SEGRO plc · LSE:SGRO

SEGRO — FY2012 Earnings Presentation

53 slides from SEGRO's earnings presentation, Feb 27, 2013

  1. Slide 1: 2012 Full Year Results

    2012 Full Year Results 27 February 2013 Casino, Ile de France

  2. Slide 2: Headlines

    Headlines  A year of considerable progress  Strategic portfolio reshaping ahead of plan  Strong operational performance  Net debt significantly reduced  Well positioned for 2013 and beyond  Good underlying earnings momentum  Limited supply; attractive growth drivers  Excellent land bank for

  3. Slide 3: Financial Results

    Financial Results Justin Read Group Finance Director DB Schenker, Heathrow

  4. Slide 4: Key financial highlights

    Key financial highlights P&L 2012 2011 Change % EPRA PBT (£m) 144.9 138.5 4.6 EPRA EPS (pence) 19.3 18.4 4.9 Dividend per share (pence) 14.8 14.8 Balance sheet 2012 2011 Change % EPRA NAV per share¹ (pence) 294 340 (13.5) Net borrowings (£m) 2,090.3 2,303.4 (9.3) LTV – including JVs at share (%) 51

  5. Slide 5: Good underlying earnings momentum; 4.6% increase in EPRA PBT

    Good underlying earnings momentum; 4.6% increase in EPRA PBT 2012 2011 £m £m Gross rental income 305.4 326.1 Property operating expenses (50.6) (54.9) Net rental income 254.8 271.2 Joint venture management fee income 7.4 5.9 Share of joint ventures’ EPRA profit1 20.2 16.6 Administration expenses (27

  6. Slide 6: Net rental income lower due to disposals; like for like up 1.9%

    Net rental income lower due to disposals; like for like net rental income up 1.9% £5.7m £(23.2)m £8.1m £3.9m £(4.6)m £(6.3)m £271.2m £254.8m 2011 2011 Like for like Developments1 Acquisitions Disposals Surrender Currency 2012 2012 net rental premiums & translation income related rent lost 5 1 Net of

  7. Slide 7: Pro forma net rental income and vacancy

    Pro forma net rental income and vacancy Net rental income Vacancy rate £m % Full Year 2012 255 8.2 Annualised incremental impact of: Disposals since Jan-121 (25) 0.3 Developments completed and let in 2012 7 - Acquisitions in 2012 7 - Neckermann takeback in Jan-13 (12) 1.1 Pro forma FY 2012 232 9.6 6

  8. Slide 8: Further reduction in the total cost ratio

    Further reduction in the total cost ratio 35 30.4% 29.9% Total cost ratio1 (%) 30 28.1% 24.5% 25 22.9% 20 15 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 2012 2011 Change £m £m % Property operating expenses 50.6 54.9 (7.8) Administrative expenses 27.9 32.1 (13.1) Total 78.5 87.0 (9.8) 7 1 Total costs as

  9. Slide 9: EPRA NAV per share bridge

    EPRA NAV per share bridge 19.3p (14.8)p (47.7)p Core (7.5)p Non-core (40.2)p (2.0)p (0.8)p 340p 294p EPRA NAV per EPRA EPS Dividend Realised and Early close-out Other EPRA NAV per share as at 31 unrealised of bond and share as at 31 December 2011 valuation bank debt December 2012 movements 8

  10. Slide 10: Like for like valuation down 5.9%; Core Industrial -1.2%

    Like for like valuation down 5.9%; Core Industrial -1.2% (IPD UK Industrial: -3.8%) Value1 Movement2 Yield2,3 £m % % Core portfolio (excluding offices) 3,553.5 (1.2) 7.7 Suburban offices 376.9 (15.9) 8.4 Large non-strategic assets4 304.8 (29.5) 8.65 Smaller non-core assets 420.1 (10.6) 8.9 Total4 4,

  11. Slide 11: Robust financing metrics

    Robust financing metrics Group level1 2012 2011 Net borrowings (£m) 2,090.3 2,303.4 Available funds - cash & undrawn facilities (£m) 449 456 Gearing (%) 93 89 Loan to value - including JVs at share (%) 51 / 502 49 Weighted average cost of debt3 (%) 4.6 4.8 Average duration of debt (years) 8.3 8.8 In

  12. Slide 12: Reducing net borrowings and financial leverage

    Reducing net borrowings and financial leverage  Net debt reduced by 9.3% to £2,090m  LTV 50% (including post year end disposals); impacted by portfolio revaluation  Key financing metrics remain solid  A- bond rating reaffirmed by Fitch in September 2012  Remain committed to reducing LTV over th

  13. Slide 13: Significant future rental growth potential

    Significant future rental growth potential Core Non-core Total £m £m £m Annualised gross passing rent1 250 46 296 Rent free on let properties 36 3 39 ERV of vacant/short let space 27 14 41 Reversion to ERV of occupied properties (12) (6) (18) Current development projects 7 4 11 Potential gross passi

  14. Slide 14: Financial Summary

    Financial Summary  Progress against strategic priorities delivering positive results  Good underlying earnings momentum, benefiting from reduced costs and developments  Balance sheet in good shape - reducing leverage remains a strategic priority over the longer term  Dividend maintained reflecti

  15. Slide 15: Our Progress in 2012

    Our Progress in 2012 David Sleath, Chief Executive La Courneuve, Ile de France

  16. Slide 16: Progress made against all four strategic priorities

    Progress made against all four strategic priorities 1. Re-shape the Divesting non-core assets existing portfolio Improving utilisation of core assets (land & vacant assets) Generating attractive returns by building a high quality, 2. Seek profitable modern portfolio with critical mass in target mark

  17. Slide 17: Strong operational progress

    Strong operational progress  262 new lettings generating £35.3m of new rental income  72 lease renewals, securing £18.8m of rental income Leasing,  TRLs 2.9% above Dec 2011 ERVs; Lease incentives 8.2% (2011: 11.0%) Customer and  Retention rate of 65% (core 74%); take-backs broadly flat at £21.5m

  18. Slide 18: £700m of non-core asset disposals at 3.6% average discount

    £700m of non-core asset disposals at 3.6% average discount to Dec-11 valuations Thales, UK MPM, Munich IQ Farnborough, UK 24 further disposals in the UK and CE 17

  19. Slide 19: £207m reinvested in acquisitions at 7.7% yield

    £207m reinvested in acquisitions at 7.7% yield; expanding SEGRO’s UK and French logistics platform UK logistics portfolio French logistics portfolio  £315m portfolio acquisition, completed Jan 2012  £130m portfolio acquisition; completed Sept 2012  SEGRO equity contribution £65m  13 prime logist

  20. Slide 20: £218m reinvested or committed to profitable development programme

    £218m reinvested or committed to profitable development programme 21 Completed development projects 14 Current development projects DB Schenker, Heathrow Karl Storz, Slough Trading Estate  190,000 sq m of new space  155,200 sq m of new space  £151m total development cost  £129m total development

  21. Slide 21: SEGRO today

    SEGRO today 30 June 2011 31 December 20121 Target Split of total portfolio by core and non-core assets 13% 31% 69% 87% 100% Core Non-core Split of core portfolio by stabilised and opportunity assets 8% 6% 5% 20% 43% 30% 49% 64% 75% Stabilised (vacancy <10%) Opportunity (built; vacancy >10%) Opportun

  22. Slide 22: 2013 And Beyond

    2013 And Beyond Infinity, Slough Trading Estate

  23. Slide 23: Focused on modern 'industrial' properties

    Focused on modern ‘industrial’ properties Larger logistics warehouses Smaller warehouses & Data Centres light industrial buildings £1.1bn portfolio; 2.1m sq m £2.2bn portfolio; 2.7m sq m £0.3bn portfolio; 0.2m sq m  ‘Big box’ sheds (>10,000 sq m)  Multi-occupier estates/urban logistics  Typically

  24. Slide 24: Attractive income-led returns from Industrial

    Attractive income-led returns from Industrial IPD UK Average Income Return IPD UK Average Total Return (%) (%) 9 12 9 6 6 3 3 0 0 5 years 10 years 30 years 5 years 10 years 30 years Retail Offices Retail Offices London Industrial Distribution London Industrial Distribution 23 Source: IPD

  25. Slide 25: Attractive growth drivers

    Attractive growth drivers  Increasing global trade and supply chain improvements driving demand for modern warehouse space  On-going trend towards outsourcing, local distribution and growth in support services  Growth in niche manufacturing sub-sectors e.g. food production, high- tech manufacturi

  26. Slide 26: Favourable demand/supply dynamics

    Favourable demand/supply dynamics UK internet sales (2007 – 2012) UK new warehouses available (2007 – 2012) (>100,000 sq ft) 25

  27. Slide 27: Capitalising on favourable trends

    Capitalising on favourable trends Retailers Parcel delivery & 3PLs ‘Hi-tech’ engineering and production Data centre providers 26

  28. Slide 28: Land bank well positioned to capitalise on favourable dynamics

    Land bank well positioned to capitalise on the favourable demand/supply dynamics Current land holdings by value Potential development projects (as at 31 December 2012)  £84m of potential future annual rent  £685m estimated development costs  9.8% estimated yield on TDC1 Residual Largest sites Hec

  29. Slide 29: Industrial capital values and rents at undemanding levels

    Industrial capital values and rents at undemanding levels IPD UK Industrial Capital Value Index IPD UK Industrial Rental Value Index (June 2007 = 100) (June 2007 = 100) 100 105 90 100 80 70 95 60 50 90 Dec-02 Dec-04 Dec-06 Dec-08 Dec-10 Dec-12 Dec-02 Dec-04 Dec-06 Dec-08 Dec-10 Dec-12 London Industr

  30. Slide 30: Outlook

    Outlook  Macro-economic environment expected to remain challenging  Investment market set to remain strong for the best industrial properties  SEGRO focused on the strongest sub-markets where supply is limited, occupier demand more robust and investment appetite healthy  Existing core assets and

  31. Slide 31: 2012 Full Year Results

     A year of considerable progress 2012 Full Year Results  Strategic portfolio reshaping ahead of plan 27 February 2013  Strong operational performance  Net debt significantly reduced  Well positioned for 2013 and beyond  Good underlying earnings momentum  Limited supply; attractive growth driv

  32. Slide 32: Appendix I: Core and non-core analysis

    Appendix I Core and non-core analysis

  33. Slide 33: Split of core portfolio by geography

    Split of core portfolio by geography Valuation movement (including joint ventures at share)1 (%) 7.5% 5.0% 2.6% 2.5% 0.0% 0.0% -0.2% -0.5% (2.5)% -1.7% -1.5% -1.7% -1.8% IPD UK Industrial Index (-3.8%) (5.0)% (7.5)% Heathrow Park Slough Logistics Rest of Germany France Poland Royal Trading Property

  34. Slide 34: £583m of non-core assets remaining

    £583m of non-core assets remaining; including three large non-strategic assets At 31 December 20121 Valuation Income2 UK Europe Total Total £m £m £m £m ‘Big 3’ assets - 177 177 143 Other industrial assets 163 190 353 35 Other land holdings 6 47 53 - Total 169 414 583 49 Targeting £300m to £500m of d

  35. Slide 35: Disposals completed since 1 January 2012

    Disposals completed since 1 January 2012 Month Portfolio/Asset Acquirer Sale proceeds Net initial yield (£m) (%) 2012: February Four regional UK estates Ignis 71.2 6.3 / 7.01 April IQ Farnborough Harbert 92.1 6.4 / 6.81 May Four regional UK estates Harbert 204.5 6.7 / 7.41 July 10 regional UK estate

  36. Slide 36: Overall performance of core portfolio

    Overall performance of core portfolio supports selections of assets and markets At 31 December 20121 Core Offices Large non- Other Group Industrial2 (core) strategic3 non-core3 Portfolio value (£m) 3,297.3 376.8 154.3 352.6 4,181.0 (completed properties) Land & developments (£m) 256.3 - 22.6 53.4 33

  37. Slide 37: Neckermann, Frankfurt

    Neckermann, Frankfurt Key information:  309,000 sq m campus including offices and bespoke distribution facilities for the German retailer, Neckermann  Acquired in 2007 as a sale & leaseback to Neckermann  Neckermann filed for administration in July 2012, fully vacated the site in January 2013  1

  38. Slide 38: Pegasus Park, Brussels

    Pegasus Park, Brussels Key information:  High quality 82,000 sq m modern suburban office park located 8km east of Brussels within close proximity to the international airport  First building acquired in 1984  Site developed over a number of years  Last development completed in 2009  Vacancy 13.

  39. Slide 39: Energy Park, Vimercate (Milan)

    Energy Park, Vimercate (Milan) Key information:  70,000 sq m office and R&D campus located approximately 20km north-east of Milan, close to the A4 highway  Acquired in 2007 as a long term re-development opportunity  First new building of 10,900 sq m completed in 2009; 100% occupied (SAP principal

  40. Slide 40: Appendix II: Operational performance

    Appendix II Operational performance

  41. Slide 41: EPRA pro forma profit before tax: JVs proportionally consolidated

    EPRA pro forma profit before tax: JVs proportionally consolidated 2012 2011 Group JVs Total Group JVs Total £m £m £m £m £m £m Gross rental income 305.4 40.0 345.4 326.1 33.0 359.1 Property operating expenses (50.6) (1.9) (52.5) (54.9) (2.8) (57.7) Net rental income 254.8 38.1 292.9 271.2 30.2 301.4

  42. Slide 42: Movement in Group net borrowings

    Movement in Group net borrowings 2012 2011 £m £m Opening net debt (2,303.4) (2,203.2) Cash flow from operations 205.1 239.0 Finance costs (net) (103.9) (120.3) Dividends received (net) 18.7 10.4 Tax paid (net) (12.8) (4.9) Free cash flow 107.1 124.2 Dividends paid (109.7) (107.4) Acquisitions and de

  43. Slide 43: EPRA PBT bridge

    EPRA PBT bridge £3.6m £(16.4)m £4.2m £1.5m £13.5m £138.5m £144.9m 2011 Net interest Admin JV management EPRA Net rental 2012 expenses fees JV PAT income 42

  44. Slide 44: Euro currency management and hedging

    Euro currency management and hedging Balance Sheet (as at 31 December 2012)  €1.23: £1 as at 31 December 2012 Other Euro liabilities  € assets 84% hedged by € liabilities Euro currency swaps 1,707  €324m (£263m) of residual exposure – 12% of Group NAV Euro debt 125  NAV sensitivity versus €1.23:

  45. Slide 45: A diversified income stream

    A diversified income stream Headline rent by customer geography Headline rent by customer type Poland & Other Food Czech 7% Other 5% Republic 16% 8% Engineering 15% Utilities France 8% Finance & 13% media 4% UK Comms & 61% technology Germany 13% 11% Transport & distribution 25% Retail 14% SEGRO has

  46. Slide 46: Top 20 Customers represent 22% of headline rent

    Top 20 Customers represent 22% of the Group’s headline rent1 Customer Type Customer Type 1 Deutsche Post (DHL) Transport & 11 Jacobs Engineering Engineering & distribution electrical 2 Telefonica (O2) Communications & 12 Equinix Communications & technology technology 3 IAG (BA/BMI) Transport & 13 DA

  47. Slide 47: Improved rental income profile

    Improved rental income profile  2012 vacancy rate lowest reported in the last 10 years  Pro forma vacancy (inc. Neckermann and post year end disposals) would be 9.6%  Retention rate of 65% (core 74%)  Average lease length increased from 7.7 years to 8.4 years since 2009 2009 2010 2011 2012 Portf

  48. Slide 48: Appendix III: Financing

    Appendix III Financing

  49. Slide 49: Group debt maturity profile

    Group debt maturity profile £600m £500m £400m £300m £200m £100m £0m 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024+ Bonds and Notes Bank debt drawn Cash Undrawn Facilities Average maturity of gross borrowings 8.3 years (2011: 8.8 years) 48

  50. Slide 50: Appendix IV: Development

    Appendix IV Development

  51. Slide 51: Current development pipeline

    Current development pipeline Project Customer Space to Project Customer Space to be built be built (sq m) (sq m) UK CONTINENTAL EUROPE Pre-let projects under construction Pre-let projects under construction Montrose & Perth Avenue, STE Karl Storz 4,100 Vimercate, Italy Alcatel-Lucent 34,000 (63%)/sp

  52. Slide 52: London industrial land

    London industrial land 51 Source: Deloitte/ONS

  53. Slide 53: 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

SEGRO — FY2012 Earnings Presentation on 6ix