REG-SEGRO PLC RESULTS FOR THE YEAR ENDED 31 DECEMBER 2023
16/02/2024 07:00
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RESULTS FOR THE YEAR ENDED 31 DECEMBER 2023
GROWTH IN RENTS, EARNINGS AND DIVIDENDS SUPPORTED BY FAVOURABLE OCCUPIER
MARKETS AND ACTIVE ASSET MANAGEMENT
SEGRO PLC (Paris:SGRO):
SEGRO plc's Full Year 2023 Results have been submitted in full unedited text
to the Financial Conduct Authority's National Storage Mechanism and will be
available shortly for inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://cts.businesswire.com/ct/CT?id=smartlink&url=https%3A%2F%2Fdata.fca.org.uk%2F%23%2Fnsm%2Fnationalstoragemechanism&esheet=53897224&newsitemid=20240215019907&lan=en-US&anchor=https%3A%2F%2Fdata.fca.org.uk%2F%23%2Fnsm%2Fnationalstoragemechanism&index=1&md5=80ee774ede6423e9aafa01d60e99502c)
and are also available on the SEGRO website at: www.segro.com/investors
(https://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww.segro.com%2Finvestors&esheet=53897224&newsitemid=20240215019907&lan=en-US&anchor=www.segro.com%2Finvestors&index=2&md5=e560373801418db6f5e22174dc8b3b05)
. Investors should read the full unedited text of the Full Year 2023 Results,
including the description of the Group’s principal risks and uncertainties,
and not rely only on the summarised information set out in this announcement.
Notes or Tables that are not included herein refer to the full unedited text
of the Full Year 2023 Results.
KEY MESSAGES:
* 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.”
HIGHLIGHTS(1):
* 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
projects 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
venture(2) 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).
OUTLOOK
SEGRO has one of the highest quality, best located and most modern
pan-European industrial warehouse portfolios, with a diverse customer base.
Our strategic focus is to ensure that our properties are located in the most
supply constrained locations and are of a standard that makes them highly
appealing to occupiers - and are therefore able to generate superior long-term
rental growth and overall performance.
As we progress through 2024, whilst macroeconomic and geopolitical uncertainty
remain elevated, we note that inflation has fallen sharply over recent months
and capital market pricing is now implying that interest rates have peaked. If
sustained, this provides a positive backdrop for a recovery of investment
market sentiment as the year progresses.
Take-up levels are in line with or higher than pre-pandemic levels across our
markets, supported by the key structural drivers of occupier demand which
remain very much in evidence: data and digitalisation, supply chain
optimisation, sustainability and urbanisation. This gives us confidence in the
outlook for continued rental growth in line with our medium-term guidance of
two to six per cent per annum, particularly as supply remains restricted in
the near-term due to low levels of vacancy and limited capital availability
for developers; and in the longer-term as public policy, particularly in urban
areas, continues to favour housing over industrial usage and severely
restricts the use of greenbelt land.
£137 million of our future income growth is underpinned by rent reversion
within our existing portfolio, approximately 20 per cent of our current rent
roll. Most of this reversion is in the UK and will be captured by the
five-yearly open market rent review process, whilst we will continue to
benefit from index-linked uplifts on over half of our leases (mostly in
Continental Europe).
Further, our high-quality land bank, with the potential to add over £390
million of rental income, provides us with the ability to meet occupier demand
through further development. Projects within this land bank, as well as
redevelopment opportunities within our existing portfolio such as on the
Slough Trading Estate, combine to give the potential for 1.2 GW of new data
centre capacity across 24 sites. Our strong balance sheet provides financial
flexibility to invest at a time when construction costs are moderating, and
supply of new competing product remains low. Development therefore continues
to offer a profitable growth opportunity, as demonstrated with improving
development yields of seven to eight per cent.
Overall, we believe the present market environment offers an attractive
opportunity for profitable mid-term investment, including the ability to grow
passing rents by more than 50 per cent over the next three years. SEGRO is
therefore well-placed to deliver attractive returns and continued growth in
earnings and dividends.
FINANCIAL SUMMARY
2023 2022 Change
per cent
Adjusted(3) profit before tax (£m) 409 386 6.0
IFRS(3) loss before tax (£m) (263) (1,967) –
Adjusted(3) earnings per share (pence) 32.7 31.0 5.5
IFRS(3) earnings per share (pence) (20.7) (159.7) –
Dividend per share (pence) 27.8 26.3 5.7
Total Accounting Return (%)(4) (3.3) (12.8) –
2023 2022 Change
per cent
Assets under Management (£m) 20,677 20,947 –
Portfolio valuation (SEGRO share, £m) 17,762 17,925 (4.0)(5)
Net true equivalent yield (per cent) 5.3 4.8
Adjusted(6 7 )net asset value per share (pence, diluted) 907 966 (6.1)
IFRS net asset value per share (pence, diluted) 886 938 –
Net debt (SEGRO share, £m) 6,016 5,693 –
Loan to value ratio including joint ventures and associates at share (per 34 32 –
cent)
Net debt:EBITDA(8) 10.4 11.7 –
1 Figures quoted on pages 1 to 18 refer to SEGRO and SEGRO’s share of joint
ventures and associates, 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 For further information on the SELP Performance fee see Note 6 to the
condensed financial information.
3 The primary driver of the difference between Adjusted profit before tax and
IFRS loss before tax (£263m IFRS loss before tax versus £409m Adjusted
profit before tax) and earnings per share (32.7p Adjusted earnings versus
-20.7p IFRS earnings) is the unrealised valuation deficit on our portfolio
recognised in IFRS but not recognised in our Adjusted profit and earnings
metrics. Further information and reconciliations between the Adjusted and IFRS
metrics can be found in Note 2 (Adjusted profit) and Notes 11 (Earnings per
ordinary share) 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.
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.
FINANCIAL CALENDAR
2023 final dividend ex-div date 14 March 2024
2023 final dividend record date 15 March 2024
2023 final dividend scrip dividend price announced 22 March 2024
Last date for scrip dividend elections 12 April 2024
2023 final dividend payment date 3 May 2024
2024 Q1 Trading Update 18 April 2024
Half Year 2024 Results (provisional) 26 July 2024
OPERATING SUMMARY & KEY METRICS
2023 2022
MARKET RENTAL GROWTH REMAINS STRONG DUE TO TIGHT SUPPLY-DEMAND DYNAMICS,
PORTFOLIO VALUATION IMPACTED BY INTEREST RATE DRIVEN YIELD SHIFT (see page 9):
Valuation decline driven by increased yields (50 basis points), partly offset
by strong rental value (ERV) growth, active asset management of the standing
portfolio and gains recognised on completed development and buildings under
construction.
Portfolio valuation change (%): Group (4.0) (11.0)
UK (3.4) (13.1)
CE (5.1) (7.3)
ERV growth (%) Group 6.0 10.9
UK 4.9 11.5
CE 7.9 9.9
STRONG GROWTH IN RENTAL INCOME DRIVEN BY HIGH OCCUPIER DEMAND AND ACTIVE ASSET
MANAGEMENT OF OUR PRIME PORTFOLIO (see page 15):
Existing portfolio contributed strongly to our rent roll growth through
continued capture of reversion in the UK portfolio and indexation provisions
on the Continent, supplemented by pre-lets signed during the year.
Total new rent signed during the period (£m) 88 98
Pre-lets signed during the period (£m) 27 41
Like-for-like net rental income growth (%): Group 6.5 6.7
UK 5.3 7.7
CE 8.5 4.9
Uplift on rent reviews and renewals (%): Group 31.0 23.3
(note: excludes uplifts from indexation) UK 39.9 28.0
CE 7.9 1.7
Occupancy rate (%) 95.0 96.0
Customer retention (%) 81 76
Visibility of customer energy use (%) 81 68
Corporate and customer carbon emission (tonnes CO2e) 254,168 272,218
INVESTMENT ACTIVITY REMAINS DISCIPLINED AND FOCUSED ON SECURING PROFITABLE
GROWTH (see page 12):
Capital investment continues to focus on our development programme (through
capex and securing land to provide future growth opportunities). Development
capex for 2024, including infrastructure, expected to be approximately £600
million.
Development capex (£m) 527 787
Asset acquisitions (£m) – 155
Land acquisitions (£m) 404 712
Disposals (£m) 356 367
DEVELOPMENT PIPELINE HELPING TO GROW OUR RENT ROLL (see page 13):
Our active and largely pre-let development pipeline remains a key driver of
rent roll growth and attractive returns on capital. Potential rent of £71
million from projects currently on site or expected to commence shortly at a
yield on cost of 7.4 per cent.
Development completions:
– Space completed (sq m) 625,700 639,200
– Potential rent (£m) (Rent secured) 50 (87%) 46 (80%)
Average embodied carbon intensity (kgCO2e/m(2)) 348 353
Current development pipeline potential rent (£m) (Rent secured) 51 (62%) 67 (73%)
Near-term development pipeline potential rent (£m) 20 19
WEBCAST / CONFERENCE CALL FOR INVESTORS AND ANALYSTS
A live webcast of the results presentation will be available from 08:30am (UK
time) at:
https://www.investis-live.com/segro/65a5393dbacfa60c00652ed9/ater
(https://cts.businesswire.com/ct/CT?id=smartlink&url=https%3A%2F%2Fwww.investis-live.com%2Fsegro%2F65a5393dbacfa60c00652ed9%2Fater&esheet=53897224&newsitemid=20240215019907&lan=en-US&anchor=https%3A%2F%2Fwww.investis-live.com%2Fsegro%2F65a5393dbacfa60c00652ed9%2Fater&index=3&md5=8556902e41c74747ad6462e376008406)
The webcast will be available for replay at SEGRO’s website at:
http://www.segro.com/investors
(https://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww.segro.com%2Finvestors&esheet=53897224&newsitemid=20240215019907&lan=en-US&anchor=http%3A%2F%2Fwww.segro.com%2Finvestors&index=4&md5=7efe4f6aa9590d4aabf516a1b3b3b7b8)
shortly after the live presentation.
A conference call facility will be available at 08:30am (UK time) on the An audio recording of the conference call will be available until 23 February
following number: 2024 on:
Dial-in: +44 (0)800 279 3956
UK: +44 (0) 203 608 8021
+44 (0) 207 107 0613
Access code: 43520861#
Access code: 43520861
A video of David Sleath, Chief Executive discussing the results will be
available to view on www.segro.com
(https://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww.segro.com&esheet=53897224&newsitemid=20240215019907&lan=en-US&anchor=www.segro.com&index=5&md5=e67920e8f372e112061c34f01e4098bf)
, together with this announcement, the Full Year 2023 Property Analysis Report
and other information about SEGRO.
ABOUT SEGRO
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 10.4 million
square metres of space (112 million square feet) valued at £20.7 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 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.
See www.SEGRO.com
(https://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww.SEGRO.com&esheet=53897224&newsitemid=20240215019907&lan=en-US&anchor=www.SEGRO.com&index=6&md5=a4b23a32366b427eb084d65945117d9b)
for further information.
The financial information set out in this announcement does not constitute the
consolidated statutory accounts (“Group Financial Statements”) for the
years ended 31 December 2023 and 2022, but is derived from those Financial
Statements. Statutory accounts for 2022 have been delivered to the Registrar
of Companies and those for 2023 (approved by the Board on 15 February 2024)
will be delivered following the Company’s annual general meeting. The
external auditor has reported on the Group Financial Statements for the year
ended 31 December 2023 and their report did not contain any modification.
The Board of Directors of SEGRO plc met on 15 February 2024 and approved the
Group Annual Report and Financial Statements for the year ended 31 December
2023. Certain parts of the Group Annual Report and Financial Statements have
not been included in this announcement.
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.
CONTACT DETAILS FOR INVESTOR / ANALYST AND MEDIA ENQUIRIES:
SEGRO
Soumen Das
(Chief Financial Officer)
Tel: + 44 (0) 20 7451 9110
(after 11am)
Claire Mogford
(Head of Investor Relations)
Mob: +44 (0) 7710 153 974
Tel: +44 (0) 20 7451 9048
(after 11am)
FTI Consulting
Richard Sunderland /Eve Kirmatzis
Tel: +44 (0) 20 3727 1000
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