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Derwent London PLC18 March 2008 DERWENT LONDON PLC ("Derwent" / "Group") Preliminary results for the year ended 31st December 2007 DERWENT LONDON ANNOUNCES STRONG RESULTS Derwent London is pleased to announce excellent progress in the year to 31December 2007, demonstrating the quality of its portfolio and management and theopportunities created by and the success of the acquisition of London MerchantSecurities. Highlights • Adjusted net asset value per share rose 8.4% to 1,862p (1 February 2007 proforma: 1,717p); adjusted net asset value excluding minority interests of 1,801p (1 February 2007 proforma: 1,662p). • Total dividend up 53% to 22.5p (2006: 14.75p) compared to an increase in diluted recurring earnings per share of 29% to 34.99p. • Value of the Group's portfolio rose to £2.7 billion (1 February 2007 proforma: £2.5 billion) producing a surplus of £90.3 million. • Recurring profit before tax of £38.0 million, up 132% (2006: £16.4 million). IFRS loss, after goodwill write off, of £99.8 million (2006: profit £242.8 million). • Successful REIT conversion achieved on 1 July 2007; resulting capital gains tax saving of £31.3 million on the Group's disposals. • Disposals programme realised £344 million, producing a valuation surplus of £130 million. • Acquisition of £142 million of Central London assets. • Lettings totalling 21,900 sq m completed during the year with an annual rental income of £8.3 million. Robert Rayne, Chairman, commented: "After our first year as Derwent London following the acquisition of LondonMerchant Securities ("LMS") in February, it is extremely pleasing to be able toreport a strong set of results. 2007 has been a testing period for the propertysector, particularly in the latter months when the industry experienced a sharpdecline in values. Against this background, the results clearly demonstrate thequality of both our portfolio and management." "We foresee a more demanding market in which the key to value creation will behands-on property expertise. With balance sheet gearing of 43%, unused,committed, bank facilities of £370 million and long-term rental commitments fromquality tenants, the group is financially well positioned not only to face, butalso to capitalise, on these challenging times. We are confident that yourmanagement's experience and proven skills will enable your group to takeadvantage of those opportunities which will deliver future growth." For further information, please contact: Derwent London Financial DynamicsJohn Burns, Chief Executive Stephanie Highett/Dido LaurimoreTel: 020 7659 3000 Tel: 020 7831 3113 A copy of the investor presentation and a live audio webcast will be availableon Derwent London's website, www.derwentlondon.com, from 9.30am. Chairman's statement Overview and results After our first year as Derwent London following the acquisition of LondonMerchant Securities ("LMS") in February 2007, it is extremely pleasing to beable to report a strong set of results. 2007 has been a testing period for theproperty sector, particularly in the latter months when the industry experienceda sharp decline in values. Against this background, the results clearlydemonstrate the quality of both our portfolio and management. Adjusted net asset value per share, based on the total net assets of the group,increased to 1,862p from the proforma figure of 1,717p at 1st February 2007, theacquisition completion date. The adjusted figure, excluding minority interests,was 1,801p, an increase of 8.4% from the comparable proforma figure of 1,662p.An increase of 12.8% in the first six months was followed by a decline of 3.9%in the second half as the impact of the credit crisis contributed to an increasein yields. At the year end, the investment portfolio was valued at £2.7billion, producing a surplus of £94.4 million before the lease incentiveadjustment of £4.1 million. The valuation reflects a true equivalent yield of5.7%. The Central London properties which account for 93% of the totalportfolio showed a 5.8% increase for the year. Properties held throughout theperiod gained in value by 4.3% compared to 21.6% in 2006. Recurring profit before tax, which includes eleven months of the results of LMS,was £38.0 million. This measure of performance has increased 132% from lastyear's level of £16.4 million. REITS The group converted to a REIT on 1st July 2007 to take advantage of the morefavourable tax regime in which it is exempt from tax on both rental profits andchargeable gains. The consequent conversion charge, calculated as 2% of thevalue of the investment portfolio at the date of conversion, amounts to £53.6million. This is included in the tax charge for the year and will be paid during2008. As a REIT, the group was able to eliminate the latent capital gains taxliability on the investment property portfolio. Following conversion, the groupmoved decisively to take advantage of the active investment market and effecttax efficient disposals of non-core properties. This achieved outstandingresults and, together with the first half sales, proceeds totalled £344 millionnet of costs, showing a surplus of £130 million or 63% over the pro-formavalues. The exemption from tax on capital gains saved the group £31.3 million oftax on these disposals. Dividend As a REIT, the group is subject to a minimum distribution test whereby at least90% of recurring profits from the tax-exempt business must be distributed as aProperty Income Dividend ("PID"). Therefore, all dividends must now be allocatedbetween PIDs and non-PIDs. The directors are recommending a final dividend of15.0p per share of which 10.0p per share will be paid as a PID. This will bepaid on 19th June 2008 to shareholders on the register on 23rd May 2008.Together with the non-PID interim dividend of 7.5p per share this gives a totaldividend for the year of 22.5p per share. In accordance with the group's revisedpolicy, this dividend includes a substantial proportion of the tax on incomesaved through REIT conversion and represents an increase of 52.5% on the 14.75ppaid in respect of 2006. Market review After a strong first half for property values, the second half of the year wascharacterised by a lack of liquidity and rising yields, causing a decline invalues. By contrast, tenant demand remained strong, particularly in our corearea of operations, the West End. This area has a limited supply of qualityoffice space and, as a consequence, has enjoyed growth in rental values of 14.6%over the year. In our key London villages, we continue to focus on the middle market deliveringour hallmark, design-led offices at economic rents ranging from £430 - £700 persq m (£40 - £65 per sq ft). When measured against prime rents in Mayfair and StJames', which have exceeded £1,290 per sq m (£120 per sq ft), we believe ourbuildings are an attractive proposition for tenants. The success of thisapproach is demonstrated by lettings totalling 21,900 sq m being completedduring the year at rental levels 18% above the valuers' December 2006 estimates.These included both the highest rent achieved at Tower House, Covent Gardenand a record rent for Fitzrovia at Qube. At the year end, space available forletting within the group's 533,000 sq m (5.7 million sq ft) portfolio amountedto 4.0% by floor area and 4.5% by rental value. The planning process continues to become more complicated and lengthy. In orderto minimise voids during this period, and to maintain flexibility over thetiming of schemes, it is part of the group's strategy to keep properties incomeproducing until works commence. Despite the protracted process, three notable planning consents have recentlybeen obtained. At North Wharf Road, Paddington, a scheme for a landmark 22,300sq m office building and 100 residential apartments has been approved, anincrease in floor area of 276% from the existing building. The property is letuntil a possible start date of 2010. Secondly, we have received planning permission for the redevelopment of 40Chancery Lane, Holborn. This involves replacing three buildings, totalling 6,600sq m, with 9,500 sq m of high quality offices. They are all multi-let on leasesthat expire by 2012. Finally, at the Angel Building in Islington, planning permission has beenobtained for a 23,700 sq m property, an increase of 58% from the existingbuilding. This project also illustrates how, by working closely with ourtenants, we are able to unlock additional value from within our portfolio. Arestructuring of the existing lease was negotiated whereby we are able toundertake construction works immediately but the tenant continues to pay therent of £4.2 million per annum until March 2010. With the scheme expected to bedelivered for occupation in 2010, this has mitigated a substantial income void. During the year, further investment has been made in the group's pipeline offuture projects. Within the key London villages of Clerkenwell, Fitzrovia andNoho, £142 million was expended on enlarging our holdings. The average passingrent of these acquisitions is £178 per sq m (£16.50 per sq ft) and all have thescope to substantially increase floor area. In addition, capital expenditure onprojects during the year was £61 million. Principally, this was incurred on ourpre-let schemes at Horseferry House and Arup Phases II and III, as well as Qubewhich completed towards the year end and Portobello Dock which completes inMarch. These projects comprise 44,800 sq m. Board The directors are delighted to welcome David Silverman to the board. David, whohas been with the group since 2002, was appointed on 2nd January 2008 withresponsibility for investment acquisitions and sales. Prospects Our objective is to create superior shareholder return through the intensivemanagement of our Central London portfolio. This is characterised by itsreversionary nature as well as the potential to create value through leasemanagement and high quality refurbishment or re-development. These features notonly underpin our future growth but also allow us to manage risk in times ofuncertainty. At present, the investment market is experiencing some instability andequilibrium will only return when there is a consistent deal flow which requiresthe restoration of both confidence and liquidity to the market. Currently,demand for space in the West End remains firm for the limited available space.However, in the event of a general economic slowdown, even in this distinctivearea, rental growth is likely to be affected. While these factors lead us to have a cautious view of the market in the yearahead, our focus on properties offering mid-market rents, provides relativeresilience and many of the group's most successful projects were originallyacquired in similarly testing markets. At the year end, both balance sheetgearing at 42.5% and profit and loss gearing at 1.81, were at comfortablelevels. Together with unused, committed, bank facilities of £370 million andlong-term rental commitments from quality tenants, this shows the group to befinancially well positioned not only to face, but also to capitalise, on thesechallenging times. In summary, whilst we foresee a more demanding market in which the key to valuecreation will be hands-on property expertise, we are confident that yourmanagement's experience and proven skills will enable the group to takeadvantage of those opportunities which will deliver future growth. R A Rayne 18th March 2008 Property review Derwent London is a property investment company focused on the Central Londonoffice market. At 31st December 2007, the portfolio was valued at £2.7billion, comprising over 533,000sq m concentrated in the West End where 72% byvalue of the assets are located. The company's strategy is to deliver aboveaverage total returns from rental income and the creation of value through assetmanagement and development. Innovative design solutions and high qualitycontemporary architecture play an important role in the business and the grouphas gained a strong reputation for delivering first class, award-winning officespace that is both attractive and economical to tenants. Key achievements in 2007 and since the year end include: • The integration of London Merchant Securities into Derwent Valley Holdings to create Derwent London. • Conversion to a REIT on 1st July 2007. • £344 million of disposals, which produced a £130 million surplus. • The acquisition of £142 million of properties, all characterised by low rental levels and offering significant planning opportunities. • 21,900sq m of letting activity at an annual rental income of £8.3 million and achieving 18% above the valuers' estimated rental values. • Initial lettings made at the group's 10,000sq m Qube office development following its completion in October. • Substantial progress at current schemes including Horseferry House in Victoria and the Arup project in Fitzrovia, both of which are pre-let. • Development commenced at 16-19 Gresse Street to deliver 4,400sq m of offices in Noho in 2009. • A significant planning permission obtained for the redevelopment of North Wharf Road, Paddington to provide 22,300sq m of offices and 100 residential units. • A lease restructure at the Angel Building in Islington that paved the way for a major 23,700sq m redevelopment for which planning permission has been received in 2008. • A total annualised property return for properties held throughout the period of 11.2%. Overview 2007 was a groundbreaking year for the company with the creation of DerwentLondon - following the acquisition of LMS by Derwent Valley Holdings ("DVH").Managing the merger of the businesses was an important and complex process,requiring not only the successful integration of the operations but also thecontinuation of the DVH ethos that has been built up over many years. With theintegration fully complete, all employees are now based at our Savile Rowoffice. The merger doubled the floor area of the portfolio to 533,000 sq m andsignificantly strengthened our position as a leading Central London officeinvestor. Overall, 93% of our assets by value are located here. At the sametime it reinforced our strategy of owning properties let at low average rentswith important reversionary growth potential and maintaining a portfolio withsubstantial development potential. The average rent of the Central Londonportfolio is £257 per sq m and the average unexpired lease length is 8.8 years.Over 50% of this space has been identified for refurbishment/redevelopmentprojects at the appropriate time in the future. Whilst substantially enlarging our property ownership, the merger also enhancedour geographical coverage within Central London. In particular, DVH had astrong representation in the villages south of Oxford Street (such as Soho,Covent Garden, Victoria) which complements the LMS ownerships to the north ofOxford Street (such as Fitzrovia, Baker Street, Islington). This increasedpresence in these dynamic and evolving areas gives us the opportunity to providea greater offering of West End properties to tenants at various levels of rent.With high occupational costs in the West End, this puts us in a strong position. In the villages of Central London, we have accumulated a specialist knowledgeand understanding of their history and culture and how each is evolving to facethe future. Through the provision of high quality working environments, we aimto be recognised as a key player in Central London and to help influence thechanging look of the capital. We concentrate on mid-market office rentallocations, typically £430 - £700 per sq m, as these are found in some of themost vibrant and improving areas in London to both work and live. For example,we identified and invested in Paddington at an early stage of its regenerationand this area has been transformed over the last five years to become animportant part of the West End office market. In Fitzrovia, where we own over100,000sq m of property, we are reinvigorating the locality by replacing thetired 1950s properties with contemporary offices and improved retail facilities. The London economy With our Central London focus, the health and trends of London's economy are akey factor to the group, not only in the generation and growth of rental incomebut also in the timing and delivery of our projects. London's economy accounts for approximately 19% of the UK's total GDP and 15% ofits employment. Its growth and prosperity is strongly influenced by thevitality of the financial and business services (F&BS) sector and this hasexpanded rapidly over recent years. Consequently, the health of this sector isan important determinant in the demand for the capital's office space. Despitethe recent turbulence in the global financial markets, economic forecastssuggest that over the next five years, London's economy should be more resilientthan the rest of the UK. Total office stock in Central London is estimated at 19.1 million m2 and issubdivided into three distinct regions - the City (49%), the West End (42%) andDocklands (9%). The West End has a broad tenant base and is home to media,professional & business services and specialist fund management, whilst the Cityis the traditional home of banking, insurance and legal services. Since itscreation in the late 1980s, Docklands has been very successful in deliveringlarge, modern office space that has attracted tenants away from the City. TheCity's response was to ease planning regulations to allow taller, higher densitybuildings, thus increasing the development pipeline and enlarging the Cityoffice stock. By contrast, the supply of West End office space has remainedextremely tight due to the restrictive planning regulations, which include therequirement for residential provision where additional office space is proposed.With conservation areas covering approximately 75% of the West End and nearly3,900 listed buildings, development activity in the area is further constrained.As a consequence, office space in the West End has increased little since theearly 1990s. The strong UK economy in 2007, especially in the first half of the year, helpeddrive the Central London office vacancy rate downwards, from 4.3% of total stockat 31st December 2006 to 3.0% at the year end, the lowest level since 2001.Looking at the sub-markets, the City vacancy rate dropped from 5.5% to 3.5%whilst the West End, where available space is particularly scarce, decreasedfrom 3.5% to just 2.3%. These levels are well below the 10-year averages of7.3% in the City and 4.8% in the West End. Strong letting activity contributedto these falling vacancy rates with take-up in Central London and the West Endexceeding their 10-year annual averages. During the year, the supply-demand imbalance in the Central London officemarket, especially in the West End, drove rents to new heights and we benefitedfrom this in our letting activity. Tenant demand is still firm, despite thechanging economic outlook in the second half of the year that began with thecredit crisis, although the mood is undoubtedly more cautious. The West Endmarket looks set to prove more resilient than that of the City due to its lowervacancy levels, more diverse tenant base and limited development pipeline. Despite strong rental growth in 2007, the increase in yields pushed capitalvalues downwards. According to the IPD Quarterly Property Index, the totalreturn in 2007 for West End offices was 5.7%, outperforming both the City OfficeIndex (-3.9%), and the All Property Index (-4.4%). Derwent London's underlyingproperty return over the same period was 11.2%. We monitor closely the occupational and investment trends and their subsequentimpact on the office market. As the properties that form the next generation ofschemes are income producing, we have the flexibility to adjust the timing ofour projects to reflect anticipated market conditions. Our skills andexperience in operating through different stages of the economic and propertycycles enable us to produce superior returns through this careful timing of ourschemes, their design and their rental competitiveness. Objectives and key performance indicators Derwent London's strategy is straightforward; we add value to our propertiesthrough asset management and the development process. We implement well thoughtout planning solutions, based on high quality architectural design and initiatedby enterprising asset management which reflects our understanding of tenants'requirements. Through this process, our objective is to deliver above averageannualised total return to our shareholders. In last year's report and accounts we divided this approach into a number of keyobjectives. These, together with the progress that has been made during 2007,are reviewed below. 1. Ownership of a portfolio with significant opportunities for valueenhancement. Each year a thorough property-by-property review is undertaken and incorporatedinto a five-year business plan. This year's review identified over 50% of theenlarged portfolio as having significant development potential, a similarproportion to a year ago prior to the merger. 2. Active lease management to improve rental income. A key characteristic of the portfolio is its reversionary rental profile withlow passing rents, thereby providing the opportunity for income growth and valueenhancement. At the year-end, our average Central London office rent was £257per sq m, compared to £281 per sq m last year reflecting the lower average rentsin the LMS portfolio. However, on a like for like basis, the average rent inthe DVH portfolio increased to £294 per sq m. We aim to maximise rental income in all of our buildings including thoseearmarked for redevelopment. As an example, at the Angel Building, we securedcontrol from the tenant in March, whilst maintaining the £4.2 million per annumrental income until 2010. Planning permission has now been obtained for a majordevelopment. 3. Maintain a pipeline of projects that can be delivered according tomarket conditions. The planning process is complex and protracted so it is important to identifydevelopment potential and undertake appraisals at an early stage to ensure anappropriate supply of schemes for the future. With diligence and flexibility,we deliver schemes to the market at the most appropriate time. Our currentmajor projects total 40,300sq m, of which 70% of the space has been pre-let toArup and Burberry. Additionally, we have planning permission for over 84,600sqm of future projects at properties which have an existing floor area of 39,500sq m and are currently producing a rental income of £8.5 million per annum. 4. Deliver and let projects on time and to cost. Capital expenditure during the year was approximately £61 million. Of this, £33million was invested in Qube, Horseferry House and Arup Phase II. As planned,Qube completed towards the end of the year, and progress has been made withletting. Horseferry House and Arup Phase II, both of which are pre-let, are oncourse to complete this spring. Capital expenditure for 2008 is forecast to be£100 million. 5. Apply and promote contemporary architecture and forward-thinkingtechniques through the Derwent London design brand. We work with a number of architectural practices to ensure there is a constantflow of new ideas that drive the boundaries of good design. These range fromestablished names to smaller, cutting-edge practices and enable us to nurturetalent and push forward imaginative building solutions. These endeavours wererecognised during the year with the winning of the 2007 Royal Institute ofBritish Architects (RIBA) Client of the Year Award. 6. Recycle capital for reinvestment when potential is maximised. In 2007, property disposals totalled £344 million, net of costs, and achievedoutstanding prices, realising a £130 million profit. These were disposals ofproperties that did not conform with our post-merger strategy and includedresidential sites, provincial and smaller properties. Where possible they weresold post REIT conversion, thereby improving the after tax return. We willcontinue to disinvest mature assets to free up capital for selectiveacquisitions and projects. Our strategy translated into a property return of 30.1% for 2007, compared to26.7% in 2006. However, the figure for 2007 is distorted by the level andtiming of sales during the year. The corresponding underlying figure is 11.2%with the principal drivers being rental growth and development surplus. Rentalvalues advanced 13.0% during 2007, with the West End achieving 14.6%, albeitthat the pace slowed in the second half of the year. With regards tovaluations, the yield compression of the first half of the year reversed in thesecond half as the anticipated correction was exacerbated by the global creditproblems in the financial markets. While these remain turbulent, the outlookfor yields is uncertain. We are encouraged by tenant enquires in the West Endwhich is relatively insulated from the impact of global financial market turmoiland expect modest rental growth here in 2008. Currently, we have no ownershipin the City core. This year, in addition to following the same six broad objectives set out above,we have also identified specific Key Performance Indicators (KPIs). Key Performance Indicators (KPIs) The following KPIs were identified for the group as a traditional propertycompany. As more experience is gained of operating as a REIT, these may berevised to reflect the different metrics of this new environment. Financial i) Total return. This is calculated as the increase in adjusted net asset value excludingminority interests over the period plus dividends paid during the period dividedby the adjusted net asset value excluding minority interests at the start of theperiod. This is the return that management delivers to shareholders and for 2007was 2.8%. Property i) Total property return. This measure combines a property's rental and capital return and iscalculated by the group in accordance with the formula used by IPD. The grouphas adopted two targets for this KPI: to exceed the annualised IPD QuarterlyProperty Index for All UK Property on a three year rolling basis; and to exceedthat for Central London Offices on an annual basis. For the 3 year period ending on 31st December 2007 the group's totalproperty return was 25.6% whilst the All UK Property Index was 10.2%. Annually,the group's total property return was 30.1% whilst the Central London Index was0.7%. The group's figures are affected significantly by the sales undertaken torefocus the portfolio in 2007. Excluding these, the group's total propertyreturn for the year was 11.2% and for the three year period, 19.2%. ii) Void management. The group manages the level of vacant space in its portfolio to ensure anappropriate balance between value enhancing schemes and the associated risk.The related KPI is that the expected rental value of space immediately availablefor letting must not exceed 10% of the portfolio's reversionary rental value.At the year end, this figure was £7.7 million, equivalent to 4.5% of theportfolio's reversionary rental value. Environmental i) Impact of developments. A target has been adopted for the group to ensure that all developments inexcess of 5,000m(2) are assessed against Building Research EstablishmentEnvironmental Assessment Method (BREEAM) and rated very good or above. Awards Our commitment to good design and improving the office working environment wasrewarded in 2007 with Derwent London winning the RIBA Client of the Year award.The prestigious accolade was for the commissioning of both established andup-and-coming architects to deliver a mix of refurbished and new-built officesthroughout London. We also won a RIBA award for 28 Dorset Square, a stylishoffice project in Marylebone. In April, we won the "Deal of the Year" PropertyWeek Award for the acquisition of LMS and in October, we were also awardedProperty Company of the Year - London, from Estates Gazette. Valuation commentary The year under review was very much a tale of two halves. The six months toJune showed modest yield compression and strong rental growth performance,delivered through healthy tenant demand and historically low vacancy rates.However, the disruptions in the world financial markets in the autumndramatically changed the outlook for values with the investment market reactingswiftly. This contributed to an increase in yields as the availability offinance became restricted. However, letting activity remained buoyant,especially in the West End, with rents continuing to increase in the second halfof the year. Set against this background, the investment portfolio was valued at £2.7 billionat 31st December 2007. The valuation surplus for the year was £94.4 million, before lease incentiveadjustments of £4.1 million. Properties held throughout the period contributed£54.0 million, a result of strong rental growth which compensated for theincrease in yields. In addition, the revaluation of our development propertiesadded a further £50.3 million with a substantial surplus coming from therecently completed Qube development. Other properties in this category wereArup Phases II and III, Horseferry House, Portobello Dock, Gresse Street andLeonard Street. Acquisitions saw a £9.9 million deficit, principally as theassociated transaction costs were written off. However, these propertiescontain exciting planning opportunities and offer potential for significantvalue enhancement in the future. The portfolio's underlying valuation uplift was 4.3% compared to 21.6% lastyear. The West End properties, which represent 72% of the portfolio, achieved a5.9% increase. Here, good uplifts came from our Belgravia and Victoriaproperties, which rose by 13.9% and 12.5% respectively. The remainingproperties in Central London, 21% of the portfolio, are located on the Cityborders. The value of these assets increased by 5.3% over the year with a goodperformance from our Holborn properties at 9.8%, principally due to a strongreturn at The Johnson Building. Overall, the value of the Central Londonportfolio increased by 5.8%. The remaining 7% of the portfolio is located in the provinces and valuesdecreased by 11.2% as valuation yields increased and rental growth was limited.A principal factor in this return was the downgrading in value of StrathkelvinRetail Park in Scotland which comprises just over a third of the provincialportfolio by value. However, we have recently improved the planning use at thisbulky goods park and are working on asset management initiatives. Furtherprogress on the disposal of the provincial properties has been made since theyear end, with the sale of our Southampton properties. At 31st December 2007, the portfolio's initial yield, based on the annualised,contracted rental income, net of ground rents, was 4.4%, rising to 6.3% on fullreversion. The portfolio's true equivalent yield was 5.7%, showing an increasefrom 5.4% at the start of the year and 5.3% in June 2007. Lettings Managing our vacant space is an important part of the business and the appetitefor high quality accommodation was evident through our letting activity. Intotal, we completed 21,900sq m of lettings in 81 transactions at a combinedrental income of £8.3 million per annum. These were 18% above the valuer'sestimated rental values underlying the pro forma valuations, highlighting thegroup's exceptional performance against market expectations. Early in the year, the final floor of the 13,900sq m Johnson Building in Holbornwas let at £460 per sq m, rising to a minimum of £480 per sq m on first review.This 1,030sq m letting achieved a rent 26% above our initial lettings in 2006.This project was fully let in just nine months, a testament to its innovativedesign and flexible floorplates. Within the same complex, the 540sq m SweepsStudios was pre-let and 1,750sq m was let at 6-7 St Cross Street, the latterachieving rents of up to £375 per sq m which was 27% above the anticipatedrental values at the outset of the project. In February 2007, we completed the 3,600sq m refurbishment of 186 City Road inthe City borders and quickly multi-let the building at a combined annual rentalincome of just over £1.0 million per annum. The highest rent achieved was £335per sq m and the overall rental income was 13% above the level initiallyanticipated. At Tower House in Covent Garden, a lease paying £375 per sq m was surrendered.The space was re-let in the second half of the year, achieving rents between£700 and £730 per sq m, exceeding the valuer's assessment at June of £540 per sq m. In October, we completed our largest project of the year - Qube. This highspecification building comprises 9,300sq m of office space and 700sq m of retailaccommodation located on our Fitzrovia Estate, where 23% of the portfolio isheld. This project is part of our long term strategy to significantly improvethis well known London village which offers attractive office space atapproximately half the rents of the West End core of Mayfair. In December,advertising company Aegis Media, leased the 1,750sq m second floor at the Qubeat a rent of £1.1 million per annum, equivalent to £645 per sq m and setting arecord rent in Fitzrovia. For our retail strategy, we are targeting specificoperators that improve the retail mix at this end of Tottenham Court Road. Thefirst retail unit at Qube has been let to itsu, a fashionable sushi outlet, andagain setting a new rental high for this location. The Qube, combined with thenearby Arup development, is helping to make Fitzrovia one of London's fastestimproving business locations. Portfolio management During the year, we successfully completed the amalgamation of the DVH and LMSportfolios and identified the immediate and future opportunities for assetmanagement initiatives, that the properties offered. The integration process allowed the group's management practices to be reviewedand refined. Our asset managers have invaluable local knowledge and experienceof the designated villages in which they operate. Further value is addedthrough regular asset management meetings that enable us to identify and actupon opportunities across the villages. In addition to new lettings, 37 rent reviews and 20 lease renewals or regearswere completed during the year. As a consequence of this active management, theannualised contracted rental income, net of ground rents, was £117.6 million atthe year end. The valuer's estimated rental value of the portfolio was £172.6million, producing a 47% reversionary potential - highly significant for thefuture. Of the £55.0 million reversion, £18.4 million was attributable tovacant space and £36.6 million to lease renewal and rent review reversion. Ofthe vacant space, £7.7 million was immediately available for letting, reflectinga vacancy rate of 4.5% of the portfolio's estimated rental value. The majorityof this income potential is from the recently completed Qube development (£5.2million). The remaining £10.7 million of vacant space comprised redevelopmentsand refurbishments (excluding pre-lets). This includes the principal currentprojects, 16-19 Gresse Street and Portobello Dock, which have a combinedpotential annual rental income of £4.1 million. The balance is made up ofsmaller, yet important, refurbishments - often single floors within buildings.This activity is complemented by an average unexpired lease length of 9.1 yearsacross the portfolio as a whole with 8.8 years in Central London and 10.1 yearsin the West End. As we offer a variety of office space with a wide range of pricing, we have adiverse tenant base thus balancing the portfolio's income. For instance, 36% ofour contracted rental income is from professional and business services and 19%is from the media sector. Government and public administration account for 8%whilst the financial sector accounts for a further 7%. Development programme An integral part of our business is the management and implementation of ourdevelopment programme, and we categorise this into three stages: • Current projects - The scheme is committed and construction is underway. • Planning consents - Planning permission has been granted but the project is not yet committed. • Appraisal studies - Planning and viability assessments are underway. Current projects During the year we were extremely active in Fitzrovia. We completed thestriking £35 million Qube development that is now being marketed and we are wellunderway with the highly sustainable Arup Phase II and III development. PhaseII is scheduled for completion in spring 2008 with Phase III due to be finishedin late 2009, bringing the total floor area developed to 13,200sq m in what is atruly enterprising design that should achieve an excellent BREEAM rating. Thisdevelopment is pre-let to Arup on a 25 year lease at an annual rental income of£2.7 million that rises to £3.6 million on completion of Phase II and to £6.0million on the completion of Phase III. In Victoria, Horseferry House will be completed this spring, allowing its newtenant, Burberry, to take possession. The entire 15,200sq m building was pre-letto the company at the start of the £29 million refurbishment in 2006, and willbe a stylish global headquarters for this prestigious company. The imposing1930s building has been extensively remodelled and modernised with an imposingcentral atrium - a prime example of Derwent London's design-led approach toworkspaces and our commitment to adding to the vitality of an area. Continuing the theme of regeneration through high-quality design, we haverecently commenced work on site at 16-19 Gresse Street, Noho. At thisimaginative scheme, we are integrating a new 4,400sq m office building withresidential accommodation, linked by an attractive public space, and we expectto transform this area into a bustling and lively destination. Completion isdue in early 2009 and rents in this locality are presently around £645 per sq m. Elsewhere, we have taken an innovative approach at Portobello Dock in LadbrokeGrove. We are nearing completion in transforming a redundant group ofcanal-side buildings into an unusual mixed-use development. This will comprise anew office building of 2,200sq m, refurbished office spaces totalling 2,400sq m,and 19 attractive waterside apartments. These residential units were recentlypre-sold in 2008 for £12.6m. Planning consents To ensure that we can continue to deliver, when appropriate, our individualbrand of space to the market, we have significantly added to our planningconsents over the last twelve months. Major consents now total 84,600sq mreflecting a 114% increase over the existing floor area of 39,500sq m. Theseproperties produce an annual rental income of £8.5 million and their varyinglease expiries and break options offer significant flexibility forimplementation. The largest planning permission is for the redevelopment of North Wharf Road inPaddington. After detailed and lengthy negotiations, permission has beenobtained for a truly innovative office building of 22,300sq m with 270sq m ofretail. This is complemented by a separate 6,800sq m residential building whichwill provide 100 residential units, of which 16 will be designated affordablehousing. The buildings will enjoy a canal-side setting thereby providing anattractive environment for both office and residential occupiers, whilePaddington's excellent transport connections more than justify the area's statusas a major West End location. The existing buildings, totalling 7,800sq m,produce an annual income of £1.7 million and, subject to detailed design andtenure restructuring, there is the potential to commence on site from 2010. Following a lease restructure with the tenant BT, at the Angel Building inIslington, we now have possession of the property. In February 2008, planningpermission was granted for a comprehensive refurbishment and extension that willincrease the size of the building by 58%, from 15,000sq m to 23,700sq m. Thiswill be an exceptional office building in an improving location close to KingsCross and is illustrative of Derwent London's talent for creating attractiveworkspaces at competitive rents in some of London's most vibrant villages. A refined planning consent has recently been gained at Wedge House in theSouthbank area. The tired, 1950s office building of 3,600sq m can be replaced bya substantially larger new development of 7,500sq m. This is a rapidlyimproving location, where several other mixed-use developments promise tosignificantly raise the area's profile. Vacant possession can be obtained inJune 2008. At 18-30 Leonard Street we have a planning permission for a 1,900sq m officedevelopment and 47 residential units totalling 3,200sq m. Work is scheduled tostart on site later this year. The building features a refreshinglycontemporary design that reflects the site's enviable position on the edge ofthe City, yet also close to the lively streets of Shoreditch. At the Turnmill in Clerkenwell, planning permission has been granted to convertthe former Victorian stables into 6,000sq m of interesting office space,representing a 44% increase in floor area. Also, in Clerkenwell, we havepermission for a 3,400 sq m refurbishment at 20-26 Rosebery Avenue. Finally, in February 2008, planning permission was obtained to replace three,multi-let properties at 40 Chancery Lane, Holborn, with a 9,500sq m building setaround a tranquil courtyard. Appraisal studies As part of the development process, the appraisal stage enables us to consider anumber of options for a building that could lead to a planning consent andultimately to a current project. There are several major projects at the early stage in the appraisal processwhere our architectural and viability studies are being advanced. These could besome of our biggest developments over the next decade. In partnership with the freeholder Grosvenor, we have appointed architects tolook at the redevelopment of 1-5 Grosvenor Place. This has the potential to bea unique project in Belgravia, one of London's most prestigious locations. Theinitial design studies envisage a building that could substantially increase theexisting floor area of 15,000sq m. One option is for several floors of highquality office space set around a central atrium with residential at higherlevels. These could potentially be some of the West End's most desirableaddresses, enjoying an unparalleled location with unmatched views over GreenPark. At another prestigious location, our studies are evolving for the redevelopmentof Riverwalk House, Millbank. Here, there is the potential for high qualityresidential accommodation, with exceptional views of the River Thames. Massingstudies show scope for a scheme in the order of 18,600sq m, a substantial uplifton the existing 6,900sq m building. In the interim, both Riverwalk House andGrosvenor Place are fully let and produce annual rental income of £7.5 million. Further into the future, plans are advancing for our holdings on Charing CrossRoad, following the Government's recent progress on the Crossrail transportproject. Together with Crossrail, we are leading the design for a majorredevelopment of Tottenham Court Road underground station which will become oneof London's most strategic transport interchanges. Ultimately, we will have theoption to develop this important West End commercial site. Detailednegotiations are ongoing with a wide range of organisations to take this complexproject forward, and we are in an ideal position with a controlling role in theregeneration of this location. One of the difficulties with the planning process is that even with the planningofficer's recommendation for approval, consent is not always automatic. Thesewere the circumstances in which planning permission was refused for an officeand residential scheme on our City Road Estate in July 2007. However, we arenow working on a revised proposal with the intention of resubmitting a planningapplication in 2008. The existing buildings continue to provide an annualincome of £1.0 million and we are confident that we will deliver an excitingdevelopment in this prominent and improving location. Disposals One of the clear strategies set out at the time of the LMS acquisition was thedisposal of those properties that did not adhere with the group's objectives.These fell into three categories; London development sites, provincialproperties and smaller holdings. During the year, we implemented an extremelysuccessful disposal programme that was substantially completed before theinvestment market became turbulent. Disposals for the year totalled £344 million, net of costs, with the majority inthe second half of the year, post REIT conversion. These achieved anexceptional £130 million surplus above book value with an exit yield of 1.7%based on an annual rental income of £5.7 million. The most significant disposal was of an eight acre residential site at GreenwichReach, SE10 for £109.9 million, more than twice the book value. Much of thisuplift was the result of the group reducing both the planning and commercialrisks associated with the site. Other significant London transactions includedthe £44.3 million sale of 160-166 Brompton Road, SW3 which had residentialpotential and the sale of the vacant Argosy House, W1 and 3-4 South Place, EC2,which achieved £22.4 million and £18.0 million respectively. Of the provincial assets, disposals included retail centres in Brighton (£19.5million) and Farnham (£31.8 million), the latter being held in our joint venturewith the Portman Estate. We intend to make further disposals of our remaining provincial properties andsmall, management intensive assets, thereby allowing us to focus on our majorCentral London holdings. Since the year-end, we have sold all of our buildingsin Southampton for £18.95 million excluding costs, in line with the December2007 valuation. Acquisitions We made a number of selective acquisitions throughout the year, totalling £141.5million after costs, where our key requirements of low passing rents withsignificant scope for asset management and future planning potential were allmet. The principal acquisition was 132-142 Hampstead Road, NW1 for £54.9 million inSeptember 2007. The property comprises several fully let buildings, totalling21,500sq m, with an annual rental income of £2.0 million, on a prominent 1.85acre site located in what is an emerging part of the West End, adjacent toEuston Station. Being close to our Fitzrovia Estate, there is also thepotential for beneficial planning synergy. A similar planning opportunity was identified at 43 and 45-51 Whitfield Street,W1 which were acquired for £16.9 million in December. These two buildings,totalling 2,500sq m, produce an aggregate rent of £0.7 million per annum withthe leases expiring in June 2008. They occupy a strategic position in the heartof our Fitzrovia holdings and represent an opportunity for redevelopment and,possibly, incorporation into our major regeneration plans for the area. Also in the West End, Castle House, W1 was acquired for £21.0 million in May.This attractive multi-let corner office building in Noho is let at a low averagepassing rent of £255 per sq m and has excellent active management potential.This is a location where the rental level for quality office refurbishments isaround £650 per sq m so there is a significant refurbishment opportunity in duecourse. Finally, Woodbridge House, EC1 was acquired for £48.7 million in August. This7,000sq m office building is let to solicitors Pinsent Masons at a rent of £350per sq m and has excellent reversionary potential together with an opportunityto extend the building when the lease expires in 2015. The group is financially well positioned to make further similar acquisitions,particularly where it sees opportunities created by the current marketconditions. Financial review The group's results are prepared in compliance with International FinancialReporting Standards (IFRS) and the accounting policies set out in note 1 to theaccounts. However, the investment community makes a number of adjustments tokey IFRS figures. It is the adjusted figures that the board also uses inmonitoring performance and these are included in this review. The results for 2007 incorporate 11 months for LMS which was acquired witheffect from 1st February 2007. The acquisition was financed by the issue of46,910,232 Derwent London ordinary shares, £32.5 million of loan notes, and acash payment of £12.2 million. The acquired goodwill of £353.3 million has beenexpensed in the group income statement after the impairment tests required byIAS 36 were applied. The rationale for this can be found in the note headedacquisition of subsidiaries. Results commentary The headline numbers from the results are shown below followed by a commentarywhich highlights the make-up of these key numbers. The figures for the prioryear, as noted above, do not include any results for LMS: 2007 2006Net property income (£m) 103.8 58.0Recurring profit before taxation (£m) 38.0 16.4(Loss)/profit before taxation (£m) (99.8) 242.8Diluted recurring earnings per share* (p) 34.99 27.21Adjusted net asset value per share* (p) 1,801 1,770* After minority interests Net property income • Gross property income, mainly rent receivable from tenants, rose £60.4 million to £111.7 million in 2007, with a net £54.4 million of the increase coming from properties acquired with LMS. Income from the DVH properties and 2007 acquisitions increased by £6.0 million to £57.3 million. Within this, lettings added £8.2 million, the main contributions being £3.6 million from the recently completed Johnson Building and £1.1 million from short lets at North Wharf Road, pending its redevelopment. Voids, predominantly from properties under refurbishment or redevelopment, reduced the rent roll by £3.3 million. With the exception of £1.0 million at Horseferry House, the voids were spread over a number of properties. Rent from recent acquisitions at £3.2 million exceeded that lost due to disposals by £2.0 million. • Net property expenditure on the enlarged portfolio for the year was £9.9 million, compared with £4.9 million in 2006. Void costs were £4.7 million against £2.2 million last year and transaction costs, which reflect letting and rent review activity, increased from £2.1 million to £3.6 million. Other miscellaneous property costs increased by £1.0 million. • Therefore, the net result of letting property for 2007 was an income of £101.8 million. The final component of net property income is the development profit that the group has earned from the Telstar redevelopment carried out on behalf of Prudential. The redevelopment is now complete and a further £2.0 million of profit has been earned in 2007 in addition to the £11.6 million taken to the group income statement in 2006, to give £13.6 million in total. This is a successful outcome for Telstar House which had been sold to the Prudential in 2005 with Derwent undertaking the redevelopment and retaining a profit share valued upon practical completion. At the interim results stage, the profit earned was calculated at £6.8 million, but rising property yields by December led to a fall in the final valuation of the property and therefore a reduction in the estimated final profit. Administrative expenses • Turning to overheads, administrative expenses excluding goodwill write off for 2007 are £17.9 million, but this is after a credit of £1.6 million following the valuation of the LMS cash-settled share options. However, the grossed up figure of £19.5 million still shows a saving over the combined overheads of the DVH and LMS groups prior to the merger, and the second half charge of £9.1 million compares favourably with that in the first half of £10.4 million. Employment costs are the group's biggest overhead and account for £11.7 million of the total costs. With an enlarged portfolio to manage, the average number of employees during the year, excluding directors, has risen from 23 in 2006 to 56 in 2007. Net finance costs • While little of the consideration paid for LMS was in cash, the LMS group brought with it £501 million of debt at fair value. Consequently, finance costs have shown a substantial rise from £20.4 million to £49.1 million, partially offset by a rise in finance income of £2.4 million. The company's hedging policy, and the nature of its bank loans, meant that approximately 75% of the company's debt was protected from the artificially high LIBOR interest rates in the last five months of 2007. Recurring profit before taxation • Distilling the above into one figure, but excluding development income, the recurring profit before taxation was £38.0 million which compares with the 2006 result for DVH alone of £16.4 million, an increase of 132%. Loss before taxation • Listed below are a number of other items in the group income statement which reconcile the recurring profit to the IFRS defined loss before taxation of £99.8 million. These are a mixture of the by now usual adjustments and those associated with the LMS acquisition. • The group revaluation surplus for the year of £90.3 million. • The profit on disposal of property and investments of £130.1 million, including those realised in a joint venture. • The negative movement in the fair value of derivative financial instruments of £5.1 million. • The Telstar development income of £2.0 million discussed above. • The write-off of the acquired goodwill of £353.3 million following the impairment tests carried out in accordance with IFRS. • Net exceptional finance costs of £1.8 million, being the cost of the acquisition facility less a profit on redemption of a debenture. Tax credit On 1st July 2007, Derwent London converted to REIT status. This generated aconversion charge of £53.6 million, which was provided for in the half yearresults and is payable in 2008, and also allowed most of the deferred taxliability to be credited back to the group income statement. In addition, thereis a corporation tax charge for the year of £33.5 million which arises from thefirst half year prior to REIT conversion, and residual tax in the second half onassets outside the REIT "ring fence". Earnings per share Diluted recurring earnings per share rose to 34.99p from 27.21p in 2006, anincrease of nearly 29%. This compares with the increase in the dividend of 53%from 14.75p per share to 22.5p. This has been achieved partly by distributingthe major part of the tax savings arising in the second half due to thecompany's REIT status. Net assets Net assets attributable to equity shareholders at 31st December 2007 were£1,782.0 million compared with £783.4 million at the end of 2006. The group'sproperty portfolio was valued at £2.7 billion at the year end as has beendiscussed earlier. The adjusted net asset value per share, excluding minorityinterests, has risen 139p to 1,801p per share compared with the proforma balancesheet figure upon acquisition of LMS of 1,662p per share. The equivalentadjusted net asset value per share for DVH at December 2006 was 1,770p. Theadjustments made to arrive at the above figures are shown in the notes to theaccounts. Cash flow Following the acquisition, and the board's stated intention of realising some ofthe acquired assets, it is not surprising that there was a cash inflow in 2007of £84.4 million compared with an outflow of £59.4 million in 2006. However,these total figures require some interpretation. The cash inflow fromoperational activities was £28.4 million compared with an outflow of £5.6million in 2006. There was also a net inflow from the group's investingactivities of £85.2 million after adding back £16.0 million of LMS's preacquisition costs paid after 1st February. This inflow was due to the level ofdisposals subsequent to the LMS acquisition which, in total, realised £352.4million, with a further £5.7 million received from the sale of a property heldin a joint venture. Part of these proceeds was reinvested in the business withthe acquisition of new properties totalling £140.7 million and with capitalexpenditure absorbing £68.3 million. The remainder has been used to reduce groupdebt. The only other notable figure in investing activities is the cash cost ofthe LMS acquisition which amounted to £38.4 million. Finally, dividends paidout to shareholders totalled £13.2 million compared with £7.5 million in 2006,the rise due to the increased number of shares in issue and the substantialincrease in the 2007 interim dividend. Debt and sources of finance The total of net debt at the 2007 year end was £782.8 million compared with theequivalent figure for 2006 of £349.8 million, and that shown in the interimbalance sheet of £947.6 million. The nominal value of this net debt was £753.9million, the difference being the fair value less costs of the LMS bond and theleasehold liabilities. The fall in borrowings in the second half of the year wasdue to the disposals mentioned above with all but £34.3 million of the proceedsreceived in this period. The reduction in both borrowings and net assets hasleft balance sheet gearing at 42.5% compared with that at the half year of49.1%. However, in terms of the group's risk profile, the more important profitand loss gearing ratio has been restored to a more normal level of 1.81 after ithad fallen at the interim stage, following the acquisition, to 1.50. The figureof 1.81 compares with that in 2006, prior to the acquisition, of 1.85. Tocomplete the debt ratios, property gearing (nominal debt divided by the fairvalue of investment properties) at December 2007 was 28% compared with 27% atthe prior year end. This is substantially under half of what a typicalconservative bank covenant would be and it demonstrates both the soundness ofthe Derwent London balance sheet and the potential financial resources availableto the group. The group's financing philosophy has been "keep it simple, keep it flexible".Both Derwent and LMS were financed in a similar manner, so the philosophy hasnot changed since the acquisition. LMS added a syndicated £375 million term andrevolving facility, and a long term fixed rate secured bond, to DVH's fourbilateral revolving facilities. All the banks provide committed facilities andthe group continues to borrow on a secured basis. Financial covenants aresecurity specific and not corporate based. The flexibility of the revolvingcredit loans was demonstrated in 2007 with these absorbing disposal proceeds ofapproximately £350 million while remaining available to satisfy the demands ofacquiring £141 million of property. At 31st December 2007, committed bankfacilities totalled £918 million of which £370 million was undrawn. This levelof available resources provides both comfort and opportunity in the currenteconomic environment. Only one major facility amounting to £100 million is duefor renewal in 2008 (November). Close relationships are maintained not onlywith existing lending banks but also a second tier to satisfy future debtrequirements. GROUP INCOME STATEMENT Note 2007 2006 £m £m Gross property income 2 111.7 51.3Development income 2 2.0 11.6Property outgoings 3 (9.9) (4.9) _______ _______Net property income 103.8 58.0 Administrative expenses (19.5) (10.1)Movement in valuation of cash-settled share options 1.6 -Goodwill impairment 11 (353.3) -Revaluation surplus 90.3 223.3Profit on disposal of properties 4 129.8 2.9Profit on disposal of investments 1.0 - _______ _______(Loss)/profit from operations (46.3) 274.1 Finance income 5 2.8 0.4Exceptional finance income 5 1.5 -Finance costs 5 (49.1) (20.4)Exceptional finance costs 5 (3.3) (18.1)Movement in fair value of derivative financial instruments (5.1) 3.2Share of results of joint ventures 6 (0.3) 3.6 _______ _______(Loss)/profit before tax (99.8) 242.8 Tax credit/(expense) 7 200.7 (60.6) _______ _______Profit for the year 100.9 182.2 _______ _______Attributable to:Equity shareholders 15 97.0 182.2Minority interests 15 3.9 - _______ _______ Earnings per share attributable to equity shareholders 8 100.55p 340.13p _______ _______ Diluted earnings per share attributable to equityshareholders 8 100.11p 337.21p _______ _______ GROUP BALANCE SHEET Note 2007 2006 £m £mNon-current assetsInvestment property 9 2,654.6 1,274.0Property, plant and equipment 10 1.4 0.3Investments 5.1 5.4Pension scheme surplus 2.8 -Derivatives 13 1.2 0.1Other receivables 23.3 13.7 _______ _______ 2,688.4 1,293.5 _______ _______Current assetsTrading property 12 9.4 -Trade and other receivables 61.0 39.4Corporation tax asset - 1.4Cash and cash equivalents 10.3 - _______ _______ 80.7 40.8 _______ _______ Non-current assets held for sale 3.4 - _______ _______ 84.1 40.8 _______ _______Total assets 2,772.5 1,334.3 _______ _______ Current liabilitiesBank overdraft and loans 13 (120.6) (2.2)Trade and other payables (48.0) (32.5)Corporation tax liability (75.4) -Provisions (0.5) (0.1) _______ _______ (244.5) (34.8) _______ _______Non-current liabilitiesBorrowings 13 (672.5) (347.6)Provisions (2.8) (1.3)Deferred tax liability 14 (10.8) (167.2) _______ _______ (686.1) (516.1) _______ _______ Total liabilities (930.6) (550.9) _______ _______Total net assets 1,841.9 783.4 _______ _______ Equity 15Share capital 5.0 2.6Share premium 157.0 156.1Other reserves 914.0 3.8Retained earnings 706.0 620.9 _______ _______Attributable to equity holders of the parent company 1,782.0 783.4Minority interests 59.9 - _______ _______Total equity 1,841.9 783.4 _______ _______ Adjusted net asset value per share 17 1,862p 1,770p _______ _______ Adjusted net asset value per share after minorityinterests 17 1,801p 1,770p _______ _______ GROUP STATEMENT OF RECOGNISED INCOME AND EXPENSE 2007 2006 £m £m Profit for the year 100.9 182.2Deferred tax in respect of share-based payments - 0.6Actuarial gain on defined benefits pension scheme 1.3 -Foreign currency translation (0.6) - _______ _______Total recognised income and expense relating to the year 101.6 182.8 _______ _______ Attributable to:Equity shareholders 97.7 182.8Minority interests 3.9 - _______ _______ CHANGE IN SHAREHOLDERS' EQUITY 2007 2006 £m £m Total recognised income and expense relating to the year 97.7 182.8Dividends paid (13.2) (7.5)Issue of shares 2.4 -Premium on issue of shares 911.4 1.0Share-based payments transferred to reserves 0.3 0.9 _______ _______ 998.6 177.2 Shareholders' equity at 1st January 783.4 606.2 _______ _______Shareholders' equity at 31st December 1,782.0 783.4 _______ _______ GROUP CASH FLOW STATEMENT 2007 2006 £m £m Operating activitiesCash received from tenants 111.9 48.7Direct property expenses (10.1) (5.5)Cash paid to and on behalf of employees (10.2) (4.5)Other administrative expenses (8.8) (3.9)Interest received 2.5 0.4Interest paid (53.4) (21.9)Exceptional financing costs 20 (3.3) (17.6)Tax expense paid in respect of operating activities (0.2) (1.3) _______ _______Net cash from/(used in) operating activities 28.4 (5.6) _______ _______Investing activitiesAcquisition of investment properties (140.7) (48.9)Capital expenditure on investment properties (65.1) (18.9)Disposal of investment properties 233.2 31.2Capital expenditure on assets under construction (3.2) -Disposal of assets under construction 110.1 -Purchase of property, plant and equipment (0.2) (0.2)Disposal of property, plant and equipment 0.3 -Disposal of investments 9.1 -Distributions received from joint ventures 5.7 -Payments in relation to joint ventures (0.3) -Acquisition of subsidiaries (net of cash acquired) (38.4) (6.6)Payment of subsidiary's pre-acquisition expenses 20 (16.0) -Advances to minority interest holder (14.3) -Tax expense paid in respect of investing activities (11.0) (2.9) _______ _______Net cash from/(used in) investing activities 69.2 (46.3) _______ _______Financing activitiesMovement in bank loans (83.3) 78.5Movement in loan notes 32.0 -Redemption of debenture (26.6) (35.0)Net proceeds of share issues 0.1 1.0Dividends paid (13.2) (7.5) _______ _______Net cash (used in)/from financing activities (91.0) 37.0 _______ _______ Increase/(decrease) in cash and cash equivalents in 6.6 (14.9)the year Cash and cash equivalents at the beginning of the (2.2) 12.7year _______ _______Cash and cash equivalents at the end of the year 4.4 (2.2) _______ _______ NOTES TO THE FINANCIAL STATEMENTS 1. Basis of preparation The results for the year ended 31st December 2007 include those for theholding company and all of its subsidiaries, together with the group's share ofthe results of its joint ventures. The results are prepared on the basis of theaccounting policies set out in the 2006 annual report and financial statementswith the addition of the policies below. These new policies relate to asset andliability classes arising as a result of the acquisition of London MerchantSecurities plc. Business combinations Business combinations are accounted for under the acquisition method.Any excess of the purchase price of business combinations over the fair value ofthe assets, liabilities and contingent liabilities acquired and resultingdeferred tax thereon is recognised as goodwill. Any discount is credited to thegroup income statement in the period of acquisition. Goodwill is recognised asan asset and reviewed for impairment. Any impairment is recognised immediatelyin the group income statement and is not subsequently reversed. Any residualgoodwill is reviewed annually for impairment. Assets under construction Property assets acquired with the intention of subsequent development asinvestment properties are included as "Assets under construction" withinproperty, plant and equipment, until the construction or development iscompleted, at which time they are reclassified as investment properties. Assetsunder construction are included in the balance sheet at fair value, determinedby an independent valuer on the same basis as used for investment properties.If the fair value increases, this increase is credited directly to therevaluation reserve, except to the extent that it reverses a revaluationdecrease of the same asset which previously had been charged to the group incomestatement. If the fair value decreases, this decrease is recognised in thegroup income statement, except to the extent that it reverses previousrevaluation increases of the same asset which have been credited to therevaluation reserve, in which case it is charged against the revaluationreserve. Non-current assets held for sale Non-current assets are classified as held for sale if their carryingvalue will be recovered through a sale transaction rather than throughcontinuing use. This condition is regarded as met if the sale is highlyprobable, the asset is available for immediate sale in its present condition,being actively marketed, and management is committed to the sale which should beexpected to qualify for recognition as a completed sale within one year from thedate of classification; Non-current assets, including related liabilities, classified as heldfor sale are measured at the lower of carrying value and fair value less costsof disposal. Trading property Trading property includes those properties which were acquiredexclusively with a view to resale or development and resale and are held at thelower of cost and net realisable value. Employee benefits (i) Pensions a) Defined contribution plans Obligations for contributions to defined contributionpension plans are recognised as an expense in the group income statement in theperiod to which they relate. b) Defined benefit plans The group's net obligation in respect of defined benefitpost-employment plans, including pension plans, is calculated separately foreach plan by estimating the amount of future benefit that employees have earnedin return for their service in the current and prior periods. That benefit isdiscounted to determine its present value, and the fair value of any plan assetsis deducted. The discount rate is the yield at the balance sheet date on AAcredit rated bonds that have maturity dates approximating the terms of thegroup's obligations. The calculation is performed by a qualified actuary usingthe projected unit credit method. Any actuarial gain or loss in the period isrecognised in full in the statement of recognised income and expense. (ii) Cash-settled share-based remuneration For cash-settled share-based payments, a liability isrecognised based on the current fair value determined at each balance sheetdate. The movement in the current fair value is taken to the group incomestatement. 2. Income Gross property income includes surrender premiums received from tenantsduring 2007 of £5.7 million (2006 - £1.0 million). The development income of £2.0 million (2006 - £11.6 million) is theproportion of the total profit share estimated to have been earned by the groupfrom the construction and letting of a property on behalf of a third party. 3. Property outgoings 2007 2006 £m £m Ground rents 0.4 0.4Other property outgoings 9.5 4.5 _______ _______ 9.9 4.9 _______ _______ 4. Profit on disposal of properties 2007 2006 £m £mInvestment propertyDisposal proceeds 233.6 31.2Carrying value (157.4) (30.7)Leasehold liabilities - 2.4 _______ _______ 76.2 2.9 _______ _______ Assets under constructionDisposal proceeds 109.9 -Carrying value (56.3) - _______ _______ 53.6 - _______ _______ TotalDisposal proceeds 343.5 31.2Carrying value (213.7) (30.7)Leasehold liabilities - 2.4 _______ _______ 129.8 2.9 _______ _______ The profit of £129.8 million includes £112.6 million which relates toproperties acquired as part of the acquisition of London Merchant Securities plc(see note 11). 5. Finance income and costs 2007 2006 £m £mFinance incomeInterest on development funding 1.1 -Return on pension plan assets 0.6 -Foreign exchange gain 0.4 -Bank interest received 0.1 0.4Other 0.6 - _______ _______ 2.8 0.4 _______ _______ Exceptional finance incomeProfit on redemption of debentures 1.5 - _______ _______ _______ _______Total finance income 4.3 0.4 _______ _______ Finance costsBank loans and overdraft wholly repayable within five years 27.0 12.7Bank loans not wholly repayable within five years 9.4 3.7Loan notes 1.5 -Secured bond and debenture 9.9 3.1Mortgages 0.1 -Finance leases 0.6 0.9Pension interest costs 0.5 -Other 0.1 - _______ _______ 49.1 20.4 _______ _______ Exceptional finance costsCost of acquisition facility 3.3 -Loss on redemption of debentures - 18.1 _______ _______ 3.3 18.1 _______ _______ _______ _______Total finance costs 52.4 38.5 _______ _______ An exceptional profit of £1.5 million arose following the payment of a£6.6 million premium on the redemption of a debenture. The debenture was fairvalued at £8.1 million on the acquisition of London Merchant Securities plc.Exceptional finance costs in 2006 arose from the redemption of the 10 1/8% FirstMortgage Debenture Stock 2019. 6. Share of results of joint ventures 2007 2006 £m £m Loss from sale of investment property (0.7) -Revaluation surplus - 3.5Other profit from operations after tax 0.4 0.1 _______ _______ (0.3) 3.6 _______ _______ 7. Tax (credit)/expense 2007 2006 £m £m Corporation tax expense/(credit)UK corporation tax and income tax on profits for the year 33.5 0.7REIT conversion charge 53.6 -Adjustment for under/(over) provision in prior years 0.3 (1.0) _______ _______ 87.4 (0.3) _______ _______Deferred tax (credit)/expenseOrigination and reversal of temporary differences (287.4) 60.6Changes in tax rates (0.7) -Adjustment for under provision in prior years - 0.3 _______ _______ (288.1) 60.9 _______ _______ _______ _______ (200.7) 60.6 _______ _______ The tax for both 2007 and 2006 is lower than the standard rate ofcorporation tax in the UK. The differences are explained below: 2007 2006 £m £m (Loss)/profit before tax (99.8) 242.8 _______ _______ Expected tax (credit)/expense based on the standard rate ofcorporation tax in the UK of 30% (2006 - 30%) (29.9) 72.8Indexation relief on investment properties - (11.1)Difference between tax and accounting profit on disposals (9.4) 0.2Goodwill impairment 106.0 -REIT conversion charge 53.6 -Revaluation gain attributable to REIT properties (24.1) -Deferred tax released as a result of REIT conversion (288.7) -Other differences (8.5) (0.6) _______ _______Tax (credit)/expense on current year's profit (201.0) 61.3Adjustments in respect of prior years' tax 0.3 (0.7) _______ _______ (200.7) 60.6 _______ _______ Tax credited directly to reservesDeferred tax on share-based payments - (0.6) _______ _______ 8. Earnings per share attributable to equity shareholders Weighted average Profit for number of Earnings the year shares per share £m '000 p Year ended 31st December 2007 97.0 96,473 100.55Adjustment for dilutive share-based payments - 418 (0.44) _______ _______ _______Diluted 97.0 96,891 100.11 _______ _______ _______ Year ended 31st December 2006 182.2 53,567 340.13Adjustment for dilutive share-based payments - 464 (2.92) _______ _______ _______Diluted 182.2 54,031 337.21 _______ _______ _______ Year ended 31st December 2007 97.0 96,473 100.55Adjustment for:Disposal of property and investments (98.2) - (101.79)Disposal of joint venture property 0.7 - 0.72Group revaluation surplus (89.0) - (92.26)Fair value movement in derivative financial instruments 5.1 - 5.28Deferred tax released as a result of REIT conversion (288.7) - (299.25)REIT conversion charge 53.6 - 55.56Goodwill impairment 353.3 - 366.22Development income (1.4) - (1.45)Exceptional finance income and costs (1.2) - (1.24)Minority interests in respect of the above 2.7 - 2.80 _______ _______ _______Recurring 33.9 96,473 35.14 Adjustment for dilutive share-based payments - 418 (0.15) _______ _______ _______Diluted recurring 33.9 96,891 34.99 _______ _______ _______ Year ended 31st December 2006 182.2 53,567 340.13Adjustment for:Deferred tax on capital allowances 2.7 - 5.04Disposal of investment properties (1.7) - (3.17)Group revaluation surplus (167.0) - (311.76)Share of joint ventures' revaluation surplus (2.9) - (5.41)Exceptional finance costs 12.7 - 23.71Development income (8.1) - (15.12)Fair value movement in derivative financial instruments (3.2) - (5.98) _______ _______ _______Recurring 14.7 53,567 27.44 Adjustment for dilutive share-based payments - 464 (0.23) _______ _______ _______Diluted recurring 14.7 54,031 27.21 _______ _______ _______ The recurring earnings per share excludes the after tax effect of fair valueadjustments to the carrying value of assets and liabilities, the profit or lossarising from the disposal of properties and investments, the development income,and any exceptional costs and income in order to show the underlying trend. Inaddition, the conversion charge and the release of deferred tax related to thetransfer to REIT status, and the impairment of goodwill resulting from theacquisition of London Merchant Securities plc have been excluded. For the 2006figures, the recurring earnings per share figure also excludes the deferred taxcharge in respect of capital allowances claimed on the basis that it wasunlikely that a liability would ever crystallise. 9. Investment property Freehold Leasehold Total £m £m £mCarrying valueAt 1st January 2007 1,025.2 248.8 1,274.0Arising on acquisition of subsidiary 1,104.6 141.0 1,245.6Additions 177.6 24.9 202.5Disposals (151.2) (6.2) (157.4)Revaluation 67.9 22.4 90.3Movement in grossing up of headlease liabilities - (0.4) (0.4) _______ _______ _______At 31st December 2007 2,224.1 430.5 2,654.6 _______ _______ _______ Carrying valueAt 1st January 2006 724.2 291.4 1,015.6Transfer 38.5 (38.5) -Additions 76.1 0.9 77.0Disposals (10.3) (20.4) (30.7)Revaluation 196.7 26.6 223.3Movement in grossing up of headlease liabilities - (11.2) (11.2) _______ _______ _______At 31st December 2006 1,025.2 248.8 1,274.0 _______ _______ _______ At 31st December 2007Fair value 2,249.0 422.7 2,671.7Adjustment for rents recognised in advance (24.9) (1.2) (26.1)Adjustment for grossing up of headlease liabilities - 9.0 9.0 _______ _______ _______Carrying value 2,224.1 430.5 2,654.6 _______ _______ _______ At 31st December 2006Fair value 1,039.7 243.0 1,282.7Adjustment for rents recognised in advance (14.5) (0.8) (15.3)Adjustment for grossing up of headlease liabilities - 6.6 6.6 _______ _______ _______Carrying value 1,025.2 248.8 1,274.0 _______ _______ _______ The investment properties were revalued at 31st December 2007 by externalvaluers, on the basis of market value as defined by the Appraisal and ValuationStandards published by The Royal Institution of Chartered Surveyors. CB RichardEllis Limited valued properties to a value of £2,647.9 million (2006 - CBRichard Ellis Limited: £1,040.9 million; Keith Cardale Groves (Commercial)Limited: £241.8 million); other valuers £23.8 million (2006 - £nil). At 31st December 2007, the historical cost of investment property owned by thegroup was £1,990.7 million (2006 - £688.9 million). 10. Property, plant and equipment Assets under Plant and construction equipment Total £m £m £m Net book valueAt 1st January 2006 - 0.4 0.4Additions - 0.2 0.2Disposals - (0.2) (0.2)Depreciation - (0.1) (0.1) _______ _______ _______At 31st December 2006 - 0.3 0.3Arising on acquisition of subsidiary 53.1 1.6 54.7Additions 3.2 0.2 3.4Disposals (56.3) (0.5) (56.8)Depreciation - (0.2) (0.2) _______ _______ _______At 31st December 2007 - 1.4 1.4 _______ _______ _______ Net book value at 31st December 2007Cost or valuation - 3.1 3.1Accumulated depreciation - (1.7) (1.7) _______ _______ _______ - 1.4 1.4 _______ _______ _______ Net book value at 31st December 2006Cost or valuation - 1.2 1.2Accumulated depreciation - (0.9) (0.9) _______ _______ _______ - 0.3 0.3 _______ _______ _______ 11. Acquisition of subsidiaries The whole of the issued share capital of London Merchant Securities plc, aproperty investment company, was acquired on 1st February 2007 for a total costof £965.6 million. Cost of acquisition: £m Equity 912.9Loan notes 32.5Cash 12.2Directly attributable acquisition costs 8.0 _______ 965.6 _______ The equity consideration was satisfied by Derwent London plc issuing 46,910,232ordinary shares at a price of £19.46 on 1st February 2007. This was the closingmarket price of Derwent Valley Holdings plc 5p ordinary shares on 31st January2007. This issue price consists of the nominal value of the ordinary shares of£0.05 and a share premium of £19.41. Directly attributable acquisition costs are those charged by the company'sadvisers in performing due diligence activities and producing the acquisitiondocuments. The net assets acquired at 1st February 2007 were: Book value of Fair value of assets acquired assets acquired £m £mNon-current assetsInvestment property 1,245.6 1,245.6Property, plant and equipment 53.9 54.7Investments 18.0 17.5Pension scheme surplus 1.4 1.4Deferred tax asset 12.0 12.0Derivatives 6.1 6.1Other receivables 6.2 6.2 _______ _______ 1,343.2 1,343.5 _______ _______ Current assetsTrading property 1.3 9.4Trade and other receivables 9.4 8.8Cash and cash equivalents 13.9 13.9 _______ _______ 24.6 32.1 _______ _______ Total assets 1,367.8 1,375.6 Current liabilitiesBank loans (4.6) (4.6)Trade and other payables (39.8) (40.9) _______ _______ (44.4) (45.5) _______ _______ Non-current liabilitiesBorrowings (480.4) (510.6)Deferred tax liability (148.8) (144.4)Other (6.8) (6.8) _______ _______ (636.0) (661.8) _______ _______ Total liabilities (680.4) (707.3) _______ _______ Total net assets acquired 687.4 668.3 Minority interests (56.0) (56.0) _______ _______Attributable to equity holders of the parent company 631.4 612.3 _______Goodwill on acquisition 353.3 _______Cost of acquisition 965.6 _______ The goodwill on acquisition disclosed above differs from that in the interimresults of £297.3 million due to an amendment to the treatment of minorityinterests on consolidation. Adjustments from book value to fair value include those arising from the fairvalue adjustments to property, plant and equipment, trading property, deferredtax and debt. Adjustments arising from the application of Derwent London'saccounting policies have been made to the book value figures. A detailed review of the existence of intangible assets, other than goodwill,has been concluded, and none were found to have any material value. Animpairment test has been carried out on the goodwill arising on the acquisition. The properties acquired on the acquisition of London Merchant Securities plccomplement the existing portfolio of properties held by the group. It isanticipated that the group will be capable of deriving significantly enhancedcashflows from the acquired property portfolio due to lease management,refurbishment and redevelopment opportunities, which can be implemented in thefuture. While the amount that the group has paid for London Merchant Securitiesplc is justified by these anticipated enhancements and benefits that will bebrought to the group, IAS 36, Impairment of Assets, does not permit suchenhancements to be included in the cashflows used in estimating value in use forthe purposes of impairment testing, and instead requires the cashflows to bebased on the assets in their current condition. In addition, the benefits arising from the acquired portfolio are specific tothe group and, consequently, the fair value, less costs to sell, of the acquiredbusiness does not support the carrying amount of the goodwill associated withthe acquisition. As a consequence, the goodwill associated with this transaction is deemed to befully impaired and has been written off to the group income statement. If the date for this acquisition had been 1st January 2007, the gross propertyincome for the combined entity would have increased by £4.6 million. As thefair value adjustments and adjustments arising from the application of DerwentLondon's accounting policies, made above, have not been made to the results ofLondon Merchant Securities plc for 31st December 2006, it is impractical toassess the impact on the profit for the period arising from a 1st January 2007acquisition date. The profit for the year ended 31st December 2007 of £100.9million, which is after recognising the £353.3 million of goodwill impairment,includes post acquisition profits of £203.0 million for London MerchantSecurities plc. 12. Trading property The fair value of trading property at 31st December 2007 is the same asthe book value. 13. Derivatives and borrowings 2007 2006 £m £mNon-current assetsDerivative financial instruments 1.2 0.1 _______ _______ Current liabilitiesBank loans 113.4 -Unsecured loans 1.3 -Overdraft 5.9 2.2 _______ _______ 120.6 2.2 _______ _______ Non-current liabilities6.5% secured bond 2026 194.9 -Loan notes 32.0 -Bank loans 434.0 341.0Mortgages 2.2 -Unsecured loans 0.4 -Leasehold liabilities 9.0 6.6 _______ _______ 672.5 347.6 _______ _______ _______ _______Net derivatives and borrowings 791.9 349.7 _______ _______ 14. Deferred tax liability Revaluation Capital surplus allowances Other Total £m £m £m £m At 1st January 2007 150.2 16.3 0.7 167.2Arising on acquisition of subsidiary 135.9 7.8 (11.3) 132.4Transfer to investment in joint ventures (0.7) - - (0.7)Provided during the year in the groupincome statement 1.3 - - 1.3Released during the year in the groupincome statement (272.7) (24.1) 8.1 (288.7)Change in tax rates (0.9) - 0.2 (0.7) _______ _______ _______ _______At 31st December 2007 13.1 - (2.3) 10.8 _______ _______ _______ _______ At 1st January 2006 91.6 13.6 - 105.2Arising on acquisition of subsidiary 1.7 - - 1.7Adjustment to reserves in respect ofdeferred tax on share-based payments - - (0.6) (0.6)Provided during the year in the groupincome statement 56.9 2.7 1.3 60.9 _______ _______ _______ _______At 31st December 2006 150.2 16.3 0.7 167.2 _______ _______ _______ _______ Deferred tax on the revaluation surplus is calculated on the basis ofthe chargeable gains that would crystallise on the sale of the investmentproperty portfolio as at each balance sheet date. The calculation takes accountof indexation on the historic cost of the properties and any available capitallosses. Due to the group's conversion to REIT status on 1st July 2007, deferredtax is only provided at 31st December 2007 on properties outside of the REITregime. 15. Equity Share Share Other Retained Minority capital premium reserves earnings interest £m £m £m £m £m At 1st January 2007 2.6 156.1 3.8 620.9 -Issue of shares 2.4 - - - -Premium on issue of shares - 0.9 910.5 - -Arising on acquisition of subsidiary - - - - 56.0Share-based payments expensetransferred to reserves - - 0.3 - -Actuarial gain on defined benefits - - - 1.3 -pension schemeForeign exchange translationdifferences - - (0.6) - -Profit for the year - - - 97.0 3.9Dividends paid - - - (13.2) - _____ _______ _______ ________ _______At 31st December 2007 5.0 157.0 914.0 706.0 59.9 _____ _______ _______ ________ _______ At 1st January 2006 2.6 155.1 2.3 446.2 -Premium on issue of shares - 1.0 - - -Share-based payments expensetransferred to reserves - - 0.9 - -Deferred tax in respect ofshare-based payments - - 0.6 - -Profit for the year - - - 182.2 -Dividends paid - - - (7.5) - _____ _______ _______ _______ _______At 31st December 2006 2.6 156.1 3.8 620.9 - _____ _______ _______ _______ _______ 16. Dividend 2007 2006 £m £m Second interim dividend of 10.525p (2006 final - 9.725p) per ordinaryshare declared during the year relating to the previous year's results 5.7 5.2 Interim dividend of 7.5p (2006 interim - 4.225p) per ordinary sharedeclared during the year 7.5 2.3 _______ _______ 13.2 7.5 _______ _______ The directors are proposing the payment of a final dividend in respect of thecurrent year's results of 15p (2006 second interim - 10.525p) per ordinary sharewhich would total £15.1 million (2006 second interim - £5.6 million). Thisdividend has not been accrued at the balance sheet date. 17. Net asset value per share Deferred Fair value of tax on derivative Fair value revaluation financial adjustment to Adjusted Net assets surplus instruments secured bond net assets £m £m £m £m £m At 31st December 2007 1,841.9 13.1 (1.2) 21.6 1,875.4Minority interests (59.9) (1.7) 0.0 0.0 (61.6) _______ _______ _______ _______ _______Attributable to equityshareholders 1,782.0 11.4 (1.2) 21.6 1,813.8 _______ _______ _______ _______ _______ Net asset value per share (p) 1,829 13 (1) 21 1,862 _______ _______ _______ _______ _______Net asset value per shareattributable to equityshareholders (p) 1,770 11 (1) 21 1,801 _______ _______ _______ _______ _______ Deferred Deferred Fair value of tax on tax on derivative revaluation capital financial Adjusted Net assets surplus allowances instruments net assets £m £m £m £m £m At 31st December 2006Net assets attributable to equityshareholders 783.4 150.2 16.3 (0.1) 949.8 _______ _______ _______ _______ _______ Net asset value per share (p) 1,460 280 30 - 1,770 _______ _______ _______ _______ _______Net asset value per shareattributable to equityshareholders (p) 1,460 280 30 - 1,770 _______ _______ _______ _______ _______ The number of shares at 31st December 2007 was 100,703,194 (2006: 53,656,492) The total net assets of the group and those attributable to equity shareholdersare shown in the table above. Adjustments are made for the deferred tax on therevaluation surplus, the post tax fair value of derivative financial instrumentsand the secured bond, on the basis that these amounts are not relevant whenconsidering the group as an ongoing business. Additionally, at 31st December2006, adjusted net assets also excluded the deferred tax provided in respect ofcapital allowances claimed, on the basis that it was unlikely that thisliability would ever crystallise. 18. Total return 2007 2006 % % Total return 2.8 33.6 _______ _______ Total return is the movement in adjusted net asset value per share afterminority interests plus the dividend per share paid during the year expressedas a percentage of the adjusted net asset value per share after minorityinterests at the beginning of the year. 19. Gearing Balance sheet gearing at 31st December 2007 is 42.5% (2006 - 44.7%).This is defined as net debt divided by net assets. Profit and loss gearing for 2007 is 1.81 (2006 - 1.85). This is definedas recurring net property income less administrative expenses divided by netinterest payable having reversed the reallocation of ground rent payable onleasehold properties to interest payable of £0.6 million (2006 - £0.9 million).For 2007 and 2006, recurring net property income excludes development income. 20. Exceptional cash flows The cash flow for the year to 31st December 2007 contained £16.0 million(2006 - £nil) which relate to costs incurred by London Merchant Securities plcprior to the acquisition and accrued at 31st January 2007 in the fair valuebalance sheet shown in note 11. The year to 31st December 2007 also contained exceptional finance costsof £3.3 million (2006 - £17.6 million), as described in note 5. 21. Post balance sheet events Since 31st December 2007 the group has completed the disposal of 11properties for a total of £28.6 million, before costs, and exchanged contractsfor the disposal of a further 4 properties for a total of £10.9 million, beforecosts. The estimated profit on these disposals is £0.1 million. 22. The financial information set out above does not constitute the company'sstatutory accounts for the years ended 31st December 2007 or 2006, but isderived from those accounts. Statutory accounts for 2006 have been delivered tothe Registrar of Companies and those for 2007 will be delivered following thecompany's annual general meeting which will be held on 5th June 2008. Theauditors have reported on those accounts; their reports were unqualified, didnot include references to any matters to which the auditors drew attention byway of emphasis without qualifying their reports, and did not contain statementsunder the Companies Act 1985, s237(2) or (3). The annual report and accountswill be posted to shareholders on 22nd April 2008, and will also be available onthe company's website, www.derwentlondon.com, from that date. POST ACQUISITION PROFORMA BALANCE SHEET As at 1st February 2007 Derwent Group LMS Derwent 31.12.06 Group London £m 31.01.07 Adjustments Group £m £m £mNon-current assetsInvestment property 1,274.0 1,245.6 - 2,519.6Property, plant and equipment 0.3 54.7 - 55.0Investments 5.4 17.5 - 22.9Pension scheme surplus - 1.4 - 1.4Deferred tax asset - 12.0 - 12.0Derivatives 0.1 6.1 - 6.2Other receivables 13.7 6.2 - 19.9 _______ _______ _______ _______ 1,293.5 1,343.5 - 2,637.0 _______ _______ _______ _______ Current assetsTrading property - 9.4 - 9.4Corporation tax asset 1.4 - - 1.4Trade and other receivables 39.4 8.8 (8.0) 40.2Cash and cash equivalents - 13.9 - 13.9 _______ _______ _______ _______ 40.8 32.1 (8.0) 64.9 _______ _______ _______ _______ Current liabilitiesBank overdraft and loans (2.2) (4.6) - (6.8)Trade and other payables (32.5) (40.9) - (73.4)Provisions (0.1) - - (0.1) _______ _______ _______ _______ (34.8) (45.5) - (80.3) _______ _______ _______ _______ Non-current liabilitiesBorrowings (347.6) (510.6) (44.7) (902.9)Deferred tax liability (167.2) (144.4) - (311.6)Provisions (1.3) - - (1.3)Other - (6.8) - (6.8) _______ _______ _______ _______ (516.1) (661.8) (44.7) (1,222.6) _______ _______ _______ _______ Total net assets 783.4 668.3 (52.7) 1,399.0 _______ _______ _______ _______ EquityShare capital 2.6 82.6 (80.2) 5.0Share premium 156.1 22.2 (22.2) 156.1Other reserves 3.8 11.1 899.4 914.3Retained earnings 620.9 496.4 (849.7) 267.6 _______ _______ _______ _______Attributable to equity holders 783.4 612.3 (52.7) 1,343.0Minority interests - 56.0 - 56.0 _______ _______ _______ _______Total equity 783.4 668.3 (52.7) 1,399.0 _______ _______ _______ _______ Adjusted net asset value pershare 1,717p _______Adjusted net asset value pershare attributable to equityshareholders - post minorityinterests 1,662p _______ This information is provided by RNS The company news service from the London Stock Exchange
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Share Price:
2,322.00
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Ask:
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Change:
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