SEGRO has announced results for the six months ended 30 June 2016. Its EPRA NAV per share is up 2.6 per cent to 475 pence, driven by a 1.9 per cent increase in the value of the portfolio, due primarily to development gains and active asset management. Adjusted EPS is up 6.5 per cent to 9.8 pence (H1 2015: 9.2 pence), underpinned by a 4.1 per cent increase in like-for-like net rental income, a continued low vacancy rate at 4.8 per cent and strong income from development completions. IFRS EPS is 25.9 pence (H1 2015: 44.4 pence), which includes the impact of unrealised capital gains on the portfolio, this was lower due mainly to stable property investment yields on their investment portfolio. The interim dividend increased by 4.0 per cent to 5.2 pence.
Results were helped by a 43 per cent increase in new rent contracted to GBP21.5 million (H1 2015: GBP15.0 million), including GBP8.0 million from standing stock and GBP8.7 million from new development pre-let agreements and lettings of speculative space prior to completion. They saw 4.1 per cent like-for-like net rental income growth, including 6.2 per cent in the UK, partly offset by a 1.0 per cent fall in Continental Europe, the latter mainly due to slightly increased operating costs and lower rents on renewal in Central Europe. The vacancy rate remains at record low of 4.8 per cent (31 December 2015: 4.8 per cent), they say due to strong demand for modern, well-located warehouse space. Average vacancy during the period improved to 5.0 per cent from 6.8 per cent in H1 2015, contributing to the like-for-like net rental income growth. Completed developments added GBP8.2 million of annualised rental income (increasing to GBP9.9 million when fully leased). Additionally, the committed development pipeline, most of which will be completed in the second half, is 67 per cent pre-let and expected to deliver a further GBP26.5 million of annualised rental income when fully leased.
Very few acquisition opportunities met their return requirements and, consequently, they acquired only GBP14.5 million of assets during the period at a blended topped-up net initial yield of 6.7 per cent. They also invested GBP43.8 million in additions to their development land bank. They say the level of asset pricing in the investment market means that the focus of investment activity has been on development rather than acquisitions. As a result, during the first half they acquired GBP14.5 million of urban warehouses in Continental Europe at an average topped-up initial yield of 6.7 per cent, compared to GBP158.5 million of investment in new developments and land.
SGRO : SEGRO focuses on developments