REG-SEGRO PLC Trading Update

SEGROAnnouncement

20/10/2022 07:00

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Trading Update

 

SEGRO plc (“SEGRO” or the “Group”) today publishes a trading update
for the period from 1 July 2022 to 19 October 2022(1).

David Sleath, Chief Executive, said:

“SEGRO has performed well throughout the third quarter of 2022, delivering
excellent operational results with momentum continuing into the final quarter.

“Occupier demand remains strong across all of our markets, driven by
long-term structural trends, whilst supply remains limited and this should
continue to support high levels of rental growth. These factors have helped us
to grow the rent roll by £20 million in the third quarter (bringing the total
increase to £76 million so far in 2022(1)) through new lettings, indexation
and the capture of reversion, as well as from additions to our profitable
development programme.

“Over the past decade, the successful execution of our strategy has created
an irreplaceable portfolio of modern, sustainable assets focused on markets
with the tightest supply-demand dynamics, underpinning significant
reversionary potential and future rental growth. Increases in interest rates
and the volatile macro-economic environment have reduced volumes in the
investment markets, causing asset prices to soften in the third quarter.
However, we remain focused on the fundamentals of our business – owning,
managing and developing the highest-quality buildings whilst maintaining low
leverage and a strong balance sheet, thereby supporting the delivery of
attractive growth in earnings and dividends for our shareholders.”

(1) 9M 2021 rent roll growth: £64 million.

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 €1.14:£1 as at 30 September 2022.
                                                                                         Q3 2022   Q3 2021   
 
                                                                                                           
 OPERATING SUMMARY & KEY METRICS                                                                             
 ACTIVE ASSET MANAGEMENT CAPTURING RENTAL GROWTH AND GROWING THE RENT ROLL (see                              
 Appendix):                                                                                                  
 * Continued strong occupier demand has supported our ability to let new space                               
 and grow rents in the standing portfolio through indexation-linked increases                                
 and capturing accumulated reversion in the portfolio.                                                       
 
*Occupancy and retention have both remained high.                                                          
 Total new headline rent(1) signed during the period (£m)                                20        26        
 Pre-lets signed during the period (£m)                                                  8         9         
 Uplift on rent reviews and renewals (%)                                                 22        13        
 Occupancy rate (%)                                                                      96.7      96.8      
 Customer retention (%)                                                                  76        76        
                                                                                                             
 
                                                                                                           
 CAPITAL INVESTMENT FOCUSES ON DEVELOPMENT PIPELINE:                                                         
 * SEGRO’s investment activity continues to be focused on the development                                    
 programme. Development capex for 2022, including infrastructure, still                                      
 expected to be c.£700 million.                                                                              
 
*We note that CBRE UK Monthly Property Index has shown a 10 per cent decline in                            
 UK industrial values during Q3.                                                                             
 Acquisitions(2) (£m)                                                                    424       140       
 Disposals (£m)                                                                          109       98        
                                                                                                             
 
                                                                                                           
 EXECUTING AND GROWING OUR DEVELOPMENT PIPELINE:                                                             
 * New pre-lets signed since half year have helped to expand development pipeline                            
 with 1.3 million sq m of space, equivalent to £118 million of new rent, under                               
 construction or in advanced discussions.                                                                    
 
*Yield on cost for these projects is 6.3 per cent (approximately 10 per cent                               
 yield on new money).                                                                                        
 Development completions year-to date:                                                                       
 – Space completed (sq m, at 100%)                                                       419,100   450,000   
 – Potential rent (£m, at share) (Rent secured)                                          20 (92%)  25 (93%)  
 Current development pipeline potential rent (£m) (Rent secured)                         86 (64%)  68 (66%)  
 Near-term development pipeline potential rent (£m)                                      32        24        
                                                                                                             


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

(2 )All acquisitions during the period were land.
 BALANCE SHEET                            30 Sep 22  30 Jun 22  
 LONG-TERM, DIVERSIFIED DEBT PROFILE PROVIDES CERTAINTY AND FLEXIBILITY 
 * Issuance of €750 million of five-year debt at a coupon of 3.75 per cent for 
 our SELP joint venture in early August to refinance 2023 SELP bonds. We also 
 drew down €225 million of US Private Placement notes (average maturity 19 
 years) at an average coupon of 4.08 per cent during the period. 
 
*We have no further material refinancing requirements until 2026 and an 8.2 
 year average debt maturity (79 per cent of which is fixed or capped(1); the 
 floating rates exposure is mostly to three-month EURIBOR).     
 
*Afurther 100bp rise in benchmark rates from current levels would increase 
 SEGRO’s cost of debt by 24 bps.                                
 Net debt (£m)                            5,414      4,764      
 Cost of debt (%)                         2.1        1.6        
 LTV(2) (%)                               26         23         
 Cash and available facilities (£m)       1,739      1,983      


(1) 71 per cent is fixed, a further 8 per cent is capped once 3-month EURIBOR
reaches 1.5 per cent.

(2) Based on values at 30 June 2022, adjusted for acquisitions, disposals and
other capital expenditure during the third quarter.

Appendix

Leasing data for the period to 30 September(1 2)
                                                                                  Q3 2022  Q3 2021  9M 2022  9M 2021  
 Take-up of existing space (A)                                               £m   5        9        15       19       
 Space returned(2) (B)                                                       £m   (4)      (7)      (14)     (17)     
 NET ABSORPTION OF EXISTING SPACE (A-B)                                      £m   1        2        1        2        
 Other rental movements (rent reviews, renewals, indexation) (C)             £m   5        2        19       6        
 RENT ROLL GROWTH FROM EXISTING SPACE                                        £m   6        4        20       8        
 Take-up of developments completed in the period – pre-let space (D)         £m   2        15(3)    13       20       
 Take-up of speculative developments completed in the past two years (E)     £m   4        6        9        10       
 TOTAL TAKE UP (A+C+D+E)                                                     £m   16       32       56       55       
 Less take-up of pre-lets and speculative lettings signed in prior periods   £m   (4)      (15)     (16)     (21)     
 Pre-lets and lettings on speculative developments signed in the period for  £m   8        9        36       30       
 future delivery                                                                                                      
 RENTAL INCOME CONTRACTED IN THE PERIOD(2)                                   £m   20       26       76       64       
 Take-back of space for redevelopment                                        £m   (1)      (1)      (3)      (2)      


(1 )All figures reflect headline rent (annualised gross rental income, after
the expiry of any rent-free periods), exchange rates at 30 September 2022 and
include joint ventures at share.

(2) Excluding space taken back for redevelopment.

(3) 2021 comparator is high as development completions were heavily weighted
towards H2.

Financial calendar

The 2022 full year results will be published on Friday 17(th) February 2023.

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=52948383&newsitemid=20221019005853&lan=en-US&anchor=www.segro.com%2Finvestors&index=1&md5=0947cece27257bfbb8107992eac72c8f)
.

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 9.7 million
square metres of space (104 million square feet) valued at £23.8 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=52948383&newsitemid=20221019005853&lan=en-US&anchor=www.SEGRO.com&index=2&md5=0fe02b175890509770fda17bab31b50c)
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. These 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 Strickland / Eve Kirmatzis

Tel: +44 (0) 20 3727 1000



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