SEGRO, the largest UK listed property company, has amassed a £1.5bn war chest as it aims to become Europe’s largest data centre operator.
In positive full-year results to the end of 2024, the company says that it has built a landbank with access to 2.3GW of potential power in Europe’s key data centre ‘availability zones’ – describing the opportunity as “high growth”.
It has already created Europe’s largest hub of data centres in Slough, with over 0.5GW of capacity either operational or under construction, which it says has helped it to develop strong relationships with global data centre players.
David Sleath, chief executive of SEGRO, said: “We have created the largest data centre hub in Europe and are increasingly excited about the exceptional value creation opportunity from our pipeline of 2.3GW European data centre sites in core Availability Zones. We plan to pursue the most attractive risk-adjusted returns on each opportunity, including initially working with partners to develop fully-fitted data centres.”
[QD comment: Data centres seem to be largest growth opportunity that exists in the property sector, with exceptional demand growth expected to come from the increase in AI adoption. Across Europe and the UK, there is a dearth of supply and the rental growth prospects have the leading players such as SEGRO and Tritax Big Box REIT excited for the sector.]
Results
Results for the year show a static NAV of 907p per share, with the portfolio value increasing 1.1% to £17.8bn. Meanwhile, estimated rental value (ERV) grew by 3.2%.
Asset management initiative generated new headline rent of £91m during the year (2023: £88m), £26m of this was driven by the capture of reversion in the UK portfolio at rent reviews and renewals, reflecting a record 43% average uplift.
Net rental income grew 7.0% to £628m (2023: £587m), driven by strong like-for-like rental growth of 5.8% and development completions, which added £37m of potential new headline rent, delivered at a yield on cost of 6.9%.
Adjusted earnings per share increased by 5.5% to 34.5p (2023: 32.7p), the impact of the equity placing in the period being broadly neutral as lower interest costs were offset by the higher share count.
During the year the company acquired £431m of prime assets in core markets, and sold £896m of disposals that it expects to deliver less attractive risk-adjusted returns.
LTV was 28% at 31 December 2024 (Dec 2023: 34%) and net debt:EBITDA 8.6 times (Dec 2023: 10.4 times). The average cost of debt reduced to 2.5% from 3.1%.
The full year dividend increased 5.4% to 29.3p (2023: 27.8p). Final dividend increased by 5.8% to 20.2p (2023: 19.1p).
Commenting on the results Sleath added:
“SEGRO delivered over 5% growth in earnings and dividends per share in 2024. We generated £91m of new headline rent, our third best year on record, including a 43% uplift from UK rent reviews and renewals.
“We have strong conviction in the enduring structural trends that are driving occupier demand for our space. Our business, with its high-quality, well-located, urban-weighted portfolio, exceptional land bank and strong balance sheet is primed for further growth. Having seen conversations with occupiers pick up pace in recent weeks, we expect leasing and pre-letting activity to increase. This would support attractive, compounding earnings and dividend growth in the medium-term, with significant additional value upside from our data centre pipeline.”
