Last checked at 18 Apr 2018 07:00
18 April 2018
SEGRO plc
Trading Update
SEGRO plc ("SEGRO" or the "Group") today publishes its trading update for the period from 1 January to 17 April 20181.
David Sleath, Chief Executive, said:
"We have had a strong start to 2018, securing £27 million of new headline rent, a record level for a single quarter. Occupational demand remains encouraging across all our markets, particularly driven by the growth of online retailing. Our profitable and largely pre-leased development pipeline is expected to generate £55 million of new rent when fully built and leased, and there are further projects in advanced discussions which will add to this in the coming months.
"The combination of attractive yields and rental growth, resulting from limited supply and the enduring positive structural drivers of occupier demand, continues to appeal to investors. Consequently, the investment market remains active with evidence of some further yield compression in recent urban and big box warehouse transactions."
Operational Excellence: Delivering profitable growth from active asset management, development and a record level of pre-let agreements (Appendix 1)
· In the first quarter, we contracted £27.3 million of new headline rent (Q1 2017: £16.3 million), including £23.3 million of pre-lets (Q1 2017: £10.6 million).
· We completed 146,500 sq m of developments in the quarter, capable of generating £10.9 million of headline rent when fully let, of which £6.8 million (63 per cent) has been secured.
· 1.0 million sq m of space was approved or under development at 31 March 2018 (31 December 2017: 693,900 sq m). These projects equate to potential future annualised headline rent of £55 million, 69 per cent of which has been secured (31 December 2017: £43 million, 50 per cent secured), reflecting an estimated, fully-let yield on total development cost of 7.3 per cent.
· The development pipeline includes new pre-lets totalling 490,000 sq m, of which 270,000 sq m is to online retailers including to Zalando in Verona. It also includes the first two pre-lets at SEGRO Logistics Park East Midlands Gateway (SLPEMG): 122,000 sq m to a major online retailer and 60,000 sq m to a third party logistics provider. We have also agreed to construct a warehouse for Shop Direct at SLPEMG which it will acquire on completion. In Paris, we have secured a 50,000 sq m letting to IKEA at our two-storey warehouse in Gennevilliers, the inland port close to the centre of Paris, meaning this 63,000 sq m warehouse is now fully let six months prior to completion.
· The vacancy rate has remained low at 5.0 per cent (31 December 2017: 4.0 per cent). The increase since December reflects the impact of development completions (+0.7 per cent), acquisitions and disposals (+0.1 per cent) and modest net take-back of existing space (+0.2 per cent).
Disciplined Capital Allocation: Investment focused on development (Appendices 2 and 3)
· Net investment during Q1 2018 totalled £50 million, comprising £65 million of asset and land disposals, £24 million of asset acquisitions and £91 million of development capex and land purchases.
· Our investment activity continues to focus on delivering our current development pipeline and securing land for near-term projects. We invested £63 million in development capex during the quarter (including £5 million of infrastructure expenditure) and continue to expect total development capex to exceed £350 million for 2018 as a whole. In addition, we acquired £28 million of development land in Italy, Germany, Spain and London, almost all of which is connected to pre-let agreements.
· During the quarter we disposed of £65 million of land and assets, including a small industrial estate in Germany and £84 million of Continental European big box warehouses to our SELP joint venture (£42 million net disposal by SEGRO).
· We took the opportunity to acquire an 18,600 sq m urban warehouse estate approximately 9km from Warsaw city centre and 6km from the international airport, helping to build scale in this attractive location.
· In the UK, the CBRE Monthly Index reported 3.1 per cent growth in industrial property capital values during the first quarter, outperforming the All Property growth rate of 0.9 per cent.
Balance sheet remains in a strong position to support future growth
· Net debt (including our share of debt in joint ventures) at 31 March 2018 remained stable at £2.4 billion (31 December 2017: £2.4 billion).
· The look-through loan to value (LTV) ratio at 31 March 2018 (based on asset values at 31 December 2017, adjusted for development expenditure, acquisitions and disposals) was 30 per cent, unchanged from 31 December 2017.
Financial calendar
The 2018 interim results will be published on Thursday 26 July 2018.
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 three months to, or at, 31 March unless otherwise indicated. The exchange rate on 31 March 2018 was €1.14:£1 (31 March 2017: €1.18:£1; 31 December 2017: €1.13:£1).
Appendices
1. Leasing data for the period to 31 March1
|
| Q1 2018 | Q1 2017 |
Take-up of existing space2 (A) | £m | 2.4 | 2.1 |
Space returned3 (B) | £m | (3.1) | (1.1) |
NET ABSORPTION OF EXISTING SPACE (A-B) | £m | (0.7) | 1.0 |
Other rental movements (rent reviews, renewals, indexation)2 (C) | £m | 1.2 | 1.4 |
RENT ROLL GROWTH FROM EXISTING SPACE | £m | 0.5 | 2.4 |
Take-up of developments completed in the period - pre-let space2 (D) | £m | 5.2 | 0.0 |
Take-up of speculative developments completed in the past two years2 (E) | £m | 2.0 | 2.8 |
TOTAL TAKE UP2 (A+C+D+E) | £m | 10.8 | 6.3 |
Less take-up of pre-lets and speculative lettings signed in prior periods2 | £m | (6.8) | (0.6) |
Pre-lets and lettings on speculative developments signed in the period for future delivery2 | £m | 23.3 | 10.6 |
RENTAL INCOME CONTRACTED IN THE PERIOD2 | £m | 27.3 | 16.3 |
Take-back of space for redevelopment | £m | 0.0 | (0.1) |
1 All figures reflect exchange rates at 31 March and include joint ventures at share.
2 Annualised rental income, after the expiry of any rent-free periods.
3 Annualised rental income, excluding space taken back for redevelopment.
2. Acquisitions completed during the three months to 31 March 2018
Asset location / type | Purchase price1 (£m, SEGRO share) | Net initial yield (%) | Topped-upnet initial yield2 (%) |
Continental Europe: Urban warehousing | 24.1 | 6.3 | 6.5 |
Continental Europe: Land | 25.8 | n/a | n/a |
UK: Land | 1.7 | n/a | n/a |
Total acquisitions during the quarter | 51.6 | 6.33 | 6.53 |
1 Excluding acquisition costs; purchase price reflects exchange rate at 31 March 2018 and includes joint ventures at share.
2 Topped up net initial yield includes rent due after expiry of rent-free periods.
3 Yield excludes land acquisitions.
3. Disposals completed during the three months to 31 March 2018
Asset location / type | Gross proceeds (£m, SEGRO share) | Net initial yield (%) | Topped-upnet initial yield1 (%) |
Continental Europe: Light Industrial | 17.1 | 3.4 | 5.2 |
Continental Europe: Big box warehouse | 41.8 | 5.5 | 5.9 |
UK: Land | 6.1 | n/a | n/a |
Total disposals during the quarter | 65.0 | 4.92 | 5.72 |
1 Topped up net initial yield includes rent due after expiry of rent-free periods.
2 Yield excludes land disposals.
CONTACT DETAILS FOR INVESTOR / ANALYST AND MEDIA ENQUIRIES:
SEGRO | Soumen Das (Chief Financial Officer) | Tel: +44 (0) 20 7451 9110 |
Harry Stokes (Head of Investor Relations and Research) | Tel: +44 (0) 20 7451 9124 | |
Lizzie Humphreys (External Communications Manager) | Tel: +44 (0) 20 7451 9118 | |
FTI Consulting | Richard Sunderland / Claire Turvey / Eve Kirmatzis | Tel: +44 (0) 20 3727 1000 |
This Trading Update, the most recent Annual Report and other information are available on the SEGRO website at www.segro.com/investors. 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.
Forward-Looking Statements: This announcement contains certain forward-looking statements with respect to SEGRO plc's ('SEGRO') expectations and plans, strategy, management objectives, future developments and performances, 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 SEGRO's shareholders 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. 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 to reflect any 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 forecast. The information in this announcement does not constitute an offer to sell or an invitation to buy securities in SEGRO or an invitation or inducement to engage in any 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.
About SEGRO
SEGRO is a UK Real Estate Investment Trust (REIT), and a leading owner, manager and developer of modern warehouses and light industrial property. It owns or manages 6.7 million square metres (72 million square feet) of space valued at £9.3 billion (as at 31 December 2017), 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 nine other European countries.
See www.SEGRO.com for further information.