SEGRO’s great run, both financially and on the stock market, continues.
Its annual results released on February 15, confirmed its strength – in terms of warehouse and light industrial property development pipeline – while minimising certain operational risks.
Not only has this logistics property developer delivered for years, but it has just successfully issued new equity – at a negligible discount to market values – to fund growth.
Proceeds will be deployed in expansion-led growth projects – new equity is routinely used to de-risk its capital structure when new capital is needed but there is something remarkable about its successful placing, given latent Brexit risk.
Chief Executive Officer David Sleath – a company man appointed CEO in 2011, who has since contributed to a doubling in the stock price – said the extensive development activity “that has been our focus over the past few years … underpinned by the structural themes of e-commerce and urbanisation driving occupier demand, means we now have portfolio of very high quality and well-located warehouses”.
A prime portfolio and active approach to asset management has enabled SEGRO “to grow rents and maintain high occupancy across markets”.
Adjusted pre-tax profit, up 24.4% to £241.5m, came on the back of development success and careful customer/portfolio management, which helped it deliver high customer retention rates, like-for-like rental growth and a low vacancy rate. This was a very similar performance to 2017, when adjusted pre-tax profit rose 25.7% to £194.2m, thanks to those same factors.
Adjusted earnings per share (24.3p) were 22.2p, excluding certain non-recurring item, rising 11.6% on a comparable annual basis.
The group said net investment amounted to £327m, and was comprised of £688m invested in development capex, infrastructure and land, and £81m of asset acquisitions which were offset by £442m of asset and land disposals (including sales of assets to its SELP joint venture).
(The SEGRO European Logistics Partnership (SELP) was created in October 2013 as a 50/50 joint venture between SEGRO and Public Sector Pension Investment Board, the Canadian pension fund.)
Total development capex for 2019, including infrastructure and land acquisitions, is expected to exceed £600m. The loan-to-value ratio was stable in 2018, while the balance sheet is properly capitalised.
The market value of its shares is almost £6.5bn, priced slightly below book value at 0.9x, on a forward basis.
Classed as a UK Real Estate Investment Trust (REIT), SEGRO owns and manages 7m sq metres of space valued at £11bn.
Source: Transport Intelligence, February 21, 2019
Author: Alessandro Pasetti
GLOBAL SUPPLY CHAIN INTELLIGENCE (GSCi)