2023 Full Year Results

Growth in rents, earnings and dividends supported by favourable occupier markets and active asset management.

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• Occupier markets remained favourable throughout 2023, supporting a strong operating performance that has driven income and earnings growth, with momentum continuing into 2024.
  
• Significant progress with our Responsible SEGRO targets, including tracking ahead of schedule with our carbon reduction targets and a large increase in our solar capacity during the year.
  
• SEGRO is well-placed for further attractive growth as asset valuations start to bottom-out, rents continue to grow and development offers improved profitability at a yield on cost of 7-8 per cent.

Commenting on the results David Sleath, Chief Executive of SEGRO, said:

“SEGRO delivered a strong operating performance in 2023, despite the weaker macroeconomic backdrop. Significant rental uplifts on the standing portfolio and our profitable development programme have driven further growth in both earnings and dividends.

“Last year, tighter monetary conditions resulted in a modest, yield-driven valuation decline; however, we are reassured by continued rental growth across our markets. Market expectations for lower interest rates, if sustained, provide a positive backdrop for a recovery of investment market sentiment as the year progresses.

“In the next three years we expect to increase our passing rents by more than fifty per cent through capturing embedded reversion, leasing vacant units and developing new space. Looking beyond this our exceptional land bank, continuing occupier demand and constrained supply, offer significant additional opportunities for profitable growth.”

HIGHLIGHTS¹:

• Favourable occupier markets, along with our customer focus and proactive management of the portfolio, supported new headline rent commitments of £88 million during the period (2022: £98 million), including £27 million of new pre-let agreements, and a 31 per cent average uplift on rent reviews and renewals.
• 12.5 per cent increase in net rental income to £587 million (2022: £522 million), driven by development completions and strong like-for-like rental growth of 6.5 per cent.
• Adjusted pre-tax profit of £409 million up 6.0 per cent compared with the prior year (2022: £386 million). Adjusted EPS increased by 5.5 per cent to 32.7 pence (2022: 31.0 pence).
• Adjusted NAV per share down 6.1 per cent to 907 pence (31 December 2022: 966 pence), reflecting a 4.0 per cent like-for-like portfolio valuation decline (2022: 11.0 per cent decline), as a result of interest-rate driven yield expansion. This was partly offset by rental value (ERV) growth of 6.0 per cent, asset management initiatives and development profits.
• Capital investment of £931 million (2022: £1.3 billion) in development and land purchases, less £356 million of disposals completed during the year significantly ahead of book value.
• £50 million of potential new headline rent from 625,700 sq m of development completions, delivered at a yield on cost (excluding forward funded schemes) of 7.0 per cent. 87 per cent of this is already let to customers from a diverse range of sectors.
• Continued momentum in the development pipeline with 623,900 sq m of projects under construction or in advanced negotiations equating to £71 million of potential rent, 73 per cent of which has been or is expected to be pre-let. Expected yield on cost for these projects is 7.4 per cent.
• €103 million (£89 million) performance fee received from SELP joint venture² based on its ten-year IRR of 12.7 per cent which significantly outperformed its hurdle rate, resulting in €51 million (£44 million) net benefit before tax to SEGRO (not included in Adjusted profit).
• Strong balance sheet with access to £1.9 billion of available liquidity and a modest level of gearing reflected in an LTV of 34 per cent at 31 December 2023 (31 December 2022: 32 per cent). Average cost of debt at 31 December 2023 of 3.1 per cent, and interest cover of 3.0 times.
• 2023 full year dividend increased 5.7 per cent to 27.8 pence (2022: 26.3 pence). Final dividend increased by 4.9 per cent to 19.1 pence (2022: 18.2 pence).