TIDMSGRO
Commenting on the results, David Sleath, Chief Executive,
said:
"SEGRO has delivered both operationally and financially in the
first half of 2022. Our prime portfolio of modern, sustainable
warehouses focused on key urban markets and logistics corridors
across the UK and Europe is in high demand from a diverse range of
customers. This strong demand combined with low levels of supply in
our key markets, particularly in the urban locations where
two-thirds of our assets are located, has helped us to increase
rents, capture reversion and indexation, and expand our development
programme -- resulting in inflation-beating earnings growth.
"Our focus on maintaining close relationships with our
customers, our well-located land bank and our prudent capital
structure, provide significant opportunities for further profitable
growth arising from the ongoing structural changes in our
customers' markets.
"We are confident that by continuing to follow our well-proven
strategy of disciplined capital allocation and operational
excellence, with Responsible SEGRO at its core, we will be able to
navigate the more challenging current macroeconomic environment and
drive further sustainable compound growth in rental income,
earnings and dividends over the coming years."
HIGHLIGHTS(A) :
-- Adjusted pre-tax profit of GBP216 million up 29 per cent compared with
the prior year (H1 2021: GBP168 million). Adjusted EPS is 16.9 pence, up
22 per cent (H1 2021: 13.8 pence) including 1.3 pence relating to
recognition of performance fees from our SELP joint venture.
-- Adjusted NAV per share is up 10 per cent to 1,249 pence (31 December
2021: 1,137 pence) driven by a 7.2 per cent increase in the valuation of
the portfolio, reflecting asset management initiatives, a 5.9 per cent
estimated rental value (ERV) growth and profitable development activity.
-- Our customer focus and active management of the portfolio, supported by
strong and diverse occupier demand, generated GBP55 million of new
headline rent commitments during the period (H1 2021: GBP38 million),
including GBP28 million of new pre-let agreements, and a 24 per cent
average reletting spread on rent reviews and renewals.
-- Further growth in the development pipeline with 1.3 million sq m of
projects under construction or in advanced pre-let discussions equating
to GBP118 million of potential rent (31 December 2021: GBP82 million), of
which 70 per cent is associated with pre-lets, substantially de-risking
the 2022-2023 pipeline.
-- Delivering on our Responsible SEGRO commitments including progress with
our renewable energy strategy; the formation of our first Community
Investment Plan in Slough; and the enhancement of our early careers
programme to help improve diversity within our business.
-- GBP2.1 billion of new financing, including a EUR1.15 billion Green bond
and EUR225 million US private placement helping to maintain our long-term
debt structure and providing high visibility on funding costs with no
significant debt maturities until 2026. 94 per cent of our debt is fixed
or capped.
-- Balance sheet positioned to support further, development-led growth with
access to over GBP2 billion of available liquidity (including the US
private placement debt signed in July) and a low level of gearing
reflected in an LTV of 23 per cent at 30 June 2022 (31 December 2021: 23
per cent).
-- Interim dividend increased by 9 per cent to 8.1 pence (2021: 7.4 pence),
in line with our usual practice of setting the interim dividend at
one-third of the previous full year dividend.
FINANCIAL SUMMARY
6 months to 6 months to Change
30 June 2022 30 June 2021 per cent
Adjusted(1) profit before tax
(GBPm) 216 168 28.6
IFRS profit before tax (GBPm) 1,375 1,413 --
Adjusted(2) earnings per share
(pence) 16.9 13.8 22.5
IFRS earnings per share (pence) 110.7 110.3 --
Dividend per share (pence) 8.1 7.4 9.5
Total Accounting Return (%)(3) 11.3 13.5
Change
30 June 2022 31 December 2021 per cent
Assets under Management (GBPm) 23,756 21,286
Portfolio valuation (SEGRO share,
GBPm) 20,480 18,377 7.2(4)
Adjusted(5 6) net asset value per
share (pence, diluted) 1,249 1,137 9.8
IFRS net asset value per share
(pence, diluted) 1,212 1,115 --
Net debt (SEGRO share, GBPm) 4,764 4,201
Loan to value ratio including
joint ventures at share (per
cent) 23 23
1. A reconciliation between Adjusted profit before tax and IFRS
profit before tax is shown in Note 2 to the condensed financial
information.
2. A reconciliation between Adjusted earnings per share and IFRS
earnings per share is shown in Note 11 to the condensed financial
information.
3. Total Accounting Return is calculated based on the opening
and closing adjusted NAV per share adding back dividends paid
during the period.
4. Percentage valuation movement during the period based on the
difference between opening and closing valuations for all
properties including buildings under construction and land,
adjusting for capital expenditure, acquisitions and disposals.
5. A reconciliation between Adjusted net asset value per share
and IFRS net asset value per share is shown in Note 11 to the
condensed financial information.
6. Adjusted net asset value is in line with EPRA Net Tangible
Assets (NTA) (see Table 4 in the Supplementary Notes for a NAV
reconciliation).
(A) Figures quoted on pages 1 to 15 refer to SEGRO's share,
except for land (hectares) and space (square metres) which are
quoted at 100 per cent, unless otherwise stated. Please refer to
the Presentation of Financial Information statement in the
Financial Review for further details.
OUTLOOK
SEGRO has one of the best and most modern pan-European
industrial portfolios with a heavy weighting towards major urban
markets where the supply-demand dynamics are tightest and where
long-term rental growth potential is therefore highest. Over the
past decade, we have pro-actively repositioned our portfolio to be
resilient and perform at all stages of the cycle, by recycling out
of older secondary assets and focusing on prime locations and high
quality, sustainable assets for which occupier and investor demand
is likely to be greatest and supply is most limited.
Occupier demand for warehouse space is strong, broad and deep
and continues to be driven by long-term structural tailwinds
particularly in those urban markets where our space is used to
provide a wide range of often essential goods and services to
consumers and businesses. We are mindful that the coming months
will be impacted by heightened macroeconomic risk but, against this
backdrop, our portfolio offers considerable inflation protection:
almost half of our rents are index-linked and the majority of the
remaining leases are exposed to UK upwards-only rent reviews, where
we have significant reversionary potential and continue to see
strong demand led market rental growth.
Our sizeable, mostly pre-let, current development programme and
well-located land bank provide us with both significant potential
to grow our rent roll, and optionality due to the short
construction periods of our assets. We will continue to be led by
customer demand as we make decisions regarding the execution of
future projects. The long-standing and strong relationship between
our development teams and key construction partners is helping us
to de-risk our pipeline by securing materials on a timely basis,
whilst the tight occupier supply-demand situation has meant that we
have been able to offset increased building costs with higher
rents, which is in turn helping to drive further rental growth from
our GBP20 billion portfolio. We will continue to take a disciplined
approach to allocating capital to development and investment
activity, ensuring that our portfolio should continue to
outperform, and expect to invest at least GBP700 million on
development capex in 2022.
Finally, in recent years we have significantly strengthened our
balance sheet alongside our property portfolio. We benefit from low
leverage and one of the longest debt maturities in the sector with
no significant refinancing requirements in SEGRO before 2026. We
have demonstrated again this year that we have access to diverse
sources of debt finance. 94 per cent of our debt is either fixed
rate or capped so we are well protected against interest rate rises
and have plenty of capacity to continue to invest capital in the
profitable opportunities available to us.
These factors combined mean that we are heading into the second
half of the year with confidence in the outlook for our business.
Whilst we remain watchful of the world around us and will respond
accordingly to any changes in market conditions, we intend to
continue to deliver the much-needed modern, sustainable warehouse
space in the right locations to enable our customers to make their
businesses fit for the future, and at the same time ensure that we
continue to create value for all of our stakeholders.
SUMMARY & KEY METRICS
H1 2022 H1 2021 FY2021
STRONG PORTFOLIO PERFORMANCE (see page 8):
Valuation increase driven by rental value growth and active asset management
of the standing portfolio, supplemented by gains recognised on completed
developments and buildings under construction.
Portfolio valuation uplift (%) Group 7.2 10.2 28.8
UK 8.2 9.6 32.2
CE 5.2 11.1 22.5
Estimated rental value (ERV) growth (%) Group 5.9 2.8 13.1
UK 7.3 3.6 18.8
CE 3.6 1.5 4.1
ACTIVE ASSET MANAGEMENT DRIVING OPERATIONAL PERFORMANCE (see page 9):
Operational performance captured significant new rent, including leases signed
with existing and new customers from a wide range of sectors, highlighting the
versatility of our portfolio.
Total new rent contracted during the period
(GBPm) 55 38 95
Pre-lets signed during the period (GBPm) 28 21 49
Like-for-like net rental income growth (%):
Group 7.1 4.7 4.9
UK 8.9 4.8 5.6
CE 4.1 4.6 3.6
Uplift on rent reviews and renewals (%) Group 23.5 12.1 13.0
UK 29.0 16.4 18.7
CE 1.8 1.8 1.5
Occupancy rate (%) 96.7 95.7 96.8
Customer retention (%) 79 83 77
DISCIPLINED CAPITAL ALLOCATION (see page 14):
Capital investment continues to remain disciplined and is focused on
development and acquisition of assets with opportunities for future growth, as
well as sourcing land to extend our development pipeline. Development capex
for 2022, including infrastructure, expected to be at least GBP700 million.
Development capex (GBPm) 364 364 649
Asset acquisitions (GBPm) 145 -- 997
Land acquisitions (GBPm) 220 92 326
Disposals (GBPm) 181 154 515
EXECUTING AND GROWING OUR DEVELOPMENT PIPELINE (see page 12):
Our active and largely pre-let development pipeline continues to be a key
driver of rent roll growth with a record year of completions. Potential rent
of GBP118 million from projects currently on site or expected to commence
shortly.
Development completions:
-- Space completed (sq m) 329,900 104,000 839,200
-- Potential rent (GBPm) (Rent secured) 15 (87%) 8 (75%) 52 (93%)
Current development pipeline potential rent
(GBPm) (Rent secured) 84 (63%) 74 (72%) 62 (60%)
Near-term pre-let development pipeline potential
rent (GBPm) 34 22 20
WEBCAST / CONFERENCE CALL FOR INVESTORS AND ANALYSTS
A live webcast of the results presentation will be available
from 08:30am (UK time) at:
https://www.investis-live.com/segro/62bab8c3299ad30e000907aa/smnbb
The webcast will be available for replay at SEGRO's website at:
http://www.segro.com/investors shortly after the live
presentation.
A conference call facility will be An audio recording of the conference
available at 08:30 (UK time) on the call will be available until 4 August
following number: Dial-in: +44 (0)800 2022 on: UK: +44 (0) 203 936 3001
640 6441 +44 (0) 203 936 2999 Access Access code: 876113
code: 584512
A video of David Sleath, Chief Executive discussing the results
will be available to view on www.segro.com, together with this
announcement, the Half Year 2022 Property Analysis Report and other
information about SEGRO.
FINANCIAL CALAR
2022 interim dividend ex-div date 11 August 2022
2022 interim dividend record date 12 August 2022
2022 interim dividend scrip dividend price announced 18 August
2022
Last date for scrip dividend elections 2 September 2022
2022 interim dividend payment date 23 September 2022
2022 Third Quarter Trading Update 20 October 2022
Full Year 2022 Results (provisional) 17 February 2023
ABOUT SEGRO
SEGRO is a UK Real Estate Investment Trust (REIT), listed on the
London Stock Exchange and Euronext Paris, and is a leading owner,
manager and developer of modern warehouses and industrial property.
It owns or manages 9.7 million square metres of space (104 million
square feet) valued at GBP23.8 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
seven other European countries.
For over 100 years SEGRO has been creating the space that
enables extraordinary things to happen. From modern big box
warehouses, used primarily for regional, national and international
distribution hubs, to urban warehousing located close to major
population centres and business districts, it provides high-quality
assets that allow its customers to thrive.
A commitment to be a force for societal and environmental good
is integral to SEGRO's purpose and strategy. Its Responsible SEGRO
framework focuses on three long-term priorities where the company
believes it can make the greatest impact: Championing Low-Carbon
Growth, Investing in Local Communities and Environments and
Nurturing Talent.
See www.SEGRO.com for further information.
Forward-Looking Statements: This announcement contains certain
forward-looking statements with respect to SEGRO's expectations and
plans, strategy, management objectives, future developments and
performance, 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 you 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. The information contained
in this announcement is provided as at the date of this
announcement and is subject to change without notice. Other than in
accordance with its legal or regulatory obligations (including
under the UK Listing Rules and the Disclosure Guidance and
Transparency Rules of the Financial Conduct Authority), SEGRO does
not undertake to update forward-looking statements, including to
reflect any new information or 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
estimate or 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
or enter into any contract or commitment or other investment
activities.
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.
CHIEF EXECUTIVE'S REVIEW
INTRODUCTION
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. Together with our active approach to
asset management, rental growth and further progress with our
development pipeline, these factors have driven valuation increases
and earnings growth.
Our business is well-placed to continue benefitting from the
structural tailwinds driving the industrial property sector. The
long-term consumer trends of digitalisation and urbanisation,
alongside the increased focus from our customers on the resilience
and sustainability of their supply chains, continue to create
demand for our space despite the well-documented macro and
geopolitical uncertainties. The combination of our unique portfolio
of prime warehouses, two-thirds of which are located in the most
supply constrained urban markets; an enviable land bank capable of
supporting our profitable development programme; our established
pan-European, customer-focused operating platform; and our
relationships and reputation with other key stakeholders, provide
us with what we believe is a significant competitive advantage
which enhances our ability to secure opportunities for future
growth.
PORTFOLIO UPDATE -- VALUATION GROWTH FROM INCREASED RENTS AND
DEVELOPMENT PROFITS
Our portfolio comprises two main asset types: urban warehouses
and big box warehouses. The demand-supply dynamics in both asset
classes continue to be positive.
Urban Warehouses
Urban warehouses account for 67 per cent of our portfolio value.
They tend to be smaller warehouses, and are located mainly in and
on the edges of major cities where land supply is restricted and
there is strong demand for warehouse space. They are often used by
businesses providing essential goods and services for the urban
conurbations in which they operate, as well as catering for the
needs of last mile delivery and data centre operators.
Our urban portfolio is concentrated in London and South-East
England (81 per cent) and major cities in Continental Europe (19
per cent), including Paris, Düsseldorf, Frankfurt, Berlin and
Warsaw. These locations share similar characteristics in terms of
limited supply of industrial land and growing populations, while
occupiers are attracted to modern warehouses with plenty of yard
space to allow easy and safe vehicle circulation. We believe that
this enduring, diverse occupier demand and limited supply bodes
well for future rental growth.
Big Box Warehouses
Big box warehouses account for 31 per cent of our portfolio
value. They tend to be used for storage, processing and
distribution of goods on a regional, national or international
basis and are, therefore, much larger than urban warehouses.
They are focused on the major logistics hubs and corridors in
the UK (South-East and Midlands regions), France (the logistics
'spine' linking Lille, Paris, Lyon and Marseille), Germany
(Düsseldorf, Berlin, Frankfurt and Hamburg) and Poland (Warsaw,
ódz, Poznań, and the industrial region of Silesia). 29 per cent of
our big box warehouses are in the UK and the remaining 71 per cent
are in Continental Europe. Almost all our Continental European big
box warehouses are owned by our 50-50 joint venture, the SEGRO
European Logistics Partnership (SELP).
Occupier demand has stayed at elevated levels during the first
half of 2022 and into the second, vacancy has remained low, and
this is resulting in continued rental growth in most of our
markets. However, the nature (and typical location) of big box
warehouses tends to mean that, over time, supply is able to
increase more easily to satisfy demand, as there is more land
available in out of town locations. We therefore continue to
believe that the prospects for significant rental growth in big box
warehouses on a longer-term basis are, and have always been, more
limited than for urban locations.
At the same time, this asset class brings other benefits
including lower asset management intensity and long leases which
help to ensure a sustainable level of income.
In addition, by holding the majority of our Continental European
big box warehouses in SELP, we receive additional income from
managing the joint venture which increases total returns.
Valuation gains driven by rental growth, asset management and
development
Warehouse property values across Europe increased again during
the first half of the year. Investment demand was strong throughout
the first months of 2022 across all of our markets but in recent
weeks, the uncertainty around high levels of inflation across
Europe and the potential central bank response to this has meant
that activity levels have reduced as buyers and sellers await more
clarity on the outlook.
The Group's property portfolio was valued at GBP20.5 billion at
30 June 2022 (GBP23.8 billion of assets under management). The
portfolio valuation, including completed assets, land and buildings
under construction, increased by 7.2 per cent (adjusting for
capital expenditure and asset recycling during the year) compared
to 10.2 per cent in the first half of 2021.
This primarily comprises a 6.3 per cent increase in the assets
held throughout the period (H1 2021: 8.5 per cent), mainly driven
by strong rental growth (our valuer's estimate of the market rental
value of our portfolio (ERV) increased by 5.9 per cent). The true
equivalent yield applied to the portfolio was 3.8 per cent, the
same as at 31 December 2021.
Assets held throughout the year in the UK increased in value by
7.5 per cent (H1 2021: 8.6 per cent). The true equivalent yield
applied to our UK portfolio was 3.7 per cent, the same as at 31
December 2021. Rental values improved by 7.3 per cent (H1 2021: 3.6
per cent).
Assets held throughout the year in Continental Europe increased
in value by 4.2 per cent (H1 2021: 8.3 per cent) on a constant
currency basis, reflecting rental value growth of 3.6 per cent (H1
2021: 1.5 per cent). Yields compressed slightly in France, Germany,
Spain, the Netherlands and Poland but were flat in other markets
resulting in the yield applied to our Continental European
portfolio remaining unchanged at 4.0 per cent (31 December 2021:
4.0 per cent)
More details of our property portfolio can be found in the 2022
Half Year Property Analysis Report available at
www.segro.com/investors.
Property portfolio metrics at 30 June 2022(1)
Portfolio
value,
GBPm Yield(3)
Whole Topped-up
Lettable portfolio Whole Valuation net Net true
area sq m (at portfolio movement(2) initial equivalent ERV Occupancy
(AUM) share) (AUM) % % % % (ERV) %
UK
GREATER
LONDON 1,267,680 8,078 8,088 6.3 2.6 3.5 6.3 95.8
THAMES
VALLEY 601,619 3,512 3,512 10.0 3.2 4.2 9.8 97.2
NATIONAL
LOGISTICS 630,076 2,039 2,039 8.9 3.7 3.8 7.0 100.0
UK TOTAL 2,499,375 13,629 13,639 7.5 2.9 3.7 7.3 96.7
Continental
Europe
Germany 1,701,287 1,938 2,854 4.3 3.5 3.5 3.8 98.7
Netherlands 276,006 239 440 7.6 3.6 3.8 4.6 100.0
France 1,568,185 2,111 2,719 3.5 3.4 4.0 3.2 93.5
Italy 1,492,590 1,249 1,874 2.5 3.7 3.8 1.8 97.4
Spain 362,726 412 625 4.9 3.9 3.8 1.4 100.0
Poland 1,625,046 789 1,380 5.2 5.1 5.1 4.6 96.6
Czech
Republic 169,514 113 225 17.2 3.9 4.8 19.4 97.3
CONTINENTAL
EUROPE
TOTAL 7,195,354 6,851 10,117 4.2 3.7 4.0 3.6 96.6
GROUP TOTAL 9,694,729 20,480 23,756 6.3 3.2 3.8 5.9 96.7
1 Figures reflect SEGRO wholly-owned assets and its share of
assets held in joint ventures unless stated "AUM" which refers to
all assets under management.
2 Valuation movement percentage is based on the difference
between the opening and closing valuations for properties held
throughout the period, allowing for capital expenditure,
acquisitions and disposals.
3 In relation to completed properties only.
ASSET MANAGEMENT UPDATE - CREATING VALUE THROUGH OPERATIONAL
EXCELLENCE
Our continued focus on Operational Excellence has helped us
deliver GBP43 million of rent roll growth in the first half of
2022, ensured the successful execution of our expanded development
programme and alongside this we have made great progress with our
renewable energy strategy and the setting up of our Community
Investment Plans.
Growing rental income from reversion capture, indexation and new
developments
At 30 June 2022, our portfolio generated passing rent of GBP540
million, rising to GBP590 million once rent free periods expire
('headline rent'). During the first half of the year, we contracted
GBP55 million of new headline rent, an increase of almost 45 per
cent on the same period in 2021, reflecting the positive impact of
reversion capture in the UK and indexation in Continental Europe,
as well as another strong period for pre-let agreements.
Just under 40 per cent of our new lettings came from sectors
linked to e-commerce (including retail and third party logistics
providers) compared to almost 60 per cent in 2021. Within this,
only 10 per cent related to pure online retailers, as many
successful retailers are increasingly embracing both online and
physical retail and eroding the distinction between them.
Approximately a quarter of take-up was from technology, media and
telecoms companies, including 17 per cent from data centre
operators, while manufacturing companies accounted for 12 per cent
of take-up, compared to 8 per cent in 2021. The strong growth in
lettings despite the reduction in e-commerce related take-up shows
just how broad demand for our warehouses is and this is also
reflected in the diversity of the customer base of our
portfolio.
Our top 20 customers account for 32 per cent of total headline
rent. Amazon remained as our largest customer during the first half
of 2022, accounting for just under 7 per cent of the total.
Our rent roll growth consisted of:
-- GBP14 million of net new rent from existing assets. We generated GBP11
million of headline rent from new leases on existing assets (H1 2021:
GBP10 million) and GBP13 million from rent reviews, lease renewals and
indexation (H1 2021: GBP4 million). This was offset by rent from space
returned of GBP10 million (H1 2021: GBP9 million).
-- Significant rental growth from lease reviews and renewals (re-leasing
spreads). Re-leasing spreads of 23.5 per cent (H1 2021: 12.1 per cent)
for the portfolio as a whole were the primary driver of strong
like-for-like rental growth during the period. New rents agreed at review
and renewal were 29.0 per cent higher in the UK (H1 2021: 16.4 per cent)
as reversion accumulated over the past five years was reflected in new
rents agreed, adding GBP9 million of headline rent. In Continental Europe,
rents agreed on renewal were 1.8 per cent higher (H1 2021: 1.8 per cent
higher), strengthening once again as market rental growth continues to
outpace the indexation provisions that have accumulated over recent
years.
-- Continued strong demand from customers for pre-let agreements. In
addition to increased rents from existing assets, we contracted GBP28
million of headline rent from pre-let agreements and lettings of
speculative developments prior to completion (H1 2021: GBP21 million).
Within this are a number of big box developments in the UK, including our
first pre-let at SEGRO Park Coventry and our last sizeable plot at SEGRO
Logistics Park East Midlands Gateway. We also signed projects for a
leading global online retailer in Italy as well as big box space for
retailers, third party logistics providers and manufacturers across
Continental Europe.
-- Rent roll growth increased to a record GBP43 million. An important
element of achieving our goal of being a leading income-focused REIT is
to grow our rent roll, primarily through increasing rent from our
existing assets and then from generating new rent through development.
Rent roll growth, which reflects net new headline rent from existing
space (adjusted for take-backs of space for development), take-up of
developments and pre-lets agreed during the period, increased to GBP43
million in H1 2022, compared to GBP27 million in H1 2021.
Summary of key leasing data for H1 2022
Summary of key leasing data(1) for the year to 30
June H1 2022 H1 2021
Take-up of existing space2 (A) GBPm 11 10
Space returned3 (B) GBPm (10) (9)
NET ABSORPTION OF EXISTING SPACE(2) (A-B) GBPm 1 1
Other rental movements (rent reviews, renewals,
indexation)(2) (C) GBPm 13 4
RENT ROLL GROWTH FROM EXISTING SPACE GBPm 14 5
Take-up of pre-let developments completed in the year
(signed in prior years)(2) (D) GBPm 11 5
Take-up of speculative developments completed in the
past two years(2) (D) GBPm 4 4
TOTAL TAKE-UP(2) (A+C+D) GBPm 39 23
Less take-up of pre-lets and speculative lettings
signed in prior years(2) GBPm (12) (6)
Pre-lets signed in the year for future delivery(2) GBPm 28 21
RENTAL INCOME CONTRACTED IN THE YEAR(2) GBPm 55 38
Less space returned GBPm (10) (9)
Less takeback of space for redevelopment GBPm (2) (2)
RENT ROLL GROWTH GBPm 43 27
Retention rate(4) % 79 83
1 All figures reflect exchange rates at 30 June 2022 and include
joint ventures at share.
2 Headline rent.
3 Headline rent, excluding space taken back for
redevelopment.
4 Headline rent retained as a percentage of total headline rent
at risk from break or expiry during the period.
Existing portfolio continues to perform well and delivered
another set of strong operating metrics
We monitor a number of asset management indicators to assess the
performance of our existing portfolio:
-- Occupancy has remained high. The occupancy rate at 30 June 2022 was 96.7
per cent (31 December 2021: 96.8 per cent). The occupancy rate, excluding
space recently developed on a speculative basis, remains high at 97.2 per
cent (31 December 2021: 97.4 per cent). The average occupancy rate during
the period was 96.7 per cent (H1 2021: 95.7 per cent).
-- Customer retention rate of 79 per cent. Approximately GBP43 million of
headline rent was at risk from a break or lease expiry during the period
of which we retained 78 per cent in existing space, with a further 1 per
cent retained but in new premises. We value the long-term relationships
that we build with our customers and always try to work with them to meet
their changing requirements. However, with occupancy at such high levels
we do also take the opportunity to create space for reletting and the
capture of market rental growth. We continue to take back space to
facilitate redevelopment and refurbishment.
-- Lease terms continue to offer attractive income security. The level of
incentives agreed for new leases (excluding those on developments
completed in the period) represented 5.9 per cent of the headline rent
(H1 2021: 6.0 per cent). The portfolio's weighted average lease length
was maintained with 7.1 years to first break and 8.4 years to expiry (31
December 2021: 7.2 years to first break, 8.5 years to expiry). Lease
terms are longer in the UK (8.2 years to break) than in Continental
Europe (5.6 years to break), reflecting the market convention of shorter
leases in countries such as France and Poland.
Continued focus on reducing operational carbon emissions and
increasing visibility of the energy usage of our customers
We continue to work hard on our Responsible SEGRO commitment to
Champion low-carbon growth and to become a net zero-carbon business
by 2030. Within our existing portfolio, the greatest contribution
that we can make is to reduce the operational carbon emissions from
our warehouses (including those generated by the activities of our
customers operating within them).
Our targets, approved by the Science Based Targets Initiative
(SBTi), include the aim to reduce the absolute operating carbon
emissions from our portfolio by 42 per cent by 2030 (compared to a
2020 baseline), in line with the 1.5 degree scenario. This includes
all customer emissions and captures the organic growth of the
business.
Our net zero-carbon goal includes Scope 3 emissions from our
customers. Due to the nature of typical lease terms we do not have
operational control over the majority of our buildings and
therefore have limited visibility of how much energy is used and
how it is procured. Where this is the case we are engaging with our
customers to receive their energy usage data. Improving visibility
allows us to help our customers operate their buildings more
efficiently, saving them both carbon emissions and money. During
the first half of 2022 we have introduced 'green' clauses into our
standard leases in the UK which means that new customers are
required to provide us with data on their energy usage and to make
reasonable endeavours to source their energy via a renewable
tariff. Our goal is to introduce this practice in our Continental
European markets as soon as possible.
We are also making improvements to the carbon footprint of our
portfolio through the ongoing maintenance and refurbishment of our
warehouses. Our active asset recycling and new development means
that the majority of our portfolio is modern and built to the
highest sustainability standards but there are still some older
assets where we can make improvements. When the opportunity arises,
normally at lease expiry, we refurbish the assets and upgrade their
sustainability credentials before letting them to a new customer.
This not only helps with our progress towards our net zero-carbon
targets but also makes the space more attractive to a potential
customer.
Changes that we make include installing LED lighting, solar
panels, air source heat pumps and smart metering. We aim to have
the entire portfolio rated with at least an Energy Performance
Certificate (EPC) of a B-grade or equivalent.
In addition to installing solar panels on new developments and
at the point of refurbishment, a further part of our renewable
energy strategy is to retrofit solar panels to our leased assets.
We have made good progress in the first half of 2022, working hard
to overcome the multiple, market-specific complexities, and are now
officially in our pilot phase of the programme. We have installed
12,222 solar panels on our first site in Tilburg in the Netherlands
which will generate 5.6MW of capacity. We have plans for a further
11 sites during the pilot stage, potentially adding 20 MW of power
(our solar capacity at 31 December 2021 was 35.4 MW so this will be
a significant increase).
Investing in our local communities and environments
Our Responsible SEGRO framework also prioritises Investing in
our local communities and environments and we are aiming to
establish a Community Investment Plan in each of our key markets by
2025.
During the first half of 2022 we launched the first of these
plans, the Slough Community Investment Plan. This sets out how our
Thames Valley Business Unit will deliver a meaningful and impactful
community programme that will contribute to growth in the local
economy and employment, as well as improving the local environment.
We will be working with charity partners to deliver the plan and
hope to inspire our employees, customers and suppliers to actively
participate in the delivery so we can make an even greater positive
impact on the community.
DEVELOPMENT UPDATE - GROWING THROUGH DEVELOPMENT
Development Activity
During the first half of 2022, we invested GBP584 million in our
development pipeline which comprised GBP364 million (H1 2021:
GBP364 million) in development spend, of which GBP80 million was
for infrastructure, and a further GBP220 million to replenish our
land bank to secure future development-led growth
opportunities.
Development Projects Completed
We completed 329,900 sq m of new space during the period, the
majority on time despite wider market issues with the supply of
construction materials and labour. These projects were 75 per cent
pre-let prior to the start of construction and were 87 per cent let
as at 30 June 2022, generating GBP13 million of headline rent, with
a potential further GBP2 million to come when the remainder of the
space is let. This translates into a yield on total development
cost (including land, construction and finance costs) of 7.3 per
cent when fully let.
We completed 266,000 sq m of big box warehouse space, including
our first unit at our innovative food manufacturing and
distribution park SmartParc SEGRO Derby. We also completed 59,000
sq m of urban warehouses, including a new multi-level data centre
on the Slough Trading Estate and speculative schemes in Frankfurt
and Paris.
Supply chain issues continue to make development more
challenging but we are proactively working with our contractors to
secure materials on a timely basis and have therefore been able to
avoid any major delays. We have been able to mitigate increases in
construction costs through higher rents on new projects, and we
typically agree fixed price contracts with our contractors to
protect against further cost increases within our current
pipeline.
Focusing on reducing embodied carbon in our development
programme to help us achieve net zero carbon by 2030
We have established a Science Based Target of reducing the
embodied carbon intensity of our development programme by 20 per
cent by 2030, compared to a 2020 baseline of 400kg of CO2e per
square metre. We will provide further details on our progress
towards this with the full year results.
An important element of this is to use lower-carbon materials
(particularly steel, timber and concrete) across our projects. For
example, concrete can comprise up to 50 per cent of the total
embodied carbon of a new building. One scheme in Germany is using a
low carbon concrete called ECOPact Beton for the internal floor
slab and external yard area: we have calculated that it is saving
30 per cent of CO2e compared to standard concrete products.
In addition, from this year we are targeting at least BREEAM
'Excellent' (or equivalent) certification for all new eligible
developments.
Current Development Pipeline
At 30 June 2022, we had development projects approved,
contracted or under construction totalling 886,500 sq m,
representing GBP518 million of future capital expenditure to
complete and GBP84 million of annualised gross rental income when
fully let. 63 per cent of this rent has already been secured and
these projects should yield 6.4 per cent on total development cost
when fully occupied.
-- In the UK, we have 332,400 sq m of space approved or under construction.
Within this are urban schemes in London and Slough, including two of our
new concept V-Park multi-level schemes, in Park Royal and on the Slough
Trading Estate. In Slough we are also building an innovative multi-storey
data centre and we have a number of UK big box schemes under construction
including pre-lets at SEGRO Parks in Kettering, East Midlands Gateway and
Coventry, and at SmartParc SEGRO Derby.
-- In Continental Europe, we have 493,600 sq m of space approved or under
construction. This includes pre-let big box warehouses for a variety of
different occupiers, from retailers to manufacturers, in Germany, France
and Poland.
-- In addition to the above we have 60,500 sq m of space under construction
as part forward-funded agreements with local developers.
We continue to focus our speculative developments primarily on
urban warehouse projects, particularly in the UK, France and
Germany, where modern space is in short supply and occupier demand
is strong.
Within our Continental European current development programme,
approximately GBP15 million of potential gross rental income is
associated with big box warehouses developed outside our SELP joint
venture. Under the terms of the joint venture, SELP has the option,
but not the obligation, to acquire these assets shortly after
completion. Assuming SELP exercises its option, we would retain a
50 per cent share of the rent after disposal. During the first half
of 2022, SEGRO sold GBP172 million of completed assets to SELP,
representing a net disposal of GBP86 million.
FUTURE DEVELOPMENT PIPELINE
Near-Term Development Pipeline
Within the future development pipeline are a number of pre-let
projects which are close to being approved, awaiting either final
conditions to be met or planning approval to be granted. We expect
to commence these projects within the next six to 12 months.
These projects total 457,700 sq m of space, equating to
approximately GBP390 million of additional capital expenditure and
GBP34 million of additional rent (31 December 2021: 334,100 sq m,
GBP271 million of capital and GBP20 million of rent).
We have factored increased construction costs into the
development returns for our near-term and future development
projects. However, increased rental values are more than offsetting
any additional costs and our anticipated development returns
therefore remain highly attractive.
Land Bank
Our land bank identified for future development (including the
near-term projects detailed above) totalled 681 hectares at 30 June
2022, valued at GBP1.5 billion, roughly 7 per cent of our total
portfolio value. Within this is GBP650 million of land for future
re-development which is currently income-producing (equating to
GBP20 million of annualised rent, which is excluded from passing
rent), known as 'covered land', reducing the hold costs until
development can start. This includes a substantial element of the
Slough office portfolio purchased at the end of 2021, the first
phase of which is expected to be brought forward for development
later this year.
Our land bank includes GBP220 million of land acquired so far in
2022, including land associated with developments already underway
or expected to start in the short term.
We estimate that our land bank can support 3.2 million sq m of
development over the next five years. The prospective capital
expenditure associated with the future pipeline is approximately
GBP2.5 billion. It could generate GBP250 million of gross rental
income, representing a yield on total development cost (including
land and notional finance costs) of around 6-7 per cent and a yield
on further expenditure (as the land has already been acquired) of
10 per cent. These figures are indicative based on our current
expectations and are dependent on our ability to secure pre-let
agreements, planning permissions, construction contracts and on our
outlook for occupier conditions in local markets.
Conditional land acquisitions and land held under option
agreements
Land acquisitions (contracted but subject to further conditions)
and land held under option agreements are not included in the
figures above but together represent significant further
development opportunities. These include sites for big box
warehouses in the UK Midlands as well as in Germany, Italy and
Poland. They also include urban warehouse sites in East and West
London.
The options are held on the balance sheet at a value of GBP28
million (including joint ventures at share). Those we expect to
exercise over the next two to three years, combined with the
contracted land acquisitions, are capable of supporting just over
1.7 million sq m of space and generating almost GBP170 million of
headline rent for a blended yield of approximately 6 per cent.
INVESTMENT UPDATE - GBP550 MILLION OF NET INVESTMENT FOR
GROWTH
We invested over GBP700 million in our portfolio during the
first half of the year: development capital expenditure of GBP364
million, GBP145 million of assets and GBP220 million of land
acquisitions. This was partly offset by GBP181 million of
disposals.
Acquisitions focused on building scale in urban warehousing
We have continued to leverage our market position, reputation,
relationships and expertise to source unique acquisitions in some
of our key markets.
We acquired assets totalling GBP145 million, reflecting a
blended topped-up initial yield of 2.5 per cent. This included:
-- urban warehouse estates in Park Royal and Slough (one of which was part
of an asset swap) that neighbour our existing assets and unlock potential
redevelopment opportunities;
-- an urban warehouse estate in Essen, one of the largest cities in the
Rhine-Ruhr area, with medium-term redevelopment potential; and
-- a big box warehouse close to Paris that was acquired from a long-term
customer which had developed it themselves to a high specification.
In addition to the asset acquisitions, we also acquired GBP220
million of land (including covered land) to create future
development opportunities.
Asset recycling to improve portfolio focus
During the first half we sold GBP181 million of land and assets,
realising profits and releasing capital to reinvest in our
business.
The asset disposals totalled GBP172 million, reflecting a
blended topped-up initial yield of 4.3 per cent, and were
significantly ahead of 31 December 2021 book values. They
included:
-- a stand-alone asset that we swapped for the Whitby Business Centre in
Slough; and
-- big box warehouses in Italy, including an older stand-alone warehouse on
the outskirts of Milan and a state-of-the-art facility for an online
retailer where we took the opportunity to capitalise on strong demand
from wide range of investors.
As in previous years, we sold a portfolio of Continental
European big box warehouses developed by SEGRO to SELP for which we
received GBP86 million net proceeds from an effective sale of a 50
per cent interest.
Additionally, we disposed of GBP9 million of land, primarily
comprising plots in non-core markets.
INTERIM DIVID OF 8.1 PENCE PER SHARE
Consistent with its previous guidance that the interim dividend
would normally be set at one-third of the previous year's total
dividend, the Board has declared an increase in the interim
dividend of 0.7 pence per share to 8.1 pence (H1 2021: 7.4 pence),
a rise of 9.5 per cent. This will be paid as an ordinary dividend
on 23 September 2022 to shareholders on the register at the close
of business on 12 August 2022.
The Board will offer a scrip dividend option for the 2022
interim dividend, allowing shareholders to choose whether to
receive the dividend in cash or new shares. 41 per cent of the 2021
final dividend was paid in new shares, equating to GBP76 million of
cash retained on the balance sheet and 5.8 million new shares being
issued.
FINANCIAL REVIEW
Like-for-like net rental income growth, income from acquisitions
and new developments and performance fee income were the primary
drivers of the 29 per cent increase in Adjusted profit before tax
compared to H1 2021. Adjusted NAV per share increased by 10 per
cent to 1,249 pence compared to December 2021, primarily driven by
the valuation uplift on the property portfolio.
Financial highlights
30 June 30 June
2022 2021 31 December 2021
IFRS(1) net asset value (NAV) per share
(diluted) (p) 1,212 897 1,115
Adjusted NAV per share(1) (diluted) (p) 1,249 909 1,137
IFRS profit before tax (GBPm) 1,375 1,413 4,355
Adjusted profit before tax(2) (GBPm) 216 168 356
IFRS earnings per share (EPS) (p) 110.7 110.3 339.0
Adjusted EPS(2) (p) 16.9 13.8 29.1
1. A reconciliation between IFRS NAV and Adjusted NAV is shown in Note 11.
2. A reconciliation between IFRS profit before tax and Adjusted profit
before tax is shown in Note 2 and between IFRS EPS and Adjusted EPS is
shown in Note 11.
Presentation of financial information
The condensed financial information is prepared under IFRS where
the Group's interests in joint ventures are shown as a single line
item on the income statement and balance sheet, whereas
subsidiaries are consolidated line by line.
The Adjusted profit measure better reflects the underlying
recurring performance of the Group's property rental business,
which is SEGRO's core operating activity. It is based on the Best
Practices Recommendations of the European Public Real Estate
Association (EPRA) which are widely used alternate metrics to their
IFRS equivalents (further details on EPRA Best Practices
Recommendations can be found at www.epra.com). In calculating
Adjusted profit, the Directors may also exclude additional items
considered to be non-recurring, not in the ordinary course of
business, and significant by virtue of size and nature. There are
no such items reported in the current period or prior periods.
A detailed reconciliation between Adjusted profit after tax and
IFRS profit after tax is provided in Note 2 of the condensed
financial information. The Adjusted NAV per share measure reflects
the EPRA Net Tangible Asset metric and based on the EPRA Best
Practices Reporting Recommendations. A detailed reconciliation
between Adjusted NAV and IFRS NAV is provided in Note 11(ii) of the
condensed financial information.
The Supplementary Notes to the condensed financial information
include other EPRA metrics as well as SEGRO's Adjusted income
statement and balance sheet presented on a proportionately
consolidated basis.
SEGRO monitors the above alternative metrics, as well as the
EPRA metrics for vacancy rate, net asset value, loan-to-value ratio
and total cost ratio, as they provide a transparent and consistent
basis to enable comparison between European property companies.
Look-through metrics provided for like-for-like net rental
income include joint ventures at share in order that our full
operations are captured, therefore providing more meaningful
analysis.
ADJUSTED PROFIT
Adjusted profit
Six months to Six months to
30 June 2022 30 June 2021(3)
GBPm GBPm
Gross rental income 239 195
Property operating expenses (36) (28)
Net rental income(3) 203 167
Joint venture fee income 57 12
Management and development fee income 2 3
Net solar energy income 1 1
Administration expenses (31) (27)
Share of joint ventures' Adjusted profit
after tax(1) 16 32
Adjusted operating profit before interest
and tax 248 188
Net finance costs (32) (20)
Adjusted profit before tax 216 168
Tax on Adjusted profit (12) (3)
Adjusted profit after tax(2) 204 165
1. Comprises net property rental income and management income
less administration expenses, net interest expenses and
taxation.
2. A detailed reconciliation between Adjusted profit after tax
and IFRS profit after tax is provided in Note 2 to the condensed
financial information.
3. The composition of gross and net rental income has changed in
2022 to provide a better measure of the underlying rental income
from the property portfolio. There is no impact on Adjusted
operating profit before interest and tax from this change and the
prior period comparatives in the table above have been re-presented
to reflect this change. See Notes 2,4 and 5 of the condensed
financial information for further details.
Adjusted profit before tax increased by 29 per cent to GBP216
million (H1 2021: GBP168 million) during H1 2022 as a result of the
movements described below, primarily growth in rental income and
recognition of a performance fee from the SELP joint venture (GBP42
million income) offset by the performance fee expense recognised in
the share of joint ventures profits (GBP21 million cost) which has
a GBP21 million net impact on profit before tax.
Adjusted profit is detailed further in Note 2 of the condensed
financial information.
Net rental income (including joint ventures at share)
Six months to Six months to
30 June 2022 30 June 2021 Change(3)
Net rental income GBPm GBPm %
UK 132 121 8.9
Continental Europe 77 74 4.1
Like-for-like net rental income
before other items(1) 209 195 7.1
Other(2) (3) (3)
Like-for-like net rental income
(after other) 206 192 7.2
Development lettings 22 1
Properties taken back for
development -- 2
Like-for-like net rental income
plus developments 228 195
Properties acquired 17 --
Properties sold 2 9
Net rental income before
surrenders, dilapidations and
exchange 247 204
Lease surrender premiums and
dilapidations income 3 3
Other items and rent lost from
lease surrenders 5 4
Impact of exchange rate difference
between periods -- 3
Net rental income (including joint
ventures at share) 255 214
SEGRO share of joint venture
management fees (6) (5)
SEGRO share of joint venture
performance fees (21) --
Net rental income after SEGRO
share of joint venture fees 228 209
1. Like-for-like change by Business Unit: Greater London 13.0%, Thames
Valley 4.7%, National Logistics 0.0%, Northern Europe 9.8%, Southern
Europe 1.9%, Central Europe 0.7%.
2. Other includes the corporate centre and other costs relating to the
operational business which are not specifically allocated to a
geographical business unit.
3. Percentage change has been calculated using the figures presented in the
table above in millions accurate to one decimal place.
The like-for-like rental growth metric is based on properties
held throughout both H1 2022 and H1 2021 and comprises wholly owned
assets (net rental income of GBP203 million) and SEGRO's share of
net rental income held in joint ventures (GBP25 million) totalling
GBP228 million.
Net rental income increased by GBP19 million to GBP228 million
in H1 2022, reflecting the positive impact of like-for-like rental
growth of GBP14 million, GBP21 million of additional income from
development lettings and GBP17 million from properties acquired.
These increases were partially offset by a performance fee expense
recognised in share of net rental income held in joint ventures of
GBP21 million.
On a like-for-like basis, before other items, net rental income
increased by GBP14 million, or 7.1 per cent, compared to H1
2021.
This is due to strong rental performance across our portfolio.
UK: 8.9 per cent increase, in particular in Greater London; and
Continental Europe: 4.1 per cent increase, in particular in
Germany.
Where a completed property has been sold into SELP, the 50 per
cent share owned throughout the period is included in the
like-for-like calculation or development lettings where applicable,
with the balance shown in properties sold.
Income from joint ventures
Joint venture fee income increased by GBP45 million to GBP57
million in H1 2022. This increase is primarily due to the
recognition of a performance fee of GBP42 million in respect of the
SELP joint venture (as detailed further in Note 6 of the condensed
financial information).
SEGRO's share of joint ventures' Adjusted profit after tax
decreased by GBP16 million from GBP32 million in H1 2021 to GBP16
million in H1 2022. This includes a performance fee expense (at
share) of GBP21 million and an associated tax credit of GBP2
million. Excluding performance fee expense, the Adjusted joint
venture profit after tax increased by GBP3 million compared to H1
2021 primarily as a result of growth in net rental income in the
SELP joint venture.
Administrative and operating costs
The Total Cost Ratio ('TCR') for H1 2022 increased slightly to
20.5 per cent from 19.8 per cent in H1 2021. Excluding the impact
of share-based payments, the cost of which are directly linked to
the relative total return of the property portfolio, the Cost Ratio
rose to 18.7 per cent in H1 2022 from 17.4 per cent in H1 2021. The
calculations are set out in Table 9 of the Supplementary Notes to
the condensed financial information.
The increase in the ratio has been primarily caused by the total
costs increasing by GBP11 million to GBP60 million in H1 2022.
Administration expenses have increased by GBP4 million, as a result
of increased staff costs following headcount increases. Property
operating expenses in the wholly-owned portfolio have increased in
the period from GBP28 million in H1 2021 to GBP36 million in H1
2022, as the portfolio has grown in size.
Net finance costs
Net finance costs have increased by GBP12 million during the
period from GBP20 million in H1 2021 to GBP32 million in H1 2022.
The increased costs reflect the higher gross debt position in H1
2022 compared to H1 2021 as well as the finance costs from the new
loan facilities entered into at the end of H2 2021 and during the
first half of 2022 (as discussed further in the Financial Position
and Funding section below).
Taxation
The tax charge on Adjusted profit of GBP12 million (H1 2021:
GBP3 million) reflects an effective tax rate of 5.6 per cent (H1
2021: 1.8 per cent). The increase of GBP9 million from H1 2021 is
primarily due to the tax charge on the performance fee recognised
from SELP in the period as discussed above.
The Group's tax rate reflects the fact that over three-quarters
of its assets are located in the UK and France and qualify for REIT
and SIIC status respectively in those countries. This status means
that income from rental profits and gains on disposals of assets in
the UK and France are exempt from corporation tax, provided SEGRO
meets a number of conditions including, but not limited to,
distributing 90 per cent of UK taxable profits.
Adjusted earnings per share
Adjusted earnings per share were 16.9 pence (H1 2021: 13.8
pence) reflecting the GBP39 million increase in Adjusted profit
after tax.
Excluding the impact of the performance fee recognised in the
period (net GBP21 million discussed above) and the associated tax
(being a tax charge of GBP7 million in the wholly owned less a tax
credit, at share in the SELP joint venture of GBP2 million), the
Adjusted profit after tax would be GBP16 million lower and Adjusted
earnings per share would be 15.6 pence, a 13 per cent increase
compared to H1 2021.
IFRS PROFIT
IFRS profit before tax has decreased by GBP38 million from
GBP1,413 million in H1 2021 to GBP1,375 million in H1 2022 as a
result of the movements described below, primarily due to an
increase in net finance costs.
IFRS profit after tax has increased by GBP13 million to GBP1,334
million in H1 2022. This equated to post-tax IFRS earnings per
share of 110.7 pence compared with 110.3 pence for H1 2021.
The increase in IFRS profit after tax is driven primarily by an
increase in unrealised and realised gains on our property portfolio
of GBP51 million, a reduction in tax charge in respect of
adjustments of GBP60 million and an increase in Adjusted profit
after tax of GBP39 million (as discussed above), partially offset
by a net fair value loss on interest rate swaps and other
derivatives, which were GBP94 million higher in H1 2022.
A reconciliation between Adjusted profit before tax and IFRS
profit before tax is provided in Note 2 to the condensed financial
information.
Realised and unrealised gains on wholly owned investment and
trading properties of GBP1,174 million in H1 2022 (H1 2021:
GBP1,123 million) have been recognised in the income statement,
mainly comprising an unrealised valuation surplus on investment
properties of GBP1,164 million (H1 2021: GBP1,118 million).
SEGRO's share of realised and unrealised gains on properties
held in joint ventures was GBP172 million (H1 2021: GBP217 million)
primarily arising on revaluation gains in the SELP joint
venture.
IFRS earnings were impacted by a net fair value loss on interest
rate swaps and other derivatives of GBP150 million (H1 2021: loss
of GBP56 million) primarily as a result of adverse movements on
interest rate expectations.
The tax charge in respect of adjustments decreased by GBP60
million in H1 2022 to GBP29 million (H1 2021: GBP89 million), with
a lower tax charge arising from property valuation movements in the
Continental Europe portfolio and the SIIC entry tax charge incurred
in H1 2021 of GBP39 million.
BALANCE SHEET
Adjusted net asset value
GBPm Shares million Pence per share
Adjusted net assets attributable to
ordinary shareholders at 31 December
2021 13,704 1,205.5 1,137
Realised and unrealised property gain
(including joint ventures) 1,346 -- 111
Adjusted profit after tax 204 -- 17
Dividend net of scrip shares issued
(2021 final) (126) 5.8 (17)
Other including exchange rate
movement (net of hedging) 11 0.8 1
Adjusted net assets attributable to
ordinary shareholders at 30 June
2022 15,139 1,212.1 1,249
At 30 June 2022, IFRS net assets attributable to ordinary
shareholders (on a diluted basis) were GBP14,695 million (31
December 2021: GBP13,436 million), equating to 1,212 pence per
share (31 December 2021: 1,115 pence).
Adjusted net asset value per share at 30 June 2022 was 1,249
pence measured on a diluted basis (31 December 2021: 1,137 pence),
an increase of 10 per cent in the period. The table above
highlights the principal factors behind the increase.
A reconciliation between IFRS and Adjusted net assets is
available in Note 11 to the condensed financial information.
CASH FLOW AND NET DEBT RECONCILIATION
Cash flow from operations for the period was GBP218 million, an
increase of GBP50 million from H1 2021 (GBP168 million), primarily
due to increased rental income received during the period.
The largest cash outflow in the period relates to acquisitions
and developments of investment properties at GBP658 million, which
primarily reflects the Group's investment activity during the
period and ongoing development activity (see Chief Executive's
Review for more details). Cash flows from investment property sales
are GBP223 million (which includes GBP172 million from properties
sold to the SELP joint venture), giving a net outflow of GBP435
million from property investment activity. In addition, investment
outflows of GBP31 million to joint ventures was made primarily to
fund the SELP investing activity.
Other significant financing cash flows include dividends paid of
GBP100 million (H1 2021: GBP90 million) reflecting the increased
dividend per share and level of scrip dividend take-up and an
inflow of GBP15 million from the derivatives which are used to
manage the Group's exposure to foreign exchange during the
period.
As a result of these factors there was a net funds outflow of
GBP385 million during the period compared to an outflow of GBP8
million in H1 2021.
Cash flow and net debt reconciliation
Six months to 30 June Six months to 30 June
2022 GBPm 2021 GBPm
Opening net debt (3,361) (2,325)
Cash flow from operations 218 168
Finance costs (net) (47) (25)
Dividends received 5 4
Tax paid (13) (2)
Free cash flow 163 145
Dividends paid (100) (90)
Acquisitions and
development of
investment properties (658) (371)
Investment property sales 223 350
Acquisitions of other
interests in property
and other investments (6) (3)
Purchase of
non-controlling
interest -- (12)
Net settlement of foreign
exchange derivatives 15 34
Net investment in joint
ventures (31) (56)
Other items 9 (5)
Net funds flow (385) (8)
Non-cash movements (4) (1)
Exchange rate movements (82) 59
Closing net debt (3,832) (2,275)
Capital expenditure
The table below sets out analysis of the capital expenditure on
property assets during the period on a basis consistent with the
EPRA Best Practices Recommendations. This includes acquisition and
development spend, on an accruals basis, in respect of the Group's
wholly--owned investment and trading property portfolios, as well
as the equivalent amounts for joint ventures at share.
Total spend for the period was GBP771 million, an increase of
GBP281 million compared to H1 2021. This is primarily driven by an
increased volume of acquisitions, with significant acquisitions in
the Greater London business unit during the current period.
Development capital expenditure for the period was GBP364 million,
in line with the level of expenditure in H1 2021, with particular
spend on our schemes in Italy and the UK National Logistics
business unit.
Spend on existing completed properties totalled GBP21 million
(H1 2021: GBP21 million), over half of which was for
value-enhancing major refurbishment and fit-out costs prior to
re-letting.
EPRA capital expenditure analysis
Six months to Six months to
30 June 2022 30 June 2021
Joint Wholly Joint
Wholly owned ventures Total owned ventures Total
GBPm GBPm GBPm GBPm GBPm GBPm
Acquisitions 328(1) 37 365(7) 90(1) 2 92(7)
Developments(4) 330(2) 34 364 327(2) 37 364
Completed
properties(5) 17(3) 4 21 16(3) 5 21
Other(6) 16 5 21 8 5 13
Total 691 80 771 441 49 490
1. Being GBP328 million investment property and GBPnil trading property
(2021: GBP90 million and GBPnil respectively) see Note 12.
2. Being GBP326 million investment property and GBP4 million trading
property (2021: GBP318 million and GBP9 million respectively) see Note
12.
3. Being GBP17 million investment property and GBPnil trading property
(2021: GBP16 million and GBPnil respectively) see Note 12.
4. Includes wholly owned capitalised interest of GBP6 million (2021: GBP4
million) as further analysed in Note 8 and share of joint venture
capitalised interest of GBPnil (2021: GBPnil).
5. Being GBP20 million expenditure used for enhancing existing space (2021:
GBP19 million) and GBP1 million used for creation of additional lettable
space (2021: GBP2 million).
6. Tenant incentives, letting fees and rental guarantees.
7. Excludes acquisitions of property sold from the Group's wholly owned
portfolio to the SELP joint venture of GBP86 million (2021: GBP117
million), which is effectively a net 50 per cent disposal by the Group.
FINANCIAL POSITION AND FUNDING
Financial Key Performance Indicators
30 June 2022 30 June 30 June
GROUP ONLY (Proforma)(3) 2022 2021 31 December 2021
Net borrowings
(GBPm) 3,832 3,832 2,275 3,361
Available Group cash
and undrawn
facilities (GBPm) 1,902 1,795 983 893
Gearing (%) n/a 26 21 25
LTV ratio (%) n/a 22 19 22
Weighted average
cost of debt(1)
(%) 1.9 1.7 1.6 1.5
Interest cover(2)
(times) n/a 6.1 7.0 7.0
Average duration of
debt (years) 9.8 9.0 11.3 9.6
INCLUDING JOINT
VENTURES AT SHARE
Net borrowings
(GBPm) 4,764 4,764 3,092 4,201
Available cash and
undrawn facilities
(GBPm) 2,091 1,983 1,230 1,105
LTV ratio (%) n/a 23 21 23
Weighted average
cost of debt(1)
(%) 1.8 1.6 1.5 1.5
Interest cover(2)
(times) n/a 6.2 6.9 6.9
Average duration of
debt (years) 8.7 8.0 9.7 8.6
1. Based on gross debt, excluding commitment fees and non-cash
interest.
2. Net rental income/adjusted net finance costs (before
capitalisation).
3. Proforma for US Private Placement signed in early July
2022.
At 30 June 2022, the Group's net borrowings (including the
Group's share of borrowings in joint ventures) were GBP4,764
million (31 December 2021: GBP4,201 million). When the US Private
Placement ('USPP') debt arranged in early July (see below) is
included, the weighted average cost of debt is 1.8 per cent with an
average duration of 8.7 years. The loan to value ratio (including
joint ventures at share) was 23 per cent (31 December 2021: 23 per
cent) with GBP1,983 million of cash and undrawn facilities
available for investment (GBP2,091 million, adjusted for the net
proceeds of the USPP).
Gross borrowings of SEGRO Group were GBP3,923 million at 30 June
2022, all but GBP2 million of which were unsecured, and cash and
cash equivalent balances were GBP91 million. SEGRO's share of gross
borrowings in its joint ventures was GBP987 million (all of which
were advanced on a non-recourse basis to SEGRO) and cash and cash
equivalent balances of GBP55 million.
Cash and cash equivalent balances, together with the Group's
interest rate and foreign exchange derivative portfolio, are spread
amongst a strong group of banks, all of which have a credit rating
of A- or better.
In March, SEGRO established a European Medium-Term Note (EMTN)
programme. Upon creation, SEGRO issued EUR650 million of four year
and EUR500 million of eight year unsecured green bonds. The annual
coupons were 1.25 per cent and 1.875 per cent respectively.
Also in March, SEGRO entered into an additional EUR1 billion
multicurrency term loan facility maturing in March 2024. This
facility was undrawn at 30 June 2022.
In May, SEGRO extended the maturity of its EUR1.2 billion of
revolving credit facilities for a further year to 2027. SELP also
extended maturity of its EUR500 million revolving credit facility
for a further year to 2026 and has since entered into a new
additional EUR100 million bilateral revolving credit facility on
the same terms as the existing facility.
In June, SEGRO arranged a US private placement of EUR225 million
unsecured notes to be drawn down in September 2022. The issue
consisted of EUR50 million of fifteen year notes carrying a fixed
coupon of 3.87 per cent and EUR175 million of twenty year notes
carrying a fixed coupon of 4.14 per cent. The net proceeds will be
used for general corporate purposes and the Notes will rank pari
passu with SEGRO's existing unsecured bank, bond and US Private
Placement debt.
MONITORING AND MITIGATING FINANCIAL RISK
The Group monitors a number of financial metrics to assess the
level of financial risk being taken and to mitigate that risk.
Treasury policies and governance
The Group Treasury function operates within a formal policy
covering all aspects of treasury activity, including funding,
counterparty exposure and management of interest rate, currency and
liquidity risks. Group Treasury reports on compliance with these
policies on a quarterly basis and policies are reviewed regularly
by the Board.
Gearing and financial covenants
The key leverage metric for SEGRO is its loan to value ratio
(LTV), which incorporates assets and net debt on SEGRO's balance
sheet and SEGRO's share of assets and net debt on the balance
sheets of its joint ventures. The LTV at 30 June 2022 on this
'look-through' basis remained at 23 per cent (31 December 2021: 23
per cent).
Our borrowings contain gearing covenants based on Group net debt
and net asset value, excluding debt in joint ventures. The gearing
ratio of the Group at 30 June 2022, as defined within the principal
debt funding arrangements of the Group, was 26 per cent (31
December 2021: 25 per cent). This is significantly lower than the
Group's tightest financial gearing covenant within these debt
facilities of 160 per cent. Property valuations would need to fall
by around 62 per cent from their 30 June 2022 levels to reach the
gearing covenant threshold of 160 per cent.
The Group's other key financial covenant within its principal
debt funding arrangements is interest cover, requiring that net
interest before capitalisation be covered at least 1.25 times by
net property rental income. At 30 June 2022, the Group comfortably
met this ratio at 6.1 times. On a look-through basis, including
joint ventures, this ratio was 6.2 times.
We mitigate the risk of over-gearing the Company and breaching
debt covenants by carefully monitoring the impact of investment
decisions on our LTV and by stress-testing our balance sheet to
potential changes in property values. We also expect to continue to
recycle assets which would also provide funding for future
investment.
Our intention for the foreseeable future is to maintain our LTV
at around 30 per cent. This provides the flexibility to take
advantage of investment opportunities arising and ensures
significant headroom compared to our tightest gearing covenants
should property values decline.
The Group's debt has a range of maturities. The nearest of which
are SEGRO's syndicated term loan facilities that mature in December
2023 (this facility was fully repaid and cancelled in July 2022)
and March 2024. There are no significant Group bond maturities
until 2026. This long average debt maturity translates into a
favourable, well spread debt funding maturity profile which reduces
future refinancing risk.
Interest rate risk
The Group's interest rate risk policy is designed to ensure that
we limit our exposure to volatility in interest rates. The policy
states that between 50 and 100 per cent of net borrowings
(including the Group's share of borrowings in joint ventures)
should be at fixed or capped rates, including the impact of
derivative financial instruments.
As at 30 June 2022, including the impact of derivative
instruments, 90 per cent (31 December 2021: 65 per cent) of the net
borrowings of the Group (including the Group's share of borrowings
within joint ventures) were at fixed or capped rates; this
increases to 94 per cent when including the impact of the USPP debt
arranged in July. The fixed-only level of debt is 74 per cent at 30
June 2022 (31 December 2021: 46 per cent).
As a result of the fixed rate cover in place, if short term
interest rates had been 1 per cent higher throughout the six month
period to 30 June 2022, the adjusted net finance cost of the Group
would have increased by approximately GBP8 million representing
around 4 per cent of Adjusted profit after tax.
The Group elects not to hedge account its interest rate
derivatives portfolio. Therefore, movements in derivative fair
values are taken to the income statement but, in accordance with
EPRA Best Practices Recommendations Guidelines, these gains and
losses are excluded from Adjusted profit after tax.
Foreign currency translation risk
The Group has negligible transactional foreign currency exposure
but does have a potentially significant currency translation
exposure arising on the conversion of its substantial foreign
currency denominated assets (mainly euro) and euro denominated
earnings into sterling in the Group consolidated accounts.
The Group seeks to limit its exposure to volatility in foreign
exchange rates by hedging at a level between the year-end Group LTV
percentage and 100 per cent of its foreign currency gross assets
through either borrowings or derivative instruments. At 30 June
2022, the Group had gross foreign currency assets which were 69 per
cent hedged by gross foreign currency denominated liabilities
(including the impact of derivative financial instruments).
The exchange rate used to translate euro denominated assets and
liabilities as at 30 June 2022 into sterling within the balance
sheet of the Group was EUR1.16:GBP1 (31 December 2021:
EUR1.19:GBP1). Including the impact of forward foreign exchange and
currency swap contracts used to hedge foreign currency denominated
net assets, if the value of the other currencies in which the Group
operates at 30 June 2022 weakened by 10 per cent against sterling
(EUR1.28, in the case of euros), net assets would have decreased by
approximately GBP180 million and there would have been a reduction
in gearing of approximately 1.6 per cent and in the LTV of
approximately 1.3 per cent.
The average exchange rate used to translate euro denominated
earnings generated during the six months ending 30 June 2022 into
sterling within the consolidated income statement of the Group was
EUR1.19:GBP1 (H1 2021: EUR1.15:GBP1).
Based on the hedging position at 30 June 2022, and assuming that
this position had applied throughout the six month period, if the
euro had been 10 per cent weaker than the average exchange rate
(EUR1.31:GBP1), Adjusted profit after tax for the six month period
would have been approximately GBP7 million (3.6 per cent) lower
than reported. If it had been 10 per cent stronger, adjusted profit
after tax for the period would have been approximately GBP10
million (4.9 per cent) higher than reported.
GOING CONCERN
As noted in the Financial Position and Funding section above,
the Group has significant available liquidity to meet its capital
commitments, a long-dated debt maturity profile and substantial
headroom against financial covenants.
In 2022 the Group has extended the term of its EUR1.2 billion of
bank facilities to 2027 and secured a further EUR1.0 billion two
year bank facility to finance acquisitions.
-- The Group executed its second Eurobond issue, raising EUR1.15 billion
with a six times oversubscription rate.
-- The Group arranged EUR225 million of funding from existing US Private
Placement investors.
-- Cash and available facilities at 30 June 2022 were GBP1.8 billion.
-- The Group continuously monitors its liquidity position compared to
committed and expected capital and operating expenses on a rolling
forward 18 month basis. The quantum of committed capital expenditure at
any point in time is typically low due to the short timeframe to
construct warehouse buildings.
-- The Group also regularly stress-tests its financial covenants. As noted
above, at 30 June 2022, property values would need to fall by around 62
per cent before breaching the gearing covenant. In terms of interest
cover, net rental income would need to fall by 79 per cent before
breaching the interest cover covenant. Both would be significantly in
excess of the Group's experience during the financial crisis.
Having made enquiries and having considered the principal risks
facing the Group, including liquidity and solvency risks, and
material uncertainties, the Directors have a reasonable expectation
that the Group have adequate resources to continue in operational
existence for the foreseeable future (a period of at least 12
months from the date of approval of the financial statements).
Accordingly, they continue to adopt the going concern basis in
preparing these financial statements.
STATEMENT OF PRINCIPAL RISKS
OUR DYNAMIC APPROACH TO RISK MANAGEMENT IS INTEGRAL TO OUR
BUSINESS AND ENABLES US TO BE RESPONSIVE TO CHALLENGES AS THEY
ARISE.
The Group's risk appetite, its integrated approach to managing
risk, and the governance arrangements in place are described in the
Principal Risks section of the 2021 Annual Report on pages 76 to
83.
Current risk focus
At the current time, we are observing heightened macroeconomic
risks and capital markets volatility which creates uncertainty that
influences our entire risk landscape including our markets, the
valuation of our assets and our operations. The supply chain issues
affecting both materials and labour, which were initially caused by
Covid-19 restrictions, have been exacerbated by the conflict in
Ukraine and have also contributed to sharply higher energy prices
as well as concerns over access to energy supply in the coming
months, particularly in Continental Europe. Despite this, occupier
demand continues to be strong in line with the long-term structural
tailwinds we have identified elsewhere in this report, and this has
led to strong rental growth in the period which helps to offset the
detrimental impact of inflation on income.
The Group's Board and key committees have overseen the Group's
response to the impact of these influences and their wider economic
implications throughout the period. Consequentially they have taken
actions to mitigate its impacts including on our operations, the
wellbeing of our employees, compliance with relevant sanctions and
to review our investment plans accordingly. We continue to
strengthen our balance sheet in order to assist us in negotiating
future volatility.
We have reviewed and updated the Group's risk register during
the period, in particular in light of events during the period as
detailed above which has impacted risks already on the risk
register, as detailed further in our Principal Risks section below.
No new risks have been identified in this period.
Looking forward, it is clear there is still much uncertainty
around the future trajectory of the economy. Accordingly, we remain
vigilant to the rapidly changing environment and possible prolonged
impact of economic uncertainty in the locations in which we
operate.
Emerging risks
We continue to identify and monitor emerging risks through our
risk processes. Emerging risks are those which may be evolving
rapidly and whose impact or probability may not yet be fully
understood and whose mitigations are consequently evolving. This
process is supplemented by formal horizon scans with the Executive
Committee. For example, the long-term impact of climate change on
our business continues to be a major focus.
Risks Appetite
Our risk appetite depends on the nature of the risk and falls
into three broad categories:
-- Property risk - we recognise that, in seeking outperformance from our
portfolio, the Group must accept a balanced level of property risk --
with diversity in geographic locations and asset types and an appropriate
mixture of stabilised income producing and opportunity assets -- in order
to enhance opportunities for superior returns. This is balanced against
the backdrop of the macroeconomic climate and its impact on the property
cycle.
-- Financial risk - we maintain a low to moderate appetite for financial
risk in general, with a very low appetite for risks to solvency and
gearing covenant breaches.
-- Corporate risk - we have a very low appetite for risks to our good
reputation with our customers and wider stakeholders including investors,
regulators, employees, business partners, suppliers, lenders and by the
communities in which we operate.
Principal Risks
A summary of the Group's principal risks including an update for
changes during the period and expected impacts during the second
half of 2022, is provided below. The principal risks remain the
same as reported in the Annual Report for 2021 apart from the
Political and Regulatory risk which is now called Legal, Political
and Regulatory to better reflect the scope of the risk. The impact
and probability of each risk have not changed significantly since
they were reported in the 2021 Annual Report and the residual risk
for each remains within appetite.
-- Macroeconomic Impact on Market Cycle. The property market is cyclical and
there is a continuous risk that the Group could either misinterpret the
market or fail to react appropriately to changing market and wider
geopolitical conditions, which could result in capital being invested or
disposals taking place at the wrong price or time in the cycle.
Update: The market continues to exhibit increased volatility and
less predictability in light of heightened macroeconomic
uncertainty exacerbated by the Ukraine conflict and wider cost
inflation pressures. In response we have increased the regularity
of our economic outlook assessments and reassessed their
consequences on our portfolio strategy (discussed below). We are
prepared for the higher inflation rates and interest rates which
could persist across Europe for some time.
-- Portfolio Strategy and Execution. The Group's Total Property and/or
Shareholder Returns could underperform in absolute or relative terms as a
result of an inappropriate portfolio strategy.
Update: The Group's approach to portfolio management and capital
allocation remains disciplined and responsive to opportunities that
arise, as detailed further in the Investment and Development
sections above, although the attractiveness of the industrial
property asset class has led to increased market competition. Our
portfolio has been positioned to be resilient at all stages in the
cycle. Our investment criteria have also been reassessed to reflect
the impacts of the macroeconomic uncertainty discussed above. These
factors have increased the scrutiny around our capital allocation
and investment decisions.
-- Major Event / Business Disruption. Unexpected global, regional or
national events result in severe adverse disruption to SEGRO, such as
sustained asset value or revenue impairment, solvency or covenant stress,
liquidity or business continuity challenges. A global event or business
disruption may include but is not limited to a global financial crisis,
health pandemic, civil unrest, act of terrorism, cyber-attack or other IT
disruption. Events may be singular or cumulative, and lead to
acute/systemic issues in the business and/or operating environment.
Update: Whilst the direct impacts of the pandemic have largely
abated, the heightened global macroeconomic volatility including
high inflation, exacerbated by conflict in Ukraine, is expected to
continue to cause increased uncertainty to the Group's operations
and stakeholders. The Group maintains a robust financing and
portfolio strategy in order to be well positioned and flexible in
response to major events/business disruption. The Board and other
committees remain vigilant and responsive in managing the
mitigation of risks as they evolve.
-- Health & Safety. Health and safety management processes could fail,
leading to a loss of life, litigation, fines and serious reputational
damage to the Group.
Update: The health and safety of the workforce remains a key
priority in locations we operate in, including when working away
from the office. We continue to closely monitor our development
sites with in-person inspections in order to ensure a safe and
compliant working environment. This risk is expected to remain a
key focus going forward.
-- Environmental Sustainability and Climate Change. Failure to anticipate
and respond to the impact of both physical and transitional risks from
climate change on the sustainability of our environment is both a
principal and emerging risk. Laws, regulations, policies, taxation,
obligations, customer preferences and social attitudes relating to
climate change continue to evolve. Non-compliance with laws and
regulations, reporting requirements, increased costs of tax and energy
could cause loss of value to the Group. Not keeping pace with social
attitudes and customer behaviours and preferences could additionally
cause reputational damage and reduce the attractiveness and value of our
assets. A lack of strong environmental credentials may reduce access to
capital or increase cost as these are increasingly important criteria to
investors and lenders.
Update: Our 'Responsible SEGRO' framework continues to
prioritise our commitment to net-zero carbon by 2030 underpinned by
our Mandatory Sustainability policy with minimum Science-Based
Targets for reducing Scope 1, 2 and 3 emissions. This is detailed
further in the Asset Management and Development Updates above. The
Responsible SEGRO Steering Group monitors progress against this
framework. This risk is expected to continue to have increased
prominence going forward.
-- Development Plan Execution. The Group could suffer significant financial
losses from its extensive current programme and future pipeline of
developments.
Update: During the period pressures in the construction supply
chain for certain materials and labour are continuing and we
continue to work proactively alongside our contractors to mitigate
any undue delay and cost increases as far as is possible. More
generally, market competition has reduced the availability of
suitably priced land at attractive prices. As detailed in the
Portfolio Strategy and Execution risk above, we have reassessed our
investment criteria in response to such pressures. Going forward
such pressures are likely to continue in a similar way as we
balance the needs of our contractors and customers.
-- Financing Strategy. The Group could suffer an acute liquidity or solvency
crisis, financial loss or financial distress as a result of a failure in
the design or execution of its financing strategy.
Update: The Group has demonstrated strong access to financial
markets as seen by our funding activity (as detailed in the
Financial Position and Funding section above), despite the
uncertain economic backdrop and volatile capital markets. The Group
(including its largest joint venture SELP) now has a meaningful
presence in the Euro bond market as well as in the Sterling bond
and US Private Placement markets leaving us well positioned
financially to fund activity in the remainder of the year and
beyond. The Group continues to use fixed rate debt and relevant
derivatives to mitigate against the risk of interest rates
increasing both now and going forward.
-- Legal, Political and Regulatory. The Group could fail to anticipate
significant political, legal, tax or regulatory changes, leading to a
significant unexpected financial or reputational impact.
Update: The legal and regulatory environment remains dynamic. In
response to the conflict in Ukraine, a series of new sanctions were
introduced, including by the UK, EU and US. An internal working
group was created which met regularly to monitor both the impact of
the crisis on the Group and its employees, as well as to ensure
that the business continues to comply with relevant sanctions laws.
The working group regularly took advice from its external lawyers
on these topics.
In addition, we continue to monitor the divergence of UK and EU
laws, including in respect of sanctions and potential privacy laws.
We remain vigilant for other future changes in the legal,
regulatory and political environment.
-- Operational Delivery & Compliance. The Group's ability to protect its
reputation, revenues and shareholder value could be damaged by
operational failures such as: failing to attract, retain and motivate key
employees; major customer default; supply chain failure or the structural
failure of one of our assets. Compliance failures, such as breaches of
joint venture shareholders' agreements, loan agreements or tax
legislation could also damage reputation, revenue and shareholder value.
Update: Following the normalisation of working practices, the
Group has returned to its agile working approach to promote our
strong, positive corporate culture, ensuring our employees continue
to be motivated and challenged. We continue to ensure the
resilience and security of our technology. During the period we
continue to have enhanced engagement with our customers in light of
the volatile economic conditions.
RESPONSIBILITY STATEMENT
We confirm that to the best of our knowledge:
(a) the interim condensed set of financial statements has been
prepared in accordance with IAS 34 'Interim Financial Reporting' as
adopted by the United Kingdom and European Union;
(b) the interim management report includes a fair review of the
information required by DTR 4.2.7R (indication of important events
during the first six months and description of principal risks and
uncertainties for the remaining six months of the year); and
(c) the interim management report includes a fair review of the
information required by DTR 4.2.8R (disclosure of related parties'
transactions and changes therein).
By order of the Board,
David Sleath
Chief Executive
Soumen Das
Chief Financial Officer
INDEPENT REVIEW REPORT TO SEGRO PLC
REPORT ON THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
Our conclusion
We have reviewed SEGRO plc's condensed consolidated interim
financial statements (the "interim financial statements") in the
half-yearly report of SEGRO plc for the 6 month period ended 30
June 2022 (the "period").
Based on our review, nothing has come to our attention that
causes us to believe that the interim financial statements are not
prepared, in all material respects, in accordance with UK adopted
International Accounting Standard 34, 'Interim Financial Reporting'
and International Accounting Standard 34, 'Interim Financial
Reporting' as adopted by the European Union and the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority.
The interim financial statements comprise:
-- the Condensed Group Balance Sheet as at 30 June 2022;
-- the Condensed Group Income Statement and Condensed Group Statement of
Comprehensive Income for the period then ended;
-- the Condensed Group Cash Flow Statement for the period then ended;
-- the Condensed Group Statement of Changes in Equity for the period then
ended; and
-- the explanatory notes to the interim financial statements.
The interim financial statements included in the half-yearly
report of SEGRO plc have been prepared in accordance with UK
adopted International Accounting Standard 34, 'Interim Financial
Reporting' and International Accounting Standard 34, 'Interim
Financial Reporting' as adopted by the European Union and the
Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority.
Basis for conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410, 'Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity' issued by the Financial Reporting Council for use in the
United Kingdom. A review of interim financial information consists
of making enquiries, primarily of persons responsible for financial
and accounting matters, and applying analytical and other review
procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and,
consequently, does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the half-yearly
report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the interim financial statements.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
conclusion section of this report, nothing has come to our
attention to suggest that the directors have inappropriately
adopted the going concern basis of accounting or that the directors
have identified material uncertainties relating to going concern
that are not appropriately disclosed. This conclusion is based on
the review procedures performed in accordance with this ISRE.
However, future events or conditions may cause the group to cease
to continue as a going concern.
Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the directors
The half-yearly report, including the interim financial
statements, is the responsibility of, and has been approved by the
directors. The directors are responsible for preparing the
half-yearly report in accordance with the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority. In preparing the half-yearly report, including
the interim financial statements, the directors are responsible for
assessing the group's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless the directors
either intend to liquidate the group or to cease operations, or
have no realistic alternative but to do so.
Our responsibility is to express a conclusion on the interim
financial statements in the half-yearly report based on our review.
Our conclusion, including our Conclusions relating to going
concern, is based on procedures that are less extensive than audit
procedures, as described in the Basis for conclusion paragraph of
this report. This report, including the conclusion, has been
prepared for and only for the company for the purpose of complying
with the Disclosure Guidance and Transparency Rules sourcebook of
the United Kingdom's Financial Conduct Authority and for no other
purpose. We do not, in giving this conclusion, accept or assume
responsibility for any other purpose or to any other person to whom
this report is shown or into whose hands it may come save where
expressly agreed by our prior consent in writing.
PricewaterhouseCoopers LLP
Chartered Accountants
London
27 July 2022
CONDENSED GROUP INCOME STATEMENT
For the six months ended 30 June 2022
Half year to Half year to Year to
30 June 30 June 31 December
2022 2021 2021
(unaudited) (unaudited) (audited)
Notes GBPm GBPm GBPm
Revenue 4 330 246 546
Costs 5 (65) (62) (140)
265 184 406
Administration expenses (31) (27) (59)
Share of profit from joint
ventures after tax 6 151 210 461
Realised and unrealised
property gain 7 1,172 1,122 3,669
Operating profit 1,557 1,489 4,477
Finance income 8 36 23 35
Finance costs 8 (218) (99) (157)
Profit before tax 1,375 1,413 4,355
Tax 9 (41) (92) (288)
Profit after tax 1,334 1,321 4,067
Attributable to equity
shareholders 1,333 1,317 4,060
Attributable to
non-controlling interests 1 4 7
Earnings per share (pence)
Basic 11 110.7 110.3 339.0
Diluted 11 110.4 110.0 338.1
CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 30 June 2022
Half year to Half year to Year to
30 June 30 June 31 December
2022 2021 2021
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
Profit for the period 1,334 1,321 4,067
Items that may be reclassified
subsequently to profit or loss
Foreign exchange movement
arising on translation of
international operations 100 (124) (184)
Fair value movements on
derivatives and borrowings in
effective hedge relationships (49) 48 74
51 (76) (110)
Tax on components of other
comprehensive income -- -- --
Other comprehensive
income/(loss) 51 (76) (110)
Total comprehensive income for
the period 1,385 1,245 3,957
Attributable to -- equity
shareholders 1,385 1,241 3,949
-- non-controlling interests -- 4 8
CONDENSED GROUP BALANCE SHEET
As at 30 June 2022
30 June 30 June 31 December
2022 2021 2021
(unaudited) (unaudited) (audited)
Notes GBPm GBPm GBPm
Assets
Non-current assets
Intangible assets 9 8 9
Investment properties 12 17,209 11,850 15,492
Other interests in property 28 16 24
Property, plant and equipment 23 23 22
Investments in joint ventures 6 2,022 1,620 1,795
Other investments 8 4 5
Other receivables 38 36 35
Derivative financial
instruments 47 58 50
19,384 13,615 17,432
Current assets
Trading properties 12 57 47 45
Trade and other receivables 297 175 247
Derivative financial
instruments -- 4 14
Cash and cash equivalents 13 91 78 45
445 304 351
Total assets 19,829 13,919 17,783
Liabilities
Non-current liabilities
Borrowings 13 3,923 2,352 3,406
Deferred tax liabilities 9 296 112 274
Trade and other payables 77 107 75
Derivative financial
instruments 192 41 56
Tax liabilities 19 -- 19
4,507 2,612 3,830
Current liabilities
Trade and other payables 552 460 463
Borrowings 13 -- 1 --
Derivative financial
instruments 3 1 --
Tax liabilities 72 62 54
627 524 517
Total liabilities 5,134 3,136 4,347
Net assets 14,695 10,783 13,436
Equity
Share capital 121 120 120
Share premium 3,447 3,343 3,371
Capital redemption reserve 114 114 114
Own shares held (3) (1) (1)
Other reserves 191 170 140
Retained earnings 10,825 7,037 9,692
Total shareholders' equity 14,695 10,783 13,436
Non-controlling interests -- -- --
Total equity 14,695 10,783 13,436
Net assets per ordinary share
(pence)
Basic 11 1,216 899 1,118
Diluted 11 1,212 897 1,115
CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 June 2022
Attributable to owners of the parent
Other reserves
Translation, Total equity
Ordinary Capital Own Share-based hedging and attributable
share Share redemption shares payment other Merger Retained to owners of Non-controlling Total
capital premium reserve held reserve reserve reserve earnings the parent interest(1) equity
(unaudited) GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 1
January 2022 120 3,371 114 (1) 20 (49) 169 9,692 13,436 -- 13,436
Profit for the
period -- -- -- -- -- -- -- 1,333 1,333 1 1,334
Other
comprehensive
income/(expense) -- -- -- -- -- 52 -- -- 52 (1) 51
Total
comprehensive
income for the
period -- -- -- -- -- 52 -- 1,333 1,385 -- 1,385
Transactions with
owners of the
Company
Issues of shares -- -- -- -- -- -- -- -- -- -- --
Own shares
acquired -- -- -- (5) -- -- -- -- (5) -- (5)
Equity-settled
share-based
payment
transactions -- -- -- 3 (1) -- -- 3 5 -- 5
Dividends 1 76 -- -- -- -- -- (203) (126) -- (126)
Movement in
non-controlling
interest(1) -- -- -- -- -- -- -- -- -- -- --
Total
transactions
with owners of
the Company 1 76 -- (2) (1) -- -- (200) (126) -- (126)
Balance at 30
June 2022 121 3,447 114 (3) 19 3 169 10,825 14,695 -- 14,695
1. Non-controlling interests relate to Vailog Sàrl.
For the six months ended 30 June 2021
Attributable to owners of the parent
Other reserves
Translation, Total equity
Ordinary Capital Own Share-based hedging and attributable
share Share redemption shares payment other Merger Retained to owners of Non-controlling Total
capital premium reserve held reserve reserve reserve earnings the parent interest(1) equity
(unaudited) GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 1
January 2021 119 3,277 114 (1) 22 62 169 5,897 9,659 12 9,671
Profit for the
period -- -- -- -- -- -- -- 1,317 1,317 4 1,321
Other
comprehensive
expense -- -- -- -- -- (76) -- -- (76) -- (76)
Total
comprehensive
(expense)/income
for the period -- -- -- -- -- (76) -- 1,317 1,241 4 1,245
Transactions with
owners of the
Company
Issues of shares -- 1 -- -- -- -- -- -- 1 -- 1
Own shares
acquired -- -- -- (3) -- -- -- -- (3) -- (3)
Equity-settled
share-based
payment
transactions -- -- -- 3 (7) -- -- 5 1 -- 1
Dividends 1 65 -- -- -- -- -- (181) (115) -- (115)
Movement in
non-controlling
interest(1) -- -- -- -- -- -- -- (1) (1) (16) (17)
Total
transactions
with owners of
the Company 1 66 -- -- (7) -- -- (177) (117) (16) (133)
Balance at 30
June 2021 120 3,343 114 (1) 15 (14) 169 7,037 10,783 -- 10,783
1. Non-controlling interests relate to Vailog Sàrl and Sofibus
Patrimoine SA. During the period the remaining share capital of Sofibus
Patrimoine SA was acquired and is a 100 per cent subsidiary of the Group
at 30 June 2021.
For the year ended 31 December 2021
Attributable to owners of the parent
Other reserves
Translation, Total equity
Ordinary Capital Own Share-based hedging and attributable
share Share redemption shares payment other Merger Retained to owners of Non-controlling Total
capital premium reserve held reserve reserve reserve earnings the parent interest(1) equity
(audited) GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 1
January 2021 119 3,277 114 (1) 22 62 169 5,897 9,659 12 9,671
Profit for the
year -- -- -- -- -- -- -- 4,060 4,060 7 4,067
Other
comprehensive
(expense)/income -- -- -- -- -- (111) -- -- (111) 1 (110)
Total
comprehensive
(expense)/income
for the year -- -- -- -- -- (111) -- 4,060 3,949 8 3,957
Transactions with
owners of the
Company
Issues of shares -- 1 -- -- -- -- -- -- 1 -- 1
Own shares
acquired -- -- -- (3) -- -- -- -- (3) -- (3)
Equity-settled
share-based
payment
transactions -- -- -- 3 (2) -- -- 6 7 -- 7
Dividends 1 93 -- -- -- -- -- (270) (176) (4) (180)
Movement in
non-controlling
interest(1) -- -- -- -- -- -- -- (1) (1) (16) (17)
Total
transactions
with owners of
the Company 1 94 -- -- (2) -- -- (265) (172) (20) (192)
Balance at 31
December 2021 120 3,371 114 (1) 20 (49) 169 9,692 13,436 -- 13,436
1. Non-controlling interests relate to Vailog Sàrl and Sofibus
Patrimoine SA. During the period the remaining share capital of Sofibus
Patrimoine SA was acquired and is a 100 per cent subsidiary of the Group
at 31 December 2021.
CONDENSED GROUP CASH FLOW STATEMENT
For the six months ended 30 June 2022
Half year to Half year to Year to
30 June 30 June 31 December
2022 2021 2021
(unaudited) (unaudited) (audited)
Notes GBPm GBPm GBPm
Cash flows from operating
activities 14 218 168 347
Interest received 14 21 48
Dividends received 5 4 33
Interest paid (61) (46) (100)
Tax paid (13) (2) (17)
Net cash received from
operating activities 163 145 311
Cash flows from investing
activities
Purchase and development
of investment properties (658) (371) (1,706)
Sale of investment
properties 223 350 491
Acquisition of other
interests in property (3) -- (8)
Purchase of plant and
equipment and
intangibles (3) (5) (7)
Acquisition of other
investments (3) (3) (4)
Investment and loans to
joint ventures (67) (67) (74)
Divestment and repayment
of loans from joint
ventures 36 11 35
Net cash used in investing
activities (475) (85) (1,273)
Cash flows from financing
activities
Dividends paid to ordinary
shareholders (100) (90) (180)
Proceeds from borrowings 14 1,833 35 1,214
Repayment of borrowings 14 (1,385) (34) (140)
Principal element of lease
payments (1) (1) (2)
Settlement of foreign
exchange derivatives 15 34 40
Purchase of
non-controlling interest -- (12) (12)
Proceeds from issue of
ordinary shares -- 1 1
Purchase of ordinary
shares (5) (3) (3)
Net cash generated
from/(used in) financing
activities 357 (70) 918
Net increase/(decrease) in
cash and cash
equivalents 45 (10) (44)
Cash and cash equivalents
at the beginning of the
period 45 89 89
Effect of foreign exchange
rate changes 1 (1) --
Cash and cash equivalents
at the end of the period 13 91 78 45
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
1. BASIS OF PREPARATION
The condensed set of financial statements for the six months
ended 30 June 2022 were approved by the Board of Directors on 27
July 2022.
The condensed set of financial statements for the six months
ended 30 June 2022 is unaudited and does not constitute statutory
accounts within the meaning of Section 434 of the Companies Act
2006. The financial information contained in this report for the
year ended 31 December 2021 does not constitute statutory accounts
within the meaning of Section 434 of the Companies Act 2006 and has
been extracted from the statutory accounts, which were prepared in
accordance with UK-adopted International Accounting Standards (IAS)
and the requirements of the Companies Act 2006 as applicable to
companies reporting under those standards and International
Financial Reporting Standards (IFRS) adopted pursuant to Regulation
(EC) No 1606/2002 as it applies in the European Union and were
delivered to the Registrar of Companies. The auditor's opinion on
these accounts was unqualified, did not draw attention to any
matters by way of emphasis and did not contain a statement made
under S498(2) or S498(3) of the Companies Act 2006. The condensed
set of financial statements included in this half-yearly report has
been prepared in accordance with both UK-adopted International
Accounting Standard 34 'Interim Financial Reporting', and the
Disclosure Rules and Transparency Rules of the United Kingdom's
Financial Conduct Authority as well as EU-adopted International
Accounting Standard 34 'Interim Financial Reporting'.
UK-adopted International Accounting Standards differs in certain
respects from International Financial Reporting Standards as
adopted by the EU. The differences have no material impact on the
Group's condensed financial statements for the periods presented,
which therefore also comply with International Financial Reporting
Standards as adopted by the EU.
The condensed set of financial statements have been prepared on
a going concern basis for a period of at least 12 months from the
date of approval of the financial statements. This is discussed
further in the Financial Review section.
The same accounting policies, presentation and methods of
computation are followed in the condensed set of financial
statements as applied in the Group's latest financial
statements.
The following new accounting amendments became effective for the
financial year beginning on 1 January 2022:
- Amendments to IFRS 3, 'Business Combinations'
- Amendments to IAS 16, 'Property, Plant and Equipment'
- Amendments to IAS 37, 'Provisions, Contingent Liabilities and
Contingent Assets'
- Annual Improvements 2018-2020
The Group did not have to change its accounting policies or make
retrospective adjustments as a result of these amendments.
The principal exchange rates used to translate foreign currency
denominated amounts are:
Balance sheet: GBP1 = EUR1.16 (30 June 2021: GBP1 = EUR1.17; 31
December 2021: GBP1 = EUR1.19)
Income statement: GBP1 = EUR1.19 (30 June 2021: GBP1 = EUR1.15;
31 December 2021: GBP1 = EUR1.16)
The Group's business is not seasonal and the results relate to
continuing operations unless otherwise stated.
2. ADJUSTED PROFIT
Adjusted profit is a non-GAAP measure and is the Group's measure
of underlying profit, which is used by the Board and senior
management to measure and monitor the Group's income
performance.
It is based on the Best Practices Recommendations of European
Public Real Estate Association (EPRA), which calculate profit
excluding investment and development property revaluations and
gains or losses on disposals, changes in the fair value of
financial instruments and associated close-out costs and their
related taxation, as well as other permitted one-off items. Refer
to the Supplementary Notes for all EPRA adjustments.
The Directors may also exclude from the EPRA profit measure
additional items (gains and losses) which are considered by them to
be non-recurring, not in the ordinary course of business and
significant by virtue of size and nature. No non-EPRA adjustments
to underlying profit were made in the current or prior periods.
The following table provides a reconciliation of Adjusted profit
to IFRS profit:
Half year to Half year to Year to 31
30 June 2022 30 June December
Notes GBPm 2021(3) GBPm 2021(3) GBPm
Gross rental income 4 239 195 398
Property operating
expenses 5 (36) (28) (57)
Net rental income(3) 203 167 341
Joint venture fee income 4 57 12 52
Management and
development fee income 4 2 3 5
Net solar energy
income(2) 1 1 1
Administration expenses (31) (27) (59)
Share of joint ventures'
adjusted profit after
tax(1) 6 16 32 56
Adjusted operating
profit before interest
and tax 248 188 396
Net finance costs
(including
adjustments) 8 (32) (20) (40)
Adjusted profit before
tax 216 168 356
Adjustments to reconcile
to IFRS:
Adjustments to the share
of profit from joint
ventures after tax(1) 6 135 178 405
Realised and unrealised
property gain 7 1,172 1,122 3,669
Gain on sale of trading
properties 2 1 7
Net fair value loss on
interest rate swaps and
other derivatives 8 (150) (56) (82)
Total adjustments 1,159 1,245 3,999
Profit before tax 1,375 1,413 4,355
Tax
On Adjusted profit 9 (12) (3) (8)
In respect of
adjustments 9 (29) (89) (280)
Total tax adjustments (41) (92) (288)
Profit after tax before
non-controlling
interests 1,334 1,321 4,067
Non-controlling
interests:
Less: share of adjusted
profit attributable to
non-controlling
Interests -- -- --
: share of adjustments
attributable to
non-controlling
interests (1) (4) (7)
Profit after tax and
non-controlling
interests 1,333 1,317 4,060
Of which:
Adjusted profit after
tax and non-controlling
interests 204 165 348
Total adjustments after
tax and non-controlling
interests 1,129 1,152 3,712
Profit attributable to
equity shareholders 1,333 1,317 4,060
1. A detailed breakdown of the adjustments to the share of profit from joint
ventures is included in Note 6.
2. Net solar income of GBP1 million (31 December 2021: GBP1 million; 30 June
2021: GBP1 million) is calculated as Solar energy income of GBP1 million
(31 December 2021: GBP2 million; 30 June 2021: GBP1 million) shown in
Note 4, less Solar energy expenses of GBPnil (31 December 2021: GBP1
million; 30 June 2021: GBPnil) shown in Note 5.
3. The composition of gross and net rental income has changed in 2022 to
provide a better measure of the underlying rental income from the
property portfolio. Management and development fee income; service charge
income and expense; and solar energy income and expense are now presented
outside of gross and net rental income. Details of the change is
disclosed further in Note 4 and 5. Service charge income is netted
against the equal and opposite service charge expense and are not shown
as separate line items in the table above. There is no impact on Adjusted
operating profit before interest and tax from this change and the prior
period comparatives in the table above have been represented to reflect
this change.
3. SEGMENTAL REPORTING
The Group's reportable segments are the geographical business
units: Greater London (UK), Thames Valley (UK), National Logistics
(UK), Northern Europe (principally Germany), Southern Europe
(principally France and Italy) and Central Europe (principally
Poland), which are managed and reported to the Board as separate
and distinct Business Units.
Share of Total
joint directly
Gross ventures' Adjusted owned Investments
rental Net rental Adjusted operating property in joint Capital
income(4) Income(4) profit PBIT(2) assets ventures expenditure(3)
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
30 June
2022
Thames
Valley 57 53 -- 52 3,512 -- 59
National
Logistics 21 20 -- 22 2,039 -- 139
Greater
London 101 93 -- 92 8,066 13 271
Northern
Europe 15 11 14 28 1,053 1,037 40
Southern
Europe 41 32 18 56 2,397 1,350 160
Central
Europe 4 2 10 14 199 630 6
Other(1) -- (8)(1) (26)(1) (16)(1) -- (1,008) 3
Total 239 203 16 248 17,266 2,022 678
30 June
2021
Thames
Valley 41 39 -- 39 2,249 -- 15
National
Logistics 18 17 -- 17 1,438 1 94
Greater
London 85 78 -- 77 5,349 -- 79
Northern
Europe 13 9 12 24 765 834 27
Southern
Europe 35 27 16 49 1,939 1,116 217
Central
Europe 3 2 11 15 157 517 1
Other(1) -- (5) (7) (33) -- (848) 5
Total 195 167 32 188 11,897 1,620 438
31 December 2021
Thames
Valley 86 80 -- 79 3,102 -- 454
National
Logistics 35 33 -- 34 1,717 -- 213
Greater
London 173 163 -- 161 7,325 8 678
Northern
Europe 26 18 26 52 928 911 93
Southern
Europe 71 56 35 100 2,285 1,178 443
Central
Europe 7 4 22 31 180 559 22
Other(1) -- (13)(1) (27)(1) (61)(1) -- (861)(4) 7
Total 398 341 56 396 15,537 1,795 1,910
1. 'Other' category includes the corporate centre, SELP holding companies
and costs relating to the operational business which are not specifically
allocated to a geographical Business Unit. Additionally, in the period
ended 30 June 2022 and year ended 31 December 2021 the impact of the SELP
performance fee (detailed in Note 6) on Share of joint ventures Adjusted
profit (being the performance fee expense recognised by SELP of GBP21
million (31 December 2021: GBP13 million; 30 June 2021: GBPnil)) and
Adjusted PBIT (being the net profit impact to the Group of GBP21 million
(31 December 2021: GBP13 million; 30 June 2021: GBPnil)) is shown within
Other.
2. A reconciliation of total Adjusted PBIT to the IFRS profit before tax is
provided in Note 2.
3. Capital expenditure includes additions and acquisitions of investment and
trading properties but does not include tenant incentives, letting fees
and rental guarantees. Part of the capital expenditure incurred is in
response to climate change including the reduction of the carbon
footprint of the Group's existing investment properties and developments.
The "Other" category includes non-property related spend, primarily IT.
4. The composition of gross and net rental income has changed in 2022.
Management and development fee income, service charge income and expenses,
and solar energy income and expenses are now presented outside of gross
and net rental income. See Notes 4 and 5 for further details. The prior
period comparatives in the table above have been represented to reflect
this change.
4. REVENUE
Half year to Half year to
30 June 2022 30 June 2021(2) Year to 31 December
GBPm GBPm 2021(2) GBPm
Rental income from
investment and
trading properties 230 188 382
Rent averaging 8 5 13
Surrender premiums 1 2 3
Gross rental
income(1,2) 239 195 398
Joint venture fees -
management fees* 15 12 26
- performance fee* 42 -- 26
Joint venture fee
income 57 12 52
Management and
development fee
income*(2) 2 3 5
Service charge
income*(2) 22 21 42
Solar energy
income*(2) 1 1 2
Proceeds from sale of
trading properties* 9 14 47
Total revenue 330 246 546
* The above income streams are recognised under IFRS 15 Revenue
from Contracts with Customers and total GBP91 million (31 December
2021: GBP148 million; 30 June 2021: GBP51 million).
1. Net rental income of GBP203 million (31 December 2021: GBP341 million; 30
June 2021: GBP167 million) is calculated as gross rental income of GBP239
million (31 December 2021 GBP398 million; 30 June 2021: GBP195 million)
less total property operating expenses of GBP36 million (31 December
2021: GBP57 million; 30 June 2021: GBP28 million) shown in Note 5.
2. The composition of gross rental income within Total Revenue has changed
in 2022. Management and development fee, Service charge income and Solar
energy income are now presented outside of gross rental income. The prior
period comparatives in the table above have been represented to reflect
this change. Development fee income (31 December 2021: GBP2 million, 30
June 2021: GBP1 million) and Solar energy income (31 December 2021: GBP2
million, 30 June 2021: GBP1 million) were previously presented within the
Rental income from investment and trading properties line in the table
above.
5. COSTS
Half year to Half year to
30 June 2022 30 June 2021(3) Year to 31 December
GBPm GBPm 2021(3) GBPm
Vacant property costs 4 3 5
Letting, marketing,
legal and
professional fees 9 5 11
Loss allowance and
impairment of
receivables 1 1 --
Other expenses 6 5 11
Property management
expenses 20 14 27
Property
administration
expenses(1) 23 19 39
Costs capitalised(2) (7) (5) (9)
Total property
operating expenses 36 28 57
Service charge
expense(3) 22 21 42
Solar energy
expense(3) -- -- 1
Trading properties
cost of sales 7 13 40
Total costs 65 62 140
1. Property administration expenses predominantly relate to the employee
staff costs of personnel directly involved in managing the property
portfolio.
2. Costs capitalised relate to staff costs of those internal employees
directly involved in developing the property portfolio.
3. The composition of Property management expenses within Total expenses has
changed in 2022. Service charge expense and Solar energy expense are now
presented outside of Property management expenses. The prior period
comparatives in the table above have been represented to reflect this
change. Solar energy expense was previously presented within the Other
expenses line in the table above.
6. INVESTMENTS IN JOINT VENTURES AND SUBSIDIARIES
6(i) Share of profit from joint ventures after tax
Half year to Half year to Year to 31
30 June 2022 30 June 2021(4) December 2021(4)
GBPm GBPm GBPm
Revenue(1) 146 131 270
Gross rental income(4) 112 103 210
Property operating
expenses:
-underlying property
operating expenses (8) (6) (12)
-vacant property costs (1) (1) (2)
-property management
fees(2) (12) (10) (22)
-performance fees(3) (42) -- (26)
Net rental income(4) 49 86 148
Management fee income(4) 2 1 4
Administration expenses (2) (2) (3)
Net finance costs
(including
adjustments) (13) (13) (26)
Adjusted profit before
tax 36 72 123
Tax (4) (8) (11)
Adjusted profit after
tax 32 64 112
At share 16 32 56
-
Adjustments:
Profit on sale of
investment properties -- -- 19
Valuation surplus on
investment properties 343 435 974
Tax in respect of
adjustments (74) (79) (183)
Total adjustments 269 356 810
At share 135 178 405
Profit after tax 301 420 922
At share 151 210 461
Total comprehensive
income for the period 301 420 922
At share 151 210 461
1. Total revenue at 100 per cent of GBP146 million (31 December 2021: GBP270
million; 30 June 2021: GBP131 million) includes: Gross rental income
GBP112 million (31 December 2021: GBP210 million; 30 June 2021: GBP103
million); service charge income GBP32 million (31 December 2021: GBP56
million; 30 June 2021: GBP27 million); and management fee income of GBP2
million (31 December 2021: GBP4 million; 30 June 2021: GBP1 million).
Service charge income is netted against the equal and opposite service
charge expense in calculating Adjusted profit before tax.
2. Property management fees paid to SEGRO.
3. Performance fees recognised by SEGRO. See Fees section below for further
details.
4. The composition of gross and net rental income has changed in 2022.
Management fee income and service charge income and expense are now
presented outside of gross and net rental income. Service charge income
is netted against the equal and opposite service charge expense in the
table above and are not shown as separate line items. There is no impact
on Adjusted operating profit before interest and tax from this change and
the prior period comparatives in the table above have been represented to
reflect this change.
6(ii) Summarised balance sheet information of the Group's share
of joint ventures
As at As at
30 June 2022 30 June 2021 As at 31 December
GBPm GBPm 2021 GBPm
Investment properties 6,552 5,249 5,818
Property, plant and
equipment 2 -- --
Total non-current
assets 6,554 5,249 5,818
Trade and other
receivables 139 173 78
Cash and cash
equivalents 110 66 43
Total current assets 249 239 121
Total assets 6,803 5,488 5,939
-
Borrowings (1,974) (1,701) (1,723)
Deferred tax
liabilities (589) (412) (504)
Total non-current
liabilities (2,563) (2,113) (2,227)
Trade and other
liabilities (195) (136) (122)
Total current
liabilities (195) (136) (122)
Total liabilities (2,758) (2,249) (2,349)
Net assets 4,045 3,239 3,590
At share 2,022 1,620 1,795
Fees
SEGRO provides certain services, including venture advisory and
asset management, to the SELP joint venture and receives fees for
doing so.
A 10 year performance fee, denominated in euros, is payable from
SELP to SEGRO in October 2023 based on SELP's internal rate of
return ('IRR') subject to certain hurdle rates. The IRR calculation
is based on a 10 year performance period from the inception of SELP
in October 2013 to October 2023. The IRR calculation to determine
whether the hurdle rates will be met when the performance period
ends is currently an estimation and sensitive to movements and
assumptions in property valuations over the remaining performance
period.
In the year ended 31 December 2021, SEGRO recognised a
performance fee of GBP26 million (EUR29 million) in its Income
Statement. An equivalent performance fee expense was recognised
within the share of profit from joint ventures.
In the six months to 30 June 2022, SEGRO has recognised a
performance fee of GBP42 million (EUR50 million) (H1 2021: GBPnil)
in the Income Statement. When consolidating the SELP Group
financial statements into the SEGRO Group, an equivalent
performance fee expense of GBP42 million (GBP21 million at share)
has been recognised within the share of profit from joint ventures
and reflected in table 6(i) above.
This means the cumulative 10 year performance fee recognised by
SEGRO to 30 June 2022 totals GBP68 million (EUR79 million) (FY 2021
fee of GBP26 million plus HY 2022 fee of GBP42 million). The full
amount of the cumulative performance fee recognised is subject to
future reversal based on performance over the remaining period to
October 2023.
Performance fee income is recognised during the performance
period to the extent that it is highly probable there will not be a
significant future reversal and the fee can be reliably estimated.
None of the GBP42 million performance fee recognised in 2022 will
be reversed if property values fall by up to 17 per cent between 30
June 2022 and the end of the performance period in October 2023. If
property values fall by over 21 per cent all of the GBP42 million
performance fee recognised in the period would be reversed. If
property values fall by over 23 per cent all of the GBP68 million
cumulative performance fee recognised to date would be
reversed.
Based on SEGRO management's assessment of these sensitivities in
light of market conditions at the period end, the market outlook
and the track record of property market trends, management
considers it highly probable that there will not be a significant
reversal of the performance fee recognised in the period.
Sensitivity
Based on current estimates of the IRR of SELP from inception in
October 2013 to 30 June 2022, an additional performance fee (beyond
the cumulative fee of EUR79 million recognised to 30 June 2022) due
to SEGRO in October 2023 could be in the region of EUR288 million
(EUR144 million at share after accounting for the corresponding
performance fee expense recognised in SELP). However, this is
dependent on future events, in particular property valuation
movements, to the end of the performance period in October 2023.
The current estimate of the IRR is based on property values as at
30 June 2022: a 10 per cent decrease in property values would
result in a EUR162 million decrease in the estimated fee and a 10
per cent increase in property values would result in a EUR162
million increase in the estimated fee. If property values decreased
by 17 per cent no additional performance fee would be due beyond
the cumulative amount recognised to 30 June 2022. A further
performance fee above the GBP42 million recorded during the period
has not been recognised as management do not consider it highly
probable that there will not be a significant reversal.
7. REALISED AND UNREALISED PROPERTY GAIN
Half year to Half year to
30 June 2022 30 June 2021 Year to 31 December
GBPm GBPm 2021 GBPm
(Loss)/profit on sale
of investment
properties (1) 4 53
Valuation surplus on
investment properties 1,164 1,118 3,617
Decrease/(increase) in
provision for
impairment of trading
properties 9 -- (1)
Total realised and
unrealised property
gain 1,172 1,122 3,669
The above table does not include realised gains on sale of
trading properties of GBP2 million (31 December 2021: GBP7 million;
30 June 2021: GBP1 million) as detailed further in Note 2.
Total valuation surplus on investment and trading properties
total GBP1,345 million (31 December 2021: GBP4,103 million; 30 June
2021: GBP1,335 million). This comprises GBP1,164 million surplus
from investment properties (31 December 2021: GBP3,617 million; 30
June 2021: GBP1,118 million), GBP9 million reversal of impairment
from trading properties (31 December 2021: impairment of GBP1
million; 30 June 2021: GBPnil) and GBP172 million surplus from
joint ventures at share (31 December 2021: GBP487 million; 30 June
2021: GBP217 million).
Valuation surpluses are discussed further in the Chief
Executive's Review.
8. NET FINANCE COSTS
Half year to
30 June 2022 Half year to 30 Year to 31 December
Finance income GBPm June 2021 GBPm 2021 GBPm
Interest received on
bank deposits and
related
derivatives 11 16 24
Fair value gain on
interest rate swaps
and other
derivatives 25 7 11
Total finance income 36 23 35
Finance costs
Interest on
overdrafts, loans
and related
derivatives (43) (37) (67)
Amortisation of
issue costs (4) (1) (3)
Interest on lease
liabilities (1) (2) (3)
Total borrowing
costs (48) (40) (73)
Less amount
capitalised on the
development of
properties 6 4 9
Net borrowing costs (42) (36) (64)
Fair value loss on
interest rate swaps
and other
derivatives (175) (63) (93)
Exchange differences (1) -- --
Total finance costs (218) (99) (157)
Net finance costs (182) (76) (122)
Net finance costs (including adjustments) in Adjusted profit
(see Note 2) are GBP32 million (31 December 2021: GBP40 million; 30
June 2021: GBP20 million). This excludes net fair value loss on
interest rate swaps and other derivatives of GBP150 million (31
December 2021: loss of GBP82 million; 30 June 2021: loss of GBP56
million) in the table above.
9. TAX
9(i) Tax on profit
Half year to Half year to Year to
30 June 2022 30 June 2021 31 December 2021
GBPm GBPm GBPm
Tax:
On Adjusted profit (12) (3) (8)
In respect of adjustments
- French withholding tax (13) -- (145)
- SIIC entry charge -- (39) (38)
- Other (primarily in respect
of property valuation
movements) (16) (50) (97)
Total tax charge (41) (92) (288)
Current tax
Current tax charge (27) (23) (36)
French withholding tax -- -- (16)
SIIC entry charge -- (39) (38)
Total current tax charge (27) (62) (90)
Deferred tax
Origination and reversal of
temporary differences (5) (2) (34)
Released in respect of
property disposals in the
period 18 21 22
On valuation movements (25) (48) (173)
Total deferred tax in respect
of investment properties (12) (29) (185)
Other deferred tax (2) (1) (13)
Total deferred tax charge (14) (30) (198)
Total tax charge on profit on
ordinary activities (41) (92) (288)
The Group operates in a number of jurisdictions and is subject
to periodic challenges by local tax authorities on a range of tax
matters during the normal course of business. The tax impact can be
uncertain until a conclusion is reached with the relevant tax
authority or through a legal process. The Group uses in-house
expertise when assessing uncertain tax positions and seeks the
advice of external professional advisors where appropriate. The
Group believes that its accruals for tax liabilities are adequate
for all open tax years based on its assessment of many factors,
including tax laws and prior experience. The most significant
assessment relates to the recognition of withholding tax in
France.
9(ii) Deferred tax liabilities
Movement in deferred tax was as follows:
Balance
1 Balance Balance
January Exchange Acquisitions/ Recognised 30 June 30 June
2022 movement (disposals) in income 2022 2021
GBPm GBPm GBPm GBPm GBPm GBPm
Valuation surplus and
deficits on
properties/accelerated
tax allowances 259 8 -- 13 280 109
Others 15 -- -- 1 16 3
Total deferred tax
liabilities 274 8 -- 14 296 112
10. DIVIDS
Half year to Half year to Year to
30 June 2022 30 June 2021 31 December 2021
GBPm GBPm GBPm
Ordinary dividends paid
Final dividend for 2021 @
16.9 pence per share 203 -- --
Interim dividend for 2021 @
7.4 pence per share -- -- 89
Final dividend for 2020 @
15.2 pence per share -- 181 181
203 181 270
The Board has declared an interim dividend of 8.1 pence per
ordinary share (2021: 7.4 pence). This dividend has not been
recognised in the condensed financial statements.
11. EARNINGS AND NET ASSETS PER ORDINARY SHARE
The earnings per share calculations use the weighted average
number of shares in issue during the period and the net assets per
share calculations use the number of shares in issue at the period
end. Earnings per share calculations exclude 0.2 million shares
(0.2 million for the full year 2021 and 0.2 million for half year
2021) being the average number of shares held on trust during the
period for employee share schemes and net assets per share exclude
0.2 million shares (0.2 million for the full year 2021 and 0.2
million for the half year 2021) being the actual number of shares
held on trust for employee share schemes at the period end.
11(i) Earnings per ordinary share (EPS)
Half year to 30 June 2022 Half year to 30 June 2021 Year to 31 December 2021
Pence Pence Pence
Earnings Shares per Earnings Shares per Earnings Shares per
GBPm million share GBPm million share GBPm million share
Basic EPS 1,333 1,204.2 110.7 1,317 1,194.1 110.3 4,060 1,197.7 339.0
Dilution
adjustments:
Share and save
as you earn
schemes -- 3.3 (0.3) -- 2.9 (0.3) -- 3.3 (0.9)
Diluted EPS 1,333 1,207.5 110.4 1,317 1,197.0 110.0 4,060 1,201.0 338.1
Basic EPS 1,333 1,204.2 110.7 1,317 1,194.1 110.3 4,060 1,197.7 339.0
Adjustments to
profit before
tax(1) (1,159) (96.2) (1,245) (104.3) (3,999) (333.9)
Tax in respect
of Adjustments 29 2.4 89 7.5 280 23.4
Non-controlling
interest on
adjustments 1 -- 4 0.3 7 0.6
Adjusted Basic
EPS 204 1,204.2 16.9 165 1,194.1 13.8 348 1,197.7 29.1
Adjusted Diluted
EPS 204 1,207.5 16.9 165 1,197.0 13.8 348 1,201.0 29.0
1. Details of adjustments are included in Note 2.
11(II) NET ASSET VALUE PER SHARE (NAV)
The EPRA Net Tangible Assets (NTA) metric is considered to be
most consistent with the nature of SEGRO's business as a UK REIT
providing long-term progressive and sustainable returns. EPRA NTA
acts as the primary measure of net asset value and is also referred
to as Adjusted Net Asset Value (or Adjusted NAV).
A reconciliation from IFRS NAV to Adjusted NAV is set out in the
table below along with the net asset per share metrics.
Table 4 of the supplementary notes provides a reconciliation for
each of the three EPRA net asset value metrics.
As at 30 June 2022 As at 30 June 2021 As at 31 December 2021
Equity Equity Equity
attributable attributable attributable
to ordinary Pence to ordinary Pence to ordinary Pence
shareholders Shares per shareholders Shares per shareholders Shares per
GBPm million share GBPm million share GBPm million share
Basic NAV 14,695 1,208.9 1,216 10,783 1,200.0 899 13,436 1,202.3 1,118
Dilution
adjustments:
Share and
save as you
earn
schemes -- 3.2 (4) -- 2.5 (2) -- 3.2 (3)
Diluted NAV 14,695 1,212.1 1,212 10,783 1,202.5 897 13,436 1,205.5 1,115
Fair value
adjustment
in respect
of interest
rate
derivatives
-- Group 161 13 (1) -- 24 2
Fair value
adjustment
in respect
of trading
properties
-- Group 10 1 -- -- 1 --
Deferred tax
in respect
of
depreciation
and
valuation
surpluses --
Group(1) 139 12 55 5 129 11
Deferred tax
in respect
of
depreciation
and
valuation
surpluses --
Joint
ventures(1) 143 12 100 8 123 10
Intangible
assets (9) (1) (8) (1) (9) (1)
Adjusted NAV
(EPRA NTA) 15,139 1,212.1 1,249 10,929 1,202.5 909 13,704 1,205.5 1,137
1. 50 per cent of deferred tax in respect of depreciation and valuation
surpluses has been excluded in calculating Adjusted NAV in line with
option 3 of EPRA Best Practices Recommendations guidelines.
12. PROPERTIES
12(i) Investment properties
Completed Development Total
GBPm GBPm GBPm
At 1 January 2022 13,815 1,461 15,276
Exchange movement 71 16 87
Property acquisitions 108 220 328
Additions to existing investment properties 17 326 343
Disposals(2) (209) -- (209)
Transfers on completion of development and
completed properties taken back for
redevelopment (322) 322 --
Transfers from/(to) trading properties 3 (7) (4)
Revaluation surplus during the period 923 241 1,164
At 30 June 2022 14,406 2,579 16,985
Add tenant lease incentives, letting fees and
rental guarantees 152 -- 152
Investment properties excluding head lease
liabilities at 30 June 2022 14,558 2,579 17,137
Add head lease liabilities (ROU assets)(1) 72 -- 72
Total investment properties at 30 June 2022 14,630 2,579 17,209
Total investment properties at 30 June 2021 10,243 1,607 11,850
1. At 30 June 2022 investment properties included GBP72 million (31 December
2021: GBP70 million; 30 June 2021: GBP75 million) for the head lease
liabilities (ROU assets) recognised under IFRS 16.
2. Total disposals completed in H1 2022 of GBP181 million shown in the Chief
Executive's Review includes: Carrying value of investment properties
disposed by the Group of GBP209 million less loss generated on disposal
of GBP1 million (see Note 7); proceeds from the sale of trading
properties by the Group of GBP9 million (see Note 4); share of joint
venture investment properties disposal proceeds of GBP49 million;
carrying value of lease incentives, letting fees and rental guarantees
disposed by the Group and joint venture (at share) of GBP1 million; and
excludes 50 per cent of the disposal proceeds for assets sold by SEGRO to
SELP JV of GBP86 million (further discussed below).
Investment properties are stated at fair value based on external
valuations performed by professionally qualified, independent
valuers. The Group's wholly owned property portfolio and joint
venture properties were performed by CBRE Ltd (apart from one asset
valued by Knight Frank). The valuations conform to International
Valuation Standards and were arrived at by reference to market
evidence of the transaction prices paid for similar properties. In
estimating the fair value of the properties, the valuers consider
the highest and best use of the properties. All investment property
would be classified as level 3 fair value measurements, there has
been no change in the valuation technique and no significant
changes in the assumptions used during the period. The valuation
surplus recognised during the period is discussed further in the
Chief Executive's Review.
CBRE Ltd also undertake some professional and agency work on
behalf of the Group, although this is limited relative to the
activities provided by other advisors to the Group as a whole.
Sensitivity analysis
An increase/decrease to ERV will increase/decrease valuations,
while an increase/decrease to yield will decrease/increase
valuations. Sensitivity analysis showing the impact on valuations
of changes in yields and ERV on the property portfolio (including
joint ventures at share) and the impact on valuations of changes in
development costs on the development property and land portfolio
(including joint ventures at share) is shown below. Management
continues to consider a +/- 25bp change in yield, a +/- 5% change
in ERV and a +/- 10% change in development costs to be reasonably
possible changes to the assumptions.
Impact on
valuation
of 25bp
change in Impact on valuation
nominal Impact on valuation of 5% of 10% change in
equivalent change in estimated rental estimated development
yield value (ERV) costs
Group(1) Increase Decrease Increase Decrease Increase Decrease
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
30 June 2022
Completed
property 17,743 (1,155) 1,322 683 (680) -- --
Development
property
and land 2,737 (238) 260 285 (285) (299) 299
Group total
property
portfolio 20,480 (1,393) 1,582 968 (965) (299) 299
30 June 2021
Completed
property 12,662 (685) 692 472 (467) -- --
Development
property
and land 1,784 (139) 152 176 (176) (176) 176
Group total
property
portfolio 14,446 (824) 844 648 (643) (176) 176
31 December
2021
Completed
property 16,739 (1,057) 1,211 628 (625) -- --
Development
property
and land 1,638 (164) 172 192 (199) (232) 225
Group total
property
portfolio 18,377 (1,221) 1,383 820 (824) (232) 225
1. For further details see Table 7 of the supplementary notes.
There are interrelationships between all these inputs as they
are determined by market conditions. The existence of an increase
in more than one input would be to magnify the impact on the
valuation. The impact on the valuation will be mitigated by the
interrelationship of two inputs in opposite directions, e.g. an
increase in rent may be offset by an increase in yield.
Completed properties include buildings that are occupied or are
available for occupation. Development properties include land
available for development (land bank), land under development,
construction in progress and covered land. To provide additional
transparency over the future development pipeline of the Group, the
'covered land' category has been identified in the year. This new
category consists of income-producing assets acquired with the
explicit intention to take back for redevelopment in the short to
medium term. Valued on the balance sheet as land plus remaining
contracted income. As a result of the new covered land category,
GBP493 million of standing assets acquired in 2021 have been
identified as covered land, these assets were classified as
Completed property as at 31 December 2021 and during the period
transferred to Development property in the table above. The
carrying value of covered land held within Development properties
is GBP648 million (31 December 2021: GBPnil; 30 June 2021:
GBPnil).
At 30 June 2022 investment properties included GBP152 million
tenant lease incentives, letting fees and rent guarantees (31
December 2021: GBP146 million; 30 June 2021: GBP137 million).
The carrying value of investment properties situated on land
held under leaseholds amount to GBP216 million (excluding head
lease ROU assets) (31 December 2021: GBP206 million; 30 June 2021:
GBP183 million).
The disposals of completed properties during the period includes
properties with a carrying value of GBP172 million (31 December
2021: GBP231 million; 30 June 2021: GBP233 million) sold to the
SELP joint venture.
12(ii) Trading properties
The carrying value of trading properties at 30 June 2022 was
GBP57 million (31 December 2021: GBP45 million; 30 June 2021: GBP47
million). Based on the fair value at 30 June 2022, the portfolio
has unrecognised surplus of GBP10 million (31 December 2021: GBP1
million; 30 June 2021: GBPnil).
13. NET BORROWINGS AND FINANCIAL INSTRUMENTS
As at As at As at
30 June 2022 30 June 2021 31 December 2021
GBPm GBPm GBPm
In one year or less -- 1 --
In more than one year but
less than two 169 1 --
In more than two years but
less than five 759 210 877
In more than five years but
less than ten 1,757 909 1,308
In more than ten years 1,238 1,232 1,221
In more than one year 3,923 2,352 3,406
Total borrowings 3,923 2,353 3,406
Cash and cash equivalents (91) (78) (45)
Net borrowings 3,832 2,275 3,361
Total borrowings is split between secured
and unsecured as follows:
Secured (on land and
buildings) 2 13 2
Unsecured 3,921 2,340 3,404
Total borrowings 3,923 2,353 3,406
Currency profile of total
borrowings after derivative
instruments
Sterling 730 (113) 617
Euros 3,193 2,466 2,789
Total borrowings 3,923 2,353 3,406
Maturity profile of undrawn
borrowing facilities
In one year or less 17 9 8
In more than one year but
less than two 862 -- 630
In more than two years 825 896 210
Total available undrawn
facilities 1,704 905 848
Fair value of financial
instruments
Book value of debt 3,923 2,353 3,406
Interest rate derivatives 161 (1) 24
Foreign exchange
derivatives (13) (19) (32)
Book value of debt
including derivatives 4,071 2,333 3,398
Net fair market value 3,656 2,655 3,658
Mark to market adjustment
(pre-tax) (415) 322 260
In March 2022, SEGRO established a European Medium-Term Note
(EMTN) programme. Upon creation, SEGRO issued EUR650 million of
four year and EUR500 million of eight year unsecured green bonds.
The annual coupons were 1.25 per cent and 1.875 per cent
respectively.
Also in March 2022, SEGRO entered into an additional EUR1
billion multicurrency term loan facility maturing in March 2024.
This facility was undrawn at 30 June 2022.
In May 2022, SEGRO extended the maturity of its EUR1.2 billion
of revolving credit facilities for a further year to 2027. SELP
also extended maturity of its EUR500 million revolving credit
facility for a further year to 2026.
On 15 July 2022 SEGRO signed a EUR225 million US Private
Placement with a group of institutional investors (after being
arranged in June 2022). The transaction (which will fund on 22
September 2022) consists of two tranches: EUR50 million of notes at
a fixed coupon of 3.87 per cent and EUR175 million of notes at a
fixed coupon of 4.14 per cent.
The debt financing is discussed in more detail in the Financial
Position and Funding section.
Fair value measurements recognised in the Balance Sheet
The financial instruments that are measured subsequent to
initial recognition at fair value are equity investments, forward
exchange and currency swap contracts, interest rate swaps and
interest rate caps. Investments in equity securities traded in
active markets are classified as level 1. All other financial
instruments would be classified as level 2 fair value measurements,
as defined by IFRS 13, being those derived from inputs other than
quoted prices (included within level 1) that are observable for the
asset or liability, either directly (i.e. as prices) or indirectly
(i.e. derived from prices). There were no transfers between
categories in the current or prior periods.
The fair values of financial assets and financial liabilities
are determined as follows:
-- Forward foreign exchange contracts are measured using quoted forward
exchange rates and yield curves derived from quoted interest rates with
maturities matching the contracts.
-- Interest rate swaps, currency swap contracts and interest rate caps are
measured at the present value of future cash flows estimated and
discounted based on the applicable yield curves derived from quoted
interest rates and the appropriate exchange rate at the Balance Sheet
date.
-- The fair value of non-derivative financial assets and financial
liabilities traded on active liquid markets is determined with reference
to the quoted market prices.
14. NOTES TO THE CONDENSED GROUP CASH FLOW STATEMENT
14(i) Reconciliation of cash generated from operations
Half year to Year to
30 June 2022 Half year to 31 December 2021
GBPm 30 June 2021 GBPm GBPm
Operating profit 1,557 1,489 4,477
Adjustments for:
Depreciation of
property, plant and
equipment 2 2 5
Share of profit from
joint ventures after
tax (151) (210) (461)
Loss/(profit) on sale
of investment
properties 1 (4) (53)
Revaluation surplus
on investment
properties (1,164) (1,118) (3,617)
Other provisions (5) 5 9
240 164 360
Changes in working
capital:
Decrease in trading
properties 1 4 12
Increase in debtors
and tenant
incentives (55) (1) (49)
Increase in creditors 32 1 24
Net cash inflow
generated from
operations 218 168 347
14(ii) Analysis of net debt
Non-cash movements
At 1 At 30
January Cash Cash Exchange Other non-cash June
2022 inflow(1) Outflow(2) movement adjustments(3) 2022
GBPm GBPm GBPm GBPm GBPm GBPm
Bank loans
and loan
capital 3,429 1,833 (1,385) 83 -- 3,960
Capitalised
finance
costs (23) -- (18) -- 4 (37)
Total
borrowings 3,406 1,833 (1,403) 83 4 3,923
Cash in hand
and at
bank (45) (45) -- (1) -- (91)
Net debt 3,361 1,788 (1,403) 82 4 3,832
1. Proceeds from borrowings of GBP1,833 million.
2. Cash outflow of GBP1,403 million, comprises the repayment of borrowings
of GBP1,385 million and capitalised costs of GBP18 million.
3. The other non-cash adjustments relate to the amortisation of issue costs
offset against borrowings.
15. RELATED PARTY TRANSACTIONS
There have been no undisclosed material changes in the related
party transactions as described in the last annual report, other
than those disclosed in Note 6 and 12 in this condensed set of
financial statements.
16. SUBSEQUENT EVENTS
There have been no subsequent events other than those disclosed
in Note 13.
SUPPLEMENTARY NOTES NOT PART OF CONDENSED FINANCIAL
INFORMATION
TABLE 1: EPRA PERFORMANCE MEASURES SUMMARY
Half year to Half year to Year to 31
30 June 2022 30 June 2021 December 2021
Pence Pence Pence
per per per
Notes GBPm share GBPm share GBPm share
Table
EPRA Earnings 6 204 16.9 165 13.8 348 29.1
EPRA NTA (Adjusted Table
NAV) 4 15,139 1,249 10,929 909 13,704 1,137
Table
EPRA NRV 4 16,520 1,363 11,868 987 14,986 1,243
Table
EPRA NDV 4 15,257 1,259 10,432 868 13,155 1,091
Table
EPRA LTV 5 25.1% 23.9% 24.5%
EPRA net initial Table
yield 7 2.9% 3.5% 3.0%
EPRA 'topped up'
net initial Table
yield 7 3.2% 3.8% 3.3%
Table
EPRA vacancy rate 8 3.3% 4.3% 3.2%
EPRA cost ratio
(including vacant Table
property costs) 9 20.5% 19.8% 20.2%
EPRA cost ratio
(excluding vacant Table
property costs) 9 19.0% 18.4% 19.0%
TABLE 2: INCOME STATEMENT, PROPORTIONALLY CONSOLIDATED
Half year to 30 June Half year to 30 June Year to 31 December
2022 2021 2021
Group JV Total Group JV Total Group JV Total
Notes GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Gross rental income 2, 6 239 56 295 195 51 246 398 105 503
Property operating
expenses 2, 6 (36) (4) (40) (28) (4) (32) (57) (7) (64)
Net rental income(2) 203 52 255 167 47 214 341 98 439
Joint venture fee
income(1) 2 57 (27) 30 12 (5) 7 52 (24) 28
Management and
development fee
income(2) 2 2 1 3 3 1 4 5 2 7
Net solar energy
income(2) 2 1 -- 1 1 -- 1 1 -- 1
Administration expenses 2 (31) (1) (32) (27) (1) (28) (59) (2) (61)
Adjusted operating
profit before interest
and tax 232 25 257 156 42 198 340 74 414
Net finance costs
(including
adjustments) 2, 6 (32) (7) (39) (20) (6) (26) (40) (13) (53)
Adjusted profit before
tax 200 18 218 136 36 172 300 61 361
Tax on adjusted profit 2, 6 (12) (2) (14) (3) (4) (7) (8) (5) (13)
Adjusted earnings before
non-controlling
interests 188 16 204 133 32 165 292 56 348
Non-controlling interest
on adjusted profit -- -- -- -- -- -- -- -- --
Adjusted/EPRA earnings after
tax and non-controlling
interests 188 16 204 133 32 165 292 56 348
Number of shares,
million 1,204.2 1,194.1 1,197.7
Adjusted/EPRA EPS, pence per
share 16.9 13.8 29.1
Number of shares,
million 1,207.5 1,197.0 1,201.0
Adjusted/EPRA EPS, pence per share --
diluted 16.9 13.8 29.0
1. Joint venture fee income includes the cost of such fees borne by the
joint ventures which are shown in Note 6 within net rental income.
2. The composition of gross and net rental income has changed in 2022 to
give a better measure of the underlying rental income from the property
portfolio. Management and development fee income; service charge income
and expense; and solar energy income and expense are now presented
outside of gross and net rental income. Details of the change is
disclosed further in Notes 4, 5 and 6. Service charge income is netted
against the equal and opposite service charge expense and are not shown
as separate line items in the table above. There is no impact on Adjusted
operating profit before interest and tax from this change and the prior
period comparatives in the table above have been represented to reflect
this change.
As discussed in Note 2 there were no non-EPRA adjustments to
underlying profit made in the current period or prior periods,
therefore Adjusted earnings is equal to EPRA earnings in the table
above.
TABLE 3: BALANCE SHEET, PROPORTIONAL CONSOLIDATION
As at 30 June 2022 As at 30 June 2021 As at 31 December 2021
Group JV Total Group JV Total Group JV Total
Notes GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Investment
properties 12, 6 17,209 3,276 20,485 11,850 2,624 14,474 15,492 2,909 18,401
Trading
properties 12, 6 57 -- 57 47 -- 47 45 -- 45
Total
properties 17,266 3,276 20,542 11,897 2,624 14,521 15,537 2,909 18,446
Investment in
joint
ventures 6 2,022 (2,022) -- 1,620 (1,620) -- 1,795 (1,795) --
Other net
liabilities (761) (322) (1,083) (459) (187) (646) (535) (274) (809)
Net borrowings 13,6 (3,832) (932) (4,764) (2,275) (817) (3,092) (3,361) (840) (4,201)
Total
shareholders'
equity(1) 14,695 -- 14,695 10,783 -- 10,783 13,436 -- 13,436
EPRA
adjustments 11 444 146 268
Adjusted NAV 11 15,139 10,929 13,704
Number of
shares,
million 11 1,212.1 1,202.5 1,205.5
Adjusted NAV
pence per
share 11 1,249 909 1,137
1. After non-controlling interests.
The portfolio valuation uplift of 7.2 per cent shown in the
Chief Executive's Review is not directly derivable from the
condensed financial statements and is calculated to be comparable
with published MSCI Real Estate indices against which SEGRO are
measured. Based on the condensed financial statements there is a
valuation surplus of GBP1,345 million (see Note 7) and property
value of GBP20,480 million (see Table 7) giving a valuation uplift
of 7.0 per cent. The primary differences are that the uplift
excludes the impact of rent-free incentives (GBP8 million, +0.1 per
cent) and other movements (GBP20 million, +0.1 per cent) primarily
due to foreign exchange based on closing rate as opposed to average
used in the condensed financial statements.
TABLE 4: EPRA NET ASSET MEASURES
The European Public Real Estate Association ('EPRA') Best
Practices Recommendations (BPR) for financial disclosures by public
real estate companies sets out three net asset value measures: EPRA
net tangible assets (NTA), EPRA net reinstatement value (NRV) and
EPRA net disposal value (NDV).
The EPRA Net Tangible Assets (NTA) metric is considered to be
most consistent with the nature of SEGRO's business as a UK REIT
providing long-term progressive and sustainable returns. EPRA NTA
acts as the primary measure of net asset value and is also referred
to as Adjusted Net Asset Value (or Adjusted NAV).
A reconciliation of the three EPRA NAV metrics from IFRS NAV is
shown in the table below.
EPRA measures
EPRA NTA
As at 30 June 2022 (Adjusted NAV) EPRA NRV EPRA NDV
GBPm GBPm GBPm
Equity attributable to ordinary
shareholders 14,695 14,695 14,695
Fair value adjustment in respect of
interest rate derivatives -- Group 161 161 --
Fair value adjustment in respect of
trading properties -- Group 10 10 10
Deferred tax in respect of depreciation
and valuation surpluses -- Group(1) 139 278 --
Deferred tax in respect of depreciation
and valuation surpluses -- Joint
ventures(1) 143 286 --
Intangible assets (9) -- --
Fair value adjustment in respect of debt
-- Group -- -- 415
Fair value adjustment in respect of debt
-- Joint ventures -- -- 137
Real estate transfer tax(2) -- 1,090 --
Net assets 15,139 16,520 15,257
Diluted shares (million) 1,212.1 1,212.1 1,212.1
Diluted net assets per share 1,249 1,363 1,259
1. 50 per cent of deferred tax in respect of depreciation and valuation
surpluses has been excluded in calculating EPRA NTA in line with option 3
of EPRA BPR guidelines.
2. EPRA NTA and EPRA NDV reflect IFRS values which are net of purchasers'
costs. Purchasers' costs are added back when calculating EPRA NRV.
EPRA measures
EPRA NTA
As at 30 June 2021 (Adjusted NAV) EPRA NRV EPRA NDV
GBPm GBPm GBPm
Equity attributable to ordinary
shareholders 10,783 10,783 10,783
Fair value adjustment in respect of
interest rate derivatives -- Group (1) (1) --
Fair value adjustment in respect of
trading properties -- Group -- -- --
Deferred tax in respect of depreciation
and valuation surpluses -- Group(1) 55 110 --
Deferred tax in respect of depreciation
and valuation surpluses -- Joint
ventures(1) 100 200 --
Intangible assets (8) -- --
Fair value adjustment in respect of debt
-- Group -- -- (322)
Fair value adjustment in respect of debt
-- Joint ventures -- -- (29)
Real estate transfer tax(2) -- 776 --
Net assets 10,929 11,868 10,432
Diluted shares (million) 1,202.5 1,202.5 1,202.5
Diluted net assets per share 909 987 868
1. 50 per cent of deferred tax in respect of depreciation and valuation
surpluses has been excluded in calculating EPRA NTA in line with option 3
of EPRA BPR guidelines.
2. EPRA NTA and EPRA NDV reflect IFRS values which are net of purchasers'
costs. Purchasers' costs are added back when calculating EPRA NRV.
EPRA measures
EPRA NTA
As at 31 December 2021 (Adjusted NAV) EPRA NRV EPRA NDV
GBPm GBPm GBPm
Equity attributable to ordinary
shareholders 13,436 13,436 13,436
Fair value adjustment in respect of
interest rate derivatives -- Group 24 24 --
Fair value adjustment in respect of
trading properties -- Group 1 1 1
Deferred tax in respect of depreciation
and valuation surpluses -- Group(1) 129 259 --
Deferred tax in respect of depreciation
and valuation surpluses -- Joint
ventures(1) 123 245 --
Intangible assets (9) -- --
Fair value adjustment in respect of debt
-- Group -- -- (260)
Fair value adjustment in respect of debt
-- Joint ventures -- -- (22)
Real estate transfer tax(2) -- 1,021 --
Net assets 13,704 14,986 13,155
Diluted shares (million) 1,205.5 1,205.5 1,205.5
Diluted net assets per share 1,137 1,243 1,091
1. 50 per cent of deferred tax in respect of depreciation and valuation
surpluses has been excluded in calculating EPRA NTA in line with option 3
of EPRA BPR guidelines.
2. EPRA NTA and EPRA NDV reflect IFRS values which are net of purchasers'
costs. Purchasers' costs are added back when calculating EPRA NRV.
TABLE 5: EPRA LTV, PROPORTIONAL CONSOLIDATION
As at 30 June
2022 As at 30 June 2021 As at 31 December 2021
Group JV Total Group JV Total Group JV Total
Notes GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Borrowings(1,2) 1,493 130 1,623 1,038 1 1,039 1,966 28 1,994
Bonds(1,2) 2,430 857 3,287 1,315 849 2,164 1,440 834 2,274
Exclude:
Cash and cash
equivalents 13 (91) (55) (146) (78) (33) (111) (45) (22) (67)
Net Debt (a) 3,832 932 4,764 2,275 817 3,092 3,361 840 4,201
Foreign currency
derivatives 13 (13) -- (13) (19) -- (19) (32) -- (32)
Net
payables(3,4) 385 28 413 418 (18) 400 329 22 351
EPRA Net Debt
(b) 4,204 960 5,164 2,674 799 3,473 3,658 862 4,520
Investment
properties at
fair value
(excluding head
lease ROU
asset) 12 17,137 3,276 20,413 11,775 2,624 14,399 15,422 2,909 18,331
Trading
properties 12 57 -- 57 47 -- 47 45 -- 45
Total Property
Value (c) 17,194 3,276 20,470 11,822 2,624 14,446 15,467 2,909 18,376
Head lease ROU
asset 12 72 -- 72 75 -- 75 70 -- 70
Unrecognised
valuation
surplus on
trading
properties 12 10 -- 10 -- -- -- 1 -- 1
Other interest
in property 28 -- 28 16 -- 16 24 -- 24
Intangibles 9 -- 9 8 -- 8 9 -- 9
EPRA Total
Property Value
(d) 17,313 3,276 20,589 11,921 2,624 14,545 15,571 2,909 18,480
LTV (a/c) 22.3% 23.3% 19.2% 21.4% 21.7% 22.9%
EPRA LTV (b/d) 24.3% 25.1% 22.4% 23.9% 23.5% 24.5%
1. Total Group borrowings as at 30 June 2022 per Note 13 of GBP3,923 million
(30 June 2021: GBP2,353 million; 31 December 2021: GBP3,406 million)
consists of: Borrowings from financial institutions of GBP1,493 million
(30 June 2021: GBP1,038 million; 31 December 2021: GBP1,966 million) and
Bond loans of GBP2,430 million (30 June 2021: GBP1,315 million; 31
December 2021: GBP1,440 million).
2. JV borrowings as at 30 June 2022 per Note 6 of GBP987 million at share
(30 June 2021: GBP850 million; 31 December 2021: GBP862 million) consists
of: Borrowings from financial institutions of GBP130 million (30 June
2021: GBP1 million; 31 December 2021: GBP28 million) and Bond loans of
GBP857 million (30 June 2021: GBP849 million; 31 December 2021: GBP834
million).
3. Group net payables is calculated as the net position of the following
line items shown on the Balance Sheet: Non-current other receivables,
current trade and other receivables, non-current trade and other payables,
non-current tax liabilities, current trade and other payables and current
tax liabilities.
4. JV net payables is calculated as the net position of the following line
items shown in Note 6: Current trade and other receivables and current
trade and other liabilities.
TABLE 6: EPRA EARNINGS
Half year to Half year to Year to
30 June 2022 30 June 2021 31 December 2021
Notes GBPm GBPm GBPm
Earnings per IFRS
income statement 1,333 1,317 4,060
Adjustments to
calculate EPRA
Earnings, exclude:
Valuation surplus on
investment
properties 7 (1,164) (1,118) (3,617)
Loss/(profit) on
sale of investment
properties 7 1 (4) (53)
Profit on sale of
trading properties 7 (2) (1) (7)
(Decrease)/increase
in provision for
impairment of
trading properties 7 (9) -- 1
Tax on profits on
disposals(1) 9 16 29 10
Net fair value loss
on interest rate
swaps and other
derivatives 8 150 56 82
Deferred tax in
respect of EPRA
adjustments(1) 13 21 232
SIIC entry tax
charge(1) 9 -- 39 38
Adjustments to the
share of profit
from joint ventures
after tax 6 (135) (178) (405)
Non-controlling
interests in
respect of the
above 2 1 4 7
EPRA earnings 204 165 348
Basic number of
shares, million 11 1,204.2 1,194.1 1,197.7
EPRA Earnings per
Share (EPS) 16.9 13.8 29.1
Company specific
adjustments:
Non-EPRA adjustments 2 -- -- --
Adjusted earnings 204 165 348
Adjusted EPS 16.9 13.8 29.1
1. Total tax charge in respect of adjustments per Note 2 of GBP29 million
(H1 2021: GBP89 million, FY 2021: GBP280 million) comprises tax charge on
profits on disposals of GBP16 million (H1 2021: GBP29 million, FY 2021:
GBP10 million), deferred tax charge of GBP13 million (H1 2021: GBP21
million, FY 2021: GBP232 million) and SIIC entry tax charge of GBPnil (H1
2021: GBP39 million, FY 2021: GBP38 million).
TABLE 7: EPRA NET INITIAL YIELD AND TOPPED-UP NET INITIAL
YIELD
Combined property portfolio including Continental
joint ventures at share -- 30 June UK Europe Total
2022 Notes GBPm GBPm GBPm
Total properties per financial
statements Table 3 13,626 6,916 20,542
Add valuation surplus not recognised
on trading properties(1) 3 7 10
Less head lease ROU assets 12 -- (72) (72)
Combined property portfolio per
external valuers' report(4) 13,629 6,851 20,480
Less development properties
(investment, trading and joint
venture) (1,969) (768) (2,737)
Net valuation of completed properties 11,660 6,083 17,743
Add notional purchasers' costs 792 298 1,090
Gross valuation of completed
properties including notional
purchasers' costs A 12,452 6,381 18,833
Income
Gross passing rents(2) 337 220 557
Less irrecoverable property costs (2) (8) (10)
Net passing rents B 335 212 547
Adjustment for notional rent in
respect of rent frees 24 26 50
Topped up net rent C 359 238 597
Including fixed/minimum uplifts(3) 10 1 11
Total topped up net rent 369 239 608
Continental
UK Europe Total
Yields -- 30 June 2022 % % %
EPRA net initial yield(4) B/A 2.7 3.3 2.9
EPRA topped up net initial yield(4) C/A 2.9 3.7 3.2
True net equivalent yield 3.7 4.0 3.8
1. Trading properties are recorded in the Financial Statements at the lower
of cost and net realisable value, therefore valuations above cost have
not been recognised.
2. Gross passing rent excludes short term lettings and licences.
3. Certain leases contain clauses which guarantee future rental increases,
whereas most leases contain five yearly, upwards-only rent review clauses
(UK) or indexation clauses (Continental Europe).
4. In accordance with the Best Practices Recommendations of EPRA.
5. Total assets under management of GBP23,756 million includes Combined
property portfolio (including JV at 50 per cent share) of GBP20,480
million plus 50 per cent of JV properties not owned but under management
of GBP3,276 million.
TABLE 8: EPRA VACANCY RATE
Half year to Half year to Year to
30 June 2022 30 June 2021 31 December 2021
GBPm GBPm GBPm
Annualised potential rental
value of vacant premises 24 24 22
Annualised potential rental
value for the completed
property portfolio 729 567 693
EPRA vacancy rate(1) 3.3% 4.3% 3.2%
1. EPRA vacancy rate has been calculated using the figures presented in the
table above in millions accurate to one decimal place.
TABLE 9: TOTAL COST RATIO / EPRA COST RATIO
Half year to Half year to Year to 31
30 June 2022 30 June 2021(5) December 2021(5)
Total cost ratio Notes GBPm GBPm GBPm
Costs
Property operating
expenses(1) 5 36 28 57
Administration
expenses 31 27 59
Share of joint
venture property
operating and
administration
expenses(2) 6 11 10 20
Less:
Joint venture
property
management fee
income,
management fees
and other costs
recovered through
rents but not
separately
invoiced(3) (18) (16) (34)
Total costs (A) 60 49 102
Gross rental
income
Gross rental
income 4 239 195 398
Share of joint
venture property
gross rental
income 6 56 51 105
Less:
Other costs
recovered through
rents but not
separately
invoiced(3) (1) (1) (3)
Total gross rental
income (B) 294 245 500
Total cost ratio
(A)/(B)(4) 20.5% 19.8% 20.2%
Total costs (A) 60 49 102
Share-based
payments (5) (6) (13)
Total costs after
share based
payments (C) 55 43 89
Total cost ratio
after share based
payments
(C)/(B)(4) 18.7% 17.4% 17.6%
EPRA cost ratio
Total costs (A) 60 49 102
Non-EPRA
adjustments -- -- --
EPRA total costs
including vacant
property costs
(D) 60 49 102
Group vacant
property costs (4) (3) (5)
Share of joint
venture vacant
property costs - (1) (1)
EPRA total costs
excluding vacant
property costs
(E) 56 45 96
Total gross rental
income (B) 294 245 500
Total EPRA costs
ratio (including
vacant property
costs)
(D)/(B)(4) 20.5% 19.8% 20.2%
Total EPRA costs
ratio (excluding
vacant property
costs)
(E)/(B)(4) 19.0% 18.4% 19.0%
1. Property operating expenses are net of costs capitalised in accordance
with IFRS of GBP7 million (H1 2021: GBP5 million, FY 2021: GBP9 million)
(see Note 5 for further detail on the nature of costs capitalised).
2. Share of joint venture property operating and administration expenses
after deducting costs related to performance fees.
3. Total deduction of GBP18 million (H1 2021: GBP16 million, FY 2021: GBP34
million) from costs includes: joint venture management fees income of
GBP15 million (H1 2021: GBP12 million, FY 2021: GBP26 million) and
management fees and other costs recovered through rents but not
separately invoiced, including joint ventures, of GBP3 million (H1 2021:
GBP4 million, FY 2021: GBP8 million). These items have been represented
as an offset against costs rather than a component of income in
accordance with EPRA BPR Guidelines as they are reimbursing the Group for
costs incurred. Gross rental income of GBP239 million (H1 2021: GBP195
million, FY 2021: GBP398 million) does not include joint venture
management fees income of GBP15 million (H1 2021: GBP12 million, FY 2021:
GBP26 million) and management fee income of GBP2 million (H1 2021: GBP3
million, FY 2021: GBP5 million) these fees are not required to be
included in the total deduction to income of GBP1 million (H1 2021: GBP1
million, FY 2021: GBP3 million).
4. Cost ratio percentages have been calculated using the figures presented
in the table above in millions accurate to one decimal place.
5. As detailed in Note 4 and 5, the composition of Gross rental income and
Property operating expenses have changed in 2022. The prior period
comparatives have been represented in the table above to reflect the
impact on the cost ratio calculation. This change resulted in Total gross
rental income decreasing by GBP4 million for FY 2021 and GBP2 million for
H1 2021 to exclude Solar energy income and Development fee income which
is no longer included within Gross rental income. Total Costs decreased
GBP1 million for FY 2021 and GBPnil for H1 2021 to exclude Solar energy
expenses. This had nil impact on the cost ratio percentage when
calculating using the represented figures presented in the table above in
millions accurate to one decimal place.
GLOSSARY OF TERMS
Completed portfolio: The completed investment properties and the
Group's share of joint ventures' completed investment properties.
Includes properties held throughout the period, completed
developments and properties acquired during the period.
Covered land: Income-producing assets acquired with the explicit
intention to take back for redevelopment in the short to medium
term. Valued on the balance sheet as land plus remaining contracted
income.
Development pipeline: The Group's current programme of
developments authorised or in the course of construction at the
balance sheet date (current development pipeline), together with
potential schemes not yet commenced on land owned or controlled by
the Group (future development pipeline). Within the future
development pipeline are pre-let development projects which
management expects to approve over the next twelve months or which
have been approved but are subject to final planning approval or
other conditions being met ("near-term" development pipeline).
EPRA: The European Public Real Estate Association, a real estate
industry body, which has issued Best Practices Recommendations
Guidelines in order to provide consistency and transparency in real
estate reporting across Europe.
Estimated cost to completion: Costs still to be expended on a
development or redevelopment to practical completion, including
attributable interest.
Estimated rental value (ERV): The estimated annual market rental
value of lettable space as determined biannually by the Group's
valuers. This will normally be different from the rent being
paid.
Gearing: Net borrowings divided by total shareholders' equity
excluding intangible assets and deferred tax provisions.
Gross rental income: Contracted rental income recognised in the
period in the Income Statement, including surrender premiums. Lease
incentives, initial costs and any contracted future rental
increases are amortised on a straight line basis over the lease
term.
Headline rent: The annual rental income currently receivable on
a property as at the balance sheet date (which may be more or less
than the ERV) ignoring any rent-free period.
Hectares (Ha): The area of land measurement used in this
analysis. The conversion factor used, where appropriate, is 1
hectare = 2.471 acres.
Investment property: Completed land and buildings held for
rental income return and/or capital appreciation.
Joint venture: An entity in which the Group holds an interest
and which is jointly controlled by the Group and one or more
partners under a contractual arrangement whereby decisions on
financial and operating policies essential to the operation,
performance and financial position of the venture require each
partner's consent.
Loan to value (LTV): Net borrowings divided by the carrying
value of total property assets (investment, owner occupied and
trading properties and excludes head lease ROU asset). This is
reported on a 'look--through' basis (including joint ventures at
share) except where stated.
MSCI: MSCI Real Estate calculates indices of real estate
performance around the world.
Net debt: Borrowings less cash and cash equivalents.
Net initial yield: Passing rent less non recoverable property
expenses such as empty rates, divided by the property valuation
plus notional purchasers' costs. This is in accordance with EPRA's
Best Practices Recommendations.
Net rental income: Gross rental income less ground rents paid
and property operating expenses.
Net true equivalent yield: The internal rate of return from an
investment property, based on the value of the property assuming
the current passing rent reverts to ERV and assuming the property
becomes fully occupied over time. Rent is assumed to be paid
quarterly in advance, in line with standard UK lease terms.
Passing rent: The annual rental income currently receivable on a
property as at the Balance Sheet date (which may be more or less
than the ERV). Excludes rental income where a rent free period is
in operation. Excludes service charge income.
Pre-let: A lease signed with an occupier prior to commencing
construction of a building.
REIT: A qualifying entity which has elected to be treated as a
Real Estate Investment Trust for tax purposes. In the UK, such
entities must be listed on a recognised stock exchange, must be
predominantly engaged in property investment activities and must
meet certain ongoing qualifications. SEGRO plc and its UK
subsidiaries achieved REIT status with effect from 1 January
2007.
Rent-free period: An incentive provided usually at commencement
of a lease during which a customer pays no rent. The amount of rent
free is the difference between passing rent and headline rent.
Rent roll: See Passing Rent.
SELP: SEGRO European Logistics Partnership, a 50-50 joint
venture between SEGRO and Public Sector Pension Investment Board
(PSP Investments).
SIIC: Sociétés d'investissements Immobiliers Cotées are the
French equivalent of UK Real Estate Investment Trusts (see
REIT).
Speculative development: Where a development has commenced prior
to a lease agreement being signed in relation to that
development.
Square metres (sq m): The area of buildings measurements used in
this analysis. The conversion factor used, where appropriate, is
one square metre = 10.7639 square feet.
Take-back: Rental income lost due to lease expiry, exercise of
break option, surrender or insolvency.
Topped up net initial yield: Net initial yield adjusted to
include notional rent in respect of let properties which are
subject to a rent free period at the valuation date. This is in
accordance with EPRA's Best Practices Recommendations.
Total accounting return (TAR): A measure of the growth in Net
Asset Value (NAV) per share calculated as change in Adjusted NAV
per share in the period plus dividend per share paid in the period,
expressed as a percentage of Adjusted NAV per share at the
beginning of the period.
Total property return (TPR): A measure of the ungeared return
for the portfolio and is calculated as the change in capital value,
less any capital expenditure incurred, plus net income, expressed
as a percentage of capital employed over the period concerned, as
calculated by MSCI Real Estate and excluding land.
Total shareholder return (TSR): A measure of return based upon
share price movement over the period and assuming reinvestment of
dividends.
Trading property: Property being developed for sale or one which
is being held for sale after development is complete.
Yield on cost: The expected gross yield based on the estimated
current market rental value (ERV) of the developments when fully
let, divided by the book value of the developments at the earlier
of commencement of the development or the balance sheet date, plus
future development costs and estimated finance costs to
completion.
Yield on new money: The yield on cost excluding the book value
of land if the land is owned by the Group in the reporting period
prior to commencement of the development.
CONTACT DETAILS FOR INVESTOR / ANALYST AND MEDIA ENQUIRIES:
SEGRO
Soumen Das (Chief Financial Officer)
Tel: + 44 (0) 20 7451 9110
(after 11am)
Claire Mogford (Head of Investor Relations)
Mob: +44 (0) 7710 153 974
Tel: +44 (0) 20 7451 9048
(after 11am)
FTI Consulting
Richard Sunderland / Ellie Sweeney / Eve Kirmatzis
Tel: +44 (0) 20 3727 1000
View source version on businesswire.com:
https://www.businesswire.com/news/home/20220727005603/en/
CONTACT:
SEGRO
SOURCE: SEGRO PLC
Copyright Business Wire 2022
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