Segro Regulatory News (SGRO)

8 November 2011

SEGRO INVESTOR AND ANALYST EVENT

SEGRO, Europe's leading industrial REIT, is today hosting an investor and analyst event in London. The event will include presentations from David Sleath, Chief Executive, and other members of the senior management team, followed by a tour of the Slough Trading Estate and SEGRO's assets in and around Park Royal, London. 

Since taking over as Chief Executive at the end of April 2011, David Sleath and the senior management team have undertaken a detailed review of SEGRO's operations and business. At this event, we will outline the results of this review and our plans for SEGRO over the coming years.

In summary, we believe that SEGRO has the opportunity to build on its considerable strengths as an industrial property specialist to deliver attractive shareholder returns. We will do this by focusing on the highest quality assets in the strongest locations, actively managing the portfolio, using an appropriate capital and corporate structure and by driving operational excellence.

Review of the current business and operations

The conclusions of the business review are as follows:

·; Industrial property is an attractive asset class which produces good income orientated property returns. In the context of a Real Estate Investment Trust, these returns should support an attractive dividend stream and NAV growth over time.

·; SEGRO has a very strong position within the industrial property sector:

o The majority of our portfolio comprises high quality, well located assets;

o In the UK, we have exceptional strength in key markets such as West London (Heathrow and Park Royal) and Slough;

o In Continental Europe, we have a good platform for further growth both in the light industrial and logistics sectors;

o We have very strong operational teams skilled in leasing, customer and asset management and development;

o We have strong, long term customer relationships; and

o Our income stream is diversified, with no concentration of exposure to one industry sector or customer type.

·; However, the benefit of these strengths has been diluted both at a portfolio and shareholder returns level by a number of underperforming assets.

Strategy to deliver attractive shareholder returns

We are implementing a strategy which will build on SEGRO's considerable strengths and address the underperforming elements of the business. The key points of this strategy are:

1. Disciplined capital allocation

·; High quality assets in the strongest locations - Managing a portfolio focused on high quality industrial and logistics assets in the strongest European markets where SEGRO has or can achieve critical mass. 

·; Developing higher value uses - Developing industrial land for higher value uses (such as data centres and suburban offices) to replicate the success we have had with this model at the Slough Trading Estate.

·; Changing the balance of our portfolio - Ensuring around three quarters of our portfolio comprises stabilised assets - prime, high quality and well located assets with a low vacancy rate, minimal capital expenditure requirements and above average total return prospects - with the balance representing opportunity assets which provide asset management or development opportunities to provide additional value or income growth.

·; Recycling capital - Actively managing our portfolio to recycle capital from underperforming and non-core assets and higher value use developments and reinvesting in further growth opportunities through the cycle. 

·; Capital structure - Operating with lower gearing over the medium term and increasing our use of third party capital to enhance our risk adjusted returns.

2. Operational excellence

·; Continuing to drive operational excellence across our business in the areas of leasing, customer and asset management, development and cost control to maximise the total property returns from the portfolio. 

A clear plan

We will also outline the steps which are to be taken to reshape the portfolio and position the Group to deliver stronger returns to shareholders:

·; Recycle capital - we have identified £640 million of large non-strategic assets, such as pure suburban offices and bespoke manufacturing campuses and £1 billion of other industrial and land holdings which will be recycled over the coming years. We have discussed with our valuers the uncertain market conditions for these assets as a result of the on-going Eurozone crisis. In particular, the potential impact on large office parks and specialist industrial properties. Whilst it is too early to be clear on the final outcome of the year end portfolio valuation, they consider the assets identified for recycling could be impacted by approximately £150 million.

·; Reduce leverage - over the medium term we are targeting a loan to value ratio of around 40%, although it may increase at various stage of the cycle and during the portfolio re-shaping period.

·; Reinvest in growth areas - we plan to invest through development and acquisition opportunities in the following areas:

o Light industrial and higher value uses in and around a few specified major conurbations in the UK and Continental Europe where we see attractive property market dynamics and believe we have the potential to profitably grow our business; and

o Logistics focused in and around major ports, airports and transportation corridors in the UK, France, Germany, Benelux, Poland and the Czech Republic.

·; Expand use of third party capital - we will seek opportunities to partner with third party capital providers to support our growth and enhance the risk adjusted returns for our shareholders.

The Board currently expects to at least maintain the current level of the dividend throughout the reshaping process and remains committed to a progressive dividend policy as the plan progresses and earnings growth comes through.

Commenting, David Sleath, Chief Executive, said:

"We are outlining a clear strategy today for the future of SEGRO which builds on our great strengths as an industrial specialist. Over the coming years we will take a number of steps to reshape the portfolio and address underperforming areas of the business. Current market conditions are likely to influence the timing of our execution of this plan and we will be pragmatic as to when we sell assets and reinvest in attractive opportunities. However, the Board and senior management team are committed to making the changes necessary to reshape SEGRO to ensure that we are positioned for future income and NAV growth and to deliver better returns to our shareholders." 

Copies of the various presentations will be available on www.SEGRO.com and a recording of the event will also be available on the SEGRO website on 9 November 2011.

CONTACT DETAILS FOR INVESTOR / ANALYST AND MEDIA ENQUIRIES:

This announcement, the most recent Annual Report and other information are available on the SEGRO website at http://www.segro.com/segro/Investors/Investors-Home/.

Neither the content of SEGRO's website nor any other website accessible by hyperlinks from SEGRO's websites are incorporated in, or form, part of this announcement.

Forward-looking statements: This announcement may contain 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 and forecasts involve risk and uncertainty because they relate to events and depend upon circumstances that may occur in the future. There are a number of factors which could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements and forecasts. Certain statements have been made with reference to forecast price changes, economic conditions and the current regulatory environment. Any forward-looking statements made by or on behalf of SEGRO speak only as of the date they are made. SEGRO does not undertake to update forward-looking statements to reflect any changes in SEGRO's expectations with regard thereto or any changes in events, conditions or circumstances on which any such statement is based. Nothing in this announcement should be construed as a profit forecast. Past share performance cannot be relied on as a guide to future performance.

About SEGRO

SEGRO is Europe's leading developer and owner of industrial space. The Group is a Real Estate Investment Trust (REIT), listed on the London Stock Exchange. SEGRO's portfolio comprises £5.4 billion of predominantly industrial and warehouse assets concentrated in and around major business centres and transportation hubs such as ports and airports. The Group serves over 1,600 customers spread across many geographies and different industry sectors. It has 5.5 million sq m of built space and a passing rent roll of £340 million (as at 30 June 2011). For further information see www.SEGRO.com.