Derwent London (LSE:DLN) ROC % : 3.03% (As of Dec. 2023)

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What is Derwent London ROC %?

ROC % measures how well a company generates cash flow relative to the capital it has invested in its business. It is also called ROIC %. Derwent London's annualized return on capital (ROC %) for the quarter that ended in Dec. 2023 was 3.03%.

As of today (2024-05-15), Derwent London's WACC % is 11.92%. Derwent London's ROC % is 2.93% (calculated using TTM income statement data). Derwent London earns returns that do not match up to its cost of capital. It will destroy value as it grows.

Derwent London ROC % Historical Data

The historical data trend for Derwent London's ROC % can be seen below:

* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD.
* For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.

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Derwent London ROC % Chart

Derwent London Annual Data

Trend

Dec14

Dec15

Dec16

Dec17

Dec18

Dec19

Dec20

Dec21

Dec22

Dec23

ROC %

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2.62

2.79

2.72

2.78

2.93

Derwent London Semi-Annual Data
	Jun14	Dec14	Jun15	Dec15	Jun16	Dec16	Jun17	Dec17	Jun18	Dec18	Jun19	Dec19	Jun20	Dec20	Jun21	Dec21	Jun22	Dec22	Jun23	Dec23
ROC %	Get a 7-Day Free Trial															2.71	2.59	2.76	2.83	3.03

Derwent London ROC % Calculation

Derwent London's annualized Return on Capital (ROC %) for the fiscal year that ended in Dec. 2023 is calculated as:

	ROC % (A: Dec. 2023 )
=	NOPAT	/	Average Invested Capital
=	Operating Income * ( 1 - Tax Rate % )	/	( (Invested Capital (A: Dec. 2022 )	+	Invested Capital (A: Dec. 2023 ))	/ count )
=	154.4 * ( 1 - -0.11% )	/	( (5480.8	+	5054.7)	/ 2 )
=	154.56984	/	5267.75
=	2.93 %

where

	Invested Capital		(A: Dec. 2022 )
=	Total Assets	-	Accounts Payable & Accrued Expense	-	Excess Cash
=	Total Assets	-	Accounts Payable & Accrued Expense	-	( Cash, Cash Equivalents, Marketable Securities	-	max(0, Total Current Liabilities	-	Total Current Assets	+	Cash, Cash Equivalents, Marketable Securities	))
=	5509.4	-	37.7	-	( 26.9	-	max(0, 169.2	-	160.1	+	26.9	))
=	5480.8

	Invested Capital		(A: Dec. 2023 )
=	Total Assets	-	Accounts Payable & Accrued Expense	-	Excess Cash
=	Total Assets	-	Accounts Payable & Accrued Expense	-	( Cash, Cash Equivalents, Marketable Securities	-	max(0, Total Current Liabilities	-	Total Current Assets	+	Cash, Cash Equivalents, Marketable Securities	))
=	5028	-	39.7	-	( 13.9	-	max(0, 251.4	-	185	+	13.9	))
=	5054.7

Derwent London's annualized Return on Capital (ROC %) for the quarter that ended in Dec. 2023 is calculated as:

	ROC % (Q: Dec. 2023 )
=	NOPAT	/	Average Invested Capital
=	Operating Income * ( 1 - Tax Rate % )	/	( (Invested Capital (Q: Jun. 2023 )	+	Invested Capital (Q: Dec. 2023 ))	/ count )
=	156.6 * ( 1 - -0.12% )	/	( (5281.2	+	5054.7)	/ 2 )
=	156.78792	/	5167.95
=	3.03 %

where

	Invested Capital		(Q: Jun. 2023 )
=	Total Assets	-	Accounts Payable & Accrued Expense	-	Excess Cash
=	Total Assets	-	Accounts Payable & Accrued Expense	-	( Cash, Cash Equivalents, Marketable Securities	-	max(0, Total Current Liabilities	-	Total Current Assets	+	Cash, Cash Equivalents, Marketable Securities	))
=	5346.6	-	49.1	-	( 39.1	-	max(0, 184.5	-	200.8	+	39.1	))
=	5281.2

	Invested Capital		(Q: Dec. 2023 )
=	Total Assets	-	Accounts Payable & Accrued Expense	-	Excess Cash
=	Total Assets	-	Accounts Payable & Accrued Expense	-	( Cash, Cash Equivalents, Marketable Securities	-	max(0, Total Current Liabilities	-	Total Current Assets	+	Cash, Cash Equivalents, Marketable Securities	))
=	5028	-	39.7	-	( 13.9	-	max(0, 251.4	-	185	+	13.9	))
=	5054.7

Note: The Operating Income data used here is two times the semi-annual (Dec. 2023) data.

Derwent London (LSE:DLN) ROC % Explanation

ROC % measures how well a company generates cash flow relative to the capital it has invested in its business. It is also called ROIC %. The reason book values of debt and equity are used is because the book values are the capital the company received when issuing the debt or receiving the equity investments.

There are four key components to this definition. The first is the use of operating income or EBIT rather than net income in the numerator. The second is the tax adjustment to this operating income or EBIT, computed as a hypothetical tax based on an effective or marginal tax rate. The third is the use of book values for invested capital, rather than market values. The final is the timing difference; the capital invested is from the end of the prior year whereas the operating income or EBIT is the current year's number.

Why is ROC % important?

Because it costs money to raise capital. A firm that generates higher returns on investment than it costs the company to raise the capital needed for that investment is earning excess returns. A firm that expects to continue generating positive excess returns on new investments in the future will see its value increase as growth increases, whereas a firm that earns returns that do not match up to its cost of capital will destroy value as it grows.

As of today, Derwent London's WACC % is 11.92%. Derwent London's ROC % is 2.93% (calculated using TTM income statement data). Derwent London earns returns that do not match up to its cost of capital. It will destroy value as it grows.

Be Aware

Like ROE % and ROA %, ROC % is calculated with only 12 months of data. Fluctuations in the company's earnings or business cycles can affect the ratio drastically. It is important to look at the ratio from a long term perspective.

Derwent London ROC % Related Terms

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Derwent London (LSE:DLN) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Real Estate » REITs » Derwent London PLC (LSE:DLN) » Definitions » ROC %

Comparable Companies

Traded in Other Exchanges

DWVYF:USA DLNl:UK DVK:Germany

Address

25 Savile Row, London, GBR, W1S 2ER

Website

https://www.derwentlondon.com

Derwent London PLC is a London-focused real estate investment trust. Derwent owns, manages, and refurbishes office real estate in Central London. Within this region, the majority of the company's assets are located in the districts of London's West End, such as Fitzrovia. Properties in London's Tech Belt and the City Borders also represent significant parts of the company's real estate portfolio. Derwent derives nearly all of its revenue from tenants in the form of rental income structured in mid-to-long-term leases. Office buildings in the central West End are responsible for the majority of revenue generated. Media and advertising companies, professional and business services firms, and retail head offices are all fairly evenly represented among the company's tenants.