Derwent shrugs off Brexit jitters as net asset value nudges ahead

Derwent London unveiled an improvement in net asset value and full-year earnings on Tuesday, as it announced it had appointed a contractor for Soho Place, its flagship development above Tottenham Court Road tube station.

The FTSE 250 property firm said underlying earnings were 99.1p a share, an increase of 5.1% on the previous year, while adjusted NAV came in at 3,776p, a 1.6% improvement after dividends.

Group income, including net property income, was ahead 12.8% at £185.9m.

Chairman Robbie Rayne said: “Derwent London made good progress last year, despite continuing political and economic uncertainty. We propose raising the final dividend 10.3% to 46.75p per share.”

Looking forward, Derwent said that two new developments – Soho Place, on the corner of Oxford Street and Charing Cross Road, and The Featherstone Building in EC1 – could add £30m of rental income to the portfolio post development.

The firm has appointed Laing O’Rourke as the main construction contractor for Soho Place, while demolition at the site of The Featherstone Building is now underway.

The London property market is seen as particularly vulnerable to potential disruption because of Brexit. Derwent conceded that there was a risk that “negotiations to leave the European Union result in arrangements which are damaging to the London economy. As a predominantly London-based group, we are particularly sensitive to any factors which impact upon London’s growth and demand for office space.”

However, the group added that its “strong financing and covenant headroom” would enable to weather any downturn.

Analysts at Liberum said: “Derwent again delivered low, stable returns, reflecting the continued resilience of the London office market.

“We believe Derwent remains in a good position to continue to navigate market uncertainty, with low financial risk and an office portfolio less exposed to new supply and financial services occupier risk. However, with low returns and relatively full valuation, we maintain a ‘hold’ rating.”