Derwent London (DLN) H2 2025 earnings summary

Executive summary

• Portfolio is concentrated in high-quality, well-connected central London offices, especially the West End, targeting high-performing submarkets with strong tenant diversity and embedded rental growth potential.

• Flexibility and active portfolio management are central, with a focus on adapting to market conditions and capturing rental growth through a robust development pipeline.

• 2025 saw record asset management transactions and strong leasing momentum, with new lettings at rents 10% above ERV and significant disposals to fund higher-return opportunities.

• Strategic action plan prioritizes returns, disciplined capital allocation, and active management to capture rental growth and value creation.

• London’s office market fundamentals are strong, with high demand, limited supply, and increasing investment liquidity supporting positive rental and capital growth outlook.

Financial highlights

• Net Tangible Assets rose to £32.25 per share (3,225p), up 2.4% from Dec 2024, with a 5% total accounting return for 2025.

• Gross rental income increased 1.6% to £218.3m; net rental income up 0.2% to £190.0m; EPRA earnings per share declined 7.6% to 98.4p.

• Dividend increased by 1.2% to 81.5p, well covered by EPRA earnings; 18th consecutive year of dividend growth.

• Profit for the year rose 39% to £161.1m compared to 2024.

• EPRA loan-to-value ratio at 29.4%; net debt/EBITDA at 9.0x.

Outlook and guidance

• 2026 ERV guidance for the portfolio increased to +4% to +7%, reflecting strong market fundamentals and leasing momentum.

• 2026 earnings expected at £0.42–£0.44 per share in H1, rising to £0.52 in H2, with full-year earnings 3%-5% below 2025 but significant growth expected in 2027.

• By 2030, earnings projected to rise 25%-30% above 2025 levels, driven by rental reversion and income from completed projects.

• Total accounting return outlook: 3%+ from earnings, 3%-5% capital growth, and attractive development IRRs of 10%+.

• Accelerated disposal program targeting £1bn over three years; proceeds to be redeployed into higher-return opportunities.