Segro Plc · LSE:SGRO
Segro — FY2023 Earnings Presentation
59 slides from Segro's earnings presentation, Feb 16, 2024
Slide 1: 2023 Full Year Results
2023 FULL YEAR RESULTS 16 FEBRUARY 2024
Slide 2: Clear & consistent strategy continues to deliver
CLEAR & CONSISTENT STRATEGY CONTINUES TO DELIVER… £575m net investment Strong operating metrics £527m Development capex £88m New rent contracted £404m Land acquisitions +6.5% Like-for-like rental growth £356m Disposal proceeds £50m Development completions Balance sheet strength 34% LTV ratio 3.1% Co
Slide 3: Attractive long-term total returns
…ATTRACTIVE LONG-TERM TOTAL RETURNS Passing Rent Adjusted NAV1 per share 1,300 750 Adjusted NAV, pence 650 1,050 Passing rent, £m 550 800 450 1,137 639 966 907 350 587 550 814 462 518 650 700 250 350 378 478 556 288 324 300 150 2016 2017 2018 2019 2020 2021 2022 2023 2016 2017 2018 2019 2020 2021 20
Slide 4: Making good progress with Responsible SEGRO
MAKING GOOD PROGRESS WITH RESPONSIBLE SEGRO INVESTING IN OUR LOCAL CHAMPIONING COMMUNITIES AND NURTURING TALENT LOW-CARBON GROWTH ENVIRONMENTS 12 Community Investment Plans Reshaping of Leadership Team Meaningful reduction in carbon emissions, tracking ahead pathway set and 44 local community projec
Slide 5: Decarbonisation tracking ahead of SBTi targets
DECARBONISATION TRACKING AHEAD OF SBT i TARGETS Corporate and customer emissions Embodied carbon intensity of developments 19% 13% reduction reduction since 20201 since 20201 • 81% visibility of customer energy data (+19%) • Embodied carbon assessed with Building Information Modelling on all new dev
Slide 6: We create the space that enables extraordinary things to happen
WE CREATE THE SPACE THAT ENABLES EXTRAORDINARY THINGS TO HAPPEN Attractive Resilient Driving rents Primed for market financial through asset further fundamentals results management growth & development
Slide 7: We create the space that enables extraordinary things to happen
WE CREATE THE SPACE THAT ENABLES EXTRAORDINARY THINGS TO HAPPEN Attractive Resilient Driving rents Primed for market financial from asset further fundamentals results management growth & development
Slide 8: Long-term structural drivers remain intact
LONG-TERM STRUCTURAL DRIVERS REMAIN INTACT DATA & SUPPLY CHAIN URBANISATION SUSTAINABILITY DIGITALISATION OPTIMISATION Growth of e-commerce Customer service Growing urban populations Regulation Explosion of data Cost efficiency New users of space Customer carbon targets Emergence of gen AI Nearshori
Slide 9: Supply-demand balance is supportive of ERV growth and development
SUPPLY-DEMAND BALANCE IS SUPPORTIVE OF ERV GROWTH AND DEVELOPMENT European take-up1 and vacancy2 45 10 Consistent occupier demand - normalising to pre- 40 9 pandemic averages 35 8 7 Low vacancy in SEGRO’s chosen sub-markets Take-up, million sq m 30 6 Vacancy, % 25 5 Reduction in construction starts
Slide 10: Outlook supportive for investment market recovery
OUTLOOK SUPPORTIVE FOR INVESTMENT MARKET RECOVERY European industrial investment volumes1 60 Investment markets impacted by monetary conditions 50 Industrial outperformed other asset classes driven by attractive fundamentals 40 By quarter, €bn 30 Market interest rates expectations for 2024 and beyon
Slide 11: We create the space that enables extraordinary things to happen
WE CREATE THE SPACE THAT ENABLES EXTRAORDINARY THINGS TO HAPPEN Attractive Resilient Driving rents Primed for market financial from asset further fundamentals results management growth & development
Slide 12: Full year 2023 financial results
FULL YEAR 2023 FINANCIAL RESULTS £409m 32.7p 27.8p Adjusted profit before tax Adjusted earnings per share1 Dividend per share +6.0% +5.5% +5.7% £17.8bn 907p 34% Portfolio valuation Adjusted NAV per share3 Loan to value -4.0%2 -6.1% +2.0% 1 Average number of shares was 1,220 million in 2023. 2 Percen
Slide 13: £65m growth in net rental income
£65M GROWTH IN NET RENTAL INCOME Proportionally consolidated net rental income (excluding joint venture fees) Like for like NRI +12.5% Group +6.5% Reversion UK +5.3% £42m £1m -£6m -£3m £587m Indexation CE +8.5% JVs £125m £31m Proportion ally consolidate d net rental income (excluding £522m joint ven
Slide 14: 6.5% like-for-like income growth
6.5% LIKE-FOR-LIKE INCOME GROWTH Components of like-for-like net rental income +£11m -£3m +£31m +£18m Net lettings: Lettings +£15m Takebacks -£10m +£5m Net lettings Rent reviews and renewals Indexation Operating costs 1 FY23 Like-for-like NRI 1 Like-for-like operating costs include £1m of bad debts.
Slide 15: Driving 6% increase in earnings
DRIVING 6% INCREASE IN EARNINGS Adjusted income statement 2023 2022 Change £m £m Gross rental income 547 488 Property operating expenses (85) (76) Net rental income 462 412 +12.1% Total cost ratio: – Down at 19.9% (2022: 20.3%) Joint venture fee income 29 30 – 18.4% excl share based payments (2022:
Slide 16: Valuation decline due to yield expansion
VALUATION DECLINE DUE TO YIELD EXPANSION… Portfolio value1 at 31 December 2023: £17.8 billion (at share) Portfolio UK Continental Europe -4.0% -3.4% -5.1% £500m Whole portfolio valuation change £0m -£500m 650p -£1,000m -£1,500m -£2,000m -£2,500m Total London Thames Valley UK Big Box Germany France P
Slide 17: Partially offset by rental growth
… PARTIALLY OFFSET BY RENTAL GROWTH Property yield1: 5.3% Yield change ERV growth2: +6.0% (+50bps) London 4.9% +4.6% +30bps UK: Thames Valley 5.6% +6.2% +30bps +4.9% National +3.5% 5.5% Logistics +20bps Germany 4.9% +60bps +10.9% France 5.5% Cont. +70bps +7.0% Eur: Italy 5.5% +70bps +7.0% +7.9% Pola
Slide 18: 10-year SELP performance
10-YEAR SELP PERFORMANCE €6.9bn €6.8bn €6.7bn AuM 7.0 €6.7bn from €1.0bn in 2013 6.0 €5.3bn €342m headline rent 5.0 from €81m in 2013 €4.5bn SELP AuM, €bn 4.0 €3.5bn 99% 3.0 €2.9bn Occupancy €2.5bn €2.1bn 2.0 €1.7bn 12.7% 1.0 €1.0bn 10-year gross IRR 0.0 2013 2014 2015 2016 2017 2018 2019 2020 2021
Slide 19: Balance sheet remains strong
BALANCE SHEET REMAINS STRONG LTV ratio and average cost of debt (incl share of joint ventures), 2014-23 £1.8bn committed liquidity cash and available committed bank facilities 60% 5.0% 4.2% A- (Fitch senior unsecured) 3.5% 4.0% credit rating 3.4% 3.1% Average cost of debt 40% 3.0% 10.4x 2.5% LTV rat
Slide 20: Low refinancing risk
LOW REFINANCING RISK Diverse, long duration debt profile (as at 31 December 2023) 2,500 6.9 years debt maturity 2,000 76% fixed, 95% fixed or capped interest rate exposure 1,500 £ million 1,000 500 0 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 SEGRO
Slide 21: 2023 financial summary
2023 FINANCIAL SUMMARY 6.5% like-for-like rental growth and 5.5% adjusted earnings growth 2023 full year dividend increased by 5.7% Modest 4.0% decrease in the value of the portfolio Strong balance sheet to support future growth 21 SEGRO Logistics Park East Midlands Gateway
Slide 22: We create the space that enables extraordinary things to happen
WE CREATE THE SPACE THAT ENABLES EXTRAORDINARY THINGS TO HAPPEN Attractive Resilient Driving rents Primed for market financial from asset further fundamentals results management growth & development
Slide 23: £88m of new rent contracted in 2023
£88M OF NEW RENT CONTRACTED IN 2023 Contracted rent1 £98m £95m 100 £88m 90 £78m 80 Annualised rental income, £m £66m £66m 70 60 £54m 50 £45m 40 30 20 10 0 2016 2017 2018 2019 2020 2021 2022 2023 Existing space Developments 1 New rent contracted is additional headline rent secured or (in the case of
Slide 24: Driving rents through asset management
DRIVING RENTS THROUGH ASSET MANAGEMENT Delivering an outstanding Proactive asset management Setting new standards customer experience through refurbishment 24
Slide 25: Record uplift from renewals and reviews
RECORD UPLIFT FROM RENEWALS AND REVIEWS Capturing high levels of reversion…1 …retaining customers and maintaining healthy levels of occupancy2 Occupancy 95% (target: 94-96%) 35 100 Customer retention rate and occupancy rate, % +31% 90 Rent change on review and renewal, % 30 UK +40% 80 CE +8% 25 70 R
Slide 26: £137m reversionary potential to be captured
£137M REVERSIONARY POTENTIAL TO BE CAPTURED 150 150 20% Reversionary potential1 130 (UK 28%, CE 9%) 130 £84m uplift opportunity over 110 110 next 3 years 53 Rental uplift potential, £m 90 90 Reversion to ERV, £m 19 70 70 137 50 50 24 30 30 41 10 10 -10 -10 2016 2017 2018 2019 2020 2021 2022 2023 202
Slide 27: Driving rents through profitable development
DRIVING RENTS THROUGH PROFITABLE DEVELOPMENT 60 Development completions 50 £50m potential headline rent (87% leased) Potential new headline rent, £m 40 625,700 sqm of new space completed (34 projects) 30 7.0%1 20 yield on cost 10 92%2 rated BREEAM ‘Excellent’ or better (99% ‘Very 0 Good’ or better)
Slide 28: 2023 development completions
2023 DEVELOPMENT COMPLETIONS Data Centre, Slough Trading Estate SEGRO Park Amsterdam Airport SEGRO Logistics Park East Midlands Gateway SEGRO Park Cologne 28
Slide 29: £575m net investment into development pipeline
£575M NET INVESTMENT INTO DEVELOPMENT PIPELINE DEVELOPMENT LAND ACQUISITIONS DISPOSALS • Including £92m for infrastructure • Limited to rare, super prime opportunities • Selective disposals of land and buildings • Developing on land we already own – Radlett (former aerodrome) • £8m annualised net re
Slide 30: Profitable development outlook
PROFITABLE DEVELOPMENT OUTLOOK Continued Speculative Rental Construction occupier starts growth costs demand reducing continuing moderating CURRENT AND NEAR-TERM LAND BANK £71m potential rent £372m potential rent £342m capex £3.5bn capex Attractive 7-8% yield on cost See slide 52 for current, near-t
Slide 31: Significant growth potential from data centres
SIGNIFICANT GROWTH POTENTIAL FROM DATA CENTRES 24 potential sites across UK and Europe1 1.2GW potential new capacity1 >£100m potential new headline rent from data centres included in the future pipeline2 8-12% yield on cost >£150m2 Headline rent from data centres, £m 150 125 Slough Trading Estate is
Slide 32: We create the space that enables extraordinary things to happen
WE CREATE THE SPACE THAT ENABLES EXTRAORDINARY THINGS TO HAPPEN Attractive Resilient Driving rents Primed for market financial through asset further fundamentals results management growth & development
Slide 33: A prime portfolio of assets and a pan-European operating platform
A PRIME PORTFOLIO OF ASSETS AND A PAN-EUROPEAN OPERATING PLATFORM Portfolio split by geography and asset type (at 31 December 2023) Other Poland £1.1bn £1.3bn London Italy £6.1bn £1.7bn AUM France £2.6bn £20.7bn Germany Thames Valley £2.8bn £3.2bn National Logistics £1.9bn Other (2%) Big Box (32%) U
Slide 34: A very diversified customer base
A VERY DIVERSIFIED CUSTOMER BASE Customer sectors (headline rent, SEGRO share) 1,416 customers Other Services & 7% ultilities Transport and 6% logistics TMT (incl. data centres) 23% Top 20 customers = 11% Wholesale and 32% of total group Retail Distribution headline rent 8% Retail 20% Post and Manuf
Slide 35: 53% potential rental growth over next 3 years
53% POTENTIAL RENTAL GROWTH OVER NEXT 3 YEARS Annualised gross cash passing rent1, £ million (as at 31 December 2023) +£341m +£431m 2024-2026 opportunity >2027 opportunity 89 +121% 289 53 83 +53% 71 84 58 45 1,411 980 Plus: further growth potential from Plus: further growth potential from 639 redeve
Slide 36: Further rental growth to come from favourable occupier market
FURTHER RENTAL GROWTH TO COME FROM FAVOURABLE OCCUPIER MARKET Supply– 2016-2023 Pre-2021 Future ERV Property Type Region % of portfolio1 demand average average growth balance ERV growth ERV growth2 expectations UK 52% FAVOURABLE 7.3% 4.4% Urban 3-6% pa warehouses Continental 14% FAVOURABLE 3.6% 1.8%
Slide 37: SEGRO primed for further profitable growth
SEGRO PRIMED FOR FURTHER PROFITABLE GROWTH Supportive structural trends Restricted Strong land balance availability sheet limits supply response Market leading pan-European Prime operating portfolio platform of existing assets Exceptional landbank for development 37 37
Slide 38: Q&A
Q&A 2023 Full Year Results SEGR°
Slide 39: Appendix: Portfolio and Financial Data
APPENDIX 1 Portfolio and Financial Data
Slide 40: Adjusted income statement
ADJUSTED INCOME STATEMENT (JVS PROPORTIONALLY CONSOLIDATED) 2023 2022 Group JVs Total Group JVs Total £m £m £m £m £m £m Gross rental income 547 134 681 488 119 607 Property operating expenses (85) (9) (94) (76) (9) (85) Net rental income 462 125 587 412 110 522 JV management fee income1 29 (12) 17 3
Slide 41: Pro forma 2023 accounting net rental income
PRO FORMA 2023 ACCOUNTING NET RENTAL INCOME Group JVs Total - Pro forma 2023 net rental income assuming £m £m £m disposals, acquisitions and let developments completed as at 1 January 2023 2023 net rental income 462 125 587 - Share of JV fee costs removed from Full year impact of: JV net rental inco
Slide 42: Total cost ratio (proportionally consolidated)
TOTAL COST RATIO (PROPORTIONALLY CONSOLIDATED) 2023 2022 Incl. joint ventures at share £m £m Gross rental income (less reimbursed costs) 678 604 Property operating expenses 85 76 Administration expenses 63 59 JV operating and administrative expenses 23 25 JV management fees and other costs recovered
Slide 43: Balance sheet
BALANCE SHEET (JVS PROPORTIONALLY CONSOLIDATED) 31 December 2023 31 December 2022 Group JVs Total Group JVs Total £m £m £m £m £m £m Investment properties 14,914 2,915 17,829 14,939 3,022 17,961 Trading properties 3 - 3 35 - 35 Total properties 14,917 2,915 17,832 14,974 3,022 17,996 Investment in jo
Slide 44: 6% decrease in Adjusted NAV
6% DECREASE IN ADJUSTED NAV1 Components of Adjusted NAV change, 31 December 2022 to 31 December 2023 33p 3p -27p 1,137p -64p -3p -1p 966 Standing assets -56p Land & Development -8p 907 31 December 2022 2023 Adjusted EPS SELP Dividends Realised and Exchange rate Other (incl tax) 31 December 2023 perf
Slide 45: EPRA performance measures
EPRA PERFORMANCE MEASURES 31 December 2023 31 December 2022 £m £p per share £m £p per share EPRA Earnings 413 33.9 374 31.0 EPRA NTA 11,162 907 11,717 966 EPRA NRV 12,317 1,001 12,879 1,062 EPRA NDV 11,310 919 12,170 1,004 EPRA LTV 36.9% 34.2% EPRA net initial yield 4.0% 3.7% EPRA topped-up net init
Slide 46: EPRA capital expenditure analysis
EPRA CAPITAL EXPENDITURE ANALYSIS 2023 2022 - More than 69% 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 which is expected to be value-enhancing Acquisitions 403 10 413 800 176 976 r
Slide 47: Euro currency exposure and hedging
EURO CURRENCY EXPOSURE AND HEDGING Balance sheet, £m - €1.15:£1 as at 31 December 2023 (31 December 2023) - € assets 74% hedged by € liabilities 7,000 6,000 - €1.9bn (£1.7bn) of residual exposure – 15% of Group NAV Assets 74% - Illustrative NAV sensitivity vs €1.15: 5,000 hedged 4,000 - +5% (€1.21)
Slide 48: Look-through loan-to-value ratio and cost of debt
LOOK-THROUGH LOAN-TO-VALUE RATIO AND COST OF DEBT 31 December 2023 Weighted average cost of debt, % Fixed Interest Cover % £m Gross debt, Net debt, including excluding Fixed and Capped cover of commitment fees and non- Fixed Cover of Net debt commitment fees net debt cash interest and non-cash inter
Slide 49: Net debt:EBITDA
NET DEBT:EBITDA 31 December 2023 31 December 2022 £m £m Gross rental income 547 488 Property operating expenses (85) (76) Administration expenses (63) (59) Other fee income 5 6 JV management fee income 29 30 Add back depreciation 6 4 Dividends received (incl from JVs) 38 9 EBITDA (A) 477 402 Adjustm
Slide 50: Positioning SEGRO to deliver on its purpose
POSITIONING SEGRO TO DELIVER ON ITS PURPOSE Investing in our local Championing Low-carbon growth Nurturing talent communities and environments SEGRO recognises that the world faces a climate SEGRO is an integral part of the communities in SEGRO’s people are vital to and inseparable from emergency an
Slide 51: Urban and big box warehouses – complementary asset types
URBAN AND BIG BOX WAREHOUSES – COMPLEMENTARY ASSET TYPES Urban warehouses (66%) Big boxes (32%) Portfolio by type: - Smaller units, generally <10,000 sq m - Larger units, generally over 10,000 sq m (valuation, SEGRO share) Data as at 31 December 2023 - Diverse range of uses (including ‘last mile’ -
Slide 52: >£530 million of potential rental income from future development
>£530 MILLION OF POTENTIAL RENTAL INCOME FROM FUTURE DEVELOPMENT SEGRO land bank (31 December 2023) gross rent (£m) Estimated cost Development Development to complete Proportion Expected Potential delivery pipeline pre-let (sq m) yield3 (£m) Area 1-12 Current 415,155 1832 51 7.3% 62% months Near-ter
Slide 53: Enhanced, de-risked development programme
ENHANCED, DE-RISKED DEVELOPMENT PROGRAMME Development-led growth1 The majority of which is pre-let 900 100% 800 80% 700 Development capex, £m 600 60% 500 400 40% 300 200 20% 100 0 0% 2016 2017 2018 2019 2020 2021 2022 2023 2016 2017 2018 2019 2020 2021 2022 2023 Pre-let Speculative Let at 31 Decembe
Slide 54: Land bank provides optionality and opportunity for growth
LAND BANK PROVIDES OPTIONALITY AND OPPORTUNITY FOR GROWTH 2,000 12.0% Net land utilisation, 2016-2023 1,800 (Based on opening book value or acquisition value) 10.0% 1,600 800 433 1,400 600 8.0% 151 Land bank value, £m 1,200 400 86 (40) Land value, £m 68 (28) 1,000 6.0% 200 (84) (118) 0 800 4.0% -200
Slide 55: SEGRO European Logistics Partnership (SELP) headline figures
SEGRO EUROPEAN LOGISTICS PARTNERSHIP (SELP) HEADLINE FIGURES Assets under Management Land and assets Net true equivalent yield (as at 31 December 2023) €6.7bn 5.5% €1,853m 1.8 Capital value change ERV growth €1,539m -5.1% 9.3% Assets under management, €m 1.6 1.4 €1,205m €1,155m 1.2 Headline rent ERV
Slide 56: Appendix II: Market Data
APPENDIX II Market Data SEGRO
Slide 57: European industrial investment volumes
EUROPEAN INDUSTRIAL INVESTMENT VOLUMES European industrial investment volumes European industrial investment volumes By geography, €bn By quarter, €bn 70 60 60 50 50 40 By quarter, €bn 40 30 30 20 20 10 10 0 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2013 2014 2015 2016 2017 2018 2019 20
Slide 58: Prime logistics yields
PRIME LOGISTICS YIELDS 12.0 10.0 8.0 Yield, % 6.0 Warsaw: 6.3% London: 5.3% Dusseldorf: 4.3% 4.0 Paris: 4.8% 2.0 0.0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Source: CBRE. 58
Slide 59: 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 year ended 31 December 2023 (the Results Announcement). For the purposes of this disclaimer, ‘Presentation’ shall mean t