SEGRO posts impressive 19% hike in profits – SEGRO, the UK’s biggest REIT, has posted a 19% jump in profits and 3.5% growth in its UK and European industrial portfolio in half-year results.
The company reported adjusted pre-tax profit of £131.8m in the six months to 30 June (H1 2018: £110.6m) reflecting record development completions in the period and rental growth captured through active asset management.
The 3.5% increase in the value of its portfolio, to £9.92bn, drove EPRA NAV per share up by 4% to 673 pence (31 December 2018: 650 pence).
Operational performance
During the first half, SEGRO secured £33.3m of new headline rent, driven by new pre-lets of £15.2m, net rent roll growth of £8.4m on the existing space and increased lettings of recently completed speculatively developed space.
It also posted 3.7% like-for-like net rental income growth, including 4.3% in the UK and 2.5% in Continental Europe.
Vacancy rate across its portfolio remains low at 4.8% (31 December 2018: 5.2%) due to pre-let development success and a high retention rate of 94%.
Development-led growth
The company’s net capital investment of £141m included £27m in asset acquisitions, £220m in new land and development capital expenditure, offset by £106m of proceeds from disposals.
It will invest a further £229m in completing 34 development projects under construction, representing £36m of potential rent, of which 65% has been secured through pre-lets. Completions in the second half of 2019 will potentially generate £29m of annual rent, of which £21m has already been secured.
Further ‘near-term’ pre-let projects are expected to commence in the coming months, with potential capex of £125m and £14m of associated rent.
Total development capex for the year is expected to be in the region of £600m (including land acquisitions), in line with expectations.
Future earnings growth is underpinned by over 7m sq ft of development projects under construction or in advanced pre-let discussions capable of generating £50m of rent, reflecting a yield on cost of 7%, most of which is de-risked through pre-leasing agreements.
Balance sheet
An equity placing of £451m completed in February 2019, providing it with the capacity to continue to invest in its development pipeline and future land acquisitions.
It conducted further debt re-financing activity in the period with the repayment of £250m 5.625% SEGRO bonds due 2020 and the issue of €500m 1.5% SELP bonds due 2026.
Look-through LTV ratio now stands at 24% (31 December 2018: 29%) and it has £1.6bn of cash and undrawn facilities.
SGRO : SEGRO posts impressive 19% hike in profits