Segro pre-tax profit rises as development pipeline expands

The FTSE 100 company said its adjusted net asset value per share was up 12% year-on-year for the six months ended 30 June, to 909p, which was driven by portfolio asset management initiatives, yield compression, rental growth, and its development activity delivering a 10% increase in the valuation of the portfolio.

Strong occupier demand, the company’s customer focus, and active management of the portfolio generated £38m of new headline rent commitments during the period, the board said, including £21m of new pre-let agreements, and a 12% average uplift on rent reviews and renewals.

Further growth in the development pipeline was made in the period, with 1.3 million square metres of projects under construction or in advanced pre-let discussions, equating to £96m of potential rent, of which 75% had been pre-let, “substantially de-risking” the 2021 to 2022 pipeline.

Segro said its balance sheet was positioned to support further development-led growth, with access to over £1.2bn of available liquidity and a low-level of gearing reflected in a loan-to-value ratio of 21% as at 30 June, compared to 24% at the end of December.

The board declared a 7% improvement in the interim dividend to 7.4p per share, in line with its “usual practice” of setting the interim distribution at one-third of the previous full year dividend.

“Segro has delivered another strong set of results, which reflect the high quality of our portfolio and increased demand from a diverse range of occupiers and investors,” said chief executive officer David Sleath.

“Together with our active approach to asset management, rental growth and further progress with our development pipeline, these factors have driven significant valuation increases and earnings growth.

“We have also made important progress on our ‘responsible Segro’ priorities, putting the necessary framework in place to enable us to deliver on our long-term commitments, whilst continuing to work with our local teams and partners to embed our approach into our day-to-day business.”

Sleath said Segro was “well-placed” to continue benefiting from the structural tailwinds driving the industrial property sector with its “unique portfolio” of prime warehouses, two-thirds of which were located in the “most supply-constrained” urban markets, and an “enviable” land bank capable of supporting its “profitable and expanding” development programme.

“The combination of our established pan-European, customer-focused operating platform and our relationships and reputation with other key stakeholders, give us a significant competitive advantage which further enhances our ability to secure opportunities for future growth.”

At 0840 BST, shares in Segro were down 0.87% at 1,194.5p.