TIDMSGRO
RNS Number : 2624E
SEGRO PLC
17 October 2018
17 October 2018
SEGRO plc
Trading Update
SEGRO plc ("SEGRO" or the "Group") today publishes a trading
update for the period from 1 July 2018 to 16 October 2018(1) .
David Sleath, Chief Executive, said:
"SEGRO's business has continued to perform well in the third
quarter of 2018. Ongoing favourable occupier market conditions have
enabled us to achieve another strong leasing performance for both
new and existing space. The development pipeline is strong, with
891,000 sq m approved or under construction, of which 71 per cent
has been pre-leased.
"In line with our disciplined approach to capital allocation, we
have exchanged or completed disposals totaling over GBP200 million
during the period at a significant premium to book value, taking
advantage of strong investor demand and a limited supply of prime,
well-located assets.
"The structural trends of e-commerce and urbanisation continue
to underpin occupier and investor demand for prime warehouse space,
notwithstanding near-term economic and political uncertainty in the
UK. We remain optimistic about our prospects for the remainder of
the year and into 2019."
Positive leasing momentum driven by robust occupier market
(Appendix 1)
-- We contracted GBP12.6 million (Q3 2017: GBP8.8 million) of
new headline rent(2) during the third quarter, including GBP4.2
million (Q3 2017: GBP3.8 million) in rent from existing space.
Total contracted headline rent for the nine months to 30 September
2018 was GBP52.0 million (9M 2017: GBP36.4 million), 43 per cent
ahead of a very strong prior year comparator.
-- We completed 219,800 sq m (Q3 2017: 313,000 sq m) of new
developments in the quarter, capable of generating GBP10.6 million
(Q3 2017: GBP12.0 million) of headline rent, of which GBP8.5
million has been leased.
-- The vacancy rate increased slightly to 5.2 per cent (30 June
2018: 4.8 per cent) primarily due to completion of speculative
developments during the period. The vacancy rate on the standing
portfolio has remained stable.
-- We have continued to capture reversionary potential from our
portfolio, with new headline rents on review and renewal 9.5 per
cent higher in the nine months to 30 September 2018 (30 June 2018:
5.5 per cent).
Significant investment activity focused on delivering profitable
and low risk developments
-- At 30 September 2018, 891,000 sq m of space was in the
current development pipeline, equating to potential future headline
rent of GBP46 million (30 June 2018: 1.1 million sq m, GBP54
million) of which 71 per cent has been secured (30 June 2018: 71
per cent). Once complete and fully let, the pipeline is expected to
generate a yield on total development cost of approximately 7 per
cent. Developments capable of generating GBP10 million of headline
rent are expected to complete in the fourth quarter, of which GBP7
million has been secured.
-- In 2018 to date, we have invested GBP454 million in our
development pipeline (including land, infrastructure and asset
development) and we remain on course to invest in excess of GBP500
million in 2018 as whole.
Enduring investor demand for high quality warehousing continues
to support capital values (Appendices 2 and 3)
-- During the third quarter we completed an off-market
acquisition of a recently completed, speculatively developed big
box warehouse in the Netherlands for GBP22 million (SEGRO share
GBP11 million). We also invested GBP25 million in our land bank, of
which approximately half is associated with development projects in
London, Bologna and Lyon due to commence imminently.
-- We disposed of GBP106 million of land and assets during the
third quarter, including the portion of the site of the former
Nestlé factory in Hayes, west London, approved for residential
development. We have retained the land zoned for industrial
development and intend to commence construction of urban warehouses
in this supply-constrained market in 2019.
-- On 11 October 2018 we exchanged contracts to sell a 158,000
sq m warehouse in Rome for EUR118 million, taking the opportunity
to capitalise on very strong demand from a wide range of
international investors. This transaction completed on 16 October
2018.
-- The CBRE Monthly Index reported a 2.3 per cent increase in UK
industrial property capital values for the third quarter (9.4 per
cent increase for the first nine months of 2018).
Financing activity has improved the balance sheet by extending
debt maturity and reducing the cost of debt
-- Net debt (including our share of debt in joint ventures) at
30 September 2018 was GBP2.8 billion (30 June 2018: GBP2.6
billion), equating to a pro forma(3) look-through LTV of 31 per
cent (30 June 2018: 29 per cent).
-- During the period, we completed a US Private Placement of
EUR300 million 10 year and 15 year senior unsecured notes at a
blended coupon of 2.2 per cent, using the proceeds in part to repay
the remaining 2019 bonds.
-- At 30 September 2018 the average cost of debt (including our
share of debt in joint ventures) was 1.9 per cent (30 June 2018:
2.0 per cent).
-- As disclosed in our half year results, we expect to receive a
performance fee from the SELP joint venture during the fourth
quarter, currently estimated to have a net impact of approximately
GBP10 million on adjusted profit. Further details can be found in
SEGRO's half year results statement at www.segro.com.
-- Approximately 22 per cent of the interim dividend was paid as
scrip, resulting in the issue of 1.8 million new shares during the
period. Earnings per share for 2018 are expected to be based on an
average of 1,009 million shares.
Financial calendar
The 2018 full year results will be published on Friday 15
February 2019.
(1) In this statement, space is stated at 100 per cent, whilst
financial figures are stated reflecting SEGRO's share of joint
ventures. Financial figures are stated for the period to, or at, 30
September 2018 unless otherwise indicated. The exchange rate
applied is EUR1.12:GBP1 as at 30 September 2018.
(2) Headline rent is annualised gross passing rent receivable
once incentives such as rent free periods have expired.
(3) Based on values at 30 June 2018, adjusted for acquisitions,
disposals and other capital expenditure during the third
quarter.
Appendices
1. Leasing data for the period to 30 September(1 2)
Q3 2018 Q3 2017 9M 2018 9M 2017
----------------------------------------------------------------------------- -------- -------- -------- --------
Take-up of existing space (A) GBPm 4.2 3.8 10.1 7.2
Space returned(2) (B) GBPm (2.7) (1.5) (9.5) (4.5)
NET ABSORPTION OF EXISTING SPACE (A-B) GBPm 1.5 2.3 0.6 2.7
Other rental movements (rent reviews, renewals, indexation) (C) GBPm 4.0 1.0 6.3 3.5
RENT ROLL GROWTH FROM EXISTING SPACE GBPm 5.5 3.3 6.9 6.2
Take-up of developments completed in the period - pre-let space (D) GBPm 8.5 11.8 20.3 14.8
Take-up of speculative developments completed in the past two years
(E) GBPm 0.7 2.7 4.0 6.5
TOTAL TAKE UP (A+C+D+E) GBPm 17.4 19.3 40.7 32.0
Less take-up of pre-lets and speculative lettings signed in prior
periods GBPm (8.5) (11.8) (22.5) (15.5)
Pre-lets and lettings on speculative developments signed in the
period for future delivery GBPm 3.7 1.3 33.8 19.9
RENTAL INCOME CONTRACTED IN THE PERIOD(2) GBPm 12.6 8.8 52.0 36.4
Take-back of space for redevelopment GBPm (0.1) (0.6) (0.3) (3.2)
---------------------------------------------------------------------- ------ -------- -------- -------- --------
1 All figures reflect headline rent (annualised gross rental
income, after the expiry of any rent-free periods), exchange rates
at 30 September and include joint ventures at share.
2 Excluding space taken back for redevelopment.
2. Acquisitions completed during the three months to 30 September 2018
Asset location / type Purchase price(1) Net initial Topped-up
yield
(GBPm, SEGRO (%) net initial yield(2)
share) (%)
------------------------------ ----------------- ----------- ----------------------
Continental Europe: Big box
warehouse 11.4 0.0 6.4
Continental Europe: Land 24.8 n/a n/a
UK: Land 0.1 n/a n/a
Total acquisitions during the
quarter 36.3 0.0(3) 6.4(3)
------------------------------ ----------------- ----------- ----------------------
1 Excluding acquisition costs; purchase price reflects exchange
rate at 30 September 2018 and includes joint ventures at share.
2 Topped up net initial yield includes rent due after expiry of
rent-free periods.
3 Yield excludes land acquisitions.
3. Disposals completed during the three months to 30 September 2018
Asset location / type Gross proceeds(1) Net initial Topped-up
yield
(GBPm, SEGRO share) (%) net initial yield(2)
(%)
---------------------------- -------------------- ----------- ----------------------
UK: Big box warehouse 21.1 5.2 5.2
Continental Europe: Big box
warehouse 24.6 6.1 6.2
UK: Land 60.5 n/a n/a
Total disposals during the
quarter 106.2 5.7 5.8
Continental Europe: Big box
warehouse (completed on 16
October 2018) 105.4 5.1 5.1
---------------------------- -------------------- ----------- ----------------------
1 Proceeds reflect exchange rate at 30 September 2018 and
include joint ventures at share.
2 Topped up net initial yield includes rent due after expiry of
rent-free periods.
CONTACT DETAILS FOR INVESTOR / ANALYST AND MEDIA ENQUIRIES:
SEGRO Soumen Das (Chief Financial Officer) Tel: +44 (0) 20 7451
9110
--------------
Claire Mogford (Head of Investor Relations) Tel: +44 (0) 20 7451
9048
--------------
Lizzie Humphreys (External Communications Tel: +44 (0) 20 7451
Manager) 9129
-------------- ------------------------------------------- --------------------
FTI Consulting Richard Sunderland / Claire Turvey Tel: +44 (0) 20 3727
/ Eve Kirmatzis 1000
-------------- ------------------------------------------- --------------------
This Trading Update, the most recent Annual Report and other
information are available on the SEGRO website at
www.segro.com/investors.
Neither the content of SEGRO's website nor any other website
accessible by hyperlinks from SEGRO's website are incorporated in,
or form part of, this announcement.
Forward-Looking Statements: This announcement contains certain
forward-looking statements with respect to SEGRO's expectations and
plans, strategy, management objectives, future developments and
performances, costs, revenues and other trend information. These
statements are subject to assumptions, risk and uncertainty. Many
of these assumptions, risks and uncertainties relate to factors
that are beyond SEGRO's ability to control or estimate precisely
and which could cause actual results or developments to differ
materially from those expressed or implied by these forward-looking
statements. Certain statements have been made with reference to
forecast process changes, economic conditions and the current
regulatory environment. Any forward-looking statements made by or
on behalf of SEGRO are based upon the knowledge and information
available to Directors on the date of this announcement.
Accordingly, no assurance can be given that any particular
expectation will be met and SEGRO's shareholders are cautioned not
to place undue reliance on the forward-looking statements.
Additionally, forward-looking statements regarding past trends or
activities should not be taken as a representation that such trends
or activities will continue in the future. Other than in accordance
with its legal or regulatory obligations (including under the UK
Listing Rules and the Disclosure and Transparency Rules of the
Financial Conduct Authority), SEGRO does not undertake to update
forward-looking statements to reflect any changes in events,
conditions or circumstances on which any such statement is based.
Past share performance cannot be relied on as a guide to future
performance. Nothing in this announcement should be construed as a
profit forecast. The information in this announcement does not
constitute an offer to sell or an invitation to buy securities in
SEGRO plc or an invitation or inducement to engage in any other
investment activities.
About SEGRO
SEGRO is a UK Real Estate Investment Trust (REIT), and a leading
owner, manager and developer of modern warehouses and light
industrial property. It owns or manages 6.3 million square metres
(68 million square feet) of space valued at over GBP8 billion,
serving customers from a wide range of industry sectors. Its
properties are located in and around major cities and at key
transportation hubs in the UK and in nine other European
countries.
For further information see www.SEGRO.com/investors.
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contact rns@lseg.com or visit www.rns.com.
END
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