SEGRO plc · LSE:SGRO

SEGRO — FY2014 Earnings Presentation

47 slides from SEGRO's earnings presentation, Feb 25, 2015

  1. Slide 1: 2014 Full Year Results

    2014 Full Year Results 25th February 2015

  2. Slide 2: Strategic Progress Is Paying Dividends

    STRATEGIC PROGRESS IS PAYING DIVIDENDS  Strategic repositioning programme largely complete  Strong operational performance  23% increase in NAV  Well placed to deliver in 2015 and beyond 0.3 pence increase in the final dividend to 10.2p 2

  3. Slide 3: Financial Review

    Financial Review Justin Read, Group Finance Director SR Technics, North Feltham

  4. Slide 4: Financial Highlights

    FINANCIAL HIGHLIGHTS 2014 2013 Change EPRA PBT (£m) 129.7 134.1 (3.3)% EPRA EPS (pence) 17.2 17.7 (2.8)% Dividend per share (pence) 15.1 14.8 2.0% 31 Dec 2014 31 Dec 2013 Change EPRA NAV per share1 384p 312p +23.1% Loan to value ratio (inc. JVs at 40% 42% -2ppts share)2 1 EPRA NAV per share excludes

  5. Slide 5: EPRA Income Statement

    EPRA INCOME STATEMENT Limited impact of 2013/2014 disposal activity on earnings 2014 2013 £m £m Gross rental income 215.1 273.8 Property operating expenses (40.5) (50.4) Net rental income 174.6 223.4 Share of joint ventures’ EPRA profit1 46.3 26.3 Joint venture fee income 11.8 7.1 Administration exp

  6. Slide 6: Drivers of Net Rental Income Change

    DRIVERS OF NET RENTAL INCOME CHANGE Like for like net rental income +2.4% £263.9m JVs at £6.2m £3.3m share £15.8m £238.0m £40.5m £(2.9)m £(4.7)m £(4.7)m JVs at share £(38.9)m +2.4% exc. allocated central admin £63.4m and property operating costs Group Group £223.4m £174.6m 2013 Disposals Acquisition

  7. Slide 7: Vacancy Rate Reconciliation

    VACANCY RATE RECONCILIATION Vacancy rate improvement to 6.3% 8.5% 0.3% (1.6)% (0.6)% (0.3)% 6.3% 2013 Net take-up New developments Acquisitions Disposals 2014 7

  8. Slide 8: Euro Currency Exposure and Hedging

    EURO CURRENCY EXPOSURE AND HEDGING Balance sheet, £m • €1.29:£1 as at 31 December 2014 31 December 2014 2,000 Assets 90% hedged • € assets 90% hedged by € liabilities • €164m (£127m) of residual exposure – 4% of Group NAV Other Euro 1,500 liabilities • Illustrative NAV sensitivity vs €1.29: Euro cur

  9. Slide 9: Pro-forma Accounting Net Rental Income

    PRO-FORMA ACCOUNTING NET RENTAL INCOME £5.7m lower after adjusting for major 2014 transaction activity Group JVs Total Excludes: £m £m £m  Full year impact of lower vacancy 2014 net rental income 174.6 63.4 238.0 rate and rent roll growth Incremental impact of:  £4.2m of potential annual gross Dis

  10. Slide 10: Total Cost Ratio

    TOTAL COST RATIO Lower cost ratio due to more efficient portfolio; 12% reduction in total costs Incl. joint ventures at share 2014 2013 Change  Gross rental income includes £3.4m £m £m % receipt from Neckermann administrator Gross rental income 289.7 322.3 (10.1)  Property operating expenses refle

  11. Slide 11: Financial Position

    FINANCIAL POSITION 40% LTV target achieved 2014 2013 £m £m  Net debt (incl JVs) increased £152m Group only reflecting net investment Net borrowings (£m) 1,679 1,459  Secured/amended €668m of bank Group cash and undrawn facilities (£m) 429 982 facilities at reduced cost and Weighted average cost of

  12. Slide 12: Main Drivers of EPRA NAV Growth

    MAIN DRIVERS OF EPRA NAV GROWTH 23% increase in EPRA NAV per share reflects valuation rise and tax refund 69.9p 4.5p (5.1)p 384p 17.2p 312p (14.8)p 2013 EPRA EPS Dividends paid Realised and US tax refund Other movements 2014 unrealised gains incl FX 12

  13. Slide 13: Portfolio Value Change and ERV Growth by Geography

    PORTFOLIO VALUE CHANGE AND ERV GROWTH BY GEOGRAPHY1 12.9% portfolio valuation movement (UK +17.1%; Continental Europe +2.2%) £600m 12.9% £500m Slough Trading Estate +15.5% SELP (big box logistics) +3.3% UK big box logistics +23.4% SEGRO (light industrial) +1.8% £400m £300m 18.4% 15.6% £200m £100m 2.

  14. Slide 14: Financial Summary

    FINANCIAL SUMMARY  Results reflect successful implementation of strategy  Improved operating metrics, strong NAV growth  Final dividend increased to reflect confidence in medium-term outlook  Introduction of optional scrip dividend to provide shareholder choice 14

  15. Slide 15: Delivering on the strategy — building for the future

    Delivering on the strategy — building for the future 15 Sonoko, Strykow

  16. Slide 16: Strategic Progress – Three Years On

    STRATEGIC PROGRESS – THREE YEARS ON Disciplined capital allocation £0.9bn of acquisitions in our core markets at 7.0% topped up initial yield £1.6bn of disposals at blended topped-up £0.4bn of capex on new development at £1.6bn initial yield of 7.5% £1.3bn average yield on TDC of >9% Operational exc

  17. Slide 17: Market Environment Remains Favourable

    MARKET ENVIRONMENT REMAINS FAVOURABLE Economic environment improving1 Supply conditions remain tight2 130 Forecast European real GDP growth 125 5.0 UK logistics availability 120 4.0 115 (2008=100) 110 3.0 (m sq m) 105 2.0 100 95 1.0 90 0.0 2008 2010 2012 2014 2016 2005 2006 2007 2008 2009 2010 2011

  18. Slide 18: Creating Value and Driving Income Growth

    CREATING VALUE AND DRIVING INCOME GROWTH Supportive investment and occupational market conditions  Improving existing assets  Developing new assets  Accretive acquisitions  Strong customer relationships  458 hectare land bank  Building scale in key markets  Expert asset management  In-house

  19. Slide 19: Improving Existing Assets

    IMPROVING EXISTING ASSETS Driving UK value growth through intensive asset management UK estimated realised and unrealised valuation gains, 2014  Approx. 40% of the 2014 UK valuation surplus generated through asset management and Gain on sale development (5%) Development  Reflects like-for-like ren

  20. Slide 20: Slough Trading Estate

    SLOUGH TRADING ESTATE Key portfolio data AUM Value (at share) Value movement 1 £1,229m £1,229m +15.5% Average lease length2 Vacancy rate Equivalent yield 7.7 years 5.2% (-140bp) 6.6% (-80 bps) Highlights • +5% like for like rental growth for TVNL3 as a whole; 89% retention rate • Net lettings of £0.

  21. Slide 21: Greater London

    GREATER LONDON Key portfolio data AUM Value (at share) Value movement 1 £2,396m £1,819m +18.4% Average lease length2 Vacancy rate Equivalent yield 7.5 years 7.8% (-90bp) 6.1% (-90 bps) Origin, Park Royal Highlights • Like for like rental growth of 5% • Net lettings of £1.5m of existing space (9,400

  22. Slide 22: UK Logistics

    UK LOGISTICS Key portfolio data AUM Value (at share) Value movement 1 £683m £551m +23.4% Average lease2 Vacancy rate Equivalent yield 7.3 years 0.6% (-670bp) 6.0% (-50 bps) Highlights for the period • Took full control of LPP joint venture for £175m and acquired £84m of new assets; part-funded by £1

  23. Slide 23: Continental Europe Logistics – SELP Portfolio

    CONTINENTAL EUROPE LOGISTICS – SELP PORTFOLIO Key portfolio data AUM Value (at share) Value movement 1 £1,308m (€1,687m) £654m +3.3% Average lease2 Vacancy rate Equivalent yield 4.7 years 4.0% (-180bp) 7.5% (-20 bps) Highlights for the period ASICS Phase I, Krefeld • SELP portfolio €1.7bn from acqui

  24. Slide 24: Continental Europe Light Industrial

    CONTINENTAL EUROPE LIGHT INDUSTRIAL Key portfolio data AUM Value (at share) Value movement 1 £451m £451m +1.8% Average lease2 Vacancy rate Equivalent yield 4.6 years 11.7% (+510bp) 7.8% (-20 bps) Highlights for the period • 46,700 sq m of development completed, 58% let – primary driver of Blanc Mesn

  25. Slide 25: Developing New Assets: £80m of Potential Rent from Land Bank

    DEVELOPING NEW ASSETS £80m of potential rent from land bank Current land bank Current land & development holdings by value (31 December 2014) (31 December 2014) Current pipeline (241,400 sq m) Long-term £108m estimated development cost land £37m (exc. land) (130 ha) Current pipeline Annual rent of £

  26. Slide 26: Developing New Assets: New Income Over Next Five Years

    DEVELOPING NEW ASSETS Strong potential to generate new income over the next five years Fully-let annualised gross rental income by year of  £120m of land purchases during 2014 and 2015 development completion - indicative1 to date (incl. exchanged) (31 December 2014) £30m  Focused on existing core

  27. Slide 27: Driving Income Growth

    DRIVING INCOME GROWTH Existing assets and potential investment Annualised gross cash passing rent1, £ millions 400 62.8 350 373.3 4.2 17.1 300 28.2 (2.9) 293.4 250 263.9 200 150 100 50 0 31-Dec-14 Expiry of rent- Reversion to 2014 Potential Current Future Potential (total) free ERV development (comp

  28. Slide 28: Delivering on the Strategy — Building for the Future

    DELIVERING ON THE STRATEGY — BUILDING FOR THE FUTURE  Occupier demand likely to remain strong, particularly in the UK  Investment markets remain positive  Disposals of non-core/mature assets to fund development capex and acquisition opportunities of standing assets and land in our core markets Ju

  29. Slide 29: Q&A

    Q&A 29 Origin, Park Royal

  30. Slide 30: Appendix I: Portfolio and financial data

    Appendix I Portfolio and financial data 30 CWS-Boco, Lodz

  31. Slide 31: EPRA Performance Measures

    EPRA PERFORMANCE MEASURES 2014 2013 £m £m EPRA profit after tax 127.8 17.2p 131.4 17.7p EPRA NAV 2,844.7 384p 2,312.6 312p EPRA NNNAV 2,514.6 339p 2,086.8 282p EPRA net initial yield 5.4% 6.3% EPRA topped-up net initial yield 6.0% 6.9% EPRA vacancy rate 6.3% 8.5% EPRA cost ratio (including vacant pr

  32. Slide 32: EPRA Income Statement

    EPRA INCOME STATEMENT JVs proportionally consolidated 2014 2013 Group JVs Total Group JVs Total £m £m £m £m £m £m Gross rental income 215.1 74.6 289.7 273.8 48.5 322.3 Property operating expenses (40.5) (11.2) (51.7) (50.4) (8.0) (58.4) Net rental income 174.6 63.4 238.0 223.4 40.5 263.9 JV manageme

  33. Slide 33: EPRA Balance Sheet

    EPRA BALANCE SHEET JVs proportionally consolidated 2014 2013 Group JVs Total Group JVs Total £m £m £m £m £m £m Investment properties 3,477.0 1,230.8 4,707.8 2,910.0 1,079.6 3,989.6 Trading properties 77.8 13.1 90.9 138.7 12.8 151.5 Owner-occupied properties – – – 4.1 – 4.1 Total properties 3,554.8 1

  34. Slide 34: EPRA Capital Expenditure Analysis

    EPRA CAPITAL EXPENDITURE ANALYSIS JVs proportionally consolidated 2014 2013  Acquisitions include LPP purchase at 100% and acquisition costs Group JVs Total Group JVs Total £m £m £m £m £m £m  Approximately 60% of completed Acquisitions 437.1 234.0 671.1 184.1 418.3 602.4 properties capex is direct

  35. Slide 35: 'Look-Through' Loan to Value Ratio

    ‘LOOK-THROUGH’ LOAN TO VALUE RATIO 31 December 2014 Weighted average cost of £m gross debt, %1 Group gross borrowings 1,703.0 4.4 Group cash & equivalents (23.8) Group net borrowings 1,679.2 SELP deferred consideration (119.9) 5.02 Share of JV net borrowings 361.2 3.2 Total properties 4,798.7 Loan t

  36. Slide 36: Debt Maturity Profile

    DEBT MATURITY PROFILE As at 31 December 2014, £ millions 600 500 400 300 200 100 0 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 … 2035 SEGRO Bonds SEGRO Bank Debt JV debt at share SEGRO cash SEGRO Undrawn 36

  37. Slide 37: Land Holdings by Value

    LAND HOLDINGS BY VALUE, £ MILLIONS 400 7% 350 6% 300 5% 250 4% 200 3% 150 2% 100 50 1% 0 0% FY 2011 H1 2012 FY 2012 H1 2013 FY 2013 H1 2014 FY 2014 Future development pipeline (schemes not yet commenced) Long-term and residual land bank As % of portfolio (right hand scale) 37

  38. Slide 38: SEGRO Continental Europe Assets Under Management

    SEGRO CONTINENTAL EUROPE ASSETS UNDER MANAGEMENT € millions, as at 31 December 2014 800  Big box logistics assets held within SELP joint venture 700  Seeking scale benefits in each major 600 market at €500-750m AUM 500  Other European countries include Belgium, Netherlands, Czech 400 Republic and

  39. Slide 39: Appendix II: Supplementary market data

    Appendix II Supplementary market data 39 CWS-Boco, Lodz

  40. Slide 40: European Industrial Investment Volumes

    EUROPEAN INDUSTRIAL INVESTMENT VOLUMES European industrial investment volumes European industrial investment volumes By country, €m By quarter, €m 25,000 25,000 20,000 20,000 15,000 15,000 10,000 10,000 5,000 5,000 0 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2006 2007 2008 2009 2010 2011 2012 2

  41. Slide 41: Investment Market Yields vs 10 Year Bond Yields

    INVESTMENT MARKET YIELDS VS 10 YEAR BOND YIELDS 12.0 10.0 8.0 Warsaw: 7.0% Paris: 6.8% 6.0 Dusseldorf: 6.0% London: 4.6% 4.0 2.0 UK 10yr bond: 1.7% Germany 10yr bond: 0.4% 0.0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source: CBRE, Bloomberg 41

  42. Slide 42: European Industrial and Logistics Supply of New Space

    EUROPEAN INDUSTRIAL AND LOGISTICS SUPPLY OF NEW SPACE Logistics space under construction1 UK logistics availability2 (m sq m) (m sq m) 3.0 5.0 2.5 4.0 2.0 3.0 1.5 1.0 2.0 0.5 1.0 0.0 Germany UK France Poland Belgium Neth. 0.0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Pre-let Speculative New

  43. Slide 43: European Industrial & Logistics Take-up Statistics

    EUROPEAN INDUSTRIAL & LOGISTICS Take-up statistics Take-up – UK1 Take-up – France2 (m sq m) (m sq m) 3.0 4.0 2.0 2.0 1.0 0.0 0.0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 New Second hand Grade A Other Pre-let or owner occupied Take-up – Polan

  44. Slide 44: European Industrial & Logistics Availability Statistics

    EUROPEAN INDUSTRIAL & LOGISTICS Availability statistics Availability – UK1 Availability – France2 (m sq m) (m sq m) 6.0 6.0 4.0 4.0 2.0 2.0 0.0 0.0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 New / Early Marketed Second hand Grade A Other Space

  45. Slide 45: Structural Changes in Retailing

    STRUCTURAL CHANGES IN RETAILING The rise of convenience retailing Online retail sales as a percentage of total retail sales by country1 Method of purchasing UK food and groceries, £bn, 2013-20182 — Expected to grow at a CAGR of 12% from 2013-2018 — Convenience stores show CAGR of 5%pa vs 3.8%pa for

  46. Slide 46: Heathrow Airport Cargo & Passenger Volumes

    HEATHROW AIRPORT CARGO & PASSENGER VOLUMES Heathrow Airport cargo volumes Heathrow Airport passenger volumes (million metric tonnes) (millions) 1.6 80 1.5 75 1.4 1.3 70 1.2 65 1.1 1.0 60 Jun-07 Mar-08 Jun-10 Mar-11 Jun-13 Mar-14 Jun-07 Mar-08 Jun-10 Mar-11 Jun-13 Mar-14 Sep-06 Sep-09 Sep-12 Sep-06 S

  47. Slide 47: Forward-Looking Statements

    FORWARD-LOOKING STATEMENTS This presentation may contain certain forward-looking statements with respect to SEGRO’s expectations and plans, strategy, management’s objectives, future performance, costs, revenues and other trend information. These statements and forecasts involve risk and uncertainty

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