further information on the intended phased
alignment of Emily’s salary with the other Executive Directors’ salaries is on page 192.
The fees payable to Non-Executive Directors were increased effective from 1 January 2022 (see page 210).
Executive Directors
Paul Williams
Damian Wisniewski
Nigel George
Emily Prideaux3
Former Executive Director
David Silverman2
Non-Executive Directors
Mark Breuer3
Richard Dakin
Claudia Arney
Cilla Snowball
Helen Gordon1
Lucinda Bell
Sanjeev Sharma1,3
2022 base
salary/fee
2021 base
salary/fee
£630,400
£504,300
£504,300
£450,000
£612,000
£489,600
£489,600
£341,667
£141,231
£489,600
£250,000
£77,500
£82,500
£77,500
£76,666
£82,500
£71,666
£172,605
£67,000
£71,000
£67,000
£57,167
£71,000
£14,875
1 Helen Gordon and Sanjeev Sharma were appointed members of the Risk and Remuneration Committee, respectively, on 1 March 2022.
2 David Silverman did not receive a salary increase effective from 1 January 2022. He received a base salary of £489,600 per annum until he stepped down from the Board on
14 April 2022. The 2022 base salary shown in the table above is the actual salary paid to David Silverman for the period 1 January to 14 April 2022.
3 Mark Breuer, Emily Prideaux and Sanjeev Sharma were appointed to the Board on 1 February, 1 March and 1 October 2021, respectively. The base salaries and fees shown in
the table above are the actual salaries and fees paid to them for the periods they were Directors.
Benefits
Executive Directors are entitled to a car and fuel allowance, private medical insurance and life assurance. Further details of
the taxable benefits paid in 2022 can be found in the table below.
Executive Directors
Paul Williams
Damian Wisniewski
Nigel George
Emily Prideaux
Former Executive Director
David Silverman1
Car and fuel
allowance
Private medical
insurance
Total 2022
taxable benefits
£16,000
£16,000
£16,000
£16,000
£5,852
£7,011
£6,318
£2,722
£21,852
£23,011
£22,318
£18,722
£4,615
£1,649
£6,264
1 David Silverman stepped down from the Board on 14 April 2022, therefore his benefits shown in the table above are for the period 1 January to 14 April 2022.
Governance
215
Pension and life assurance
Paul Williams, Damian Wisniewski and Nigel George each received a cash supplement of 15% of salary. Emily Prideaux and
David Silverman received £4,000 and £1,333 respectively, 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.
There was no change in the life assurance benefits received by the Executive Directors in 2022. The change in the annual
cost is due to changes in life assurance premiums.
Pay for performance (audited)
Determination of 2022 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.
Total return performance is measured against a comparator group of real estate companies (see footnote 1 below for
details). A robust methodology for assessing the Group’s total return performance against the comparator group has been
applied consistently for a number of years which includes, for a number of the comparators, an estimate of performance to
31 December 2022. However, in light of current volatility and uncertainty in respect of property valuations, the Committee
has decided to delay the assessment of the performance of the total return performance of the comparator group until
more published information is available. The Committee has therefore not yet determined the Group’s relative performance
and vesting outcome as at the date of this report.
The Committee will determine the vesting outcome of the relative total return element in the coming months, when it has
greater clarity in respect of comparator group total return performance. Full details of the vesting outcome of the relative
total return element (which may range between 0% and 100% of maximum) and total bonus earned in respect of 2022 will
be disclosed in the 2023 Report & Accounts.
Based on performance against the total property return and strategic targets, the Executive Directors each earned a bonus
equal to 82.7% of salary. The Executive Directors may ultimately earn a bonus up to 139% of salary depending on the
vesting outcome of the relative total return element.
2022 annual bonus outcome
Bonus payable for financial-based performance (see below)
Bonus payable for strategic target performance (see page 216)
37.5% out of 37.5%
17.6% out of 25%
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 190 and 191.
The Committee determined that it was not appropriate to apply discretion to adjust the formulaic outcome.
Financial-based metrics
Performance measure
Total return
Total property
return (TPR)
Weighting %
of bonus
Basis of calculation
37.5
37.5
Total return versus other
major real estate companies1
Versus the MSCI Quarterly
Central London Office Total
Return Index
Total bonus payable for financial-based metrics
Threshold2
Maximum3
Actual
%
–
%
–
%
–
(8.0)
(6.0)
(3.4)
Payable
%
Not
determined
37.5
37.5
1 The major real estate companies contained in the comparator group for the 2022 and 2023 annual bonus are: Big Yellow Group plc, The British Land Company plc, Capital &
Counties Properties plc, CLS Holdings plc, Great Portland Estates plc, Hammerson plc, Helical plc, Landsec plc, LondonMetric Property plc, Segro plc, Shaftesbury plc, UK
Commercial Property, Unite Group plc and Workspace Group plc.
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%.
216
Derwent London plc / Report and Accounts 2022
REMUNERATION COMMITTEE REPORT continued
ANNUAL REPORT ON REMUNERATION continued
Strategic targets
Performance measure
Void management
This is measured by the Group’s average EPRA
vacancy rate over the year
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
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 genders3
Accident rate
The Accident Frequency Rate, which is calculated
based on the number of development RIDDOR
injuries during the year multiplied by 1,000,000
and divided by ‘work hours’
Portfolio development potential
This is measured by the percentage of the
Group’s portfolio by area where a potential
development scheme has been identified
Carbon intensity
This is measured by emissions intensity per
m2 of landlord-controlled floor area across our
managed like-for-like portfolio, against the rolling
three-year average
Energy intensity
This is measured by energy consumption (kWh)
per m2 of landlord-controlled floor area across our
managed like-for-like portfolio, against the rolling
three-year average
Link to
strategic
objectives1
Target range2
Maximum
award
2022
achievement
Proportion
awarded for
2022
1.2.
10% to 2%
5.0%
6.4%
2.3%
1.2.
50% to 75%
5.0%
79.0%
5.0%
3. 80% to >95%
of staff to be
satisfied or
better
4.
65% to 75%
of the latest
industry
benchmark4
2.5%
88.5%
1.4%
2.5%
>75% of the
latest industry
benchmark
0.0%
1.
35% to 50%
2.5%
43.2%
1.4%
4.
-5% to -10%
5.0%
-16%
5.0%
4.
-2% to -4%
2.5%
-13%
2.5%
25%
17.6%
1 Success against our strategic objectives is measured using our KPIs (see pages 45 to 49) 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 38 to 44).
2 Payout accrues on a broadly straight-line basis, between threshold and maximum performance.
3 The variance between genders in response to employee surveys is taken into account by the Committee when determining the payout for staff satisfaction. In 2022, the
results showed a 3.0% variance between genders, with female satisfaction being at 90.3% and male satisfaction at 87.3%.
4 The latest industry benchmark for AFR relates to the financial year ending 31 March 2022, as the majority of our peers have a March year end.
In accordance with our current Remuneration Policy, bonuses of up to 100% of base salary are paid as cash. Amounts in
excess of 100% are deferred into shares and released after three years, subject to continued employment. The total bonus
for each Executive Director based on performance against the total property return and strategic elements is therefore:
Executive Directors
Paul Williams
Damian Wisniewski
Nigel George
Emily Prideaux
Bonus payable
as % of salary
Cash bonus
payable (£’000)
£’000
% of
salary
Deferred bonus
82.7
82.7
82.7
82.7
521
417
417
372
–
–
–
–
–
–
–
–
1 David Silverman was not eligible to receive a bonus in respect of the period 1 January to 14 April 2022 (the date that he stepped down as an Executive Director).
Governance
217
Performance Share Plan (PSP) (audited)
Vesting of PSP awards
The Group granted share-based awards under the PSP on 13 March 2020. The grant was subject to performance conditions
over a three-year performance period which ended on 31 December 2022. As shown in the table below, the PSP awards
granted in 2020 will not vest, and will lapse in full on 13 March 2023.
Overall, the Committee considers that the Remuneration Policy has operated as it intended during 2022 and that the pay
outcomes are aligned with the experience of shareholders, employees and other stakeholders. The Committee determined
that it was not appropriate to apply discretion to adjust the formulaic outcome.
Performance measure
Total property return
(TPR)
Total shareholder return
(TSR)
Weighting
% of award
50
50
Basis of calculation
MSCI Quarterly UK
All Property Total
Return Index
FTSE 350 Super
Sector Real
Estate Index1
Threshold2
%
1.19
Maximum3
%
3.19
Actual
%
0.99
(17.7)
(0.8)
(33.2)
% vesting/
estimated
vesting
0.0
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 2020).
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%.
Therefore, the vesting for each Executive Director will be:
Executive Directors
Paul Williams
Damian Wisniewski
Nigel George
Emily Prideaux1
Former Executive Directors2
Simon Silver
David Silverman
Number of awards granted
based on performance (0.0%)
Number of shares vesting
36,210
28,968
28,968
9,052
35,063
28,968
–
–
–
–
–
–
1 Emily Prideaux’s PSP award was granted in respect of her role prior to being appointed an Executive Director.
2 As disclosed in the 2021 Report & Accounts, PSP awards granted on 13 March 2020 to former Executive Directors Simon Silver and David Silverman remained capable of
vesting, subject to performance. Awards for Simon Silver and David Silverman would have been subject to a pro rata reduction to take into account time served during the
vesting period and be subject to the normal holding period of two years.
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. As the
2020 Grant will lapse in full, it has been removed from the table below.
Grant
Grant date
Performance period
Vesting date
Holding period
Holding period ceases
2018 Grant
6 March 2018
2019 Grants
12 March 2019
14 August 2019
2021 Grant
12 March 2021
2022 Grant
9 March 2022
1 January 2018 to
31 December 2020
1 January 2019 to
31 December 2021
1 January 2021 to
31 December 2023
1 January 2022 to
31 December 2024
8 March 2021
Two years
8 March 2023
12 March 2022
Two years
12 March 2024
14 August 2022
14 August 2024
12 March 2024
Two years
12 March 2026
9 March 2025
Two years
9 March 2027
218
Derwent London plc / Report and Accounts 2022
REMUNERATION COMMITTEE REPORT continued
ANNUAL REPORT ON REMUNERATION continued
Grant of PSP awards
On 9 March 2022, the Committee made an award under the Group’s 2014 PSP to Executive Directors on the following basis:
Executive Directors
Paul Williams
Damian Wisniewski
Nigel George
Emily Prideaux
Number of shares
awarded
42,942
34,352
34,352
30,653
Face value of award
£
1,260,777
1,008,575
1,008,575
899,972
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 £29.36. The performance period will run over three financial years ending on
31 December 2024 and, dependent upon the achievement of the performance conditions, the awards will vest on 9 March
2025 and will be subject to a two-year holding period as outlined in the table on page 217.
50% of the award vests according to the Group’s relative TSR performance versus the constituents of the FTSE 350 Super
Sector Real Estate Index with the following vesting profile:
TSR performance of the Company relative to the TSR of the constituents of the FTSE 350 Super
Sector Real Estate Index tested over three-year performance period ending 31 December 2024
(% of TSR part of award)
Vesting
Below Median
Median
Upper quartile and above
Straight-line vesting occurs between these points
0%
22.5%
100%
50% of the award vests according to the Group’s TPR versus the MSCI Quarterly UK All Property Total Return Index with the
following vesting profile:
Annualised TPR versus the MSCI Quarterly UK All Property Index tested over three years
Below Index
At Index
Index + 2%
Straight-line vesting occurs between these points
(% of TSR part of award)
Vesting
0%
22.5%
100%
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.
Weighted average exercise price of PSP awards
Weighted average remaining contracted life of PSP awards
31/12/2022
31/12/2021
31/12/2020
–
1.19 years
–
1.20 years
–
1.19 years
The weighted average exercise price of awards that either vested or lapsed in 2022 was £nil (2021: £nil). The weighted
average market price of awards which vested for current and former Executive Directors during 2022 was £30.69
(2021: £33.03). At the year end, Damian Wisniewski’s 2019 PSP award remained exercisable and is comprised of 5,253
shares (see pages 219 and 228).
Governance
219
Outstanding PSP awards (audited)
The outstanding PSP awards held by Directors and employees are set out in the table below:
At Grant
During the year
Market
price at
date of
grant
£
1 January
2022
(number)
Date of award
Granted3
(number)
Vested1,2
(number)
Lapsed
(number)
31 December
2022
(number)
Executive Directors
Paul
Williams
12/03/2019
14/08/2019
13/03/2020
12/03/2021
09/03/2022
Damian
Wisniewski
Nigel
George
Emily
Prideaux
12/03/2019
13/03/2020
12/03/2021
09/03/2022
12/03/2019
13/03/2020
12/03/2021
09/03/2022
12/03/2019
13/03/2020
12/03/2021
09/03/2022
32.53
29.42
33.14
33.16
29.36
32.53
33.14
33.16
29.36
32.53
33.14
33.16
29.36
32.53
33.14
33.16
29.36
Former Executive Directors
David
Silverman
12/03/2019
13/03/2020
12/03/2021
32.53
33.14
33.16
Simon
Silver
12/03/2019
13/03/2020
32.53
33.14
Other
employees 12/03/2019
13/03/2020
12/03/2021
09/03/2022
32.53
33.14
33.16
29.36
Total
27,174
6,713
36,210
36,911
–
107,008
27,174
28,968
29,529
–
85,671
27,174
28,968
29,529
–
85,671
7,377
9,052
24,728
–
41,157
27,174
28,968
29,529
85,671
35,720
35,063
70,783
–
–
–
–
42,942
42,942
–
–
–
34,352
34,352
–
–
–
34,352
34,352
–
–
–
30,653
30,653
(5,253)
(1,300)
–
–
–
(6,553)
(21,921)
(5,413)
–
–
–
(27,334)
–
–
–
–
–
(5,253)
–
–
–
(5,253)
(1,435)
–
–
–
(1,435)
(21,921)
–
–
–
(21,921)
(21,921)
–
–
–
(21,921)
(5,942)
–
–
–
(5,942)
–
–
–
–
–
–
–
(5,253)
–
–
(5,253)
(21,921)
–
–
(21,921)
(4,517)
–
(4,517)
(31,203)
–
(31,203)
33,030
34,843
31,654
–
99,527
575,488
–
–
–
61,199
61,199
203,498
(5,937)
–
–
–
(5,937)
(28,948)
(27,093)
–
–
–
(27,093)
(157,335)
–
–
36,210
36,911
42,942
116,063
5,253
28,968
29,529
34,352
98,102
–
28,968
29,529
34,352
92,849
–
9,052
24,728
30,653
64,433
–
28,968
29,529
58,497
–
35,063
35,063
–
34,843
31,654
61,199
127,696
592,703
Market
price at
date of
vesting
£
Value vested
(inclusive
of dividend
equivalents)
£’000
30.90
27.14
162
35
30.90
162
30.90
162
30.90
44
30.90
162
Earliest
vesting date
12/03/2022
14/08/2022
13/03/2023
12/03/2024
09/03/2025
12/03/2022
13/03/2023
12/03/2024
09/03/2025
12/03/2022
13/03/2023
12/03/2024
09/03/2025
12/03/2022
13/03/2023
12/03/2024
09/03/2025
12/03/2022
13/03/2023
12/03/2024
30.90
140
12/03/2022
13/03/2023
30.90
183
12/03/2022
13/03/2023
12/03/2024
09/03/2025
1,050
1 The PSP awards granted on 12 March 2019 and 14 August 2019 vested on 14 March 2022 and 14 August 2022, respectively, at a vesting level of 18.1%. The value of the vesting
awards was based on the share price on the vesting date and is inclusive of dividend equivalents in the form of additional vesting shares (see note 2 for further details).
In accordance with the PSP rules, Damian Wisniewski has not yet exercised his vested awards (5,253 shares). The 5,253 shares are being held by the Company and will
not accrue dividend equivalents. Damian Wisniewski has until the 10th anniversary of grant to exercise these shares.
2
In accordance with the PSP rules, the Remuneration Committee has discretion to allow PSP participants to receive dividend equivalents upon the vesting of their awards,
which is equivalent to the value of any dividends paid on those shares between the grant date and the vesting date. For the March 2019 PSP grant, dividend equivalents were
in the form of additional vesting shares and equated to dividends paid between March 2019 and March 2022. The dividend equivalent shares have been included in the table
above, within the number of vesting awards, and equates to 91 shares for Emily Prideaux, 288 shares for Simon Silver and 335 shares each for the other Executive Directors.
For the August 2019 PSP grant, dividend equivalents were in the form of additional vesting shares and equated to dividends paid between August 2019 and August 2022.
The dividend equivalent shares have been included in the table above, within the number of vesting awards, and equates to 86 shares for Paul Williams.
3 The PSP awards granted on 9 March 2022 will vest on 9 March 2025. The performance targets attached to these awards are detailed on page 218.
220
Derwent London plc / Report and Accounts 2022
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 a HMRC tax efficient Sharesave Plan since the
2018 AGM. On 21 September 2022, the Company granted options under the Derwent London Sharesave Plan. The three-
year contract for the Options started on 1 November 2022. These Options are exercisable at a price of £19.61 per share from
1 November 2025 and are not subject to any performance conditions.
Executive Directors
Paul Williams
Damian Wisniewski
Nigel George
Emily Prideaux
Monthly saving
amount
Number of
shares under
option
£250
£250
£250
£250
458
458
458
458
Option
price
£19.61
£19.61
£19.61
£19.61
Market price
at grant
Value of award1
£23.26
£23.26
£23.26
£23.26
£1,672
£1,672
£1,672
£1,672
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
Date of award
Option
price
£
1 January
2022
(number)
Granted
(number)
Exercised1
(number)
Lapsed
(number)
31 December
2022
(number)
Maturity date
Market
price at
date of
exercise £
Value of
award at
exercise
£’000
29.32
29.32
29.32
1
1
1
Executive Directors
Paul
Williams
30/04/2019
09/04/2020
21/09/2022
Damian
Wisniewski 30/04/2019
09/04/2020
15/04/2021
21/09/2022
25.80
27.53
19.61
25.80
27.53
25.93
19.61
Nigel
George
Emily
Prideaux
30/04/2019
09/04/2020
21/09/2022
25.80
27.53
19.61
15/04/2021
21/09/2022
25.93
19.61
Former Executive Director
David
Silverman
30/04/2019
09/04/2020
Other
employees 30/04/2019
09/04/2020
15/04/2021
21/09/2022
25.80
27.53
25.80
27.53
25.93
19.61
Total
348
326
–
674
348
163
173
–
684
348
326
–
674
347
–
347
348
326
674
–
–
458
458
–
–
–
458
458
–
–
458
458
–
458
458
–
–
–
(348)
–
–
(348)
(348)
–
–
–
(348)
(348)
–
–
(348)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
01/06/2022
326 01/06/2023
01/11/2025
458
784
–
01/06/2022
163 01/06/2023
173 01/06/2024
01/11/2025
458
794
–
01/06/2022
326 01/06/2023
01/11/2025
458
784
347 01/06/2024
01/11/2025
458
805
(348)
(326)
(674)
01/06/2022
01/06/2023
–
–
–
16,990
20,285
13,290
–
50,565
53,618
–
–
–
33,133
33,133
34,965
(15,527)
–
–
–
(15,527)
(16,571)
(1,324)
(5,574)
(4,020)
(916)
(11,834)
(12,508)
139
01/06/2022
14,711 01/06/2023
9,270 01/06/2024
01/11/2025
32,217
56,337
59,504
1 On 1 June 2022, the Options granted on 30 April 2019 became capable of exercise at a price of £25.80 per share. On the same date, and on various allotment dates during the
six-month exercise period, the Company allotted 16,571 shares, in aggregate, to participants who chose to exercise their Option.
Governance
221
Deferred Bonus Plan (audited)
Executive Directors are required to defer any annual bonus earned above 100% of salary into shares for three years. Under
the new Remuneration Policy, the Committee has strengthened the annual bonus deferral requirements (see page 191).
Details of the deferred bonus shares held by Directors and employees are set out in the table below:
At Grant
Market
price at
date of
grant
£
During the year
Original
Grant
(number)
1 January
2022
(number)
Deferred
(number)
Released1,2
(number)
31 December
2022
(number)
Date of award
Executive Directors
Paul
Williams
13/03/2020
33.03
7,474
3,737
Damian
Wisniewski
13/03/2020
33.03
Nigel
George
13/03/2020
33.03
7,474
6,364
6,364
6,364
3,737
3,182
3,182
3,182
6,364
3,182
Former Executive Directors
John
Burns
13/03/2020
33.03
3,572
1,786
Simon
Silver
13/03/2020
33.03
David
Silverman
13/03/2020
33.03
13/03/2020
33.03
Other
employees
Total
3,572
7,996
7,996
6,364
6,364
1,834
1,786
3,998
3,998
3,182
3,182
917
1,834
39,968
917
19,984
Market
price at
date of
release
£
30.90
Value at
release
£’000
Release dates
115 15/03/2021 &
14/03/2022
30.90
98 15/03/2021 &
14/03/2022
30.90
98 15/03/2021 &
14/03/2022
30.90
55 15/03/2021 &
14/03/2022
30.90
124 15/03/2021 &
14/03/2022
30.90
98 15/03/2021 &
14/03/2022
30.90
28 15/03/2021 &
14/03/2022
616
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(3,737)
(3,737)
(3,182)
(3,182)
(3,182)
(3,182)
(1,786)
(1,786)
(3,998)
(3,998)
(3,182)
(3,182)
(917)
(917)
(19,984)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1 The 2019 annual bonus in excess of 100% of salary was deferred into shares on 13 March 2020 and was released in two tranches, 50% on 15 March 2021 and the remaining
50% on 14 March 2022. On 14 March 2022, the Directors chose to sell all, or a proportion, of their released shares (which included a number to discharge the relevant tax
obligations), in all cases at an average price of £30.90 per share. Further information is in the notes to the Directors’ interests in shares table on page 222.
2
In accordance with the Annual Bonus Plan rules, the Remuneration Committee has discretion to allow participants to receive dividend equivalents upon the release of their
deferred bonus shares, which is equivalent to the value of any dividends paid on those shares between the deferral date and the release date. The dividend equivalents are in
the form of additional shares. The dividend equivalent shares added to the released shares on 14 March 2022 are excluded from the above table. For the shares released on
14 March 2022, the additional dividend equivalent shares equated to 122 shares for John Burns, 273 shares for Simon Silver, 255 shares for Paul Williams and 217 shares each
for the other Executive Directors.
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.
Total issued share capital as at 31 December 2022
Investment Association share limits (in any consecutive 10-year period):
Current dilution for all share plans
Headroom relative to 10% limit
5% for executive plans – current dilution for discretionary (executive) plans
Headroom relative to 5% limit
2022
112.3m
2.3%
7.7%
1.2%
3.8%
222
Derwent London plc / Report and Accounts 2022
REMUNERATION COMMITTEE REPORT continued
ANNUAL REPORT ON REMUNERATION continued
Directors’ interests in shares (audited)
Details of the Directors’ interests in shares are provided in the table below.
Number at 31 December 2022
Number at 31 December 2021
Beneficially
held
Deferred
shares
Conditional
shares7
Share
options8
Total
Beneficially
held
Deferred
shares
Conditional
shares
Share
options
Total
Executive Directors
Paul Williams1
Damian Wisniewski2
Nigel George3
Emily Prideaux4
Total
Non-Executive
Directors
Mark Breuer
Richard Dakin
Claudia Arney
Cilla Snowball
Helen Gordon5
Lucinda Bell
Sanjeev Sharma6
Total
95,497
69,095
100,046
6,081
270,719
7,000
–
2,500
–
961
1,000
1,261
12,722
–
–
–
–
–
–
–
–
–
–
–
–
–
116,063
98,102
92,849
64,433
371,447
212,344
784
167,991
794
193,679
784
3,725
74,239
6,087 648,253
86,383
65,661
90,948
5,322
312,510
3,737
3,182
3,182
–
13,283
107,008
85,671
85,671
41,157
405,178
674 197,802
155,198
684
180,475
674
3,267
49,746
3,053 736,944
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
7,000
–
2,500
–
961
1,000
1,261
12,722
7,000
–
2,500
–
938
1,000
–
11,438
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
7,000
–
2,500
–
938
1,000
–
11,438
There have been no other changes to the above interests between 31 December 2022 and 27 February 2023.
1 Paul Williams acquired 5,253 shares from the PSP (March) 2019 grant which vested on 14 March 2022. The vesting shares included dividend equivalents in the form of 335
additional shares. To satisfy the tax liability arising, Paul sold 2,474 shares immediately upon vesting at an average share price of £30.90 per share. On 14 March 2022, Paul
Williams acquired 3,992 shares under the Company’s deferred bonus scheme when they were released from the 2020 deferral. To satisfy the tax liability arising, Paul sold
1,881 shares immediately upon their release at an average share price of £30.90 per share. On 1 June 2022, Paul Williams acquired 348 shares at an Option price of £25.80
pursuant to the Derwent London Sharesave Plan (see page 220). Paul Williams acquired 1,300 shares from the PSP (August) 2019 grant which vested on 15 August 2022, the
vesting shares included dividend equivalents in the form of 86 additional shares. On 21 September 2022, Paul Williams was granted 458 share options under the Derwent
London Sharesave Plan. On 11 October 2022, Paul Williams purchased 2,576 shares at an average share price of £19.26.
2 Damian Wisniewski became entitled to exercise 5,253 shares from the PSP 2019 grant which vested on 14 March 2022. The vesting shares included dividend equivalents
in the form of 335 additional shares. In accordance with the PSP rules, Damian Wisniewski has not yet exercised his vested awards (5,253 shares). The 5,253 shares are
being held by the Company and will not accrue dividend equivalents. Damian Wisniewski has until the 10th anniversary of grant to exercise these shares. On 14 March 2022,
Damian Wisniewski acquired 3,399 shares under the Company’s deferred bonus scheme when they were released from the 2020 deferral. To satisfy the tax liability arising,
Damian sold 1,601 shares immediately upon their release at an average share price of £30.90 per share. On 1 June 2022, Damian Wisniewski acquired 348 shares at an
Option price of £25.80 pursuant to the Derwent London Sharesave Plan (see page 220). On 21 September 2022, Damian Wisniewski was granted 458 share options under the
Derwent London Sharesave Plan. On 11 October 2022, Damian Wisniewski purchased 1,288 shares at an average share price of £19.26.
3 Nigel George acquired 5,253 shares from the PSP 2019 grant which vested on 14 March 2022. The vesting shares included dividend equivalents in the form of 335 additional
shares. To satisfy the tax liability arising, Nigel sold 2,474 shares immediately upon vesting at an average share price of £30.90 per share. On 14 March 2022, Nigel George
acquired 3,399 shares under the Company’s deferred bonus scheme when they were released from the 2020 deferral. To satisfy the tax liability arising, Nigel sold 1,601
shares immediately upon their release at an average share price of £30.90 per share. On 1 June 2022, Nigel George acquired 348 shares at an Option price of £25.80
pursuant to the Derwent London Sharesave Plan (see page 220). On 21 September 2022, Nigel George was granted 458 share options under the Derwent London Sharesave
Plan. On 11 October 2022, Nigel George purchased 2,576 shares at an average share price of £19.26.
4 Emily Prideaux was appointed an Executive Director on 1 March 2021, Emily’s awards includes those that were granted prior to her appointment. Emily Prideaux acquired
1,435 shares from the PSP 2019 grant which vested on 14 March 2022. The vesting shares included dividend equivalents in the form of 91 additional shares. To satisfy the tax
liability arising, Emily sold 676 shares immediately upon vesting at an average share price of £30.90 per share. On 21 September 2022, Emily Prideaux was granted 458 share
options under the Derwent London Sharesave Plan, further information on page 220.
5 During 2022, Helen Gordon reinvested her dividend to purchase an additional 23 shares.
6 On 11 August 2022, Sanjeev Sharma purchased 1,261 shares at an average share price of £26.98.
7 Conditional shares are those which are subject to performance conditions. For further information on the Performance Share Plan see pages 217 to 219.
8 Share options principally relate to the Sharesave Plan (see page 220) and are unvested. For Emily Prideaux only, she has outstanding Employee Share Option Plan (ESOP)
awards which were granted in respect of her role prior to being appointed an Executive Director.
Governance
223
Directors’ shareholding guideline
Executive Directors are subject to within-employment and post-employment shareholding guidelines (see page 196).
The within-employment shareholding guideline for the year ended 31 December 2022 expects all Executive Directors
to work towards holding shares in Derwent London plc equivalent to 200% of base salary.
As at 31 December 2022, 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
Paul Williams
Damian Wisniewski
Nigel George
Emily Prideaux
Beneficially
held shares
95,497
69,095
100,046
6,081
2022 salary1
£630,400
£504,300
£504,300
£450,000
Target
Achieved
(% of base salary)
Value of
beneficially
held shares2
200%
200%
200%
200%
417%
£2,627,122
377% £1,900,803
546% £2,752,265
£167,288
37%
1 The base salaries shown in the table above are as at 31 December 2022. Further information on fixed pay during 2022 is provided on page 213.
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 2022 of £27.51.
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) requires 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.
Within-employment shareholding guideline
The chart below highlights the value of each Executive Director’s beneficially held shares at 31 December 2022, as a
percentage of base salary. 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 21% of his base salary.
546%
417%
377%
Paul Williams
Damian Wisniewski
Nigel George
Emily Prideaux
37%
Achieved
200% Target
SHARE OWNERSHIP GUIDELINES / See page 196
224
Derwent London plc / Report and Accounts 2022
DIRECTORS’
REPORT
DAVID LAWLER
Company Secretary
The Directors’ report for the financial year ended
31 December 2022 is set out on pages 224 to 228.
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:
Future business developments
Pages 3 to 125
Stakeholder engagement
Diversity and inclusion
Charitable donations
Page 130
Page 186
Page 57
Going concern & viability
The section 172(1) statement
Pages 108 to 111
Pages 131 to 133
Monitoring purpose, values and culture Page 140
Review of the 2022 Report & Accounts Page 158
Internal financial control
Pages 160 to 161
Risk management and internal controls Page 171
Total remuneration in 2022
Page 213
Long-term incentive schemes
Pages 190 to 223
The Directors present their Report & Accounts and
audited financial statements for the year ended
31 December 2022.
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 2022, 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 2022
is on page 128. Further details on how we have applied the
Code can be found in the Governance section on pages 127
to 229.
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.
Interest capitalised
Financial instruments
Page 255
Pages 272 to 281
Company status and branches
Financial risk management
Page 280
Credit, market and liquidity risks
Pages 280 to 281
Related party disclosures
Pages 290 to 291
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 listed
company on the London Stock Exchange main market with a
premium listing, and is registered and domiciled in England
and Wales (company number 01819699).
Governance
225
Key stakeholders
The long-term success of the Group is dependent on its relationships with its key stakeholders. On page 130 we outline the
ways in which we have engaged with key stakeholders to understand the value created and value received.
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.
T. Rowe Price Associates, Inc
Norges Bank
BlackRock Investment Management
(UK) Ltd
Resolution Capital Limited
Ameriprise Financial Inc
(Columbia Threadneedle)
Lady Jane Rayne
Canada Pension Plan Investment Board
APG Asset Management N.V.
31 December 2022
Number of
shares (m)
12.3
10.1
6.0
5.5
4.9
4.1
3.5
3.4
Direct/
indirect
Indirect
Direct
Indirect
Direct
Indirect
Direct
Direct
Direct
%
10.9
9.0
5.4
4.9
4.8
3.6
3.1
3.0
Direct/
indirect
Indirect
Direct
Indirect
Direct
Indirect
Direct
Direct
Direct
27 February 2023
Number of
shares (m)
10.9
10.1
6.0
5.5
4.9
4.1
3.5
4.5
%
9.8
9.0
5.4
4.9
4.8
3.6
3.1
4.0
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
are on pages 132 and 144.
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 page
69 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
Directors
The Directors of the Company are set out on pages 134 to
135, all of which were in office during the year under review
except for David Silverman who stepped down from the
Board on 14 April 2022.
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 202 and 222.
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 148.
226
Derwent London plc / Report and Accounts 2022
DIRECTORS’ REPORT continued
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.
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
2023 AGM.
All Directors who held office during the financial year under
review will be putting themselves forward for election at
the AGM on 12 May 2023, except David Silverman who
stepped down as a Director on 14 April 2022 and Richard
Dakin who will retire from the Board on 28 February 2023.
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 2022 AGM, we were delighted to receive in excess of
93% votes in favour of all resolutions. In total, 87.8% of our
shareholders (voting capital) voted.
The 39th AGM of Derwent London plc will be held in DL/78
at 78 Charlotte Street, London W1T 4QS on 12 May 2023 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.
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. 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.
Governance
227
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.
Capital structure
As at 28 February 2023, the Company’s issued share
capital comprised a single class of 5p ordinary shares
(ISIN: GB0002652740) and equalled an amount of
£5,614,533.95 divided into 112,290,679 ordinary shares.
The market price of the 5p ordinary shares at 31 December
2022 was £23.68 (2021: £34.15). During the year, they
traded in a range between £17.83 and £35.80 (2021: £30.16
and £38.50). Details of the ordinary share capital and
shares issued during the year can be found in note 29 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.
Powers in relation to the Company issuing or
buying back its own shares
At the 2022 AGM, shareholders authorised the Company to
allot relevant securities:
(i) up to a nominal amount of £1,869,955; and
(ii) up to a nominal amount of £3,740,471, 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 2023 AGM to grant a similar
authority to allot:
(i) up to a nominal amount of £1,871,324 (being one-third
of the issued share capital of the Company); 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
(being two-thirds of the issued share capital).
At the 2023 AGM, similar to previous years, authority will
be sought via a special resolution to enable the Directors
to allot securities and/or sell any treasury shares for cash
on a non-pre-emptive basis up to a nominal amount of
£280,727 (representing 5% of the issued share capital). In
addition, authority will be sought via a special resolution
to enable the Directors to allot securities and/or sell
treasury shares for cash on a non-pre-emptive basis for the
purposes of financing (or refinancing, if the authority is
to be used within six months after the original transaction)
an acquisition or other capital investment. The allotment
of equity securities or sale of treasury shares under such
authority will also be limited to a nominal amount of
£280,727 (representing a further 5% 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 11,229,068
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.
228
Derwent London plc / Report and Accounts 2022
DIRECTORS’ REPORT continued
Derwent London shares held by the Group
As at 31 December 2022, the Group holds 10,666 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 2022 include 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 219).
1 January 2022
Deferred bonus
Performance Share Plan
Total
Price (£)
Percentage of issued share capital
19,984
–
19,984
During the year
Allotted
–
39,614
39,614
Acquired
1,362
–
1,362
£30.29
Disposal
31 December 2022
(21,346)
(28,948)
(50,294)
–
10,666
10,666
0%
Results and dividends
Auditors
The financial statements set out the results of the Group for
the financial year ended 31 December 2022 and are shown
on pages 242 to 305. The Directors recommend a final
dividend of 54.50p per ordinary share for the year ended
31 December 2022. When taken together with the interim
dividend of 24.0p per ordinary share paid in October
2022, this results in a total dividend for the year of 78.50p
(2021: 76.50p) per ordinary share. Subject to approval
by shareholders of the recommended final dividend, the
dividend to shareholders for 2022 will total £61.2m. If
approved, the Company will pay the final dividend on
2 June 2023 to shareholders on the register of members
at 28 April 2023.
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 2022, resulting in a deficit of £401.8m, before
accounting adjustments of £19.8m and share of joint
venture of £9.2m. The portfolio is included in the Group
balance sheet at a carrying value of £5,145.6m. Further
details are given in note 16 of the financial statements.
Post-balance sheet events
Details of post-balance sheet events are given in note 37
of the financial statements.
Political donations
There were no political donations during 2022 (2021: nil).
PricewaterhouseCoopers LLP, which was appointed in 2014
following a competitive tender process, has expressed its
willingness to continue in office as the Group’s Auditor and,
accordingly, resolutions to reappoint it and to authorise the
Audit Committee, for and on behalf of the Directors,
to determine its remuneration will be proposed at the
AGM. These are resolutions 15 and 16 set out in the
Notice of Meeting.
A competitive tender process for the role of Group Auditor
will be conducted during 2023, for the 2024 year end audit,
in accordance with the current regulation that requires a
tender every 10 years, further information is on pages 168
to 169.
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 2023
Governance
229
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report and the financial statements in
accordance with applicable law and regulation.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the
Directors have prepared the Group and the Company
financial statements in accordance with UK-adopted
international accounting standards.
Under Company law, Directors must not approve the
financial statements unless they are satisfied that they
give a true and fair view of the state of affairs of the Group
and Company and of the profit or loss of the Group for that
period. In preparing the financial statements, the Directors
are required to:
• select suitable accounting policies and then apply
them consistently;
• state whether applicable UK-adopted international
accounting standards have been followed, subject to
any material departures disclosed and explained in the
financial statements;
• make judgements and accounting estimates that are
reasonable and prudent; and
• prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the
Group and Company will continue in business.
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 134 to 135 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.
On behalf of the Board
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.
PAUL WILLIAMS
Chief Executive
27 February 2023
DAMIAN WISNIEWSKI
Chief Financial Officer
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.
Governance
230
Derwent London plc / Report and Accounts 2022
The Featherstone Building EC1
E Financial statements
231
Terrace
Reception
“ The Featherstone Building fuses site-specific contextual
references with modern engineering and cutting-edge
construction techniques, including Intelligent Building
infrastructure, to deliver a high quality and forward-looking,
net zero carbon building in this important London location.”
JOE MORRIS
FOUNDING DIRECTOR, MORRIS+COMPANY
FINANCIAL
STATEMENTS
232 Independent Auditors’ report
242 Group income statement
243 Group statement of comprehensive income
244 Balance sheets
245 Statements of changes in equity
246 Cash flow statements
247 Notes to the financial statements
Other information
305 Ten-year summary
306 EPRA summary
309 Principal properties
311 List of definitions
315 Shareholder information
316 Awards & recognition
232
Derwent London plc / Report and Accounts 2022
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 2022 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 2022 (the “Annual Report”), which
comprise: Balance sheets as at 31 December 2022; the Group income statement and 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, which include a description of the significant accounting policies.
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 67 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 with
additional procedures performed on the consolidation to ensure sufficient coverage for our opinion on the Group
financial statements as a whole.
Key audit matters
• Valuation of investment properties (Group)
• Revenue recognition (Group)
• Accounting for the expected credit loss provision (Group)
• Compliance with REIT guidelines (Group)
• Valuation of investments in and loans to subsidiaries (Company)
Financial statements
233
Materiality
• Overall Group materiality: £55.0 million (2021: £58.9 million) based on 1% of Total assets.
• Specific materiality: £6.0million (2021: £5.8 million) for certain income statement line items 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.
• Overall Company materiality: £41.1 million (2021: £37.4 million) based on 1% of Total assets.
• Performance materiality: £41.2 million (2021: £44.1 million) (Group) and £30.8 million (2021: £28.0 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.
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.
Valuation of borrowings and derivatives (Group), which was a key audit matter last year, is no longer included because
of no significant changes in financing activity during the year that warranted additional audit focus in the current year.
Otherwise, the key audit matters below are consistent with last year.
Key audit matter
How our audit addressed the key audit matter
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
£5,002.0 million (2021: £5,361.2 million – restated).
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 Institute
of Chartered Surveyors Valuation – Professional
Standards, 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 Valuers used by the Group are Knight Frank for the central
London portfolio and Savills for the majority of the remaining
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.
We tested the data inputs underpinning the investment property
valuation for a sample of properties, including rental income,
acquisitions and capital expenditure, by agreeing them 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. For the properties currently under development,
we agreed the costs to date included within development
appraisals to quantity surveyor reports. We met with the Valuers
independently of management and obtained the valuation
reports to discuss and challenge the valuation methodology
and assumptions. 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. We agreed the
total forecasted cost of upgrading buildings to EPC (Energy
Performance Certificate) B to a third party report commissioned
by the Group and challenged the Valuers on demonstrating their
consideration of these EPC related costs within the underlying
property valuations.
234
Derwent London plc / Report and Accounts 2022
INDEPENDENT AUDITORS’ REPORT continued
to the members of Derwent London plc
Key audit matter
How our audit addressed the key audit matter
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).
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 including 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.
Revenue recognition (Group)
Refer to the Strategic report – “Our principal risks”
and note 5 (Property and other income) to the
financial statements.
Revenue for the Group consists primarily of rental
income, and service charge income. Rental income
is based on tenancy agreements where there is a
standard process in place for recording revenue.
Service charge income relates to expenditure that
is directly recoverable from tenants.
There are certain transactions within revenue
that warrant additional audit focus because of an
increased inherent risk of error due to their non-
standard nature.
These include spreading of tenant incentives,
guaranteed rent increases and rental concessions
given to tenants.
These balances require adjustments made to rental
income to ensure revenue is recorded on a straight-
line basis over the course of the lease.
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 (qualified chartered surveyors)
to assist us in our audit of this area. We involved our internal
valuation experts to compare the valuations of each property
with our independently formed market expectations and
challenged any differences outside of our expected range. In
doing this we used evidence of comparable market transactions
and focused in particular on properties where the growth in
capital values was higher or lower than our expectations based
on independent publicly available market indices.
We identified the following categories of assets for further
testing: standing investments where the valuation fell outside
the expected range; ongoing and planned development
projects; high value assets greater than our overall materiality;
and acquisitions.
In relation to these assets, we found that yield rates and ERVs
were predominantly consistent with comparable information
for central London offices and assumptions appropriately
reflected comparable market information. Where assumptions
did not fall within our expected range, we assessed whether
additional evidence presented in arriving at the final valuations
was appropriate. Variances were largely due to property specific
factors such as movements in ERV following leasing activity
or yield to reflect market transactions in close proximity. We
verified the movements to supporting documentation including
evidence of comparable market transactions where appropriate.
We challenged the Directors on the movements in the valuations
and found that they were able to provide explanations and refer
to appropriate supporting evidence.
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.
We performed sample testing over the lease data recorded
in the two tenancy management systems to supporting lease
agreements, to gain comfort over the accuracy of the data.
We also performed a recalculation of rental income on a sample
basis based on the information in the tenancy management
system (that generates rental demands) to gain comfort over the
completeness of revenue recognised. We tested on a sample
basis the calculation of rental demands.
For rental income, we tested a sample of balances to invoices
and traced receipts to bank statements and ensured that rental
income had been appropriately recorded.
We tested a sample of lease incentive debtor balances back
to supporting documentation agreeing the inputs to the lease
incentive calculations and assessed the appropriateness of
the calculations in line with International Financial Reporting
Standard 16 (Leases) (“IFRS 16”).
We recalculated a sample of lease incentive adjustments posted
to revenue in the year to ensure that lease incentive debtors are
being recognised properly as accrued income and subsequently
amortised in line with IFRS 16.
We have no matters to report in respect of this work.
Financial statements
235
Key audit matter
How our audit addressed the key audit matter
We verified the mathematical accuracy of the model and
provision calculation of the ECL.
We evaluated the basis for determining the categorisation
of tenants by risk and the associated probability of default
percentages applied to each category.
We reviewed the risk committee meeting minutes and compared
these against the ECL model to ensure that the tenant specific
discussions were reflected in the provision calculation.
We obtained an ageing report of trade receivables and tested
the accuracy by checking the ageing of selected invoices on a
sample basis.
We performed independent research over a sample of tenants
in order to assess any contradictory evidence and how this had
been incorporated into the forward-looking probability of default
assigned to the tenant.
We reviewed the disclosures made in relation to the ECL
provision and the sensitivity of the provision to the underlying
probability of default applied.
We have no matters to report in respect of this work.
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 found that the assessment prepared was free from material
error and consistent with the UK REIT guidelines.
Accounting for the expected credit loss provision
(Group)
Refer to the Audit Committee report (Significant
financial judgements, key assumptions and
estimates), note 3 (Significant judgements, key
assumptions and estimates) and note 21 (Trade
and other receivables) to the financial statements.
IFRS 9 requires that credit losses on financial assets
are measured and recognised using the “expected
credit loss” (ECL) approach. The Group has applied
the simplified approach to trade receivables and lease
incentive debtors.
The ongoing economic uncertainty as a result of
factors such as the Russo-Ukrainian war, rising
interest and inflation rates have caused unforeseen
challenges to the UK and the wider global economy,
impacting the overall risk profile of tenants. Whilst
during the period rent collection rates have remained
high there remains a risk of tenants defaulting or
tenant failure, particularly in respect to the retail or
hospitality sectors.
At the year end an ECL provision of £5.0 million (2021:
£8.3 million – restated) has been recorded. In arriving
at the Group’s estimate, management has considered
the probability of default for tenants at higher risk,
particularly in the retail or hospitality sectors, those in
administration or Company voluntary arrangements
(CVA) and the top 50 tenants by size. Management
has also considered the remaining balances classified
by sector risk.
Due to the subjectivity of the assumptions used therein,
we have considered this an area of audit focus.
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.
236
Derwent London plc / Report and Accounts 2022
INDEPENDENT AUDITORS’ REPORT continued
to the members of Derwent London plc
Key audit matter
How our audit addressed the key audit matter
We obtained the directors’ impairment assessment for the
recoverability of investments in and loans to subsidiaries as at
31 December 2022.
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 the directors in arriving at the carrying
value of each subsidiary, and the expected credit loss ‘simplified
approach’ provision 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.
Valuation of investments in and loans to subsidiaries
(Company)
Refer to notes 19 (Investments) and 21 (Trade and
other receivables) to the financial statements.
The Company has investments in subsidiaries of
£2,224.7 million (2021: £1,749.8 million) and loans
to subsidiaries of £1,759.2 million (2021: £1,860.7
million) as at 31 December 2022. This is following
the recognition of a £130.1million (2021: £19.9
million) provision for impairment on investments in
subsidiaries and an expected credit loss impairment
of £nil (2021: £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.
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 67 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 with
additional procedures performed on the consolidation to ensure sufficient coverage and appropriate audit evidence for our
opinion on the Group financial statements as a whole.
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.
Financial statements
237
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Overall materiality
How we determined it
Rationale for
benchmark applied
Financial statements – Group
Financial statements – Company
£55.0 million (2021: £58.9 million).
1% of Total assets
The key driver of the business and
determinant of the Group’s value is direct
property investments. Due to this, the key
area of focus in the audit is the valuation of
investment properties. On this basis, we set
an overall Group materiality level based on
total assets.
£41.1 million (2021: £37.4 million).
1% of Total assets
The key driver of the business and determinant
of the Company’s value is investments in
and loans to subsidiaries. Due to this, the
key area of focus in the audit is the valuation
of investments in and loans to subsidiaries.
On this basis, we set an overall Company
materiality level based on total assets.
For each component in the scope of our Group audit, we allocated a materiality that is less than our overall Group
materiality. The range of materiality allocated across components was £4.0 million to £40.0 million. Certain components
were audited to a local statutory audit materiality that was also less than our overall Group materiality.
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% (2021: 75%) of overall materiality,
amounting to £41.2 million (2021: £44.1 million) for the Group financial statements and £30.8 million (2021: £28.0 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 materiality level of £6.0 million (2021: £5.8 million) for certain income statement line items
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.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above
£2.7 million (for items audited using overall materiality) and £0.6 million (for items audited using specific materiality)
(Group audit) (2021: £2.9 million and £0.5 million) and £2.0 million (Company audit) (2021: £1.7 million) as well as
misstatements below those amounts that, in our view, warranted reporting for qualitative reasons.
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 compare to the
actuals 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 under both 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.
238
Derwent London plc / Report and Accounts 2022
INDEPENDENT AUDITORS’ REPORT continued
to the members of Derwent London plc
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 2022 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.
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.
Financial statements
239
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.
240
Derwent London plc / Report and Accounts 2022
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 breaches of the Real Estate Investment Trust (REIT) status section 1158 of the Corporation
Tax Act 2010 and non-compliance with 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 or
posted by senior management.
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.
Financial statements
241
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 nine years, covering the years ended 31 December 2014 to 31 December 2022.
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 2023
242
Derwent London plc / Report and Accounts 2022
GROUP INCOME STATEMENT
for the year ended 31 December 2022
Gross property and other income
Net property and other income2
Administrative expenses
Revaluation (deficit)/surplus
Profit on disposal
(Loss)/profit from operations
Finance income
Finance costs
Movement in fair value of derivative financial instruments
Financial derivative termination costs
Share of results of joint ventures
(Loss)/profit before tax
Tax (charge)/credit
(Loss)/profit for the year
Attributable to:
Equity shareholders
Non-controlling interest
Basic (loss)/earnings per share
Diluted (loss)/earnings per share
2022
£m
248.8
194.6
(36.4)
(422.1)
25.6
(238.3)
0.3
(39.7)
5.8
(0.3)
(7.3)
(279.5)
(1.0)
(280.5)
(280.5)
–
(280.5)
2021
Restated1
£m
241.3
187.2
(37.1)
131.1
10.4
291.6
–
(28.1)
4.8
(1.9)
(13.9)
252.5
1.3
253.8
252.3
1.5
253.8
(249.84p)
224.99p
(249.84p)
224.44p
Note
5
5
16
6
7
7
8
9
10
15
31
40
40
1 Prior year figures have been restated for a change in accounting policy in relation to forgiveness of lease payments. See note 2 for additional information.
2 Net property and other income in 2022 includes a credit of £1.0m for the movement in impairment of receivables (2021 restated: charge of £2.2m). See note 3 for additional
information.
The notes on pages 247 to 304 form part of these financial statements.
Financial statements
243
GROUP STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 December 2022
(Loss)/profit for the year
Actuarial (losses)/gains on defined benefit pension scheme
Deferred tax charge on pension
Revaluation surplus of owner-occupied property
Deferred tax charge on revaluation
Other comprehensive (expense)/income that will not be reclassified
to profit or loss
Total comprehensive (expense)/income relating to the year
Attributable to:
Equity shareholders
Non-controlling interest
The notes on pages 247 to 304 form part of these financial statements.
Note
14
28
16
28
2022
£m
(280.5)
(2.0)
–
0.7
(0.2)
(1.5)
(282.0)
(282.0)
–
(282.0)
2021
£m
253.8
2.7
(0.4)
3.7
(1.3)
4.7
258.5
257.0
1.5
258.5
244
Derwent London plc / Report and Accounts 2022
BALANCE SHEETS
as at 31 December 2022 (Registered No. 1819699)
Group
2022
£m
Note
Non-current assets
Investment property
Property, plant and equipment
Investments
Derivative financial instruments
Deferred tax
Pension scheme surplus
Other receivables
Current assets
Trading property
Trading stock
Trade and other receivables
Cash and cash equivalents
Non-current assets held for sale
Total assets
Current liabilities
Borrowings
Leasehold liabilities
Trade and other payables
Corporation tax liability
Derivative financial instruments
Provisions
Non-current liabilities
Borrowings
Derivative financial instruments
Leasehold liabilities
Provisions
Deferred tax
Total liabilities
Total net assets
Equity
Share capital
Share premium
Other reserves
Retained earnings2
Total equity
16
17
19
25
28
14
20
16
18
21
33
22
25
25
23
25
24
25
25
25
24
28
29
30
30
30
2021
Restated1
£m
5,361.2
54.0
51.1
–
0.3
1.8
159.3
5,627.7
32.2
0.4
41.0
105.5
179.1
102.8
Company
2022
£m
2021
Restated1
£m
–
21.0
2,224.7
5.0
3.0
1.2
–
2,254.9
–
–
1,788.0
67.3
1,855.3
–
–
22.6
1,749.8
–
3.6
1.8
–
1,777.8
–
–
1,898.9
90.6
1,989.5
–
5,002.0
54.3
43.9
5.0
–
1.2
188.1
5,294.5
39.4
2.3
42.4
76.6
160.7
54.2
5,509.4
5,909.6
4,110.2
3,767.3
19.7
0.5
148.1
0.9
–
–
169.2
1,229.4
–
34.5
0.2
0.6
1,264.7
1,433.9
12.3
51.2
145.9
0.5
0.4
0.3
210.6
1,237.1
0.4
19.4
0.3
–
1,257.2
1,467.8
–
1.3
1,707.5
0.9
–
–
1,709.7
1,048.4
–
21.6
0.2
–
1,070.2
2,779.9
–
1.2
1,304.1
0.7
0.4
0.3
1,306.7
1,054.7
0.4
22.9
0.3
–
1,078.3
2,385.0
4,075.5
4,441.8
1,330.3
1,382.3
5.6
196.6
941.9
2,931.4
4,075.5
5.6
195.4
941.1
3,299.7
4,441.8
5.6
196.6
925.9
202.2
1,330.3
5.6
195.4
925.6
255.7
1,382.3
1 Prior year figures have been restated for changes in accounting policies. See note 2 for additional information.
2 Retained earnings for the Company include profit for the year of £34.3m (2021: £11.6m).
The financial statements were approved by the Board of Directors and authorised for issue on 27 February 2023.
PAUL WILLIAMS
Chief Executive
DAMIAN WISNIEWSKI
Chief Financial Officer
The notes on pages 247 to 304 form part of these financial statements.
Financial statements
245
STATEMENTS OF CHANGES IN EQUITY
for the year ended 31 December 2022
Share
capital
£m
Share
premium
£m
Other
reserves1
£m
Retained
earnings
£m
Equity
shareholders’
funds
£m
Non–
controlling
interest
£m
Total
equity
£m
Group
At 1 January 2022
Loss for the year
Other comprehensive income/(expense)
Share-based payments
Dividends paid
At 31 December 2022
At 1 January 2021
Profit for the year
Other comprehensive income
Share-based payments
Dividends paid
Acquisition of non-controlling interest
At 31 December 2021
Company
At 1 January 2022
Profit for the year
Other comprehensive expense
Share-based payments
Dividends paid
At 31 December 2022
At 1 January 2021
Profit for the year
Other comprehensive income
Share-based payments
Dividends paid
At 31 December 2021
1 See note 30.
5.6
–
–
–
–
5.6
5.6
–
–
–
–
–
5.6
5.6
–
–
–
–
5.6
5.6
–
–
–
–
5.6
195.4
–
–
1.2
–
196.6
193.7
–
–
1.7
–
–
195.4
195.4
–
–
1.2
–
196.6
193.7
–
–
1.7
–
195.4
941.1
–
0.5
0.3
–
941.9
939.4
–
2.4
(0.7)
–
–
941.1
925.6
–
–
0.3
–
925.9
926.3
–
–
(0.7)
–
925.6
3,299.7
(280.5)
(2.0)
1.2
(87.0)
2,931.4
3,124.5
252.3
2.3
5.2
(84.6)
–
3,299.7
255.7
34.3
(2.0)
1.2
(87.0)
202.2
321.2
11.6
2.3
5.2
(84.6)
255.7
4,441.8
(280.5)
(1.5)
2.7
(87.0)
4,075.5
4,263.2
252.3
4.7
6.2
(84.6)
–
4,441.8
1,382.3
34.3
(2.0)
2.7
(87.0)
1,330.3
1,446.8
11.6
2.3
6.2
(84.6)
1,382.3
–
–
–
–
–
–
51.9
1.5
–
–
–
(53.4)
–
–
–
–
–
–
–
–
–
–
–
–
–
4,441.8
(280.5)
(1.5)
2.7
(87.0)
4,075.5
4,315.1
253.8
4.7
6.2
(84.6)
(53.4)
4,441.8
1,382.3
34.3
(2.0)
2.7
(87.0)
1,330.3
1,446.8
11.6
2.3
6.2
(84.6)
1,382.3
The notes on pages 247 to 304 form part of these financial statements.
246
Derwent London plc / Report and Accounts 2022
CASH FLOW STATEMENTS
for the year ended 31 December 2022
Operating activities
Rents received
Surrender premiums and other property income
Property expenses
Costs recoverable from tenants
Service charge balance inflows
Service charge balance outflows
Tenant deposit inflows
Tenant deposit outflows
Cash paid to and on behalf of employees
Other administrative expenses
Interest received
Interest paid
Other finance costs
Other income
Disposal of trading properties
Expenditure on trading properties/stock
Tax paid in respect of operating activities
VAT movement
Net cash from/(used in) operating activities
Investing activities
Acquisition of properties
Capital expenditure on the property portfolio
Disposal of investment properties
Investment in joint ventures
Settlement of shareholder loan
Proceeds from sale of investments
Purchase of property, plant and equipment
Disposal of property, plant and equipment
VAT movement
Net cash (used in)/from investing activities
Financing activities
Net proceeds of green bond issue
Net movement in intercompany loans
Net movement in revolving bank loans
Proceeds from other loan
Repayment of secured bank loan
Financial derivative termination costs
Acquisition of non-controlling interest
Net proceeds of share issues
Dividends paid
Net cash (used in)/from financing activities
(Decrease)/increase in cash and cash equivalents in the year
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
Group
Company
2022
£m
2021
Restated1
£m
2022
£m
2021
Restated1
£m
Note
193.7
0.7
(22.5)
(1.9)
64.5
(61.5)
13.9
(4.2)
(25.1)
(8.0)
0.3
(33.7)
(3.4)
4.2
3.0
(9.7)
(0.5)
1.6
111.4
(137.6)
(120.7)
206.7
(0.3)
–
–
(2.0)
–
2.2
(51.7)
–
–
(10.1)
7.4
–
(0.3)
–
1.2
(86.8)
(88.6)
(28.9)
105.5
76.6
187.0
5.7
(14.3)
–
49.5
(49.1)
1.5
(2.7)
(26.9)
(7.8)
–
(21.9)
(3.1)
4.1
5.0
(1.6)
(0.5)
4.0
128.9
(251.8)
(172.1)
297.3
(64.1)
2.0
–
(1.6)
0.2
3.5
(186.6)
346.0
–
(117.8)
12.3
(28.0)
(1.9)
(53.4)
1.8
(84.3)
74.7
17.0
88.5
105.5
–
–
–
–
–
–
–
–
(25.0)
(8.0)
0.2
(26.6)
(2.3)
3.2
–
–
–
–
(58.5)
–
–
–
–
–
–
(0.6)
–
–
(0.6)
–
131.8
(10.1)
–
–
(0.3)
–
1.2
(86.8)
35.8
(23.3)
90.6
67.3
–
–
–
–
–
–
–
–
(26.6)
(8.5)
–
(19.4)
(2.2)
3.8
–
–
–
–
(52.9)
–
–
–
–
–
82.0
(1.2)
0.1
–
80.9
346.0
(153.9)
(117.8)
–
–
(1.9)
–
1.8
(84.3)
(10.1)
17.9
72.7
90.6
7
7
7
7
27
8
29
32
33
33
1 Prior year figures have been restated for changes in accounting policies. See note 2 for additional information.
The notes on pages 247 to 304 form part of these financial statements.
Financial statements
247
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2022
1 BASIS OF PREPARATION
The financial statements have been prepared in accordance with UK-adopted International Accounting Standards,
(the ‘applicable framework’), and have been prepared in accordance with the provisions of the Companies Act 2006
(the ‘applicable legal requirements’). The financial statements have been prepared under the historical cost convention as
modified by the revaluation of investment properties, the revaluation of property, plant and equipment, assets held for sale,
pension scheme, and financial assets and liabilities held at fair value.
Going concern
The Board continues to adopt the going concern basis in preparing these consolidated financial statements. In considering
this requirement, the Directors have taken into account the following:
• The Group’s latest rolling forecast for the next two years, in particular the cash flows, borrowings and undrawn facilities.
• The headroom under the Group’s financial covenants.
• The risks included on the Group’s risk register that could impact on the Group’s liquidity and solvency over the next
12 months.
• The risks on the Group’s risk register that could be a threat to the Group’s business model and capital adequacy.
The Directors have considered the relatively long-term and predictable nature of the income receivable under the tenant
leases, the Group’s year end loan-to-value ratio for 2022 of 23.9%, the interest cover ratio of 423%, the £577m total of
undrawn facilities and cash and the fact that the average maturity of borrowings was 6.2 years at 31 December 2022.
The impact of the Covid-19 pandemic on the business and its occupiers has been considered. The impact in 2022 was
considerably less than in 2021 as evidenced by a partial reversal in impairment charges and rent collection rates now close
to that seen pre-pandemic. Office occupation rates are also gradually recovering. The likely impact of climate change has
been incorporated into the Group’s forecasts and has taken account of the impact of EPC upgrades across the portfolio,
estimated at £99m. Based on the Group’s forecasts, rental income would need to decline by 65% and property values
would need to fall by 60% before breaching its financial covenants. Further information is provided in the Group’s viability
statement on page 108.
The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the financial
review. In addition, the Group’s risks and risk management processes can be found within the risk management and
internal controls.
Having due regard to these matters and after making appropriate enquiries, the Directors have reasonable expectation that
the Group has adequate resources to continue in operational existence for a period of at least 12 months from the date of
signing of these consolidated financial statements and, therefore, the Board continues to adopt the going concern basis in
their preparation.
2 CHANGES IN ACCOUNTING POLICIES
The 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 2021, as amended to reflect the adoption of new standards, amendments and
interpretations which became effective in the year as shown below.
New standards adopted during the year
The following standards, amendments and interpretations were effective for the first time for the Group’s current
accounting period and had no material impact on the financial statements.
Reference to the Conceptual Framework (amendments to IFRS 3);
IFRS 16 (amended) – Covid-19-related Rent Concessions;
IAS 37 (amended) – Onerous Contracts – Cost of Fulfilling a Contract;
Annual Improvements to IFRS Standards 2018-2020;
IAS 16 (amended) – Property, Plant and Equipment: Proceeds before Intended Use.
248
Derwent London plc / Report and Accounts 2022
NOTES TO THE FINANCIAL STATEMENTS continued
for the year ended 31 December 2022
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.
IFRS 17 (amended) – Insurance Contracts;
IAS 1 (amended) – Classification of liabilities as current or non-current, Non-current Liabilities with Covenants;
IAS 1 and IFRS Practice Statement 2 (amended) – Disclosure of Accounting Policies;
IAS 8 (amended) – Definition of Accounting Estimate;
IAS 12 (amended) – Income Taxes: Deferred Tax Related to Assets and Liabilities Arising from a Single Transaction;
IFRS 16 (amended) – Lease Liability in a Sale and Leaseback;
IFRS 17 (amended) and IFRS 9 – Comparative Information.
Restatement – IFRIC Agenda Decision – Forgiveness of lease payments
In October 2022, the IFRS Interpretations Committee (‘IFRIC’) released its decision on the application of IFRS 9 and IFRS 16
in relation to how a lessor should account for the forgiveness of amounts due under leases.
It was determined that for any rent receivables that are past their due dates and subsequently forgiven, the lessor should
apply the expected credit loss (ECL) model in IFRS 9. Therefore, the forgiveness will be subject to the derecognition and
impairment requirements in IFRS 9, and the impact of relevant receivable amounts written off reflected in the income
statement. The Group had previously treated the forgiveness of rent receivables, in particular Covid-19 concessions, that
were past their due dates as lease modifications under IFRS 16, rather than the updated guidance of applying IFRS 9.
However, forgiveness of future rent not currently due meets the definition of a lease modification in IFRS 16. The impact of
this forgiveness is recognised on a straight-line basis over the remaining term of the lease, which is consistent with the
Group’s treatment.
The adjustments required to amounts forgiven for receivables past their due date, including the remeasurement of the ECL,
have been recalculated and the impact determined to be immaterial for each individual financial year. However, the Group
has voluntarily elected to apply IFRS 9 where applicable. This includes adjusting the relevant 2020 opening balances and
restating the 2021 comparative information. In the income statement, the restatement has resulted in a change to gross
rental income, write-off/impairment of receivables and revaluation movement with no impact in the total profit/(loss) in the
respective years. In addition, there is no impact on the total net assets within the balance sheets, with adjustments in rents
recognised in advance (trade and other receivables), provision for bad debts, and investment property. The impact of these
adjustments is shown on the following page. As the impact is not material, in accordance with IAS 1 Presentation of Financial
Statements the Group has not presented revised balance sheets as at 31 December 2020 within the financial statements.
Restatement – IFRIC Agenda Decision – Recognition of Tenant Deposits as restricted cash
In March 2022, the IFRS Interpretations Committee (‘IFRIC’) finalised a decision with respect to the treatment of demand
deposits with restrictions on use, which includes tenant rent deposits. It was concluded that these deposits, which are
subject to contractual restrictions, meet the definition of ‘cash and cash equivalents’ under IAS 7 and should therefore
be included as restricted cash under ‘cash and cash equivalents’ within the financial statements. The Group had not
previously recognised tenant rent deposits on its balance sheets as these deposits are only available upon a tenant
defaulting under the terms of its lease and are normally refunded upon expiry. As a result of the IFRIC decision, the
Group has revisited its policy and has now included tenant rent deposits as restricted cash with a restatement to the
prior year comparatives. The adjustment has no impact on the net assets of the Group, but cash and cash equivalents
have increased by £17.6m (2020: £18.8m) with a corresponding increase in other payables. The movement in tenant rent
deposits has been included in net cash from operating activities in the cash flow statement.
Cash collected on behalf of tenants to fund service charges of properties in the portfolio was previously recognised
within trade and other receivables. This has now been reclassified and presented as restricted cash within ‘cash and
cash equivalents’. For the prior year, the adjustment has no impact on the net assets of the Group, with cash and cash
equivalents increasing by £19.4m (2020: £19.0m) and a corresponding decrease of in trade and other receivables. The
movement in service charge balances has been included in net cash from operating activities in the cash flow statement.
The impact of these adjustments is shown on the following page. As the total impact of both tenant deposits and service
charge balances is not material, the Group has not presented revised balance sheets as at 31 December 2020 within the
financial statements, in accordance with IAS 1 Presentation of Financial Statements.
Financial statements
249
The following table shows the impact of these adjustments in the prior years.
2021
31 December
£m
Restatement1
£m
Restatement2
£m
Group balance sheet (extract)
Investment property
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Group income statement (extract)
Net property and other income
Gross rental income
Movement in impairment of receivables
Revaluation surplus
Group cash flow statement (extract)
Net cash from operating activities
Group balance sheet (extract)
Investment property
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Group income statement (extract)
Net property and other income
Gross rental income
Movement in impairment of receivables
Revaluation deficit
Group cash flow statement (extract)
Cash and cash equivalents at the end of the year
5,359.9
61.7
68.5
(128.3)
5,361.8
194.2
(0.8)
130.8
324.2
125.7
125.7
–
(19.4)
37.0
(17.6)
–
–
–
–
–
(0.8)
(0.8)
1.3
(1.3)
–
–
–
1.1
(1.4)
0.3
–
–
–
2020
31 December
£m
Restatement1
£m
Restatement2
£m
5,029.1
76.2
50.7
(106.7)
5,049.3
202.9
(10.1)
(196.1)
(3.3)
50.7
50.7
1.4
(1.4)
–
–
–
0.5
(1.9)
1.4
–
–
–
–
(19.0)
37.8
(18.8)
–
–
–
–
–
37.8
37.8
1 Restatement in relation to IFRIC Agenda Decision – Forgiveness of lease payments.
2 Restatement in relation to IFRIC Agenda Decision – Recognition of Tenant Deposits as restricted cash and service charge reclassification.
31 December
Restated
£m
5,361.2
41.0
105.5
(145.9)
5,361.8
195.3
(2.2)
131.1
324.2
124.9
124.9
31 December
Restated
£m
5,030.5
55.8
88.5
(125.5)
5,049.3
203.4
(12.0)
(194.7)
(3.3)
88.5
88.5
250
Derwent London plc / Report and Accounts 2022
NOTES TO THE FINANCIAL STATEMENTS continued
for the year ended 31 December 2022
2 CHANGES IN ACCOUNTING POLICIES continued
Company balance sheet (extract)
Cash and cash equivalents
Trade and other payables
Company cash flow statement (extract)
Net cash used in financing activities
Company balance sheet (extract)
Cash and cash equivalents
Trade and other payables
Company cash flow statement (extract)
Cash and cash equivalents at the end of the year
2021
31 December
£m
Restatement1
£m
Restatement2
£m
68.2
(1,281.7)
(1,213.5)
(9.9)
(9.9)
22.4
(22.4)
–
(0.2)
(0.2)
–
–
–
–
–
2020
31 December
£m
Restatement1
£m
Restatement2
£m
50.1
(1,072.9)
(1,022.8)
50.1
50.1
–
–
–
–
–
22.6
(22.6)
–
22.6
22.6
31 December
Restated
£m
90.6
(1,304.1)
(1,213.5)
(10.1)
(10.1)
31 December
Restated
£m
72.7
(1,095.5)
(1,022.8)
72.7
72.7
1 Restatement in relation to IFRIC Agenda Decision – Forgiveness of lease payments.
2 Restatement in relation to IFRIC Agenda Decision – Recognition of Tenant Deposits as restricted cash and service charge reclassification.
Re-presentation of VAT in Group cash flow statement
The Group has re-presented the cash flow statement for the year ended 31 December 2021, to separate VAT movements as either
operating activities or investing activities. This has the effect of increasing the net cash from operations in 2021 by £4.0m with
a corresponding increase in the net cash used in investing activities. There is no impact upon the cash flow statement overall.
Restatement of Property portfolio, historical cost
The disclosure of historical cost of the property portfolio within note 16 comparatives have been restated by £69.7m to
£3,464.4m to correct an error in the calculation of the historical cost.
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. Knight Frank LLP were appointed to value the
whole London-based portfolio as at 31 December 2022. More information is provided in note 16.
Financial statements
251
Impairment testing of trade receivables and other financial assets
Trade receivables and accrued rental income recognised in advance of receipt are subject to impairment testing. This
accrued rental income arises due to the spreading of rent-free and reduced rent periods, capital contributions and
contracted rent uplifts in accordance with IFRS 16 Leases.
Impairment calculations have been carried out using the forward-looking, simplified approach to the expected credit loss
model within IFRS 9. The impact of the Covid-19 pandemic on the Group’s business and its occupiers has been considered
and in 2022 the severity of the impact was considerably less than in 2021 as evidenced by a partial reversal in impairment
charges and rent collection rates now close to that seen pre-pandemic. The result is a £3.3m reduction in the provision
and after adding receivable balances written off of £2.3m, the total credit to the income statement for 2022 was £1.0m,
compared to the restated £2.2m charge recognised in 2021. In arriving at the estimates, the Group considered the tenants
at higher risk, particularly in the retail or hospitality sectors, those in administration or CVA, the top 64 tenants by size and
has also considered the remaining balances classified by sector.
The impairment provisions are included within ‘Other receivables (non-current)’ (see note 20) and ‘Trade and other
receivables’ (see note 21) as shown below:
Lease incentive receivables before impairment
Impairment of lease incentive receivables
Write-off
Net lease incentive included within accrued income
Trade receivables before impairment
Impairment of trade receivables
Service charge provision
Write-off
Net trade receivables
Other receivables
(non-current)
Trade and other
receivables
(current)
£m
167.8
(2.4)
(0.2)
165.2
–
–
–
–
–
£m
24.3
(0.7)
–
23.6
9.0
(1.8)
(0.1)
(2.2)
4.9
Total
£m
192.1
(3.1)
(0.2)
188.8
9.0
(1.8)
(0.1)
(2.2)
4.9
The assessment considered the risk of tenant failures or defaults using information on tenants’ payment history, deposits
held, the latest known financial position together with forecast information where available, ongoing dialogue with tenants
as well as other information such as the sector in which they operate. Following this, tenants were classified as either low,
medium or high risk and the table below provides further information. The impairment against lease incentive receivable
balances was £3.1m and against trade receivable balances was £1.9m.
Balance before impairment
Low risk
Medium risk
High risk
Impairment
Low risk
Medium risk
High risk
Borrowings and derivatives
Lease incentive
receivables
(non-current)
£m
Lease incentive
receivables
(current)
£m
Trade
receivables
(current)
£m
158.4
4.6
4.6
167.6
–
(0.2)
(2.2)
(2.4)
165.2
19.5
3.2
1.6
24.3
–
(0.1)
(0.6)
(0.7)
23.6
3.3
1.7
1.8
6.8
–
(0.1)
(1.8)
(1.9)
4.9
The fair values of the Group’s borrowings and interest rate swaps are provided by an independent third party based on
information provided to them by the Group. This includes the terms of each of the financial instruments and data available
in the financial markets. More information on how fair values are derived is provided in note 25. The fair values of the
Group’s borrowings and derivatives are shown in note 26.
252
Derwent London plc / Report and Accounts 2022
NOTES TO THE FINANCIAL STATEMENTS continued
for the year ended 31 December 2022
3 SIGNIFICANT JUDGEMENTS, KEY ASSUMPTIONS AND ESTIMATES continued
Significant judgements
Compliance with the real estate investment trust (REIT) taxation regime
As a REIT, the Group benefits from tax advantages. Income and chargeable gains on the qualifying property rental business
are exempt from corporation tax. Income that does not qualify as property income within the REIT rules is subject to
corporation tax in the normal way. There are a number of tests that are applied annually, and in relation to forecasts, to
ensure the Group remains well within the limits allowed within those tests.
The Group met all the criteria in 2022 with a substantial margin in each case, thereby ensuring its REIT status is
maintained. The Directors intend that the Group should continue as a REIT for the foreseeable future.
The Group has maintained its low risk rating with HMRC following continued regular dialogue and a focus on transparency
and full disclosure.
4 SEGMENTAL INFORMATION
IFRS 8 Operating Segments requires operating segments to be identified on the basis of internal financial reports about
components of the Group that are regularly reviewed by the chief operating decision makers (which in the Group’s case are
the four Executive Directors assisted by the other ten members of the Executive Committee) in order to allocate resources
to the segments and to assess their performance.
The internal financial reports received by the Group’s Executive Committee contain financial information at a Group level
as a whole and there are no reconciling items between the results contained in these reports and the amounts reported in
the financial statements. These internal financial reports include IFRS figures but also report non-IFRS figures for the EPRA
earnings and net asset value. Reconciliations of each of these figures to their statutory equivalents are detailed in note 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
reportable segment in that its performance is monitored individually.
The Group’s property portfolio includes investment property, owner-occupied property and trading property and comprised
97% office buildings1 by value at 31 December 2022 (2021: 97%). The Directors consider that these individual properties
have similar economic characteristics and therefore have been aggregated into a single reportable segment. The
remaining 3% (2021: 3%) represented a mixture of retail, residential and light industrial properties, as well as land, each
of which is de minimis in its own right and below the quantitative threshold in aggregate. Therefore, in the view of the
Directors, there is one reportable segment under the provisions of IFRS 8.
All of the Group’s properties are based in the UK. No geographical grouping is contained in any of the internal financial
reports provided to the Group’s Executive Committee and, therefore, no geographical segmental analysis is required
by IFRS 8. However, geographical analysis is included in the tables below to provide users with additional information
regarding the areas contained in the Strategic report. The majority of the Group’s properties are located in London (West
End central, West End borders/other and City borders), with the remainder in Scotland (Provincial).
1 Some office buildings have an ancillary element such as retail or residential.
Gross property income
West End central
West End borders/other
City borders
Provincial
Gross property income (excl. joint venture)
Share of joint venture gross property income
2022
2021 Restated
Office
buildings
£m
118.3
16.3
67.2
–
201.8
2.1
203.9
Other
£m
1.5
–
0.5
4.6
6.6
–
6.6
Total
£m
119.8
16.3
67.7
4.6
208.4
2.1
210.5
Office
buildings
£m
109.5
18.5
67.6
–
195.6
0.4
196.0
Other
£m
0.3
–
0.5
4.5
5.3
–
5.3
Total
£m
109.8
18.5
68.1
4.5
200.9
0.4
201.3
A reconciliation of gross property income to gross property and other income is given in note 5.
Property portfolio
Carrying value
West End central
West End borders/other
City borders
Provincial
Group (excl. joint venture)
Share of joint venture
Fair value
West End central
West End borders/other
City borders
Provincial
Group (excl. joint venture)
Share of joint venture
Office
buildings
£m
3,123.9
356.9
1,494.5
–
4,975.3
42.6
5,017.9
3,234.9
376.6
1,534.2
–
5,145.7
42.4
5,188.1
2022
Other
£m
Total
£m
81.2
–
10.4
78.7
170.3
–
170.3
86.3
–
10.4
79.4
176.1
–
176.1
3,205.1
356.9
1,504.9
78.7
5,145.6
42.6
5,188.2
3,321.2
376.6
1,544.6
79.4
5,321.8
42.4
5,364.2
Office
buildings
£m
3,314.9
408.1
1,649.7
–
5,372.7
50.2
5,422.9
3,348.9
431.4
1,690.4
–
5,470.7
50.0
5,520.7
A reconciliation between the fair value and carrying value of the portfolio is set out in note 16.
5 PROPERTY AND OTHER INCOME
Gross rental income
Surrender premiums received
Other property income
Gross property income
Trading property sales proceeds1
Service charge income1
Other income1
Gross property and other income
Gross rental income
Movement in impairment of receivables
Service charge income1
Service charge expenses
Property costs
Net rental income
Trading property sales proceeds1
Trading property cost of sales
Profit on trading property disposals
Other property income
Other income1
Surrender premiums received
Dilapidation receipts
Write-down of trading property
Net property and other income
Financial statements
253
2021
Restated
Other
£m
Total
£m
82.2
–
8.4
82.2
172.8
–
172.8
84.2
–
8.4
83.0
175.6
–
175.6
2022
£m
207.0
1.1
0.3
208.4
1.6
34.6
4.2
248.8
207.0
1.0
34.6
(39.7)
(5.1)
(14.4)
188.5
1.6
(1.4)
0.2
0.3
4.2
1.1
0.5
(0.2)
194.6
3,397.1
408.1
1,658.1
82.2
5,545.5
50.2
5,595.7
3,433.1
431.4
1,698.8
83.0
5,646.3
50.0
5,696.3
2021
Restated
£m
195.3
3.6
2.0
200.9
6.7
30.2
3.5
241.3
195.3
(2.2)
30.2
(33.6)
(3.4)
(11.8)
177.9
6.7
(6.0)
0.7
2.0
3.5
3.6
0.9
(1.4)
187.2
1
In line with IFRS 15 Revenue from Contracts with Customers, the Group recognised a total of £40.4m (2021: £40.4m) of other income, trading property sales proceeds and
service charge income, which relates to expenditure that is directly recoverable from tenants, within gross property and other income.
254
Derwent London plc / Report and Accounts 2022
NOTES TO THE FINANCIAL STATEMENTS continued
for the year ended 31 December 2022
5 PROPERTY AND OTHER INCOME continued
As described in note 2, gross rental income and movement in impairment of receivables have been restated in accordance
with the guidance provided by the IFRS Interpretations Committee.
Gross rental income includes £20.3m (2021 restated: £19.5m) relating to rents recognised in advance of cash receipts.
Other income relates to fees and commissions earned from tenants in relation to the management of the Group’s
properties and was recognised in the Group income statement in accordance with the delivery of services.
The impairment review has been carried out using the expected credit loss model within IFRS 9 Financial Instruments (see
notes 3 and 21 for additional information). Included in this provision is a charge of £0.4m against trade receivables relating
to rental income for the 25 December 2022 quarter day. Most of this income is deferred and has not yet been recognised
in the income statement. A 10% increase/decrease to the absolute probability rates of tenant default in the year would
result in a £1.6m increase/decrease and £1.2m decrease/increase respectively, in the Group’s profit/loss for the year. This
sensitivity has been performed on the medium to high risk tenants as the significant estimation uncertainty is wholly
related to these.
6 PROFIT ON DISPOSAL
Investment property
Gross disposal proceeds
Costs of disposal
Net disposal proceeds
Carrying value
Adjustment for lease costs and rents recognised in advance
Profit on disposal of investment property
Artwork
Carrying value
Loss on disposal of artwork
Profit on disposal
2022
£m
209.6
(3.2)
206.4
(180.8)
–
25.6
–
–
25.6
2021
£m
402.4
(3.7)
398.7
(387.5)
(0.7)
10.5
(0.1)
(0.1)
10.4
Included within gross disposal proceeds for 2022 is £67.2m relating to the disposal of the Group’s freehold interest in New
River Yard EC1 in June 2022, £85.0m relating to the disposal of the Group’s freehold interest in Bush House, South West
Wing WC2 in July 2022, and £40.5m relating to the disposal of the Group’s leasehold interest in 2 & 4 Soho Place W1 in
July 2022. In addition, gross disposal proceeds also included £15.3m following completion of the grant of an intermediate
long leasehold interest in relation to the Soho Place W1 development agreement.
7 FINANCE INCOME AND FINANCE COSTS
Finance income
Bank interest receivable
Other
Finance income
Finance costs
Bank loans
Non-utilisation fees
Unsecured convertible bonds
Unsecured green bonds
Secured bonds
Unsecured private placement notes
Secured loan
Amortisation of issue and arrangement costs
Amortisation of the fair value of the secured bonds
Obligations under headleases
Other
Gross finance costs
Less: interest capitalised
Finance costs
Financial statements
255
2022
£m
(0.2)
(0.1)
(0.3)
1.1
2.1
3.9
6.7
11.4
15.6
3.3
2.6
(1.4)
1.1
0.3
46.7
(7.0)
39.7
2021
£m
–
–
–
0.9
2.1
3.9
0.8
11.4
15.6
3.3
2.5
(1.3)
0.7
0.2
40.1
(12.0)
28.1
Finance costs of £7.0m (2021: £12.0m) have been capitalised on development projects, in accordance with IAS 23 Borrowing
Costs, using the Group’s average cost of borrowings during each quarter. Total finance costs paid to 31 December 2022
were £44.1m (2021: £37.0m) of which £7.0m (2021: £12.0m) was included in capital expenditure on the property portfolio
in the Group cash flow statement under investing activities.
8 FINANCIAL DERIVATIVE TERMINATION COSTS
The Group incurred costs of £0.3m in the year to 31 December 2022 (2021: £1.9m) deferring or terminating interest rate
swaps. Included in this is £0.3m of receipts and £0.6m of costs.
9 SHARE OF RESULTS OF JOINT VENTURES
Net property income
Administrative expenses
Revaluation deficit
Joint venture acquisition costs incurred
2022
£m
2.1
(0.1)
(9.3)
(7.3)
–
(7.3)
2021
£m
0.4
(0.1)
(10.2)
(9.9)
(4.0)
(13.9)
The share of results of joint ventures for the year ended 31 December 2022 includes the Group’s 50% share in the Derwent
Lazari Baker Street Limited Partnership. See note 19 for further details of the Group’s joint ventures.
256
Derwent London plc / Report and Accounts 2022
NOTES TO THE FINANCIAL STATEMENTS continued
for the year ended 31 December 2022
10 (LOSS)/PROFIT BEFORE TAX
This is arrived at after charging:
Depreciation
Contingent rent payable under headleases
Auditor's remuneration
Audit – Group
Audit – subsidiaries
2022
£m
1.0
1.7
0.4
0.2
2021
£m
0.9
1.4
0.4
0.1
In 2022, audit fees for the Group were £400,000 (2021: £435,718) and for the subsidiaries £159,000 (2021: £94,180). 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 £64,000 (2021: £60,000) and other non-audit services were £nil (2021: £90,000).
Details of the Auditor’s independence are included on page 166.
11 DIRECTORS’ EMOLUMENTS
Remuneration for management services
Share-based payments
Post-employment benefits
National insurance contributions
2022
£m
4.1
0.5
0.4
5.0
0.7
5.7
2021
£m
4.0
3.6
0.5
8.1
1.1
9.2
An amount of £0.6m (2021: £1.7m) relating to the Directors is included within Share-based payments expense of £1.9m
(2021: £4.3m) 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 190 to 223. The only key
management personnel are the Directors.
12 EMPLOYEES
Staff costs, including those of Directors:
Wages and salaries
Social security costs
Other pension costs
Share-based payments expense relating
to equity-settled schemes
Group
Company
2022
£m
18.8
2.7
2.6
1.9
26.0
2021
£m
18.5
2.5
2.4
4.3
27.7
2022
£m
18.8
2.6
2.4
1.9
25.7
2021
£m
18.5
2.3
2.2
4.4
27.4
The monthly average number of employees in the Group during the year, excluding Directors, was 166 (2021: 140).
The monthly average number of employees in the Company during the year, excluding Directors, was 140 (2021: 120).
All were employed in administrative or support roles. Of the Group’s employees, there were 37 (2021: 39) whose costs
were recharged or partially recharged to tenants via service charges.
Financial statements
257
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 219.
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.
Year of grant
Exercise
price
£
Adjusted
exercise1
£
Outstanding at
1 January
Movement in options
Granted
Exercised
Lapsed
Outstanding at
31 December
For the year to 31 December 2022
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
21.99
27.39
34.65
31.20
28.93
30.29
32.43
30.02
33.28
31.10
For the year to 31 December 2021
2013
2014
2015
2016
2017
2018
2019
2020
2021
21.99
27.39
34.65
31.20
28.93
30.29
32.43
30.02
33.28
21.09
26.27
33.23
29.93
27.75
29.57
32.43
30.02
33.28
31.10
21.09
26.27
33.23
29.93
27.75
29.57
32.43
30.02
33.28
4,158
17,050
35,062
37,635
70,553
91,835
124,025
165,975
200,829
–
747,122
4,158
18,650
43,474
38,397
99,446
114,234
129,575
172,475
–
620,409
–
–
–
–
–
–
–
–
–
249,950
249,950
–
–
–
–
–
–
–
–
204,079
204,079
Number of shares:
Exercisable
Non-exercisable
Weighted average exercise price of share options:
Exercisable
Non-exercisable
Weighted average remaining contracted life of share options:
Exercisable
Non-exercisable
Weighted average exercise price of share options that lapsed:
Exercisable
Non-exercisable
(3,908)
(3,607)
–
(3,648)
(5,212)
(4,609)
(5,000)
–
–
–
(25,984)
–
(1,600)
(5,807)
(762)
(28,893)
(22,399)
–
–
–
(59,461)
–
–
(4,012)
–
(1,791)
(2,809)
(10,200)
(18,617)
(18,415)
(6,609)
(62,453)
–
–
(2,605)
–
–
–
(5,550)
(6,500)
(3,250)
(17,905)
250
13,443
31,050
33,987
63,550
84,417
108,825
147,358
182,414
243,341
908,635
4,158
17,050
35,062
37,635
70,553
91,835
124,025
165,975
200,829
747,122
31 December
2022
31 December
2021
1 January
2021
335,522
573,113
256,293
490,829
204,125
416,284
£30.46
£31.52
£29.37
£31.96
£29.23
£30.66
4.72 years
7.47 years
4.92 years
7.30 years
5.29 years
8.36 years
£31.87
£31.51
£33.23
£31.56
£27.81
£31.14
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 2022 was £33.02 (2021: £35.82).
The weighted average fair value of options granted during 2022 was £6.85 (2021: £8.23).
258
Derwent London plc / Report and Accounts 2022
NOTES TO THE FINANCIAL STATEMENTS continued
for the year ended 31 December 2022
13 SHARE-BASED PAYMENTS continued
The following information is relevant in the determination of the fair value of the options granted during 2022 and 2021
under the equity-settled employee share plan operated by the Group.
Option pricing model used
Risk free interest rate
Volatility
Dividend yield
2022
2021
Binomial lattice
1.5%
25.0%
2.5%
Binomial lattice
0.3%
30.0%
2.2%
For both the 2022 and 2021 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 220.
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 (2021: £2.0m).
Defined benefit plan
The Company 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 2019 in accordance with the scheme funding requirements of
the Pensions Act 2004 and the funding of the scheme is agreed between the Company and the trustees in line with those
requirements. The 31 October 2022 actuarial valuation is currently ongoing. 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 2019 actuarial valuation showed a deficit of £7.3m. The Company agreed with the trustees that it will aim to eliminate the
deficit over a period of 5 years and 2 months from 31 October 2019 by the payment of a contribution of £0.9m by 31 December
2019, followed by annual contributions of £1.4m payable by each 31 December from 31 December 2020 to 31 December 2024
inclusive. In addition, the Company has agreed with the trustees that the Company 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 2023 is £1.4m (31 December 2022 actual: £1.4m).
For the purposes of IAS 19 the actuarial valuation as at 31 October 2019, which was carried out by a qualified independent
actuary, has been updated on an approximate basis to 31 December 2022.
Financial statements
259
Amounts included in the balance sheet
Fair value of plan assets
Present value of defined benefit obligation
Net asset/(liability)
2022
£m
42.2
(41.0)
1.2
2021
£m
62.7
(60.9)
1.8
2020
£m
66.6
(68.8)
(2.2)
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/(liability) 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
At 1 January
Current service cost
Interest cost
Actuarial losses due to scheme experience
Actuarial gains due to changes in demographic assumptions
Actuarial gains due to changes in financial assumptions
Benefits paid, death in service premiums and expenses
At 31 December
There have been no scheme amendments, curtailments or settlements in the year.
Reconciliation of opening and closing values of the fair value of plan assets
At 1 January
Interest income
Return on plan assets (excluding amounts included in interest income)
Contributions by the Group
Benefits paid, death in service premiums and expenses
Other
At 31 December
2022
£m
60.9
–
1.1
–
–
(18.4)
(2.6)
41.0
2022
£m
62.7
1.1
(20.4)
1.4
(2.6)
–
42.2
2021
£m
68.8
–
0.8
0.7
(0.1)
(6.9)
(2.4)
60.9
2021
£m
66.6
0.8
(3.6)
1.4
(2.4)
(0.1)
62.7
The actual return on the plan assets including interest income over the year was a loss of £19.3m (2021: loss of £2.8m).
Amounts recognised in other comprehensive income
Loss on plan assets (excluding amounts recognised in net interest cost)
Experience losses arising on the defined benefit obligation
Gain from changes in the demographic assumptions underlying the
present value of the defined benefit obligation
Gain from changes in the financial assumptions underlying the present
value of the defined benefit obligation
Total (loss)/gain recognised in other comprehensive income
2022
£m
(20.4)
–
–
18.4
(2.0)
2021
£m
(3.6)
(0.7)
0.1
6.9
2.7
260
Derwent London plc / Report and Accounts 2022
NOTES TO THE FINANCIAL STATEMENTS continued
for the year ended 31 December 2022
14 PENSION COSTS continued
Fair value of plan assets
UK equities
Overseas equities
LDI
Buy and maintain credit
Government bonds
Cash
Other
Insured assets
Total assets
2022
£m
–
–
4.5
2.7
–
1.2
4.2
29.6
42.2
2021
£m
0.6
0.6
6.2
4.1
–
1.4
9.3
40.5
62.7
2020
£m
0.5
0.5
–
–
4.8
0.2
15.1
45.5
66.6
The £4.2m (2021: £9.3m) in the ‘other’ asset class is made up of holdings of £2.7m (2021: £5.5m) in equity-linked bonds,
£nil (2021: £2.4m) in global funds and £1.5m (2021: £1.4m) in sterling liquidity funds.
The scheme’s assets are held exclusively within instruments with quoted market prices in an active market 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 GMP 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 2022.
There are no asset-liability matching strategies currently being used by the plan.
Significant actuarial assumptions
Discount rate
Inflation (RPI)
Salary increases
Allowance for commutation of pension for cash at retirement
2022
%
2021
%
2020
%
4.8
n/a
n/a
75% of Post A
Day Pension
1.9
n/a
n/a
75% of Post A
Day Pension
1.2
n/a
n/a
75% of Post A
Day Pension
The mortality assumptions adopted at 31 December 2022 are 85% of the standard tables S3NXA_L, year of birth, no age
rating for males and females, projected using CMI 2021 converging to 1.25% p.a. These imply the following life expectancies:
Life expectancy at age 65
Male retiring in 2022
Female retiring in 2022
Male retiring in 2042
Female retiring in 2042
Years
24.9
26.1
26.1
27.8
Financial statements
261
Analysis of the sensitivity to the principal assumptions of the present value of the defined benefit obligation
Discount rate
Rate of mortality
Change in assumption
Change in liabilities
Decrease of 0.25% p.a
Increase in life expectancy of one year
Increase by 3.0%
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 2022 is 12 years (2021: 15 years) for the scheme as a whole
or 22 years (2021: 25 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, a rise in inflation 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 bond holdings.
The best estimate of contributions to be paid by the Group to the plan for the year commencing 1 January 2023 is £1.4m.
15 TAX CHARGE/(CREDIT)
Corporation tax
UK corporation tax and income tax in respect of results for the year
Other adjustments in respect of prior years' tax
Corporation tax charge
Deferred tax
Origination and reversal of temporary differences
Adjustment for changes in estimates
Deferred tax charge/(credit)
Tax charge/(credit)
2022
£m
0.5
0.4
0.9
0.1
–
0.1
1.0
2021
£m
0.9
(0.4)
0.5
(1.1)
(0.7)
(1.8)
(1.3)
In addition to the tax charge of £1.0m (2021: credit of £1.3m) that passed through the Group income statement, a deferred
tax charge of £0.2m (2021: £1.3m) relating to the revaluation of the owner-occupied property at 25 Savile Row W1 was
recognised in the Group statement of comprehensive income. In 2021, a charge of £0.4m relating to the future defined
benefit pension liabilities was also recognised in the Group statement of comprehensive income.
The effective rate of tax for 2022 is lower (2021: lower) than the standard rate of corporation tax in the UK. The differences
are explained below:
(Loss)/profit before tax
Expected tax (credit)/charge based on the standard rate of corporation tax in the UK
of 19.00% (2021: 19.00%)1
Difference between tax and accounting profit on disposals
REIT exempt income
Revaluation deficit/(surplus) attributable to REIT properties
Expenses and fair value adjustments not allowable for tax purposes
Capital allowances
Other differences
Tax charge/(credit) in respect of (loss)/profit for the year
Adjustments in respect of prior years’ tax
Tax charge/(credit)
2022
£m
(279.5)
(53.1)
(3.1)
(16.0)
78.6
0.4
(6.5)
0.3
0.6
0.4
1.0
2021
£m
252.5
48.0
(0.7)
(14.9)
(32.2)
4.6
(4.3)
(1.4)
(0.9)
(0.4)
(1.3)
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 expected enacted tax rate and this is reflected in these financial statements.
262
Derwent London plc / Report and Accounts 2022
NOTES TO THE FINANCIAL STATEMENTS continued
for the year ended 31 December 2022
Freehold
£m
Leasehold
£m
Total
investment
property
£m
Owner-
occupied
property
£m
Assets
held for
sale
£m
Trading
property
£m
Total
property
portfolio
£m
16 PROPERTY PORTFOLIO
Group
Carrying value
At 1 January 2022
Acquisitions
Capital expenditure
Interest capitalisation
Additions
Disposals
Transfers
Revaluation
Write-down of trading property
Movement in grossing up of headlease liabilities
At 31 December 2022
At 1 January 2021 (restated)
Acquisitions
Capital expenditure
Interest capitalisation
Additions
Disposals
Transfers
Revaluation (restated)
Write-down of trading property
Transfer from prepayments and accrued income
Movement in grossing up of headlease liabilities
Movement in grossing up of other liabilities
At 31 December 2021 (restated)
Adjustments from fair value to carrying value
At 31 December 2022
Fair value
Selling costs relating to assets held for sale
Revaluation of trading property
Lease incentives and costs included in
receivables
Grossing up of headlease liabilities
Carrying value
At 31 December 2021
Fair value
Selling costs relating to assets held for sale
Revaluation of trading property
Lease incentives and costs included in
receivables (restated)
Grossing up of headlease liabilities
Grossing up of other liabilities
Carrying value (restated)
Reconciliation of fair value
4,140.4
0.1
47.7
1.3
49.1
(46.6)
(54.2)
(388.2)
–
–
3,700.5
3,894.9
214.6
76.6
2.4
293.6
(75.8)
(63.7)
91.4
–
–
–
–
4,140.4
1,220.8
132.9
58.8
3.9
195.6
(30.0)
–
(33.9)
–
(51.0)
1,301.5
1,135.6
139.0
88.4
9.6
237.0
(146.7)
(63.0)
39.3
–
–
3.8
14.8
1,220.8
5,361.2
133.0
106.5
5.2
244.7
(76.6)
(54.2)
(422.1)
–
(51.0)
5,002.0
5,030.5
353.6
165.0
12.0
530.6
(222.5)
(126.7)
130.7
–
–
3.8
14.8
5,361.2
3,865.8
–
–
1,307.1
–
–
5,172.9
–
–
(165.3)
–
3,700.5
(39.8)
34.2
1,301.5
(205.1)
34.2
5,002.0
4,296.2
–
–
1,161.9
–
–
5,458.1
–
–
(155.8)
–
–
4,140.4
(26.3)
70.4
14.8
1,220.8
(182.1)
70.4
14.8
5,361.2
Portfolio including the Group's share of joint ventures
Less: joint ventures
IFRS property portfolio
49.3
–
–
–
–
–
–
0.7
–
–
50.0
45.6
–
–
–
–
–
–
3.7
–
–
–
–
49.3
50.0
–
–
–
–
50.0
49.3
–
–
–
–
–
49.3
102.8
–
–
1.4
1.4
(104.2)
54.2
–
–
–
54.2
165.0
–
–
–
–
(165.0)
101.2
–
–
1.6
–
–
102.8
54.7
(0.5)
–
–
–
54.2
104.8
(2.0)
–
–
–
–
102.8
32.2
–
8.3
0.4
8.7
(1.3)
–
–
(0.2)
–
39.4
12.9
–
1.1
–
1.1
(5.9)
25.5
–
(1.4)
–
–
–
32.2
5,545.5
133.0
114.8
7.0
254.8
(182.1)
–
(421.4)
(0.2)
(51.0)
5,145.6
5,254.0
353.6
166.1
12.0
531.7
(393.4)
–
134.4
(1.4)
1.6
3.8
14.8
5,545.5
44.2
–
(4.8)
5,321.8
(0.5)
(4.8)
–
–
39.4
(205.1)
34.2
5,145.6
34.1
–
(1.9)
5,646.3
(2.0)
(1.9)
–
–
–
32.2
(182.1)
70.4
14.8
5,545.5
2022
£m
5,364.2
(42.4)
5,321.8
2021
£m
5,696.3
(50.0)
5,646.3
Financial statements
263
The property portfolio is subject to semi-annual external valuations and was revalued at 31 December 2022 by external
valuers on the basis of fair value in accordance with The RICS Valuation – Professional Standards, which takes account of
the properties’ highest and best use. When considering the highest and best use of a property, the external valuers will
consider its existing and potential uses which are physically, legally and financially viable. Where the highest and best use
differs from the existing use, the external valuers will consider the costs and the likelihood of achieving and implementing
this change in arriving at the property valuation. There were no such instances in the year.
The external valuations for the London-based portfolio at December 2022 were carried out by Knight Frank LLP, whilst the
December 2021 valuations were carried out by CBRE Limited.
Knight Frank valued properties at £5,285.6m (2021: £nil), CBRE at £nil (2021: £5,610.8m) and other valuers at £36.2m
(2021: £35.5m), giving a combined value of £5,321.8m (2021: £5,646.3m). Of the properties revalued, £50.0m (2021:
£49.3m) relating to owner-occupied property was included within property, plant and equipment and £44.2m (2021:
£34.1m) was in relation to trading property.
The total fees, including the fee for this assignment, earned by Knight Frank (or other companies forming part of the same
group of companies within the UK) from the Group is less than 5.0% of their total UK revenues.
As described in note 2, the prior year revaluation has been restated in accordance with the guidance provided by the IFRS
Interpretations Committee.
Net zero carbon and EPC compliance
In response to climate change, the Group published its pathway to net zero carbon in July 2020 and has set 2030 as
its target date to achieve this. In accordance with the Group’s Green Finance Framework, £99.9m (year to 31 December
2021: £116.6m) of eligible ‘green’ expenditure was incurred in the year to 31 December 2022 on major developments at
80 Charlotte Street W1, Soho Place W1, The Featherstone Building EC1 and 25 Baker Street W1. As these have met the
criteria to be eligible qualifying projects under the Framework, the Group has utilised the green tranche of the £450m
revolving credit facility and the £350m green bonds (more information can be found on pages 106 to 107).
In 2021, the Group commissioned a third-party report to determine the costs of achieving EPC compliance across the
portfolio by 2030. Results of the study indicated an estimated cost of c.£97m to upgrade the Group’s properties to EPC
‘B’ or above. This has since been updated to reflect the latest scope change and 2022 cost inflation, taking the estimate
to c.£107m at year end. This includes £8.0m relating to 19 Charterhouse Street EC1 which was sold in January 2023. It is
expected that a small proportion of this cost will be recoverable through service charges. A specific deduction of £58.4m
for identified EPC upgrade works across the portfolio has been included within the external valuation at 31 December
2022, with an additional allowance for further general upgrades to properties following assumed tenant vacancies.
Any committed capital expenditure has been included in note 34.
Reconciliation of revaluation (deficit)/surplus
Total revaluation (deficit)/surplus
Less:
Share of joint ventures
Lease incentives and costs
Assets held for sale selling costs
Trading property revaluation adjustment
IFRS revaluation (deficit)/surplus
Reported in the:
Revaluation (deficit)/surplus
Write-down of trading property
Group income statement
Group statement of comprehensive income
Valuation process
2022
£m
(401.8)
9.2
(23.2)
(2.5)
(3.3)
(421.6)
(422.1)
(0.2)
(422.3)
0.7
(421.6)
2021
Restated
£m
142.9
13.9
(19.4)
(2.0)
(2.0)
133.4
131.1
(1.4)
129.7
3.7
133.4
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.
264
Derwent London plc / Report and Accounts 2022
NOTES TO THE FINANCIAL STATEMENTS continued
for the year ended 31 December 2022
16 PROPERTY PORTFOLIO continued
Valuation process continued
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.
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 2022 or 2021.
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 £422.1m (2021 restated: gain of £131.1m) and are presented in the Group income statement
in the line item ‘revaluation (deficit)/surplus’. The revaluation surplus for the owner-occupied property of £0.7m (2021:
surplus of £3.7m) was included within the Group statement of comprehensive income.
All gains and losses recorded in profit or loss in 2022 and 2021 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 2022 and 31 December 2021, respectively.
Quantitative information about fair value measurement using unobservable inputs (Level 3)
Valuation technique
Fair value (£m)1
Area ('000 sq ft)
Range of unobservable inputs2:
Gross ERV (per sq ft pa)
Minimum
Maximum
Weighted average
Net initial yield
Minimum
Maximum
Weighted average
Reversionary yield
Minimum
Maximum
Weighted average
True equivalent yield (EPRA basis)
Minimum
Maximum
Weighted average
1
Includes the Group’s share of joint ventures.
Total
5,364.2
5,460
West End
central
West End
borders/other
City
borders
Provincial
commercial
Provincial
land
Income
capitalisation
Income
capitalisation
Income
capitalisation
Income
capitalisation
Income
capitalisation
3,363.7
3,002
376.6
429
1,544.5
1,703
£28
£100
£64
2.8%
6.4%
3.1%
2.8%
7.1%
4.9%
2.8%
6.4%
4.6%
£23
£59
£52
2.2%
6.1%
5.3%
4.1%
6.6%
5.5%
3.8%
5.7%
5.4%
£30
£69
£53
2.3%
6.4%
4.1%
3.4%
6.3%
5.4%
4.1%
5.7%
5.1%
43.0
326
£nil
£13
£13
8.5%
8.5%
8.5%
6.8%
6.8%
6.8%
9.3%
9.3%
9.3%
36.4
–
n/a3
n/a3
n/a3
0.0%
1.3%
1.3%
0.0%
1.3%
1.3%
0.0%
0.0%
0.0%
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.
Financial statements
265
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:
Unobservable input
Gross ERV
Net initial yield
Reversionary yield
True equivalent yield
Impact on fair value measurement
of significant increase in input
Impact on fair value measurement
of significant decrease in input
Increase
Decrease
Decrease
Decrease
Decrease
Increase
Increase
Increase
There are inter-relationships between these inputs as they are partially determined by market conditions. An increase in the
reversionary yield may accompany an increase in gross ERV and would mitigate its impact on the fair value measurement.
A sensitivity analysis has been performed to ascertain the impact of a 25 basis point shift in true equivalent yield and a
£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:
True equivalent yield
+25bp
-25bp
ERV
+£2.50 psf
-£2.50 psf
Historical cost
Investment property
Owner-occupied property
Assets held for sale
Trading property
Total property portfolio
West End
central
West End
borders/other
City
borders
Provincial
commercial
Provincial
land
(5.2%)
5.7%
3.9%
(3.9%)
(4.4%)
4.9%
4.8%
(4.8%)
(4.7%)
5.2%
4.7%
(4.7%)
(2.6%)
2.8%
19.3%
(19.3%)
–
–
–
–
2022
£m
3,478.3
19.6
51.5
42.5
3,591.9
Total
(4.9%)
5.4%
4.4%
(4.4%)
2021
Restated
£m
3,362.3
19.6
38.5
44.0
3,464.4
266
Derwent London plc / Report and Accounts 2022
NOTES TO THE FINANCIAL STATEMENTS continued
for the year ended 31 December 2022
17 PROPERTY, PLANT AND EQUIPMENT
Owner-occupied
property
£m
Right-of-use
asset
£m
Artwork
£m
Other
£m
Group
At 1 January 2022
Additions
Depreciation
Revaluation
At 31 December 2022
At 1 January 2021
Additions
Disposals
Depreciation
Revaluation
At 31 December 2021
Net book value
Cost or valuation
Accumulated depreciation
At 31 December 2022
Net book value
Cost or valuation
Accumulated depreciation
At 31 December 2021
Company
At 1 January 2022
Additions
Depreciation
At 31 December 2022
At 1 January 2021
Additions
Disposals
Depreciation
Revaluation
At 31 December 2021
Net book value
Cost or valuation
Accumulated depreciation
At 31 December 2022
Net book value
Cost or valuation
Accumulated depreciation
At 31 December 2021
49.3
–
–
0.7
50.0
45.6
–
–
–
3.7
49.3
50.0
–
50.0
49.3
–
49.3
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
18.0
–
(1.2)
16.8
19.2
–
–
(1.2)
–
18.0
21.5
(4.7)
16.8
21.6
(3.6)
18.0
0.8
–
–
–
0.8
1.0
–
(0.1)
–
(0.1)
0.8
0.8
–
0.8
0.8
–
0.8
0.8
–
–
0.8
1.0
–
(0.1)
–
(0.1)
0.8
0.8
–
0.8
0.8
–
0.8
3.9
0.6
(1.0)
–
3.5
3.6
1.3
(0.1)
(0.9)
–
3.9
7.8
(4.3)
3.5
8.0
(4.1)
3.9
3.8
0.6
(1.0)
3.4
3.5
1.3
(0.1)
(0.9)
–
3.8
7.7
(4.3)
3.4
8.0
(4.2)
3.8
Total
£m
54.0
0.6
(1.0)
0.7
54.3
50.2
1.3
(0.2)
(0.9)
3.6
54.0
58.6
(4.3)
54.3
58.1
(4.1)
54.0
22.6
0.6
(2.2)
21.0
23.7
1.3
(0.2)
(2.1)
(0.1)
22.6
30.0
(9.0)
21.0
30.4
(7.8)
22.6
The artwork is periodically valued by Bonhams on the basis of fair value using their extensive market knowledge. The latest
valuation was carried out in December 2021. In accordance with IFRS 13 Fair Value Measurement, the artwork is deemed to
be classified as Level 3.
The historical cost of the artwork in the Group at 31 December 2022 was £0.9m (2021: £0.9m) and £0.9m (2021: £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
267
18 TRADING STOCK
Trading stock
Group
2022
£m
2.3
2021
£m
0.4
Company
2022
£m
–
2021
£m
–
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.
At 1 January
Additions
Joint venture acquisition costs
Revaluation deficit
Other profit from operations
At 31 December
2022
£m
51.1
0.1
–
(9.3)
2.0
43.9
2021
£m
0.9
64.1
(4.0)
(10.2)
0.3
51.1
The Group’s share of its investments in joint ventures is represented by the following amounts in the underlying joint
venture entities.
2022
2021
Joint ventures
£m
Group share
£m
Joint ventures
£m
Group share
£m
Non-current assets
Current assets
Current liabilities
Non-current liabilities
Net liabilities
Loans provided to joint ventures
Total investment in joint ventures
Net property income
Administrative expenses
Revaluation deficit
Loss for the year
Company
At 1 January 2021
Additions
Disposals
Repayment of capital
Impairment
At 31 December 2021
Additions
Reversal of impairment
Impairment
At 31 December 2022
85.0
5.0
(2.7)
(121.0)
(33.7)
4.2
(0.3)
(18.5)
(14.6)
42.5
2.5
(1.4)
(60.5)
(16.9)
60.8
43.9
2.1
(0.1)
(9.3)
(7.3)
100.5
3.7
(2.7)
(120.8)
(19.3)
0.7
(0.1)
(20.4)
(19.8)
50.2
1.9
(1.3)
(60.4)
(9.6)
60.7
51.1
0.4
(0.1)
(10.2)
(9.9)
Subsidiaries
£m
1,615.9
268.0
(80.7)
(33.5)
(19.9)
1,749.8
605.0
3.9
(134.0)
2,224.7
268
Derwent London plc / Report and Accounts 2022
NOTES TO THE FINANCIAL STATEMENTS continued
for the year ended 31 December 2022
19 INVESTMENTS continued
At 31 December 2022, 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 £130.1m (2021: £19.9m). 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 resulting from a change in their
fair values being reported in the income statement of those subsidiaries, thereby affecting their fair values. 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)
Rents recognised in advance
Initial direct letting costs
Prepayments
Prepayments and accrued income
Group
Company
2022
£m
165.2
13.8
9.1
188.1
2021
Restated
£m
147.0
12.3
–
159.3
2022
£m
–
–
–
–
2021
£m
–
–
–
–
Prepayments and accrued income include £165.2m (2021: £147.0m) after impairments (see note 3) relating to rents
recognised in advance as a result of spreading tenant lease incentives over the expected terms of their respective leases.
This includes rent-free and reduced rent periods, capital contributions in lieu of rent-free periods and contracted rent
uplifts. In addition, £13.8m (2021: £12.3m) relates to the spreading effect of the initial direct costs of letting over the
same term. Together with £26.1m (2021 restated: £22.8m), which was included as accrued income within trade and other
receivables (see note 21), these amounts totalled £205.1m at 31 December 2022 (2021 restated: £182.1m).
Prepayments represent £9.1m of costs incurred in relation to Old Street Quarter EC1. In May 2022, the Group entered into
a conditional contract to acquire the freehold of Old Street Quarter island site. The site is being sold by Moorfields Eye
Hospital NHS Foundation Trust and UCL, together the Oriel joint initiative (‘Oriel’). Completion is subject to Oriel’s receipt
of final Treasury approval (subsequently received in February 2023), delivery by Oriel of a new hospital at St Pancras and
subsequent vacant possession of the site, which is anticipated in 2027.
The total movement in tenant lease incentives is shown below:
At 1 January
Amounts taken to income statement
Capital incentives granted
Lease incentive reversal/(impairment)
Adjustment for non-current asset held for sale
Disposal of investment properties
Write off to bad debt
Amounts included in trade and other receivables (see note 21)
At 31 December
2022
£m
167.0
20.4
0.6
1.0
–
–
(0.2)
188.8
(23.6)
165.2
2021
Restated
£m
148.5
19.9
0.7
(0.1)
(1.3)
(0.5)
(0.2)
167.0
(20.0)
147.0
Financial statements
269
21 TRADE AND OTHER RECEIVABLES
Trade receivables
Amounts owed by subsidiaries
Other receivables
Prepayments
Accrued income
Group
Company
2022
£m
4.9
–
5.8
3.8
27.9
42.4
2021
Restated
£m
6.9
–
3.7
5.3
25.1
41.0
2022
£m
–
1,759.2
4.2
24.6
–
1,788.0
2021
£m
–
1,860.7
15.2
23.0
–
1,898.9
The prior year prepayments have been restated to reclassify £19.4m of cash collected on behalf of tenants’ service charges
within cash and cash equivalents. For further information refer to note 2.
The prior year accrued income has been restated by £1.3m in relation to amounts forgiven for receivables past their due
date as a result of the IFRIC decision relating to forgiveness of lease payments. For further information refer to note 2.
Group trade receivables are split as follows:
less than three months due
between three and six months due
2022
£m
4.9
–
4.9
2021
£m
6.8
0.1
6.9
Group trade receivables as at 31 December 2022 are stated net of impairment. As a result, the expected credit loss
assessment under IFRS 9 (see note 3) was lower than in 2021.
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 (2021: £nil).
Other receivables in the Company as at 31 December 2021 includes a £19.7m (2021: £12.3m) interest free loan with no fixed
repayment date provided to a subsidiary for the development of the residential element at 25 Baker Street W1. The loan
will be repaid from the sale proceeds of these residential apartments after the completion of the scheme.
In response to the Group’s climate change agenda, costs of £0.7m (2021: £0.4m) were incurred in relation to a c.100 acre,
18.4MW solar park on its Scottish land and have been included within prepayments. Resolution to grant planning consent
for this project was received in 2022.
The Group has £5.0m of provision for bad debts as shown below. £1.9m is included in trade receivables, £0.7m in accrued
income and £2.4m in prepayments and accrued income within other receivables (non-current) (note 20).
270
Derwent London plc / Report and Accounts 2022
NOTES TO THE FINANCIAL STATEMENTS continued
for the year ended 31 December 2022
21 TRADE AND OTHER RECEIVABLES continued
Provision for bad debts
At 1 January
Trade receivables provision
Lease incentive provision
Service charge provision
Released
At 31 December
The provision for bad debts are split as follows:
less than three months due
between three and six months due
between six and twelve months due
over twelve months due
22 NON-CURRENT ASSETS HELD FOR SALE
Transferred from investment properties (see note 16)
Transferred from prepayments and accrued income
2022
£m
8.3
(0.8)
(0.2)
(0.2)
(2.1)
5.0
2.2
0.1
0.3
2.4
5.0
2022
£m
54.2
–
54.2
2021
Restated
£m
8.4
(0.4)
0.8
0.1
(0.6)
8.3
3.7
0.2
0.3
4.1
8.3
2021
£m
101.2
1.6
102.8
In January 2023, the Group exchanged contracts and completed on the sale of its freehold interest in 19 Charterhouse
Street EC1. The property was valued at £53.0m as at 31 December 2022. In accordance with IFRS 5 Non-current Assets
Held for Sale, this property was recognised as a non-current asset held for sale and, after deducting selling costs of £0.5m,
the carrying value was £52.5m (see note 16).
At 31 December 2022, the freehold interest in 13 Charlotte Mews W1 was recognised as a non-current asset held for sale,
in accordance with IFRS 5 Non-current Assets Held for Sale. 13 Charlotte Mews is under offer and is available for sale in its
present condition. As at 31 December 2022, the property was valued at £1.7m and, after deducting selling costs of £0.05m,
the carrying value was £1.65m (see note 16).
Financial statements
271
23 TRADE AND OTHER PAYABLES
Trade payables
Amounts owed to subsidiaries
Other payables
Other taxes
Accruals
Deferred income
Tenant rent deposits
Group
Company
2022
£m
0.4
–
24.6
11.8
35.8
48.2
27.3
148.1
2021
Restated
£m
3.2
–
38.0
8.0
37.2
41.9
17.6
145.9
2022
£m
–
1,685.3
0.3
4.8
16.4
0.7
–
1,707.5
2021
Restated
£m
0.1
1,285.3
1.2
1.7
15.1
0.7
–
1,304.1
Deferred income primarily relates to rents received in advance.
Prior year Group trade and other payables have been restated to reflect the grossing up of tenant rent deposits of £17.6m.
Prior year Company trade and other payables (‘amounts owed to subsidiaries’) have been restated to reflect the grossing
up of £17.6m of tenant rent deposits and £4.8m of cash collected on behalf of tenants to fund the service charge of
properties in the portfolio. For further information refer to note 2.
24 PROVISIONS
At 1 January 2022
Provided in the income statement
Utilised in year
At 31 December 2022
Due within one year
Due after one year
At 1 January 2021
Provided in the income statement
Utilised in year
At 31 December 2021
Due within one year
Due after one year
Group
£m
0.6
(0.2)
(0.2)
0.2
–
0.2
0.2
1.0
0.6
(1.0)
0.6
0.3
0.3
0.6
Company
£m
0.6
(0.2)
(0.2)
0.2
–
0.2
0.2
1.0
0.6
(1.0)
0.6
0.3
0.3
0.6
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.
272
Derwent London plc / Report and Accounts 2022
NOTES TO THE FINANCIAL STATEMENTS continued
for the year ended 31 December 2022
25 NET DEBT AND DERIVATIVE FINANCIAL INSTRUMENTS
Group
Company
Current liabilities
Other loans
Non-current liabilities
1.5% unsecured convertible bonds 2025
6.5% secured bonds 2026
1.875% unsecured green bonds 2031
2.68% unsecured private placement notes 2026
3.46% unsecured private placement notes 2028
4.41% unsecured private placement notes 2029
2.87% unsecured private placement notes 2029
2.97% unsecured private placement notes 2031
3.57% unsecured private placement notes 2031
3.09% unsecured private placement notes 2034
4.68% unsecured private placement notes 2034
3.99% secured loan 2024
Unsecured bank loans
Intercompany loan
Borrowings
Leasehold liabilities – current
Leasehold liabilities – non-current
Derivative financial instruments – current
Derivative financial instruments – non-current
Gross debt
Reconciliation to net debt:
Gross debt
Derivative financial instruments
Cash at bank excluding restricted cash (see note 33)
Net debt
1.5% unsecured convertible bonds 2025
2022
£m
19.7
19.7
170.1
181.0
346.4
54.9
29.9
24.9
92.7
49.8
74.7
51.8
74.6
82.7
(4.1)
–
1,229.4
1,249.1
0.5
34.5
–
(5.0)
1,279.1
1,279.1
5.0
(26.9)
1,257.2
2021
£m
12.3
12.3
168.3
182.4
346.0
54.8
29.9
24.9
92.6
49.8
74.7
51.8
74.5
82.5
4.9
–
1,237.1
1,249.4
51.2
19.4
0.4
0.4
1,320.8
1,320.8
(0.8)
(68.5)
1,251.5
2022
£m
–
–
–
–
346.4
54.9
29.9
24.9
92.7
49.8
74.7
51.8
74.6
82.7
(4.1)
170.1
1,048.4
1,048.4
1.3
21.6
–
(5.0)
1,066.3
1,066.3
5.0
(26.4)
1,044.9
2021
£m
–
–
–
–
346.0
54.8
29.9
24.9
92.6
49.8
74.7
51.8
74.5
82.5
4.9
168.3
1,054.7
1,054.7
1.2
22.9
0.4
0.4
1,079.6
1,079.6
(0.8)
(68.2)
1,010.6
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 £91.75 per £100 as at 31 December 2022 (2021: £102.00 per £100). The carrying value at 31 December 2022 was £170.1m
(2021: £168.3m).
Reconciliation of nominal value to carrying value:
Nominal value
Fair value adjustment on issue allocated to equity
Debt component on issue
Unamortised issue costs
Amortisation of fair value adjustment
Carrying amount included in borrowings
6.5% secured bonds 2026
Financial statements
273
£m
175.0
(7.7)
167.3
(1.5)
4.3
170.1
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 2022 was determined by the ask-price of £102.67 per £100
(2021: £117.60 per £100). The carrying value at 31 December 2022 was £181.0m (2021: £182.4m).
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 2022 was determined by
the ask-price of £70.63 per £100 (2021: £98.45 per £100). The carrying value at 31 December 2022 was £346.4m (2021:
£346.0m). The £350m green bonds will be 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
comparing the discounted future cash flows using the contracted yields with those of reference gilts plus implied margins.
The references were a 2% 2025 gilt, 1.625% 2028 gilt, 4.75% 2030 gilt and a 4.25% 2032 gilt all with an implied margin
which is unchanged since the date of fixing. The carrying values at 31 December 2022 were £54.9m (2021: £54.8m),
£92.7m (2021: £92.6m), £49.8m (2021: £49.8m) and £51.8m (2021: £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 comparing the discounted future cash
flows using the contracted yields with those of reference gilts plus implied margins. The references were a 6% 2028 gilt
and a 4.75% 2030 gilt both with an implied margin which is unchanged since the date of fixing. The carrying values at
31 December 2022 were £29.9m (2021: £29.9m) and £74.7m (2021: £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 comparing the discounted future
cash flows using the contracted yields with those of reference gilts plus implied margins. The references were a 6% 2028
gilt and a 4.25% 2032 gilt both with an implied margin which is unchanged since the date of fixing. The carrying values at
31 December 2022 were £24.9m (2021: £24.9m) and £74.6m (2021: £74.5m), 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 comparing the discounted future cash flows using the contracted yield with those of the reference gilt
plus an implied margin. The reference was a 5% 2025 gilt with an implied margin which is unchanged since the date of
fixing. The carrying value at 31 December 2022 was £82.7m (2021: £82.5m).
274
Derwent London plc / Report and Accounts 2022
NOTES TO THE FINANCIAL STATEMENTS continued
for the year ended 31 December 2022
25 NET DEBT AND DERIVATIVE FINANCIAL INSTRUMENTS continued
Unsecured bank loans
In 2021, the Group exercised the one-year extension option on both the £100m revolving credit facility (‘RCF’) and the
£450m RCF, thereby extending the maturities of both facilities out to 2026. In 2022, the Group exercised a further one-year
extension option on the £100m facility, thereby extending the maturity of the facility out to 2027.
Unsecured bank borrowings are accounted for at amortised cost. At 31 December 2022, there was £nil (2021: £10.0m)
drawn on the RCFs and the unamortised arrangement fees were £4.1m (2021: £5.1m), resulting in the carrying value being
a £4.1m debit balance (2021: credit balance of £4.9m).
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.
In 2021, the benchmark rate applicable on the existing bank borrowings was transitioned from LIBOR to SONIA.
Undrawn committed bank facilities – maturity profile
< 1
year
£m
–
–
–
–
1 to 2
years
£m
2 to 3
years
£m
–
–
–
–
–
–
–
–
3 to 4
years
£m
450.0
–
450.0
–
4 to 5
years
£m
100.0
540.0
100.0
540.0
> 5
years
£m
–
–
–
–
Total
£m
550.0
540.0
550.0
540.0
Group
At 31 December 2022
At 31 December 2021
Company
At 31 December 2022
At 31 December 2021
Other loans
Other loans consist of a £19.7m interest-free loan with no fixed repayment date from a third party providing development
consultancy services on the residential element of the 25 Baker Street W1 development. The loan will be repaid from the
sale proceeds of these residential apartments after completion of the scheme. The agreement provides for a profit share
on completion of the sales which, under IFRS 9 Financial Instruments, has been deemed to have a carrying value of £nil
at 31 December 2022 (2021: £nil). The carrying value of the loan at 31 December 2022 was £19.7m (2021: £12.3m).
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 2022 was
£170.1m (2021: £168.3m).
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 2022 for the period to the contracted expiry dates.
During the prior year, all interest rate swaps were transitioned from LIBOR basis swaps to SONIA.
The Group has a £75m forward starting interest rate swap effective from 4 January 2023. This swap is not included in the
31 December 2022 figures in the table below. The Group also had a £40m forward starting interest rate swap which was
terminated during 2022.
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.
Financial statements
275
Secured and unsecured debt
Group
Company
Secured
6.5% secured bonds 2026
3.99% secured loan 2024
Unsecured
1.5% unsecured convertible bonds 2025
1.875% unsecured green bonds 2031
Unsecured private placement notes 2026 – 2034
Unsecured bank loans
Other loans
Intercompany loan
2022
£m
181.0
82.7
263.7
170.1
346.4
453.3
(4.1)
19.7
–
985.4
2021
£m
182.4
82.5
264.9
168.3
346.0
453.0
4.9
12.3
–
984.5
2022
£m
–
82.7
82.7
–
346.4
453.3
(4.1)
–
170.1
965.7
2021
£m
–
82.5
82.5
–
346.0
453.0
4.9
–
168.3
972.2
Borrowings
1,249.1
1,249.4
1,048.4
1,054.7
As at 31 December 2022, the Group’s secured bonds 2026 were secured by a floating charge over a number of the Group’s
subsidiary companies which contained £448.8m (2021: £571.8m) of the Group’s properties. The Group’s secured bank loan
was settled during the previous year in advance of the acquisition of the non-controlling interest from The Portman Estate
in 2021.
At 31 December 2022, the Company’s 3.99% secured loan 2024 was secured by a fixed charge over £272.8m (2021: £305.2m)
of the Group’s properties.
Fixed interest rate and hedged debt
At 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
2021, 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 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. At 31 December 2021, 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.
276
Derwent London plc / Report and Accounts 2022
NOTES TO THE FINANCIAL STATEMENTS continued
for the year ended 31 December 2022
25 NET DEBT AND DERIVATIVE FINANCIAL INSTRUMENTS continued
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:
Floating
rate
£m
Hedged
£m
Fixed
rate
£m
Borrowings
£m
Weighted
average
interest rate1
%
Weighted
average
life
Years
Group
At 31 December 2022
1.5% unsecured convertible bonds 2025
6.5% secured bonds 2026
1.875% unsecured green bonds 2031
Unsecured private placement notes 2026 – 2034
3.99% secured loan 2024
Unsecured bank loans
Other loans2
At 31 December 2021
1.5% unsecured convertible bonds 2025
6.5% secured bonds 2026
1.875% unsecured green bonds 2031
Unsecured private placement notes 2026 – 2034
3.99% secured loan 2024
Unsecured bank loans
Other loans
Company
At 31 December 2022
1.875% unsecured green bonds 2031
Unsecured private placement notes 2026 – 2034
3.99% secured loan 2024
Unsecured bank loans
Intercompany loan
At 31 December 2021
1.875% unsecured green bonds 2031
Unsecured private placement notes 2026 – 2034
3.99% secured loan 2024
Unsecured bank loans
Intercompany loan
–
–
–
–
–
(4.1)
–
(4.1)
–
–
–
–
–
4.9
–
4.9
–
–
–
(4.1)
–
(4.1)
–
–
–
4.9
–
4.9
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
170.1
181.0
346.4
453.3
82.7
–
19.7
1,253.2
168.3
182.4
346.0
453.0
82.5
–
12.3
1,244.5
346.4
453.3
82.7
–
170.1
1,052.5
346.0
453.0
82.5
–
168.3
1,049.8
170.1
181.0
346.4
453.3
82.7
(4.1)
19.7
1,249.1
168.3
182.4
346.0
453.0
82.5
4.9
12.3
1,249.4
346.4
453.3
82.7
(4.1)
170.1
1,048.4
346.0
453.0
82.5
4.9
168.3
1,054.7
2.30
6.50
1.93
3.42
3.99
–
–
3.26
2.30
6.50
1.93
3.42
3.99
1.25
–
3.27
1.93
3.42
3.99
–
2.30
2.78
1.93
3.42
3.99
1.25
2.30
2.78
2.4
3.2
8.9
7.7
1.8
–
–
6.2
3.4
4.2
9.9
8.7
2.8
4.8
–
7.2
8.9
7.7
1.8
–
2.4
6.7
9.9
8.7
2.8
4.8
3.4
7.7
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.
Financial statements
277
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.
Group
At 31 December 2022
1.5% unsecured convertible bonds 2025
6.5% secured bonds 2026
1.875% unsecured green bonds 2031
Unsecured private placement notes 2026 – 2034
3.99% secured loan 2024
Other loans
Total on maturity
Leasehold liabilities
Interest on borrowings
Effect of interest rate swaps
Gross loan commitments
At 31 December 2021
1.5% unsecured convertible bonds 2025
6.5% secured bonds 2026
1.875% unsecured green bonds 2031
Unsecured private placement notes 2026 – 2034
3.99% secured loan 2024
Unsecured bank loans
Other loans
Total on maturity
Leasehold liabilities
Interest on borrowings
Effect of interest rate swaps
Gross loan commitments
< 1
year
£m
1 to 2
years
£m
2 to 3
years
£m
3 to 4
years
£m
4 to 5
years
£m
> 5
years
£m
Total
£m
–
–
–
–
–
–
–
1.8
39.4
(1.8)
39.4
–
–
–
–
–
–
–
–
52.2
39.5
0.8
92.5
–
–
–
–
83.0
–
83.0
1.7
38.8
(2.4)
121.1
–
–
–
–
–
–
–
–
0.8
39.6
–
40.4
175.0
–
–
–
–
19.7
194.7
1.7
34.8
(1.1)
230.1
–
–
–
–
83.0
–
–
83.0
0.8
39.6
–
123.4
–
175.0
–
55.0
–
–
230.0
1.7
27.1
–
258.8
175.0
–
–
–
–
–
12.3
187.3
0.8
34.9
–
223.0
–
–
–
–
–
–
–
1.8
20.7
–
22.5
–
175.0
–
55.0
–
10.0
–
240.0
0.8
27.2
–
268.0
–
–
350.0
400.0
–
–
750.0
211.3
80.3
–
1,041.6
–
–
350.0
400.0
–
–
–
750.0
193.7
100.9
–
1,044.6
175.0
175.0
350.0
455.0
83.0
19.7
1,257.7
220.0
241.1
(5.3)
1,713.5
175.0
175.0
350.0
455.0
83.0
10.0
12.3
1,260.3
249.1
281.7
0.8
1,791.9
278
Derwent London plc / Report and Accounts 2022
NOTES TO THE FINANCIAL STATEMENTS continued
for the year ended 31 December 2022
25 NET DEBT AND DERIVATIVE FINANCIAL INSTRUMENTS continued
Reconciliation to borrowings:
Adjustments
Gross loan
commitments
£m
Interest on
gross debt
£m
Effect of interest
rate swaps
£m
Leasehold
liabilities
£m
Non-cash
amortisation
£m
Borrowings
£m
Group
At 31 December 2022
Maturing in:
< 1 year
1 to 2 years
2 to 3 years
3 to 4 years
4 to 5 years
> 5 years
At 31 December 2021
Maturing in:
< 1 year
1 to 2 years
2 to 3 years
3 to 4 years
4 to 5 years
> 5 years
39.4
121.1
230.1
258.8
22.5
1,041.6
1,713.5
92.5
40.4
123.4
223.0
268.0
1,044.6
1,791.9
(39.4)
(38.8)
(34.8)
(27.1)
(20.7)
(80.3)
(241.1)
(39.5)
(39.6)
(39.6)
(34.9)
(27.2)
(100.9)
(281.7)
1.8
2.4
1.1
–
–
–
5.3
(0.8)
–
–
–
–
–
(0.8)
(1.8)
(1.7)
(1.7)
(1.7)
(1.8)
(211.3)
(220.0)
(52.2)
(0.8)
(0.8)
(0.8)
(0.8)
(193.7)
(249.1)
–
(0.3)
(4.9)
2.5
(0.7)
(5.2)
(8.6)
–
–
(0.5)
(6.7)
2.1
(5.8)
(10.9)
–
82.7
189.8
232.5
(0.7)
744.8
1,249.1
–
–
82.5
180.6
242.1
744.2
1,249.4
Company
At 31 December 2022
1.875% unsecured green bonds 2031
Unsecured private placement notes 2026 – 2034
3.99% secured loan 2024
Intercompany loan
Total on maturity
Leasehold liability
Interest on debt
Effect of interest rate swaps
Gross loan commitments
At 31 December 2021
1.875% unsecured green bonds 2031
Unsecured private placement notes 2026 – 2034
3.99% secured loan 2024
Unsecured bank loans
Intercompany loan
Total on maturity
Leasehold liability
Interest on debt
Effect of interest rate swaps
Gross loan commitments
< 1
year
£m
1 to 2
years
£m
2 to 3
years
£m
3 to 4
years
£m
4 to 5
years
£m
> 5
years
£m
Total
£m
–
–
–
–
–
2.1
28.1
(1.8)
28.4
–
–
–
–
–
–
2.1
28.2
0.8
31.1
–
–
83.0
–
83.0
2.1
27.4
(2.4)
110.1
–
–
–
–
–
–
2.1
28.2
–
30.3
–
–
–
175.0
175.0
2.1
23.4
(1.1)
199.4
–
–
83.0
–
–
83.0
2.1
28.2
–
113.3
–
55.0
–
–
55.0
2.1
21.4
–
78.5
–
–
–
–
175.0
175.0
2.1
23.6
–
200.7
–
–
–
–
–
2.1
20.7
–
22.8
–
55.0
–
10.0
–
65.0
2.1
21.5
–
88.6
350.0
400.0
–
–
750.0
18.9
80.3
–
849.2
350.0
400.0
–
–
–
750.0
21.0
100.9
–
871.9
350.0
455.0
83.0
175.0
1,063.0
29.4
201.3
(5.3)
1,288.4
350.0
455.0
83.0
10.0
175.0
1,073.0
31.5
230.6
0.8
1,335.9
Financial statements
279
Reconciliation to borrowings:
Gross loan
commitments
£m
Interest on
gross debt
£m
Effect of interest
rate swaps
£m
Leasehold
liabilities
£m
Non-cash
amortisation
£m
Borrowings
£m
Adjustments
Company
At 31 December 2022
Maturing in:
< 1 year
1 to 2 years
2 to 3 years
3 to 4 years
4 to 5 years
> 5 years
At 31 December 2021
Maturing in:
< 1 year
1 to 2 years
2 to 3 years
3 to 4 years
4 to 5 years
> 5 years
28.4
110.1
199.4
78.5
22.8
849.2
1,288.4
31.1
30.3
113.3
200.7
88.6
871.9
1,335.9
(28.1)
(27.4)
(23.4)
(21.4)
(20.7)
(80.3)
(201.3)
(28.2)
(28.2)
(28.2)
(23.6)
(21.5)
(100.9)
(230.6)
1.8
2.4
1.1
–
–
–
5.3
(0.8)
–
–
–
–
–
(0.8)
(2.1)
(2.1)
(2.1)
(2.1)
(2.1)
(18.9)
(29.4)
(2.1)
(2.1)
(2.1)
(2.1)
(2.1)
(21.0)
(31.5)
–
(0.3)
(4.9)
(3.5)
(0.7)
(5.2)
(14.6)
–
–
(0.5)
(6.7)
(5.3)
(5.8)
(18.3)
–
82.7
170.1
51.5
(0.7)
744.8
1,048.4
–
–
82.5
168.3
59.7
744.2
1,054.7
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.
Group
Maturing in:
< 1 year
1 to 2 years
2 to 3 years
3 to 4 years
4 to 5 years
> 5 years
Gross contractual cash flows
Company
Maturing in:
< 1 year
1 to 2 years
2 to 3 years
3 to 4 years
4 to 5 years
> 5 years
Gross contractual cash flows
2022
Receivable
£m
2022
Payable
£m
2021
Receivable
£m
2021
Payable
£m
2.5
3.4
1.6
–
–
–
7.5
2.5
3.4
1.6
–
–
–
7.5
(0.7)
(1.0)
(0.5)
–
–
–
(2.2)
(0.7)
(1.0)
(0.5)
–
–
–
(2.2)
0.7
1.0
1.0
0.5
–
–
3.2
0.7
1.0
1.0
0.5
–
–
3.2
(1.5)
(1.0)
(1.0)
(0.5)
–
–
(4.0)
(1.5)
(1.0)
(1.0)
(0.5)
–
–
(4.0)
280
Derwent London plc / Report and Accounts 2022
NOTES TO THE FINANCIAL STATEMENTS continued
for the year ended 31 December 2022
25 NET DEBT AND DERIVATIVE FINANCIAL INSTRUMENTS continued
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 112 to 125.
There have been no substantive changes in the Group’s exposure to financial instrument risks, its objectives, policies and
processes for managing those risks or the methods used to measure them from previous years. The Group’s EPRA loan-to-
value ratio has increased to 23.9% as at 31 December 2022.
Principal financial instruments
The principal financial instruments used by the Group, from which financial instrument risk arises, are trade receivables,
accrued income arising from the spreading of lease incentives, cash at bank, trade and other payables, floating rate bank
loans, fixed rate loans and private placement notes, secured and unsecured bonds and interest rate swaps.
General objectives, policies and processes
The Board has overall responsibility for the determination of the Group’s risk management objectives and policies and,
whilst retaining ultimate responsibility for them, it has delegated the authority to executive management for designing and
operating processes that ensure the effective implementation of the objectives and policies.
The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the
Group’s flexibility and its ability to maximise returns. Further details regarding these policies are set out below:
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its
contractual obligations. The Group is mainly exposed to credit risk from lease contracts in relation to its property portfolio.
It is Group policy to assess the credit risk of new tenants before entering into such contracts. The Board has a Credit
Committee which assesses each new tenant before a new lease is signed. The review includes the latest sets of financial
statements, external ratings when available and, in some cases, forecast information and bank or trade references. The
covenant strength of each tenant is determined based on this review and, if appropriate, a deposit or a guarantee is
obtained. The Committee also reviews existing tenant covenants from time to time.
Impairment calculations have been carried out on trade receivables and accrued income arising as a result of the
spreading of lease incentives using the forward-looking, simplified approach to the expected credit loss model within
IFRS 9. In addition, the Credit Committee has reviewed its register of tenants at higher risk, particularly in the retail or
hospitality sectors, those in administration or CVA and the top 64 tenants by size with the remaining occupiers considered
on a sector by sector basis.
As the Group operates predominantly in central London, it is subject to some geographical risk. However, this is mitigated
by the wide range of tenants from a broad spectrum of business sectors.
Credit risk also arises from cash and cash equivalents and deposits with banks and financial institutions. For banks and
financial institutions, only independently rated parties with a minimum rating of investment grade are accepted. This risk
is also reduced by the short periods that money is on deposit at any one time.
The carrying amount of financial assets recorded in the financial statements represents the Group’s maximum exposure to
credit risk without taking account of the value of any collateral obtained.
Financial statements
281
Market risk
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in
market prices. Market risk arises for the Group from its use of variable interest bearing instruments (interest rate risk).
The Group monitors its interest rate exposure on at least a quarterly basis. Sensitivity analysis performed to ascertain the
impact on profit or loss and net assets of a 50 basis point shift in interest rates would result in no increase (2021: £0.1m)
or decrease (2021: £0.1m), as all borrowings at the end of the year were fixed.
It is currently Group policy that generally between 60% and 85% of external Group borrowings (excluding finance lease
payables) are at fixed rates. Where the Group wishes to vary the amount of external fixed rate debt it holds (subject to it
being generally between 60% and 85% of expected Group borrowings, as noted above), the Group makes use of interest
rate derivatives to achieve the desired interest rate profile. Although the Board accepts that this policy neither protects the
Group entirely from the risk of paying rates in excess of current market rates nor eliminates fully cash flow risk associated
with variability in interest payments, it considers that it achieves an appropriate balance of exposure to these risks. At
31 December 2022, the proportion of fixed debt held by the Group was above this range at 100% (2021: 99%). During both
2022 and 2021, the Group’s borrowings at variable rate were denominated in sterling.
The Group manages its cash flow interest rate risk by using floating-to-fixed interest rate swaps. When the Group raises
long-term borrowings, it is generally at fixed rates.
Liquidity risk
Liquidity risk arises from the Group’s management of working capital and the finance charges and principal repayments on
its debt instruments. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due.
The Group’s policy is to ensure that it will always have sufficient headroom in its loan facilities to allow it to meet its
liabilities when they become due. To achieve this aim, it seeks to maintain committed facilities to meet the expected
requirements. The Group also seeks to reduce liquidity risk by fixing interest rates (and hence cash flows) on a portion
of its long-term borrowings. This is further explained in the ‘market risk’ section above.
Executive management receives rolling three-year projections of cash flow and loan balances on a regular basis as part of
the Group’s forecasting processes. At the balance sheet date, these projections indicated that the Group expected to have
sufficient liquid resources to meet its obligations under all reasonably expected circumstances.
The Group’s loan facilities and other borrowings are spread across a range of banks and financial institutions so as to
minimise any potential concentration of risk. The liquidity risk of the Group is managed centrally by the finance department.
Capital disclosures
The Group’s capital comprises all components of equity (share capital, share premium, other reserves and retained earnings).
The Group’s objectives when maintaining capital are:
• to safeguard the entity’s ability to continue as a going concern so that it can continue to provide above average long-
term returns for shareholders; and
• to provide an above average annualised total return to shareholders.
The Group sets the amount of capital it requires in proportion to risk. The Group manages its capital structure and makes
adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. In order
to maintain or adjust the capital structure, the Group may vary the amount of dividends paid to shareholders subject to the
rules imposed by its REIT status. It may also seek to redeem bonds, return capital to shareholders, issue new shares or sell
assets to reduce debt. Consistent with others in its industry, the Group monitors capital on the basis of NAV gearing and
loan-to-value ratio. During 2022, the Group’s strategy, which was unchanged from 2021, was to maintain the NAV gearing
below 80% in normal circumstances. These two gearing ratios, as well as the net interest cover ratio, are defined in the list
of definitions on page 313 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 £4.6bn (2021: £4.8bn) of
uncharged property as at 31 December 2022.
282
Derwent London plc / Report and Accounts 2022
NOTES TO THE FINANCIAL STATEMENTS continued
for the year ended 31 December 2022
26 FINANCIAL ASSETS AND LIABILITIES AND FAIR VALUES
Categories of financial assets and liabilities
Fair value
through profit
and loss
£m
Financial
assets held at
amortised cost
£m
Financial
liabilities held at
amortised cost
£m
Group
Financial assets
Cash and cash equivalents
Other assets – current1
Financial liabilities
1.5% unsecured convertible bonds 2025
6.5% secured bonds 2026
1.875% unsecured green bonds 2031
Unsecured private placement notes 2026 – 2034
3.99% secured loan 2024
Bank borrowings due after one year
Other loans
Leasehold liabilities
Derivative financial instruments
Other liabilities – current2
At 31 December 2022
Financial assets
Cash and cash equivalents (restated)
Other assets – current1
Financial liabilities
1.5% unsecured convertible bonds 2025
6.5% secured bonds 2026
1.875% unsecured green bonds 2031
Unsecured private placement notes 2026 – 2034
3.99% secured loan 2024
Bank borrowings due after one year
Other loans
Leasehold liabilities
Derivative financial instruments
Other liabilities – current2
At 31 December 2021
–
–
–
–
–
–
–
–
–
–
–
5.0
–
5.0
5.0
–
–
–
–
–
–
–
–
–
–
–
(0.8)
–
(0.8)
(0.8)
Total
carrying
value
£m
76.6
12.5
89.1
(170.1)
(181.0)
(346.4)
(453.3)
(82.7)
4.1
(19.7)
(35.0)
5.0
(60.8)
(1,339.9)
76.6
12.5
89.1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(170.1)
(181.0)
(346.4)
(453.3)
(82.7)
4.1
(19.7)
(35.0)
–
(60.8)
(1,344.9)
89.1
(1,344.9)
(1,250.8)
105.5
13.1
118.6
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(168.3)
(182.4)
(346.0)
(453.0)
(82.5)
(4.9)
(12.3)
(70.6)
–
(78.4)
(1,398.4)
105.5
13.1
118.6
(168.3)
(182.4)
(346.0)
(453.0)
(82.5)
(4.9)
(12.3)
(70.6)
(0.8)
(78.4)
(1,399.2)
118.6
(1,398.4)
(1,280.6)
1
In 2022, 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 £29.9m (2021 restated: £27.9m) for the Group. All amounts are non-interest bearing and are receivable within one year.
2 In 2022, other liabilities include all amounts shown as trade and other payables in note 23 except deferred income and sales and social security taxes of £60.0m
(2021: £49.9m) for the Group. All amounts are non-interest bearing and are due within one year.
Financial statements
283
Company
Financial assets
Cash and cash equivalents
Other assets – current1
Financial liabilities
1.875% unsecured green bonds 2031
Unsecured private placement notes 2026 – 2034
3.99% secured loan 2024
Bank borrowings due after one year
Intercompany loan
Leasehold liabilities
Derivative financial instruments
Other liabilities – current2
At 31 December 2022
Financial assets
Cash and cash equivalents (restated)
Other assets – current1
Financial liabilities
1.875% unsecured green bonds 2031
Unsecured private placement notes 2026 – 2034
3.99% secured loan 2024
Bank borrowings due after one year
Intercompany loan
Leasehold liabilities
Derivative financial instruments
Other liabilities – current (restated)2
At 31 December 2021
Fair value
through profit
and loss
£m
Financial
assets held at
amortised cost
£m
Financial
liabilities held at
amortised cost
£m
Total
carrying
value
£m
–
–
–
–
–
–
–
–
–
5.0
–
5.0
5.0
–
–
–
–
–
–
–
–
–
(0.8)
–
(0.8)
(0.8)
67.3
1,763.4
1,830.7
–
–
–
–
–
–
–
(1,685.3)
(1,685.3)
–
–
–
(346.4)
(453.3)
(82.7)
4.1
(170.1)
(22.9)
–
(16.7)
(1,088.0)
67.3
1,763.4
1,830.7
(346.4)
(453.3)
(82.7)
4.1
(170.1)
(22.9)
5.0
(1,702.0)
(2,768.3)
145.4
(1,088.0)
(937.6)
90.6
1,875.9
1,966.5
–
–
–
–
–
–
–
(1,285.3)
(1,285.3)
–
–
–
(346.0)
(453.0)
(82.5)
(4.9)
(168.3)
(24.1)
–
(16.4)
(1,095.2)
90.6
1,875.9
1,966.5
(346.0)
(453.0)
(82.5)
(4.9)
(168.3)
(24.1)
(0.8)
(1,301.7)
(2,381.3)
681.2
(1,095.2)
(414.8)
1
2
In 2022, 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 £24.6m (2021: £23.0m) for the Company. All amounts are non-interest bearing and are receivable within one year.
In 2022, other liabilities include all amounts shown as trade and other payables in note 23 except deferred income and sales and social security taxes of £5.5m
(2021: £2.4m) for the Company. All amounts are non-interest bearing and are due within one year.
Reconciliation of net financial assets and liabilities to gross debt
Net financial assets and liabilities
Other assets – current
Other liabilities – current
Cash and cash equivalents
Gross debt
Group
Company
2022
£m
(1,250.8)
(12.5)
60.8
(76.6)
(1,279.1)
2021
Restated
£m
(1,280.6)
(13.1)
78.4
(105.5)
(1,320.8)
2022
£m
(937.6)
(1,763.4)
1,702.0
(67.3)
(1,066.3)
2021
Restated
£m
(414.8)
(1,875.9)
1,301.7
(90.6)
(1,079.6)
284
Derwent London plc / Report and Accounts 2022
NOTES TO THE FINANCIAL STATEMENTS continued
for the year ended 31 December 2022
26 FINANCIAL ASSETS AND LIABILITIES AND FAIR VALUES continued
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.
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 2022 or 2021.
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
arrangement
costs
£m
2021
£m
Cash flows
£m
Fair value
adjustments
£m
Acquisitions
£m
Unwind of
discount
£m
Disposals
Transfer
from non-
current to
current
Group
Current liabilities
Borrowings
Leasehold liabilities
Non-current liabilities
Borrowings
Leasehold liabilities
Total liabilities from
financing activities
Cash at bank1
Net debt
Company
Current liabilities
Leasehold liabilities
Non-current liabilities
Borrowings
Leasehold liabilities
Total liabilities from
financing activities
Cash at bank1
Net debt
12.3
51.2
7.4
–
1,237.1
19.4
(10.1)
–
1,320.0
(2.7)
(68.5)
1,251.5
41.6
38.9
1.2
–
1,054.7
22.9
(10.1)
–
1,078.8
(10.1)
(68.2)
1,010.6
41.8
31.7
1 Cash at bank excluding restricted cash (see note 33).
–
–
2.7
–
2.7
–
2.7
–
2.5
–
2.5
–
2.5
–
–
(0.3)
–
(0.3)
–
(0.3)
–
1.3
–
1.3
–
1.3
–
–
–
15.6
15.6
–
15.6
–
–
–
–
–
–
–
–
–
0.5
0.5
–
0.5
0.1
–
(1.3)
(1.2)
–
(1.2)
–
(50.7)
–
(1.0)
(51.7)
(51.7)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2022
£m
19.7
0.5
1,229.4
34.5
1,284.1
(26.9)
1,257.2
1.3
1,048.4
21.6
1,071.3
(26.4)
1,044.9
Financial statements
285
28 DEFERRED TAX
Group
At 1 January 2022
Charged/(credited) to the income statement
Charged to other comprehensive income
Charged to equity
At 31 December 2022
At 1 January 2021
(Credited)/charged to the income statement
Change in tax rates in the income statement
Charged to other comprehensive income
Change in tax rates in other comprehensive income
Credited to equity
At 31 December 2021
Company
At 1 January 2022
Credited to the income statement
Charged to equity
At 31 December 2022
At 1 January 2021
Charged to the income statement
Credited to equity
Change in tax rates in the income statement
At 31 December 2021
Revaluation
(deficit)/surplus
£m
3.3
0.2
0.2
–
3.7
3.5
(1.6)
0.1
0.9
0.4
–
3.3
–
–
–
–
–
–
–
–
–
Other
£m
(3.6)
(0.1)
–
0.6
(3.1)
(3.0)
0.5
(0.8)
0.5
(0.1)
(0.7)
(3.6)
(3.6)
(0.1)
0.7
(3.0)
(3.1)
1.0
(0.7)
(0.8)
(3.6)
Total
£m
(0.3)
0.1
0.2
0.6
0.6
0.5
(1.1)
(0.7)
1.4
0.3
(0.7)
(0.3)
(3.6)
(0.1)
0.7
(3.0)
(3.1)
1.0
(0.7)
(0.8)
(3.6)
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.
29 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
At 1 January 2021
Issued as a result of awards vesting under the Group's Performance Share Plan
Issued as a result of the exercise of share options1
At 31 December 2021
Issued as a result of awards vesting under the Group's Performance Share Plan
Issued as a result of the exercise of share options1
At 31 December 2022
1 Proceeds from these issues were £1.2m (2021: £1.8m).
Number
111,961,411
187,638
59,461
112,208,510
39,614
25,984
112,274,108
The number of outstanding share options and other share awards granted are disclosed in the report of the Remuneration
Committee and note 13.
286
Derwent London plc / Report and Accounts 2022
NOTES TO THE FINANCIAL STATEMENTS continued
for the year ended 31 December 2022
30 RESERVES
The following describes the nature and purpose of each reserve within shareholders’ equity:
Reserve
Description and purpose
Share premium
Other reserves:
Merger
Revaluation
Other
Retained earnings
Amount subscribed for share capital in excess of nominal value less directly attributable
issue costs.
Premium on the issue of shares as equity consideration for the acquisition of London Merchant
Securities plc (LMS).
Revaluation of the owner-occupied property and the associated deferred tax.
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.
Cumulative net gains and losses recognised in the Group income statement together with other
items such as dividends.
Other reserves
Merger reserve
Revaluation reserve
Equity portion of the convertible bonds
Equity portion of long-term intercompany loan
Fair value of equity instruments under
share-based payments
Group
Company
2022
£m
910.5
16.0
7.5
–
7.9
941.9
2021
£m
910.5
15.5
7.5
–
7.6
941.1
2022
£m
910.5
–
–
7.5
7.9
925.9
2021
£m
910.5
–
–
7.5
7.6
925.6
31 PROFIT FOR THE YEAR ATTRIBUTABLE TO MEMBERS OF DERWENT LONDON PLC
(Loss)/profit for the year in the Group income statement includes a profit of £34.3m (2021: £11.6m) generated by the
Company. 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.
32 DIVIDEND
Current year
2022 final dividend1
2022 interim dividend
Prior year
2021 final dividend
2021 interim dividend
2020 final dividend
Dividends as reported in the Group
statement of changes in equity
2022 interim dividend withholding tax
2021 interim dividend withholding tax
2020 interim dividend withholding tax
Dividends paid as reported in the
Group cash flow statement
1 Subject to shareholder approval at the AGM on 12 May 2023.
Dividend per share
PID
p
Non-PID
p
Total
p
38.50
24.00
62.50
35.50
23.00
58.50
35.00
16.00
–
16.00
18.00
–
18.00
17.45
54.50
24.00
78.50
53.50
23.00
76.50
52.45
Payment
date
2 June 2023
14 October 2022
1 June 2022
15 October 2021
4 June 2021
13 January 2023
14 January 2022
14 January 2021
2022
£m
–
26.9
26.9
60.1
–
60.1
–
87.0
(3.7)
3.5
–
2021
£m
–
–
–
–
25.8
25.8
58.8
84.6
–
(3.5)
3.2
86.8
84.3
Financial statements
287
33 CASH AND CASH EQUIVALENTS
Cash at bank
Cash held in restricted accounts
Tenant rent deposits
Service charge balances
Group
Company
2022
£m
26.9
27.3
22.4
76.6
2021
Restated
£m
68.5
17.6
19.4
105.5
2022
£m
26.4
27.3
13.6
67.3
2021
Restated
£m
68.2
17.6
4.8
90.6
Prior year Group and Company cash and cash equivalents have been restated to include £17.6m of tenant deposits, which
are subject to contractual restrictions.
In addition, £19.4m for the Group and £4.8m for the Company of cash collected on behalf of tenants to fund the service
charge of properties in the portfolio has now been reclassified from trade and other receivables and presented as
restricted cash. For further information refer to note 2.
34 CAPITAL COMMITMENTS
Contracts for capital expenditure entered into by the Group at 31 December 2022 and not provided for in the accounts
relating to the construction, development or enhancement of the Group’s investment properties amounted to £147.3m
(2021: £51.2m), whilst that relating to the Group’s trading properties amounted to £87.9m (2021: £0.9m). At 31 December
2022 and 31 December 2021, there were no material contractual obligations for the purchase, repair or maintenance of
investment or trading properties.
35 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 (subsequently 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, an additional £7.3m of
deferred consideration is payable to Lazari Investments Limited. The deferred consideration is treated as a contingent
liability in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets, as the amount is only
confirmed by the occurrence of uncertain future events not wholly within the control of the Group.
The Company and its subsidiaries are party to cross guarantees securing certain bank loans. At 31 December 2022 and
31 December 2021, there was no liability that could arise for the Company from the cross guarantees.
Where the Company enters into financial guarantee contracts and guarantees the indebtedness of other companies within
the Group, the Company considers these to be insurance arrangements, and accounts for them as such. In this respect,
the Company treats the guarantee contract as a contingent liability until such time that it becomes probable that the
Company will be required to make a payment under the guarantee.
One of the components of the Directors’ year end bonuses is calculated from the Group’s ‘total return’ performance relative
to a comparator group of real estate companies (see page 215). In light of recent exceptional volatility in respect of the
property indices used to estimate property valuations for those comparator companies who have not released December
2022 results, the Remuneration Committee has not been able to accurately determine the total return performance of this
comparator group. As a result, no provision has been made for this element of the bonus for the year ended 31 December
2022. The Committee will determine the vesting outcome of this element of the bonus in the coming months, when there
is greater clarity in respect of the comparator group total return performance.
288
Derwent London plc / Report and Accounts 2022
NOTES TO THE FINANCIAL STATEMENTS continued
for the year ended 31 December 2022
36 LEASES
Operating lease receipts
Minimum lease receipts under non-cancellable operating leases to be received:
not later than one year
later than one year and not later than five years
later than five years
Headlease obligations
Minimum lease payments under headleases that
fall due:
not later than one year
later than one year and not later than five years
later than five years
Future contingent rent payable on headleases
Future finance charges on headleases
Present value of headlease liabilities
Present value of minimum headlease obligations:
not later than one year
later than one year and not later than five years
later than five years
Group
2022
£m
1.8
6.9
211.3
220.0
–
(185.0)
35.0
0.5
1.7
32.8
35.0
2021
£m
52.2
3.2
193.7
249.1
(0.3)
(178.2)
70.6
51.2
(0.1)
19.5
70.6
2022
£m
2021
£m
200.8
642.3
884.1
1,727.2
188.5
609.4
833.5
1,631.4
Company
2022
£m
2.1
8.4
18.9
29.4
–
(6.5)
22.9
1.3
5.5
16.1
22.9
2021
£m
2.1
8.3
21.0
31.4
–
(7.3)
24.1
1.2
5.3
17.6
24.1
The Group has approximately 629 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 2022 was 8.1 years (2021: 8.4 years). Of these
leases, on a weighted average basis, 94% (2021: 94%) included a rent-free or half rent period.
37 POST BALANCE SHEET EVENTS
In January 2023, the Group exchanged contracts and completed the disposal of its freehold interest in 19 Charterhouse
Street EC1 for £54.0m before costs.
38 LIST OF SUBSIDIARIES AND JOINT VENTURES
A full list of subsidiaries and joint ventures as at 31 December 2022 is set out below:
Subsidiaries
Asta Commercial Limited
Bargate Quarter Limited
BBR (Commercial) Limited
BBR Property Limited1
Caledonian Properties Limited
Caledonian Property Estates Limited
Caledonian Property Investments Limited
Carlton Construction & Development Company Limited
Central London Commercial Estates Limited
Charlotte Apartments Limited
80 Charlotte Street Limited1
Derwent Asset Management Limited1
Derwent Central Cross Limited1
Derwent Henry Wood Limited1
Derwent London Angel Building Limited
Derwent London AD Limited1
Derwent London Asta Limited
Derwent London Asta Residential Limited
Derwent London Baker Street Limited
Derwent London BH Limited1
Derwent London Brixton Limited1
Derwent London BSP Limited
Derwent London Capital No. 3 (Jersey) Limited1
Derwent London Charlotte Street (Commercial) Limited
Derwent London Charlotte Street Limited1
Derwent London Copyright House Limited1
Derwent London Development Services Limited1
Derwent London Farringdon Limited1
Derwent London Featherstone Limited1
Derwent London Gallery Limited1
Derwent London Grafton Limited1
Derwent London George Street Limited1
Derwent London Green Energy Limited1
Derwent London Holden House Limited1
Derwent London Holford Works Limited1
Derwent London Horseferry Limited1
Derwent London Howland Limited1
Derwent London KSW Limited1
Derwent London No.2 Limited1
Derwent London No.4 Limited1
Derwent London No.5 Limited1
Derwent London No.6 Limited1
Derwent London Oliver's Yard Limited1
Derwent London Page Street (Nominee) Limited
Derwent London Page Street Limited1
Derwent London Savile Row Limited1
Derwent London White Chapel Limited1
Derwent London White Collar Limited1
Financial statements
289
Ownership2
Principal
100%
65%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Property investment
Investment company
Dormant
Dormant
Property investment
Property investment
Property investment
Dormant
Property investment
Property investment
Property investment
Property management
Property investment
Property investment
Property investment
Energy production
Property trading
Dormant
Property investment
Property investment
Property investment
Property investment
Finance company
Dormant
Dormant
Dormant
Development services
Property investment
Property investment
Property investment
Dormant
Property trading
Energy production
Property investment
Property investment
Property investment
Dormant
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Dormant
Property investment
Property investment
Property investment
Property investment
290
Derwent London plc / Report and Accounts 2022
NOTES TO THE FINANCIAL STATEMENTS continued
for the year ended 31 December 2022
38 LIST OF SUBSIDIARIES AND JOINT VENTURES continued
Subsidiaries continued
Derwent London Whitfield Street Limited1
Derwent Valley Central Limited1
Derwent Valley Employee Trust Limited1
Derwent Valley Finance Limited
Derwent Valley Limited
Derwent Valley London Limited1
Derwent Valley Property Developments Limited1
Derwent Valley Property Investments Limited1
Derwent Valley Property Trading Limited1
Derwent Valley Railway Company1
Derwent Valley West End Limited1
Kensington Commercial Property Investments Limited
LMS (City Road) Limited
LMS Finance Limited
LMS Offices Limited
London Merchant Securities Limited1
The New River Company Limited
Urbanfirst Limited
West London & Suburban Property Investments Limited
Joint ventures
Derwent Lazari Baker Street GP Limited
Dorrington Derwent Holdings Limited
Dorrington Derwent Investments Limited
Prescot Street GP Limited
Prescot Street Nominees Limited
Primister Limited
1
Indicates subsidiary undertakings held directly.
2 All holdings are of ordinary shares.
Ownership2
Principal
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Property investment
Property investment
Employee trust
Investment holding
Holding company
Property investment
Property investment
Property investment
Property trading
Dormant
Property investment
Property investment
Property investment
Investment holding
Property investment
Holding company
Property investment
Investment holding
Property investment
50% Management company
Holding company
50%
50%
Investment company
50% Management company
50%
Dormant
Property investment
50%
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 190 to 223 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 (2021: £0.1m) in relation to development management, asset management and
administration of the Derwent Lazari Baker Street Limited Partnership.
Financial statements
291
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)
Related party
80 Charlotte Street Limited
Derwent Asset Management Limited
Derwent Central Cross Limited
Derwent Henry Wood Limited
Derwent London AD Limited
Derwent London Angel Square Limited
Derwent London BH Limited
Derwent London Brixton Limited
Derwent London BSP Limited
Derwent London Capital No. 3 (Jersey) Limited1
Derwent London Development Services Limited
Derwent London Farringdon Limited
Derwent London Featherstone Limited
Derwent London Gallery Limited
Derwent London George Street Limited
Derwent London Green Energy Limited
Derwent London Holden House Limited
Derwent London Holford Works Limited
Derwent London Horseferry Limited
Derwent London KSW Limited
Derwent London No.2 Limited
Derwent London No.4 Limited
Derwent London No.5 Limited
Derwent London No.6 Limited
Derwent London Oliver's Yard Limited
Derwent London Page Street Limited
Derwent London Savile Row Limited
Derwent London White Chapel Limited
Derwent London White Collar Limited
Derwent London Whitfield Street Limited
Derwent Valley Central Limited
Derwent Valley London Limited
Derwent Valley Property Developments Limited
Derwent Valley Property Investments Limited
Derwent Valley Property Trading Limited
Derwent Valley Railway Company2
Derwent Valley West End Limited
London Merchant Securities Limited3
2022
£m
9.3
–
6.6
(0.2)
–
–
(0.3)
1.1
1.3
(3.9)
2.1
(0.7)
1.0
–
(0.1)
–
3.1
0.6
–
(4.1)
3.4
1.3
–
–
2.6
–
–
1.2
–
1.7
3.6
4.4
(8.1)
(4.8)
0.1
–
(0.1)
(10.9)
10.2
2021
£m
9.1
–
7.6
(0.2)
–
(0.2)
0.2
1.8
–
(3.9)
2.7
(0.6)
0.9
–
–
–
4.9
0.5
(0.1)
(4.4)
1.1
–
–
–
5.2
(0.2)
(0.1)
–
–
1.9
4.2
2.4
(7.9)
(5.0)
0.3
–
(0.1)
(5.6)
14.5
2022
£m
270.7
(1.1)
174.3
(3.5)
(5.0)
–
(45.8)
12.1
35.7
(170.2)
30.4
(24.8)
34.6
0.4
8.1
(3.9)
46.1
16.2
–
(110.6)
56.3
37.0
(17.3)
3.1
18.1
–
(0.5)
64.6
(2.0)
45.5
(20.0)
150.5
(223.1)
(131.2)
2.5
(0.2)
(3.8)
(339.5)
(96.3)
2021
Restated
£m
222.7
(1.0)
180.6
(5.3)
(5.0)
–
14.7
40.9
3.3
(168.3)
80.3
(18.3)
20.4
(0.2)
(4.5)
(4.6)
117.2
15.9
(3.0)
(107.0)
128.0
(20.0)
–
–
124.5
(5.8)
(5.2)
(2.8)
(2.3)
46.1
114.8
109.1
(195.1)
(123.1)
6.1
(0.2)
(3.7)
(142.1)
407.1
1 The payable balance at 31 December 2022 includes the intercompany loan of £170.1m (2021: £168.3m) 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.
292
Derwent London plc / Report and Accounts 2022
NOTES TO THE FINANCIAL STATEMENTS continued
for the year ended 31 December 2022
40 EPRA PERFORMANCE MEASURES AND CORE RECOMMENDATIONS
Unaudited unless stated otherwise.
Summary table of EPRA performance measures
2022
2021
EPRA earnings (audited1) (restated)
EPRA Net Tangible Assets (audited1)
EPRA Net Disposal Value (audited1)
EPRA Net Reinstatement Value (audited1)
EPRA Cost Ratio (including direct vacancy costs) (restated)
EPRA Cost Ratio (excluding direct vacancy costs) (restated)
EPRA Net Initial Yield
EPRA 'topped-up' Net Initial Yield
EPRA Vacancy Rate
£119.7m
£4,083.7m
£4,236.2m
£4,447.4m
23.3%
19.5%
3.7%
4.6%
6.4%
1 EPRA earnings and EPRA Net Asset Value metrics for 2022 have been audited.
The definition of these measures can be found on pages 311 and 312.
Number of shares
Pence
per share
p
108.53
3,959
3,884
4,301
Pence
per share
p
106.62
3,632
3,768
3,956
£121.7m
£4,454.2m
£4,369.6m
£4,839.7m
24.9%
21.7%
3.3%
4.4%
1.6%
For use in basic measures
Dilutive effect of share-based payments
For use in diluted measures
Earnings per share
Net asset value per share
Weighted average
At 31 December
2022
Audited
‘000
112,270
142
112,412
2021
Unaudited
‘000
112,139
273
112,412
2022
Audited
‘000
112,291
138
112,429
2021
Unaudited
‘000
112,209
308
112,517
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 2021 and 2022, the Group did not recognise the dilutive impact of the conversion
of the 2025 bonds on its earnings per share (EPS) or net asset value (NAV) per share metrics as, based on the share price
at the end of each year, the bonds were not expected to convert.
The following tables set out reconciliations between the IFRS and EPRA earnings for the year and earnings per share.
The adjustments made between the figures are as follows:
A – Disposal of investment and trading property (including the Group’s share in joint ventures), and associated tax and
non-controlling interest.
B – Revaluation movement on investment property and in joint ventures, write-down of trading property and associated
deferred tax and non-controlling interest.
C – Fair value movement and termination costs relating to derivative financial instruments, associated non-controlling
interest and loan arrangement costs written off.
Financial statements
293
Earnings and earnings per share
Year ended 31 December 2022 (audited)
Net property and other income
Total administrative expenses
Revaluation deficit
Profit on disposal of investments
Net finance costs
Movement in fair value of derivative financial
instruments
Financial derivative termination costs
Share of results of joint ventures
Loss before tax
Tax charge
Earnings attributable to equity shareholders
IFRS
£m
194.6
(36.4)
(422.1)
25.6
(39.4)
5.8
(0.3)
(7.3)
(279.5)
(1.0)
(280.5)
Adjustments
B
£m
0.2
–
422.1
–
–
–
–
9.3
431.6
0.3
431.9
A
£m
(0.2)
–
–
(25.6)
–
–
–
–
(25.8)
–
(25.8)
(Loss)/earnings per share
Diluted (loss)/earnings per share
(249.84p)
(249.84p)
C
£m
–
–
–
–
–
(5.8)
(0.1)
–
(5.9)
–
(5.9)
EPRA
basis
£m
194.6
(36.4)
–
–
(39.4)
–
(0.4)
2.0
120.4
(0.7)
119.7
106.62p
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.
Year ended 31 December 2021 (unaudited)
Net property and other income (restated)
Total administrative expenses
Revaluation surplus (restated)
Profit on disposal of investments
Net finance costs
Movement in fair value of derivative financial
instruments
Financial derivative termination costs
Share of results of joint ventures
Profit before tax
Tax credit
Profit for the year
Non-controlling interest
Earnings attributable to equity shareholders (restated)
IFRS
£m
187.2
(37.1)
131.1
10.4
(28.1)
4.8
(1.9)
(13.9)
252.5
1.3
253.8
(1.5)
252.3
Earnings per share (restated)
Diluted earnings per share (restated)
224.99p
224.44p
Adjustments
B
£m
1.4
–
(131.1)
–
–
–
–
14.2
(115.5)
(1.5)
(117.0)
0.4
(116.6)
A
£m
(0.7)
–
–
(10.4)
–
–
–
–
(11.1)
–
(11.1)
–
(11.1)
C
£m
–
–
–
–
–
(4.8)
1.9
–
(2.9)
–
(2.9)
–
(2.9)
EPRA
basis
£m
187.9
(37.1)
–
–
(28.1)
–
–
0.3
123.0
(0.2)
122.8
(1.1)
121.7
108.53p
108.26p
294
Derwent London plc / Report and Accounts 2022
NOTES TO THE FINANCIAL STATEMENTS continued
for the year ended 31 December 2022
40 EPRA PERFORMANCE MEASURES AND CORE RECOMMENDATIONS continued
EPRA Net Asset Value metrics
Net assets attributable to equity shareholders
Adjustment for:
Revaluation of trading properties
Deferred tax on revaluation surplus1
Fair value of derivative financial instruments
Fair value adjustment to secured bonds
EPRA Net Tangible Assets
Per share measure – diluted
Net assets attributable to equity shareholders
Adjustment for:
Revaluation of trading properties
Fair value adjustment to secured bonds
Mark-to-market of fixed rate debt
Unamortised issue and arrangement costs
EPRA Net Disposal Value
Per share measure – diluted
Net assets attributable to equity shareholders
Adjustment for:
Revaluation of trading properties
Deferred tax on revaluation surplus
Fair value of derivative financial instruments
Fair value adjustment to secured bonds
Purchasers' costs2
EPRA Net Reinstatement Value
Per share measure – diluted
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.
2022
Audited
£m
4,075.5
4.8
1.9
(5.0)
6.5
4,083.7
3,632p
4,075.5
4.8
6.5
159.5
(10.1)
4,236.2
3,768p
4,075.5
4.8
3.7
(5.0)
6.5
361.9
4,447.4
3,956p
2021
Unaudited
£m
4,441.8
1.9
1.7
0.8
8.0
4,454.2
3,959p
4,441.8
1.9
8.0
(69.5)
(12.6)
4,369.6
3,884p
4,441.8
1.9
3.3
0.8
8.0
383.9
4,839.7
4,301p
Cost ratio (unaudited)
Administrative expenses
Write-off/impairment of receivables
Other property costs
Dilapidation receipts
Net service charge costs
Service charge costs recovered through rents but not separately invoiced
Management fees received less estimated profit element
Share of joint ventures' expenses
EPRA costs (including direct vacancy costs) (A)
Direct vacancy costs
EPRA costs (excluding direct vacancy costs) (B)
Gross rental income
Ground rent
Service charge components of rental income
Share of joint ventures' rental income less ground rent
Adjusted gross rental income (C)
EPRA cost ratio (including direct vacancy costs) (A/C)
EPRA cost ratio (excluding direct vacancy costs) (B/C)
Financial statements
295
2022
£m
36.4
(1.0)
12.7
(0.5)
5.1
(0.7)
(4.2)
0.5
48.3
(7.9)
40.4
207.0
(1.7)
(0.7)
2.5
207.1
23.3%
19.5%
2021
Restated
£m
37.1
2.2
10.4
(0.9)
3.4
(0.6)
(3.5)
0.1
48.2
(6.1)
42.1
195.3
(1.4)
(0.5)
0.5
193.9
24.9%
21.7%
In addition to the two EPRA cost ratios, the Group has calculated an additional cost ratio based on its property portfolio fair
value to recognise the ‘total return’ nature of the Group’s activities.
Property portfolio at fair value (D)
Portfolio cost ratio (A/D)
The Group has not capitalised any overheads in either 2022 or 2021.
2022
£m
5,321.8
0.9%
2021
Restated
£m
5,646.3
0.9%
296
Derwent London plc / Report and Accounts 2022
NOTES TO THE FINANCIAL STATEMENTS continued
for the year ended 31 December 2022
40 EPRA PERFORMANCE MEASURES AND CORE RECOMMENDATIONS continued
Net Initial Yield and ‘topped-up’ Net Initial Yield (unaudited)
Property portfolio – wholly owned
Share of joint ventures
Less non-EPRA properties1
Completed property portfolio
Allowance for:
Estimated purchasers' costs
EPRA property portfolio valuation (A)
Annualised contracted rental income, net of ground rents
Share of joint ventures
Less non-EPRA properties1
Add outstanding rent reviews
Less estimate of non-recoverable expenses
Current income net of non-recoverable expenses (B)
Contractual rental increases across the portfolio
Contractual rental increases across the EPRA portfolio
‘Topped-up’ net annualised rent (C)
EPRA net initial yield (B/A)
EPRA 'topped-up' net initial yield (C/A)
Vacancy rate (unaudited)
Annualised estimated rental value of vacant premises
Portfolio estimated rental value
Less non-EPRA properties1
EPRA vacancy rate
1
In accordance with EPRA best practice guidelines, deductions are made for development properties, land and long-dated reversions.
2022
£m
5,321.8
42.5
(364.4)
4,999.9
340.0
5,339.9
201.6
2.6
(0.6)
3.1
(7.5)
(5.0)
199.2
46.4
46.4
245.6
3.7%
4.6%
2022
£m
17.3
307.7
(38.0)
269.7
6.4%
2021
£m
5,646.3
50.0
(785.3)
4,911.0
334.0
5,245.0
175.9
2.5
(0.5)
0.1
(3.5)
(3.9)
174.5
55.5
55.5
230.0
3.3%
4.4%
2021
£m
3.8
293.8
(59.9)
233.9
1.6%
Financial statements
297
Like-for-like rental growth (unaudited)
Like-for-like
portfolio
£m
Development
property
£m
Acquisitions and
disposals
£m
2022
Gross rental income
Other property expenditure
Write-off/impairment of receivables
Net rental income
Other
Net property and other income
2021
Gross rental income
Other property expenditure
Write-off/impairment of receivables
Net rental income
Other
Net property and other income
Change based on:
Gross rental income
Net rental income
Net property and other income
15.0
(5.2)
0.7
10.5
(0.2)
10.3
7.1
(1.3)
(0.4)
5.4
(1.2)
4.2
10.1
(0.5)
0.1
9.7
0.2
9.9
8.3
(2.0)
(0.2)
6.1
0.7
6.8
181.9
(13.8)
0.2
168.3
6.1
174.4
179.9
(11.9)
(1.6)
166.4
9.8
176.2
1.1%
1.1%
(1.0%)
Property-related capital expenditure (unaudited)
Acquisitions
Development
Investment properties
Incremental lettable space
No incremental lettable space
Tenant incentives
Capitalised interest
Total capital expenditure
Conversion from accrual to cash basis
Total capital expenditure on a cash basis
2022
2021
Group
(excl. Joint
ventures)
£m
Joint ventures
(50% share)
£m
133.0
94.7
0.9
18.5
0.8
6.9
254.8
11.1
265.9
–
1.6
–
–
–
–
1.6
0.1
1.7
Total
Group
£m
133.0
96.3
0.9
18.5
0.8
6.9
256.4
11.2
267.6
Group
(excl. Joint
ventures)
£m
Joint ventures
(50% share)
£m
353.6
146.6
0.1
16.7
2.5
12.0
531.5
(107.6)
423.9
60.0
0.2
–
–
–
–
60.2
(0.2)
60.0
1
In the prior year, the conversion from accrual to cash basis figure includes £100.7m in relation to the regrant of a headlease at 25 Baker Street W1.
Total
£m
207.0
(19.5)
1.0
188.5
6.1
194.6
195.3
(15.2)
(2.2)
177.9
9.3
187.2
6.0%
6.0%
4.0%
Total
Group
£m
413.6
146.8
0.1
16.7
2.5
12.0
591.7
(107.8)
483.9
298
Derwent London plc / Report and Accounts 2022
NOTES TO THE FINANCIAL STATEMENTS continued
for the year ended 31 December 2022
41 TOTAL RETURN (UNAUDITED)
EPRA Net Tangible Assets on a diluted basis
At end of year
At start of year
(Decrease)/increase
Dividend per share
(Decrease)/increase including dividend
Total return
42 GEARING AND INTEREST COVER
NAV gearing
Net debt
Net assets
NAV gearing
Loan-to-value ratio
Group loan-to-value ratio
Net debt
Fair value adjustment of secured bonds
Unamortised discount on unsecured green bonds
Unamortised issue and arrangement costs
Leasehold liabilities
Drawn debt net of cash (A)
Fair value of property portfolio (B)
Loan-to-value ratio (A/B)
Proportionally consolidated loan-to-value ratio
Drawn debt net of cash (A)
Share of cash and cash equivalents in joint ventures
Drawn debt net of cash including Group's share of joint ventures (C)
Fair value of property portfolio (B)
Share of fair value of property portfolio of joint ventures
Fair value of property portfolio including Group's share of joint ventures (D)
Proportionally consolidated loan-to-value ratio (C/D)
EPRA loan-to-value ratio
Drawn debt net of cash including Group's share of joint ventures (C)
Debt with equity characteristics
Adjustment for hybrid debt instruments
Net payables adjustment
Adjusted debt (E)
Fair value of property portfolio including Group's share of joint ventures (D)
EPRA loan-to-value ratio (E/D)
2022
p
3,632
(3,959)
(327)
78
(249)
(6.3%)
2022
£m
1,257.2
4,075.5
30.8%
2022
£m
1,257.2
(6.5)
1.7
10.1
(35.0)
1,227.5
5,321.8
23.1%
1,227.5
(1.6)
1,225.9
5,321.8
42.4
5,364.2
22.9%
1,225.9
(19.7)
3.3
74.1
1,283.6
5,364.2
23.9%
2021
p
3,959
(3,812)
147
75
222
5.8%
2021
£m
1,251.5
4,441.8
28.2%
2021
£m
1,251.5
(8.0)
1.8
12.6
(70.6)
1,187.3
5,646.3
21.0%
1,187.3
(1.2)
1,186.1
5,646.3
50.0
5,696.3
20.8%
1,186.1
(12.3)
4.5
91.7
1,270.0
5,696.3
22.3%
Financial statements
299
2022
£m
194.6
(4.2)
(0.3)
(1.1)
0.2
(0.2)
189.0
(0.3)
39.7
39.4
0.3
(0.3)
1.4
(2.6)
7.0
45.2
2021
Restated
£m
187.2
(3.5)
(2.0)
(3.6)
1.4
(0.7)
178.8
–
28.1
28.1
–
(0.2)
1.3
(2.5)
12.0
38.7
418%
462%
189.0
2.1
191.1
45.2
423%
178.8
0.4
179.2
38.7
463%
Net interest cover ratio
Group net interest cover ratio
Net property and other income
Adjustments for:
Other income
Other property income
Surrender premiums received
Write-down of trading property
Profit on disposal of trading properties
Adjusted net property income
Finance income
Finance costs
Adjustments for:
Finance income
Other finance costs
Amortisation of fair value adjustment to secured bonds
Amortisation of issue and arrangement costs
Finance costs capitalised
Net interest payable
Group net interest cover ratio
Proportionally consolidated net interest cover ratio
Adjusted net property income
Share of joint ventures' net property income
Adjusted net property income including share of joint ventures
Net interest payable
Proportionally consolidated net interest cover ratio
43 SIGNIFICANT 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.
300
Derwent London plc / Report and Accounts 2022
NOTES TO THE FINANCIAL STATEMENTS continued
for the year ended 31 December 2022
43 SIGNIFICANT ACCOUNTING POLICIES continued
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 – Where investment properties are held under operating leases, the leasehold interest is classified as
if it were held under a finance lease, which is recognised at its fair value on the balance sheet, within the investment
property carrying value. Upon initial recognition, a corresponding liability is included as a finance lease liability.
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 finance lease liability. Contingent rents payable,
being the difference between the rent currently payable and the minimum lease payments when the lease liability was
originally calculated, are charged as expenses within property expenditure in the years in which they are payable.
(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.
Financial statements
301
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.
Under the transitional provisions of IFRS 1, no expense is recognised for options or conditional shares granted on or
before 7 November 2002.
(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.
302
Derwent London plc / Report and Accounts 2022
NOTES TO THE FINANCIAL STATEMENTS continued
for the year ended 31 December 2022
43 SIGNIFICANT 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.
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
303
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.
(iii) 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 a receivable balance included within accrued income in the balance
sheet. This balance is subject to impairment testing under IFRS 9 using the forward-looking, simplified approach to the
expected credit loss model.
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
re-measured. 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.
304
Derwent London plc / Report and Accounts 2022
NOTES TO THE FINANCIAL STATEMENTS continued
for the year ended 31 December 2022
43 SIGNIFICANT 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)
Financial statements
305
Income statement
Gross property income1
Net property income
and other income1
Profit on disposal of
properties and investments
(Loss)/profit before tax
Earnings and dividend per share
EPRA earnings1
EPRA earnings per share (p)1
Dividend paid (p)
Interim/final dividend for the
year (p)
Special dividend paid (p)
Net asset value
Net assets
Net asset value per share (p) –
undiluted
EPRA NTA per share (p) –
diluted
EPRA NDV per share (p) –
diluted
EPRA NRV per share (p) –
diluted
Total return (%)
Property portfolio
Property portfolio at fair value2
Revaluation (deficit)/surplus1
Cash flow statement
Cash flow1,3
Net cash (used in)/from
financing activities
Gearing and debt
Net debt
NAV gearing (%)
Loan-to-value ratio (%)4
Net interest cover ratio (%)
2022
£m
2021
£m
2020
£m
2019
£m
2018
£m
2017
£m
2016
£m
2015
£m
2014
£m
2013
£m
208.4
200.9
205.2
192.7
196.0
172.2
156.0
152.0
138.4
131.6
194.6
187.2
183.5
182.6
185.9
164.8
149.2
148.6
136.1
124.3
25.6
10.4
(279.5) 252.5
1.7
13.8
(83.0) 280.6
5.2
221.6
50.3
314.8
7.5
54.5
40.2
779.5
30.2
753.7
53.5
467.9
119.7
121.7
106.62 108.53
75.45
77.50
109.6
115.1
97.93 103.09
73.45
105.0
126.1
113.07
94.23
67.75 136.50 107.83
85.7
76.99
44.66
78.7
71.34
40.60
58.6
57.08
37.40
55.1
53.87
34.50
78.50
–
76.50
–
74.45
–
72.45
–
65.85
–
59.73
75.00
52.36
52.00
43.40
–
39.65
–
36.50
–
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 2,370.5
3,629
3,959
3,808
3,956
3,767
3,703
3,530
3,528
2,931
2,248
3,632
3,959
3,812
3,957
3,775
3,714
3,550
3,532
2,906
2,262
3,768
3,884
3,682
3,847
3,696
3,617
3,450
3,463
2,800
2,222
3,956
(6.3)
4,301
5.8
4,138
(1.8)
4,290
6.6
4,092
5.3
4,011
7.7
3,852
1.7
3,825
23.0
3,163
30.1
2,470
21.9
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 3,353.1
337.5
(421.4)
(194.3)
(42.6)
134.8
154.6
651.4
671.9
149.7
84.1
(27.1)
(142.0)
(63.4)
(22.3) (245.9)
247.8
19.6
(43.6)
(57.3)
(65.9)
(88.6)
74.7
(27.2)
(16.6)
25.2 (298.2)
(57.0)
2.0
23.4
42.9
1,257.2 1,251.5 1,049.1
24.3
18.4
446
30.8
23.9
423
28.2
22.3
464
981.6
21.9
16.9
462
956.9
22.4
17.2
491
657.9
15.7
13.2
454
904.8
22.6
17.7
370
911.7 1,013.3
32.9
22.8
24.0
17.8
286
362
949.2
40.0
28.0
279
1 2021 and 2020 prior year figures have been restated for changes in accounting policies. See note 2 for additional information.
2 Excludes share of joint ventures.
3 Cash flow is the net cash from operating and investing activities less the dividend paid.
4 Presented on an EPRA basis for 2022 and 2021.
A list of definitions is provided on page 311.
306
Derwent London plc / Report and Accounts 2022
EPRA SUMMARY
(unaudited)
EPRA PERFORMANCE MEASURES
EPRA measure
EPRA earnings1
EPRA undiluted earnings per share1
EPRA Net Tangible Assets (NTA)
EPRA diluted NTA per share
EPRA Net Disposal Value (NDV)
EPRA diluted NDV per share
Definition
Earnings from operational activities
EPRA earnings divided by the weighted
average number of ordinary shares in issue
during the financial year
Assumes that entities buy and sell assets,
thereby crystallising certain levels of
unavoidable deferred tax
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
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 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
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
EPRA diluted NRV per share
EPRA cost ratio
(including direct vacancy costs)1
EPRA net initial yield
EPRA 'topped-up' net initial yield
EPRA vacancy rate
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
Administrative & operating costs (including
costs of direct vacancy) divided by gross
rental income
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
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)
Estimated rental value (ERV) of immediately
available space divided by the ERV of the
EPRA portfolio
1 Prior year figures have been restated for changes in accounting policies. See note 2 for additional information.
2022
£119.7m
106.62p
2021
£121.7m
108.53p
£4,083.7m
£4,454.2m
3,632p
3,959p
£4,236.2m
£4,369.6m
3,768p
3,884p
£4,447.4m
£4,839.7m
3,956p
4,301p
23.3%
24.9%
3.7%
3.3%
4.6%
4.4%
6.4%
1.6%
Financial statements
307
2022
2021
7,597,369
7,771,6151
81,367
48,188
175,180
94,436
EPRA SUSTAINABILITY PERFORMANCE MEASURES
Environmental Sustainability Performance Measures
EPRA measure
Definition
Landlord Grid electricity
consumption
Electricity use across our managed portfolio
(landlord/common areas) – annual kWh
Onsite renewable
electricity consumption
DL Occupied Grid
electricity consumption
Tenant Grid electricity
consumption
Electricity use across our managed portfolio
(onsite renewables) – annual kWh
Electricity use across our managed portfolio
(landlord occupied areas) – annual kWh
Electricity use across our total managed portfolio
(tenant occupied areas) – annual kWh
25,302,791 24,058,669
Total electricity consumption
Electricity use across our total managed portfolio
33,156,706
31,972,908
Like-for-like landlord grid
electricity consumption
Energy use across our like-for-like portfolio
(landlord/common areas) – annual kWh
Like-for-like Onsite renewable
electricity consumption
Electricity use across our like-for-like portfolio
(onsite renewables) – annual kWh
Like-for-like DL Occupied
grid electricity consumption
Electricity use across our like-for-like portfolio
(landlord occupied areas) – annual kWh
7,466,291
7,145,9071
46,324
48,188
81,453
92,555
Like-for-like Tenant grid
electricity consumption
Electricity use across our like-for-like portfolio
(tenant occupied areas) – annual kWh
24,010,561 22,390,593
Total like-for-like electricity
consumption
Total fuel consumption
Electricity use across our like-for-like portfolio
31,604,628
29,677,243
Fuel use (gas, oil, biomass) across our managed
portfolio (landlord/common areas) – annual kWh
14,633,956
17,351,1691
Like-for-like total fuel consumption Fuel use (gas, oil, biomass) use across our like-for-
13,199,121
15,189,5361
like portfolio (landlord/common areas) – annual kWh
Building energy intensity
Building energy intensity
Total direct greenhouse gas (GHG)
emissions
Total indirect greenhouse gas
(GHG) emissions
Like-for-like total direct
greenhouse gas (GHG) emissions
Like-for-like total indirect
greenhouse gas (GHG) emissions
Greenhouse gas (GHG) intensity
from building energy consumption
Greenhouse gas (GHG) intensity
from building energy consumption
Greenhouse gas (GHG) intensity
from building energy consumption
Total water consumption
Energy use across our total managed portfolio
(landlord/common areas) – kWh per m2
Energy use across our total managed portfolio
(landlord & tenants) – kWh per m2
Total managed portfolio emissions (landlord
influenced portfolio emissions); a total of gas
Scope 1 emissions – annual metric tonnes CO2e
Total managed portfolio emissions (landlord
influenced portfolio emissions); Scope 2 energy-
use – annual metric tonnes CO2e
Like-for-like emissions (landlord influenced
portfolio emissions, building related only);
Scope 1 energy-use – annual metric tonnes CO2e
Like-for-like emissions (landlord influenced
portfolio emissions, building related only);
Scope 2 energy-use – annual metric tonnes CO2e
Intensity (Scopes 1 & 2) per m2 – tCO2e/m2/year
57
123
651
128
2,988
3,1851
1,503
1,6701
2,726
2,7891
1,460
1,5371
0.012
0.013
Intensity (Scopes 1 & 2) per m2/£m fair market value
0.84
0.85
Intensity (Scopes 1 & 2) per m2/£m turnover
20
27
Like-for-like total water
consumption
Water use across our like-for-like portfolio
(excluding retail consumption) – annual m3
Water use across our total managed portfolio
(excluding retail consumption) – annual m3
150,072
107,8641
132,389
98,736
308
Derwent London plc / Report and Accounts 2022
EPRA SUMMARY continued
(unaudited)
EPRA SUSTAINABILITY PERFORMANCE MEASURES continued
Environmental Sustainability Performance Measures continued
EPRA measure
Definition
Building water intensity
Water use across our total managed portfolio
(excluding retail consumption) – m3/m2/year
Total weight of waste
by disposal route
Waste generated across our total managed portfolio –
annual metric tonnes and proportion by disposal route
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
2022
0.40
1,847
1,521
2021
0.291
1,157
695
1 2021 figures have been restated based on updated calculation methodology. Refer to our latest Responsibility Report for details and for total certifications (Cert-Tot).
Social Performance Measures
EPRA measure
Definition
Employee gender diversity
Gender pay ratio
See page 189
Percentage of male and female employees in the
organisation’s governance bodies (committee or
boards responsible for the strategic guidance of
the organisation)
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
New hires and turnover
Total number and rate of new employee hires and
employee turnover during the reporting period
See page 59
Employee health and safety
Asset health and
safety assessments
Asset health and
safety compliance
Occupational health and safety performance with
relation to direct employees
Proportion of assets controlled for which health and
safety impacts have been reviewed or assessed for
compliance or improvement
Any incidents of non-compliance with regulations and/
or voluntary standards concerning the health and safety
impacts of assets assessed during the reporting period
Employees training
and development
Average hours of training that the organisation’s
employees have undertaken in the reporting period
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
programmes
Percentage of assets under operational control that have
implemented local community engagement, impact
assessments and/or development programmes
See pages 63 and 64
See pages 63 and 64
See the EPRA Reporting
section in our
Responsibility Report
Governance Performance Measures
EPRA measure
Definition
Composition of the
highest governance body
Process for nominating
and selecting the highest
governance body
Process for managing
conflicts of interest
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
Nomination and selection process for the highest
governance body and its members, and the criteria
used to guide the nomination and selection process
See page 134, 135, 146
and 147
See pages 152 to 155
Process for the highest governance body to ensure
conflicts of interest are avoided and managed
See page 146
PRINCIPAL PROPERTIES
(unaudited)
Financial statements
309
Offices (O), Retail/
restaurant (R),
Residential (Re),
Industrial (I),
Leisure (L)
Value banding
£m
Freehold (F),
Leasehold (L)
BREEAM rating
Approximate
net area
sq ft
West End: Central (63%)
Fitzrovia1 (33%)
80 Charlotte Street W12
1-2 Stephen Street & Tottenham Court Walk W1
250 Euston Road NW1
Network, 95-100 Tottenham Court Road W1
90 Whitfield Street W1
Holden House, 54-68 Oxford Street W1
Henry Wood House, 3-7 Langham Place W1
Middlesex House, 34-42 Cleveland Street W1
Charlotte Building, 17 Gresse Street W1
88-94 Tottenham Court Road W1
80-85 Tottenham Court Road W1
Rathbone Studios, 3-10 Rathbone Place W1
60 Whitfield Street W1
43 and 45-51 Whitfield Street W1
1-5 Maple Place and 12-16 Fitzroy Street W1
171-174 Tottenham Court Road W1
76-78 Charlotte Street W1
19-23 Fitzroy Street W1
50 Oxford Street W13
Victoria (9%)
Horseferry House, Horseferry Road SW1
Greencoat and Gordon House, Francis Street SW1
1 Page Street SW1
Francis House, 11 Francis Street SW1
6-8 Greencoat Place SW1
300+
200-300
100-200
50-100
100-200
50-100
50-100
50-100
25-50
50-100
25-50
25-50
50-100
25-50
0-25
0-25
0-25
0-25
0-25
100-200
100-200
100-200
50-100
25-50
O/R/Re
O/R/L
O
O/R
O/R/Re
O/R
O/R/L
O
O
O/R
O/R
O/R/Re/L
O
O
O
O/R
O
O
O/R
Very Good
Excellent
Very Good
F
F
F
F *Outstanding
F
F
L
F
L
F
F
L/F
F
F
F
F
F
F
F
O
O
O
O
O
F
F
F
F
F
Excellent
347,600
266,200
165,900
137,000
103,100
90,600
80,100
66,500
47,200
45,900
44,500
42,300
36,200
29,400
19,900
15,800
10,500
8,100
6,100
162,700
138,300
127,800
51,800
32,400
Soho/Covent Garden (8%)
1 Soho Place W1
Paddington (7%)
Brunel Building, 2 Canalside Walk W2
Marylebone (4%)
25 Baker Street W1
300+
O/R
L *Outstanding
225,400
300+
O/R
L
Excellent
243,400
50 Baker Street W1 JV (50% share)
25-50
O/R
Mayfair (2%)
25 Savile Row W1
100-200
O/R
L
F
Very Good
43,000
100-200
O/R/Re
L **Outstanding,
**Very Good
298,000
61,100
310
Derwent London plc / Report and Accounts 2022
PRINCIPAL PROPERTIES continued
(unaudited)
Offices (O), Retail/
restaurant (R),
Residential (Re),
Industrial (I),
Leisure (L)
Value banding
£m
Freehold (F),
Leasehold (L)
BREEAM rating
Approximate
net area
sq ft
West End: Borders/Other (7%)
Islington/Camden (6%)
Angel Building, 407 St. John Street EC1
4 & 10 Pentonville Road N1
Holford Works, Cruikshank Street WC1
401 St. John Street EC1
200-300
25-50
0-25
0-25
O/R
O
O/I
O
Brixton (1%)
Blue Star House, 234-244 Stockwell Road SW9
25-50
O/R
City: Borders (29%)
Old Street (12%)
White Collar Factory, Old Street Yard EC1
300+
O/R/Re
1 Oliver’s Yard EC1
The Featherstone Building, 66 City Road EC1
100-200
100-200
Clerkenwell (9%)
20 Farringdon Road EC1
88 Rosebery Avenue EC1
Morelands, 5-27 Old Street EC1
Turnmill, 63 Clerkenwell Road EC1
19 Charterhouse Street EC14
Shoreditch/Whitechapel (7%)
The White Chapel Building E1
Tea Building, 56 Shoreditch High Street E1
Southbank (1%)
230 Blackfriars Road SE1
Provincial (1%)
O/R
O/R
O/R/L
O
O/R
O/R
O
O/L
O/R/L
100-200
50-100
50-100
50-100
50-100
100-200
200-300
25-50
O
Scotland (1%)
Strathkelvin Retail Park, Bishopbriggs, Glasgow
Land, Bishopbriggs, Glasgow
25-50
25-50
R/L
-
1
Includes North of Oxford Street.
2 Excludes sold residential.
3 Includes 36-38 and 42-44 Hanway Street W1.
4 Sold in January 2023.
* On-track for Design Certification.
** On-track for Post Completion target.
( ) Percentages weighted by valuation.
Excellent
Very Good
F
F
F
F
F
F Outstanding,
Excellent,
Very Good
F
F Outstanding
L
F
L Outstanding
Excellent,
F
Very Good
F
F
F
L
F
F
268,300
53,400
41,600
12,300
53,400
291,400
186,000
127,300
166,300
103,700
88,700
70,300
63,700
272,300
272,200
60,400
325,500
5,500 acres
Financial statements
311
LIST OF DEFINITIONS
(unaudited)
Better Buildings Partnership (BBP)
Energy Performance Certificate (EPC)
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.
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.
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.
312
Derwent London plc / Report and Accounts 2022
LIST OF DEFINITIONS continued
(unaudited)
EPRA capital expenditure
Fair value adjustment
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.
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.
EPRA Cost Ratio (including direct vacancy costs)
EPRA costs as a percentage of gross rental income
less ground rent (including share of joint venture gross
rental income less ground rent). EPRA costs include
administrative expenses, other property costs, net service
charge costs and the share of joint ventures’ overheads
and operating expenses (net of any service charge costs),
adjusted for service charge costs recovered through rents
and management fees.
EPRA Cost Ratio (excluding direct vacancy costs)
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).
Calculated as above, but with an adjustment to exclude
direct vacancy costs.
Interest rate swap
EPRA Net Initial Yield (NIY)
Annualised rental income based on the cash rents
passing at the balance sheet date, less non-recoverable
property operating expenses, divided by the market value
of the EPRA property portfolio, increased by estimated
purchasers’ costs.
EPRA ‘topped-up’ Net Initial Yield
This measure incorporates an adjustment to the EPRA NIY
in respect of the expiration of rent-free periods (or other
unexpired lease incentives such as discounted rent periods
and stepped rents).
EPRA vacancy rate
Estimated rental value (ERV) of immediately available
space divided by the ERV of the EPRA portfolio.
In addition, the Group has adopted the following
recommendation for investment property reporting.
EPRA like-for-like rental income growth
The growth in rental income on properties owned
throughout the current and previous year under review.
This growth rate includes revenue recognition and lease
accounting adjustments but excludes properties held for
development in either year and properties acquired or
disposed of in either year.
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.
Financial statements
313
Loan-to-value ratio (LTV)
Real Estate Investment Trust (REIT)
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)
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.
Equity shareholders’ funds divided by the number of
ordinary shares in issue at the balance sheet date.
Rent reviews
Net debt
Borrowings plus bank overdraft less unrestricted cash and
cash equivalents.
Net interest cover ratio
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.
Net property income, excluding all non-core items divided
by interest payable on borrowings and non-utilisation fees.
Reporting of Injuries, Diseases and Dangerous
Occurrences Regulations (RIDDORs)
Property income distribution (PID)
Dividends from profits of the Group’s tax-exempt property
rental business under the REIT regulations.
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.
Non-PID
Dividends from profits of the Group’s taxable residual business.
314
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LIST OF DEFINITIONS continued
(unaudited)
Reversion
Total return
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.
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.
Science Based Target initiative (SBTi)
Total shareholder return (TSR)
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.
‘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”.
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.
SHAREHOLDER INFORMATION
Financial statements
315
Shareholder enquiries
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 registrars, 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.
Financial and dividend calendar – 2023
Our forthcoming financial and dividend calendar for
2023 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
Q1 Business update
Annual General Meeting
Interim results announced
Q3 Business update
28 February
04 May
12 May
10 August
02 November
Dividend calendar
Ex-dividend date
Record date
Dividend paid
Final dividend
Interim dividend
27 April
28 April
02 June
07 September
08 September
13 October
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
Company information
As at 28 February 2023, the Company’s issued share
capital consisted of 112,290,679 ordinary shares of
5 pence each with voting rights (ISIN: GB0002652740).
Advisers
Stockbrokers
Solicitors
Auditor
Registrar
JP Morgan Cazenove
UBS
Slaughter & May LLP
PricewaterhouseCoopers LLP
Equiniti Limited
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
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Derwent London plc / Report and Accounts 2022
AWARDS AND RECOGNITION
Derwent London won numerous awards for its achievements
and buildings in 2022, a sample of which are shown below.
GRESB (Global Real Estate
Responsibility Benchmark) 2022 –
Green Star status, ‘A’ rated
public disclosure (100/100),
Development 5 Star (94/100),
Standing Assets 4 Star (82/100)
FTSE4Good –
Member since 2003
MSCI – ‘AAA’ rating
CDP 2022 –
Climate change 2022 ‘B’ rating
EPRA Sustainability Reporting
Award 2022 – Gold award
ISS Oekom – Prime status
80 Charlotte Street – BCO
Best National Commercial
Workplace Award 2022
EPRA Gold for Report
& Accounts
NES
Highly commended Annual
Report of the Year FTSE 250
2022
European Real Estate
Brand Award: UK Developer –
Offices 2022
Green Apple Environment
Award 2022
Derwent London plc
Registered office: 25 Savile Row, London W1S 2ER
T: +44 (0)20 7659 3000
www.derwentlondon.com
Registered No: 1819699