SEGRO said the strategic overhaul it put in place at the beginning of the decade is driving strong operational, financial and portfolio performance as it continues to respond well to the UK industrial sector's purple patch. Buoyant half-year figures provided a stark contrast to the difficulties facing its listed peers focused on retail property.
SEGRO cited a perfect mix of strong occupier demand, relatively limited supply and insatiable investor appetite underpinned by the trends of e-commerce and urbanisation as creating a particularly fertile future for its industrial and logistics development business.
Looking ahead SEGRO said it had significant prelet development commitments underpinning future income growth.
Adjusted pre-tax profit was up 21% reflecting development completions, rental growth captured through asset management and reduced interest expenses due to active management of the capital structure.
IFRS profit before tax of £570.9 million, which includes valuation gains, increased 43.8% (H1 2017: £397.1m).
Adjusted EPS increased 11% to 10.8p (H1 2017: 9.7p) while IFRS EPS increased 34% to 55.4p (H1 2017: 41.3p).
EPRA NAV per share increased 8.5% to 603p (31 December 2017: 556p), driven by a 5.9% increase in the value of the portfolio, due to development and asset management gains, further yield compression and ERV growth across the portfolio.
In notable contrast today shopping centre REIT intu posted a half-year 6% decline in valuation of its portfolio.
SEGRO said future earnings potential is underpinned by over 1m sq m of development projects under construction or in advanced pre-let discussions. The development pipeline is capable of generating £54m of rent, reflecting a yield on cost of over 7%, of which £38m (71%) has been secured through pre-lets or lettings prior to practical completion, it said.
The interim dividend increased by 5.7% to 5.55p (2017 interim dividend: 5.25p).
David Sleath, chief executive, said: “Our modern, well-located portfolio, together with our focus on customer service and continued healthy occupier demand across our markets, are reflected in strong occupancy and customer retention rates, a record volume of pre-let agreements and a further expansion of our development activity. Meanwhile, occupier demand and supply are well balanced across our markets and investor appetite for good quality warehouse assets remains unsated.
”The structural drivers of occupier demand - particularly e-commerce and urbanisation - remain strongly in evidence across our markets and whilst we remain alert to a number of macroeconomic and political risks, we have a strong pipeline of activity and remain confident about our prospects.”
Like-for-like net rental income growth was 2.3% of which UK was 2.9% and continent was 1%. There was an 8.7% uplift on rent reviews and renewals in the UK.
The vacancy is at 4.8% and LTV at 29%.
Source: CoStar
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