Derwent London Regulatory News (DLN)

13 August 2015

Derwent London plc ("Derwent London"/ "the Group")

INTERIM RESULTS FOR THE HALF YEAR ENDED 30 JUNE 2015

GOOD RETURNS DRIVEN BY RECORD LETTING ACTIVITY AND CLEAR-CUT STRATEGY

Financial highlights

· EPRA net asset value per share increased by 10.9% to 3,226p from 2,908p at 31 December 2014

· Net rental income increased by 5.0% to £66.9m from £63.7m in six months to June 2014

· EPRA profit before tax was £39.0m, an increase of 21.9% from £32.0m in H1 June 2014

· EPRA earnings per share were 33.97p, an increase of 16.5% from 29.15p in H1 June 2014

· Interim dividend per share of 12.60p, an increase of 8.2% from 2014

Operational performance

Strong property performance in six months to June 2015

· Underlying valuation uplift of 9.1%, compared to 9.8% in H1 and 9.8% in H2 2014

· Underlying valuation uplift on our six major projects was 14.2%

· Total property return of 10.3%, compared to 10.1% for IPD Central London Offices Index

· True equivalent yield tightened by 17 basis points to 4.56%

· Estimated rental values increased 5.2%, which compares to 4.2% in H1 and 4.8% in H2 2014

· Overall lettings in H1 4.3% above December 2014 ERV; open market lettings 9.3% above

Strategy delivers throughout the year

· Secured £20.3m of lettings on 394,600 sq ft, over twice that in the whole of 2014

· Maiden lettings on White Collar Factory EC1 - 24% pre-let one year ahead of completion

· Completed 210,500 sq ft of developments - 90% let, and on course to have one million sq ft under development within twelve months for delivery 2016-2019

· Resolution for planning secured at 40 Blackfriars Road SE1 for 110,000 sq ft hotel and offices

· Finalised terms with Crossrail to enable 275,000 sq ft development at 1 Oxford Street W1

· Completed or exchanged contracts on 425,600 sq ft of Tech Belt acquisitions for £232m

· Disposals of £121m in H1

Strong balance sheet

· New £75m five-year unsecured revolving bank facility drawn in July replacing secured facility

· £175m 2.75% convertible bonds converted in January with the issue of 7.88m new shares

· Loan-to-value ratio of 18.6% (31 December 2014 24.0%)

· Cash and undrawn committed facilities of £319m (£336m on 31 December 2014)

Robert Rayne, Chairman, commented: "We believe that 2015 will continue to be a very good year for Derwent London based on strong occupational demand, the quality of our product, our clear-cut strategy and our effective financing."

John Burns, Chief Executive Officer, commented:"We remain confident in our markets. We have raised our average portfolio ERV growth estimates for the full year to 8-10%, and expect property yields to remain firm in the second half supported by voracious demand. So far in 2015, £20m of new lettings have been secured and the Group has the potential to deliver over one million sq ft of developments between 2016 and 2019."

Webcast and conference call

There will be a live webcast of the results together with a conference call for investors and analysts at 9.30 BST today. The audio webcast can be accessed at www.derwentlondon.com.

To participate in the call, please dial the following number: +44 (0)20 3059 8125

Please say "Derwent London" when asked for the participant code.

A recording of the results presentation will also be made available later in the day on www.derwentlondon.com.

For further information, please contact:

Notes to editors

Derwent London plc

Derwent London plc owns a portfolio of commercial real estate predominantly in central London valued at £4.6 billion as at 30 June 2015, making it the largest London-focused real estate investment trust (REIT).

Our experienced team has a long track record of creating value throughout the property cycle by regenerating our buildings via development or refurbishment, effective asset management and capital recycling.

We typically acquire central London properties off-market with low capital values and modest rents in improving locations, most of which are either in the West End or the Tech Belt. We capitalise on the unique qualities of each of our properties - taking a fresh approach to the regeneration of every building with a focus on anticipating tenant requirements and an emphasis on design.

Reflecting and supporting our long-term success, the business has a strong balance sheet with modest leverage, a robust income stream and flexible financing.

Landmark schemes in our portfolio of 5.8 million sq ft as at 30 June 2015 include Angel Building EC1, The Buckley Building EC1, White Collar Factory EC1, 1-2 Stephen Street W1, Horseferry House SW1 and Tea Building E1.

In December 2014, Derwent London topped the real estate sector for the fifth year in a row and was placed ninth overall in the Management Today awards for 'Britain's Most Admired Companies'. Also in 2014 the Group won the Property Week 'Developer of the Year' and the RICS London Commercial Award, and was shortlisted for awards by Architects' Journal, BCO, NLA and OAS. The Group was also awarded EPRA Gold for corporate and sustainability reporting.

For further information see www.derwentlondon.com or follow us on Twitter at @derwentlondon.

Forward-looking statements

This document contains certain forward-looking statements about the future outlook of Derwent London. By their nature, any statements about future outlook involve risk and uncertainty because they relate to events and depend on circumstances that may or may not occur in the future. Actual results, performance or outcomes may differ materially from any results, performance or outcomes expressed or implied by such forward-looking statements.

No representation or warranty is given in relation to any forward-looking statements made by Derwent London, including as to their completeness or accuracy. Derwent London does not undertake to update any forward-looking statements whether as a result of new information, future events or otherwise. Nothing in this announcement should be construed as a profit forecast.

OVERVIEW

The progress we have made coupled with the market's strength has fully confirmed the upbeat outlook communicated to shareholders in our full year results in February 2015.

Occupier demand is reflected in strong rental growth and letting activity

The London commercial property market continues to see strong occupier and investment demand and business confidence in the capital remained buoyant despite the uncertainty surrounding the General Election. Our underlying portfolio value rose 9.1% in the first six months, and our estimated rental values (ERVs) on an EPRA basis rose 5.2%. Over twelve months the increases have been 19.8% and 10.2%, respectively. As a result the Group's EPRA NAV per share has grown by 10.9% in six months and 25.4% in twelve. It now stands at 3,226p.

Income underpins our values and so it is important that we take advantage of the current levels of high occupier demand. We have signed leases on 394,600 sq ft in the year to date representing £20.3m of rental income per annum. Examples of our success were the rapid re-lettings at Angel Square EC1 where we re-let 102,000 sq ft and the early lettings at White Collar Factory EC1 where we pre-let almost 70,000 sq ft. Of these lettings 46% were to professional and business services and 36% to TMT and creative businesses.

Development programme could see one million sq ft under construction in 2016

We have also made substantial progress on our development programme. Including 40 Chancery Lane WC2, which was finished in July, we have completed 210,500 sq ft of developments so far this year. This represents 41% of the projects where we were on site at the year end. These buildings are 90% let with another 5% under offer.

We are maintaining our growth prospects by initiating new projects. We commenced on site at The Copyright Building, 30 Berners Street W1 during the period, whilst 80 Charlotte Street W1 and Brunel Building, Paddington W2 (previously 55-65 North Wharf Road) will start in the second half of this year and the first half of next, respectively. Upon commencement we will have over one million sq ft under construction.

Looking beyond the immediate future we have made progress on two major longer term schemes at 1 Oxford Street W1 and 19-35 Baker Street W1. After allowing for our 55% interest in the second property, Derwent London's share is expected to be over 400,000 sq ft of development, which could start in 2018.

For the longer term we have secured two large Tech Belt opportunities: 20 Farringdon Road EC1 and Aldgate Union E1. The purchase of the latter will complete in December 2015. Together these will cost £232m, and we will adopt similar strategies for both. In the short term the properties will benefit from our asset management activity and their proximity to Crossrail and, in the longer term, they will add to our significant pipeline of potential major schemes for beyond 2020.

Financial strength and flexibility

Our confident outlook is underpinned by the Group's strong financial base, with a focus on income as well as assets. Recurring earnings per share have grown by 16.5% compared to the first half of 2014 and the early conversion into new equity of our £175m of 2016 convertible bonds in January this year further strengthened the Group's interest cover and all of our key gearing ratios. This encouraged Standard & Poor's to upgrade our rating to BBB+ (from BBB). In July 2015, we also completed a new fully revolving £75m minimum five-year unsecured loan facility. An existing £90m secured bank facility from the same lender was cancelled at the same time, thereby releasing charges over £390m of properties.

Derwent London's successes in securing new rental income, allied with a deepened and more flexible financial base, allow us to commit to new developments with the knowledge that our interest cover and low loan-to-value ratio would still leave the Group in a strong position even if there was a severe deterioration in the economic outlook. While we are not expecting such an event in the foreseeable future, the continuing global uncertainties mean that we believe that pursuing growth through operational rather than financial gearing remains the right approach for our business model.

Positive outlook expected to see good performance continue

The London office market is strong. There is very good occupier demand, which has led us to raise our average portfolio ERV growth assumption from 6-8% to 8-10% for this year. Investment demand remains voracious pushing yields to new lows. The London market is cyclical but, with meaningful rental growth and no marked change in economic expectations, we expect yields to remain firm.

CENTRAL LONDON OFFICE MARKET

London's economy continues to show good momentum. Latest figures for annual employment growth and business activity remain positive, and are ahead of the UK average. This growth is expected to continue over the next few years and should be helped by the improving economic conditions being seen in the USA and in most of Europe.

These improvements have led to warnings of potential bank rate increases in the USA and the UK despite inflation remaining very low. The expectation remains that any changes will be gradual and the Bank of England has said that ultimately it expects bank rates to remain considerably lower than in previous interest rate cycles. Other than interest rates the most likely short term changes to the UK economy will be caused by external events. Significant global uncertainty remains and it seems likely that the performance of the Chinese and Greek economies and the UK's Brexit referendum will remain a focus of attention.

CBRE report that the central London occupier market continues to be strong with 7.1m sq ft of space taken up in the first six months, which maintains the trend seen in the last two years. There was a rapid increase in take-up from the banking and financial sectors which represented 29% of the total, with TMT, business and professional services accounting for another 51%. The vacancy rate fell 79bp to 2.8%, which is the second lowest quarterly level in fourteen years, and prime rents are estimated to have risen 11.9% in the year to June. The West End indicators were broadly unchanged in the period with take-up at 2.0m sq. ft., vacancy of 2.3% and annual rental growth of 7.7%.

It is inevitable that a prolonged period of rental growth and falling vacancy stimulates new development activity. Last year 6.0m sq ft of office space was completed in central London and it is likely that this heightened level of activity will continue at least for 2015 and 2016, with the potential for it to be prolonged or even increase in the following three years. CBRE estimates that, if all current and proposed central London office developments are completed, they would deliver 33.7m sq ft of new space between 2015 and 2019. This is equivalent to 15% of the existing market or 2.7 times average annual take-up since 2000. Such a scale of delivery is likely to impact the market by tempering rental growth, but the net impact is actually lower as 55% of the total could be built on sites currently occupied by existing buildings. A number of hurdles may also delay delivery: notably planning, construction cost inflation and funding.

After the completion of White Collar Factory in 2016 our focus returns to the West End where the majority of our immediate development commitments and portfolio lie. CBRE estimate the potential five-year supply here is 6.5m sq ft, which is equivalent to 7% of existing space, or 3.1 times average annual take-up. However, 48% of the total is uncommitted.

London's positive outlook and relative strengths have continued to fuel investment demand for offices. The first half saw £8.2bn of transactions, which maintains the high levels of activity seen in the last four years. CBRE estimate prime yields in the first half reduced 25 basis points in both the City and West End, so that these are now 4.0% and 3.5%, respectively. Recent transactions continue to record firm or lower yields and broad sources of demand. In the short term we do not expect property yields to rise providing occupier demand continues and interest rate expectations remain relatively benign.

VALUATION

These conditions led to a strong valuation performance in the first half of 2015. The Group's investment portfolio was valued at £4.58bn at 30 June 2015 which produced a surplus of £369.5m before accounting adjustments of £7.4m (see note 11), giving a total reported movement of £362.1m.

On an underlying basis there was a 9.1% valuation increase. By location our central London properties, 98% of the portfolio, increased by 9.3% with the balance, our Scottish holdings, up 1.0%. Within central London the City border properties, principally those in the Tech Belt, increased by 11.9%, with the West End up 8.3%. Overall the portfolio outperformed the IPD Central London Offices Quarterly Index which increased 8.2% and the All UK Property Index which rose 3.9%.

During the first half we were on-site at six major projects. These saw strong performance, rising 14.2% to a value of £696.9m. Average growth on the rest of the portfolio was 8.2%. The projects included five developments, in total valued at £375.1m, comprising Turnmill EC1, 40 Chancery Lane WC2, White Collar Factory EC1, The Copyright Building W1 and a residential development at 73 Charlotte Street W1. Their combined increase was 15.0%. Turnmill was completed and handed over to the tenant for fit out in the first half and 40 Chancery Lane was completed in July.

The sixth project was the phased refurbishment of 1-2 Stephen Street W1 and its associated retail extension, Tottenham Court Walk. This property rose in value by 13.3% to £321.8m. Here the main office phases were completed last year, and the retail in the first half of this.

Robust investment demand from both domestic and international sources continued to exert downward pressure on valuation yields. Accordingly, on an EPRA basis, the true equivalent yield tightened by 17 basis points over the six months to 4.56% from 4.73%. The initial yield was 3.2% rising to 3.9% on a 'topped-up' basis, after contractual rental uplifts and rent free periods expire. The reversionary yield was 5.0%.

At the half year the annualised contracted rent was £134.7m with an ERV of £228.8m, thereby showing a significant potential portfolio income reversion of £94.1m. This reversion falls into three categories. First, £37.3m of contractual rental uplifts from the expiry of rent free periods, stepped rents and pre-let projects. Under IFRS much of this element is already included in our earnings, save the £7.1m of pre-let income at 40 Chancery Lane and White Collar Factory where we were still on site in June. Secondly, there is £28.3m of potential income from letting vacant space, which is either space available for occupation or development projects. Of this, only £3.1m was available to occupy, reflecting our low vacancy rate of 1.6%. Thirdly, the £28.5m of potential reversion derives from marking rent reviews and lease renewals to current market rental levels.

The portfolio's total property return was 10.3% over the half year. The IPD Index for total return over the same period was 10.1% for central London offices and 6.5% for All UK Property.

PORTFOLIO MANAGEMENT

This year is set to be an excellent letting year for the Group based on our current activity levels. To date we have let £20.3m at an average rent of £51 per sq ft. These lettings compare to the £9.2m secured in the whole of last year, and the £21.8m secured in our best letting year, 2013.

Letting activity 2015 year to date

Highlights include lettings at 1-2 Stephen Street W1 with over £81 per sq ft achieved on the top two floors, re-letting 80% of the space at Angel Square EC1 thereby raising the income 54% from its level at acquisition, and securing our first pre-lets at White Collar Factory EC1. The latter is already 24% let. We have also now let seven out of nine retail units at Tottenham Court Walk W1. As well as this activity, the Group has achieved new rental levels at Davidson Building WC2, Morelands EC1 and Tea Building E1. Overall our EPRA vacancy rate has fallen from 4.1% to 1.6 %, despite the completion of developments.

In the first half we introduced The Office Group to the tenant roster of three large multi-let buildings in our portfolio. They are one of the new breed of design-led flexible office providers, which are thriving as work patterns change. The business model not only attracts a wide range of occupiers, but also provides services to other businesses both from within the building and in the vicinity. This amenity helps create an additional vibrancy which adds to the building's appeal. In total The Office Group has taken 116,150 sq ft of space, which represents a combined rent of £6.0m per annum, with Derwent London also entitled to potential profit overage on 60% of the income.

Principal lettings in 2015 up to 10 August

* The Group will get a share of The Office Group's profits above a minimum level

** Landlord's break in year five

In the year to date we have carried out 31 rent reviews and lease renewals on a total of 181,600 sq ft. The average income increase was 28.2% to provide rents of £6.6m pa. During the period £12.7m of rental income was subject to lease expiries or breaks, and we were able to retain or re-let 87%.

PROJECTS

Two projects were completed in the first half: Turnmill EC1 and Tottenham Court Walk W1. We have subsequently completed 40 Chancery Lane WC2. The three projects totalled 210,500 sq ft and are 90% let.

We are now on-site at three projects totalling 413,500 sq ft. The largest scheme is White Collar Factory EC1, which is expected to become another iconic Tech Belt building on completion in 2016. The smaller predominantly residential property 73 Charlotte Street W1 is due for completion in Q3 this year. Earlier this year we started on site at The Copyright Building W1 where completion is scheduled for 2017. The expected future capital expenditure on these projects is £136m, with a net ERV of £22.7m per annum.

Work will commence at 80 Charlotte Street W1 later this year and Brunel Building W2 in H1 2016. These two projects will add another 620,000 sq ft to the active pipeline with deliveries running out to 2019. We estimate future capital expenditure on these projects to be £338m, with a potential ERV of £38.7m once completed.

In the second half of last year we completed the development for sale of Queens, Paddington W2 comprising 18,700 sq ft in 16 residential units, and a 2,700 sq ft retail unit. Early sales activity was strong, but we have only sold two more units for £2.8m since we last reported. This takes our total sales at Queens to nine units for £18.5m, and the retail unit has been let to Heal's. Sales prices remain above our estimates, but the volume and velocity of activity has slowed significantly reflecting a trend that is being reported across much of the London residential market. The latter has been impacted by a number of recent legislative changes, including the rise in Stamp Duty for higher end homes.

The contrasting momentum between residential values and Mayfair office rents together with the relative costs and timing of construction has led us to reappraise the redevelopment of our head office building at 25 Savile Row W1. We now consider that a future office refurbishment is capable of producing better risk adjusted returns.

In the last two years we have highlighted rising construction costs, and these have continued to escalate. As a result we have increased our estimates of development capital expenditure, and, in some instances where premiums have become excessive, to move away from fixed price contracts. We expect to see construction cost inflation remain high for at least the next two years at c.10% per annum. To date, rising rents and falling yields have ensured our profit margins have at least been maintained.

As projects move from consented to on site we look to replenish our pipeline, and in the first half we have successfully progressed a number of our medium-term developments.

In April, the Group signed a Memorandum of Understanding with our partner and freeholder, The Portman Estate, at 19-35 Baker Street W1. This allows us to proceed with the initial planning phase of a potential 250,000 sq ft development. Subject to planning, work could start as early as 2018. Derwent London owns a 55% interest in the project.

In June we received a resolution to grant planning on 40 Blackfriars Road SE1 for a 68,200 sq ft hotel and a 41,800 sq ft office development. The new hotel to be operated by the Hoxton group will comprise 192 rooms, restaurants, conference space and a skybar. The new building will be over a third larger than our previous office consent for the site. The existing 39,000 sq ft property is now vacant. We are in discussions about de-risking the project, but a number of hurdles still need to be crossed.

In July the Group agreed revised terms for its agreement with Crossrail whereby it will acquire a new 150-year lease of 1 Oxford Street W1 for £55m. We had already secured planning consent for 204,000 sq ft offices, 37,000 sq ft retail and a 34,000 sq ft 350-seat theatre. The consideration is deferred for several years as it is payable on practical completion of the development. Crossrail will receive a ground rent equivalent to 5% of the rent of the commercial space and 16% of any development profit. Work could start in Q1 2018.

Major projects pipeline

* Proposed areas

** Crossrail site still to be acquired

INVESTMENT ACTIVITY

We are contracted to acquire two major properties this year. Both are in the Tech Belt and have similar characteristics to Angel Square EC1 which we purchased in November last year. The properties are sizeable blocks secured off low capital values, with short term opportunities to drive the income, and with significant longer term regeneration potential. Together with Angel Square we will have invested c.£310m in this type of asset in the last twelve months.

In February we purchased 20 Farringdon Road EC1. It has a number of leases expiring this year which, subject to re-letting, give us the opportunity to raise the running yield. Longer term it occupies a prime site in the heart of Clerkenwell opposite the new Farringdon Crossrail station. This is an area which is likely to see substantial improvement in the next three years when the station opens.

Aldgate Union E1, opposite Aldgate East underground station, will be acquired with vacant possession in December 2015. We expect to take advantage of the current strong levels of occupier demand to multi-let the building with only modest refurbishment expenditure. This area is also going through a significant transformation benefitting from the strength of demand in the Tech Belt and latterly a resurgent City office market.

Principal acquisitions 2015

* To first break or expiry, as at 31 December 2014** Excludes 26,200 sq ft ground floor offices let at a peppercorn rent

The details of the sale of two properties and a 50% interest in 9 and 16 Prescot E1, as part of the property swap for 20 Farringdon Road, were disclosed at the time of our final results, which we reported in February 2015.

Principal disposals 2015

* 50% of total due to joint venture

FINANCE REVIEW

The Group's EPRA net asset value per share increased by 10.9% to 3,226p in the six months to 30 June 2015 bringing the increase over the last twelve months to 25.4%. The main component of this was the strong rise in the property valuation but it also benefitted from improved recurring earnings.

EPRA profit before tax for the half year to 30 June 2015 increased by 21.9% to £39.0m from £32.0m for the equivalent period in 2014. EPRA earnings per share, which take account of the additional shares in issue following the conversion of the 2016 convertible bonds, were up by 16.5% to 33.97p compared to 29.15p in H1 2014.

The equity issue and debt reduction have also had a significant impact upon our gearing ratios, with the loan-to-value ratio falling to 18.6% at 30 June 2015 from 24.0% on 31 December 2014 and 25.7% at 30 June 2014.

The Group's property portfolio performed very well again with a revaluation surplus of £362.1m for the period after allowing for £7.8m of lease incentives. The uplift was 8.3% higher than the very strong result in H1 2014, but H1 2015 was influenced more by rental growth and development uplift than by yield compression. Notwithstanding that, we have continued to see yields fall across the portfolio.

After capital expenditure of £61.2m including capitalised interest of £3.0m, the overall value of the portfolio has grown to £4.6bn as at 30 June 2015. The equivalent capital expenditure figures for H1 2014 were £59.9m and £2.3m, respectively. As the value of work carried out at the White Collar Factory site is due to expand, we expect capital expenditure in the second half of 2015 to be substantially higher at around £80.1m.

We have continued to recycle our capital and, again, property disposals exceeded acquisitions. Most of this activity was a result of the property 'swap' which saw us acquiring 20 Farringdon Road for £88.0m before costs and selling 22 Kingsway, Mark Square House and a half share in 9 and 16 Prescot Street for £115.3m. Our remaining 50% share in Prescot Street is now included within 'Investments' (note 13) and is the reason why this has increased from £7.4m at 31 December 2014 to £26.2m at 30 June 2015.

The improvement in recurring earnings noted above is a result of property revenues increasing by £5.0m from H1 2014 but also benefits from lower interest charges following the redemption of the convertible bonds. Gross property income rose to £74.3m in H1 2015 from £69.3m in H1 2014. Overall finance costs in H1 2015 were reduced to £17.4m against £21.1m in H1 2014, a fall of £3.7m or 17.5%. Administrative costs have, however, increased by £1.7m in the period compared with H1 2014 as staff costs and incentives reflect the high level of activity within the Group.

The increase in like-for-like net rental income was 4.4% compared to H1 2014 and 2.7% compared to H2 2014.

The Group's IFRS profit before tax was £405.0m for the six months to 30 June 2015 against £371.4m in H1 2014. This takes fair value movements into account and, as well as the property revaluations, includes a £4.8m improvement in the mark-to-market cost of our interest rate swaps during the first half of 2015.

Financing and net debt

As noted above, the main financing event during the first half was the conversion of our £175m 2.75% convertible bonds 2016 and the resultant issue of 7.88m new ordinary shares. Net debt at 30 June 2015 was therefore reduced by £137.4m to £875.9m from £1,013.3m at 31 December 2014. Net asset gearing has fallen accordingly to 24.1% at 30 June 2015 from 32.9% in December 2014 and 35.8% at 30 June 2014. Interest cover has improved considerably too, the figure for the six months to 30 June 2015 being 343% compared with 287% for H1 2014 and 286% for the whole of 2014.

The resulting upgrade to our credit rating, which is now BBB+ according to Standard & Poor's, should help us access external debt funding, particularly from the capital markets, at lower margins.

Earlier in the year, when interest rates appeared exceptionally low, we extended the maturity of a £40m interest rate swap from June 2017 to June 2022 thereby reducing the rate payable from 3.0% to 2.35%. This extended the maturity of one of our hedges and also reduces interest charges by £260,000 per annum until June 2017.

More recently, in July 2015 we completed a new unsecured and fully revolving £75m facility with Wells Fargo. The facility has a five-year term but can be extended by up to two years upon request and has the potential to be increased by up to £25m during its term. The previous £90m secured facility from the same lender, of which £70m was drawn, was repaid and cancelled at the same time. The margin under the new facility is substantially lower than the previous one and, at a cost of £2m, we have reduced the amount hedged from £70m to £40m and extended the hedge period out to July 2022 at a rate of 2.446%. This refinancing will extend the weighted average maturity of our debt, lower our annual finance costs by approximately £1.25m per annum (assuming the facility is half drawn) and increase our flexibility as the new facility has a £55m additional revolving element over the previous one. It also frees up £390m of assets taking our unencumbered property assets to £3.4bn. The financial covenants for the new facility are identical to those of our existing £550m unsecured revolving bank facility.

As at 30 June 2015, the Group's weighted average interest rate was 4.20% on an IFRS basis (compared with 4.22% at 31 December 2014) and 3.93% on a cash basis (compared with 3.78% at 31 December 2014). The July refinancing will reduce the overall cost by around 0.15-0.20% depending on the amount drawn. The proportion of our debt that is fixed or swapped into fixed rates was reduced to 91% as at 30 June 2015 and the level of cash and undrawn facilities was £319m. The weighted average maturity of our borrowings was increased to 7.4 years at 30 June 2015 (6.6 years at 31 December 2014) after the conversion of the 2016 convertible bonds, but before the bank refinancing explained above.

Dividend

Our continuing strong growth in earnings per share has enabled us to increase the interim dividend by 8.2% to 12.6p per share. It will all be paid as a PID on 22 October 2015 to shareholders on the register as at 18 September 2015. The scrip remains popular and will be retained as an option for shareholders.

BOARD CHANGES

As announced in June, Cilla Snowball CBE will join the Board on 1 September 2015 as an independent non-executive Director. Cilla is the second non-executive Board member to be appointed this year, following Claudia Arney who joined in May 2015, as part of our ongoing process of refreshing the Board.

CLEAR-CUT STRATEGY

Derwent London's strategy is currently focused on taking advantage of central London's buoyant market conditions. For example, a number of our recent acquisitions, as well as adding to the long term pipeline, bring short term letting opportunities totalling over 360,000 sq ft, allowing us to tap into the strong occupier demand for Tech Belt space.

Our portfolio is strategically located with 59% in the central West End and 35% in the Tech Belt with 70% also being in close proximity to a Crossrail station. Despite the good capital growth over the last six years, our true equivalent yield of 4.56% is based off an average central London office ERV of only £45 per sq ft, an attractive level from which we can derive future growth.

The Group is scheduled to have one million sq ft under construction during the next twelve months ranging from Paddington in the west to Silicon Roundabout in the east. This programme requires future capital expenditure of c.£480m. It represents a significant upgrade to the portfolio and has the potential to add £29.6m per annum, or 13% to our ERV, by 2019.

During the time we undertake all these opportunities, most of our properties will remain income producing while offering attractive growth either from active asset management or by becoming part of our longer term pipeline.

The combination of a well balanced portfolio and sound financing gives us the capacity and flexibility to pursue our plans with confidence.

Robert A. Rayne John D. Burns

Chairman Chief Executive Officer

13 August 2015

Statement of Directors' responsibilities

The Directors' confirm that, to the best of their knowledge, these condensed consolidated interim financial statements have been prepared in accordance with IAS 34 'Interim financial reporting', as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority. The interim management report includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:

· An indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

· Material related-party transactions in the first six months of the financial year and any material changes in the related-party transactions described in the last Annual Report.

The Directors are listed in the Derwent London plc Annual Report of 31 December 2014 and a list of the current Directors is maintained on the Derwent London plc website: www.derwentlondon.com. The maintenance and integrity of the Derwent London website is the responsibility of the Directors.

Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

On behalf of the Board

John D. Burns Damian M.A. Wisniewski

Chief Executive Officer Finance Director

13 August 2015

GROUP CONDENSED INCOME STATEMENT (UNAUDITED)

GROUP CONDENSED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)

GROUP CONDENSED BALANCE SHEET (UNAUDITED)

GROUP CONDENSED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)

GROUP CONDENSED CASH FLOW STATEMENT (UNAUDITED)