2023 Half Year Results

Commenting on the results, David Sleath, Chief Executive, said:

“SEGRO has performed well during the first six months of 2023, delivering rental growth from our standing portfolio and from our largely pre-let development programme. We have made great progress in capturing reversion, delivering an average rental uplift of 20 per cent at lease events during the period in addition to contracted indexation, whilst customer retention has increased significantly to 85 per cent.

“The structural drivers of occupier demand remain evident across the UK and Europe, whilst supply remains constrained in our chosen markets, helping to drive rental growth in line with our expectations.

“Valuations have been relatively stable in the first half of this year, following the deep valuation correction in the latter part of 2022. The increased volume of transactions in the last quarter indicates that investors see value at the current levels of pricing for prime industrial and logistics assets, given the positive long-term outlook for our sector.

“We have significant opportunities to drive rent and create value both within our standing portfolio and through the execution of our profitable development programme. These factors give us confidence in our ability to deliver attractive growth and returns into the years ahead.”

Highlights^A:

• Adjusted pre-tax profit of £198 million up 2.6 per cent compared with the prior year (H1 2022: £193 million1), Adjusted EPS is 15.9 pence, up 1.9 per cent (H1 2022: 15.6 pence1) excluding the impact of performance fees from our SELP joint venture.
• Adjusted NAV per share is down 3.0 per cent to 937 pence (31 December 2022: 966 pence) driven by a 1.4 per cent decrease in the valuation of the portfolio (UK -0.6 per cent, CE -2.7 per cent), due to outward yield shift, mitigated by 3.7 per cent growth in estimated rental values during the first half of the year.
• Like-for-like rental growth of 5.1 per cent and £44 million of new headline rent commitments generated during the six-month period (H1 2022: £55 million), driven by our customer focus and active management of the portfolio.
• 340,900 sq m of development completions were delivered, equating to £28 million of potential rent, of which 83 per cent of which is leased. 85 per cent of these completions were BREEAM ‘Excellent’ certification (or local equivalent).
• Future rent roll growth supported by our active development pipeline with 740,800 sq m of projects under construction or in advanced pre-let discussions equating to £76 million of potential rent (31 December 2022: 915,600 sq m, £86 million), of which 70 per cent is associated with pre-lets signed or in advanced negotiations, substantially de-risking the 2023-24 pipeline. Yield on cost for these projects is 7.2 per cent.
• Strong balance sheet, with a modest level of gearing and significant liquidity. LTV of 34 per cent at 30 June 2023 (31 December 2022: 32 per cent) and access to £1.7 billion of cash and committed bank facilities. 
• Attractive cost of debt due to our diverse, long-term debt structure. No major debt maturities until 2026 and 91 per cent of debt is fixed or capped with half of the caps active until 2029. Average cost of debt at 30 June 2023 was 2.9 per cent (31 December 2022: 2.5 per cent).
• Interim dividend increased by 7.4 per cent to 8.7 pence (2022: 8.1 pence).