Derwent London plc (LON:DLN), today announced results for the year ended 31 December 2018.
Financial highlights
· Net property and other income £185.9m, up 12.8% from £164.8m in 2017
· EPRA1 earnings of 113.1p per share, up 20.0% from 94.2p in 2017, including surrender premiums and non-recurring property income
· Underlying1 earnings of 99.1p per share, up 5.1% from 94.2p
· Derwent London delivered a total return of 5.3%:
o EPRA NAV 3,776p per share, up 1.6% after dividends from 3,716p in December 2017
o Dividends paid 136.5p per share, which includes 75.0p special paid in June 2018
· Proposed final dividend raised 10.3% to 46.75p per share from 42.40p in 2017
· Full year dividend 65.85p per share from 59.73p, up 10.2%
· We expect the 2019 dividend to grow at a similar rate
· Net debt increased to £956.9m from £657.9m in December 2017
· Interest cover 491%, loan-to-value ratio 17.2%
· Cash and undrawn facilities £274m before £250m USPP drawn in January 2019
· Assigned Fitch corporate credit rating of A- in August 2018 with senior unsecured debt rating of A
Activity and opportunities
· New lettings totalling £26.8m, achieving 4.1% above December 2017 estimated rental value (ERV)
· Two on-site developments totalling 623,000 sq ft – now 75% pre-let, up from 45% one year ago
o Brunel Building W2 – 64% pre-let at December 2018 (now 77% with balance under offer)
o 80 Charlotte Street W1 – 74% pre-let
· Potential £59.6m to contribute to income after additional capex of £133m
· Two new developments could add £30m to ERV on completion 2022, with expected capex of £359m
o Soho Place W1 construction contract signed February 2019
o Demolition started at the site of The Featherstone Building EC1
· Another 1.6m sq ft of space in the portfolio has regeneration potential, 14% with planning consent
Portfolio update
· Portfolio valued at £5.2bn – an underlying valuation increase of 2.2%
· Underlying valuation uplift on developments was 18.0%
· True equivalent yield of 4.73% – unchanged from December 2017
· Total property return of 6.0%, ahead of our benchmark index2 of 5.3%
· EPRA vacancy rate rose to 1.8% from 1.3% in December 2017, down from 4.2% in June 2018
· ERV growth of 1.1% in 2018
· ERV guidance for 2019 +1% to -2%
Board changes at next AGM 17 May 2019 (previously announced)
· The Hon. Robert Rayne (current Chairman) to retire
· John Burns (current Chief Executive) to become Non-Executive Chairman
· Paul Williams to become new Chief Executive
1 Explanations of how EPRA and underlying figures are derived from IFRS are shown in note 23
2 MSCI IPD Central London Offices Quarterly Index
Robbie Rayne, Chairman, commented:
“Derwent London made good progress last year achieving £26.8m of new lettings, a 5.1% increase in underlying earnings and a 20.0% increase in EPRA EPS, despite continuing political and economic uncertainty. We propose raising the final dividend 10.3% to 46.75p per share.”
John Burns, Chief Executive, commented:
“Demand for Central London offices remains very active and we have been able to outperform the market through our development activities. Our brand of well-designed office space remains attractive to tenants. With its strong financial position, high quality portfolio and pipeline of exciting opportunities, this positions the Group for continued success.”
