Derwent London Plc

Derwent reported EPRA earnings of GBP 54.6 million, or 48.7p per share, in H1 2026. EPRA NTA at 30 June 2026 was 31.57 per share, down 2.1% in the period, with the decline mainly from an 18p per share revaluation deficit and a 41p per share provision for Old Street Quarter. Underlying ERV growth was 2.6%, gross rent was up 1% like-for-like and net rent up 2.7% like-for-like. Gross rental income was down slightly versus H1 2025, offset in part by GBP 12.5 million of positive impact from Network, 25 Baker Street and other lettings, while rental income was reduced by GBP 13.6 million from vacancy and a larger project pipeline. The company completed or contracted about GBP 280 million of disposals within 3% of book value and has bought back about GBP 34 million of shares so far out of a GBP 50 million program. For 2026, management now expects EPRA earnings per share to be between flat and 3% lower than 2025, an improvement from prior guidance. They reiterated ERV guidance of plus 4% to plus 7% for 2026 and said 25% to 30% EPRA earnings growth by 2030 remains the target.

Paul Williams framed the half as solid execution against the February capital allocation framework, with strong leasing, active disposals, and selective development backed by a constructive London occupier market. He highlighted confidence in the portfolio’s rental reversion, the success of recent schemes like Network and 25 Baker Street, and the decision to commit to 50 Baker Street as evidence that the best West End projects still offer attractive returns. His tone was upbeat and candid, and he used the call to note that this was his final results presentation before retiring as CEO and handing over to Jonathan Murphy.

Damian Wisniewski focused on the financial mechanics behind the half-year results and guidance upgrade. He said EPRA earnings were GBP 54.6 million, the interim dividend was increased again and remains well covered, and the 2026 earnings outlook improved to flat to 3% below 2025 after being 2% to 3% weaker in prior guidance. He also flagged the 6 basis point outward yield shift, the GBP 45.8 million Old Street Quarter provision, the GBP 3.9% weighted average interest rate in H1, expected to be 3.8% in H2 assuming one further base rate increase, and cash plus undrawn facilities of GBP 481 million at June 30, rising to GBP 581 million pro forma after the new GBP 100 million RCF. He said the GBP 50 million buyback should finish in a few weeks, with future buybacks considered only if there is surplus capital after disposals and other reinvestment options.

Analysts pressed management on rental incentives, Old Street Quarter, capitalized interest, buybacks, and whether the share price still makes repurchases attractive. Management said incentives have stayed stubborn at around 24 months on 10 years because construction cost inflation has kept them from widening, and that any Old Street provision would be substantially higher if the site were assumed to be disposed of without development. On buybacks, Damian said they still make sense at this share price but only as one option if future disposals create surplus capital, since development and acquisitions support longer-term earnings growth. Management also said contractor pricing for fixed-price development has been manageable, with Derwent able to fix prices for Holden House and 50 Baker Street without paying a big premium.