Derwent London Plc

The company reported EPRA earnings of GBP 54.6 million, or 48.7p per share, for H1 '26, with gross rental income down slightly versus H1 '25 but like-for-like gross rent up 1% and net rent up 2.7%. EPRA NTA at June 30 was 31.57 per share, down 2.1%, mainly from an 18p per share revaluation deficit after accounting adjustments and a 41p per share provision for Old Street Quarter; the total accounting return was 3.7% on a neutral-yield basis and reported return was minus 0.4%. Underlying ERV growth was 2.6%, development values were up 10.3%, and the average interest rate in H1 was 3.9%. Management now expects 2026 EPRA earnings per share to be between flat and 3% lower than 2025, a 2% to 3% upgrade from the start of the year, and reiterated 2030 guidance for 25% to 30% EPRA earnings growth. They also reiterated ERV guidance of plus 4% to plus 7% for this year and said the portfolio is on track to generate 7% to 10% per annum returns over the medium term before one-off items.

Paul Williams framed the quarter as evidence that Derwent is executing well on the February capital allocation framework, with strong leasing, disciplined disposals, and selective development in the West End. His tone was upbeat and confident on the occupational market, saying demand remains above supply and rental growth supports the current pipeline. He also highlighted that he is retiring after nearly 40 years, saying he is leaving the business in strong hands.

Damian Wisniewski focused on the earnings beat, balance sheet, and valuation movements. He said EPRA earnings were GBP 54.6 million, interim dividends were increased again and remain well covered, EPRA NTA was 31.57 per share, and the 2.1% NTA decline was mainly driven by a 6 basis point outward yield shift plus the GBP 45.8 million Old Street provision. He also noted cash and undrawn facilities of GBP 481 million at June 30, rising to GBP 581 million pro forma after a new GBP 100 million revolving credit facility, and said the share buyback had reached about GBP 34 million of the GBP 50 million program.

Analysts pressed management on whether stronger rental conditions are changing incentives, and Emily said incentives have stayed around 24 months on 10-year terms, which she viewed as a positive given construction cost inflation. Questions on Old Street focused on the provision and exit strategy; Damian said any move to sell without developing would make the provision substantially higher, and management emphasized that the near-term priority is securing planning permission and preserving optionality. Analysts also asked about buybacks versus development returns; management said buybacks remain accretive at current levels but future capital allocation will depend on where surplus capital is best deployed, with development and acquisitions still important to long-term earnings growth.