Profits rise at SEGRO as it works on massive development pipeline

SEGRO issued its results for the six months ended 30 June on Thursday, reporting “strong” operating, financial and portfolio performance metrics, with significant pre-let development commitments underpinning future income growth.

The FTSE 100 company said its adjusted pre-tax profit rose 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 was £570.9m including valuation gains, which was a year-on-year improvement of 43.8%.

Adjusted earnings per share were ahead 11% to 10.8p, while IFRS earnings per share rose 34% to 55.4p, which incorporated valuation gains on the investment portfolio and an increased number of shares compared to the prior year.

Its EPRA net asset value per share was 8.5% higher than at the end of December at 603p, which the board said was driven by a 5.9% increase in the value of the portfolio due to development and asset management gains, further yield compression and estimated recovery value growth across the portfolio.

SEGRO said its future earnings potential was underpinned by more than one million square metres of development projects under construction or in advanced pre-let discussions.

The current development pipeline was said to be capable of generating £54m of rent, reflecting a yield on cost of over 7%, of which £38m had been secured through pre-lets or lettings prior to practical completion.

In particular, SEGRO said it was developing more than 250,000 square metres of new space at its flagship SEGRO Logistics Park East Midlands Gateway, which was all secured during the past six months.

The board declared an interim dividend 5.7% higher at 5.55p, in line with its dividend policy.

“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,” said SEGRO chief executive David Sleath.

“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.”