SEGRO plc · LSE:SGRO
SEGRO — H1 2019 Earnings Presentation
57 slides from SEGRO's earnings presentation, Jul 24, 2019
Slide 1: 2019 Half Year Results
2019 HALF YEAR RESULTS 24 JULY 2019
Slide 2: Strong H1 2019 performance, on-track for another good year
Strong H1 2019 performance, on-track for another good year Strong H1 2019 results Driven by operational excellence Continued disciplined approach to capital allocation Good momentum going into H2 2
Slide 3: Strong H1 2019 performance, on-track for another good year
Strong H1 2019 performance, on-track for another good year Strong H1 2019 results Driven by operational excellence Continued disciplined approach to capital allocation Good momentum going into H2 SEGRO Park Rainham, London 3
Slide 4: Another set of strong financial results
Another set of strong financial results Adjusted £130.6m pre-tax profit 13% adjusted EPS growth to 12.2p Like-for-like net rental +3.7% income growth Portfolio value £9.9bn (3.5% valuation gain) 3.5% NAV growth to 673p Loan to Value ratio 24% (FY 2018: 29%) Interim dividend per 2019 interim di
Slide 5: 13% increase in Adjusted EPS
13% increase in Adjusted EPS H1 2019 H1 2018 Adjusted income statement £m £m Gross rental income 161.3 145.1 • £5.2m from growth in like-for-like net rental income (Group: +3.7%, Property operating expenses (24.8) (23.9) UK: +4.3%, CE: +2.5%) Net rental income 136.5 121.2 • £15m growth from developm
Slide 6: 3.5% increase in EPRA NAV
3.5% increase in EPRA NAV Components of EPRA NAV change, 31 December 2018 to 30 June 2019 29p 12p (4)p (1)p 673p 650p (13)p Standing assets: 25p Land & development: 4p 31 December H1 2019 2018 final dividend Realised and Financing Exchange rate and 30 June 2019 2018 Adjusted EPS unrealised gains oth
Slide 7: Whole portfolio valuation uplift
£334m valuation surplus Portfolio: +3.5% UK: +2.3% Continental Europe: +5.8% £400m Whole portfolio valuation uplift £300m £200m £100m £0m Total London Slough UK Big Box Germany France Poland Italy Held throughout 2.5% 1.8% 0.8% (0.4)% 5.7% 8.1% 1.4% 3.3% Whole portfolio (including 3.5% 1.9% 2.6% 3.5
Slide 8: Driven by asset management and rental growth
Driven by asset management and rental growth1 Equivalent yield: 4.9%2 ERV growth: 1.4% London +1.9% London ERV 4.4% 30-Jun-19 UK: Heathrow +0.5% Slough 4.9% +1.0% +1.4% Park Royal +3.0% Change since 31 Dec UK Big Box 5.0% 0.0% 2018 N&E London +5.1% Germany 5.1% +1.6% By owner ERV SEGRO +1.5% Italy 5
Slide 9: £826m of net financing: balance sheet positioned to support growth
£826m1 of net financing: balance sheet positioned to support growth SEGRO equity placing • 71m new shares £451m gross proceeds • 635p per share, 2% discount to previous closing price SELP bond • 7.5yr duration, 1.5% coupon €500m of new debt • Proceeds used to refinance RCF and fund future acquisitio
Slide 10: Balance sheet positioned to support further development-led growth
Balance sheet positioned to support further development-led growth LTV ratio and average cost of debt (incl share of joint ventures), 2012-19 • Net debt: £2.4bn (FY 2018: £2.7bn) 60% 4.6% 5.0% 4.2% 4.2% • Debt maturity 10.5 years (from 4.0% Average cost of debt 3.5% 3.4% 10.2 years at end-2018) 40%
Slide 11: Another set of strong financial results
Another set of strong financial results 13% adjusted EPS growth 3.5% NAV growth to 673p Loan-to-value ratio of 24% 2019 interim dividend increased by 13.5% Gennevilliers, Paris 11
Slide 12: Strong H1 2019 performance, on-track for another good year
Strong H1 2019 performance, on-track for another good year Strong H1 2019 results Driven by operational excellence - record development completions - active asset management Continued disciplined approach to capital allocation Good momentum going into H2 SEGRO Park Düsseldorf Süd 12
Slide 13: A record period of development completions
A record period of development completions • 729,800 sq m of new space • 26 projects • £31m headline rent (84% leased) • 7.1% average yield on cost • 16.5% uplift on development SEGRO Logistics Park EMG, Midlands SEGRO Logistics Park EMG, Midlands 800 Development completions, ‘000 sq m 700 600 500 Z
Slide 14: Driving performance from active asset management
Driving performance from active asset management Strong leasing success in 20191 Capturing reversion from renewals Record levels of customer retention and reviews and sustained high occupancy2 New rent contracted +12.8% 9 100 Annualised rental income, £m 14 Rent change on review and renewal, % 45 Ne
Slide 15: Driving performance from active asset management
Driving performance from active asset management Park Royal, London SEGRO Logistics Park Stryków SEGRO City Park Düsseldorf Verona 15
Slide 16: Strong H1 2019 performance, on-track for another good year
Strong H1 2019 performance, on-track for another good year Strong H1 2019 results Driven by operational excellence Continued disciplined approach to capital allocation Good momentum going into H2 SEGRO SEGRO CityPark, Logistics Düsseldorf Park Tilburg II, Netherlands 16
Slide 17: Continuing a disciplined approach to capital allocation
Continuing a disciplined approach to capital allocation Acquisitions Active recycling Land and development • £27m off-market acquisitions, big box • £17m vacant UK big box in the • £195m of development capex warehouses in Barcelona, Lille and Midlands • £25m invested in 6 land acquisitions in Wrocła
Slide 18: Strong H1 2019 performance, on-track for another good year
Strong H1 2019 performance, on-track for another good year Strong H1 2019 results Driven by operational excellence Continued disciplined approach to capital allocation Good momentum going into H2 SEGRO Airport Park, Berlin 18
Slide 19: Good momentum going into H2
Good momentum going into H2 Current market conditions remain positive, supported by powerful structural tailwinds Prime portfolio of warehouses in strong locations Substantial land bank to generate development led growth VAILOG Logistics Park Castel San Giovanni 19
Slide 20: Future performance supported by powerful structural tailwinds
Future performance supported by powerful structural tailwinds Urbanisation Technological revolution SEGRO Park Le Blanc Mesnil, Paris Vailog Logistics Park Milan South Reducing land E-commerce Growth of digital Population growth availability growth data and the cloud Warehouse Increasing demand Envi
Slide 21: Current market conditions remain supportive
Current market conditions remain supportive Ecommerce penetration (% of retail sales) • No data available for urban/ last mile Source: CBRE, Euromonitor markets 25 20 • Big box take-up levels remain strong, 15 2017 2022F development mostly pre-let 10 • Supply and availability well balanced with 5 de
Slide 22: Modern, sustainable warehouses in prime locations
Modern, sustainable warehouses in prime locations Portfolio split by geography and asset type (at 30 June 2019) Our key markets: Other, £0.7bn Italy, £0.7bn London, £3.8bn Poland, £0.9bn France, AUM £1.3bn £11.7bn Germany, £1.5bn Thames Valley, £1.7bn UK Midlands, £1.1bn Other (2%) Urban Urban (64%)
Slide 23: £190m+ of potential rental income from future development
£190m+ of potential rental income from future development SEGRO land bank Estimated cost to (30 June 2019) gross rent (£m) complete (£m) Development Development Proportion Expected Potential pipeline delivery pre-let (sq m) yield3 Area Current 459,200 2292 36 7.1% 65% 1-12 months Near-term 274,145 1
Slide 24: Strong current pipeline of mostly de-risked development activity
Strong current pipeline of mostly de-risked development activity • 459,200 sq m under construction • 34 developments • £36m potential rent (65% leased) • 7.1% average yield on cost DO & CO, London SEGRO Logistics Park Aulnay SEGRO Park Rainham Phase 2, London DC3, Milan East Intermodal Maritime, SLP
Slide 25: Significant potential for further rental income growth
Significant potential for further rental income growth £143m from land bank and land options Annualised gross cash passing rent1, £ million (as at 30 June 2019) 514 £155m potential from current activity 924 670 36 14 53 52 388.8 384 Plus: further growth potential from active asset management 372 & E
Slide 26: Good momentum going into H2
Good momentum going into H2 Current market conditions remain positive, supported by powerful structural tailwinds Prime portfolio of warehouses in strong locations Substantial land bank to generate development led growth VAILOG Logistics Park Castel San Giovanni 26
Slide 27: Strong H1 2019 performance, on-track for another good year
Strong H1 2019 performance, on-track for another good year Strong H1 2019 results Driven by operational excellence Continued disciplined approach to capital allocation Good momentum going into H2 27
Slide 28: 2019 Half Year Results Q&A
SEGRO 2019 HALF YEAR RESULTS Q&A
Slide 29: Appendix I: Portfolio and Financial Data
APPENDIX I PORTFOLIO AND FINANCIAL DATA
Slide 30: Strong H1 performance, on-track for another good year
Strong H1 performance, on-track for another good year Attractive returns for shareholders Adjusted EPS growth 13.0% Interim dividend growth 13.5% NAV growth 3.5% £247 million invested Asset acquisitions £27m Strong operating metrics Development capex £195m New rent contracted £33m Land acquisitions
Slide 31: Adjusted income statement (JVs proportionally consolidated)
Adjusted income statement (JVs proportionally consolidated) H1 2019 H1 2018 Group JVs Total Group JVs Total £m £m £m £m £m £m Gross rental income 161.3 41.3 202.6 145.1 36.9 182.0 Property operating expenses (24.8) (2.4) (27.2) (23.9) (2.0) (25.9) Net rental income 136.5 38.9 175.4 121.2 34.9 156.1
Slide 32: Balance sheet (JVs proportionally consolidated)
Balance sheet (JVs proportionally consolidated) 30 June 2019 31 December 2018 Group JVs Total Group JVs Total £m £m £m £m £m £m Investment properties 8,244.8 1,736.4 9,981.2 7,801.4 1,566.9 9,368.3 Trading properties 11.7 0.8 12.5 51.7 2.4 54.1 Total properties 8,256.5 1,737.2 9,993.7 7,853.1 1,569.
Slide 33: Pro forma H1 2019 accounting net rental income
Pro forma H1 2019 accounting net rental income Group JVs Total • Pro forma 2019 net rental income assuming £m £m £m disposals, acquisitions and let developments completed as at 1 January 2019 H1 2019 net rental income 136.5 38.9 175.4 • One-off items (e.g. rates refunds) removed Full year impact of:
Slide 34: Total Cost Ratio
Total Cost Ratio Total cost ratio, H1 2018-19 (proportionally consolidated) Incl. joint ventures at share H1 2019 H1 2018 £m £m Gross rental income (less reimbursed costs) 200.4 180.6 Property operating expenses 24.8 23.9 Administration expenses 23.6 20.7 JV operating expenses 7.3 6.1 JV and other m
Slide 35: EPRA performance measures
EPRA performance measures 30 June 2019 30 June 2018 31 December 2018 £m £p per share £m £p per share £m £p per share EPRA1 Earnings 130.6 12.2 108.6 10.8 184.7 18.3 EPRA NAV 7,386.2 673 6,126.1 603 6,620.3 650 EPRA NNNAV 7,131.7 650 5,965.1 587 6,557.7 644 EPRA net initial yield 3.9% 4.2% 3.9% EPRA
Slide 36: EPRA capital expenditure analysis
EPRA capital expenditure analysis H1 2019 H1 2018 • Approximately 60% of completed properties capex was for major Group JVs Total Group JVs Total refurbishment, infrastructure and fit- £m £m £m £m £m £m out costs prior to re-letting. Acquisitions 21.1 67.4 88.5 77.5 53.9 131.4 Development1 163.9 31.
Slide 37: Further improvements to the debt structure
Further improvements to the debt structure Debt maturity by type and year, £ millions (as at 30 June 2019) • £250m 2020 SEGRO bonds 1,400 JV undrawn at share bought back 1,200 • €500m (£223m2) SELP 7.5 year SEGRO undrawn 1.5% coupon bond issued 1,000 JV debt at share • €200m (£89m2) new syndicated 8
Slide 38: Look-through loan-to-value ratio and cost of debt
Look-through loan-to-value ratio and cost of debt 30 June 2019 • Impact of IFRS 16 “Leases”: Weighted average cost of debt, % £m • Capitalises head-leases and Gross debt, excluding Net debt, including SEGRO office leases commitment fees and commitment fees amortised costs and amortised costs • Asset
Slide 39: Euro currency exposure and hedging
Euro currency exposure and hedging Balance sheet, £m 30 June 2019 • €1.12:£1 as at 30 June 2019 Assets 64% hedged € assets 64% hedged by € liabilities 3,500 • 3,000 • €1,170m (£1,044m) of residual exposure – 14% of Group NAV Other euro 2,500 liabilities • Illustrative NAV sensitivity vs €1.12: 2,000
Slide 40: 3.7% growth in like-for-like net rental income
3.7% growth in 6 month like-for-like net rental income Proportionally consolidated net rental income (excluding joint venture fees), H1 2018-19 £181.7m £4.4m £175.4m £15.4m £156.1m £(5.5)m £5.2m JVs £0.6m £(0.5)m £(0.3)m JVs £41.1m £38.9m JVs £34.9 £0.6m Mainly 2018 activity Group Group Group Group:
Slide 41: EPRA Vacancy Rate
EPRA Vacancy Rate Vacancy rate reconciliation, 31 December 2018 to 30 June 2019 5.2% 0.1% 4.8% 0.1% (0.1)% Speculative (0.3)% development1 (0.2)% Speculative 1.8% development1 2.0% Existing standing assets Existing standing 2.8% Existing standing assets assets 3.4% 2.8% 31 December Long-term Short-t
Slide 42: Urban and big box warehouses – complementary asset types
Urban and big box warehouses – complementary asset types Portfolio by type: Urban warehouses (64%) (valuation, SEGRO share) Big boxes (34%) Data as at 30 June 2019 • Smaller units, generally <10,000 sq m Other • Larger units, generally over 10,000 sq m 2% • Diverse range of uses (including ‘last mil
Slide 43: A very diversified customer base
A very diversified customer base Customer sectors (headline rent, SEGRO share) Over 1,150 customers Transport & logistics 24% Top 20 Wholesale & retail customers = distrib - 10% 32% of total Food & general Retail group headline 19% manufacturing rent 17% Parcel delivery 10% 43
Slide 44: Enhanced, de-risked development programme
Enhanced, de-risked development programme Development-led growth1 The majority of which is pre-let 600 100% 500 80% Development capex, £m 400 60% 300 40% 200 100 20% 0 0% 2012 2013 2014 2015 2016 2017 2018 1H19 2013 2014 2015 2016 2017 2018 1H19 H1 2018/19 Pre-let Speculative Let at 30 June 19 1 Cap
Slide 45: Land bank provides optionality and opportunity for growth
Land bank provides optionality and opportunity for growth 600 7.0% Additional opportunity from land held under option 500 6.0% Land bank value, £m Net land utilisation, 2015-1H19 5.0% (Based on opening book value or acquisition value) 400 4.0% 300 Land Acquired 3.0% 300 Land utilised for developme
Slide 46: Continued focus on sustainability within our development activity
Continued focus on sustainability within our development activity Over 1.8 million sq m of sustainably certified1 assets in our portfolio Continuing to install solar panels where feasible • 7,828 solar panels installed on a big box warehouse in Zalando, Verona Verona • Producing more than 2.7 GWh of
Slide 47: SEGRO European Logistics Partnership (SELP) headline figures
SEGRO European Logistics Partnership (SELP) headline figures Land and Equivalent €3.9bn 5.4% Assets under management assets yield (as at 30 June 2018) €1.1bn €1.0bn €852m Assets under management, €bn 1.2 AUM at 30 June 2019 AUM at inception Capital value 1.0 4.5% change 1.5% ERV growth 0.8 0.6 €448m
Slide 48: Appendix II: Market Data
SEGRO APPENDIX II MARKET DATA
Slide 49: E-commerce continues to gain market share
E-commerce continues to gain market share Online purchases as share of total retail sales The impact of online sales on European retail and logistics (2009 = 100) 25% 280 20% 20% 230 15% 12% 10% 11% 180 10% 5% 130 0% 80 2003 2005 2007 2009 2011 2013 2015 2017 2019F 2021F 2009 2010 2011 2012 2013 201
Slide 50: European industrial investment volumes
European industrial investment volumes European industrial investment volumes European industrial investment volumes By geography, €bn By quarter, €bn 45 45 40 40 35 35 30 30 25 25 20 20 15 15 10 10 5 5 0 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2006 2007 2008 2009 2010 201
Slide 51: Prime logistics yields vs 10 year bond yields
Prime logistics yields vs 10 year bond yields 12.0 10.0 8.0 6.0 Warsaw: 6.0% London: 4.5% 4.0 Paris: 4.5% Dusseldorf: 4.0% 2.0 0.0 UK 10yr bond: 1.3% -2.0 Germany 10yr bond: 0.2% 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 1H19 Source: CBRE, Bloomberg (data correct at
Slide 52: Favourable demand-supply conditions: UK supply shortage
Favourable demand-supply conditions: UK supply shortage UK Big Box supply-demand dynamics1 Speculative UK Big Box completions2 (m sq m) (m sq m) 3.0 2.5 3.0 14% Take-up / availability, m sq m 2.5 2.5 12% 2.0 No. of years’ supply 2.0 10% Completions, m sq m 1.5 2.0 Vacancy rate 1.5 8% 1.0 1.5 1.0 6%
Slide 53: European industrial and logistics supply dynamics
European industrial and logistics supply dynamics Logistics space under construction1 France logistics supply-demand dynamics2 (m sq m) (m sq m) 4.5 5.0 Pre-let Speculative 4.0 Take-up / availability, m sq m 3.5 4.0 3.0 2.5 3.0 2.0 2.0 1.5 1.0 1.0 0.5 0.0 0.0 Germany France Poland Spain UK Neth. Ita
Slide 54: European industrial and logistics — take-up statistics
European industrial and logistics — take-up statistics Take-up of warehouse space >100,000 sq ft – UK1 Take-up of warehouse space >5,000 sq m – France2 (m sq m) (m sq m) 3.0 5.0 4.0 2.0 3.0 1.0 2.0 1.0 0.0 0.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 1H18 1H19 2007 2008 2009 2010 2011
Slide 55: European industrial and logistics — availability statistics
European industrial and logistics — availability statistics Availability of Grade A warehouse space >100,000 sq ft– UK1 Availability of warehouse space >5,000 sq m – France2 (m sq m) (m sq m) 3.0 5.0 2.0 4.0 3.0 1.0 2.0 0.0 1.0 2010 2011 2012 2013 2014 2015 2016 2017 2018 1H19 0.0 2009 2010 2011 201
Slide 56: Heathrow Airport cargo and passenger volumes
Heathrow Airport cargo and passenger volumes Heathrow Airport cargo volumes Heathrow Airport passenger volumes (million metric tonnes) (millions) 1.8 85 1.7 80 1.6 1.5 75 1.4 1.3 70 1.2 65 1.1 1.0 60 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 De
Slide 57: Forward-looking statements and Disclaimer
Forward-looking statements and Disclaimer This document has been prepared by SEGRO plc (‘SEGRO’) solely for use at the presentation of SEGRO’s results announcement in respect of the six months ended 30 June 2019. For the purposes of this disclaimer, “Presentation” shall mean this document, the oral