Slide 1: 2012 Half Year Results
2012 Half Year Results 2 August 2012 0
Slide 2: Headlines
Headlines Further operational progress – good underlying earnings momentum Encouraging start to the strategic reshaping of our portfolio NAV impacted by the non-core and large, less-liquid, non-strategic assets Core portfolio performing well Making good progress towards our goal of creating a leadin
Slide 3: Financial Results
Financial Results Justin Read, Finance Director 2
Slide 4: Key financial highlights
Key financial highlights P&L H1 2012 H1 2011 Change % EPRA PBT (£m) 74.9 71.1 5.3 EPRA EPS (pence) 9.9 9.4 5.3 Dividend per share (pence) 4.9 4.9 - Balance sheet 30 June 31 December Change 2012 2011 % EPRA NAV per share¹ (pence) 317 340 (6.7) Net borrowings (£m) 2,022.3 2,303.4 (12.2) LTV (%) 49 50
Slide 5: Net rental income lower due to strategic non-core asset disposals
Net rental income lower due to strategic non-core asset disposals £1.1m £1.3m £(2.1)m £3.3m £(2.8)m £(5.4)m £135.5m £130.9m NET RENTAL Developments Acquisitions Like for like net rental Lease surrenders Currency translation Disposals NET RENTAL INCOME JUNE 2011 income INCOME JUNE 2012 4
Slide 6: Good underlying earnings momentum; 5.3% increase in EPRA PBT
Good underlying earnings momentum; 5.3% increase in EPRA PBT H1 2012 H1 2011 £m £m Gross rental income 156.9 161.5 Property operating expenses (26.0) (26.0) Net rental income 130.9 135.5 Joint venture management fee income 2.9 1.8 Share of joint ventures’ EPRA profit after tax1 10.1 9.7 Administrati
Slide 7: Further reduction in the total cost ratio
Further reduction in the total cost ratio 35 30.4% 29.9% Total cost ratio* (%) 30 28.1% 24.3% 25 22.4% 20 FY 2008 FY 2009 FY 2010 FY 2011 H1 2012 H1 2012 H1 2011 Movement (£m) (£m) (%) Property operating expenses (26.0) (26.0) - Administration expenses (13.1) (15.8) (17.1) *Total costs as a percenta
Slide 8: Cash flow summary
Cash flow summary H1 2012 H1 2011 £m £m Cash flow from operations 107.4 106.5 Finance costs (net) (52.3) (54.3) Dividends received (net) 2.3 3.3 Tax paid (net) (12.2) (2.1) Free cash flow 45.2 53.4 Capital expenditure (excluding trading properties) (64.6) (65.6) Investment property sales 352.5 21.8
Slide 9: Key financing metrics
Key financing metrics 30 June 31 December 2012 2011 Available funds – cash & undrawn facilities (£m) 618.9 456.1 Net borrowings (£m) 2,022.3 2,303.4 Loan to value ratio (%) 49 50 Gearing (%) 84 89 Weighted average cost of debt* (%) 5.1 4.8 Average duration of debt (years) 9.1 8.8 Interest cover (x)
Slide 10: Currency translation impact in the first half of the year
Currency translation impact in the first half of the year Income statement - H1 2012: Average exchange rate €1.22: £1 - H1 2011: Average exchange rate €1.15: £1 - Translation impact: £(1.0)m (EPRA pre-tax profit) NAV - 30 June 2012: Exchange rate €1.24: £1 - 31 Dec 2011: Exchange rate €1.20: £1 - Tr
Slide 11: Euro currency management and hedging
Euro currency management and hedging Balance sheet (as at 30 June 2012) •€1.24:£1 as at 30 June 2012 Euro gross assets 1,673 Euro debt •€ assets 89% hedged by € liabilities 117 Euro currency swaps •€214m (£173m) of residual exposure – 7% of Group NAV € million Other Euro liabilities 1,887 1,270 NAV
Slide 12: EPRA NAV per share bridge
EPRA NAV per share bridge 10p (1)p (10)p 340p (22)p Core (3)p Non-core (19)p 317p NAV DECEMBER 2011 EPRA PBT Other Dividend Realised and unrealised NAV JUNE 2012 valuation movements 11
Slide 13: Valuation movements support our strategic selection of assets and markets
Valuation movements support our strategic selection of assets and markets Greater Thames Valley France Germany Poland & Czech Benelux & TOTAL London & the Regions Republic Other 5 0.4 *Valuation movement (%) 0.1 0 (0.5) (0.9) (1.0) (1.4) (1.7) (2.3) (5.9) -5 (5.3) (5.6) (6.2) -10 (16.6) (11.6) -15 N
Slide 14: Insolvency rates generally low as a result of our large and diversified customer base
Insolvency rates generally low as a result of our large and diversified customer base 3% Percent of annualised rental income Impact of Karstadt lost through insolvencies Quelle insolvency in 2% Germany 1.5% 1% 0.7% 1.1% 1.7% 0.7% 1.2% 0.6% 0% 2007 2008 2009 2010 2011 H1 2012 13
Slide 15: A diversified income stream
A diversified income stream Headline rent by customer geography Headline rent by customer type Other Food Poland & Czech 7% Other 5% Republic 15% 7% Engineering 13% France 8% Utilities Finance & media 8% 7% Germany 8% Comms & technology 11% UK 70% Transport & distribution Retail 26% 15% SEGRO has ov
Slide 16: Top customers represent 22% of the Group's headline rent
Top 20 customers represent 22% of the Group’s headline rent (excluding Neckermann) Customer Type Customer Type 1 Telefonica/O2 Communications & technology 11 Jacobs Engineering & electrical 2 Deutsche Post/DHL Transport & distribution 12 Equinix Communications & technology 3 Krauss-Maffei Engineerin
Slide 17: Financial summary
Financial summary Good underlying earnings growth - EPRA EPS up 5.3% to 9.9p - Dividend unchanged from prior year at 4.9p EPRA NAV 317p - Reduction impacted by 19p write-down of non-core assets Solid balance sheet - Interest cover remains comfortable at 2.2 times - Net borrowings reduced by 12.2% to
Slide 18: Business Review
Business Review David Sleath, Chief Executive 17
Slide 19: Four strategic priorities to transform our business
Four strategic priorities to transform our business 1. Re-shape the existing portfolio Divest assets which do not fit our strategic criteria Reduce land holdings and other non-income producing assets 2. Re-invest – grow AUM in a smaller number of core markets through development and acquisition ‘Edg
Slide 20: Encouraging progress with our strategic priorities
Encouraging progress with our strategic priorities 1. £503m of non-core asset disposals in the year to date 2. £374 million of capital being recycled into core products and markets via acquisitions and development 3. Net debt reduced by 12.2% to £2,022m 4. Further operational progress in weak macro
Slide 21: Further operational progress in a weakening macro-economic environment
Further operational progress in a weakening macro-economic environment 126 new leases signed - take-up of £12.8m Leasing, 45 lease renewals, securing £16.6m of rental income Customer and Transactional rental values 2.0% above December 2011 ERVs Asset Retention rate of 63% (core 69%); takebacks broad
Slide 22: Occupier market trends
Occupier market trends Continuing to benefit from SEGRO’s strong operating platform combined with the constrained supply of prime, well located assets in the strongest areas of economic activity UK Demand most resilient in London and the South East; more difficult in the regions Germany Occupier mar
Slide 23: £3.6m of new annualised rental income from developments completed in H1 2012
£3.6m of new annualised rental income from developments completed in H1 2012 Zabka, Tychy – Logistics Ragus Sugars, STE – Light industrial (Pre-let) (Pre-let) Gyron, STE – Data centre Family Bargains, STE – Retail (Speculative – let before completion) (Pre-let) 22
Slide 24: Encouraging progress with our strategic priorities
Encouraging progress with our strategic priorities 1. £503m of non-core asset disposals in the year to date 2. £374 million of capital being recycled into core products and markets via acquisitions and development 3. Net debt reduced by 12.2% to £2,022m 4. Further operational progress in weak macro
Slide 25: £503m of non-core asset disposals; 3.1% average discount to December 2011 valuations
£503m of non-core asset disposals; 3.1% average discount to December 2011 valuations Month Portfolio/Asset Acquirer Sale proceeds Net initial yield (£m) (%) February Four regional UK estates Ignis 71.2 6.5 April IQ Farnborough Harbert 90.2 6.5 May Four regional UK estates Harbert 204.5 6.7 July 10 r
Slide 26: £0.8bn of non core assets remaining
£0.8bn of non core assets remaining, following £111m disposal completed today Valuation Income UK Europe Total Total (£m) (£m) (£m) (£m) ‘Big five’ assets 84 247 331 36 Other industrial assets 204 217 421 34 Other land holdings 10 54 64 - Total 298 518 816 70 Valuations as at 30 June 2012, including
Slide 27: Neckermann, Frankfurt
Neckermann, Frankfurt Key information: A 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 Asset valued at £43m at 30 June 2012 Neckermann filed for administration on 18 July 2012 Potenti
Slide 28: The remaining large non-strategic assets
The remaining large non-strategic assets Pegasus Park, Brussels Vimercate, Milan MPM/Siemens, Munich Thales, Crawley 27
Slide 29: Encouraging progress with our strategic priorities
Encouraging progress with our strategic priorities 1. £503m of non-core asset disposals in the year to date 2. £374 million of capital being recycled into core products and markets via acquisitions and development 3. Net debt reduced by 12.2% to £2,022m 4. Further operational progress in weak macro
Slide 30: 20 developments in the pipeline representing £18.2m of new annualised rental income
20 developments in the pipeline representing £18.2m of new annualised rental income Rolls-Royce at the Portal Site, Heathrow DB Schenker at the Portal Site, Heathrow Due to be completed December 2012 Due to be completed August 2012 French sports retailer, Gliwice in Poland Parc des Damiers in Ile de
Slide 31: Acquisition of the UK Logistics Fund
Acquisition of the UK Logistics Fund £315m portfolio acquisition in a 50/50 JV partnership with Royal Mail, Birmingham Moorfield Real Estate Fund (SEGRO’s equity contribution £65m) 14 prime logistics warehouses, located predominantly in the Midlands and South Excellent customer base, including Tesco
Slide 32: Acquisition of French logistics assets
Acquisition of French logistics assets Ris Orangis, Ile de France £130m acquisition, due to complete September 2012 13 prime logistics assets in the Ile de France and Lyon; close to our existing assets Strong customer line-up: UPS, Geodis, Saint-Gobain Saint Witz, Ile de France €14.2m of high qualit
Slide 33: Encouraging progress with our strategic priorities
Encouraging progress with our strategic priorities 1. £503m of non-core asset disposals in the year to date 2. £374 million of capital being recycled into core products and markets via acquisitions and development 3. Net debt reduced by 12.2% to £2,022m 4. Further operational progress in weak macro
Slide 34: Encouraging momentum with strategic portfolio reshaping
Encouraging momentum with strategic portfolio reshaping Split of total portfolio by core and non-core assets 30 June 2011 30 June 2012 19% 31% 81% 69% Core Non-core Core Non-core Split of core portfolio by stabilised and opportunity assets 30 June 2011 30 June 2012 8% 9% 43% 31% 49% 60% Stabilised (
Slide 35: Outlook
Outlook General economic environment expected to remain challenging 81% of total portfolio exposed to more resilient core markets & segments Well positioned to make further progress with strategic priorities over the coming years Re-affirming our intention to at least maintain the current level of d
Slide 36: Conclusions
Conclusions Further operational progress – core portfolio performing well Encouraging start to the strategic reshaping of our portfolio Making good progress towards our goal of creating a leading, income-focused REIT 35
Slide 37: 2012 Half Year Results
2012 Half Year Results 2 August 2012 36
Slide 38: Appendix I: Core and non core analysis
Appendix I Core and non core analysis 37
Slide 39: Overall performance of core portfolio supports our strategic selection of assets and markets
Overall performance of core portfolio supports our strategic selection of assets and markets Core Big five Other non- Group core Portfolio value* (£m) 3,483.8 296.8 527.3 4,307.9 (completed properties) Land and developments* (£m) 347.6 33.6 63.4 444.6 Net initial yield (%) 6.1 10.4 7.1 6.5 True equi
Slide 40: Thales, Crawley
Thales, Crawley Key information: A 35,000 sq m bespoke office and R&D campus for French defence contractor, Thales, located close to Gatwick airport in Crawley. Pre-let development agreed in 2005; completed in 2007 Total development cost £60m Vacancy 0.0% at 30 June 2012 WAULT to break 13.5 years at
Slide 41: Energy Park, Vimercate (Milan)
Energy Park, Vimercate (Milan) Key information: A 70,000 sq m office and R&D campus located approximately 20km north-east from central 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 p
Slide 42: Pegasus Park, Brussels
Pegasus Park, Brussels Key information: A high quality 82,000 sq m modern suburban office park located approximately 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 Vaca
Slide 43: MPM/Siemens, Munich
MPM/Siemens, Munich Key information: A large 155,000 sq m engineering and manufacturing facility leased by Krauss-Maffei (formerly MPM) and Siemens (as a sub-tenant). Acquired in 2007 as a sale & leaseback to MPM Vacancy 0.0% at 30 June 2012 WAULT to break 10.6 years at 31 March 2012 42
Slide 44: Appendix II: Operational performance
Appendix II Operational performance 43
Slide 45: Segmental reporting
Segmental reporting Net rental income (£m) EPRA PBIT (£m) Business unit 30 June 30 June 30 June 30 June 2012 2011 2012 2011 Greater London 33.3 34.2 43.8 45.4 Thames Valley and the Regions 51.9 56.2 53.9 55.9 Germany and Northern Europe 22.0 22.9 21.3 21.6 France and Southern Europe 16.9 16.8 16.2 1
Slide 46: EPRA pro forma profit before tax: JVs proportionally consolidated
EPRA pro forma profit before tax: JVs proportionally consolidated H1 2012 H1 2011 £m £m Gross rental income 176.5 178.4 Property operating expenses (28.1) (28.2) Net rental income 148.4 150.2 Joint venture management fee income 2.3 1.8 Administration expenses (13.1) (15.8) EPRA operating profit 137.
Slide 47: EPRA PBT bridge (£m)
EPRA PBT bridge (£m) £1.1m £0.4m £(4.6)m £2.7m £4.2m £74.9m £71.1m SEGRO EPRA PBT Net interest Admin expenses JV management fees EPRA JV PAT Net rental income SEGRO EPRA PBT JUNE 2011 JUNE 2012 46
Slide 48: Group vacancy bridge
Group vacancy bridge 0.8% (0.7)% 5.9% (0.8%) (5.2%) 9.1% 9.1% VACANCY DEC 2011 Space returned Developments Capital recycling Development lettings Space let VACANCY JUNE 2012 completed 47
Slide 49: Group vacancy unchanged at 9.1%
Group vacancy unchanged at 9.1% – the lowest level since 2007 16% 13.5% 14.0% 14% 12.0% % vacant by rental value 12% 11.4% Non-core 10.5% 10% 9.1% 9.1% Core 8.8% 8% 6% 4% 2% 0% FY 2009 H1 2010 FY 2010 H1 2011 FY 2011 H1 2012 48
Slide 50: Appendix III: Financing
Appendix III Financing 49
Slide 51: No significant debt maturities before 2014
No significant debt maturities before 2014 Weighted average maturity of gross borrowings 9.1 years 600.0 500.0 400.0 £m 300.0 200.0 100.0 0.0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024+ Year Bonds and Notes Bank Debt drawn Cash Undrawn facilities 50
Slide 52: Appendix IIII: Reinvestment: Development and acquisitions
Appendix IIII Reinvestment: Development and acquisitions 51
Slide 53: Significant earnings momentum from the current development pipeline
Significant earnings momentum from the current development pipeline Project Customer Space to be Project Customer Space to be built (sq m) built (sq m) UK CONTINENTAL EUROPE Pre-let projects under construction Pre-let projects under construction STE Infinity 11,600 Frankfurt, Germany Pro Tex (30%)/s
Slide 54: 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