Derwent London FY Profit Falls; Recommends Special Dividend

Derwent London Plc. (DLN.L) reported that its IFRS profit before tax for fiscal year 2016 was 54.5 million, down from 779.5 million pounds in 2015. 

Profit attributable to equity shareholders for the year fell to 58.7 million pounds or 52.59 pence per share from 766.2 million pounds or 668.73 pence per share in the previous year.

European Public Real Estate Association or EPRA NAV per share on a diluted basis was up by 16 pence to 3,551p from 3,535 pence in 2015.

EPRA earnings increased more strongly with a 8.9% rise to 85.7 million pounds and EPRA earnings per share increased by 7.9% to 76.99 pence.

Gross property and other income declined to 193.7 million pounds from 204.9 million pounds last year.

The Board has recommended a 25.0% increase in the proposed final dividend to 38.50p per share for payment to shareholders on the register on 5 May 2017 to be paid on 9 June 2017. 32.70p will be paid as a PID and the balance of 5.80p as a conventional dividend. The interim and final dividend for the year will be 52.36p per share, an increase of 20.6% over last year.  There will not be a scrip dividend alternative. It is also intended that the 2017 interim dividend will be increased by 25%.

The Directors of Derwent London are recommending a special dividend of 52p per share to be paid on 9 June 2017 to shareholders on the register as at 5 May 2017.

In addition, Derwent London has entered an agreement to sell the freehold interest in 132-142 Hampstead Road NW1 for £130 millionb before costs.  The purchaser was the Secretary of State for Transport.  The property provides 219,700 sq ft and is let to University College London for £1.7 million pa.  The property was acquired in 2007, and planning for the development of 233,000 sq ft of offices and 38 residential units was achieved in 2010.

The offices were designed as Derwent London's first White Collar Factory development, the same concept that is now being successfully delivered at Old Street Yard EC1, and had attracted considerable pre-letting interest.  However, these plans were unable to be carried forward due to the decision to build HS2 announced in 2012. The December 2016 book value, which did not reflect the full benefit of the very valuable planning consent, was £115 million.

Separately, Derwent London has regeared a number of leases with the Expedia group and Cancer Research UK at Angel Building, Islington EC1.  Expedia will occupy 231,400 sq ft or 93% of the office element from 2020, and has extended its tenure from 2021 to 2030.  There are minimum rental uplifts on various leases at the next review either in 2020 or 2021. Expedia will also have the right of first refusal on the remaining 17,100 sq ft of office space when the lease expires in 2021.Expedia currently occupies 93,400 sq ft and has agreed to take on two other leases.  The majority of this additional space becomes available when Cancer Research UK moves to a new headquarters, which is unlikely to occur before 2019.  Following this change, Expedia will be the principal occupier of the building through 2030.

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