Derwent London (DLN) has signalled its enduring confidence in the booming London property market by announcing plans to shift its development activity up yet another gear. The company had six major projects under way at the year-end, but now plans to start another three. Of these, the largest by far is the redevelopment of Saatchi & Saatchi's office on Charlotte Street, Fitzrovia - Derwent's most ambitious scheme to date.
The logic of this decision is clear from these results. Developments and comprehensive refurbishments were the standout performers of 2012, rising 14.1 per cent in value, according to surveyors' estimates. The portfolio as a whole was marked up by a very healthy 7.3 per cent.
Strong rental growth in Derwent's favourite London submarkets - West End and City border areas such as Clerkenwell and Shoreditch - was largely responsible for the revaluations. The tech and media sectors, which accounted for some 30 per cent of London office demand last year, prefer up-and-coming neighbourhoods, and new supply is limited by sparse development finance.
Derwent has also done an impressive job of capturing market rental growth through lettings. Like-for-like net rental income was up 8.2 per cent over the year, so recurring pre-tax profits remained roughly flat at £52.5m even though the company was a net seller of buildings.
Following upgrades, broker Peel Hunt expects adjusted NAV to rise from 1,841p to 2,064p this year.
DERWENT LONDON (DLN) | ||||
|---|---|---|---|---|
| ORD PRICE: | 2,169p | MARKET VALUE: | £2.21bn | |
| TOUCH: | 2,168-2,170p | 12M HIGH / LOW | 2,219p | 1,661p |
| DIVIDEND YIELD: | 1.6% | TRADING PROP: | nil | |
| PREMIUM TO NAV: | 19% | |||
| INVESTMENT PROP: | £2.77bn | NET DEBT: | 46% | |
| Year to 31 Dec | Net asset value (p) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2008 | 1170 | -607 | -582 | 24.5 |
| 2009 | 1117 | -35 | -27 | 27.0 |
| 2010 | 1432 | 352 | 340 | 29.0 |
| 2011 | 1636 | 233 | 225 | 31.4 |
| 2012 | 1824 | 228 | 223 | 33.7 |
| % change | +11 | -2 | -1 | +7 |
Ex-div: 8 May Payment: 14 Jun | ||||
