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REG-SEGRO plc Trading Statement

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Trading Statement

 

18 October 2023

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 17 October 2023(1).

Summary


 * SEGRO on track for a strong year of rent roll growth due to active asset
management and demand for our high-quality product.

 * Good progress with disposals, over £250 million completed or exchanged year
to date, above book value.

 * Prioritising profitable development opportunities with £77 million of
potential rent from projects currently on site or expected to commence shortly
at an anticipated yield on cost of 7.3 per cent.

David Sleath, Chief Executive, said:

“SEGRO’s prime portfolio and market-leading operating platform generated
£58 million of new contracted rent so far in 2023, keeping us on track for a
strong year of rent roll growth. Occupier market conditions remain supportive
with demand in line with longer-term trends and supply constrained in our
chosen sub-markets. This is resulting in continued rental growth, further
increasing the reversionary potential in our existing portfolio, which we are
capturing through our asset management and leasing activity.

“We have made good progress with disposals in recent months, although the
overall volume of investment market transactions remains subdued due to the
evolving macro-economic environment. Reassuringly, investors continue to hold
conviction over the attractiveness of the sector, with market evidence from
indices and recent transactions pointing to relatively stable asset values in
the third quarter.

“In the current environment it is important to remain disciplined in our use
of capital. We are prioritising attractive development opportunities on the
land we already own, increasingly funding such investment from the proceeds of
selective disposals, alongside driving performance and income growth from our
existing portfolio of high-quality assets.”

Financial calendar

Full Year 2023 results will be published on Friday 16 February 2024.

(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, 30 September unless otherwise
indicated. The exchange rate applied is €1.15:£1 as at 30 September 2023.

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

3 Based on values as at 30 June 2023, adjusted for acquisitions, disposals and
other capital expenditure during the third quarter.
 OPERATING SUMMARY & KEY METRICS                                                         9M 2023                     9M 2022     
 ACTIVE ASSET MANAGEMENT CAPTURING RENTAL GROWTH AND INCREASING THE RENT ROLL                                                    
 (see Appendix 1):                                                                                                               
 Standing portfolio continues to contribute significantly to rent roll growth                                                    
 as we make good progress capturing reversion, benefit from indexation and sign                                                  
 leases with both new and existing customers. Customer retention remains high                                                    
 and occupancy is within our target range of 94 to 96 per cent.                                                                  
 Total new headline rent(2) signed (£m)                                                  58                          76          
 Pre-lets signed (£m)                                                                    23                          36          
 Uplift on rent reviews and renewals (%)              Group                              22                          22          
                                                      UK                                 32                          27          
                                                      CE                                 8                           1           
 Occupancy rate (%)                                                                      95.3                        96.7        
 Customer retention (%)                                                                  81                          76          
 INVESTMENT ACTIVITY REMAINS DISCIPLINED AND FOCUSED ON SECURING PROFITABLE                                                      
 GROWTH:                                                                                                                         
 Capital investment continues to focus on our development programme through                                                      
 capex and the acquisition of some rare land opportunities, funded increasingly                                                  
 by disposals. The £251 million of sales completed or exchanged so far in 2023                                                   
 had attributable rental income of £8 million (annualised).                                                                      
 
                                                                                                                               
 
Development capex for 2023, including infrastructure, now expected to be in                                                    
 excess of £500 million (previously c.£600 million) with the residual capex                                                      
 expected to be incurred in 2024.                                                                                                
 Development capex (£m)                                                                  381                         532         
 Acquisitions (£m)                                                                       397                         789         
 Disposals (£m), completed or exchanged                                                  251                         290         
 EXECUTING AND GROWING OUR PROFITABLE DEVELOPMENT PIPELINE:                                                                      
 Our active and largely pre-let development programme remains a key driver of                                                    
 rent roll growth and attractive returns on capital.                                                                             
 Development completions:                                                                                                        
 – Space completed (sq m, at 100%)                                                       432,800                     419,100     
 – Potential rent (£m, at share) (Rent secured)                                          41 (85%)                    20 (92%)    
 Current development pipeline potential rent (£m) (Rent secured)                         68 (64%)                    86 (64%)    
 Near-term development pipeline potential rent (£m)                                      9                           32          
 BALANCE SHEET                                                                           30 Sep 23                   30 June 23  
 LONG-TERM, DIVERSIFIED DEBT PROFILE PROVIDES CERTAINTY AND FLEXIBILITY                                                          
 We retain substantial liquidity, leverage remains stable and 89 per cent of                                                     
 our debt is fixed or capped. We have no material near-term refinancing                                                          
 requirements and a 7.2 year average debt maturity.                                                                              
 Net debt (£m)                                                                           6,200                       6,078       
 Cost of debt (%)                                                                        3.0                         2.9         
 LTV(3) (%)                                                                              34                          34          
 Cash and available facilities (£m)                                                      1,583                       1,687       


Appendices

1. Leasing data for the period to 30 September (£m)(1 2)
                                                                                  Q3 2023  Q3 2022  9M 2023  9M 2022  
 Take-up of existing space (A)                                               £m   3        5        10       15       
 Space returned(2) (B)                                                       £m   (5)      (4)      (14)     (14)     
 NET ABSORPTION OF EXISTING SPACE (A-B)                                      £m   (2)      1        (3)      1        
 Other rental movements (rent reviews, renewals, indexation) (C)             £m   6        5        18       19       
 RENT ROLL GROWTH FROM EXISTING SPACE                                        £m   4        6        15       20       
 Take-up of developments completed in the period – pre-let space (D)         £m   11       2        33       13       
 Take-up of speculative developments completed in the past two years (E)     £m   1        4        7        9        
 TOTAL TAKE UP (A+C+D+E)                                                     £m   21       16       68       56       
 Less take-up of pre-lets and speculative lettings signed in prior periods   £m   (11)     (4)      (33)     (16)     
 Pre-lets and lettings on speculative developments signed in the period for  £m   4        8        23       36       
 future delivery                                                                                                      
 RENTAL INCOME CONTRACTED IN THE PERIOD(2)                                   £m   14       20       58       76       
 Take-back of space for redevelopment                                        £m   -        (1)      (1)      (3)      


1 All figures reflect headline rent (annualised gross rental income, after the
expiry of any rent-free periods), exchange rates as at 30 September and
include joint ventures at share.

2 Excluding space taken back for redevelopment.

2. SELP Performance Fee update

A performance fee is potentially payable by the SELP joint venture to SEGRO,
based on SELP’s internal rate of return since inception as at the
vehicle’s tenth anniversary, 11 October 2023, subject to certain hurdle
rates. An independent valuation of the SELP portfolio is being carried out as
part of the process to calculate this fee. SEGRO will announce the amount
payable by SELP after the valuation has been concluded and the performance fee
determined.

The performance fee will be excluded from SEGRO’s FY 2023 Adjusted Profit
(and Adjusted earnings) as announced with the HY 2023 results. For a
sensitivity analysis of the performance fee please see Note 6 (ii) of
SEGRO’s HY 2023 Financial Statements.

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=53623552&newsitemid=20231017422977&lan=en-US&anchor=www.segro.com%2Finvestors&index=1&md5=e48dfd378323561c8b3b99489643725c)
.

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 10.3 million
square metres of space (110 million square feet) valued at £21.0 billion as
at 30 June 2023, 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=http%3A%2F%2Fwww.SEGRO.com&esheet=53623552&newsitemid=20231017422977&lan=en-US&anchor=www.SEGRO.com&index=2&md5=367954efcf82478e0358e188f9f95450)
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 / Eve Kirmatzis

Tel: +44 (0) 20 3727 1000



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