Segro raises dividend after strong year for rental income

Commercial property investor and developer Segro reported strong growth in net rental income and adjusted pre-tax profit in its 2022 results on Friday.

The FTSE 100 company said its adjusted pre-tax profit for the 12 months ended 31 December stood at £386m, up 8.4% year-on-year.

Adjusted earnings per share also increased, by 6.5% to 31p.

Its adjusted net asset value per share, however, declined 15% to 966p, primarily due to a portfolio valuation decline of 11%.

The board said that was driven by market-wide yield expansion in the second half, although it was partly offset by estimated rental value growth, portfolio asset management successes, and development profits.

Segro’s net rental income for the year was £522m, up 18.9% and driven by strong like-for-like rental growth of 6.7% and development completions.

Segro also reported strong occupier demand, with a record £98m of new headline rent commitments generated during the period.

During 2022, Segro delivered 639,200 square metres of development completions at a yield on cost of 7.4%, with 80% of it already let to customers from a range of sectors.

The company noted that it also made net capital investment of £1.3bn in asset acquisitions, development projects, and land purchases, less disposals.

Segro said its strong balance sheet provided it with the capacity to invest in its development programme, and allowed it flexibility to make further commitments.

The firm said it had access to £2.2bn of available liquidity and a modest level of gearing, reflected in a loan-to-value of 32% at year-end on 31 December.

It hiked its full-year dividend by 8.2% to 26.3p per share, as it raised its final dividend by 7.7% to 18.2p.

“Segro is today reporting strong operational results for 2022, including a record level of rent roll growth driven by our active asset management and a strong leasing performance,” said chief executive officer David Sleath.

“Our modern, well-located and highly sustainable warehouses continue to be in high demand from a diverse range of occupiers, underpinned by long-term structural drivers.

“Our strategy over the past decade has focused on cultivating a unique portfolio located in the most supply-constrained European urban and logistics markets, backed by a strong balance sheet to enable Segro to outperform through the property cycle.”

Sleath said the portfolio valuation fell in the second half, as investment yields rose and values weakened across the sector in response to macroeconomic conditions.

“However, the impact on our portfolio was mitigated by its high quality and the strong rental growth we delivered across all of our markets.

“Our prime portfolio, excellent land bank, development expertise, customer focus and balance sheet capacity mean we are well positioned to deliver attractive returns and further growth into the years ahead.”

At 0919 GMT, shares in Segro were up 2.03% at 853.2p.

Reporting by Josh White for Sharecast.com.