Download the full PDF press release here.

KEY MESSAGES

• Occupier market conditions remain attractive and SEGRO’s focus on the most supply-constrained European urban and big box markets has driven continued income and earnings growth.
• Valuations have stabilised, with the UK seeing its first increase since the cycle turned in 2022.
• SEGRO is well-placed for further profitable growth with the potential to increase passing rents by over 50 per cent over the next three years, supporting strong shareholder returns.

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

“SEGRO has continued to perform well during the first half of 2024, signing £48 million of new rent. The balance of supply and demand for modern warehouse space remains supportive of further rental growth and development gains in the attractive European markets in which our portfolio is concentrated.

“Valuations have stabilised with the UK seeing its first increase since the cycle turned in 2022. The strength of our local networks, and balance sheet have enabled us to invest selectively in profitable new opportunities, putting to work some of the capital raised in February.

“In a sector that continues to benefit from long-term, attractive structural drivers, SEGRO is well-placed for further growth through a combination of active asset management of our irreplaceable, prime portfolio of existing assets and our profitable development programme, which includes a sizeable data centre pipeline. These factors, together with the competitive advantage of our market-leading operating platform, give us confidence that we will continue to deliver attractive and compounding increases in both earnings and dividends.”

HIGHLIGHTS¹:

• £48 million of new headline rent commitments signed during the period (H1 2023: £44 million), including £17 million of new pre-let agreements, and a 28 per cent average uplift in rent reviews and renewals as we continue to capture embedded reversion within the portfolio.
• 7 per cent increase in net rental income to £306 million (H1 2023: £286 million), driven by strong like-for-like rental growth of 5.3 per cent and development completions.
• Adjusted pre-tax profit of £227 million up 14.6 per cent compared with the prior year (H1 2023: £198 million). Adjusted EPS is 17.0 pence, up 6.9 per cent (H1 2023: 15.9 pence), the impact of the equity placing being broadly neutral as the higher share count was offset by lower interest costs.
• Overall valuation flat, with a positive performance in the UK offset by a small decline in Continental Europe, mostly due to modest outward yield shift. Adjusted NAV per share down 1.8 per cent to 891 pence (31 December 2023: 907 pence) largely due to the impact of the equity placing.
• Capital investment of £401 million (H1 2023: £625 million) comprising development capex and acquisitions, less £251 million of disposals completed ahead of previous book values.
• Development completions added £27 million of potential new headline rent, delivered at a yield on cost of 7.0 per cent. 78 per cent of this has been leased and 96 per cent was, or is expected to be, certified BREEAM ‘Excellent’ (or local equivalent) or higher.
• A further £49 million of potential rent from development projects under construction or in advanced negotiations, 65 per cent of which has been or is currently expected to be pre-let. Anticipated yield on cost for these projects is 7.7 per cent.
• Strong balance sheet, well-positioned for further growth following £907 million equity placing. LTV of 30 per cent (31 December 2023: 34 per cent) and net debt:EBITDA of 8.5 times (31 December 2023: 10.4 times), with access to £2.1 billion of cash and undrawn committed bank facilities.
• Attractive cost of debt due to our diverse, long-term debt structure. Average cost of debt is 2.7 per cent (31 December 2023: 3.1 per cent) with no major debt maturities until 2026.
• Interim dividend increased by 4.6 per cent to 9.1 pence (2023: 8.7 pence).

^1. Figures quoted on pages 1 to 12 refer to SEGRO’s share, except for land (hectares) and space (square metres) which are quoted at 100 per cent, unless otherwise stated. Please refer to the Presentation of Financial Information statement in the Financial Review for further details.

^2. A reconciliation between Adjusted profit before tax and IFRS profit before tax is shown in Note 2 to the condensed financial information.

^3. A reconciliation between Adjusted earnings per share and IFRS earnings per share is shown in Note 11 to the condensed financial information.

^4. Total Accounting Return is calculated based on the opening and closing adjusted NAV per share adding back dividends paid during the period.

^5. Percentage valuation movement during the period based on the difference between opening and closing valuations for all properties including buildings under construction and land, adjusting for capital expenditure, acquisitions and disposals. Table 3 in the Supplementary Notes provides a reconciliation to the condensed financial information.

^6. A reconciliation between Adjusted net asset value per share and IFRS net asset value per share is shown in Note 11 to the condensed financial information.

^7. Adjusted net asset value is in line with EPRA Net Tangible Assets (NTA) (see Table 5 in the Supplementary Notes for a NAV reconciliation).

^8. For further information on net debt:EBITDA see footnote 2 to Table 2 in the Supplementary Notes.

SEGRO has one of the best and most modern industrial and logistics portfolios in Europe, with two-thirds of our invested capital (at share) representing urban warehouses (including our data centre portfolio) located in Europe’s largest cities, and one-third representing big box warehouses located in major logistics hubs and along key transportation corridors.

These assets are in high demand from occupiers, driven by the long-term structural drivers at play in our sector - digitalisation, supply-chain resilience, urbanisation and sustainability - and the locations we operate in have a shortage of modern, sustainable space due to low availability of land, restrictive planning policies and, more recently, a significant fall in speculative construction starts across Europe.

Our portfolio is well-positioned to benefit from this tight supply-demand dynamic and we believe that this, combined with an improving macroeconomic situation, will support higher take-up levels and help to drive continued rental growth in line with our medium-term expectations.

This rental growth is expected to add to the £133 million of future additional income that is already underpinned by rent reversion within our existing portfolio, equating to approximately 20 per cent of our rent roll that we are successfully capturing whilst keeping customer retention high. Our high-quality land bank also creates the potential to add a further £404 million of rental income through development, which includes a sizeable data centre opportunity.

Asset values appear to be at an inflection point in the UK and bottoming out in Continental Europe, and the prospect of interest rate cuts later in the second half should provide support for continued recovery in investment market conditions. We believe this will present further, exciting opportunities for SEGRO to drive future returns.

Overall, we believe the present market environment offers an attractive opportunity for profitable medium-term investment. SEGRO, with the benefit of its prime portfolio, excellent land bank, market-leading operating platform and strong balance sheet, is well-placed to deliver attractive returns and continued compounding growth in earnings and dividends.

A live webcast of the results presentation will be available from 08:30am (UK time) at:

https://www.investis-live.com/segro/66714879c5e2640c000ef5ed/qpaer 

The webcast will be available for replay at SEGRO’s website at: http://www.segro.com/investors shortly after the live presentation.

A video of David Sleath, Chief Executive discussing the results will be available to view on the below links, together with this announcement and the Half Year 2024 Property Analysis Report.

Watch a video interview with David Sleath, Chief Executive.

View the full press release in PDF format.

Full details of our holdings can be found in the SEGRO Property Analysis Report.

SEGRO is a UK Real Estate Investment Trust (REIT), listed on the London Stock Exchange and Euronext Paris, and is a leading owner, manager and developer of modern warehouses and industrial property. It owns or manages 10.8 million square metres of space (116 million square feet) valued at £20.6 billion serving customers from a wide range of industry sectors. Its properties are located in and around major cities and at key transportation hubs in the UK and in seven other European countries.

For over 100 years SEGRO has been creating the space that enables extraordinary things to happen. From modern big box warehouses, used primarily for regional, national and international distribution hubs, to urban warehousing (including data centres) located close to major population centres and business districts, it provides high-quality assets that allow its customers to thrive.

A commitment to be a force for societal and environmental good is integral to SEGRO’s purpose and strategy. Its Responsible SEGRO framework focuses on three long-term priorities where the company believes it can make the greatest impact: Championing Low-Carbon Growth, Investing in Local Communities and Environments and Nurturing Talent.

Striving for the highest standards of innovation, sustainable business practices and enabling economic and societal prosperity underpins SEGRO’s ambition to be the best property company.

See www.SEGRO.com for further information.

Forward-Looking Statements: This announcement contains certain forward-looking statements with respect to SEGRO’s expectations and plans, strategy, management objectives, future developments and performance, costs, revenues and other trend information. All statements other than historical fact are, or may be deemed to be, forward-looking statements. Forward-looking statements are statements of future expectations and all forward-looking statements are subject to assumptions, risk and uncertainty. Many of these assumptions, risks and uncertainties relate to factors that are beyond SEGRO’s ability to control or estimate precisely and which could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements. Certain statements have been made with reference to forecast process changes, economic conditions and the current regulatory environment. Any forward-looking statements made by or on behalf of SEGRO are based upon the knowledge and information available to Directors on the date of this announcement. Accordingly, no assurance can be given that any particular expectation will be met and you are cautioned not to place undue reliance on the forward-looking statements. Additionally, forward-looking statements regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. The information contained in this announcement is provided as at the date of this announcement and is subject to change without notice. Other than in accordance with its legal or regulatory obligations (including under the UK Listing Rules and the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority), SEGRO does not undertake to update forward-looking statements, including to reflect any new information or changes in events, conditions or circumstances on which any such statement is based. Past share performance cannot be relied on as a guide to future performance. Nothing in this announcement should be construed as a profit estimate or profit forecast. The information in this announcement does not constitute an offer to sell or an invitation to buy securities in SEGRO plc or an invitation or inducement to engage in or enter into any contract or commitment or other investment activities. Neither the content of SEGRO’s website nor any other website accessible by hyperlinks from SEGRO’s website are incorporated in, or form part of, this announcement.