Derwent London plc (DLN) 2006年年度報告「LSE」.pdf

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1、Derwent London plcReport&Accounts 2006234820 2424252627284956576364656768697171ContentsFinancial highlightsFive year reviewChairmans statementOperating reviewFinancial reviewFinancial statementsGroup income statementStatements of recognised income and expenseBalance sheetsGroup cash flow statementCo

2、mpany cash flow statementNotes to the financial statementsDirectors reportStatement of directors responsibilitiesReport on directors remunerationReport of the audit committeeReport of the nominations committeeIndependent auditors reportDirectorsFive year summaryNotice of annual general meetingFinanc

3、ial calendarAdvisersDerwent London plc Report&Accounts 2006 1 Derwent London plc,the companys new name following the merger of Derwent Valley Holdings plc and London Merchant Securities plc,is a leading central London office specialist with a combined portfolio valued at over 2.5 billion.It is a des

4、ign-led award-winning property company with a reputation for innovative projects incorporating high quality,contemporary architecture which works closely with leading and emerging architects to create interesting solutions to enhance its schemes.The group invests mainly in the West End but also in t

5、hose newly improving locations where it perceives future value,bringing quality working environments to its tenants and contributing to Londons regeneration.The boards strategy is to add value to buildings and sites through creative planning,imaginative design and enterprising lease management.Throu

6、gh this,the aim is to deliver an above average annualised total return to shareholders.2 Derwent London plc Report&Accounts 2006 Increase (decrease)2006 2005%Adjusted net property income1 46.4m 46.6m(0.4)Adjusted profit before taxation2 16.4m 16.7m(1.8)Profit before taxation 242.8m 150.4m 61.4Adjust

7、ed earnings per share 3 24.83p 26.23p(5.3)Earnings per share 340.13p 218.63p 55.6Dividend per share Distribution of years earnings 14.75p 13.65p 8.1 IFRS 13.95p 12.825p 8.8Adjusted net assets per share4 1,770p 1,335p 32.6Net assets per share 1,460p 1,134p 28.7Total return 33.6%25.5%Gearing Balance s

8、heet 44.7%50.1%Profit and loss 1.85 1.84 Financial highlights 1 Excludes development income.2 Excludes development income,exceptional items,the revaluation movement on investment properties and financial instruments and the profit on disposal of investment properties.3 Excludes the revaluation movem

9、ent on investment properties and the profit on disposal of investment properties together with the related tax effects.4 Excludes the deferred tax on the revaluation surplus,the post tax fair value of derivative financial instruments and deferred tax in respect of capital allowances claimed./Derwent

10、 London plc Report&Accounts 2006 3 Five year review4 Derwent London plc Report&Accounts 2006After a transformational year,Derwent London,Derwent Valley Holdings new name following its merger with London Merchant Securities(LMS),reports excellent results for the year ended 31st December 2006.The merg

11、er created one of Londons leading West End office specialists with a market capitalisation in excess of 2 billion making it the sixth largest UK listed property company.The benefits and the prospects for the enlarged group are dealt with below.Results overviewThe merger was completed on 1st February

12、 2007 and,accordingly,these results do not include those of LMS.The adjusted net asset value increased by 33%to 950 million,equivalent to 1,770p per share compared with 1,335p last year.The property portfolio was valued at 1.3 billion,producing a surplus of 223 million on the previous year.Propertie

13、s held for the full year gained in value by 21.6%compared to 14.8%in 2005.At 16.4 million,adjusted profit before tax was marginally lower than the 16.7 million achieved last year.Profits were held back as a consequence of the groups strategy of foregoing income and taking possession of properties wh

14、ere opportunities for value enhancing development schemes were evident.During the year,58.3 million was expended on acquisitions including 24.8 million on the Astoria,Charing Cross Road and 17 Oxford Street.At 18.7 million,capital expenditure on projects was lower than anticipated due to unexpected

15、delays caused by the increasingly protracted planning environment within which the group operates.Disposal proceeds totalled 31.2 million and gave a profit of 2.9 million.DividendsThe terms of the merger with LMS necessitated a change to the timing of the payment of the 2006 final dividend.Sharehold

16、ers of Derwent Valley Holdings received a second interim dividend of 10.525p per share on 23rd February 2007,in lieu of the final dividend normally paid in June.This,together with the first interim dividend of 4.225p paid on 6th November 2006,gave a total payment for the year of 14.75p,an increase o

17、f 8%on the previous year.The companys next dividend payment will be the interim dividend for the year to 31st December 2007,which is expected to be paid in November 2007.Market reviewRental growth fulfilled expectations,especially in the West End,as tenant demand flourished and the supply of vacant

18、space receded.Yield compression was also still evident as demand from the investment market showed no sign of faltering.The year was an exceptionally productive one for the group in terms of letting activity,the high points being the successes at its three largest projects.In the first half of the y

19、ear,Telstar,Paddington,where the group is acting as development manager for Prudential,was pre-let to Rio Tinto.The Johnson Building,Hatton Garden,is now fully let and Horseferry House,Victoria was pre-let to Burberry as its new global headquarters,at a very early stage of its refurbishment.These th

20、ree transactions,which combined have a floor area of 39,000m2,demonstrate the high level of demand for the groups product.For Derwent London,continuing this success involves three principal factors that the board believe give a competitive advantage.First,create interesting and design-led space that

21、 stands apart.Second,be enterprising and prepared to invest in those London villages that have the essential characteristics necessary for future improvement.Third,target schemes predominantly at the middle market,where rents are in the range of 375650m2.Applying these principles to the merged portf

22、olio,which comprises over 440,000m2 of space in central London and has a project pipeline of 315,000m2,should deliver further net asset growth.MergerThe merger effectively doubled the size of the company.This,together with the additional depth in management resource,will allow the group to make larg

23、er acquisitions and increase the scale of its future redevelopment and refurbishment schemes in central London.Integration of the two businesses is proceeding smoothly with a phased transfer of personnel to Savile Row due to be completed by early April.The annual cost savings,to be achieved through

24、synergy,are estimated at 4.5 million by 2008.The net savings in 2007 are expected to be half this figure.Chairmans statementThe QubeFitzrovia,W110,000m2 offi ces/retailCompletion:Summer 2007Portobello DockLadbroke Grove,W106,400m2 mixed useCompletion:Autumn 2007Derwent London plc Report&Accounts 200

25、6 7 Chairmans statementThe combination of the two companies portfolios presented a unique opportunity to create a new major ownership within the central London commercial property market,with 2.2 billion of property located in this key sector.Whilst Derwent Valley Holdings focussed its efforts solel

26、y within this area,LMS historically held some of its assets outside London.It is the boards intention that the new group will become wholly concentrated on central London and,therefore,assets outside this core area,with a value of 0.3 billion,will be disposed of in a timely and efficient way.The pro

27、ceeds of these sales will either be recycled into the extensive pipeline of projects or reinvested in new properties.The enlarged group has a significantly enhanced presence in two major London hubs the West End and the City borders which are currently two of the most dynamic locations for property

28、investment.The total portfolio value is 2.5 billion,of which 1.7 billion is in the West End,and 0.5 billion in the City borders.Traditionally,Derwent Valley Holdings pursued a policy of owning assets with a relatively short lease profile,which provided future refurbishment and development opportunit

29、ies.In contrast,LMS concentrated on letting buildings on longer leases and at some of the larger buildings,these leases are approaching the end of their terms.This will present exciting opportunities to apply Derwents design-led philosophy and active asset management approach to regenerate the prope

30、rties and enhance value.The boardIn addition to my appointment as chairman,the merger has brought other changes to the board.I am delighted that John Ivey,the companys former chairman,has agreed to become deputy chairman.John has made a substantial contribution to the development of the group and I

31、look forward to benefiting from his knowledge and experience.John Burns,Derwent Valley Holdings managing director,became chief executive officer of the enlarged group and Simon Silver became head of development.Nick Friedlos joined the board in an executive capacity and June de Moller and Donald New

32、ell,former non-executive directors at LMS,continue in that capacity for the enlarged group.REITSThe group is planning to elect for REIT status and shareholders will shortly receive a circular convening an EGM to approve the changes to the companys articles of association needed to achieve this.The t

33、argeted conversion date is 1st July 2007.Upon conversion,the group will be required to pay a one-off charge calculated at 2%of the groups gross assets.Based on the proforma value of the investment portfolio,the conversion charge would be 46 million.The board has reviewed its dividend policy in light

34、 of the merger and the pending conversion to REIT status.Historically,the groups strategy has been to maximise total returns and this will continue post the merger and REIT conversion.The board has concluded that Derwent London will pay dividends broadly equal to the aggregate of the current dividen

35、d distributions of the two companies plus a significant proportion of the tax saving on recurring profit arising from REIT conversion.Since conversion will take place part way through 2007,the dividend for this year will be adjusted accordingly.Going forward,the board plans to continue the groups ex

36、isting progressive dividend policy,in line with adjusted earnings growth.The board consider that the benefits to the group of converting to a REIT are:A globally recognised structure for investors to gain exposure to the groups assets No tax on property rental income or chargeable gains on disposals

37、 Elimination of latent capital gains tax liability on the investment property portfolio a proforma amount of 293 million.ProspectsWith yield compression unlikely to contribute significantly to performance,it is encouraging that rental growth in central London,where the portfolios average rent is onl

38、y 255 per m2,looks firmly set to continue.For Derwent London shareholders,the future offers the exciting prospects of REIT status,a portfolio packed with opportunities and a specific focus on central London.I look forward to reporting to you later in the year on the groups progress.R.A.Rayne20th Mar

39、ch 20078 Derwent London plc Report&Accounts 20061 The Qube Fitzrovia,W1 10,000m2 offices/retail Completion:Summer 20072 Portobello Dock Ladbroke Grove,W10 6,400m2 mixed use Completion:Autumn 20073 Horseferry House Victoria,SW1 15,200m2 offices Completion:Spring 20084 Gresse Street Noho,W1 4,400m2 of

40、fices Completion:Spring 20095 Leonard Street City borders,EC2 2,000m2 offices and 47 apartments Completion:Summer 20086 Arup phases II&III Fitzrovia,W1 13,200m2 offices Completion:2007/20097 Wedge House Southbank,SE1 8,200m2 offices Completion:20108 The Angel Centre Islington,EC1 20,000m2 office ref

41、urbishment FeasibilityAfter a transformational year,Derwent London is now the sixth largest UK listed property company.The future offers the exciting prospects of REIT status,a portfolio packed with opportunities and a specific focus on central London.Operating reviewKey achievements in 2006 include

42、:Completion and letting of the 13,900m2 Johnson Building,our largest project to date.Significant West End pre-lets:15,200m2 Horseferry House refurbishment and 9,900m2 Telstar new build.Planning permissions obtained for schemes at Leonard Street and Wedge House.Charing Cross Road holdings increased t

43、hrough the Astoria acquisition,an important long term development opportunity.Future projects unlocked at Riverwalk House and Argosy House,following the Crown Estate swap transaction.A substantially increased development pipeline of 315,000m2 following the recent merger.Derwent London plc Report&Acc

44、ounts 2006 9 Operating reviewGoing forward63478Derwent London is a design-led award-winning property company with a reputation for high quality contemporary architecture and innovative refurbishment.We are working to help reshape central London through inspirational and environmentally responsible d

45、esign,working with the brightest architects to create desirable spaces to work or live in.Now,with our enlarged portfolio,we are able to increase our commitment to refurbishment and redevelopment within the London villages.51210 Derwent London plc Report&Accounts 2006Strategy and performanceDerwent

46、London is a leading commercial property company with a specific focus on central London offices.Our specialist operating areas are the established and prospering villages of the West End and the City borders.The prospects for our market place remain exciting,with Londons economic growth leading the

47、country,a trend that is set to continue.In addition,the occupational market is favouring property owners.There is strong demand for offices at a time which coincides with a shortage of available quality space that is being exacerbated by planning bureaucracy.The outcome is an upward movement on rent

48、s,particularly in our targeted middle market.With rents between 375650 per m2,this still offers tenants good economic value.Following the recent merger,the group now has ownership of a 2.5 billion portfolio.Nearly 90%by value is located in our core operating area of central London and provides in ex

49、cess of 440,000m2 of accommodation.The West End,which encompasses Victoria,Belgravia,Fitzrovia,Noho,Baker Street,Paddington,Soho and Covent Garden,is the focal area with 69%by value.Last year,a number of key objectives were set out.These,together with the progress that has been made towards achievin

50、g them during 2006,are reviewed below.1 Ownership of a portfolio with significant opportunities for value enhancement through refurbishment or redevelopment.Our strategy is to assemble and retain a core portfolio that has the characteristic of existing low rents and that offers an important refurbis

51、hment and development pipeline.In this regard,asset management activity and acquisitions undertaken during the year have significantly enhanced the portfolios potential.This includes the swap transaction with The Crown Estate and the acquisition of further properties to add to our existing holdings

52、in Charing Cross Road.In addition,the merger has created a unique opportunity to bring under one ownership similar style properties to which our proven management skills will be applied to extract further value.2 Active lease management to improve rental income.We endeavour to maximise rental income

53、 both through the letting of our completed projects and by ensuring that occupancy and income is preserved in buildings earmarked for redevelopment.As an example,at North Wharf Road,Paddington,2,670m2 was quickly re-let,following a lease surrender.The new lettings incorporate a number of lease break

54、s,which give us control over the timing of what is a major redevelopment opportunity.3 Maintain a pipeline of projects that can be delivered according to market conditions.Our development team continually instigate and evaluate planning studies to ensure an appropriate supply of schemes.Following th

55、e merger,the projects on which we are currently on site total over 59,000m2,of which 38,000m2 is pre-let.The total project pipeline is over 315,000m2 and this places us in a strong position for future value creation.4 Deliver,and let projects on time and on cost.Our largest project to date,the 13,90

56、0m2 Johnson Building,was completed on time and on budget and is now fully let.Capital expenditure on various projects during the year totalled 18.7 million,with a further 193 million planned for the enlarged group over the next two years.5 Apply and promote contemporary architecture and forward-thin

57、king techniques through the Derwent London design brand.Through our selection of architects,under the direction of Simon Silver,we continue to work with emerging talent from progressive practices in order to promote the Derwent London style and brand.This design philosophy delivers interesting build

58、ings that people want to work in,thereby improving the opportunity for letting success and value enhancement.We actively support New London Architecture,which promotes quality in urban design through exhibitions on forthcoming projects in London.As part of this,in 2006,we were principal sponsors for

59、 The Office,an event exploring innovation and change in workplace design.Operating reviewDerwent London plc Report&Accounts 2006 11 Valuation Number of Vacant Valuation Weighting performance*properties Floor area accommodation m%m2 m2 West End Central 891.2 70 21.5 30 131,700 6,900Outer 55.3 4 9.7 1

60、1 21,700 8,800 946.5 74 20.9 41 153,400 15,700City Outer 336.2 26 23.6 22 88,000 11,900 Total portfolio 2006 1,282.7 100 21.6 63 241,400 27,6002005 1,009.8 100 14.8 64 241,300 38,100*Properties held throughout the year.West End Central:Belgravia,Mayfair,Soho,Covent Garden,Victoria,Paddington,Noho Ou

61、ter:Camden,Islington,Ladbroke GroveCityOuter:Clerkenwell,Holborn,Shoreditch,Southbank and City borders Net Vacant Rent review Portfolio contracted accommodation and lease estimated Average rental income Average rental value reversions rental value unexpired per annum rental income per annum per annu

62、m per annum lease length m per m2 m m m Years West End Central 40.8 331 3.1 9.3 53.2 9.6 Outer 1.8 140 1.6 0.3 3.7 6.4 42.6 314 4.7 9.6 56.9 9.5City Outer 16.8 222 2.7 2.4 21.9 5.8 Total portfolio 2006 59.4 281 7.4 12.0 78.8 8.52005 49.3 250 9.6 7.7 66.6 8.0 Lease length weighted by rental income an

63、d assuming tenants break at first opportunity.Rental uplift Rental per annum per annum Yield m m%Portfolio yields Year end contracted rental income,net of ground rents*59.4 4.5Letting 10,200m2 vacant accommodation available at year end 2.4 4.7Completion and letting 17,400m2 of refurbishments and dev

64、elopments 5.0 5.0Anticipated rent review and lease renewal reversions 12.0 5.9Portfolio reversion 19.4 Potential portfolio rental value 78.8 5.9 Yield based upon the year end valuation and adjusted for cost to complete commenced projects.*Includes the Horseferry House pre-letting of 5.3 million per

65、annum.Operating reviewPortfolio statistics and performance12 Derwent London plc Report&Accounts 2006Operating review6 Recycle capital for reinvestment when potential is maximised.Although disposals were at a slower pace than in previous years,due to the approaching REIT regime,we continue to divest

66、mature assets in strong market conditions to free up capital to invest in situations that are capable of generating better returns.During the year,the portfolio benefited from the work that had previously been undertaken to position our assets to benefit from rental improvement and yield compression

67、.The results translated into a property return of 26.7%for the year,compared to 20.1%in 2005.Looking forward,we are encouraged by the strong levels of letting activity seen so far this year in the central London office market.With vacancy rates forecast to remain at low levels over the next few year

68、s,these conditions look set to continue to deliver rental growth.Valuation commentaryThe year under review saw unprecedented demand for central London property.This was driven by an incessant availability of money,a strong occupational market and a limited supply of office space.Against this backgro

69、und,the investment portfolio was valued at 1.3 billion at 31st December 2006.The valuation surplus achieved during the year was 224.3 million,before the lease incentive adjustment of 1.0 million.Underlying performance contributed 198.0 million with 94.4 million from rental growth and asset managemen

70、t and 103.6 million from yield compression.The revaluation of development properties added 21.1 million,driven principally by the early pre-letting of Horseferry House.The balancing surplus of 5.2 million came through strong performance from acquisitions.The underlying valuation uplift was 21.6%comp

71、ared to 14.8%last year.The West End properties,which represented 74%of the portfolio by value,achieved an increase of 20.9%.With their characteristic low levels of rent,at 314 per m2,they were well positioned to capitalise on the strong improvement in rents,and consequently capital values.In particu

72、lar,Victoria,which has one of the lowest vacancy rates of the central London villages,enjoyed a valuation increase of 25.7%.Noho properties were up 20.4%and Soho/Covent Garden achieved 18.0%.Properties in the City borders and Holborn made up the remaining 26%of the portfolio and here the valuation i

73、ncrease was 23.6%.An important contribution to this was the valuation surplus of 28.9 million at The Johnson Building,which was completed and virtually fully let before the end of the year.Portfolio management Our strategy of increasing the momentum of the project programme over the last two years h

74、as produced excellent results,with letting activity at record levels.During the year,lettings totalled over 40,000m2,excluding Telstar,and achieved an annualised income of over 12.6 million per annum.The key lettings were at The Johnson Building and Horseferry House,which together will ultimately pr

75、oduce over 10 million per annum of rental income.In addition,we remained active at a number of our multi-let buildings,such as Morelands and the Tea Building on the City borders.Both of these are now at full occupancy,which demonstrates the strength of the letting market.With the strong demand for s

76、pace in our core locations,we have seen a hardening of rents and a reduction in incentives offered.Our innovative design-led product is proving attractive and is encouraging tenants to look outside the more traditional areas for space.We have attracted tenants from a diverse range of sectors such as

77、 advertising agencies to Holborn,a fashion house to Victoria and an international mining company to Paddington.We have also been active in managing income at properties where there are potential schemes,viewing these in tandem with our planning studies.Accordingly,we have undertaken a number of ligh

78、t touch refurbishments and effected lettings that will produce valuable,short-term income as we progress our longer-term development aspirations.At the year end,vacant space in the portfolio available for occupation was only 10,200m2,which represented a low void rate of 3.0%of the portfolio rental v

79、alue and 4.2%of the floor area.This included the recently completed schemes at 186 City Road(3,600m2)and St Cross Street,EC1(1,750m2),the latter of which is now let.Derwent London plc Report&Accounts 2006 13 Operating reviewPortfolio activity Approximate Rental Headline net area per annum rental Com

80、mentsPrincipal lettings m2 m per m2 Horseferry House,SW1 15,200 5.29 410The Johnson Building,EC1 12,540 4.65 380430Telstar,W2*9,900 n/a 500Middlesex House,W1 1,580 0.65 4054305565 North Wharf Road,W2 2,670 0.50 205 26 King Street,WC2 950 0.28 325 Tea Building,E1 1,710 0.22 160The Turnmill,EC1 1,260

81、0.19 160Principal rent reviews Yorkshire House,SW1 820 0.33 40025 Savile Row,W1 505 0.29 590 *Development managed on behalf of the Prudential.Pre-letting to Burberry.Four lettings;Grey Advertising,Thomson Scientific,Faber Maunsell and EAT.Pre-letting to Rio Tinto at 4.95m per annum.Four lettings inc

82、luding pre-lettings to Fletcher Priest Architects and Walker Media.Short-term lettings pending future project.Restaurant letting to Carluccios.Various suites.Short-term lettings pending future project.Single rent review concluded to show a 16%increase.Two rent reviews settled to show an average incr

83、ease of 18%.14 Derwent London plc Report&Accounts 2006Operating reviewOther vacant space,which is either under refurbishment or identified for future projects,stood at 17,400m2 and included the proposed new office building at Gresse Street and our mixed-use scheme at Portobello Dock.Total vacant spa

84、ce at the year end was 27,600m2,down from 38,100m2 at the prior year.The reduction from last years level was also due to the successful re-letting of space which became vacant during the year.In addition to lettings,the rent reviews that were completed during the year showed an average increase of 1

85、1%in annual income.We are committed to working closely with our tenants and,where possible,retaining them within the portfolio when their leases come to an end.As a result,we were able to successfully undertake 35 renewals last year.We believe that the ability to work with our tenants to fulfil thei

86、r evolving requirements has been substantially enhanced through our merger and the consequent increase in the size and reach of our portfolio.The activity during the year increased the annualised rental income,net of ground rent,to 54.1 million at the year end.After the inclusion of the pre-let inco

87、me from Horseferry House,this rises to 59.4 million per annum.In addition,there is significant reversion of 7.4 million from letting vacant and scheme space,and 12.0 million from further rent reviews and lease reversions.Acquisitions and disposalsWithin the current extremely competitive investment m

88、arket,and alongside several new acquisitions,we continue to create value with our existing assets.A property swap was completed with The Crown Estate,in which we acquired the freeholds of Riverwalk House,Victoria and Argosy House,Noho.This substantially improved the value of our interest at both of

89、these properties,and,more importantly,unlocked significant future refurbishment and redevelopment potential.It is this type of forward-planning and flexible strategy that will ensure a strong ongoing pipeline of schemes for the future.In June,in what is identified as a strategic,long-term site assem

90、bly,we acquired The Astoria,Charing Cross Road,and a nearby property in Oxford Street for 24.8 million.These buildings adjoin our existing holdings in Charing Cross Road and are all part of the designated West End Special Policy Retail Area and a Crossrail interchange.Since acquisition,important pro

91、gress has been made with the signing of an Oversite Development Agreement with Crossrail.As part of this agreement,we will now co-ordinate and promote the planning process for the potential redevelopment.In return,we have an option to reacquire the site following Crossrail transportation works.Whils

92、t this is a long-term proposal,the investments are fully income producing and the location offers good interim growth potential.During the year,we disposed of assets for a total of 31.2 million.As part of the swap transaction with The Crown Estate,Morley House,which had undergone a rolling refurbish

93、ment following acquisition in 2001,was sold for 17.5 million.Other disposals were our residential development,known as Sweeps in Hatton Garden,and four Islington properties.The combined portfolioIn a proforma balance sheet based on Derwent Valley Holdings results to 31st December 2006 and LMSs compl

94、etion accounts at 31st January 2007,the investment portfolio is valued at 2.5 billion.Properties in central London,which is the groups principal operating area,account for 2.2 billion of the value and provide 440,000m2 of predominantly office space.They are let at a low average rental of 255 per m2

95、and have an average unexpired term of 10.2 years.The balance of the investment portfolio is located in the provinces with a focus on retail assets.Overall the total annual income,net of ground rents,is 113.4 million,with a potential rental value of 153.4 million.This significant reversion is derived

96、 from 17.2 million of vacant accommodation and 22.8 million of rent reviews and lease renewal reversions.Looking at the vacancy rate,approximately a third is from The Qube development,which is nearing completion.Actual space available for letting is low at under 2%of the portfolios rental value.Derw

97、ent London plc Report&Accounts 2006 15 Operating reviewAcquisitions and disposals Approximate net area Comments m2Acquisitions 58.3 million of central London acquisitions during the yearThe Astoria,157165 Charing Cross Road,WC2 3,900 17 Oxford Street,W1 300 186 City Road,EC1 3,600 137142 Bramley Roa

98、d,W10 2,900 Riverwalk House,157166 Millbank,SW1 n/a Argosy House,215 Great Portland Street,W1 n/a 35 Kentish Town Road,NW1 n/a 10,700 Disposals Properties sold for a net 31.2 millionMorley House,314 Regent Street,W1 3,800 Sweeps Residential,EC1 n/a Islington Estate 9,300 13,100An entertainment venue

99、 and two retail units let at 1.1 million per annum on leases expiring December 2008.Adjacent to existing ownerships and offers redevelopment potential.Freehold.A freehold retail unit adjoining the Astoria.A freehold office building,recently refurbished.A single let office building in an improving lo

100、cation.Freehold acquired.The group previously held a 57 year interest on this 6,900m2 office building.The property,which fronts the river Thames,has redevelopment potential.Freehold acquired.The group previously held a 55 year interest on this 2,800m2 office building.With the occupational lease expi

101、ring this year a refurbishment opportunity has been unlocked.Freehold acquired.This 1,400m2 property,when combined with an adjacent ownership offers a development opportunity for a mixed-use canal side scheme.Included in the property swap with The Crown Estate.14 residential units developed as part

102、of The Johnson Building project.Four properties.16 Derwent London plc Report&Accounts 2006Operating reviewRefurbishment and redevelopmentIt is into a favourable and strengthening market place that we have been progressively delivering space.Our schemes share the strong Derwent London characteristics

103、 of contemporary design,uncluttered and flexible spaces and an uncompromising attention to detail.The Johnson Building in Hatton Garden,completed in the first half,provides 13,900m2 of attractive office accommodation,around an impressive central atrium.This development has fulfilled our aspirations

104、of delivering something special into an improving location.The appeal and success of this building has been confirmed with lettings to major names such as Grey Advertising,Faber Maunsell and Thomson Scientific.Looking forward,a number of major projects are under construction.Telstar,Paddington,the 9

105、,900m2 building,where we are development managers on behalf of the Prudential,was pre-let during the year to mining group Rio Tinto for an annual rent of 4.95 million per annum.This rental set a new benchmark for the area.With the core,frame and floor slabs complete,the faade is now progressing quic

106、kly,creating an exciting building.Practical Completion is scheduled for summer 2007.The prominence of the location and the design will ensure this will be a local landmark.Following the grant of planning consent for an increase in floor area and substantial alterations,enabling works have commenced

107、at Horseferry House,Victoria.This has revealed the buildings expansive potential,which will be transformed into some exceptional open spaces.The refreshingly,modern design approach to this imposing 1930s building attracted an early pre-let in December,with Burberry leasing the entire 15,200m2 buildi

108、ng for 5.3 million per annum.Upon completion,which is scheduled for spring 2008,this will become their new global head office.In Noho,a 4,400m2 project is planned at Gresse Street.Here,we intend to improve the area and,thereby,the value of our adjacent holdings,through the delivery of an eye-catchin

109、g Derwent London scheme.Thoughtfully presented public realm,and a mix of uses,will turn this under-appreciated location into a vibrant new destination for occupiers.Elsewhere,other smaller projects will allow the group to take advantage of the current strong occupational environment.A canal-side,mix

110、ed-use scheme of 6,400m2 at Portobello Dock,Ladbroke Grove is underway.A varied range of commercial and residential units will be delivered to the market from autumn 2007.In addition,we have recently completed the refurbishment of 186 City Road,EC1.This handsome building offers 3,600m2 of high quali

111、ty,flexible office space in a convenient location on competitive terms.In order to ensure the ongoing delivery of similar value-creating schemes,we have secured and are progressing a significant pipeline of projects across our London villages.These range from those currently at the planning stage to

112、 others that may be several years from commencement but are undergoing rigorous feasibility studies.Of the former,we have recently agreed the final planning obligations for our proposed 47 residential units and 2,000m2 of commercial space at Leonard Street on the City borders.Another project where w

113、e obtained planning consent in the latter part of 2006 is Wedge House,Southbank.When vacant possession is obtained in mid 2008,we intend to replace this tired,3,600m2,1960s office building with an exciting design,providing 8,200m2 of new accommodation.A number of important,future projects,which are

114、at the planning stage,are being advanced.In the summer,we made an application for a new office building of 9,900m2 in Chancery Lane,Holborn,and we will be shortly submitting a revised application for our North Wharf Road development in Paddington.The latter will include a 23,000m2 office building wi

115、th a cutting-edge design,which will be accompanied by a separate residential building of nearly 100 units.This highly complex regeneration project is in a pivotal location and we are currently in detailed discussions with the planning authorities as to the mix of land uses for the scheme.Derwent Lon

116、don plc Report&Accounts 2006 17 Operating reviewRefurbishment and redevelopment Practical Proposed or expected Estimated cost net area completion to complete Comments m2 m Victoria Horseferry House,Horseferry Road,SW1 15,200 Apr 08 18.9 FitzroviaArup Phase II&III,Fitzroy Street 13,200 2007/09 37.9an

117、d Howland Street,W1The Qube,90 Whitfield Street,W1 10,000 Aug 07 12.3Ladbroke GrovePortobello Dock and Kensal House,W10 6,400 Oct 07 10.3 Noho1619 Gresse Street and Rathbone Place,W1 4,400 Mar 09 16.3 PaddingtonTelstar,W2 9,900 Sep 07 n/a Existing area Comments m2 City borders 1830 Leonard Street,EC

118、2 Site SouthbankWedge House,3040 Blackfriars Road,SE1 3,600 Clerkenwell 2026 Rosebery Avenue,EC1 2,300 Current projectsFuture projects with planning consentPlanning permission obtained for 2,000m2 of offices and 47 residential units.Redevelopment opportunity in 2008.Planning permission obtained for

119、a 8,200m2 office development.Planning permission obtained for a refurbishment and to add two floors.Proposed scheme floor area 3,400m2.Comprehensive refurbishment underway of this 1930s office building.Pre-let to Burberry at 5.3 million per annum.An office development under construction.Pre-let to A

120、rup on a 25 year lease at 6.0 million per annum.Phased completion.An office development nearing completion of 9,300m2 and 700m2 of retail space.Construction underway at this canal-side property to provide office and residential space.A new 4,400m2 office development proposed with 11 residential unit

121、s to be provided in Rathbone Place.Construction well advanced on this office development on behalf of Prudential.Pre-let to Rio Tinto on a 20 year lease at 4.95 million per annum.18 Derwent London plc Report&Accounts 2006 Existing area Comments m2 Paddington 5565 North Wharf Road,W2 7,800 Belgravia1

122、5 Grosvenor Place,SW1 15,000 Holborn 4043 Chancery Lane,WC2 5,700 City bordersCity Road Estate,EC1 9,300 Fitzrovia80 Charlotte Street,W1 18,600 Victoria Riverwalk House,157166 Millbank,SW1 6,900 Soho The Astoria and 135155 Charing Cross Road,WC2 10,000 Islington The Angel Centre,403 St John Street,E

123、C1 15,000 Future projects subject to planning consentOperating reviewRefurbishment and redevelopment Significant redevelopment potential.A revised planning application to be submitted for 23,000m2 of offices and 100 residential units.A landmark location on Hyde Park Corner with significant redevelop

124、ment potential.Planning studies initiated.A planning application submitted for a 9,900m2 office development around a central courtyard.A planning application submitted for a development of 9,300m2 of offices and 235 apartments.Substantial island block occupied by Saatchi&Saatchi with medium-term red

125、evelopment potential.Feasibility studies initiated.A prime riverside location overlooking the Thames.Potential to substantially increase the site density.The proposed location for a Crossrail transport interchange,which could unlock significant development potential.Architectural and planning studie

126、s progressing.Potential to increase the floor area at this prominent building.In discussion with existing tenant regarding an early surrender to obtain vacant possession.Derwent London plc Report&Accounts 2006 19 Operating reviewFor the mid-to longer-term,a number of major holdings have been identif

127、ied with scope for large-scale redevelopments.Following the swap with The Crown Estate,we improved our tenure by acquiring the freehold at Riverwalk House in Victoria.This building occupies a substantially under-utilised site in a prime location overlooking the Thames.At lease expiry in 2011,this wi

128、ll provide an attractive redevelopment scheme in the order of 18,600m2,which could incorporate exceptionally high quality residential accommodation.At Charing Cross Road,we continue to explore the long-term possibilities for our interests.This is an extensive project,incorporating numerous sites and

129、 stakeholders,as well as significant involvement with London Underground and Crossrail.The opportunity to participate in a regenerative project of this scale is eagerly anticipated.Initial studies indicate the potential for over 28,000m2 of space.Additionally,in association with our freeholder,The G

130、rosvenor Estate,we have initiated preliminary architectural studies of 15 Grosvenor Place at Hyde Park Corner.The combination of this landmark location and the potential for the site presents an exceptional opportunity in the West End.The existing buildings total 15,000m2 and there is potential to d

131、ouble this following redevelopment.The merger has added substantial current and future schemes to the pipeline.Initial focus is on Fitzrovia,where 21%of the merged portfolio is held and where the group has commenced a long-term programme of projects which will regenerate its holdings and re-establis

132、h the area as a core West End office location.The most immediate project is The Qube,which will be delivered to the market in summer 2007.This 10,000m2 office building,one of the few large-scale new buildings available in the West End this year,is attracting early interest.We are also on site at the

133、 adjacent 13,200m2 Arup Phase II&III development.A further,important holding in the area,with long-term potential,is the 18,600m2 of properties,centred on Charlotte Street,let to Saatchi&Saatchi.Another potential major scheme is The Angel Centre,Islington,a prominently located 15,000m2 office buildi

134、ng.This is an improving area and studies have been instigated for a substantial refurbishment and creation of additional space,along the lines of The Johnson Building scheme.The overall pipeline for the merged group is 315,000m2,with an estimated completed development value of 2.7 billion.On behalf

135、of the board J.D.Burns 20th March 200720 Derwent London plc Report&Accounts 2006Financial reviewThe groups results are prepared in compliance with International Financial Reporting Standards(IFRS)and the accounting polices as set out in the notes to the accounts.This is the second year that the acco

136、unts have been produced on this basis,which is now more widely understood.Some of the standards work better than others for property investment companies,evidenced by the number of adjustments the investing community makes to the key IFRS figures.It is the adjusted figures that the board uses in mon

137、itoring performance and these are included in the discussion below.2006 results commentaryThe 2006 results are those for a period ended prior to the merger with London Merchant Securities plc(LMS).The headline numbers are:2006 2005Net property income(m)58.0 46.6Adjusted profit before taxation(m)16.4

138、 16.7Profit before taxation(m)242.8 150.4Adjusted net asset value per share(p)1,770 1,335Net property incomeNet property income includes rent received from the tenants of the groups investment properties,less the associated property outgoings,and development income.These are reviewed in turn.Gross p

139、roperty income(GPI)(rents received)rose 3.6%year on year to 51.3 million.This increase of 1.8 million is the net result of a number of key decisions taken in respect of the business.As noted last year,the board,taking account of the current environment in which the group operates,has been pressing o

140、n with the refurbishment and redevelopment programme.In 2006,lettings added 3.6 million to GPI and the letting of completed schemes was the main component of this.The biggest impact from lettings came from The Johnson Building and St Cross Street(0.9 million),Tea Building (0.7 million)and Holden Hou

141、se(0.6 million).However,this continuous drive to create value in the portfolio,as described in the property review,has also had a negative effect on GPI due to buildings being emptied to enable schemes to commence.The main losses of income have been at Horseferry House(0.9 million),Kensal House/Port

142、obello Dock(0.7 million)and North Wharf Road(0.5 million),although the latter was offset by a 1.0 million premium paid by a departing tenant.GPI also rose due to rent reviews,which added 1.2 million,largely derived from the February 2006 review at Henry Wood House,and from the acquisition of Horsefe

143、rry House in 2005 and The Astoria in 2006.Finally,disposals,made in 2005 and 2006 reduced GPI by 2.4 million.Development income is a new item in 2006.This relates to the groups share of the profit estimated to have been earned from managing the Telstar redevelopment on behalf of Prudential.While the

144、 development has been prelet,the group will not receive payment for the profit until after practical completion later this year,when the final profit share will be calculated.The profit earned during 2006 has been estimated at 11.6 million.The final component of net property income is the property o

145、utgoings.These rose from 2.9 million in 2005 to 4.9 million.Substantial movements in property expenses are usually related to the commencement and completion of schemes,and 2006 was no exception.Void costs rose by 1.0 million of which 0.6 million related to costs at The Johnson Building post complet

146、ion and prior to letting.In tandem with the letting activity,letting fees increased 0.3 million to 0.9 million.The net result of the above is that,in spite of the level of development activity,gross property income less property outgoings at 46.4 million almost matched last years figure of 46.6 mill

147、ion,while net property income rose in total by 24%to 58.0 million with the inclusion of the development income.Profit before taxationThe adjusted profit before taxation which takes no credit for the development income,nor the exceptional finance costs,was 16.4 million.This compares with the 16.7 mil

148、lion reported in 2005.The lower profit derives from an increase in administrative costs of 1.3 million to 10.1 million.Employment costs are the groups major overhead and these rose 0.9 million in 2006 to 7.0 million.Profits benefited from a 1.1 million fall in interest costs,notably due to finance l

149、ease costs which were 0.4 million lower both because of the sale of leasehold properties and the buying in of freehold interests.Profit before tax for the year was 242.8 million compared with 150.4 million in 2005.The largest item in the group income statement is the revaluation surplus of 223.3 mil

150、lion,which showed an increase of 99.2 million on last years figure.A further 3.5 million of valuation surplus is included in the joint venture results.Horseferry HouseVictoria,SW115,200m2 offi cesCompletion:Spring 200822 Derwent London plc Report&Accounts 2006Financial reviewAn explanation of the fa

151、ctors behind these surpluses can be found in the operating review.Other items that reconcile the adjusted profit to IFRS profit before taxation include property disposal profits of 2.9 million and the fair valuation of derivatives,which this year gave rise to a profit of 3.2 million.Profit on dispos

152、als was down 6.7 million,year on year,on proceeds reduced from 97.8 million to 31.2 million in the run up to the conversion to REIT status.The final item,the exceptional finance cost of 18.1 million,was the cost of redeeming the companys 1018%First Mortgage Debenture Stock 2019 in November.This is d

153、iscussed further under Financing.Tax expenseFull details of the tax expense of 60.6 million can be found in the tax note.The largest item is the deferred tax expense which represents tax that may be payable in the future.A consequence of the debenture redemption is that the group actually paid littl

154、e tax during the year.DividendFor technical reasons connected with the companys merger with LMS in 2007,the board will not be proposing the payment of a final dividend.In its place,a second interim dividend was paid on 23rd February 2007,which was equivalent to the expected final dividend.The two in

155、terim dividends totalled 14.75p per share and compare with the combined interim and final for 2005 of 13.65p per share,an increase of 8%.This is well ahead of the inflation rate for the year.Net assetsNet assets rose 177.2 million to 783.4 million at 31st December 2006,following the annual valuation

156、 of the groups investment properties to a total of 1.3 billion.This resulted in an adjusted net asset value per share of 1,770p,compared with 1,335p at the 2005 year end and 1,540p reported at the interim stage.These are increases of 32.6%and 14.9%respectively.The adjustments made to arrive at this

157、figure are shown in the notes to the accounts.Cash flowThe groups underlying operational business generated a cash inflow of 12.0 million before deducting the cost of redeeming the debenture of 17.6 million.This compares with 13.7 million in the prior year.For reasons noted earlier,disposal proceeds

158、 were reduced in 2006 while the amount spent on property acquisitions increased slightly.Consequently,the net investment in business assets was nearly 48 million.This included capital expenditure,which was lower both compared with last year and budget.However,this was only due to timing variances an

159、d schemes such as Kensal Dock and Horseferry House are now well underway.In total,the group saw a cash outflow in 2006 of 59.4 million compared with an inflow in 2005 of 34.5 million.FinancingSources of financeOther than its share capital,the group continued to be predominantly financed in 2006 by a

160、 series of bilateral,medium-term,revolving credit facilities from a limited number of banks with whom the group has had long-term relationships.The effect is akin to the group creating its own syndicated loan.While close relationships are maintained with additional banks to satisfy future debt requi

161、rements,other sources of finance,which would provide an alternative to bank debt,are also reviewed and considered.The group continues to borrow on a secured basis with only loan to value and interest to rent covenants.However,following the merger with LMS,discussed later,a review of the groups finan

162、cing arrangements will be undertaken which may lead to a change in this strategy.At 31st December 2006,bank facilities totalled 430 million of which 87 million was undrawn.An additional 105 million of facilities was agreed during January 2007,not only to provide sufficient funds to cover the next tw

163、o years capital expenditure but also allow future acquisitions.None of the bank facilities mature in 2007,the next termination date being in late 2008.During the year,the company redeemed its 35 million listed debenture,which had been due for repayment in 2019.The 1018%coupon on this was out of line

164、 with current interest rates and the debenture only accounted for a small amount of the groups total debt.The premium paid for this,together with the costs of redemption,totalled 17.6 million.A further 0.5 million of original issue costs,not previously written-off in accordance with IFRS,were expens

165、ed to give a total charge to the group income statement of 18.1 million.This amount can be offset against taxable profits.Derwent London plc Report&Accounts 2006 23 Financial reviewDebt and gearingAlthough the cash outflow was 59.4 million,net debt only rose to 349.8 million from 303.9 million at th

166、e 2005 year end due to a reduction in leasehold liabilities which fell 13.5 million for the reasons noted earlier.Despite increased borrowings,the relative growth in asset values caused gearing to fall to 44.7%,compared with 50.1%last year and 47.1%reported at the half year.However,in terms of the g

167、roups risk profile,the more important ratio is the profit and loss gearing.For the second year running,despite a reduction in balance sheet gearing,this has remained virtually unchanged at 1.85,compared with 2005 at 1.84.Liability risk managementAdverse movements in interest rates are one of the mai

168、n risks to which the group is exposed.Therefore,derivatives are used to protect the group against this.Board policy is that sufficient hedging should be entered into such that the total of any fixed rate debt,and that fixed using derivative instruments,is within a range of 40%to 75%of total debt,exc

169、luding leasehold liabilities.The actual percentage is dependent on the perceived risk to the group.At the year end,43%of debt was covered and the weighted average cost of debt was 6.0%.At each reporting date,the derivatives are fair valued and the increase or decrease since the last valuation is rep

170、orted in the group income statement.For 2006,the movement amounted to a profit of 3.2 million.Risk management and outlookWhile the group cannot be immune from factors affecting the property or financial markets,the board believes that,through regular consideration of these issues,it achieves an appr

171、opriate risk/reward profile for the group.Identifying,monitoring and controlling risks so that they are appropriate to the business are amongst the key tasks of a board of directors.The annual review of the five year property strategies,the rolling financial forecasts which turn these into a detaile

172、d management reporting tool and the annual risk analysis are some of the means by which the board achieves this.Other examples have been mentioned in this review,for example,the companys banking relationships and hedging policy.Amongst the key risks faced by the group,are those set out in the follow

173、ing table,together with their effect on the business.Risk EffectProperty related :increase in valuation yields Fall in asset values;rise in gearing.:no/negative rental growth Fall in asset values;no income growth.:tenant default Fall in income;reduced cash inflow.:development cost overrun Reduced de

174、velopment surplus.Finance related:rise in interest rates Reduced profit;increased cash outflow.:lack of available finance Inability to refinance debt.Corporate,social,Adverse reputation risk;environmental,including potential fines.health and safety Looking at the profit before taxations constituent

175、parts for 2007,the net property income will continue to be determined by the balance between the letting of completed schemes and voids caused by the refurbishment and redevelopment programme.Employment costs are the groups biggest overhead,and salaries continue to rise in a competitive,buoyant econ

176、omy.The level of fixed and hedged debt will provide a large amount of insulation against currently rising interest rates.In terms of net asset growth,yield compression may have found its level,perhaps a reflection of globally rising interest rates,but rental growth is being achieved to drive on asse

177、t values if yields remain at their existing levels.MergerThe companys merger with LMS completed on 1st February 2007.The merger was financed by the issue of 46,910,232 of the companys ordinary shares,32.5 million of loan notes and a payment of 12.2 million in cash.The proforma consolidated balance s

178、heet shows that the new group has an investment property portfolio valued at 2.5 billion,net assets of 1.4 billion,net debt of 898 million at fair value and gearing of 64%.For the purposes of the proforma balance sheet,the acquired goodwill of 291 million has been assumed to be impaired and conseque

179、ntly written-off.In addition to Derwent Londons debt discussed earlier,LMS brings to the debt portfolio a 175 million 6.5%secured bond due 2026 and a 375 million combined term and revolving credit facility repayable in 2013.The new groups current cost of debt is approximately 6.15%,and 62%of debt is

180、 either fixed or hedged.On behalf of the board C.J.Odom 20th March 2007 24 Derwent London plc Report&Accounts 2006 2006 2005 Note m mGross property income 51.3 49.5Development income 3 11.6 Property outgoings 4(4.9)(2.9)Net property income 58.0 46.6Administrative expenses (10.1)(8.8)47.9 37.8Revalua

181、tion surplus 223.3 124.1Profit on disposal of investment properties 5 2.9 9.6 Profit from operations 274.1 171.5 Finance income 6 0.4 0.4 Finance costs 6(20.4)(21.5)Exceptional finance costs 6(18.1)Total finance costs 6(38.5)(21.5)Movement in fair value of derivative financial instruments 3.2 Share

182、of results of joint ventures 7 3.6 Profit before tax 8 242.8 150.4 Tax expense 11(60.6)(33.7)Profit for the year 12 182.2 116.7 Earnings per share 14 340.13p 218.63p Diluted earnings per share 14 337.21p 216.81p Statements of recognised income and expense for the year ended 31st December 2006 2006 2

183、005 m mGroupProfit for the year 182.2 116.7Recognition of financial instruments at 1st January 2005 at fair value under IFRS 1 transitional rule (2.2)Deferred tax in respect of share-based payments 0.6 1.4Total recognised income and expense relating to the year 182.8 115.9CompanyProfit for the year

184、7.1 7.7Recognition of financial instruments at 1st January 2005 at fair value under IFRS 1 transitional rule (2.2)Deferred tax in respect of share-based payments 0.6 1.4Total recognised income and expense relating to the year 7.7 6.9All amounts are attributable to the equity holders of the parent co

185、mpany.Group income statement for the year ended 31st December 2006The notes on pages 28 to 48 form part of these financial statements.Derwent London plc Report&Accounts 2006 25 Group Company 2006 2005 2006 2005 Note m m m mNon-current assetsInvestment property 17 1,274.0 1,015.6 Property,plant and e

186、quipment 18 0.3 0.4 0.3 0.4Investments 19 5.4 1.8 192.5 186.3Deferred tax asset 26 2.5 2.5Financial assets 25 0.1 0.1 Other receivables 21 13.7 13.3 1,293.5 1,031.1 195.4 189.2Current assetsTrade and other receivables 22 39.4 12.3 451.9 387.3Corporation tax asset 1.4 1.8 1.7Cash and cash equivalents

187、 14.7 10.2 40.8 27.0 453.7 399.2Total assets 1,334.3 1,058.1 649.1 588.4 Current liabilitiesBank overdraft 2.2 2.0 0.7 0.1Trade and other payables 23 32.5 20.7 89.8 73.3Corporation tax liability 3.0 Provisions 24 0.1 0.1 0.1 0.1 34.8 25.8 90.6 73.5Non-current liabilitiesFinancial liabilities 25 347.

188、6 319.7 341.0 299.6Provisions 24 1.3 1.2 1.3 1.2Deferred tax liability 26 167.2 105.2 516.1 426.1 342.3 300.8Total liabilities 550.9 451.9 432.9 374.3 Total net assets 783.4 606.2 216.2 214.1 Equity attributable to equity holders of the parent company Share capital 27 2.6 2.6 2.6 2.6Share premium 28

189、 156.1 155.1 156.1 155.1Other reserves 28 3.8 2.3 3.8 2.3Retained earnings 28 620.9 446.2 53.7 54.1 Total equity 29 783.4 606.2 216.2 214.1 The financial statements were approved by the board of directors and authorised for issue on 20th March 2007.J.D.Burns,DirectorC.J.Odom,Director Balance sheets

190、as at 31st December 2006The notes on pages 28 to 48 form part of these financial statements.26 Derwent London plc Report&Accounts 2006Group cash flow statement for the year ended 31st December 2006The notes on pages 28 to 48 form part of these financial statements.2006 2005 Note m mOperating activit

191、ies Cash received from tenants 48.7 46.3Direct property expenses (5.5)(3.0)Cash paid to and on behalf of employees (4.5)(4.5)Other administrative expenses (3.9)(2.8)Interest received 0.4 0.4 Interest paid (21.9)(21.7)Exceptional financing costs (17.6)Tax expense paid in respect of operating activiti

192、es (1.3)(1.0)Net cash(used in)/from operating activities (5.6)13.7 Investing activities Acquisition of investment properties (48.9)(40.3)Capital expenditure on investment properties (18.9)(26.7)Disposal of investment properties 31.2 97.8 Acquisition of subsidiary 20(6.2)Transaction costs for the acq

193、uisition of London Merchant Securities plc (0.4)Purchase of property,plant and equipment (0.2)Tax expense paid in respect of investing activities (2.9)(3.2)Net cash(used in)/from investing activities (46.3)27.6 Financing activities Movement in bank loans 78.5(26.0)Redemption of debenture (35.0)Net p

194、roceeds of share issues 27 1.0 1.0Dividends paid 13(7.5)(6.8)Net cash from/(used in)financing activities 37.0(31.8)(Decrease)/increase in cash and cash equivalents in the year (14.9)9.5 Cash and cash equivalents at the beginning of the year 12.7 3.2Cash and cash equivalents at the end of the year 31

195、(2.2)12.7 Derwent London plc Report&Accounts 2006 27 2006 2005 Note m mOperating activities Cash received from tenants 0.2 0.2Cash paid to and on behalf of employees (4.5)(4.5)Other administrative expenses (3.9)(2.8)Interest received 0.3 0.3 Interest paid (21.1)(20.4)Exceptional financing costs (17.

196、6)Tax expense paid in respect of operating activities (0.8)Net cash used in operating activities (47.4)(27.2)Investing activities Purchase of property,plant and equipment (0.1)Acquisition of subsidiary 20 (6.2)Transaction costs for the acquisition of London Merchant Securities plc (0.4)Net cash used

197、 in investing activities (6.7)Financing activities Movement in intercompany loans 5.8 70.2 Movement in bank loans 79.0 (26.0)Redemption of debenture (35.0)Net proceeds of share issues 27 1.0 1.0 Dividends paid 13(7.5)(6.8)Net cash from financing activities 43.3 38.4 (Decrease)/increase in cash and c

198、ash equivalents in the year (10.8)11.2 Cash and cash equivalents at the beginning of the year 10.1(1.1)Cash and cash equivalents at the end of the year 31(0.7)10.1 Company cash flow statement for the year ended 31st December 2006The notes on pages 28 to 48 form part of these financial statements.28

199、Derwent London plc Report&Accounts 2006Notes to the financial statements1 Accounting policies Basis of preparation These financial statements have been prepared in accordance with International Financial Reporting Standards(IFRS)issued by the International Accounting Standards Board as adopted by th

200、e European Union and with those parts of the Companies Act 1985 applicable to companies preparing their accounts under IFRS.The principal accounting policies are described below.Basis of consolidation The group financial statements incorporate the financial statements of Derwent London plc and all o

201、f its subsidiaries,together with the groups share of the results of its joint ventures.Standards,interpretations and amendments to published standards that are not yet effective At the date of authorisation of these financial statements,the following Standards and Interpretations applicable to the g

202、roups financial statements which have not been applied in these financial statements were in issue but not yet effective:IFRS 7 Financial Instruments:Disclosures and a complementary amendment to IAS 1,Presentation of Financial Statements capital disclosures(effective from 1st January 2007)IFRS 7 int

203、roduces new disclosures of qualitative and quantitative information about exposure to risks arising from financial instruments,including specified minimum disclosures about credit risk,liquidity risk and market risk.The amendment to IAS 1 introduces disclosures about the level of an entitys capital

204、and how it manages capital.Management is currently assessing the impact of IFRS 7 and the complementary amendment to IAS 1 on the groups financial statements but does not expect any changes to disclosures resulting from their introduction to have a material effect on the financial statements.The fol

205、lowing standard and interpretations have been issued but all are deemed not relevant to the group or to have no material impact on the financial statements of the group when the relevant standards come into effect.IFRS 8 Operating Segments(effective from 1st January 2009)IFRIC 7 Applying the Restate

206、d Approach under IAS 29 Financial Reporting in Hyperinflationary Economies (effective from 1st May 2006)IFRIC 8 Scope of IFRS 2 Share Based Payment Transactions(effective from 1st May 2006)IFRIC 9 Reassessment of Embedded Derivatives(effective from 1st June 2006)IFRIC 10 Interim Financial Reporting

207、and Impairment(effective from 1st November 2006)IFRIC 11 IFRS 2 Group and Treasury Share Transactions(effective from 1st March 2007)IFRIC 12 Service Concession Agreements(effective from 1st January 2008)UK companies can only adopt IFRSs and IFRICs after they have been endorsed by the European Union.

208、Of the standards and interpretations listed above,the following had not yet been endorsed by the European Union at the date these accounts were signed:IFRS 8 Operating Segments IFRIC 10 Interim Financial Reporting and Impairment IFRIC 11 IFRS 2 Group and Treasury Share Transactions IFRIC 12 Service

209、Concession Arrangements Critical accounting estimates and judgements The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates and judgements.It also requires management to exercise judgement in the process of applying the groups accoun

210、ting policies.Estimates and judgements are continually evaluated and are based on historical experience and other factors,including expectations of future events that are believed to be reasonable under the circumstances.Management anticipate that,in respect of assets and liabilities carried at the

211、balance sheet date,none of these estimates have a significant risk of causing a material effect on the results for the forthcoming year.Any judgements made by management are discussed in the accounting policies below.Derwent London plc Report&Accounts 2006 29 1 Accounting policies(continued)Gross pr

212、operty incomeGross property income arises from three main sources:(i)Rental income Rental income arises from operating leases granted to tenants.An operating lease is a lease other than a finance lease.A finance lease is one whereby substantially all the risks and rewards of ownership are passed to

213、the lessee.Rental income is recognised in the group income statement on a straight-line basis over the term of the lease.This includes the effect of lease incentives to tenants,which are normally in the form of rent free periods or capital contributions in lieu of rent free periods.For income from p

214、roperty leased out under a finance lease,a lease receivable asset is recognised in the balance sheet at an amount equal to the net investment in the lease,as defined in IAS 17,Leases.Minimum lease payments receivable,again defined in IAS 17,are apportioned between finance income and the reduction of

215、 the outstanding lease receivable so as to produce a constant periodic rate of return on the remaining net investment in the lease.Contingent rents,being the difference between the rent currently receivable and the minimum lease payments when the net investment in the lease was originally calculated

216、,are recognised in property income in the years in which they are receivable.(ii)Reverse surrender premiums Payments received from tenants to surrender their lease obligations are recognised immediately in the group income statement.(iii)Dilapidations Dilapidations monies received from tenants in re

217、spect of their lease obligations are recognised immediately in the group income statement.Development incomeDevelopment income is recognised in accordance with IAS 18,Revenue,and is based on the directors assessment of the stage of completion of the project,the future costs and the expected value of

218、 the completed building.Expenses(i)Lease payments Where investment properties are held under operating leases,the leasehold interest is classified as if it were held under a finance lease,which is recognised at its fair value on the balance sheet,within the investment property carrying value.Upon in

219、itial recognition,a corresponding liability is included as a finance lease liability.Minimum lease payments are apportioned between the finance charge and the reduction of the outstanding liability so as to produce a constant periodic rate of interest on the remaining finance lease liability.Conting

220、ent rents payable,being the difference between the rent currently payable and the minimum lease payments when the lease liability was originally calculated,are charged as expenses within property expenditure in the years in which they are payable.(ii)Other property expenditure Vacant property costs

221、and other property costs are expensed in the year to which they relate.Employee benefits(i)Share-based remuneration The company operates a long-term incentive plan and share option scheme.The fair value of the conditional awards of shares granted under the long-term incentive plan and the options gr

222、anted under the share option scheme are determined at the date of grant.This fair value is then expensed on a straight-line basis over the vesting period,based on an estimate of the number of shares that will eventually vest.At each reporting date,the non-market based performance criteria of the lon

223、g-term incentive plan are reconsidered and the expense is revised as necessary.In respect of the share option scheme,the fair value of options granted is calculated using a binomial model.Under the transitional provisions of IFRS 1,no expense is recognised for options or conditional shares granted o

224、n or before 7th November 2002.(ii)Pensions The company operates a defined contribution pension scheme.The contributions payable to the scheme are expensed in the year to which they relate.Notes to the financial statements30 Derwent London plc Report&Accounts 2006Notes to the financial statements1 Ac

225、counting policies(continued)Investment properties(i)Valuation Investment properties are those that are held either to earn rental income or for capital appreciation or both,including those that are undergoing redevelopment.They are reported on the group balance sheet at fair value adjusted for the c

226、arrying value of leasehold interests and lease incentive debtors.Fair value is the amount for which an investment property could be exchanged between knowledgeable and willing parties in an arms length transaction.The valuation is undertaken by independent valuers who hold recognised and relevant pr

227、ofessional qualifications and have recent experience in the locations and categories of properties being valued.Surpluses or deficits resulting from changes in the fair value of investment property are reported in the group income statement in the year in which they arise.(ii)Capital expenditure Cap

228、ital expenditure,being costs directly attributable to the redevelopment or refurbishment of an investment property,up to the point of it being completed for its intended use,are capitalised in the carrying value of that property.Borrowing costs that are directly attributable to such expenditure are

229、expensed in the year in which they arise.(iii)Disposal The disposal of investment properties is accounted for on completion of contract.On disposal,any gain or loss is calculated as the difference between the net disposal proceeds and the carrying value at the last year end plus subsequent capitalis

230、ed expenditure during the year.Property,plant and equipment Property,plant and equipment,is depreciated at a rate of between 10%and 25%per annum which is calculated to write off the cost,less estimated residual value of the individual assets,over their expected useful lives.Investments Investments i

231、n joint ventures,being those entities over whose activities the group has joint control,as established by contractual agreement,are included in the groups balance sheet at cost together with the groups share of post acquisition reserves,on a net equity basis.Investments in subsidiaries and joint ven

232、tures are included in the companys balance sheet at the lower of cost and their net asset value.Cash and cash equivalents Cash comprises cash in hand and on-demand deposits less overdrafts.Cash equivalents comprise short-term,highly liquid investments that are readily convertible to known amounts of

233、 cash and which are subject to an insignificant risk of changes in value.Trade receivables Trade receivables are recognised and carried at the original transaction value.Trade payablesTrade payables are recognised and carried at the original transaction value.Derwent London plc Report&Accounts 2006

234、31 1 Accounting policies(continued)Financial liabilities(i)Bank loans and overdrafts Bank loans and overdrafts are included as financial liabilities on the balance sheets at the amounts drawn on the particular facilities.Interest payable is expensed as a finance cost in the year to which it relates.

235、(ii)Debenture loan The debenture loan is included as a financial liability on the balance sheet net of the unamortised discount and costs on issue.The difference between this carrying value and the redemption value is recognised in the group income statement over the life of the debenture on an effe

236、ctive interest basis.Interest payable to debenture holders is expensed in the year to which it relates.On redemption,all remaining unamortised discount and costs on issue are recognised together with the premium and the costs of redemption in finance costs in the income statement as an exceptional i

237、tem in accordance with the accounting policy below.(iii)Finance lease liabilities Finance lease liabilities arise for those investment properties held under a leasehold interest and accounted for as investment property.The liability is initially calculated as the present value of the minimum lease p

238、ayments,reducing in subsequent years by the apportionment of payments to the lessor,as described above under the heading for lease payments.(iv)Interest rate derivatives The group uses derivative financial instruments to manage the interest rate risk associated with the financing of the groups busin

239、ess.No trading in financial instruments is undertaken.At each reporting date,these interest rate derivatives are measured at fair value,being the estimated amount that the group would receive or pay to terminate the agreement at the balance sheet date,taking into account current interest rates and t

240、he current credit rating of the counterparties.The gain or loss at each fair value remeasurement is recognised in the group income statement.Deferred tax Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financi

241、al statements and the corresponding tax bases used in the tax computations,and is accounted for using the balance sheet liability method.Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable th

242、at taxable profits will be available against which deductible temporary differences can be utilised.In respect of the deferred tax on the revaluation surplus,this is calculated on the basis of the chargeable gains that would crystallise on the sale of the investment portfolio as at the reporting dat

243、e.The calculation takes account of available indexation on the historic cost of the properties and any available capital losses.Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised.Deferred tax is charged or credi

244、ted in the group income statement,except when it relates to items charged or credited directly to equity,in which case it is also dealt with in equity.Dividends Dividends payable on the ordinary share capital are recognised in the year in which they are declared.Exceptional items Exceptional items a

245、re material items which derive from events or transactions that fall within the ordinary activities of the group and which,individually or,if a similar type,in aggregate,need to be disclosed by virtue of their size or incidence if the financial statements are to give a true and fair view.Notes to th

246、e financial statements32 Derwent London plc Report&Accounts 20062 Segmental information During the year,the group had only one(2005:one)business activity,that being property investment,refurbishment and redevelopment and operates only in Central London.3 Development income The amount of 11.6m(2005:n

247、il)is the proportion of the total profit share estimated to have been earned by the group from the construction and letting of a property on behalf of a third party.2006 2005 m m 4 Property outgoings Ground rents 0.4 0.2 Other property costs 4.5 2.7 4.9 2.9 2006 2005 m m5 Profit on disposal of inves

248、tment properties Disposal proceeds 31.2 97.8 Carrying value (30.7)(90.1)Leasehold liabilities 2.4 1.9 2.9 9.6 2006 2005 m m6 Finance income and costs Finance income Bank interest received 0.4 0.4 Finance costs Bank loans and overdraft wholly repayable within five years 12.7 8.4 Bank loans not wholly

249、 repayable within five years 3.7 8.2 Debenture stock 3.1 3.6 Finance leases 0.9 1.3 20.4 21.5 Exceptional finance costs 18.1 Total finance costs 38.5 21.5 Exceptional finance costs arise from the redemption of the 10%First Mortgage Debenture Stock 2019.2006 2005 m m7 Share of results of joint ventur

250、es Profit from operations before revaluation surplus 0.1 Revaluation surplus 3.5 3.6 Notes to the financial statementsDerwent London plc Report&Accounts 2006 33 2006 2005 m m 8 Profit before tax This is arrived at after charging:Depreciation and amortisation 0.1 0.1 Rent payable under property lease

251、s 0.4 0.2 Auditors remuneration Audit 0.1 0.1 Tax compliance services 0.1 0.1 In addition,auditors remuneration included 0.5m(2005:nil)for corporate finance services which was charged to the balance sheet.2006 2005 m m 9 Directors emoluments Remuneration for management services 2.8 2.2 Adjustment in

252、 respect of prior years incentive schemes 0.2 Non-executive directors remuneration 0.2 0.1 Gain on exercise of share options 1.7 1.2 Pension contributions 0.4 0.4 5.1 4.1 Details of the directors remuneration,awards under the long-term incentive plan and options held by the directors under the group

253、 share option schemes are given in the report on directors remuneration on pages 57 to 62.The only key management personnel are the directors.2006 2005 m m 10 Employees Staff costs,including those of directors:Wages and salaries 4.4 3.8 Social security costs 1.0 0.9 Pension costs 0.6 0.6 Share-based

254、 payments expense relating to equity-settled schemes 0.9 0.7 6.9 6.0 The average number of employees during the year,excluding directors,was 23(2005:23).All were employed in administrative roles.Employee costs are wholly incurred by the company.Notes to the financial statements34 Derwent London plc

255、Report&Accounts 2006Notes to the financial statements 2006 2005 m m 11 Tax expense Corporation tax expense UK corporation tax and income tax on profit for the year 0.7 4.0 Adjustment for(over)/under provision in prior years (1.0)0.6 (0.3)4.6 Deferred tax expense Origination and reversal of temporary

256、 differences 60.6 30.9 Adjustment for under/(over)provision in prior years 0.3 (1.8)60.9 29.1 60.6 33.7 The tax charge for both 2006 and 2005 is lower than the standard rate of corporation tax in the UK.The differences are explained below:2006 2005 m m Profit before tax 242.8 150.4 Expected tax expe

257、nse based on the standard rate of corporation tax in the UK of 30%(2005:30%)72.8 45.1 Indexation relief on investment properties (11.1)(8.0)Difference between tax and accounting profit on disposals 0.2(1.4)Other differences (0.6)(0.8)Tax expense on current years profit 61.3 34.9 Adjustments in respe

258、ct of prior years tax (0.7)(1.2)60.6 33.7 Tax credited directly to reserves Deferred tax on fair value of derivative financial instruments (0.9)Deferred tax on share-based payments (0.6)(1.4)(0.6)(2.3)12 Profit for year attributable to members of Derwent London plc The company has taken advantage of

259、 the exemption allowed under section 230 of the Companies Act 1985 and has not presented its own income statement in these financial statements.Profit for the year includes 7.1m(2005:7.7m)which has been dealt with in the accounts of the company.2006 2005 m m 13 Dividend Final dividend of 9.725p(2005

260、:8.90p)per ordinary share declared during the year relating to the previous years results 5.2 4.8 Interim dividend of 4.225p(2005:3.925p)per ordinary share declared during the year 2.3 2.0 7.5 6.8 A second interim dividend in respect of the current years results of 10.525p(2005 final:9.725p)per ordi

261、nary share which totalled 5.6m(2005 final:5.2m)was paid on 23rd February 2007.This dividend has not been accrued at the balance sheet date.Derwent London plc Report&Accounts 2006 35 Weighted average Profit for number of Earnings the year shares per share m 000 p14 Earnings per share Year ended 31st

262、December 2006 182.2 53,567 340.13 Adjustment for dilutive share-based payments 464 (2.92)Diluted 182.2 54,031 337.21 Year ended 31st December 2005 116.7 53,378 218.63 Adjustment for dilutive share-based payments 447(1.82)Diluted 116.7 53,825 216.81 Year ended 31st December 2006 182.2 53,567 340.13 A

263、djustment for deferred tax on capital allowances 2.7 5.04 Adjustment for disposal of investment properties (1.7)(3.17)Adjustment for group revaluation surplus (167.0)(311.76)Adjustment for share of joint ventures revaluation surplus (2.9)(5.41)Adjusted 13.3 53,567 24.83 Year ended 31st December 2005

264、 116.7 53,378 218.63 Adjustment for deferred tax on capital allowances (0.8)(1.50)Adjustment for disposal of investment properties (7.0)(13.11)Adjustment for group revaluation surplus (94.9)(177.79)Adjusted 14.0 53,378 26.23 The adjusted earnings per share excludes the after tax effect of fair value

265、 adjustments to the carrying value of assets and liabilities,together with the profit or loss after tax arising from the disposal of investment properties,in order to show the underlying trend.The adjusted earnings per share figure also excludes the deferred tax charge provided in respect of capital

266、 allowances claimed,on the basis that it is unlikely that a liability will ever crystallise.2006 2005%15 Total return Total return 33.6 25.5 Total return is the movement in adjusted net asset value per share as derived in note 30 plus the dividend per share paid during the year,expressed as percenta

267、ge of the adjusted net asset value per share at the beginning of the year.16 Gearing Balance sheet gearing is 44.7%(2005:50.1%).This is defined as net debt divided by net assets.Profit and loss gearing is 1.85(2005:1.84).This is defined as recurring net property income less administrative costs divi

268、ded by net interest payable,having reversed the reallocation of ground rent payable on leasehold investment properties to interest payable of 0.9m(2005:1.3m).Notes to the financial statements36 Derwent London plc Report&Accounts 2006 Freehold Leasehold Total m m m17 Investment property Group Carryin

269、g value At 1st January 2006 724.2 291.4 1,015.6 Transfer 38.5(38.5)Acquisitions 58.3 58.3 Capital expenditure 17.8 0.9 18.7 Additions 76.1 0.9 77.0 Disposals (10.3)(20.4)(30.7)Revaluation 196.7 26.6 223.3 Movement in grossing up of headlease liabilities (11.2)(11.2)At 31st December 2006 1,025.2 248.

270、8 1,274.0 At 1st January 2005 595.4 320.2 915.6 Transfer 23.2(23.2)Acquisitions 39.3 0.2 39.5 Capital expenditure 25.3 1.2 26.5 Additions 64.6 1.4 66.0 Disposals (55.4)(34.7)(90.1)Revaluation 96.4 27.7 124.1 At 31st December 2005 724.2 291.4 1,015.6 Adjustments from fair value to carrying value At 3

271、1st December 2006 Fair value 1,039.7 243.0 1,282.7 Adjustment 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 At 31st December 2005 Fair value 737.5 272.3 1,009.8 Adjustment for rents recognised in adva

272、nce (13.3)(1.0)(14.3)Adjustment for grossing up of headlease liabilities 20.1 20.1 Carrying value 724.2 291.4 1,015.6 The investment properties were revalued at 31st December 2006 at 1,282.7m(2005:1,009.8m)by either CB Richard Ellis Limited or Keith Cardale Groves(Commercial)Limited,as external valu

273、ers,on the basis of market value as defined by the Appraisal and Valuation Manual published by the Royal Institution of Chartered Surveyors.At 31st December 2006,the historical cost of investment property owned by the group was 688.9m(2005:635.6m).Notes to the financial statementsDerwent London plc

274、Report&Accounts 2006 37 2006 2005 m m 18 Property,plant and equipment Group and Company Net book value At 1st January 0.4 0.6 Additions 0.2 Disposals (0.2)(0.1)Depreciation (0.1)(0.1)At 31st December 0.3 0.4 Net book value at 31st December Cost 1.2 1.3 Accumulated depreciation (0.9)(0.9)0.3 0.4 19 I

275、nvestments Group The group has 50%interests in the joint ventures,Primister Ltd and Dorrington Derwent Holdings Ltd,which have been accounted for by the equity method.The following amounts have been recognised in the groups balance sheet relating to these joint ventures.2006 2005 m m Non-current ass

276、ets 8.0 4.5 Current assets 0.4 0.3 Current liabilities (0.2)(0.2)Non-current liabilities (2.8)(2.8)Net assets 5.4 1.8 Income 3.9 0.4 Expenses (0.3)(0.4)Profit for the year 3.6 Joint Subsidiaries ventures Total m m m Company Shares in subsidiaries:At 1st January 2005 and 1st January 2006 185.4 185.4

277、Acquisition of subsidiary 6.2 6.2 At 31st December 2006 191.6 191.6 Loans:At 1st January 2005 0.8 0.8 Release of provisions 0.1 0.1 At 1st January 2006 0.9 0.9 Release of provisions At 31st December 2006 0.9 0.9 At 31st December 2006 191.6 0.9 192.5 At 31st December 2005 185.4 0.9 186.3 Notes to the

278、 financial statements38 Derwent London plc Report&Accounts 200620 Acquisition of subsidiaries The following acquisition took place during the year ended 31st December 2006:Principal Date of Proportion of Cost of Name of business acquired activity acquisition shares acquired acquisition Bramley Road

279、Limited Property investment 4th October 2006 100%6.2m The net assets acquired on 4th October 2006 were:Book value of net Fair value of net assets acquired assets acquired m m Non-current assets Investment property 8.6 8.6 Current assets Cash and cash equivalents 0.2 0.2 Current liabilities Trade pay

280、ables (0.1)(0.1)Non-current liabilities Financial liabilities (0.7)(0.7)Deferred tax liabilities (1.8)(1.8)Net assets acquired 6.2 6.2 Goodwill on acquisition Cost of acquisition 6.2 The cost of this acquisition was settled 100%in cash,paid from the companys existing bank facilities.In relation to t

281、he acquisition of Bramley Road Limited,post-acquisition profit of 0.2m was recognised in the profit for the year ended 31st December 2006.If the acquisition date for this business combination had been 1st January 2006,the property income of the combined entity would have increased by 0.4m to 51.7m.A

282、s the investment property owned by Bramley Road Limited was not professionally valued at 31st December 2005 it is impracticable to state the potential effect on the profit for the year.Group Company 2006 2005 2006 2005 m m m m 21 Other receivables(non-current)Accrued income 13.7 13.3 Notes to the fi

283、nancial statementsDerwent London plc Report&Accounts 2006 39 Group Company 2006 2005 2006 2005 m m m m 22 Trade and other receivables Trade receivables 11.2 8.1 Amounts owed by subsidiaries 439.5 386.2 Other receivables 12.0 0.5 11.4 0.2 Prepayments 1.3 2.7 0.7 0.9 Amounts recoverable under contract

284、 11.6 Accrued income 3.3 1.0 0.3 39.4 12.3 451.9 387.3 Other receivables include 11.4m(2005:nil)of costs relating to the acquisition of London Merchant Securities plc.Accruals and deferred income(note 23)include 8.9m(2005:nil)of these costs.Group Company 2006 2005 2006 2005 m m m m 23 Trade and othe

285、r payables Trade payables 4.6 1.8 2.5 0.1 Amounts owed to subsidiaries 72.7 66.6 Other payables 0.2 0.1 Sales and social security taxes 0.7 0.6 0.1 Accruals and deferred income 27.0 18.2 14.6 6.5 32.5 20.7 89.8 73.3 National National insurance on insurance on Onerous share-based 2006 Onerous share-b

286、ased 2005 contract payments Total contract payments Total m m m m m m 24 Provisions Group and Company At 1st January 0.8 0.5 1.3 0.9 0.1 1.0 Charged to the income statement 0.2 0.2 0.4 0.4 Utilised in year(0.1)(0.1)(0.1)(0.1)At 31st December 0.7 0.7 1.4 0.8 0.5 1.3 Due within one year 0.1 0.1 0.1 0.

287、1 Due after more than one year 0.6 0.7 1.3 0.7 0.5 1.2 0.7 0.7 1.4 0.8 0.5 1.3 The onerous contract relates to the excess of rents payable over rents receivable on a lease which expires in 2014 and reflects the discounted present value of future net payments under that lease.National insurance is pa

288、yable on gains made by employees on the exercise of share-based payments granted to them.The eventual liability to national insurance is dependent on:the market price of the companys shares at the date of exercise;the number of equity instruments that will be exercised;and the prevailing rate of nat

289、ional insurance at the date of exercise.Notes to the financial statements40 Derwent London plc Report&Accounts 2006 Group Company 2006 2005 2006 2005 m m m m25 Financial assets and liabilities Non-current financial assets Derivative financial instruments 0.1 0.1 Non-current financial liabilities Ban

290、k loans 341.0 262.0 341.0 262.0 1018%First Mortgage Debenture Stock 2019 34.5 34.5 Leasehold liabilities 6.6 20.1 Derivative financial instruments 3.1 3.1 347.6 319.7 341.0 299.6 Total financial assets and liabilities Group Company 2006 2005 2006 2005 m m m m Secured Bank loans wholly repayable:betw

291、een 12 years 85.0 85.0 between 23 years 94.0 60.0 94.0 60.0 between 34 years 65.0 65.0 between 45 years 100.0 100.0 more than 5 years 62.0 137.0 62.0 137.0 1018%First Mortgage Debenture Stock 2019 34.5 34.5 341.0 296.5 341.0 296.5 Unsecured Overdrafts repayable in less than 1 year 2.2 2.0 0.7 0.1 Gr

292、oss debt 343.2 298.5 341.7 296.6 Leasehold liabilities repayable in more than 5 years 6.6 20.1 Derivative financial instruments (0.1)3.1(0.1)3.1 349.7 321.7 341.6 299.7 At 31st December 2006,802.4m(2005:660.9m)of the groups properties are charged against the bank loans.Undrawn committed bank facilit

293、ies Group Company 2006 2005 2006 2005 m m m m Maturity dates:less than 1 year 2.8 3.0 2.8 3.0 between 12 years 15.0 15.0 between 23 years 31.0 40.0 31.0 40.0 between 34 years 60.0 60.0 between 45 years more than 5 years 38.0 63.0 38.0 63.0 86.8 166.0 86.8 166.0 Notes to the financial statementsDerwe

294、nt London plc Report&Accounts 2006 41 25 Financial assets and liabilities(continued)Fixed interest rate and hedged debt Details of the groups and companys fixed rate debt,which,until its redemption in November 2006,comprised the Debenture Stock 2019,and the instruments used to hedge its floating rat

295、e debt,are summarised below:Weighted average Weighted Fair Fair value Principal interest rate average life value adjustment m%Years m m Interest rate swaps 140.0 5.384 1.63 (0.1)0.1 Interest rate cap 10.0 6.010 4.46 At 31st December 2006 (0.1)0.1 1018%First Mortgage Debenture Stock 2019 35.0 10.125

296、13.59 49.1(14.1)Interest rate swaps 160.0 5.387 2.37 3.1(3.1)Interest rate cap 10.0 6.010 5.46 At 31st December 2005 52.2(17.2)In both 2006 and 2005 there was no difference between the book value and the fair value of all other financial assets and liabilities.Interest rate swaps The fair value repr

297、esents the net present value of the difference between the contracted fixed rates and the fixed rates payable if the swaps were to be replaced on 31st December 2006 for the period to the contracted expiry dates.Interest rate cap The fair value represents the net cost of replacement on identical term

298、s at prices prevailing on 31st December 2006.Interest rate exposure After taking into account the various interest rate hedging instruments entered into by the company,the interest rate exposure of the groups and companys gross debt was:Weighted average cost Weighted Floating rate Hedged Fixed rate

299、Gross debt of debt average life m m m m%Years Group At 31st December 2006 193.2 150.0 343.2 6.00 3.95 At 31st December 2005 94.0 170.0 34.5 298.5 6.41 6.16 Company At 31st December 2006 191.7 150.0 341.7 6.00 3.97 At 31st December 2005 92.1 170.0 34.5 296.6 6.42 6.19 Further information on risk as r

300、equired by IAS 32,Financial Instruments:Presentation is given in the financial review on page 23.Notes to the financial statements42 Derwent London plc Report&Accounts 2006 Revaluation Capital surplus allowances Other Total m m m m26 Deferred tax Group Deferred tax liability At 1st January 2006 91.6

301、 13.6 105.2 Adjustment to reserves in respect of deferred tax on share-based payments (0.6)(0.6)Acquired on acquistion of subsidiary 1.7 1.7 Provided during the year in income statement 56.9 2.7 1.3 60.9 At 31st December 2006 150.2 16.3 0.7 167.2 At 1st January 2005 62.4 14.4 1.6 78.4 Adjustment to

302、reserves in respect of deferred tax on fair value of derivative financial instruments at 31st December 2004 (0.9)(0.9)Adjustment to reserves in respect of deferred tax on share-based payments (1.4)(1.4)Provided during the year in income statement 29.2(0.8)0.7 29.1 At 31st December 2005 91.6 13.6 105

303、.2 Company Deferred tax asset At 1st January 2006 2.5 2.5 Adjustment to reserves in respect of deferred tax on share-based payments 0.6 0.6 Provided during the year in income statement (0.6)(0.6)At 31st December 2006 2.5 2.5 At 1st January 2005 Adjustment to reserves in respect of deferred tax on fa

304、ir value of derivative financial instruments at 31st December 2004 0.9 0.9 Adjustment to reserves in respect of deferred tax on share-based payments 1.4 1.4 Credited during the year to income statement 0.2 0.2 At 31st December 2005 2.5 2.5 Deferred tax on the revaluation surplus is calculated on the

305、 basis of the chargeable gains that would crystallise on the sale of the investment property portfolio as at 31st December 2006.The calculation takes account of available indexation on the historic cost of the properties and any available capital losses.Issued and Authorised fully paid m m 27 Share

306、capital At 1st January 2005,31st December 2005,and 31st December 2006 3.55 2.6 The number of 5p ordinary shares in issue at the year end was 53,656,492(2005:53,472,492).During the year,184,000 shares (2005:204,416 shares)were issued as a result of the exercise of share options,which realised proceed

307、s of 1.0m(2005:1.0m).The number of outstanding share options and other share awards granted are disclosed in the report on directors remuneration on pages 57 to 62.Notes to the financial statementsDerwent London plc Report&Accounts 2006 43 Share Other Retained premium reserves earnings m m m28 Reser

308、ves Group At 1st January 2006 155.1 2.3 446.2 Premium on issue of shares 1.0 Share-based payments expense transferred to reserves 0.9 Deferred tax in respect of share-based payments 0.6 Profit for the year 182.2 Dividends paid (7.5)At 31st December 2006 156.1 3.8 620.9 At 1st January 2005 154.1 0.3

309、338.5 Fair value of derivative financial instruments at 31st December 2004 (3.1)Deferred tax asset in respect of the fair value of derivative financial instruments at 31st December 2004 0.9 Premium on issue of shares 1.0 Share-based payments expense transferred to reserves 0.6 Deferred tax in respec

310、t of share-based payments 1.4 Profit for the year 116.7 Dividends paid (6.8)At 31st December 2005 155.1 2.3 446.2 Company At 1st January 2006 155.1 2.3 54.1 Premium on issue of shares 1.0 Share-based payments expense transferred to reserves 0.9 Deferred tax in respect of share-based payments 0.6 Pro

311、fit for the year 7.1 Dividends paid (7.5)At 31st December 2006 156.1 3.8 53.7 At 1st January 2005 154.1 0.3 55.4 Fair value of derivative financial instruments at 31st December 2004 (3.1)Deferred tax asset in respect of the fair value of derivative financial instruments at 31st December 2004 0.9 Pre

312、mium on issue of shares 1.0 Share-based payments expense transferred to reserves 0.6 Deferred tax in respect of share-based payments 1.4 Profit for the year 7.7 Dividends paid (6.8)At 31st December 2005 155.1 2.3 54.1 The following describes the nature and purpose of each reserve within owners equit

313、y:Reserve Description and purpose Share premium Amount subscribed for share capital in excess of nominal value less directly attributable issue costs.Other Fair value and related deferred tax of equity instruments granted but not yet exercised under share-based payments.Retained earnings Cumulative

314、net gains and losses recognised in the group income statement.Notes to the financial statements44 Derwent London plc Report&Accounts 2006 Group Company 2006 2005 2006 2005 m m m m29 Changes in shareholders equity Total recognised income and expense relating to the year 182.8 115.9 7.7 6.9 Dividends

315、paid (7.5)(6.8)(7.5)(6.8)Share-based payments transferred to reserves 0.9 0.6 0.9 0.6 Net proceeds on issues of shares 1.0 1.0 1.0 1.0 177.2 110.7 2.1 1.7 Equity attributable to equity holders of the parent company at 1st January 606.2 495.5 214.1 212.4 Equity attributable to equity holders of the p

316、arent company at 31st December 783.4 606.2 216.2 214.1 Net asset Net Number of value per assets shares share m 000 p30 Net asset value per share At 31st December 2006 783.4 53,656 1,460 Adjustment for deferred tax on capital allowances 16.3 30 Adjustment for deferred tax on revaluation surplus 150.2

317、 280 Adjustment for the post tax fair value of derivative financial instruments (0.1)Adjusted 949.8 53,656 1,770 At 31st December 2005 606.2 53,472 1,134 Adjustment for deferred tax on capital allowances 13.6 26 Adjustment for deferred tax on revaluation surplus 91.6 171 Adjustment for post tax fair

318、 value of derivative financial instruments 2.2 4 Adjusted 713.6 53,472 1,335 Adjusted net assets excludes the deferred tax provided in respect of capital allowances claimed,on the basis that it is unlikely that this liability will ever crystallise.The deferred tax on the revaluation surplus and the

319、post tax fair value of derivative financial instruments are also excluded,on the basis that these amounts are not relevant when considering the group as an ongoing business.Group Company 2006 2005 2006 2005 m m m m 31 Cash and cash equivalents Overdrafts (2.2)(2.0)(0.7)(0.1)Short-term deposits 14.7

320、10.2 (2.2)12.7(0.7)10.1Notes to the financial statementsDerwent London plc Report&Accounts 2006 45 32 Principal operating companies The principal operating companies within the group are:Class of shares Principal activity Subsidiaries Derwent Valley Central Limited Ordinary Property investment Derwe

321、nt Valley London Limited Ordinary Property investment Derwent Valley Property Investments Limited Ordinary Property investment Derwent Valley Property Developments Limited Ordinary Property investment Each of the above companies share capital is wholly owned by the group.Joint ventures Primister Lim

322、ited Ordinary Property investment Dorrington Derwent Holdings Limited Ordinary Holding company The company owns 50%of the ordinary shares and controls 50%of the voting rights of each of the joint ventures which are accounted for and disclosed in accordance with IAS 31,Interests in Joint Ventures.All

323、 of the above companies are registered and operate in England and Wales.33 Share-based payments Details of the options held by directors and employees under the groups share option schemes are given in the report on directors remuneration on pages 57 to 62.The following information is relevant in th

324、e determination of the fair value of options granted during the year under the equity-settled option scheme operated by the group.2006 2005 Option pricing model used Binomial Binomial lattice lattice Share price at date of grant 15.120 10.710 Exercise price 15.120 10.710 Number granted 14,250 27,000

325、 Contractual life 10 years 10 years Risk free interest rate 4.8%4.6%Volatility 20%18%Dividend yield 0.9%1.2%For both the 2006 and 2005 grants,additional assumptions have been made that there is no employee turnover before vesting and 4%after vesting,and 50%of employees exercise early when the share

326、options are 20%in the money.The volatility assumption,measured at the standard deviation of expected share price returns,is based on a statistical analysis of daily prices over the last five years.34 Capital commitments Contracts for capital expenditure entered into by the group at 31st December 200

327、6 and not provided for in the accounts amounted to 48.3m(2005:10.6m).Notes to the financial statements46 Derwent London plc Report&Accounts 200635 Leases The group has the following future minimum lease receipts under the operating leases entered into with its tenants:2006 2005 m m Future minimum le

328、ase receipts on operating leases expiring:less than 1 year 0.9 4.0 between 15 years 43.6 49.1 more than 5 years 617.4 347.4 661.9 400.5 36 Contingent liabilities The company and its subsidiaries are party to cross guarantees securing the overdraft and certain bank loans.At 31st December 2006 the max

329、imum liability that could arise for the company from the cross guarantees amounted to 1.5m(2005:2.0m).The company has guaranteed its share of a loan to Primister Limited,the contingent liability for which at 31st December 2006 amounted to 2.8m(2005:2.8m).In addition,the company guarantees its share

330、of interest payable on this loan which amounts to 0.3m per annum(2005:0.3m).Where the company enters into financial guarantee contracts and guarantees the indebtedness of other companies within the group,the company considers these to be insurance arrangements,and accounts for them as such.In this r

331、espect,the company treats the guarantee contract as a contingent liability until such time that it becomes probable that the company will be required to make a payment under the guarantee.37 Post balance sheet event The following acquisition took place after the balance sheet date and before the app

332、roval of these financial statements:Principal Date of Proportion of Cost of Name of business acquired activity acquisition shares acquired acquisition London Merchant Securities plc Property investment 1st February 2007 100%965.6m m Cost of acquisition:Equity 912.9 Loan notes 32.5 Cash 12.2 Directly

333、 attributable acquisition costs 8.0 965.6 The equity consideration was satisfied by Derwent London plc issuing 46,910,232 ordinary shares at a price of 19.46 on 1st February 2007.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 companys advisers in performing due diligence act