REG-SEGRO PLC SEGRO plc: Trading Update

SEGROAnnouncement

20/04/2023 07:00

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SEGRO plc: Trading Update

 

SEGRO plc (“SEGRO” or the “Group”) (BOURSE:SGRO) today publishes a
trading update for the period from 1 January 2023 to 19 April 2023(1).

Summary


 * Occupier market dynamics remain favourable, supporting the delivery of strong
rent roll growth during the quarter.

 * Market data showing signs of stabilisation in industrial asset values.

 * Strong balance sheet for continued investment to drive further growth in
earnings and dividends.

David Sleath, Chief Executive, said:

“2023 has started well for SEGRO. Occupier demand continues to be high and
is coming from a diverse range of customers, whilst supply remains limited
across all our markets. These favourable dynamics, combined with the active
asset management of our prime portfolio, have enabled us to drive strong rent
roll growth from the leasing of recently completed space and the capture of
reversion and indexation from our standing assets. We have also added to our
profitable development pipeline through further pre-lets and have projects
equivalent to £84 million of additional rent under construction or due to
start shortly.

“Market data is showing signs of stabilisation in asset values, although
investment activity remains subdued. This is most evident in the UK where the
indices show that values are broadly flat over the first quarter, but also in
Continental Europe, as supported by a valuation exercise relating to the SELP
portfolio which indicated only a small decline in values during the first
three months of the year.

“Despite wider uncertainty arising from recent events in the credit markets,
we remain well positioned with significant liquidity, no near-term refinancing
requirements and modest leverage. We have considerable capacity to continue
investing in our portfolio in a disciplined manner and expect this to deliver
further compound growth in earnings and dividends during 2023 and beyond.”

Financial calendar

Half Year 2023 results will be published on Thursday 27 July 2023.

(1) In this statement, space is stated at 100 per cent, whilst financial
figures are stated reflecting SEGRO’s share of joint ventures. Financial
figures are stated for the period to, or at, 31 March unless otherwise
indicated. The exchange rate applied is €1.14:£1 as at 31 March 2023.

(2 )Headline rent is annualised gross passing rent receivable once incentives
such as rent-free periods have expired.

(3) SELP joint venture portfolio focuses on big box warehouses in Continental
Europe.

(4) Q1 2022 comparator has been restated to exclude capitalised interest and
other costs.

(5) Based on values as at 31 December 2022, adjusted for acquisitions,
disposals and other capital expenditure during the first quarter.
 OPERATING SUMMARY & KEY METRICS                                                         Q1 2023                     Q1 2022    
 ACTIVE ASSET MANAGEMENT CAPTURING RENTAL GROWTH AND INCREASING THE RENT ROLL                                                   
 (see Appendix 1):                                                                                                              
 Occupier demand remains strong and supply limited, which has supported our                                                     
 ability to let new space and grow rents in the standing portfolio through                                                      
 inflation-linked increases and capturing accumulated reversion in the                                                          
 portfolio. Occupancy and retention remain high.                                                                                
 Total new headline rent(2) signed during the period (£m)                                24                          25         
 Pre-lets signed during the period (£m)                                                  9                           11         
 Uplift on rent reviews and renewals (%)              Group                              14                          23         
                                                      UK                                 18                          29         
                                                      CE                                 3                           1          
 Occupancy rate (%)                                                                      95.7                        96.7       
 Customer retention (%)                                                                  82                          79         
 INVESTMENT ACTIVITY REMAINS DISCIPLINED AND FOCUSED ON SECURING PROFITABLE                                                     
 GROWTH:                                                                                                                        
 The majority of investment during the period was on our development programme                                                  
 with development capex for 2023, including infrastructure, still expected to                                                   
 be in excess of £600 million.                                                                                                  
 
                                                                                                                              
 
A desktop valuation of part of the SELP portfolio(3) at 31 March 2023 (see                                                    
 Appendix 2) estimated a value decline of approximately 2 per cent during the                                                   
 quarter. The CBRE UK Monthly Property index showed that capital values for UK                                                  
 industrial were flat during the same period.                                                                                   
 Development capex (£m)                                                                  138                         147(4)     
 Acquisitions (£m)                                                                       130                         175        
 Disposals (£m)                                                                          48                          73         
 EXECUTING AND GROWING OUR PROFITABLE DEVELOPMENT PIPELINE:                                                                     
 We completed a significant amount of space during the quarter, three-quarters                                                  
 of which is already let, and signed a further £9 million of pre-lets.                                                          
 Development remains highly profitable with a yield on cost in the current and                                                  
 near-term pipeline of 6.8 per cent (c.10 per cent yield on new money).                                                         
 Development completions year-to-date:                                                                                          
 – Space completed (sq m, at 100%)                                                       173,300                     121,900    
 – Potential rent (£m, at share) (Rent secured)                                          11 (74%)                    3 (100%)   
 Current development pipeline potential rent (£m) (Rent secured)                         68 (73%)                    73 (63%)   
 Near-term development pipeline potential rent (£m)                                      16                          35         
                                                                                                                     
          
                                                                                                                     
          
 BALANCE SHEET                                                                           31 Mar 23                   31 Dec 22  
 LONG-TERM, DIVERSIFIED DEBT PROFILE PROVIDES CERTAINTY AND FLEXIBILITY                                                         
 We retain substantial liquidity, leverage remains modest and 92 per cent of                                                    
 our debt is fixed or capped. We have no material near-term refinancing                                                         
 requirements and an 8.2 year average debt maturity.                                                                            
 Net debt (£bn)                                                                          5.9                         5.7        
 Cost of debt (%)                                                                        2.7                         2.5        
 LTV(5) (%)                                                                              33                          32         
 Cash and available facilities (£bn)                                                     2.0                         2.2        


Appendices

1. Leasing data for the period to 31 March (£m)(1 2)
                                                                                 Q1 2023  Q1 2022  
 Take-up of existing space (A)                                                   4        5        
 Space returned(2) (B)                                                           (5)      (5)      
 NET ABSORPTION OF EXISTING SPACE (A-B)                                          -1       -        
 Other rental movements (rent reviews, renewals, indexation) (C)                 7        7        
 RENT ROLL GROWTH FROM EXISTING SPACE                                            6        7        
 Take-up of developments completed in the period – pre-let space (D)             7        2        
 Take-up of speculative developments completed (E)                               4        2        
 TOTAL TAKE UP (A+C+D+E)                                                         22       16       
 Less take-up of pre-lets and speculative lettings signed in prior periods       (7)      (2)      
 Pre-lets and lettings on speculative developments signed in the period for      9        11       
 future delivery                                                                                   
 RENTAL INCOME CONTRACTED IN THE PERIOD(2)                                       24       25       
 Take-back of space for redevelopment                                            (1)      (1)      


1 All figures reflect headline rent (annualised gross rental income, after the
expiry of any rent-free periods), exchange rates as at 31 March 2023 and
include joint ventures at share.

2 Excluding space taken back for redevelopment.

2. SELP valuation methodology

During the period, SELP requested that CBRE conduct a sample-based valuation
of its portfolio as at 31 March 2023. The valuation was conducted on a desktop
basis and on a representative sample of properties equating to approximately
63 per cent of SELP’s portfolio fair value as at 31 December 2022, including
developments and land.

The process concluded that the portfolio was expected to have declined in
value by approximately 2 per cent during the three months to 31 March 2023,
with an increase in the overall portfolio equivalent yield of approximately 20
basis points and a blended ERV growth of approximately 3 per cent.

This Trading Update, the most recent Annual Report and other information are
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=53384239&newsitemid=20230419005897&lan=en-US&anchor=www.segro.com%2Finvestors&index=1&md5=2e39c71db48d19b6e5e11773c3abd54b)
.

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 9.9 million
square metres of space (106 million square feet) valued at £20.9 billion as
at 31 December 2022, 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.

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
(https://cts.businesswire.com/ct/CT?id=smartlink&url=https%3A%2F%2Fprotect-eu.mimecast.com%2Fs%2Fm58_CzmRgcmL0ExsXlE2_%3Fdomain%3Dsegro.com&esheet=53384239&newsitemid=20230419005897&lan=en-US&anchor=www.SEGRO.com&index=2&md5=e5ece8e7b0ae987fffb90feba5d227e1)
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.

CONTACT DETAILS FOR INVESTOR / ANALYST AND MEDIA ENQUIRIES: 

SEGRO

Soumen Das (Chief Financial Officer)

Tel: +44 (0) 20 7451 9110



Claire Mogford (Head of Investor Relations)

Tel: +44 (0) 20 7451 9048



Gary Gaskarth (External Communications Manager)

Tel: +44 (0) 20 7451 9069



FTI Consulting

Richard Sunderland / Ellie Sweeney / Eve Kirmatzis

Tel: +44 (0) 20 3727 1000



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