Derwent London plc REIT (DVK) Q2 2026 Earnings Report

The call conveys a generally positive operational and strategic position: strong leasing activity, proven development returns (Network and 25 Baker Street), a disciplined capital-allocation program (disposals and buyback), a solid liquidity position and upgraded near-term earnings confidence. However, material valuation headwinds — notably the Old Street Quarter provision and outward yield shifts linked to geopolitical uncertainty — have weighed on reported NTA and produced near-term earnings and valuation sensitivity. Overall the company appears to be executing its strategy well and is positioned to benefit from continued rental growth, while some transitional and market-driven valuation/interest-rate risks remain.

The management reiterated a constructive outlook while tightening and updating guidance: EPRA earnings in 2026 are now expected to be between flat and down up to 3% versus 2025 (a 2–3% upgrade versus earlier guidance) with EPRA H1 earnings at GBP 54.6m (48.7p), and the business remains on track for 25–30% growth in EPRA earnings by 2030; ERV guidance for 2026 is reiterated at +4% to +7% (H1 ERV growth 2.6%), portfolio returns are expected to be c.7–10% p.a. over the medium term, and development returns remain strong (Network ungeared IRR ~11%, 50 Baker Street ungeared IRR >12%, major projects combined IRR c.12%, profit on cost c.18%, reverse development yield ~7%, developments value +10.3% H1). Balance sheet and capital allocation guidance: completed/contracted disposals of c.£280m (within ~3% of book) toward targets of £400m in 2026 and £1bn over 3 years, a £50m share buyback (c.£34m completed to date) to finish shortly, cash and undrawn facilities c.£481m (pro forma £581m), EPRA NTA £31.57/share (impacted by a £45.8m provision on Old Street Quarter and a revaluation deficit of 18p/share), EPRA vacancy ~4.4% (3.5% ex one asset), central London vacancy <7% (West End 5%, Grade A 1.2%), demand ~just under 12m sq ft, and a weighted average interest rate of 3.9% in H1 (expected ~3.8% in H2).