Derwent London interim results 2026: guidance rises despite £45.8 million provision

Derwent London's first-half numbers contain a fairly sharp contrast. Operationally, the London office landlord is leasing space above estimated rental value, recycling capital and upgrading its earnings guidance. Statutory results, however, were knocked into a loss by a £45.8 million provision for Old Street Quarter.

For investors in Derwent London PLC, the important question is whether that provision signals a wider problem or is mainly a project-specific setback. The rest of the original company announcement points to a business making solid operational progress, although property yields and development execution remain important risks.

Derwent London's key first-half figures

Metric	H1 2026	H1 2025	Change
Gross rental income	£106.9 million	£109.1 million	-2.0%
Net rental income	£92.9 million	£94.0 million	-1.2%
EPRA earnings per share	48.7p	52.2p	-6.7%
Interim dividend	26.0p	25.5p	+2.0%
IFRS result before tax	£17.9 million loss	£94.0 million profit	Not meaningful
EPRA net tangible assets per share	3,157p	3,225p at December 2025	-2.1%
EPRA loan-to-value	28.8%	29.4% at December 2025	Improved

EPRA earnings strip out items such as property valuation movements to give a clearer picture of recurring property income. On that basis, earnings per share of 48.7p came in slightly ahead of Derwent London's expectations, despite falling from 52.2p last year.

The interim dividend increased 2.0% to 26.0p per share and remains covered by EPRA earnings. It is due to be paid on 9 October 2026 to shareholders on the register on 4 September.

Leasing is the main source of encouragement

Since the start of 2026, Derwent London has completed £30.4 million of leasing and asset management transactions. This includes £22.1 million of new lettings, with open-market deals agreed 5.1% above December 2025 estimated rental value, or ERV.

ERV is the rent a property could reasonably command in the current market. Signing leases above that level supports future rental growth and may help valuations, provided property yields do not move against the company.

The standout transaction was the £14.1 million pre-let to Databricks at Network W1. It was agreed 5% above December 2025 ERV and 22% above the level assumed when Derwent originally assessed the project. The building's offices are fully pre-let, substantially reducing letting risk.

Renewals and lease regears added another £8.3 million of annual rent, averaging 6.5% above previous rents. A further £5.3 million of rent was under offer at the announcement date.

Vacancy remains relatively low, although it increased from 4.1% at the end of 2025 to 4.4%. Excluding a vacant property under offer for disposal, the rate would be 3.5%.

Why did Derwent London report a statutory loss?

The £17.9 million loss before tax was principally influenced by two non-cash items: a £45.8 million provision relating to Old Street Quarter EC1 and a £19.0 million revaluation deficit recognised in the income statement.

Derwent agreed in 2022 to acquire Old Street Quarter for £239 million, with completion currently expected in late 2027. Its plans for the 2.5-acre site have evolved towards a mixed-use, living-led redevelopment. After reassessing possible outcomes, including partial disposals following planning approval, management recognised the provision.

That is the clearest negative in these results. Planning, construction costs, end values and the eventual delivery strategy could all affect the project's economics. The provision will be reassessed at future reporting dates, so further changes are possible.

EPRA net tangible assets, or NTA, declined 2.1% to 3,157p per share. Total accounting return was -0.4%, compared with 3.0% in H1 2025. Derwent estimates that, excluding the outward yield movement and Old Street provision while including share buyback accretion, the return would have been approximately 3.7%.

Disposals are strengthening the balance sheet

Derwent has completed £168.8 million of disposals and exchanged contracts on another £110.5 million. These transactions were agreed at an average 3% discount to December 2025 book value before costs.

Selling below book value is not ideal, but the discount looks relatively contained and the proceeds are helping fund developments, reduce debt and support the buyback. The company is targeting approximately £400 million of disposals in 2026 and £1 billion over three years, continuing the strategy outlined in its 2025 full-year results.

Net debt fell from £1.43 billion at December 2025 to £1.38 billion. EPRA loan-to-value, which measures net debt against property assets, improved from 29.4% to 28.8%. Cash and undrawn facilities stood at £481 million, while there are no facilities due for repayment or refinancing until November 2027.

The £50 million share buyback is also progressing. During H1, Derwent repurchased £18.1 million of shares at an average 1,833p, adding an estimated 7p to NTA per share. By the announcement date, total purchases had reached £33.4 million at an average 1,921p.

Four developments provide the next growth opportunity

Derwent now has four major West End projects on site, covering 527,300 square feet. These include 50 Baker Street, Holden House, Greencoat & Gordon and Middlesex House.

Together, they have an appraised annual ERV of £60.3 million and estimated future capital expenditure of £417 million. Management forecasts ungeared internal rates of return above 10% across the projects. An ungeared return excludes the effects of debt financing, making it easier to assess the underlying property investment.

Fixed-price construction contracts are in place for all four projects, offering some protection against cost inflation. Even so, delivery delays, tenant demand and property yield changes could still affect returns.

Upgraded earnings guidance is the key takeaway

Derwent upgraded its 2026 EPRA EPS guidance to a decline of between 0% and 3%, improving on the previous forecast of a 3% to 5% fall.

Its longer-term expectations are unchanged. EPRA EPS is still expected to rise 5% to 10% by 2027 and 25% to 30% by 2030, both measured against 2025. Portfolio ERV growth guidance remains 4% to 7% for 2026 after growth of 2.6% in the first half.

The investment case therefore rests on a clear trade-off. Leasing momentum, improving leverage, disposal progress and a pipeline of potentially accretive developments are encouraging. Against that, NTA declined, earnings remain below last year and Old Street Quarter introduces meaningful uncertainty.

The upgraded earnings guidance suggests Derwent's core operations are performing better than the statutory loss implies. The challenge is now to maintain above-ERV leasing, execute the disposal programme without larger discounts and deliver the development pipeline while keeping debt under control.