SEGRO earnings ahead in first half

SEGRO posted its results for the six months to 30 June on Tuesday, describing the period as having “strong operating metrics” supported by good occupational market fundamentals and active management of the portfolio.

The FTSE 250 firm reported a 43% increase in new annualised gross rent commitments in the half year to £21.5m.

Adjusted earnings per share were up 6.5% to 9.8p, underpinned by a 4.1% increase in like-for-like net rental income, a continued low vacancy rate at 4.8% and strong income from development completions.

IFRS earnings per share hit 25.9p including the impact of unrealised capital gains on the portfolio, down from 44.4p a year ago.

SEGRO’s board said this was lower due mainly to stable property investment yields on our investment portfolio.

The company’s EPRA net asset value per share grew 2.6% to 475p, driven by a 1.9% increase in the value of the portfolio, due primarily to development gains and active asset management.

Future earnings prospects remain underpinned by a largely de-risked development programme with £125m of development expenditure to complete the current pipeline, the company’s board reported.

It added that advanced discussions or contracts signed subject to planning approval were responsible for a further £160m of expenditure.

“Our strong first half operating performance reflects the continuing occupier demand for modern, well located urban and big box warehouses which appeared to be largely unaffected by pre-referendum uncertainty,” said SEGRO chief executive David Sleath.

“Active asset management, combined with tight demand-supply dynamics, has driven healthy like-for-like net rental income growth.”

Sleath said that while it is too early to assess the full effects of the EU referendum result on the business, they remain optimistic about the outlook for occupational markets given the underlying structural drivers for, and the limited supply of, well located, modern warehouse buildings.

“These drivers are clearly reflected in the strong first half leasing activity, which has allowed us to start the third quarter with record low vacancy and a pipeline of over 440,000 sq m of new warehouse space under construction or due to commence shortly, over two-thirds of which is pre-let, and which will be reflected in rental income by the first half of 2017 at the latest.

“The relatively short construction timescales in our sector means that we are able to add further accretive pre-let and speculative development exposure in the months ahead, should the occupational demand outlook remain supportive,” Sleath explained.

SEGRO’s board declared an interim dividend increase of 5.2p - up 4% from last year.

It was also revealed on Tuesday morning that SEGRO had poached Soumen Das from Capital & Counties as its new chief financial officer, effective from early next year.