In these times of uncertainty in London's real estate market, developer Derwent London (DLN) hasn't escaped the consequences. A portfolio revaluation of £650m in 2015 was replaced with a £37.1m devaluation in 2016 as yields continued to expand.
However, the real picture is rather different, because Derwent has been working with considerable success in de-risking its development arm and generating more recurring revenue. Tenant demand was strong, and record lettings brought in £31.4m at an average 6.3 per cent above end-December 2015 estimated rental value. So a 5.2 per cent rise in net rental income saw adjusted net asset value edge ahead from a year earlier to 3,551p. Derwent is also set to collect £327m from two disposals.
Development projects soaked up £214m, and current developments will take £363m to complete, but together with current vacant space could generate £58.4m of rental income. Since the year-end, around 18 per cent of this has already been realised, with the first letting at Charlotte Street W1 and another floor at the White Collar Factory EC1. This means that the full development programme is now 44 per cent pre-let, compared with 8 per cent a year earlier.
Analysts at Peel Hunt are forecasting adjusted net asset value at the December 2017 year-end of 3,414p a share.
| DERWENT LONDON (DLN) | ||||
|---|---|---|---|---|
| ORD PRICE: | 2,783p | MARKET VALUE: | £3.1bn | |
| TOUCH: | 2,782-2,784p | 12M HIGH | 3,507p | LOW: 2,230p |
| DIVIDEND YIELD: | 1.9% | TRADING STOCK: | £11.7m | |
| DISCOUNT TO NAV: | 22% | |||
| INVEST PROPERTIES: | £4.8bn | NET DEBT: | 23%: | |
| Year to 31 Dec | Net asset value (p) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2012 | 1,824 | 228 | 223 | 33.7 |
| 2013 | 2,248 | 468 | 446 | 36.5 |
| 2014 | 2,931 | 754 | 719 | 39.7 |
| 2015 | 3,528 | 780 | 695 | 43.4 |
| 2016 | 3,561 | 55 | 53 | 52.36* |
| % change | +1 | -93 | -92 | +21 |
Ex-div: 4 May Payment: 9 Jun *Not including special dividend of 52p a share, payable in June | ||||
