SEGRO plc · LSE:SGRO
SEGRO — H1 2018 Earnings Presentation
51 slides from SEGRO's earnings presentation, Jul 26, 2018
Slide 1: 2018 Half Year Results
2018 HALF YEAR RESULTS 26 JULY 2018
Slide 2: H1 2018 — Another period of delivery
H1 2018 — Another period of delivery Strong financial results and capital structure Disciplined capital allocation — improving portfolio scale and quality, reducing risk Operational excellence — delivering strong operating results and development growth Significant further growth opportunities 2
Slide 3: Strong momentum
Strong momentum Powerful structural drivers of occupational demand Modest new speculative supply in most markets Significant further income growth potential from development and asset management Strong capital structure Amazon, Milan Delivery Station 3
Slide 4: 2018: Delivering on our strategy
2018: Delivering on our strategy Strong financial results and capital structure Disciplined capital allocation — improving portfolio scale and quality, reducing risk Operational excellence — delivering strong operating results and development growth Significant further growth opportunities SEGRO Par
Slide 5: Strong financial results and capital structure
Strong financial results and capital structure Earnings growth +21.3% Adjusted pre-tax profit – Development completions Adjusted EPS, +11.3% 10.8p – Like-for-like rental growth Like-for-like net rental – Reduced financing costs +2.3% income growth EPRA NAV per share Strong capital structure +8.5
Slide 6: 2.3% growth in like-for-like net rental income
2.3% growth in 6 month like-for-like net rental income Proportionally consolidated net rental income (excluding joint venture fees), H1 2017-18 £8.0m £0.8m £152.5m £150.8m £12.7m £130.7m £7.9m £2.3m £(1.0)m JVs JVs JVs £31.3m £31.4m £(8.9)m £27.3m Group: +2.3% Including lower share of UK: +2.9% JV f
Slide 7: 21% increase in Adjusted PBT
21% increase in Adjusted PBT Adjusted income statement H1 2018 H1 2017 £m £m • Cost ratio of 22.5% Gross rental income 145.1 127.3 (H1 2017: 22.9%) Property operating expenses (23.9) (23.9) • 19.3% excl LTIPs (H1 2017: 20.4%) Net rental income 121.2 103.4 Share of joint ventures’ adjusted profit1 24
Slide 8: 8.5% increase in EPRA NAV
8.5% increase in EPRA NAV Components of EPRA NAV change, 31 December 2017 to 30 June 2018 48p Land & dev’pt 11p (1)p Standing assets 603p 11p 37p 556p (11)p 31 December 2017 H1 2018 2017 final dividend Realised and Exchange rate and 30 June 2018 Adjusted EPS unrealised gains other 8
Slide 9: £488m valuation surplus
£488m valuation surplus UK: +6.4% Continental Europe: +2.6% £500m +3.6% +1.4% +5.3% +4.5% +2.1% £400m +3.0% £300m +4.2% +8.1% £200m £100m £0m Total London Slough Midlands Big Germany France Poland Italy Box Percentage change relates to properties held throughout H1 2018, including JVs at share. 9
Slide 10: Driven by asset management, yield shift and rental growth
Driven by asset management, yield shift and rental growth1 Equivalent yield: 5.1%2 ERV growth: 1.7% London 4.6% At 30 June 2018 +3.1% London ERV UK: Heathrow +3.3% Slough 5.0% Change since 31 +1.6% Dec 2017 +2.3% Park Royal +2.4% Midlands Big Box 5.2% +0.4% N&E London +4.7% Germany 5.4% +0.6% By own
Slide 11: Efficient capital structure
Efficient capital structure LTV ratio and average cost of debt (incl share of joint ventures), 2012-18 Average debt duration of 10 60% 4.6% 5.0% years 4.2% 4.2% 4.0% Average cost of debt 3.5% 3.4% £500m+ estimated development 40% capex (of which £100m is 3.0% LTV ratio 2.1% 2.0% infrastructure a
Slide 12: Strong financial results and capital structure
Strong financial results and capital structure Growing earnings Strong capital structure 2018 interim dividend increased by 5.7% SEGRO Logistics Park Aulnay 12
Slide 13: 2018: Delivering on our strategy
2018: Delivering on our strategy Strong financial results and capital structure Disciplined capital allocation — improving portfolio scale and quality, reducing risk Operational excellence — delivering strong operating results and development growth Significant further growth opportunities Vailog Lo
Slide 14: Improving portfolio scale and quality, reducing risk
Improving portfolio scale and quality, reducing risk £280m of development capex £56m of acquisitions Development capex Continental European and infrastructure urban warehouses Air2, Paris Skyline Park,Pont Heathrow Yblon London, 3% Poland, 2% Netherlands, 8% Germany, 9% Italy, £50m of 19% interest 4
Slide 15: 2018: Delivering on our strategy
2018: Delivering on our strategy Strong financial results and capital structure Disciplined capital allocation — improving portfolio scale and quality, reducing risk Operational excellence — delivering strong operating results and development growth Significant further growth opportunities SEGRO Par
Slide 16: Driving performance through asset management
Driving performance through asset management… Strong leasing success in 2018…1 …high levels of occupancy and … and capturing reversion from customer retention…2 renewals and reviews3 60 New rent contracted 9 95 10 Net new rent on existing space Rent change on review and renewal, % 8 90 Annualised re
Slide 17: …and through development
…and through development Urban warehouses Big box warehouses DPD, SEGRO Park Newham SEGRO Park Morfelden SEGRO Logistics Park Bischofsheim SEGRO Park Amsterdam Airport SEGRO Park Rainham Enterprise Quarter, SEGRO Park Rainham SEGRO Logistics Park Aulnay Vailog Logistics Park Castel San Giovanni 280,
Slide 18: 2018: Delivering on our strategy
2018: Delivering on our strategy Strong financial results and capital structure Disciplined capital allocation — improving portfolio scale and quality, reducing risk Operational excellence — delivering strong operating results and development growth Significant further growth opportunities SEGRO Bus
Slide 19: Powerful structural drivers of occupational demand
Powerful structural drivers of occupational demand Urbanisation Technological revolution SEGRO Park Le Blanc Mesnil, Paris Vailog Logistics Park Milan South Reduced land More demand for E-commerce Warehouse availability goods and services growth automation Intensification of “Green” delivery Digital
Slide 20: Favourable market conditions
Favourable market conditions Structural tailwinds Benign economic backdrop Low vacancy rates across Europe (5.0% estimated aggregate pan-European vacancy rate; source: JLL) Take-up levels remain strong, new development 5.0 Big box warehouse vacancy rate, 31 March 2018 mostly pre-let Supply and avail
Slide 21: Current development pipeline: £54m rent, 48 projects, 1.1m sq m
Current development pipeline: £54m rent, 48 projects, 1.1m sq m space Rapid leasing of speculative space (Letting status of development completions in 2014-18, %) 100% Aulnay-Sous-Bois, Paris Turin, Italy 80% 60% 40% SEGRO Park Sant Esteve SLP East Midlands Gateway construction 20% 0% 2014 2015 2016
Slide 22: Significant early progress at SEGRO Logistics Park East Midlands Gateway
Significant early progress at SEGRO Logistics Park East Midlands Gateway Land and infra costs1 £183m — £139m spent Container storage Rail Freight Terminal Construction costs1 £322m — £27m spent M1 Total potential space 550,000 — 250,000 sq m East Midlands sq m under construction2 Airport Kegworth by
Slide 23: £200m+ rent from development opportunities in SEGRO's control
£200m+ rent from development opportunities in SEGRO’s control development yield Estimated cost to gross rent (£m) complete (£m) Development Proportion Estimated Expected Potential pipeline delivery pre-let (sq m) Area Current 1,076,300 4262 54 7.1% 71% 1-12 months Near-term 236,700 149 17 7% 100% 12
Slide 24: Substantial opportunity to grow rental income
Substantial opportunity to grow rental income Annualised gross cash passing rent1, £ million £145m from land bank and land options4 (as at 30 June 2018) 54 £147m potential from current activity 91 638 17 54 50 26 388.8 384 346 Of which £8m suitable for SELP Passing rent at Rent in Reversion Current
Slide 25: Strong momentum
Strong momentum Powerful structural drivers of occupational demand Modest new speculative supply in most markets Significant further income growth potential from development and asset management Strong capital structure Vailog Logistics Park Castel San Giovanni 25
Slide 26: 2018 Half Year Results Q&A
SEGRO 2018 HALF YEAR RESULTS Q&A
Slide 27: Appendix I: Portfolio and Financial Data
APPENDIX I PORTFOLIO AND FINANCIAL DATA
Slide 28: EPRA performance measures
EPRA performance measures 30 June 2018 30 June 2017 31 December 2017 £m £p per share £m £p per share £m £p per share EPRA1 Earnings 108.6 10.8 90.5 9.7 192.8 19.9 EPRA NAV 6,126.1 603 5,035.5 504 5,607.7 556 EPRA NNNAV 5,965.1 587 4,728.8 472 5,416.0 537 EPRA net initial yield 4.2% 4.7% 4.3% EPRA to
Slide 29: Adjusted income statement (JVs proportionally consolidated)
Adjusted income statement (JVs proportionally consolidated) H1 2018 H1 2017 Group JVs Total Group JVs Total £m £m £m £m £m £m Gross rental income 145.1 36.9 182.0 127.3 37.3 164.6 Property operating expenses (23.9) (2.0) (25.9) (23.9) (2.1) (26.0) Net rental income 121.2 34.9 156.1 103.4 35.2 138.6
Slide 30: Balance sheet (JVs proportionally consolidated)
Balance sheet (JVs proportionally consolidated) 30 June 2018 31 December 2017 Group JVs Total Group JVs Total £m £m £m £m £m £m Investment properties 7,348.6 1,393.1 8,741.7 6,745.4 1,280.2 8,025.6 Trading properties 34.4 0.6 35.0 12.5 0.6 13.1 Total properties 7,383.0 1,393.7 8,776.7 6,757.9 1,280.
Slide 31: Total Cost Ratio
Total Cost Ratio Total cost ratio, H1 2017-18 (proportionally consolidated) Incl. joint ventures at share H1 2018 H1 2017 £m £m Gross rental income (less reimbursed costs) 180.6 163.6 Property operating expenses 23.9 23.9 Administration expenses 20.7 17.5 JV operating expenses 6.1 6.1 JV and other m
Slide 32: EPRA capital expenditure analysis
EPRA capital expenditure analysis H1 2018 H1 2017 • Approximately 50% 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 77.5 53.9 131.4 1,143.6 15.5 1,159.1 Development1 208
Slide 33: Look-through loan-to-value ratio
Look-through loan-to-value ratio 30 June Weighted average 31 December Weighted average 2018 cost of gross debt, 2017 cost of gross debt, £m %1 £m %1 Group gross borrowings 2,156 2.2 2,063 2.3 Group cash & equivalents (41) (109) Group net borrowings 2,115 1,954 Share of joint venture net borrowings 4
Slide 34: Debt maturity profile at 30 June 2018
Debt maturity profile at 30 June 2018, £m Debt maturity by type and year, £ millions (as at 30 June 2018) 1,200 1,000 JV undrawn at share 800 JV debt at share 600 SEGRO undrawn SEGRO bank debt 400 SEGRO PP notes SEGRO bonds 200 0 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031
Slide 35: Euro currency exposure and hedging
Euro currency exposure and hedging Balance sheet, £m 30 June 2018 • €1.13:£1 as at 30 June 2018 Assets 68% hedged € assets 68% hedged by € liabilities 3,000 • 2,500 • €914m (£802m) of residual exposure – 13% of Group NAV Other euro liabilities • Illustrative NAV sensitivity vs €1.13: 2,000 Euro curr
Slide 36: EPRA Vacancy Rate
EPRA Vacancy Rate Vacancy rate reconciliation, 31 December 2017 to 30 June 2018 0.6% 0.2% 4.8% 4.0% 0.4% (0.1)% (0.2)% Speculative Speculative development1 (0.1)% development1 0.6% 1.5% Existing standing Existing standing assets assets 3.4% 3.3% 31 December Long-term Short-term New Acquisitions Disp
Slide 37: A prime portfolio of modern warehouses
A prime portfolio of modern warehouses Portfolio split by geography and asset type (at 30 June 2018) Other, £0.6bn Italy, £0.5bn Poland, Greater London, £0.8bn £3.5bn France, AUM £1.1bn £10.2bn Germany, £1.3bn Thames Valley, Midlands Logistics, £1.6bn £0.9bn Other (4%) Urban (55%) Big box (41%) 37
Slide 38: SEGRO European Logistics Partnership (SELP) headline figures
SEGRO European Logistics Partnership (SELP) headline figures Assets under management (as at 30 June 2018) Land and Equivalent €3.1bn assets 5.8% yield 1.2 Assets under management, €bn €999m 1.0 €895m AUM at 30 June 2018 AUM at inception Capital value 3.0% 0.4% ERV growth change 0.8 €671m 0.6 0.4 Hea
Slide 39: Current development pipeline
Current development pipeline Current development pipeline Current development projects, asset type by ERV (as at 30 June 2018) (30 June 2018) 1,076,289 sq m Big box warehouses 24% £54m ERV Air2, Paris Gennevilliers £38m Big box rent secured Gross rent from development completions, £m (71%) (as at 30
Slide 40: Future development pipeline
Future development pipeline Development land bank Geographic split of land bank, by potential ERV1 (30 June 2018) (30 June 2018) UK 37% Germany/ Austria 23% Italy/Spain 23% All figures include joint ventures at share. 1 Future development pipeline including near-term projects but excluding land unde
Slide 41: Land bank provides optionality and opportunity for growth
Land bank provides optionality and opportunity for growth 600 7.0% £46m of land bank subject to conditional sale for alternative (residential) use 500 6.0% Land bank value, £m Additional opportunity from land held under option 5.0% 400 4.0% 300 3.0% 200 2.0% 100 1.0% 0 0.0% 2011 2012 2013 2014 2
Slide 42: Appendix II: Market Data
SEGRO Ww APPENDIX II MARKET DATA
Slide 43: E-commerce continues to gain market share
E-commerce continues to gain market share Growth of pan-European retail sales via e-commerce vs Online purchases as share of total retail sales physical stores (2015=100) 25% 180 CAGR: 9.8% 170 20% 20% 160 15% 150 12% 10% 11% 140 10% 130 5% 120 CAGR: 2.4% 0% 110 2003 2005 2007 2009 2011 2013 2015 20
Slide 44: 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 2006 2007 2008 2009 2010 2011 201
Slide 45: Prime logistics yields vs 10 year bond yields
Prime logistics yields vs 10 year bond yields 12.0 10.0 8.0 6.0 Poland: 6.0% France: 4.5% 4.0 UK: 4.5% Germany: 4.4% 2.0 UK 10yr bond: 1.3% 0.0 Germany 10yr bond: 0.3% 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 1H18 Source: CBRE, Bloomberg (data correct at 30 June 2018) 45
Slide 46: 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 12% 2.0 No. of years’ supply 2.0 10% Completions, m sq m 1.5 2.0 Vacancy rate 8% 1.0 1.0 6% 0.5 1.0 4% 0.0 0
Slide 47: European industrial and logistics supply dynamics
European industrial and logistics supply dynamics Logistics space under construction1 France logistics supply-demand dynamics2 (m sq m, 31 March 2018) (m sq m, 30 June 2018) 3.0 5.0 2.5 2.5 Take-up / availability, m sq m 4.0 2.0 No. of years’ supply 2.0 3.0 1.5 1.5 2.0 1.0 1.0 0.5 1.0 0.5 0.0 0.0 0.
Slide 48: 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 1H17 1H18 2007 2008 2009 2010 2011 2012
Slide 49: 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 1H18 0.0 2009 2010 2011 2012 201
Slide 50: 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 80 1.7 1.6 75 1.5 1.4 70 1.3 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-05 Dec-0
Slide 51: 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 2018. For the purposes of this disclaimer, “Presentation” shall mean this document, the oral