TIDMSGRO
SEGRO PLC (BOURSE:SGRO)
Commenting on the results, David Sleath, Chief Executive,
said:
"SEGRO has performed well during the first six months of 2023,
delivering rental growth from our standing portfolio and from our
largely pre-let development programme. We have made great progress
in capturing reversion, delivering an average rental uplift of 20
per cent at lease events during the period in addition to
contracted indexation, whilst customer retention has increased
significantly to 85 per cent.
"The structural drivers of occupier demand remain evident across
the UK and Europe, whilst supply remains constrained in our chosen
markets, helping to drive rental growth in line with our
expectations.
"Valuations have been relatively stable in the first half of
this year, following the deep valuation correction in the latter
part of 2022. The increased volume of transactions in the last
quarter indicates that investors see value at the current levels of
pricing for prime industrial and logistics assets, given the
positive long-term outlook for our sector.
"We have significant opportunities to drive rent and create
value both within our standing portfolio and through the execution
of our profitable development programme. These factors give us
confidence in our ability to deliver attractive growth and returns
into the years ahead."
HIGHLIGHTS(A) :
-- Adjusted pre-tax profit of GBP198 million up 2.6 per cent compared with
the prior year (H1 2022: GBP193 million1), Adjusted EPS is 15.9 pence, up
1.9 per cent (H1 2022: 15.6 pence1) excluding the impact of performance
fees from our SELP joint venture.
-- Adjusted NAV per share is down 3.0 per cent to 937 pence (31 December
2022: 966 pence) driven by a 1.4 per cent decrease in the valuation of
the portfolio (UK -0.6 per cent, CE -2.7 per cent), due to outward yield
shift, mitigated by 3.7 per cent growth in estimated rental values during
the first half of the year.
-- Like-for-like rental growth of 5.1 per cent and GBP44 million of new
headline rent commitments generated during the six-month period (H1 2022:
GBP55 million), driven by our customer focus and active management of the
portfolio.
-- 340,900 sq m of development completions were delivered, equating to
GBP28 million of potential rent, of which 83 per cent of which is leased.
85 per cent of these completions were BREEAM 'Excellent' certification
(or local equivalent).
-- Future rent roll growth supported by our active development pipeline
with 740,800 sq m of projects under construction or in advanced pre-let
discussions equating to GBP76 million of potential rent (31 December
2022: 915,600 sq m, GBP86 million), of which 70 per cent is associated
with pre-lets signed or in advanced negotiations, substantially
de-risking the 2023-24 pipeline. Yield on cost for these projects is 7.2
per cent.
-- Strong balance sheet, with a modest level of gearing and significant
liquidity. LTV of 34 per cent at 30 June 2023 (31 December 2022: 32 per
cent) and access to GBP1.7 billion of cash and committed bank
facilities.
-- Attractive cost of debt due to our diverse, long-term debt structure.
No major debt maturities until 2026 and 91 per cent of debt is fixed or
capped with half of the caps active until 2029. Average cost of debt at
30 June 2023 was 2.9 per cent (31 December 2022: 2.5 per cent).
-- Interim dividend increased by 7.4 per cent to 8.7 pence (2022: 8.1
pence).
FINANCIAL SUMMARY
6 months to 6 months to Change
30 June 2023 30 June 2022 per cent
Adjusted(2) profit before tax (GBPm) 198 193(1) 2.6
IFRS (loss)/ profit before tax (GBPm) (33) 1,375 --
Adjusted(3) earnings per share
(pence) 15.9 15.6(1) 1.9
IFRS earnings per share (pence) (1.9) 110.7 --
Dividend per share (pence) 8.7 8.1 7.4
Total Accounting Return (%)(4) (1.1) 11.3 --
31 December Change
30 June 2023 2022 per cent
Assets under Management (GBPm) 21,024 20,947
Portfolio valuation (SEGRO share,
GBPm) 18,095 17,925 (1.4)(5)
Adjusted(6 7) net asset value per
share (pence, diluted) 937 966 (3.0)
IFRS net asset value per share
(pence, diluted) 913 938 (2.7)
Net debt (SEGRO share, GBPm) 6,078 5,693
Loan to value ratio including joint
ventures at share (per cent) 34 32
1. Adjusted profit before tax and Adjusted earnings per share
have been represented to exclude joint venture performance fee
income as detailed further in Note 2. The H1 2022 figures have been
changed accordingly. The FY 2022 and H1 2023 reported results are
not impacted by this change. Further discussion of the sensitivity
around the quantum of the performance fee is given in Note 6.
2. A reconciliation between Adjusted profit before tax and IFRS
profit before tax is shown in Note 2 to the condensed financial
information.
3. A reconciliation between Adjusted earnings per share and IFRS
earnings per share is shown in Note 11 to the condensed financial
information.
4. Total Accounting Return is calculated based on the opening
and closing adjusted NAV per share adding back dividends paid
during the period.
5. Percentage valuation movement during the period based on the
difference between opening and closing valuations for all
properties including buildings under construction and land,
adjusting for capital expenditure, acquisitions and disposals.
6. A reconciliation between Adjusted net asset value per share
and IFRS net asset value per share is shown in Note 11 to the
condensed financial information.
7. Adjusted net asset value is in line with EPRA Net Tangible
Assets (NTA) (see Table 5 in the Supplementary Notes for a NAV
reconciliation).
(A) Figures quoted on pages 1 to 14 refer to SEGRO's share,
except for land (hectares) and space (square metres) which are
quoted at 100 per cent, unless otherwise stated. Please refer to
the Presentation of Financial Information statement in the
Financial Review for further details.
OPERATING SUMMARY & KEY METRICS
H1 2023 H1 2022 FY 2022
RENTAL GROWTH REMAINS STRONG, SMALL DECLINE IN PORTFOLIO VALUATION DUE TO
FURTHER YIELD SHIFT (see page 8):
Valuation decline driven by further yield expansion, mostly on the Continent,
and partly offset by estimated rental value (ERV) growth and active asset
management of the portfolio.
Portfolio valuation change (%) Group (1.4) 7.2 (11.0)
UK (0.6) 8.2 (13.1)
CE (2.7) 5.2 (7.3)
Estimated rental value (ERV) growth (%) Group 3.7 5.9 10.9
UK 3.0 7.3 11.5
CE 4.8 3.6 9.9
ACTIVE ASSET MANAGEMENT DRIVING OPERATIONAL PERFORMANCE (see page 9):
Standing portfolio contributing significantly to rent roll growth as a result
of reversion capture, indexation and leases signed with existing and new
customers from a wide range of sectors, highlighting the versatility of our
portfolio.
Total new rent contracted during the period
(GBPm) 44 55 98
Pre-lets signed during the period (GBPm) 19 28 41
Like-for-like net rental income growth (%):
Group 5.1 7.1 6.7
UK 4.3 8.9 7.7
CE 6.4 4.1 4.9
Uplift on rent reviews and renewals (%) Group 20.4 23.5 23.3
(note: excludes uplifts from indexation) UK 26.4 29.0 28.0
CE 9.9 1.8 1.7
Occupancy rate (%) 95.5 96.7 96.0
Customer retention (%) 85 79 76
INVESTMENT ACTIVITY REMAINS DISCIPLINED AND FOCUSED ON SECURING PROFITABLE
GROWTH (see page 14):
Capital investment continues to focus on our development programme, through
capex and securing land to provide future growth opportunities. Development
capex for 2023, including infrastructure, expected to be c.GBP600 million.
Development capex (GBPm) 299 358 787
Acquisitions (GBPm) 326 365 867
Disposals (GBPm) 74 181 367
EXECUTING AND GROWING OUR PROFITABLE DEVELOPMENT PIPELINE (see page 10):
Our active and largely pre-let development pipeline remains a key driver of
rent roll growth and attractive returns on capital. Potential rent of GBP76
million from projects currently on site or expected to commence shortly at a
yield on cost of 7.2 per cent.
Development completions:
-- Space completed (sq m) 340,900 329,900 639,200
-- Potential rent (GBPm) (Rent secured) 28 (83%) 15 (87%) 46 (80%)
Current development pipeline potential rent
(GBPm) (Rent secured) 66 (65%) 84 (63%) 67 (73%)
Near-term pre-let development pipeline potential
rent (GBPm) 10 34 19
OUTLOOK
SEGRO has one of the best and most modern pan-European
industrial warehouse portfolios, through which we can serve our
customers' entire regional and local distribution needs. Our
strategic focus is to ensure that our properties are of the highest
quality and in the most supply constrained locations, and thus able
to generate superior long-term rental growth. We are also able to
respond tactically to shorter-term changes in market conditions,
including adapting our approach to capital allocation based on the
insights provided by our market-leading operating platform.
Occupier demand for industrial and logistics space is proving
resilient due to the long-term, structural drivers at play in our
sector. At the same time, modern sustainable space is in short
supply across our chosen sub-markets in Europe and a lack of
available land limits the potential supply response. We expect that
this supply-demand tension will drive further rental growth across
our portfolio, normalising over time towards our long-held
expectations of two to six per cent per annum. Net rental income
growth will also be supported by the GBP147 million of embedded
reversionary potential within our portfolio, equivalent to around a
quarter of our current rent roll. Most of this reversion is in the
UK and will be captured by the five-yearly open market rent review
process, and we have index-linked uplifts on over half of our
leases (mostly in Continental Europe) that will also help to
capture this reversion and provide further rental growth.
Our high-quality land bank, with the potential to add GBP370
million of rental income, provides us with the ability to respond
quickly to changing occupier demand through our development
programme. Coupled with this, our strong balance sheet provides
significant financial flexibility to continue to invest capital
profitably in those development opportunities which offer the most
attractive risk-adjusted returns.
Valuations have been much more stable in the first half of 2023
and investment has activity picked up across the market, including
our own disposal of a UK big box portfolio since the period end
(which was sold ahead of June 2023 book value). This demonstrates
that investors are seeing value at current levels of pricing, and
we believe that demand will further increase as clarity emerges
around future interest rates, with investors attracted by the
positive fundamentals and long-term structural growth potential in
logistics and industrial warehousing.
Our prime portfolio and market-leading operating platform
combine to create a strong competitive advantage, and position us
well to create value through the cycle for all of our stakeholders.
We therefore remain confident in our ability to deliver attractive
returns and continued growth in earnings and dividends into the
future.
WEBCAST / CONFERENCE CALL FOR INVESTORS AND ANALYSTS
A live webcast of the results presentation will be available
from 08:30am (UK time) at:
https://www.investis-live.com/segro/6491814000e68612004ca42e/hsgr
The webcast will be available for replay at SEGRO's website at:
http://www.segro.com/investors shortly after the live
presentation.
A conference call facility will be An audio recording of the conference
available at 08:30 (UK time) on the call will be available until 3 August
following number: Dial-in: +44 (0)800 2023 on: UK: +44 (0) 203 936 3001
358 1035 +44 (0) 204 587 0498 Access Access code: 673798
code: 022413
A video of David Sleath, Chief Executive discussing the results
will be available to view on www.segro.com, together with this
announcement, the Half Year 2023 Property Analysis Report and other
information about SEGRO.
CONTACT DETAILS FOR INVESTOR / ANALYST AND MEDIA ENQUIRIES:
SEGRO Soumen Das Tel: + 44 (0) 20 7451 9110
(Chief Financial Officer) (after 11am)
Claire Mogford Mob: +44 (0) 7710 153 974
(Head of Investor Relations) Tel: +44 (0) 20 7451 9048
(after 11am)
FTI Consulting Richard Sunderland / Eve Kirmatzis Tel: +44 (0) 20 3727 1000
FINANCIAL CALAR
2023 interim dividend ex-div date 10 August 2023
2023 interim dividend record date 11 August 2023
2023 interim dividend scrip dividend price announced 17 August 2023
Last date for scrip dividend elections 1 September 2023
2023 interim dividend payment date 22 September 2022
2023 Third Quarter Trading Update 18 October 2023
Full Year 2023 Results (provisional) 16 February 2024
ABOUT SEGRO
SEGRO is a UK Real Estate Investment Trust (REIT), listed on the
London Stock Exchange and Euronext Paris, and is a leading owner,
manager and developer of modern warehouses and industrial property.
It owns or manages 10.3 million square metres of space (110 million
square feet) valued at GBP21.0 billion serving customers from a
wide range of industry sectors. Its properties are located in and
around major cities and at key transportation hubs in the UK and in
seven other European countries.
For over 100 years SEGRO has been creating the space that
enables extraordinary things to happen. From modern big box
warehouses, used primarily for regional, national and international
distribution hubs, to urban warehousing located close to major
population centres and business districts, it provides high-quality
assets that allow its customers to thrive.
A commitment to be a force for societal and environmental good
is integral to SEGRO's purpose and strategy. Its Responsible SEGRO
framework focuses on three long-term priorities where the company
believes it can make the greatest impact: Championing Low-Carbon
Growth, Investing in Local Communities and Environments and
Nurturing Talent.
Striving for the highest standards of innovation, sustainable
business practices and enabling economic and societal prosperity
underpins SEGRO's ambition to be the best property company.
See www.SEGRO.com for further information.
Forward-Looking Statements: This announcement contains certain
forward-looking statements with respect to SEGRO's expectations and
plans, strategy, management objectives, future developments and
performance, costs, revenues and other trend information. All
statements other than historical fact are, or may be deemed to be,
forward-looking statements. Forward-looking statements are
statements of future expectations and all forward-looking
statements are subject to assumptions, risk and uncertainty. Many
of these assumptions, risks and uncertainties relate to factors
that are beyond SEGRO's ability to control or estimate precisely
and which could cause actual results or developments to differ
materially from those expressed or implied by these forward-looking
statements. Certain statements have been made with reference to
forecast process changes, economic conditions and the current
regulatory environment. Any forward-looking statements made by or
on behalf of SEGRO are based upon the knowledge and information
available to Directors on the date of this announcement.
Accordingly, no assurance can be given that any particular
expectation will be met and you are cautioned not to place undue
reliance on the forward-looking statements. Additionally,
forward-looking statements regarding past trends or activities
should not be taken as a representation that such trends or
activities will continue in the future. The information contained
in this announcement is provided as at the date of this
announcement and is subject to change without notice. Other than in
accordance with its legal or regulatory obligations (including
under the UK Listing Rules and the Disclosure Guidance and
Transparency Rules of the Financial Conduct Authority), SEGRO does
not undertake to update forward-looking statements, including to
reflect any new information or changes in events, conditions or
circumstances on which any such statement is based. Past share
performance cannot be relied on as a guide to future performance.
Nothing in this announcement should be construed as a profit
estimate or profit forecast. The information in this announcement
does not constitute an offer to sell or an invitation to buy
securities in SEGRO plc or an invitation or inducement to engage in
or enter into any contract or commitment or other investment
activities.
Neither the content of SEGRO's website nor any other website
accessible by hyperlinks from SEGRO's website are incorporated in,
or form part of, this announcement.
INTRODUCTION
The first half of 2023 has seen a strong operational performance
supported by the high quality of our portfolio, continued occupier
demand and the active approach to asset management that we take to
unlock value and drive performance.
We have a unique portfolio of prime warehouses, two-thirds of
which are located in the most supply constrained urban markets with
the remaining one-third close to transportation hubs and key
logistics corridors; an enviable land bank capable of supporting
our profitable development programme; an established pan-European,
customer-focused operating platform; and strong, strategic
relationships with other key stakeholders. These combine to provide
us with what we believe is a significant competitive advantage
which enhances our ability to outperform through the cycle and to
secure opportunities for future growth.
The fundamentals for industrial assets remain attractive and we
expect to see continued rental growth in our markets due to the
supply-demand imbalance of high-quality space. This is in addition
to the embedded reversionary potential already within the portfolio
and the increased levels of indexation that we are capturing across
Continental Europe.
With modest leverage, no near-term refinancing requirements, and
a significant amount of liquidity at our disposal we have financial
flexibility to continue to invest capital in the development
opportunities that offer the most attractive risk-adjusted
returns.
We continue to invest in and de-risk the future of the business
through our Responsible SEGRO strategic priorities. We are making
great steps in our ambition to Champion low-carbon growth by
focusing on: driving down the carbon emissions produced by our
development programme; making the running of our warehouses more
efficient; and adding solar panels to help reduce our customers'
emissions.
Through Investing in our local communities and environments we
are making a real difference to the lives of thousands of people
who live close to our parks and estates. During the first half of
2023 our people volunteered 380 days to projects running within our
Community Investment Plans (CIPs). In addition, working with local
delivery partners, SEGRO-funded projects have delivered some great
outcomes so far in 2023: more than 3,800 students participated in
our schools programme; 582 unemployed people took part in our
training, skills and job brokerage programme; and we delivered 18
environmental projects to enhance biodiversity and community health
and wellbeing.
Finally, the management changes that we announced in June show
the importance of Nurturing talent within our business. We were
able to appoint four of our existing leadership team into Executive
Committee roles, helping us to benefit from their many years of
experience within SEGRO and the wider business world. We are now in
the process of making changes to align our operational business
units to the new organisational structure, which will create many
more opportunities for talent to progress within SEGRO and help to
ensure that our business is in the best shape possible for success
in the coming years.
PORTFOLIO PERFORMANCE
The Group's property portfolio was valued at GBP18.1 billion at
30 June 2023 (GBP21.0 billion of assets under management). The
portfolio valuation, including completed assets, land and buildings
under construction, decreased by 1.4 per cent (adjusting for
capital expenditure and asset recycling) during the first six
months of the year, compared to an increase of 7.2 per cent in the
first half of 2022 and a decline of 16.6 per cent in the second
half of 2022.
The slower rate of valuation declines in the first half of 2023
was due to some modest, market-driven yield expansion, 30 basis
points across the whole portfolio (UK: 20bps, CE: 40bps), mostly
offset by gains from strong rental growth, development profits and
asset management across the portfolio.
In the six months to 30 June 2023, the MSCI UK Monthly index
showed capital growth of 0.3 per cent, ahead of SEGRO's UK
portfolio. However, over the 12 months to 30 June 2023, which we
consider to be a more appropriate period due to the significant
changes in the property investment market over the past year,
SEGRO's UK portfolio outperformed the MSCI UK Monthly index,
showing a capital decline of -21.9 per cent vs -26.5 per cent
respectively.
Occupier demand has remained healthy and occupancy rates across
our markets are high, driving further market rental growth. The
external valuer's estimate of the market rental value of our
portfolio increased by 3.7 per cent (H1 2022: 5.9 per cent) during
the period.
Assets held throughout the year decreased in value by 1.6 per
cent. In the UK, the decrease was 0.8 per cent (H1 2022: 7.5 per
cent increase). The net true equivalent yield applied to our UK
portfolio was 5.0 per cent, 20 basis points higher than at 31
December 2022 (4.8 per cent). Rental values improved by 3.0 per
cent (H1 2022: 7.3 per cent).
Assets held throughout the year in Continental Europe decreased
in value by 3.0 per cent (H1 2022: 4.2 per cent increase) on a
constant currency basis, reflecting a combination of yield
expansion to 5.2 per cent (31 December 2022: 4.8 per cent) and
rental value growth of 4.8 per cent (H1 2022: 3.6 per cent).
Property portfolio metrics at 30 June 2023(1)
Portfolio value, GBPm Yield(3)
Topped-up
Combined Combined Valuation net Net true Occupancy
Lettable Land & property property movement(2) initial equivalent (ERV)
area sq m Completed develop-ment portfolio portfolio % % % %
(AUM) (AUM)
UK
Greater
London 1,319,894 6,039 273 6,312 6,325 (1.5) 3.5 4.7 92.6
Thames
Valley 607,770 2,390 838 3,228 3,228 0.6 4.3 5.4 97.7
National
Logistics 817,388 1,369 602 1,971 1,971 0.2 5.3 5.4 98.9
UK Total 2,745,052 9,798 1,713 11,511 11,524 (0.8) 4.0 5.0 94.9
Continental
Europe
Germany 1,838,304 1,664 289 1,953 2,800 -- 4.0 4.5 96.8
Netherlands 260,042 162 24 186 371 (1.8) 4.7 5.3 100.0
France 1,606,749 1,663 446 2,109 2,632 (4.8) 4.4 5.3 94.1
Italy 1,608,488 983 166 1,149 1,648 (4.1) 5.1 5.2 99.8
Spain 313,199 247 70 317 510 (5.0) 4.5 4.8 100.0
Poland 1,711,512 685 84 769 1,336 (3.8) 6.0 6.3 96.1
Czech
Republic 169,513 97 4 101 203 (2.0) 4.7 6.0 97.7
Continental
Europe
Total 7,507,807 5,501 1,083 6,584 9,500 (3.0) 4.6 5.2 96.7
GROUP TOTAL 10,252,859 15,299 2,796 18,095 21,024 (1.6) 4.2 5.1 95.5
1. Figures reflect SEGRO wholly-owned assets and its share of
assets held in joint ventures unless stated "AUM" which refers to
all assets under management.
2. Valuation movement is based on the difference between the
opening and closing valuations for properties held throughout the
period, allowing for capital expenditure, acquisitions and
disposals.
More details of our property portfolio can be found in the H1
2023 Property Analysis Report at www.SEGRO.com/investors.
INVESTMENT ACTIVITY
Net investment during the first half of the year was GBP551
million comprising: development capital expenditure of GBP299
million and GBP326 million of acquisitions, partly offset by GBP74
million of disposals during the period.
Acquisitions during the first half of 2023 focused on land
acquisitions to create future development opportunities (see page
13 for further information).
Disposals comprised GBP51 million of proceeds from the disposal
of two non-core office assets and GBP23 million of land disposals,
primarily small plots of residual land that were unsuitable for
industrial development.
Since the period end, we agreed the conditional exchange of a
portfolio of UK big box assets in the Midlands, reflecting a price
above 30 June 2023 valuation. The conditions have subsequently been
met and the transaction is expected to complete in early
August.
ASSET MANAGEMENT
Our continued focus on Operational Excellence has helped us
deliver GBP34 million of rent roll growth in the first half of 2023
(H1 2022: GBP43 million).
Growing rental income from capturing reversion, letting existing
space and new developments
At 30 June 2023, our portfolio generated passing rent of GBP605
million, rising to GBP660 million once rent free periods expire
('headline rent'). During the period, we contracted GBP44 million
of new headline rent, consistent with our expectations after the
elevated levels seen during the pandemic and its immediate
aftermath (H1 2022: GBP55 million). We grew the rent from our
existing space significantly through the capture of reversionary
potential at rent reviews and renewals and also due to the impact
of index-linked leases. Strong occupier demand for new space also
helped us sign further pre-let agreements for delivery over the
next two years.
Our customer base remains well diversified, reflecting the
flexibility of warehouse space. Our top 20 customers account for 32
per cent of total headline rent. Amazon remains our largest
customer, accounting for 7 per cent of our total rent roll.
Customers from the transport and logistics and retail sectors
were the largest takers of our space during the first six months of
2023, with these sectors focused on ensuring they have efficient
and resilient supply chains and distribution networks, as well as
building out their capability to respond to increase levels of
e-commerce penetration across Europe. The Slough Trading Estate
remains a popular location for data centres, and we signed a new
lease to deliver space with a leading global data centre operator
during the period.
-- GBP11 million of net new rent from existing assets. We generated GBP8
million of headline rent from new leases on existing assets (H1 2022:
GBP11 million) and GBP12 million from rent reviews, lease renewals and
indexation (H1 2022: GBP13 million). This was offset by rent from space
returned of GBP9 million (H1 2022: GBP10 million), much of it for
refurbishment. Less than GBP1 million of rent was lost due to insolvency
(H1 2022: GBP1 million).
-- Rental growth from lease reviews and renewals. These generated an
uplift of 20.4 per cent (H1 2022: 23.5 per cent) for the portfolio,
compared to previous headline rent. During the year, new rents agreed at
review and renewal were 26.4 per cent higher in the UK (H1 2022: 29.0 per
cent) as reversion accumulated over the past five years was reflected in
new rents agreed. This includes the impact of a particularly large rent
review dating back to 2020, and therefore agreed in line with 2020 ERVs;
excluding this the uplift would have been 24.0 per cent for the Group and
35.7 per cent for the UK. In Continental Europe, rents agreed on renewal
were 9.9 per cent higher (H1 2022: 1.8 per cent higher), as a result of
market rental growth continuing to outpace the indexation provisions that
have accumulated over recent years.
-- Continued strong demand from customers for pre-let agreements. We
contracted GBP19 million of headline rent from pre-let agreements and
lettings of speculative developments prior to completion (H1 2022: GBP28
million). This includes a second pre-let at our new UK logistics park in
Coventry, space for third-party logistics operators, retailers and
manufacturers across Continental Europe, and a data centre in Slough.
-- Rent roll growth of GBP34 million. Rent roll growth, which reflects net
new headline rent from existing space (adjusted for takebacks of space
for development), take-up of developments and pre-lets agreed during the
period, was GBP34 million in H1 2023 (H1 2022: GBP43 million).
Summary of key leasing data for H1 2023
Summary of key leasing data(1) for the six months to
30 June H1 2023 H1 2022
Take-up of existing space(2) (A) GBPm 8 11
Space returned(3) (B) GBPm (9) (10)
NET ABSORPTION OF EXISTING SPACE(2) (A-B) GBPm (1) 1
Other rental movements (rent reviews, renewals,
indexation)(2) (C) GBPm 12 13
RENT ROLL GROWTH FROM EXISTING SPACE GBPm 11 14
Take-up of pre-let developments completed during the
period (signed in prior years)(2) (D) GBPm 21 11
Take-up of speculative developments completed in the
past two years(2) (D) GBPm 6 4
TOTAL TAKE-UP(2) (A+C+D) GBPm 47 39
Less take-up of pre-lets and speculative lettings
signed in prior years(2) GBPm (22) (12)
Pre-lets signed in the period for future delivery(2) GBPm 19 28
RENTAL INCOME CONTRACTED DURING THE PERIOD(2) GBPm 44 55
Takeback of space for redevelopment GBPm (1) (2)
Retention rate(4) % 85 79
1. All figures reflect exchange rates at 30 June 2023 and
include joint ventures at share.
2. Headline rent.
3. Headline rent, excluding space taken back for
redevelopment.
4. Headline rent retained as a percentage of total headline rent
at risk from break or expiry during the period.
Existing portfolio continues to perform well and delivered
another set of strong operating metrics
We monitor a number of asset management indicators to assess the
performance of our existing portfolio:
-- Occupancy has remained high. The occupancy rate at 30 June 2023 was
95.5 per cent (31 December 2022: 96.0 per cent), reflecting the
completion of newly-completed speculative urban warehousing in South
London as well as relocating a number of other customers into brand new
space at SEGRO Park Hayes and SEGRO Park Tottenham, allowing us to
refurbish and redevelop their former, older space on existing estates.
The occupancy rate excluding recently completed speculative developments
remains high at 96.7 per cent (31 December 2022: 97.3 per cent). The
average occupancy rate during the period was 95.7 per cent (H1 2022: 96.7
per cent) which is at the high end of our 94 to 96 per cent target.
-- Customer retention rate increased to 85 per cent. Approximately GBP42
million of headline rent at risk from a break or lease expiry during the
period was settled, of which we retained 82 per cent in existing space,
with a further 3 per cent retained but in new premises.
-- Lease terms continue to offer attractive income security. The level of
incentives agreed for new leases (excluding those on developments
completed in the period) represented 6.1 per cent of the headline rent
(H1 2022: 5.9 per cent). We maintained the portfolio's weighted average
lease length, with 7.0 years to first break and 8.2 years to expiry (31
December 2022: 7.0 years to first break, 8.3 years to expiry). Lease
terms are longer in the UK (8.0 years to break) than in Continental
Europe (5.6 years to break), reflecting the market convention of shorter
leases in countries such as France and Poland.
Focusing on visibility of customer energy use, highly
sustainable refurbishments and the installation of solar panels
onto existing assets.
Integrated into the day-to-day management of our portfolio, our
teams continue to work hard on our Responsible SEGRO commitment to
Champion low-carbon growth and be a net-zero carbon business by
2030. We have a science-based target to reduce the absolute
corporate and customer carbon emissions from our portfolio by 42
per cent by 2030 (compared to a 2020 baseline), in line with the
1.5 degree scenario.
The recent introduction of green lease clauses is helping us to
improve our visibility of customer emissions, which in turn allows
us to better identify opportunities to help them operate their
buildings more efficiently, reducing their carbon footprint and
operating costs.
We continue to improve the carbon footprint of our portfolio
through the ongoing maintenance and refurbishment of our
warehouses. One such refurbishment, SEGRO Park Greenford in West
London, was awarded BREEAM 'Outstanding' during the period and
rated EPC A+. It is our most sustainable refurbishment to date and
includes the installation of photo voltaic panels, SMART building
sensors, dynamic LED lighting, a green wall which is estimated to
remove 260kg of carbon emissions per year (the equivalent to
planting ten trees), as well as other features such as EV charging
points and air purifiers.
We are also working hard to expand the solar capacity of our
portfolio through retrofitting onto existing assets and installing
panels on every new development where feasible. During the first
half of the year our most significant installation was 6,204 solar
panels on a site in Granollers, Spain, which added 2.6 MW to our
capacity. We have a pipeline of further projects expected to
complete in the second half of the year.
DEVELOPMENT
Growing through development
Development activity
During the first six months of 2023, we invested over GBP600
million in our development pipeline, which comprised GBP299 million
(H1 2022: GBP358 million) in development spend, of which GBP37
million was for infrastructure, and a further GBP322 million of
land to secure future development-led growth opportunities.
Development projects completed
We completed 340,900 sq m of new space during the first half of
2023. These projects were 77 per cent pre-let prior to the start of
construction and were 83 per cent let as at 30 June 2023,
generating GBP23 million of headline rent, with a potential further
GBP5 million to come when the remainder of the space is let. The
yield on total development cost (including land, construction and
finance costs) will be 6.1 per cent when fully let (excluding
developments completed by third parties on a forward funded basis
acquired at investment value), around 100bp above the portfolio
investment yield. The completion yield is slightly lower than in
recent years mainly due to the mix of projects and the fact that
most of these projects commenced when land and construction costs
were at their peak in early 2022.
We completed 260,100 sq m of big box warehouse space, including
on one of our last remaining plots at SEGRO Logistics Park East
Midlands Gateway. This also included 155,900 sq m of big box
warehouses across all of our major European markets, let to
third-party logistics operators, retailers and manufacturers.
We completed 80,800 sq m of urban warehouses and data centres in
Slough, London, Berlin and Paris, the majority of which was
developed speculatively and 65 per cent is already let.
Reducing embodied carbon in our development programme is
critical to helping us achieve net-zero carbon by 2030 and we
continue to make progress in reducing the carbon intensity of our
developments towards our science-based target of a 20 per cent
reduction by 2030 (from a 2020 baseline). We use best available
data, including Building Information Modelling (BiM) for our life
cycle assessments at design stage, which helps us to assess how
best to reduce the carbon footprint of our developments.
All of our eligible development completions during the first
half of 2023 have been, or are expected to be, accredited at least
BREEAM 'Very Good' (or local equivalent), with 85 per cent
'Excellent' or 'Outstanding'.
Current development pipeline
At 30 June 2023, we had development projects approved,
contracted or under construction totalling 616,500 sq m,
representing GBP271 million of future capital expenditure to
complete and GBP66 million of annualised gross rental income when
fully let. 65 per cent of this rent has already been secured and
these projects should yield 7.2 per cent on total development cost
when fully occupied.
In the UK, we have 197,900 sq m of space approved or under
construction. Within this are our first multi-level warehouse
scheme in West London, three new data centres on the Slough Trading
Estate and big box warehouses at our logistics parks in Coventry
and East Midlands Gateway.
In Continental Europe, we have 418,600 sq m of space approved or
under construction. This includes pre-let big box warehouses for a
variety of different occupiers, from retailers to manufacturers,
across all our European markets. We are also developing further
phases of our successful urban warehouse parks in Amsterdam,
Cologne, Lyon and Paris.
We continue to focus our speculative developments on urban
warehouse projects, particularly in cities such as London, Paris
and Berlin, where modern space is in short supply and occupier
demand is strong.
We have factored current construction and financing costs into
the development returns for our future development projects.
Encouragingly, we are seeing build costs stabilise across most of
our markets and in some regions have started to see construction
tenders coming in at reduced prices. We expect to be able to
develop at a margin over the valuation yields on equivalent
standing assets of at least 150 basis points, meaning that it
remains a profitable way of growing the rent roll.
FUTURE DEVELOPMENT PIPELINE
Near-term development pipeline
Within the future development pipeline are a number of pre-let
projects close to being approved, awaiting either final conditions
to be met or planning approval to be granted. We expect to commence
these projects within the next six to 12 months.
These projects total 124,300 sq m of space, equating to
approximately GBP94 million of future capital expenditure and GBP10
million of potential annual rent.
Land bank
Our land bank identified for future development (including the
near-term projects detailed above) totalled 1,125 hectares as at 30
June 2023, valued at GBP1.8 billion, roughly 10 per cent of our
total portfolio value. This includes GBP741 million of land
acquired for future re-development but which is currently income
producing, reducing the holding costs until development can start
(equating to GBP20 million of annualised rent, excluded from
passing rent).
The land bank includes GBP322 million of land acquired during
the first six months of the year, including land associated with
developments already underway or expected to start in the short
term. This includes the acquisition of Bath Road Shopping Park in
Slough, which creates significant further potential for data centre
development in the Slough Trading Estate. We also acquired the
former Radlett Aerodrome in Hertfordshire, a brown-field site on
the edge of London and close to the M25, which provides us with the
opportunity to develop an exceptionally rare site of scale that
will deliver over 330,000 sq m of logistics buildings. It will be
supported by a strategic rail freight interchange and we will also
be creating a substantial country park for use by the local
community. We also purchased small plots of land in Italy, France,
Spain and Poland.
We estimate our land bank can support 3.7 million sq m of
development over the next five to seven years. The estimated
capital expenditure associated with the future pipeline is
approximately GBP3.4 billion. It could generate GBP370 million of
gross rental income, representing a yield on total development cost
(including land and notional finance costs) of around 7 per cent.
These figures are indicative, based on our current expectations,
and are dependent on our ability to secure pre-let agreements,
planning permissions, construction contracts and on our outlook for
occupier conditions in local markets.
Conditional land acquisitions and land held under option
agreements
Land acquisitions (contracted but subject to further conditions)
and land held under option agreements are not included in the
figures above, but represent significant further development
opportunities. These include sites for big box warehouses in the UK
Midlands as well as in Italy and Poland. They also include urban
warehouse sites in East and West London.
The options are held on the balance sheet at a value of GBP23
million (including joint ventures and associates at share). Those
we expect to exercise over the next two to three years are for land
capable of supporting almost 1.6 million sq m of space and
generating almost GBP154 million of headline rent, for a blended
yield of approximately 7 per cent.
Further details of our completed projects and development
pipeline are available in the H1 2023 Property Analysis Report, at
www.SEGRO.com/investors.
INTERIM DIVID OF 8.7 PENCE PER SHARE
Consistent with its previous guidance that the interim dividend
would normally be set at one-third of the previous year's total
dividend, the Board has declared an increase in the interim
dividend of 0.6 pence per share to 8.7 pence (H1 2022: 8.1 pence),
a rise of 7.4 per cent. This will be paid as a Property Income
Distribution (PID) on 22 September 2023 to shareholders on the
register at the close of business on 9 August 2023.
The Board will offer a scrip dividend option for the 2023
interim dividend, allowing shareholders to choose whether to
receive the dividend in cash or new shares. In respect of the 2022
final dividend, 49 per cent of shareholders, representing GBP107
million of dividend payments, elected for the scrip option which
resulted in the issue of 14.5 million new shares.
FINANCIAL REVIEW
Like-for-like net rental income growth and income from new
developments were the primary drivers of the 3 per cent increase in
Adjusted profit before tax compared to H1 2022. Adjusted NAV per
share decreased by 3 per cent to 937 pence compared to December
2022, primarily due to the valuation deficit on the property
portfolio.
Financial highlights
30 June 30 June 31 December
2023 2022 2022
IFRS net asset value (NAV) per share (diluted)
(p) 913 1,212 938
Adjusted NAV per share(1) (diluted) (p) 937 1,249 966
IFRS (loss)/profit before tax (GBPm) (33) 1,375 (1,967)
Adjusted profit before tax(2) (GBPm) 198 193(3) 386
IFRS earnings per share (EPS) (p) (1.9) 110.7 (159.7)
Adjusted EPS(2) (p) 15.9 15.6(3) 31.0
1. A reconciliation between IFRS NAV and Adjusted NAV is shown
in Note 11.
2. A reconciliation between IFRS profit before tax and Adjusted
profit before tax is shown in Note 2 and between IFRS EPS and
Adjusted EPS is shown in Note 11.
3. The Adjusted profit before tax and Adjusted EPS for HY 2022
has been represented to exclude the impact of the SELP performance
fee as detailed further below and in Note 2.
Presentation of financial information
The condensed financial information is prepared under IFRS where
the Group's interests in joint ventures and associates are shown as
a single line item on the income statement and balance sheet,
whereas subsidiaries are consolidated line by line.
The Adjusted profit measure better reflects the underlying
recurring performance of the Group's property rental business,
which is SEGRO's core operating activity. It is based on the Best
Practices Recommendations of the European Public Real Estate
Association (EPRA) which are widely used alternate metrics to their
IFRS equivalents (further details on EPRA Best Practices
Recommendations can be found at www.epra.com). In calculating
Adjusted profit, the Directors may also exclude additional items
considered to be non-recurring, not in the ordinary course of
business or significant by virtue of size and nature.
At 30 June 2022 estimated SELP performance fees were included in
Adjusted Profit. They were not excluded because it was anticipated
that further fees would subsequently be recognised throughout the
latter part of the performance period and therefore these would not
be considered unusual. The market volatility that was seen in the
latter half of 2022 significantly impacted property valuations and
consequentially, management's consideration of SELP performance
fees, leading to the reversal of the fee recognised in the six
months to 30 June 2022 and no performance fee recognised for the
year ended 31 December 2022 or the six months ended 30 June 2023.
Based on this volatility, these fees are now considered unusual as
they are inherently uncertain and sensitive to movements in
property valuations (which themselves are excluded from the EPRA
profit metric). In excluding such items going forward, management
believe this gives a more reliable and relevant measure of the
underlying performance of the business. At 30 June 2022 (as
previously reported) the performance fee recognised was GBP42
million within Joint venture fee income; a cost of GBP19 million
within Share of joint ventures' and associates adjusted profit
after tax (being the share of performance fee cost of GBP21 million
less a tax credit of GBP2 million); and a tax charge of GBP7
million was recognised in respect of the performance fee income.
Overall, the net profit after tax impact is a decrease in the
previously reported Adjusted profit of GBP16 million. The H1 2022
Adjusted profit has therefore been represented to exclude these
items and the previously reported amount has decreased from GBP204
million to GBP188 million (as detailed further in Note 2). The FY
2022 and H1 2023 reported results are not impacted by this
change.
A detailed reconciliation between Adjusted profit after tax and
IFRS profit after tax is provided in Note 2 of the condensed
financial information. The Adjusted NAV per share measure reflects
the EPRA Net Tangible Asset metric and based on the EPRA Best
Practices Reporting Recommendations. A detailed reconciliation
between Adjusted NAV and IFRS NAV is provided in Note 11(ii) of the
condensed financial information.
The Supplementary Notes to the condensed financial information
include other EPRA metrics as well as SEGRO's Adjusted income
statement and balance sheet presented on a proportionately
consolidated basis.
SEGRO monitors the above alternative metrics, as well as the
EPRA metrics for vacancy rate, net asset value, loan-to-value ratio
and total cost ratio, as they provide a transparent and consistent
basis to enable comparison between European property companies.
Look-through metrics provided for like-for-like net rental
income include joint ventures and associates at share in order that
our full operations are captured, therefore providing more
meaningful analysis.
ADJUSTED PROFIT
Adjusted profit
Six months to
Six months to 30 June 2022
30 June 2023 (represented(3) )
GBPm GBPm
Gross rental income 266 239
Property operating expenses (42) (36)
Net rental income 224 203
Joint venture management fee income 16 15
Management and development fee income 3 2
Net solar energy income -- 1
Administrative expenses (33) (31)
Share of joint ventures and associates'
Adjusted profit after tax(1) 40 35
Adjusted operating profit before interest
and tax 250 225
Net finance costs (52) (32)
Adjusted profit before tax 198 193
Tax on Adjusted profit (5) (5)
Adjusted profit after tax(2) 193 188
1. Comprises net property rental income and management income
less administrative expenses, net interest expenses and
taxation.
2. A detailed reconciliation between Adjusted profit after tax
and IFRS profit after tax is provided in Note 2 to the condensed
financial information.
3. Adjusted profit for HY 2022 has been represented to exclude
the impact of the SELP performance fee as detailed further in Note
2.
Adjusted profit before tax increased by GBP5 million (3 per
cent) to GBP198 million (H1 2022: GBP193 million) during H1 2023.
The results are driven by growth in net rental income (including
joint ventures and associates at share) of GBP31 million which has
been offset by an increase in net finance costs of GBP20 million as
detailed further below.
Adjusted profit is detailed further in Note 2 of the condensed
financial information.
Net rental income (including joint ventures and associates at
share)
Six months to Six months to
30 June 2023 30 June 2022
Net rental income GBPm GBPm Change(3) %
UK 153 147 4.3
Continental Europe 98 92 6.4
Like-for-like net rental income
before other items(1) 251 239 5.1
Other(2) (3) (3)
Like-for-like net rental income
(after other) 248 236 5.1
Development lettings 22 1
Properties taken back for
development 7 9
Like-for-like net rental income
plus developments 277 246
Properties acquired 3 1
Properties sold -- 4
Net rental income before
surrenders, dilapidations and
exchange 280 251
Lease surrender premiums and
dilapidations income 1 3
Other items and rent lost from
lease surrenders 5 5
Impact of exchange rate difference
between periods -- (4)
Net rental income (including joint
ventures and associates at
share)(5) 286 255
SEGRO share of joint venture
management fees (6) (6)
Net rental income after SEGRO
share of joint venture management
fees 280 249
1. Like-for-like change by Business Unit: Greater London 4.5%,
Thames Valley 3.8%, National Logistics 4.5%, Northern Europe 8.1%,
Southern Europe 4.8%, Central Europe 8.7%.
2. Other includes the corporate centre and other costs relating
to the operational business which are not specifically allocated to
a geographical business unit.
3. Percentage change has been calculated using the figures
presented in the table above in millions accurate to one decimal
place.
4. The like-for-like net rental growth metric is based on
properties held throughout both 2023 and 2022 on a proportionally
consolidated basis. This provides details of net rental income
growth excluding the distortive impact of acquisitions, disposals,
and development completions. Where an asset has been sold into a
joint venture (sales to SELP, for example) the 50 per cent share
owned throughout the period is included in like-for-like
calculation or development lettings where applicable, with the
balance shown as disposals.
5. Net rental income based on Adjusted profit metrics in Table 2
which exclude joint venture management fees and performance
fees.
The like-for-like rental growth metric is based on properties
held throughout both H1 2023 and H1 2022 and comprises wholly-owned
assets (net rental income of GBP224 million) and SEGRO's share of
net rental income held in joint ventures and associates (GBP56
million) totalling GBP280 million.
Net rental income increased by GBP31 million in H1 2023,
reflecting the positive impact of like-for-like rental growth of
GBP12 million and GBP21 million of additional income from
development lettings.
On a like-for-like basis, before other items, net rental income
increased by GBP12 million, or 5.1 per cent, compared to H1 2022.
In the UK there was a 4.3 per cent increase and in Continental
Europe a 6.4 per cent increase. This is due to strong rental
performance from rent reviews and indexation across our
portfolio.
Income from joint ventures and associates
Joint venture management fee income increased by GBP1 million to
GBP16 million in H1 2023. The prior period recognition of a
performance fee of GBP42 million in respect of the SELP joint
venture (as detailed further in Note 6 of the condensed financial
information) has been excluded from Adjusted profit as discussed
above.
SEGRO's share of joint ventures and associates' Adjusted profit
after tax increased by GBP5 million from GBP35 million in H1 2022
to GBP40 million in H1 2023 as a result of growth in net rental
income in the SELP joint venture.
Administrative and operating costs
The Total Cost Ratio ('TCR') for H1 2023 of 20.4 per cent was
broadly consistent with H1 2022 (20.5 per cent). Excluding the
impact of share-based payments, the cost of which are directly
linked to the relative total return of the property portfolio, the
Cost Ratio of 18.8 per cent in H1 2023 was also broadly consistent
with H1 2022 (18.7 per cent). The calculations are set out in Table
9 of the Supplementary Notes to the condensed financial
information.
Property operating expenses in the wholly-owned portfolio have
increased in the period from GBP36 million in H1 2022 to GBP42
million in H1 2023, as the portfolio has grown in size.
Administrative expenses have increased by GBP2 million, as a result
of increased staff costs following headcount increases.
Net finance costs
Net finance costs have increased by GBP20 million during the
period from GBP32 million in H1 2022 to GBP52 million in H1 2023.
The increased net interest costs on overdrafts, loans and related
derivatives (GBP41 million higher) reflect the higher interest
rates in H1 2023 compared to H1 2022. This is partially offset by
an increase of GBP21 million interest capitalised on the
development of properties, reflecting the higher interest cost of
new borrowings to fund this expenditure.
Taxation
The tax charge on Adjusted profit of GBP5 million (H1 2022: GBP5
million) reflects an effective tax rate of 2.5 per cent (H1 2022:
2.6 per cent).
The Group's tax rate reflects the fact that over three-quarters
of its assets are located in the UK and France and qualify for REIT
and SIIC status respectively in those countries. This status means
that income from rental profits and gains on disposals of assets in
the UK and France are exempt from corporation tax, provided SEGRO
meets a number of conditions including, but not limited to,
distributing 90 per cent of UK taxable profits.
Adjusted earnings per share
Adjusted earnings per share were 15.9 pence (H1 2022: 15.6
pence) reflecting the GBP5 million increase in Adjusted profit
after tax slightly offset by the higher average number of shares
compared to the prior period. The increase in shares is primarily
as a result of the scrip dividend take-up for the 2022
dividends.
IFRS (LOSS)/PROFIT
IFRS (loss)/profit before tax has decreased by GBP1,408 million
from a profit of GBP1,375 million in H1 2022 to a loss of GBP33
million in H1 2023 as a result of the movements described below,
primarily due to property revaluation losses in the period.
IFRS (loss)/profit after tax has decreased by GBP1,357 million
to a GBP23 million loss in H1 2023. This equated to post-tax IFRS
loss per share of 1.9 pence compared with IFRS earnings per share
of 110.7 pence for H1 2022.
The decrease in IFRS profit after tax is driven primarily by a
fall in valuation gains and losses on the property portfolio
(including joint ventures at share) of GBP1,620 million, from a
surplus of GBP1,345 million at HY 2022 to a deficit of GBP275
million in the current period. Further breakdown is detailed in
Note 7. These losses are partially offset by a reduction in tax
charge in respect of adjustments of GBP95 million (being GBP51
million in respect of wholly-owned properties and GBP44 million in
respect of joint ventures and associates at share). These tax
movements primarily arise as a consequence of the revaluation
deficits recognised.
In addition, IFRS profit in HY 2023 has fallen GBP16 million
compared to HY 2022 due to the impact of the recognition of a
performance fee in the prior period. Further detail on the
presentation and nature of this fee is given in Note 2 and 6
respectively.
In addition, IFRS profit after tax includes GBP23 million in
respect of fair value gains from derivatives (compared to a loss of
GBP150 million in HY 2022) which mainly arise on interest rate
swaps. The overall reduction in IFRS profit after tax has therefore
been offset by GBP173 million in respect of this item.
A reconciliation between Adjusted profit before tax and IFRS
profit before tax is provided in Note 2 to the condensed financial
information.
BALANCE SHEET
Adjusted net asset value
Pence
Shares per
GBPm million share
Adjusted net assets attributable to ordinary
shareholders at 31 December 2022 11,717 1,212.5 966
Realised and unrealised property gains and losses
(including joint ventures and associates)(1) (264) (22)
Adjusted profit after tax 193 16
Dividend net of scrip shares issued (2022 final) (113) (20)
Other including exchange rate movement (net of
hedging) (33) (3)
Adjusted net assets attributable to ordinary
shareholders at 30 June 2023 11,500 1,227.4 937
1. Includes unrealised valuation losses of GBP275 million and
realised property gains of GBP11 million (being: GBP9 million
profit on sale of investment properties and other investment
income; and GBP2 million gain on sale of trading properties). See
Note 7 for further details.
At 30 June 2023, IFRS net assets attributable to ordinary
shareholders (on a diluted basis) were GBP11,203 million (31
December 2022: GBP11,373 million), equating to 913 pence per share
(31 December 2022: 938 pence).
Adjusted net asset value per share at 30 June 2023 was 937 pence
measured on a diluted basis (31 December 2022: 966 pence), a
decrease of 3 per cent in the period. The table above highlights
the principal factors behind the decrease. The dividend impact
includes the dilutive effect of issuing scrip shares in lieu of
cash.
A reconciliation between IFRS and Adjusted net assets is
available in Note 11 to the condensed financial information.
CASH FLOW AND NET DEBT RECONCILIATION
Cash flow from operations for the period was GBP254 million, an
increase of GBP29 million from H1 2022 (GBP225 million), consistent
with the increased rental income received during the period.
The largest cash outflow in the period relates to acquisitions
and developments of investment properties at GBP580 million, which
primarily reflects the Group's investment activity during the
period and ongoing development activity (see Investment Activity
and Development sections above for more details). Cash flows from
investment property sales are GBP41 million and GBP1 million was
spent on acquisitions of other property interests, giving a net
outflow of GBP540 million from property investment activity
compared to GBP441 million in the prior period.
Another significant financing cash flow is dividends paid of
GBP113 million (H1 2022: GBP100 million) reflecting the increased
dividend per share and level of scrip dividend take-up.
Furthermore, during the period, the Group paid GBP15 million to
acquire the 5 per cent of Vailog s.r.l. it did not already own.
As a result of these factors there was a net funds outflow of
GBP490 million during the period compared to GBP385 million in H1
2022.
Cash flow and net debt reconciliation
Six months to Six months to
30 June 2023 30 June 2022
GBPm GBPm
Opening net debt (4,722) (3,314)
Cash flow from operations 254 225
Finance costs (net) (65) (47)
Dividends received 3 5
Tax paid (4) (13)
Free cash flow 188 170
Dividends paid (113) (100)
Acquisitions and development of investment
properties (580) (658)
Investment property sales 41 223
Acquisitions of other interests in property and
other investments (1) (6)
Purchase of non-controlling interest (15) --
Net settlement of foreign exchange derivatives (2) 15
Net investment in joint ventures and associates 1 (31)
Other items (9) 2
Net funds flow (490) (385)
Non-cash movements (4) (4)
Exchange rate movements 88 (82)
Closing net debt (5,128) (3,785)
Capital expenditure
The table below sets out analysis of the capital expenditure on
property assets during the period on a basis consistent with the
EPRA Best Practices Recommendations. This includes acquisition and
development spend, on an accruals basis, in respect of the Group's
wholly--owned investment and trading property portfolios, as well
as the equivalent amounts for joint ventures and associates at
share.
Total spend for the period was GBP702 million, a decrease of
GBP69 million compared to H1 2022. Acquisitions for the period were
GBP326 million, a decrease of GBP39 million compared to H1 2022 and
primarily related to land at Radlett and the Bath Road Shopping
Park in Slough. Development capital expenditure for the period was
GBP299 million, a decrease of GBP59 million compared to H1 2022,
with the largest spend continuing to be on our schemes in the UK
National Logistics business unit and in Italy.
Spend on existing completed properties totalled GBP27 million
(H1 2022: GBP21 million), over half of which was for
value-enhancing major refurbishment and fit-out costs prior to
re-letting.
EPRA capital expenditure analysis
Six months to 30 June 2023 Six months to 30 June 2022
Joint
ventures Joint
Wholly- and Wholly ventures and
owned associates Total - owned associates Total
GBPm GBPm GBPm GBPm GBPm GBPm
Acquisitions 323(1) 3 326 328(1) 37 365
Development(5) 248(2) 51 299 324(2) 34 358
Capitalised
interest(4,5) 27 2 29 6 -- 6
Investment
properties:
Incremental
lettable space 1 -- 1 1 -- 1
Non-incremental
lettable space 21 5 26 16 4 20
Tenant
incentives(3) 17 4 21 16 5 21
Total 637 65 702 691 80 771
1. Being GBP323 million investment property and GBPnil trading
property (H1 2022: GBP328 million and GBPnil respectively) see Note
12.
2. Being GBP248 million investment property and GBPnil trading
property (H1 2022: GBP320 million and GBP4 million respectively)
see Note 12.
3. Includes tenant incentives, letting fees and rental
guarantees.
4. Capitalised interest on development expenditure.
5. Development and capitalised interest on development
expenditure were previously presented in total as a single line
items in the table above. In line with EPRA BPR Guidelines,
development and capitalised interest are now presented as separate
line items and the prior period comparative has been represented in
the table.
FINANCIAL POSITION AND FUNDING
Financial Key Performance Indicators
30 June 30 June 31 December
GROUP ONLY 2023 2022 2022
Net borrowings (GBPm)(3) 5,128 3,785 4,722
Available cash and undrawn committed facilities
(GBPm) (4) 1,410 1,778 1,720
Gearing (%) 45 26 41
LTV ratio (%) 34 22 32
Weighted average cost of debt1 (%) 3.0 1.7 2.6
Interest cover2 (times) 3.2 6.1 4.3
Average duration of debt (years) 8.1 9.0 9.4
INCLUDING JOINT VENTURES AND ASSOCIATES AT
SHARE
Net borrowings (GBPm) (3) 6,078 4,717 5,693
Available cash and undrawn committed facilities
(GBPm) (4) 1,687 1,966 2,007
LTV ratio (%) 34 23 32
Weighted average cost of debt1 (%) 2.9 1.6 2.5
Interest cover2 (times) 3.4 6.2 4.5
Average duration of debt (years) 7.5 8.0 8.6
1. Based on gross debt, excluding commitment fees and non-cash
interest.
2. Net rental income/adjusted net finance costs (before
capitalisation) on a rolling 12 month basis.
3. SEGRO Group cash and cash equivalents have been restated as
at 30 June 2022. See Note 1 for further details. Net borrowings as
at 30 June 2022 have been restated to reflect this change.
4. Available cash and undrawn committed facilities exclude
tenant deposit balances and uncommitted facilities as detailed
further in Note 13.
At 30 June 2023, the Group's net borrowings (including the
Group's share of borrowings in joint ventures and associates) were
GBP6,078 million (31 December 2022: GBP5,693 million). The loan to
value ratio (including joint ventures and associates at share) was
34 per cent (31 December 2022: 32 per cent) with GBP1,687 million
of cash and undrawn facilities available for investment.
Gross borrowings of SEGRO Group were GBP5,231 million at 30 June
2023, all but GBP1 million of which were unsecured, and cash and
cash equivalent balances were GBP103 million. SEGRO's share of
gross borrowings in its joint ventures and associates was GBP990
million (all of which were advanced on a non-recourse basis to
SEGRO) and cash and cash equivalent balances of GBP40 million.
Cash and cash equivalent balances, together with the Group's
interest rate and foreign exchange derivative portfolio, are spread
amongst a strong group of banks, all of which have a credit rating
of A- or better.
During the period, SEGRO drew down GBP300 million and EUR407
million term loan facilities which were the main contributors to
the reduction in the duration of debt.
In May 2023, SEGRO extended the maturity of EUR200 million of
its revolving credit facilities for a further year to 2028. SELP
also extended the maturity of its EUR600 million revolving credit
facilities for a further year to 2027.
In June 2023, SEGRO arranged two further term loan facilities.
The first facility has GBP100 million of commitment maturing in
2026; the second facility has EUR150 million of commitment also
maturing in 2026. Both term loan facilities were undrawn at 30 June
2023.
MONITORING AND MITIGATING FINANCIAL RISK
The Group monitors a number of financial metrics to assess the
level of financial risk being taken and to mitigate that risk.
Treasury policies and governance
The Group Treasury function operates within a formal policy
covering all aspects of treasury activity, including funding,
counterparty exposure and management of interest rate, currency and
liquidity risks. Group Treasury reports on compliance with these
policies on a quarterly basis and policies are reviewed regularly
by the Board.
Gearing and financial covenants
The key leverage metric for SEGRO is its loan to value ratio
(LTV), which incorporates assets and net debt on SEGRO's balance
sheet and SEGRO's share of assets and net debt on the balance
sheets of its joint ventures and associates. The LTV at 30 June
2023 on this 'look-through' basis was 34 per cent (31 December
2022: 32 per cent).
Our borrowings contain gearing covenants based on Group net debt
and net asset value, excluding debt in joint ventures and
associates. The gearing ratio of the Group at 30 June 2023, as
defined within the principal debt funding arrangements of the
Group, was 45 per cent (31 December 2022: 41 per cent). This is
significantly lower than the Group's tightest financial gearing
covenant within these debt facilities of 160 per cent. Property
valuations would need to fall by around 45 per cent from their 30
June 2023 levels to reach the gearing covenant threshold of 160 per
cent.
The Group's other key financial covenant within its principal
debt funding arrangements is interest cover, requiring that net
interest before capitalisation be covered at least 1.25 times by
net property rental income. At 30 June 2023, the Group comfortably
met this ratio at 3.2 times, calculated on a rolling 12 month basis
in line with covenant requirements. On a look-through basis,
including joint ventures and associates, this ratio was 3.4
times.
We mitigate the risk of over-gearing the Company and breaching
debt covenants by carefully monitoring the impact of investment
decisions on our LTV and by stress-testing our balance sheet to
potential changes in property values. We also expect to continue to
recycle assets which would also provide funding for future
investment.
Our intention for the foreseeable future is to maintain our LTV
at around 30 per cent, although the evolution of the property cycle
will inevitably mean that there are periods of time when our LTV is
higher or lower than this. However, this level of LTV through the
cycle provides the flexibility to take advantage of investment
opportunities arising and ensures significant headroom compared
against our tightest gearing covenant should property values
decline.
The Group's debt has a range of maturities. The next debt
maturity for the Group is the GBP82 million of SEGRO 2024 sterling
bonds, which are now due in August 2023 following the announcement
of their early redemption. There are no other significant debt
maturities until the second half of 2025. This long average debt
maturity translates into a favourable, well spread debt funding
maturity profile which reduces future refinancing risk.
Interest rate risk
The Group's interest rate risk policy is designed to ensure that
we limit our exposure to volatility in interest rates. The policy
states that between 50 and 100 per cent of net borrowings
(including the Group's share of borrowings in joint ventures and
associates) should be at fixed or capped rates, including the
impact of derivative financial instruments.
As at 30 June 2023, including the impact of derivative
instruments, 91 per cent (31 December 2022: 95 per cent) of the net
borrowings of the Group (including the Group's share of borrowings
within joint ventures and associates) were at fixed or capped
rates.
GROUP ONLY 30 June 30 June 31 December
(% of net borrowings) 2023 2022 2022
Fixed rate 72 70 79
Capped rate -- triggered 13 -- 9
Capped rate -- not triggered 4 21 6
Floating rate 11 9 6
TOTAL 100 100 100
INCLUDING JOINT VENTURES AND ASSOCIATES AT
SHARE (% of net borrowings)
Fixed rate 76 74 83
Capped rate -- triggered 12 -- 8
Capped rate -- not triggered 3 17 4
Floating rate 9 9 5
TOTAL 100 100 100
As a result of the fixed and capped rate cover in place, if
short term interest rates had been 1 per cent higher throughout the
six month period to 30 June 2023, the adjusted net finance cost of
the Group would have increased by approximately GBP3 million
representing around 2 per cent of Adjusted profit after tax.
The Group elects not to hedge account its interest rate
derivatives portfolio. Therefore, movements in derivative fair
values are taken to the income statement but, in accordance with
EPRA Best Practices Recommendations Guidelines, these gains and
losses are excluded from Adjusted profit after tax.
Foreign currency translation risk
The Group has negligible transactional foreign currency exposure
but does have a potentially significant currency translation
exposure arising on the conversion of its substantial foreign
currency denominated assets (mainly euro) and euro denominated
earnings into sterling in the Group consolidated accounts.
The Group seeks to limit its exposure to volatility in foreign
exchange rates by hedging at a level between the period-end Group
LTV percentage and 100 per cent of its foreign currency gross
assets through either borrowings or derivative instruments. At 30
June 2023, the Group had gross foreign currency assets which were
77 per cent hedged by gross foreign currency denominated
liabilities (including the impact of derivative financial
instruments).
The exchange rate used to translate euro denominated assets and
liabilities as at 30 June 2023 into sterling within the balance
sheet of the Group was EUR1.16:GBP1 (31 December 2022:
EUR1.13:GBP1). Including the impact of forward foreign exchange and
currency swap contracts used to hedge foreign currency denominated
net assets, if the value of the other currencies in which the Group
operates at 30 June 2023 weakened by 10 per cent against sterling
(EUR1.28, in the case of euros), net assets would have decreased by
approximately GBP124 million and there would have been a reduction
in gearing of approximately 2.5 per cent and in the LTV of
approximately 1.5 per cent.
The average exchange rate used to translate euro denominated
earnings generated during the six months ended 30 June 2023 into
sterling within the consolidated income statement of the Group was
EUR1.14:GBP1 (H1 2022: EUR1.19:GBP1).
Based on the hedging position at 30 June 2023, and assuming that
this position had applied throughout the six month period, if the
euro had been 10 per cent weaker than the average exchange rate
(EUR1.25:GBP1), Adjusted profit after tax for the six month period
would have been approximately GBP4 million (2.1 per cent) lower
than reported. If it had been 10 per cent stronger, adjusted profit
after tax for the period would have been approximately GBP4 million
(2.1 per cent) higher than reported.
GOING CONCERN
As noted in the Financial Position and Funding section above,
the Group has significant available liquidity to meet its capital
commitments, a long-dated debt maturity profile and substantial
headroom against financial covenants.
-- In June 2023, the Group executed two additional term loan facilities.
The first facility has a commitment of GBP100 million, and a second
facility has a commitment of EUR150 million. Both term loan facilities
were undrawn at 30 June 2023 and have a three year maximum term.
-- Cash and available committed facilities, excluding tenant deposits, at
30 June 2023 were GBP1.4 billion.
-- The Group continuously monitors its liquidity position compared to
committed and expected capital and operating expenses on a rolling
forward 18 month basis. The quantum of committed capital expenditure at
any point in time is typically low due to the short timeframe to
construct warehouse buildings.
-- The Group also regularly stress-tests its financial covenants. As noted
above, at 30 June 2023, property values would need to fall by around 45
per cent before breaching the gearing covenant. In terms of interest
cover, net rental income would need to fall by 60 per cent or the average
interest rate would need to reach 8% before breaching the interest cover
covenant. All would be significantly in excess of the Group's experience
during the financial crisis.
Having made enquiries and having considered the principal risks
facing the Group, including liquidity and solvency risks, and
material uncertainties, the Directors have a reasonable expectation
that the Company and the Group have adequate resources to continue
in operational existence for the foreseeable future (a period of at
least 12 months from the date of approval of the financial
statements). Accordingly, they continue to adopt the going concern
basis in preparing these financial statements.
STATEMENT OF PRINCIPAL RISKS
The Board has overall responsibility for ensuring that risk is
effectively and consistently managed across the Group. The Audit
Committee monitors the effectiveness of the Group's risk management
process on behalf of the Board.
The risk management process is designed to identify, evaluate
and respond to the significant risks (including emerging risks)
that the Group faces. The process aims to understand, document and
mitigate, rather than eliminate, the risk of failure to achieve
business objectives, and therefore can only provide reasonable and
not absolute assurance.
The identification and review of emerging risks are integrated
into our risk review process.
The Group's risk management process including risk appetite, its
integrated approach, governance arrangements in place remain as
described in the Managing Risks section of the 2022 Annual Report
on pages 64 to 74. The Board has performed a robust assessment of
the principal and emerging risks facing the Group and has concluded
that they continue to apply and expected to be relevant for the
remaining six months of the year.
The principal risks and uncertainties are summarised below:
-- Macroeconomic Impact on Market Cycle. The property market is cyclical
in nature and there is a continuous risk that the Group could either
misread or fail to react appropriately to changing property market cost
of finance or wider macroeconomic/geopolitical conditions. This could
result in an incorrect strategy or the ability to deliver a strategy
being inhibited and consequential impact on property performance and
shareholder value.
-- Portfolio Strategy and Execution. The Group's Total Property and/or
Shareholder Returns could underperform in absolute or relative terms as a
result of an inappropriate portfolio strategy.
-- Major Event / Business Disruption. Unexpected global, regional or
national events result in severe adverse disruption to SEGRO, such as
sustained asset value or revenue impairment, solvency or covenant stress,
liquidity or business continuity challenges. A global event or business
disruptor may include but is not limited to a global financial crisis,
health pandemic, power/water shortages, civil unrest, act of terrorism,
cyber-attack or other IT disruption. Events may be singular or cumulative,
and lead to acute/systemic issues in the business and/or operating
environment.
-- Health & Safety. A health and safety incident may occur which may
involve harm to an individual or loss of life. This may be due to the
failure of management processes, failure of a building or other physical
asset, or negligence of a third party. Furthermore, the Group may breach
relevant legislation and fail to provide suitable employee support. This
may consequentially result in litigation, fines, serious reputational
damage and a negative impact on employees.
-- Environmental Sustainability and Climate Change. Failure to anticipate
and respond to the impact of both physical and transitional risks from
climate change on the sustainability of our environment is both a
principal and emerging risk. The likelihood of increased severity and
unpredictability of weather-related events may result in more frequent
damage to our buildings causing disruption and increased costs to SEGRO
and our customers. Non-compliance with changing laws, regulations,
policies, taxation and obligations could cause loss of value to the
Group. Not keeping pace with social attitudes and customer behaviours and
preferences whereby SEGRO may need to alter the design and build and/or
energy provision of their assets could additionally cause reputational
damage and reduce the attractiveness and value of our assets. The volume
of new legislation and guidance in this area have continued to increase.
-- Development Plan Execution. The Group could suffer significant
financial losses from cost over-runs, for example, due to contractor
default or poor performance and management; increased construction costs;
above-appetite exposure to non-income producing assets; inappropriate
land acquisition due diligence (including energy accessibility); and
market competition reducing access to suitable land bank and/or
increasing acquisition costs.
-- Financing Strategy. The Group could suffer an acute liquidity or
solvency crisis, financial loss or financial distress as a result of a
failure in the design or execution of its financing strategy. Such an
event may be caused by a failure to obtain debt or equity funding; having
an inappropriate debt structure; poor forecasting; defaulting on loan
agreements as a result of a breach of financial or other covenants; or
counterparty default. The recent inflationary pressures have caused
increases to debt costs and impacted property yields.
-- Legal, Political and Regulatory. The Group could fail to anticipate
significant political, legal, tax or regulatory changes, leading to a
significant unexpected financial or reputational impact.
-- People and Talent. The performance of the business could be impaired
due to SEGRO: not having the appropriate culture, organisational
structure and skilled people to deliver its strategy and its strategic
priorities; failing to attract, motivate, retain and develop diverse
talent as part of our Nurturing Talent ambition; and failing to prepare
adequate succession plans. Transition risks arise as the Group moves to a
new operational structure and reporting lines.
-- Operational Delivery. The Group's ability to protect its reputation,
revenues and shareholder value could be damaged by operational failures
such as: major customer default; supply chain failure or the structural
failure of one of our assets.
RESPONSiBILITY STATEMENT
We confirm that to the best of our knowledge:
(a) the interim condensed set of financial statements has been
prepared in accordance with IAS 34 'Interim Financial Reporting' as
adopted by the United Kingdom and European Union;
(b) the interim management report includes a fair review of the
information required by DTR 4.2.7R (indication of important events
during the first six months and description of principal risks and
uncertainties for the remaining six months of the year); and
(c) the interim management report includes a fair review of the
information required by DTR 4.2.8R (disclosure of related parties'
transactions and changes therein).
By order of the Board,
David Sleath
Chief Executive
Soumen Das
Chief Financial Officer
Independent review report to SEGRO plc
Report on the condensed consolidated interim financial
statements
Our conclusion
We have reviewed SEGRO plc's condensed consolidated interim
financial statements (the "interim financial statements") in the
half year results of SEGRO plc for the 6 month period ended 30 June
2023 (the "period").
Based on our review, nothing has come to our attention that
causes us to believe that the interim financial statements are not
prepared, in all material respects, in accordance with UK adopted
International Accounting Standard 34, 'Interim Financial Reporting'
and International Accounting Standard 34, 'Interim Financial
Reporting' as adopted by the European Union and the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority.
The interim financial statements comprise:
-- the Condensed Group Balance Sheet as at 30 June 2023;
-- the Condensed Group Income Statement and Condensed Group Statement of
Comprehensive Income for the period then ended;
-- the Condensed Group Cash Flow Statement for the period then ended;
-- the Condensed Group Statement of Changes in Equity for the period then
ended; and
-- the explanatory notes to the interim financial statements.
The interim financial statements included in the half year
results of SEGRO plc have been prepared in accordance with UK
adopted International Accounting Standard 34, 'Interim Financial
Reporting' and International Accounting Standard 34, 'Interim
Financial Reporting' as adopted by the European Union and the
Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority.
Basis for conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410, 'Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity' issued by the Financial Reporting Council for use in the
United Kingdom ("ISRE (UK) 2410"). A review of interim financial
information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying
analytical and other review procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and,
consequently, does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the half year
results and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the interim financial statements.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
conclusion section of this report, nothing has come to our
attention to suggest that the directors have inappropriately
adopted the going concern basis of accounting or that the directors
have identified material uncertainties relating to going concern
that are not appropriately disclosed. This conclusion is based on
the review procedures performed in accordance with ISRE (UK) 2410.
However, future events or conditions may cause the group to cease
to continue as a going concern.
Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the directors
The half year results, including the interim financial
statements, is the responsibility of, and has been approved by the
directors. The directors are responsible for preparing the half
year results in accordance with the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority. In preparing the half year results, including
the interim financial statements, the directors are responsible for
assessing the group's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless the directors
either intend to liquidate the group or to cease operations, or
have no realistic alternative but to do so.
Our responsibility is to express a conclusion on the interim
financial statements in the half year results based on our review.
Our conclusion, including our Conclusions relating to going
concern, is based on procedures that are less extensive than audit
procedures, as described in the Basis for conclusion paragraph of
this report. This report, including the conclusion, has been
prepared for and only for the company for the purpose of complying
with the Disclosure Guidance and Transparency Rules sourcebook of
the United Kingdom's Financial Conduct Authority and for no other
purpose. We do not, in giving this conclusion, accept or assume
responsibility for any other purpose or to any other person to whom
this report is shown or into whose hands it may come save where
expressly agreed by our prior consent in writing.
PricewaterhouseCoopers LLP
Chartered Accountants
London
26 July 2023
CONDENSED GROUP INCOME STATEMENT
For the six months ended 30 June 2023
Half year to Half year to Year to
30 June 30 June 31 December
2023 2022 2022
(unaudited) (unaudited) (audited)
Notes GBPm GBPm GBPm
Revenue 4 342 330 669
Costs 5 (97) (65) (214)
245 265 455
Administrative expenses (33) (31) (59)
Share of (loss)/profit from
joint ventures and
associates after tax 6 (28) 151 (144)
Realised and unrealised
property gains and losses 7 (188) 1,172 (1,946)
Operating (loss)/profit (4) 1,557 (1,694)
Finance income 8 38 36 67
Finance costs 8 (67) (218) (340)
(Loss)/profit before tax (33) 1,375 (1,967)
Tax 9 10 (41) 37
(Loss)/profit after tax (23) 1,334 (1,930)
Attributable to equity
shareholders (23) 1,333 (1,927)
Attributable to
non-controlling interests -- 1 (3)
Earnings per share (pence)
Basic 11 (1.9) 110.7 (159.7)
Diluted 11 (1.9) 110.4 (159.7)
CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 30 June 2023
Half year to Half year to Year to
30 June 30 June 31 December
2023 2022 2022
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
(Loss)/profit for the period (23) 1,334 (1,930)
Items that may be reclassified
subsequently to profit or loss
Foreign exchange movement arising
on translation of international
operations (89) 100 179
Fair value movements on
derivatives and borrowings in
effective hedge relationships 51 (49) (98)
(38) 51 81
Tax on components of other
comprehensive income -- -- --
Other comprehensive
(expense)/income (38) 51 81
Total comprehensive
(expense)/income for the period (61) 1,385 (1,849)
Attributable to -- equity
shareholders (61) 1,385 (1,845)
-- non-controlling interests -- -- (4)
CONDENSED GROUP BALANCE SHEET
As at 30 June 2023
30 June 30 June 31 December
2023 2022 (restated)(1) 2022
(unaudited) (unaudited) (audited)
Notes GBPm GBPm GBPm
Assets
Non-current assets
Intangible assets 17 9 12
Investment properties 12 15,234 17,209 14,939
Other interests in
property 23 28 30
Property, plant and
equipment 23 23 23
Investments in joint
ventures and
associates 6 1,698 2,022 1,768
Other investments 10 8 9
Other receivables 81 38 81
Derivative financial
instruments 71 47 58
17,157 19,384 16,920
Current assets
Trading properties 12 2 57 35
Trade and other
receivables 204 250 199
Tax asset 11 -- 21
Derivative financial
instruments 4 -- 11
Cash and cash
equivalents 13 103 138 162
324 445 428
Total assets 17,481 19,829 17,348
Liabilities
Non-current
liabilities
Borrowings 13 5,149 3,923 4,884
Deferred tax
liabilities 9 203 296 226
Trade and other
payables 74 77 77
Derivative financial
instruments 168 192 188
Tax liabilities 10 19 10
5,604 4,507 5,385
Current liabilities
Trade and other
payables 580 552 560
Borrowings 13 82 -- --
Derivative financial
instruments 2 3 14
Tax liabilities 10 72 16
674 627 590
Total liabilities 6,278 5,134 5,975
Net assets 11,203 14,695 11,373
Equity
Share capital 122 121 121
Share premium 3,556 3,447 3,449
Capital redemption
reserve 114 114 114
Own shares held (1) (3) (1)
Other reserves 187 191 227
Retained earnings 7,225 10,825 7,463
Total shareholders'
equity 11,203 14,695 11,373
Non-controlling
interests -- -- --
Total equity 11,203 14,695 11,373
Net assets per
ordinary share
(pence)
Basic 11 915 1,216 941
Diluted 11 913 1,212 938
1. Cash and cash equivalents and Trade and other receivables
have been restated as at 30 June 2022 following IFRIC's agenda
decision in respect of Demand Deposits with Restrictions on Use
arising from a Contract with a Third Party. See Note 1 for further
details.
CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 June 2023
Attributable to owners of the parent
Other reserves
Share- Translation, Total equity
Ordinary Capital Own based hedging attributable Non-
share Share redemption shares payment and other Merger Retained to owners of controlling Total
capital premium reserve held reserve reserve reserve earnings the parent interest(1) equity
(unaudited) GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 1
January 2023 121 3,449 114 (1) 25 33 169 7,463 11,373 -- 11,373
Loss for the
period -- -- -- -- -- -- -- (23) (23) -- (23)
Other
comprehensive
expense -- -- -- -- -- (38) -- -- (38) -- (38)
Total
comprehensive
expense for the
period -- -- -- -- -- (38) -- (23) (61) -- (61)
Transactions
with owners of
the Company
Issue of shares -- 1 -- -- -- -- -- -- 1 -- 1
Own shares
acquired -- -- -- (3) -- -- -- -- (3) -- (3)
Equity-settled
share-based
payment
transactions -- -- -- 3 (2) -- -- 5 6 -- 6
Dividends 1 106 -- -- -- -- -- (220) (113) -- (113)
Movement in
non-controlling
interest(1) -- -- -- -- -- -- -- -- -- -- --
Total
transactions
with owners of
the Company 1 107 -- -- (2) -- -- (215) (109) -- (109)
Balance at 30
June 2023 122 3,556 114 (1) 23 (5) 169 7,225 11,203 -- 11,203
1. During the period to 30 June 2023, the non-controlling interest held in Vailog s.r.l was acquired by the Group. There is no
non-controlling interest held at 30 June 2023.
For the six months ended 30 June 2022
Attributable to owners of the parent
Other reserves
Translation, Total equity
Ordinary Capital Own Share-based hedging and attributable
share Share redemption shares payment other Merger Retained to owners of Non-controlling Total
capital premium reserve held reserve reserve reserve earnings the parent interest(1) equity
(unaudited) GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 1
January 2022 120 3,371 114 (1) 20 (49) 169 9,692 13,436 -- 13,436
Profit for the
period -- -- -- -- -- -- -- 1,333 1,333 1 1,334
Other
comprehensive
income/(expense) -- -- -- -- -- 52 -- -- 52 (1) 51
Total
comprehensive
income for the
period -- -- -- -- -- 52 -- 1,333 1,385 -- 1,385
Transactions with
owners of the
Company
Issue of shares -- -- -- -- -- -- -- -- -- -- --
Own shares
acquired -- -- -- (5) -- -- -- -- (5) -- (5)
Equity-settled
share-based
payment
transactions -- -- -- 3 (1) -- -- 3 5 -- 5
Dividends 1 76 -- -- -- -- -- (203) (126) -- (126)
Movement in
non-controlling
interest(1) -- -- -- -- -- -- -- -- -- -- --
Total transactions
with owners of
the Company 1 76 -- (2) (1) -- -- (200) (126) -- (126)
Balance at 30 June
2022 121 3,447 114 (3) 19 3 169 10,825 14,695 -- 14,695
1. Non-controlling interest relates to Vailog s.r.l.
For the year ended 31 December 2022
Attributable to owners of the parent
Other reserves
Translation, Total equity
Ordinary Capital Own Share-based hedging and attributable
share Share redemption shares payment other Merger Retained to owners of Non-controlling Total
capital premium reserve held reserve reserve reserve earnings the parent interest(1) equity
(audited) GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 1
January 2022 120 3,371 114 (1) 20 (49) 169 9,692 13,436 -- 13,436
Loss for the year -- -- -- -- -- -- -- (1,927) (1,927) (3) (1,930)
Other
comprehensive
income/(expense) -- -- -- -- -- 82 -- -- 82 (1) 81
Total
comprehensive
income/(expense)
for the year -- -- -- -- -- 82 -- (1,927) (1,845) (4) (1,849)
Transactions with
owners of the
Company
Issue of shares -- -- -- -- -- -- -- -- -- -- --
Own shares
acquired -- -- -- (4) -- -- -- -- (4) -- (4)
Equity-settled
share-based
payment
transactions -- -- -- 4 5 -- -- 2 11 -- 11
Dividends 1 78 -- -- -- -- -- (301) (222) -- (222)
Movement in
non-controlling
interest(1) -- -- -- -- -- -- -- (3) (3) 4 1
Total transactions
with owners of
the Company 1 78 -- -- 5 -- -- (302) (218) 4 (214)
Balance at 31
December 2022 121 3,449 114 (1) 25 33 169 7,463 11,373 -- 11,373
1. Non-controlling interest relates to Vailog s.r.l.
CONDENSED GROUP CASH FLOW STATEMENT
For the six months ended 30 June 2023
Half year to Year to 31
Half year to 30 June 2022 December
30 June 2023 (restated)(1) 2022
(unaudited) (unaudited) (audited)
Notes GBPm GBPm GBPm
Cash flows from
operating
activities 14 254 225 479
Interest received 15 14 28
Dividends received 3 5 9
Interest paid (79) (61) (131)
Cost of early close
out of interest rate
derivatives and new
interest rate
derivatives
transacted (1) -- (77)
Tax paid (4) (13) (95)
Net cash received
from operating
activities 188 170 213
Cash flows from
investing
activities
Purchase and
development of
investment
properties (580) (658) (1,472)
Sale of investment
properties 41 223 310
Acquisition of other
interests in
property -- (3) (6)
Purchase of plant and
equipment and
intangibles (8) (3) (9)
Acquisition of other
investments (1) (3) (3)
Investment and loans
to joint ventures
and associates (6) (67) (112)
Divestment and
repayment of loans
from joint ventures
and associates 7 36 37
Net cash used in
investing
activities (547) (475) (1,255)
Cash flows from
financing
activities
Dividends paid to
ordinary
shareholders (113) (100) (222)
Proceeds from
borrowings 14 710 1,833 2,752
Repayment of
borrowings 14 (277) (1,385) (1,421)
Principal element of
lease payments (1) (1) (2)
Settlement of foreign
exchange
derivatives (2) 15 15
Purchase of
non-controlling
interest (15) -- --
Proceeds from issue
of ordinary shares 1 -- --
Purchase of ordinary
shares (3) (5) (4)
Net cash generated
from financing
activities 300 357 1,118
Net
(decrease)/increase
in cash and cash
equivalents (59) 52 76
Cash and cash
equivalents at the
beginning of the
period 162 85 85
Effect of foreign
exchange rate
changes -- 1 1
Cash and cash
equivalents at the
end of the period 13 103 138 162
1. Cash and cash equivalents and Trade and other receivables have been
restated as at 30 June 2022 following IFRIC's agenda decision in
respect of Demand Deposits with Restrictions on Use arising from a
Contract with a Third Party. See Note 1 for further details.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
1. BASIS OF PREPARATION
The condensed set of financial statements for the six months
ended 30 June 2023 were approved by the Board of Directors on 26
July 2023.
The condensed set of financial statements for the six months
ended 30 June 2023 is unaudited and does not constitute statutory
accounts within the meaning of Section 434 of the Companies Act
2006. The financial information contained in this report for the
year ended 31 December 2022 does not constitute statutory accounts
within the meaning of Section 434 of the Companies Act 2006 and has
been extracted from the statutory accounts, which were prepared in
accordance with UK-adopted International Accounting Standards (IAS)
and the requirements of the Companies Act 2006 as applicable to
companies reporting under those standards and International
Financial Reporting Standards (IFRS) adopted pursuant to Regulation
(EC) No 1606/2002 as it applies in the European Union and were
delivered to the Registrar of Companies. The auditor's opinion on
these accounts was unqualified, did not draw attention to any
matters by way of emphasis and did not contain a statement made
under S498(2) or S498(3) of the Companies Act 2006. The condensed
set of financial statements included in this half-yearly report has
been prepared in accordance with both UK-adopted International
Accounting Standard 34 'Interim Financial Reporting', and the
Disclosure Rules and Transparency Rules of the United Kingdom's
Financial Conduct Authority as well as EU-adopted International
Accounting Standard 34 'Interim Financial Reporting'.
UK-adopted International Accounting Standards differs in certain
respects from International Financial Reporting Standards as
adopted by the EU. The differences have no material impact on the
Group's condensed financial statements for the periods presented,
which therefore also comply with International Financial Reporting
Standards as adopted by the EU. The condensed set of financial
statements have been prepared on a going concern basis for a period
of at least 12 months from the date of approval of the financial
statements. This is discussed further in the Financial Review
section.
The same accounting policies, presentation and methods of
computation are followed in the condensed set of financial
statements as applied in the Group's latest financial statements,
unless otherwise stated below.
The following new accounting amendments became effective for the
financial year beginning on 1 January 2023:
- Amendments to IAS 1, "Presentation of financial
statements"
- Amendments to IAS 8, "Accounting Policies, changes in
accounting estimates and errors"
- Amendments to IAS 12, "Deferred tax related to assets and
liabilities arising from a single transaction"
- Amendments to IAS 12, "International Tax Reform -- Pillar Two
Model Rules"
The amendments did not have any impact on the amounts recognised
in the prior or current period and are not expected to
significantly affect future periods. The Group acknowledges that on
23 May 2023, the IASB issued narrow-scope amendments to IAS 12,
'Income Taxes' which provide temporary relief from accounting for
deferred taxes arising from the implementation of the Pillar Two
model rules.
As set out in the Annual report and accounts for the year ended
31 December 2022, the Group assessed the impact of the IFRS
Interpretation Committee's recent Agenda Decision in respect of
Demand Deposits with Restrictions on Use arising from a Contract
with a Third Party (IAS 7). The 30 June 2022 comparative balances
have been restated where applicable to reflect this change in
classification which resulted in GBP47 million of tenant deposits
being reclassified from 'Other receivables' to 'Cash and cash
equivalents'.
The Group's definition of Adjusted profit has changed as
detailed further in Note 2 below.
The principal exchange rates used to translate foreign currency
denominated amounts are:
Balance sheet: GBP1 = EUR1.16 (30 June 2022: GBP1 = EUR1.16; 31
December 2022: GBP1 = EUR1.13)
Income statement: GBP1 = EUR1.14 (30 June 2022: GBP1 = EUR1.19;
31 December 2022: GBP1 = EUR1.17)
The Group's business is not seasonal, and the results relate to
continuing operations unless otherwise stated.
2. ADJUSTED PROFIT
Adjusted profit is a non-GAAP measure and is the Group's measure
of underlying profit, which is used by the Board and senior
management to measure and monitor the Group's income
performance.
It is based on the Best Practices Recommendations of European
Public Real Estate Association (EPRA), which calculate profit
excluding investment and development property revaluations and
gains or losses on disposals, changes in the fair value of
financial instruments and associated close-out costs and their
related taxation, as well as other permitted one-off items. Refer
to the Supplementary Notes for all EPRA adjustments.
The Directors may also exclude from the EPRA profit measure
additional items (gains and losses) which are considered by them to
be non-recurring, not in the ordinary course of business or
significant by virtue of size and nature. At 30 June 2022 estimated
SELP performance fees were included in Adjusted Profit. They were
not excluded because it was anticipated that further fees would
subsequently be recognised throughout the latter part of the
performance period and therefore these would not be considered
unusual. The market volatility that was seen in the latter half of
2022 significantly impacted property valuations and
consequentially, management's consideration of SELP performance
fees, leading to the reversal of the fee recognised in the six
months to 30 June 2022 and no performance fee recognised for the
year ended 31 December 2022 or the six months ended 30 June 2023.
Based on this volatility, these fees are now considered unusual as
they are inherently uncertain and sensitive to movements in
property valuations (which themselves are excluded from the EPRA
profit metric). In excluding such items going forward,
management
believe this gives a more reliable and relevant measure of the
underlying performance of the business. For the half year to 30
June 2022, the net profit after tax impact of the SELP performance
fee recognised of GBP16 million has been excluded from the
calculation of Adjusted profit, see footnote 3 below for further
details. No non-EPRA adjustments to underlying profits were made in
the current period and for the year ended 31 December 2022.
The following table provides a reconciliation of Adjusted profit
to IFRS (loss)/profit:
Year to
Half year Half year to 30 31
to 30 June 2022 December
June 2023 (represented(3) 2022
Notes GBPm ) GBPm GBPm
Gross rental income 4 266 239 488
Property operating
expenses 5 (42) (36) (76)
Net rental income 224 203 412
Joint venture management
fee income 4 16 15 30
Management and
development fee income 4 3 2 5
Net solar energy
income(2) -- 1 1
Administrative expenses (33) (31) (59)
Share of joint ventures
and associates' adjusted
profit after tax(1) 6 40 35 71
Adjusted operating profit
before interest and tax 250 225 460
Net finance costs
(including adjustments) 8 (52) (32) (74)
Adjusted profit before
tax 198 193 386
Adjustments to reconcile
to IFRS:
Adjustments to the share
of gains and losses from
joint ventures and
associates after tax(1) 6 (68) 116 (215)
Realised and unrealised
property gains and
losses 7 (188) 1,172 (1,946)
Gain on sale of trading
properties 2 2 7
Net fair value
gain/(loss) on interest
rate swaps and other
derivatives 8 23 (150) (199)
Joint venture performance
fee income 4 -- 42 --
Total adjustments (231) 1,182 (2,353)
(Loss)/profit before tax (33) 1,375 (1,967)
Tax
On Adjusted profit 9 (5) (5) (11)
In respect of adjustments 9 15 (36) 48
Total tax adjustments 10 (41) 37
(Loss)/profit after tax
before non-controlling
interests (23) 1,334 (1,930)
Non-controlling
interests:
Less: share of adjusted
profit attributable to
non-controlling
Interests -- -- (1)
: share of adjustments
attributable to
non-controlling
interests -- (1) 4
(Loss)/profit after tax
and non-controlling
interests (23) 1,333 (1,927)
Of which:
Adjusted profit after tax
and non-controlling
interests 193 188 374
Total adjustments after
tax and non-controlling
interests (216) 1,145 (2,301)
(Loss)/profit
attributable to equity
shareholders (23) 1,333 (1,927)
1. A detailed breakdown of the adjustments to the share of
(loss)/profit from joint ventures and associates is included in
Note 6.
2. Net solar income of GBPnil (31 December 2022: GBP1 million;
30 June 2022: GBP1 million) is calculated as Solar energy income of
GBP1 million (31 December 2022: GBP2 million; 30 June 2022: GBP1
million) shown in Note 4, less Solar energy expenses of GBP1
million (31 December 2022: GBP1 million; 30 June 2022: GBPnil)
shown in Note 5.
3. For the half year to 30 June 2022 (as previously reported)
the impact of the joint venture performance fee from SELP was
recognised within Adjusted profit being: performance fee of GBP42
million within Joint venture fee management fee income (previously
named joint venture fee income); a cost of GBP19 million within
Share of joint ventures' and associates adjusted profit after tax
(being the share of performance fee cost of GBP21 million less a
tax credit of GBP2 million); and a tax charge of GBP7 million
recognised in respect of the performance fee income. Overall, the
net profit after tax impact was GBP16 million, the half year to 30
June 2022 Adjusted profit in the table above has been represented
to exclude these items.
3. SEGMENTAL ANALYSIS
The Group's reportable segments are the geographical business
units: Greater London (UK), Thames Valley (UK), National Logistics
(UK), Northern Europe (principally Germany), Southern Europe
(principally France and Italy) and Central Europe (principally
Poland), which are managed and reported to the Board as separate
and distinct Business Units.
Share of
joint
ventures Total Investments
and directly in joint
Gross Net associates' Adjusted owned ventures
rental rental Adjusted operating property and Capital
income income profit PBIT(2) assets associates expenditure(3)
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
30 June
2023
Thames
Valley 64 59 -- 58 3,228 -- 144
National
Logistics 26 25 -- 27 1,971 -- 276
Greater
London 107 98 -- 97 6,297 15 12
Northern
Europe 19 13 17 34 1,106 961 20
Southern
Europe 46 34 24 63 2,432 1,125 147
Central
Europe 4 2 13 18 202 601 21
Other(1) -- (7) (14) (47) -- (1,004)(4) 8
Total 266 224 40 250 15,236 1,698 628
30 June 2022
Thames
Valley 57 53 -- 52 3,512 -- 59
National
Logistics 21 20 -- 22 2,039 -- 139
Greater
London 101 93 -- 92 8,066 13 271
Northern
Europe 15 11 14 28 1,053 1,037 40
Southern
Europe 41 32 18 56 2,397 1,350 160
Central
Europe 4 2 10 14 199 630 6
Other(1) -- (8)(1) (7) (39) -- (1,008)(4) 3
Total 239 203 35(5) 225(5) 17,266 2,022 678
31 December 2022
Thames
Valley 116 109 -- 107 3,011 -- 80
National
Logistics 47 43 -- 45 1,721 -- 362
Greater
London 203 185 -- 183 6,401 11 325
Northern
Europe 33 23 29 60 1,149 958 345
Southern
Europe 82 63 40 114 2,503 1,191 474
Central
Europe 7 3 22 31 189 616 7
Other(1) -- (14)(1) (20)(1) (80)(1) -- (1,008)(4) 9
Total 488 412 71 460 14,974 1,768 1,602
1. 'Other' category includes the corporate centre, SELP holding
companies and costs relating to the operational business which are
not specifically allocated to a geographical Business Unit.
2. A reconciliation of total Adjusted PBIT to the IFRS
(loss)/profit before tax is provided in Note 2.
3. Capital expenditure includes additions and acquisitions of
investment and trading properties but does not include tenant
incentives, letting fees and rental guarantees. Part of the capital
expenditure incurred is in response to climate change including the
reduction of the carbon footprint of the Group's existing
investment properties and developments. The "Other" category
includes non-property related spend, primarily IT.
4. Includes the bonds held by SELP Finance S.à.r.l, a Luxembourg
entity.
5. Share of joint ventures and associates' Adjusted profit and
Adjusted operating PBIT for the half year to 30 June 2022 have been
represented. See Note 2 for further details.
4. REVENUE
Half year to Half year to Year to
30 June 2023 30 June 2022 31 December 2022
GBPm GBPm GBPm
Rental income from
investment and
trading properties 260 230 473
Rent averaging 6 8 14
Surrender premiums -- 1 1
Gross rental
income(1) 266 239 488
Joint venture fees
-- management
fees* 16 15 30
-- performance
fees*(2) -- 42 --
Joint venture fee
income 16 57 30
Management and
development fee
income* 3 2 5
Service charge
income* 22 22 44
Solar energy income* 1 1 2
Proceeds from sale
of trading
properties* 34 9 100
Total revenue 342 330 669
* The above income streams are recognised under IFRS 15 Revenue
from Contracts with Customers and total GBP76 million (31 December
2022: GBP181 million; 30 June 2022: GBP91 million).
1. Net rental income of GBP224 million (31 December 2022: GBP412
million; 30 June 2022: GBP203 million) is calculated as gross
rental income of GBP266 million (31 December 2022: GBP488 million;
30 June 2022: GBP239 million) less total property operating
expenses of GBP42 million (31 December 2022: GBP76 million; 30 June
2022: GBP36 million) shown in Note 5.
2. Performance fees recognised by SEGRO. Due to changes in the
estimation of the performance fee, between 30 June 2022 and 31
December 2022, the performance fee of GBP42 million recognised for
the half year to 30 June 2022 was reversed and no fee was
recognised for the year to 31 December 2022. No performance fee has
been recognised for the half year to 30 June 2023. See Note 6(ii)
for further details on the performance fee from SELP.
5. COSTS
Half year to Half year to Year to
30 June 2023 30 June 2022 31 December 2022
GBPm GBPm GBPm
Vacant property
costs 7 4 10
Letting, marketing,
legal and
professional fees 7 9 17
Loss allowance and
impairment of
receivables 1 1 3
Other expenses 8 6 12
Property management
expenses 23 20 42
Property
administrative
expenses(1) 25 23 45
Costs capitalised(2) (6) (7) (11)
Total property
operating expenses 42 36 76
Service charge
expense 22 22 44
Solar energy expense 1 -- 1
Trading properties
cost of sales 32 7 93
Total costs 97 65 214
1. Property administrative expenses predominantly relate to the
employee staff costs of personnel directly involved in managing the
property portfolio.
2. Costs capitalised relate to staff costs of those internal
employees directly involved in developing the property
portfolio.
6. INVESTMENTS IN JOINT VENTURES AND ASSOCIATES
6(i) Share of (loss)/profit from joint ventures and associates
after tax
Half year to 30
Half year to June 2022 Year to 31
30 June 2023 (represented(4) December 2022
GBPm ) GBPm GBPm
Revenue(1) 171 146 303
Gross rental income 132 112 237
Property operating
expenses:
-underlying property
operating expenses (7) (8) (16)
-vacant property costs (1) (1) (1)
-property management
fees(2) (12) (12) (25)
Net rental income 112 91 195
Management fee income 2 2 3
Administrative expenses (2) (2) (6)
Net finance costs
(including adjustments) (20) (13) (34)
Adjusted profit before
tax 92 78 158
Tax (11) (8) (16)
Adjusted profit after tax 81 70 142
At share 40 35 71
Adjustments:
Valuation
(deficit)/surplus on
investment properties (156) 343 (472)
Early close out of debt -- -- (3)
Performance fees(3) -- (42) --
Tax in respect of
adjustments 19 (70) 46
Total adjustments (137) 231 (429)
At share (68) 116 (215)
(Loss)/profit after tax (56) 301 (287)
At share (28) 151 (144)
Total comprehensive
(expense)/income for the
period (56) 301 (287)
At share (28) 151 (144)
1. Total revenue of GBP171 million (31 December 2022: GBP303
million; 30 June 2022: GBP146 million) includes: Gross rental
income GBP132 million (31 December 2022: GBP237 million; 30 June
2022: GBP112 million); service charge income GBP37 million (31
December 2022: GBP63 million; 30 June 2022: GBP32 million); and
management fee income of GBP2 million (31 December 2022: GBP3
million; 30 June 2022: GBP2 million). Service charge income is
netted against the equal and opposite service charge expense in
calculating Adjusted profit before tax.
2. Property management fees paid to SEGRO.
3. Performance fees recognised by SEGRO. Due to changes in the
estimation of the performance fee, between 30 June 2022 and 31
December 2022, the performance fee of GBP42 million recognised for
the half year to 30 June 2022 was reversed and no fee was
recognised for the year to 31 December 2022. No performance fee has
been recognised for the half year to 30 June 2023. See Fees section
below for further details.
4. Adjusted profit after tax and Total adjustments for the half
year to 30 June 2022 have been represented. See Note 2 for further
details.
The Group has not recognised losses totalling GBP1 million at
share in the period (31 December 2022: GBP12 million; 30 June 2022:
GBPnil) in relation to its interests in associates, because the
Group has no obligation in respect of these losses.
6(ii) Summarised balance sheet information of the Group's share
of joint ventures and associates
As at As at As at 31
30 June 2023 30 June 2022 December 2022
GBPm GBPm GBPm
Investment properties 5,857 6,552 6,044
Property, plant and
equipment 9 2 6
Other receivables 2 -- 3
Total non-current
assets 5,868 6,554 6,053
Trade and other
receivables 72 139 72
Cash and cash
equivalents 79 110 63
Total current assets 151 249 135
Total assets 6,019 6,803 6,188
Borrowings (1,979) (1,974) (2,005)
Deferred tax
liabilities (454) (589) (482)
Other liabilities (33) -- (40)
Total non-current
liabilities (2,466) (2,563) (2,527)
Trade and other
liabilities (183) (195) (148)
Total current
liabilities (183) (195) (148)
Total liabilities (2,649) (2,758) (2,675)
Unrecognised share of
losses 25 -- 23
Net assets 3,395 4,045 3,536
At share 1,698 2,022 1,768
Fees
SEGRO provides certain services, including venture advisory and
asset management, to the SELP joint venture and receives fees for
doing so.
A 10 year performance fee, denominated in euros, is payable from
SELP to SEGRO in October 2023 based on SELP's internal rate of
return (IRR) subject to certain hurdle rates. The IRR calculation
is based on a 10 year performance period from the inception of SELP
in October 2013 to October 2023. The IRR calculation to determine
whether the hurdle rates will be met when the performance period
ends is currently an estimation and sensitive to movements and
assumptions in property valuations over the remaining performance
period.
The cumulative performance fee recognised by SEGRO in its Income
Statement in the periods to 31 December 2022 was GBP26 million
(EUR29 million). An equivalent performance fee expense at share of
GBP13 million was recognised within the share of profit from joint
ventures and associates.
In the six months to 30 June 2023, no further performance fee
has been recognised by SEGRO, and therefore no equivalent
performance fee expense has been recognised within the share of
profit from joint ventures and associates and reflected in Note
6(i).
This means the cumulative 10 year performance fee recognised by
SEGRO to 30 June 2023 totals GBP26 million (EUR29 million)
(accumulated fee as at 31 December 2022: GBP26 million (EUR29
million) plus six months to 30 June 2023: GBPnil). The full amount
of the cumulative performance fee recognised is subject to future
reversal based on performance over the remaining period to October
2023.
Performance fee income is recognised during the performance
period to the extent that it is highly probable there will not be a
significant future reversal and the fee can be reliably estimated.
None of the cumulative GBP26 million performance fee recognised
will be reversed if property values fall by up to 12 per cent
between 30 June 2023 and the end of the performance period in
October 2023. If property values fall by over 14 per cent, all of
the GBP26 million cumulative performance fee recognised to date
would be reversed.
SEGRO management notes the inherent uncertainty caused by the
market conditions at the period end and the sensitivities detailed
below. The volatility that was seen in the latter half of 2022 has
impacted management's consideration of the point at which it is
highly probable that there will not be a significant reversal
relative to the estimations undertaken previously. Having
considered these market conditions, the market outlook and the
track record of property market trends, management believes it is
highly probable that there will not be a significant reversal of
the cumulative performance fee recognised to date.
A 12 per cent reduction in property values between June and
October 2023 would result in no further performance fee being
recognised. This reduction is not dissimilar to the reduction in
property values in SELP in the second half of 2022. When
considering this, and wider market factors, management do not
believe recognition of any additional performance fee at 30 June
2023 meets the highly probably recognition criteria.
Sensitivity
Based on current estimates of the IRR of SELP from inception in
October 2013 to 30 June 2023, an additional performance fee (beyond
the cumulative fee of EUR29 million recognised to 30 June 2023) due
to SEGRO in October 2023 could be in the region of EUR160 million
(EUR80 million at share after accounting for the corresponding
performance fee expense recognised in SELP). However, this is
dependent on future events, in particular property valuation
movements, to the end of the performance period in October 2023.
The current estimate of the IRR is based on property values as at
30 June 2023; a 5 per cent decrease in property values from 30 June
2023 would result in a EUR70 million decrease in the estimated fee
and a 5 per cent increase in property values would result in a
EUR70 million increase in the estimated fee. Whilst property
valuations continue to be volatile, using a 5 per cent
increase/decrease is considered appropriate to provide transparency
on the relative sensitivity of the estimate.
7. REALISED AND UNREALISED PROPERTY GAINS AND LOSSES
Half year to Half year to Year to
30 June 2023 30 June 2022 31 December 2022
GBPm GBPm GBPm
Profit/(loss) on sale
of investment
properties and other
investment income(1) 9 (1) 9
Valuation
(deficit)/surplus on
investment properties (197) 1,164 (1,970)
Decrease in provision
for impairment of
trading properties -- 9 15
Total realised and
unrealised property
gains and losses (188) 1,172 (1,946)
1. Includes profit on sale of investment properties of GBP3
million (31 December 2022: GBP9 million; 30 June 2022: GBP1 million
loss) and other property related investment income of GBP6 million
(31 December 2022: GBPnil; 30 June 2022: GBPnil).
The above table does not include realised gains on sale of
trading properties of GBP2 million (31 December 2022: GBP7 million;
30 June 2022: GBP2 million) as detailed further in Note 2.
Valuation deficit on investment and trading properties totals
GBP275 million (31 December 2022: GBP2,191 million deficit; 30 June
2022: GBP1,345 million surplus). This comprises GBP197 million
deficit from investment properties (31 December 2022: GBP1,970
million deficit; 30 June 2022: GBP1,164 million surplus), GBPnil
impairment from trading properties (31 December 2022: GBP15 million
impairment reversal; 30 June 2022: GBP9 million impairment
reversal) and GBP78 million deficit from joint ventures and
associates at share (31 December 2022: GBP236 million deficit; 30
June 2022: GBP172 million surplus).
Valuation deficits are discussed further in the Portfolio
Performance section above.
8. NET FINANCE COSTS
Half year to Half year to Year to
30 June 2023 30 June 2022 31 December 2022
Finance income GBPm GBPm GBPm
Interest received on
bank deposits and
related derivatives 13 11 21
Fair value gain on
interest rate swaps
and other derivatives 25 25 46
Total finance income 38 36 67
Finance costs
Interest on overdrafts,
loans and related
derivatives (86) (43) (104)
Amortisation of issue
costs (4) (4) (9)
Interest on lease
liabilities (2) (1) (3)
Total borrowing costs (92) (48) (116)
Less amount capitalised
on the development of
properties 27 6 22
Net borrowing costs (65) (42) (94)
Fair value loss on
interest rate swaps
and other derivatives (2) (175) (245)
Exchange differences -- (1) (1)
Total finance costs (67) (218) (340)
Net finance costs (29) (182) (273)
Net finance costs (including adjustments) in Adjusted profit
(see Note 2) are GBP52 million (31 December 2022: GBP74 million; 30
June 2022: GBP32 million). This excludes net fair value gain on
interest rate swaps and other derivatives of GBP23 million (31
December 2022: loss of GBP199 million; 30 June 2022: loss of GBP150
million) in the table above.
9. TAX
9(i) Tax on (loss)/profit
Half year to 30
Half year to June 2022 Year to
30 June 2023 (represented(1) ) 31 December 2022
GBPm GBPm GBPm
Tax:
On Adjusted profit (5) (5) (11)
In respect of
adjustments 15 (36) 48
Total tax
credit/(charge) 10 (41) 37
Current tax
Current tax charge (8) (27) (24)
Total current tax
charge (8) (27) (24)
Deferred tax
Origination and
reversal of
temporary
differences (7) (5) (13)
Released in respect
of property
disposals in the
period (1) 18 25
On valuation
movements 26 (25) 50
Total deferred tax
in respect of
investment
properties 18 (12) 62
Other deferred tax -- (2) (1)
Total deferred tax
credit/(charge) 18 (14) 61
Total tax
credit/(charge) on
(loss)/profit on
ordinary
activities 10 (41) 37
1. Tax on Adjusted profit and In respect of adjustments for the
half year to 30 June 2022 have been represented. See Note 2 for
further details.
The Group operates in a number of jurisdictions and is subject
to periodic challenges by local tax authorities on a range of tax
matters during the normal course of business. The tax impact can be
uncertain until a conclusion is reached with the relevant tax
authority or through a legal process. The Group uses in-house
expertise when assessing uncertain tax positions and seeks the
advice of external professional advisors where appropriate. The
Group believes that its provisions for tax liabilities and
associated penalties are adequate for all open tax years based on
its assessment of many factors, including tax laws and prior
experience. The most significant assessment relates to the
recognition of withholding tax in France.
9(ii) Deferred tax liabilities
Movement in deferred tax was as follows:
Balance
1 Balance Balance
January Exchange Acquisitions/ Recognised 30 June 30 June
2023 movement (disposals) in income 2023 2022
GBPm GBPm GBPm GBPm GBPm GBPm
Valuation surplus and
deficits on
properties/accelerated
tax allowances 209 (5) -- (18) 186 280
Others 17 -- -- -- 17 16
Total deferred tax
liabilities 226 (5) -- (18) 203 296
10. DIVIDS
Half year to Half year to Year to
30 June 2023 30 June 2022 31 December 2022
GBPm GBPm GBPm
Ordinary dividends
paid
Final dividend for
2022 @ 18.2 pence per
share 220 -- --
Interim dividend for
2022 @ 8.1 pence per
share -- -- 98
Final dividend for 2021
@ 16.9 pence per
share -- 203 203
220 203 301
The Board has declared an interim dividend of 8.7 pence per
ordinary share (2022: 8.1 pence). This dividend has not been
recognised in the condensed financial statements.
11. EARNINGS AND NET ASSETS PER SHARE
The earnings per share calculations use the weighted average
number of shares in issue during the period and the net assets per
share calculations use the number of shares in issue at the period
end. Earnings per share calculations exclude 0.2 million shares
(0.2 million for the full year 2022 and 0.2 million for half year
2022) being the average number of shares held on trust during the
period for employee share schemes and net assets per share exclude
0.3 million shares (0.2 million for the full year 2022 and 0.2
million for the half year 2022) being the actual number of shares
held on trust for employee share schemes at the period end.
11(i) Earnings per ordinary share (EPS)
Half year to 30 June Half year to 30 June 2022
2023 (represented(3) ) Year to 31 December 2022
Pence Pence Pence
Earnings Shares per Earnings Shares per Earnings Shares per
GBPm million share GBPm million share GBPm million share
Basic EPS (23) 1,213.9 (1.9) 1,333 1,204.2 110.7 (1,927) 1,206.6 (159.7)
Dilution
adjustments:
Share and save as
you earn
schemes -- -- -- -- 3.3 (0.3) -- -- --
Diluted EPS(2) (23) 1,213.9 (1.9) 1,333 1,207.5 110.4 (1,927) 1,206.6 (159.7)
Basic EPS (23) 1,213.9 (1.9) 1,333 1,204.2 110.7 (1,927) 1,206.6 (159.7)
Adjustments to
profit before
tax(1) 231 19.0 (1,182) (98.2) 2,353 195.0
Tax in respect of
Adjustments (15) (1.2) 36 3.1 (48) (4.0)
Non-controlling
interest on
adjustments -- -- 1 -- (4) (0.3)
Adjusted Basic
EPS 193 1,213.9 15.9 188 1,204.2 15.6 374 1,206.6 31.0
Adjusted Diluted
EPS 193 1,217.1 15.9 188 1,207.5 15.6 374 1,210.0 30.9
1. Details of adjustments are included in Note 2.
2. In the half year to 30 June 2023 and year to 31 December
2022, share options are excluded from the weighted average diluted
number of shares when calculating IFRS diluted loss per share
because they are not dilutive.
3. Adjusted earnings and Adjusted EPS for the half year to 30
June 2022 have been represented. See Note 2 for further
details.
11(II) NET ASSET VALUE PER SHARE (NAV)
The EPRA Net Tangible Assets (NTA) metric is considered to be
most consistent with the nature of SEGRO's business as a UK REIT
providing long-term progressive and sustainable returns. EPRA NTA
acts as the primary measure of net asset value and is also referred
to as Adjusted Net Asset Value (or Adjusted NAV).
A reconciliation from IFRS NAV to Adjusted NAV is set out in the
table below along with the net asset per share metrics.
Table 5 of the supplementary notes provides a reconciliation for
each of the three EPRA net asset value metrics.
As at 30 June 2023 As at 30 June 2022 As at 31 December 2022
Equity Equity Equity
attributable Pence attributable Pence attributable Pence
to ordinary Shares per to ordinary Shares per to ordinary Shares per
shareholders million share shareholders million share shareholders million share
GBPm GBPm GBPm
Basic NAV 11,203 1,224.4 915 14,695 1,208.9 1,216 11,373 1,209.1 941
Dilution
adjustments:
Share and save
as you earn
schemes -- 3.0 (2) -- 3.2 (4) -- 3.4 (3)
Diluted NAV 11,203 1,227.4 913 14,695 1,212.1 1,212 11,373 1,212.5 938
Fair value
adjustment in
respect of
interest rate
derivatives
-- Group 107 9 161 13 131 11
Fair value
adjustment in
respect of
trading
properties --
Group 1 -- 10 1 2 --
Deferred tax
in respect of
depreciation
and valuation
surpluses --
Group(1) 94 7 139 12 104 8
Deferred tax
in respect of
depreciation
and valuation
surpluses --
Joint
ventures and
associates(1) 112 9 143 12 119 10
Intangible
assets (17) (1) (9) (1) (12) (1)
Adjusted NAV
(EPRA NTA) 11,500 1,227.4 937 15,139 1,212.1 1,249 11,717 1,212.5 966
1. 50 per cent of deferred tax in respect of depreciation and
valuation surpluses has been excluded in calculating Adjusted NAV
in line with option 3 of EPRA Best Practices Recommendations
guidelines.
12. PROPERTIES
12(i) Investment properties
Completed Development Total
GBPm GBPm GBPm
At 1 January 2023 12,113 2,589 14,702
Exchange movement (73) (23) (96)
Property acquisitions 1 322 323
Additions to existing investment
properties 22 275 297
Disposals(2) (16) (21) (37)
Transfers on completion of development
and completed properties taken back for
redevelopment 432 (432) --
Revaluation deficit during the period (127) (70) (197)
At 30 June 2023 12,352 2,640 14,992
Add tenant lease incentives, letting
fees and rental guarantees 171 -- 171
Investment properties excluding head
lease liabilities at 30 June 2023 12,523 2,640 15,163
Add head lease liabilities (ROU
assets)(1) 71 -- 71
Total investment properties at 30 June
2023 12,594 2,640 15,234
Total investment properties at 30 June
2022 14,630 2,579 17,209
1. At 30 June 2023 investment properties included GBP71 million
(31 December 2022: GBP73 million; 30 June 2022: GBP72 million) for
the head lease liabilities (ROU assets) recognised under IFRS
16.
2. Total disposals completed in H1 2023 of GBP74 million shown
in the Investment Activity includes: Carrying value of investment
properties disposed by the Group of GBP37 million plus profit
generated on disposal of GBP3 million (see Note 7); proceeds from
the sale of trading properties by the Group of GBP34 million (see
Note 4); share of joint venture and associate investment properties
disposal proceeds of GBPnil; carrying value of lease incentives,
letting fees and rental guarantees disposed by the Group and joint
ventures and associates (at share) of GBPnil.
Investment properties are stated at fair value based on external
valuations performed by professionally qualified, independent
valuers. The Group's wholly-owned property portfolio and joint
venture and associates property valuations were performed by CBRE
Ltd. The valuations conform to International Valuation Standards
and were arrived at by reference to market evidence of the
transaction prices paid for similar properties. In estimating the
fair value of the properties, the valuers consider the highest and
best use of the properties. All investment property would be
classified as level 3 fair value measurements, there has been no
change in the valuation technique and no significant changes in the
assumptions used during the period. The valuation deficit
recognised during the period is discussed further in the Portfolio
Performance section above.
CBRE Ltd also undertakes some professional and agency work on
behalf of the Group. This is carried out by departments separate
from the Valuation team in CBRE and overall the total fees earned
from the Group are below 5% of CBRE's total income. This work does
not therefore lead to a conflict of interest for the properties
being valued by CBRE at the period end.
Sensitivity analysis
An increase/decrease to ERV will increase/decrease valuations,
while an increase/decrease to yield will decrease/increase
valuations. Sensitivity analysis showing the impact on valuations
of changes in yields and ERV on the property portfolio (including
joint ventures and associates at share) and the impact on
valuations of changes in development costs on the development
property and land portfolio (including joint ventures and
associates at share) is shown below. Management continues to
consider a +/- 25bp change in yield, a +/- 5% change in ERV and a
+/- 10% change in development costs to be reasonably possible
changes to the assumptions.
Impact on valuation Impact on valuation Impact on valuation
of 25bp change in of 5% change in of 10% change in
nominal equivalent estimated rental estimated
yield value (ERV) development costs
Group(1) Increase Decrease Increase Decrease Increase Decrease
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
30 June 2023
Completed
property 15,299 (731) 735 572 (566) -- --
Development
property and
land 2,796 (233) 251 323 (323) (371) 371
Group total
property
portfolio 18,095 (964) 986 895 (889) (371) 371
30 June 2022
Completed
property 17,743 (1,155) 1,322 683 (680) -- --
Development
property and
land 2,737 (238) 260 285 (285) (299) 299
Group total
property
portfolio 20,480 (1,393) 1,582 968 (965) (299) 299
31 December
2022
Completed
property 15,191 (793) 883 580 (576) -- --
Development
property and
land 2,734 (226) 245 295 (295) (321) 321
Group total
property
portfolio 17,925 (1,019) 1,128 875 (871) (321) 321
1. For further details see Table 7 of the supplementary
notes.
There are interrelationships between all these inputs as they
are determined by market conditions. The existence of an increase
in more than one input would be to magnify the impact on the
valuation. The impact on the valuation will be mitigated by the
interrelationship of two inputs in opposite directions, e.g. an
increase in rent may be offset by an increase in yield.
Completed properties include buildings that are occupied or are
available for occupation. Development properties include land
available for development (land bank), land under development,
construction in progress and covered land. The carrying value of
covered land held within Development properties is GBP741 million
(31 December 2022: GBP656 million; 30 June 2022: GBP648
million).
At 30 June 2023 investment properties included GBP171 million
tenant lease incentives, letting fees and rent guarantees (31
December 2022: GBP164 million; 30 June 2022: GBP152 million).
The carrying value of investment properties situated on land
held under leaseholds amount to GBP203 million (excluding head
lease ROU assets) (31 December 2022: GBP209 million; 30 June 2022:
GBP216 million).
The disposals of completed properties during the period includes
properties with a carrying value of GBPnil (31 December 2022:
GBP215 million; 30 June 2022: GBP172 million) sold to the SELP
joint venture.
12(ii) Trading properties
The carrying value of trading properties at 30 June 2023 was
GBP2 million (31 December 2022: GBP35 million; 30 June 2022: GBP57
million). Based on the fair value at 30 June 2023, the portfolio
has unrecognised surplus of GBP1 million (31 December 2022: GBP2
million; 30 June 2022: GBP10 million).
13. NET BORROWINGS AND FINANCIAL INSTRUMENTS
As at 30 June
As at 2022 As at 31
30 June 2023 (restated)(1) December 2022
GBPm GBPm GBPm
In one year or less 82 -- --
In more than one year but
less than two 1 169 83
In more than two years
but less than five 1,958 759 1,562
In more than five years
but less than ten 1,630 1,757 1,662
In more than ten years 1,560 1,238 1,577
In more than one year 5,149 3,923 4,884
Total borrowings 5,231 3,923 4,884
Cash and cash
equivalents(1,2) (103) (138) (162)
Net borrowings 5,128 3,785 4,722
Total borrowings is split between
secured and unsecured as follows:
Secured (on land and
buildings) 1 2 1
Unsecured 5,230 3,921 4,883
Total borrowings 5,231 3,923 4,884
Currency profile of
total borrowings after
derivative instruments
Sterling 1,402 730 1,120
Euros 3,829 3,193 3,764
Total borrowings 5,231 3,923 4,884
Maturity profile of undrawn borrowing facilities
In one year or less 147 17 150
In more than one year
but less than two -- 862 --
In more than two years 1,366 825 1,608
Total available undrawn
facilities(3) 1,513 1,704 1,758
Fair value of financial instruments
Book value of debt 5,231 3,923 4,884
Interest rate derivatives 107 161 131
Foreign exchange
derivatives (12) (13) 2
Book value of debt
including derivatives 5,326 4,071 5,017
Net fair market value 4,656 3,656 4,345
Mark to market adjustment
(pre-tax) (670) (415) (672)
1. Cash and cash equivalents have been restated as at 30 June
2022 following IFRIC's agenda decision in respect of Demand
Deposits with Restrictions on Use arising from a Contract with a
Third Party. See Note 1 for further details.
2. Cash and cash equivalents also include tenant deposits held
in separate designated bank accounts of GBP59 million (31 December
2022: GBP50 million; 30 June 2022: GBP47 million), the use of the
deposits is subject to restrictions as set out in the tenant lease
agreement and therefore not available for general use by the
Group.
3. Total available undrawn facilities include committed
facilities of GBP1,366 million (31 December 2022: GBP1,608 million;
30 June 2022: GBP1,687 million) and uncommitted facilities of
GBP147 million (31 December 2022: GBP150 million; 30 June 2022:
GBP17 million).
During the period, SEGRO drew down GBP300 million and EUR407
million term loan facilities.
In May 2023, SEGRO extended the maturity of EUR200 million of
its revolving credit facilities for a further year to 2028.
In June 2023, SEGRO arranged two further term loan facilities.
The first facility has GBP100 million of commitment maturing in
2026; the second facility has EUR150 million of commitment also
maturing in 2026. Both term loan facilities were undrawn at 30 June
2023.
The debt financing is discussed in more detail in the Financial
Position and Funding section.
14. NOTES TO THE CONDENSED GROUP CASH FLOW STATEMENTS
14(i) Reconciliation of cash generated from operations
Half year to 30
Half year to June 2022 Year to
30 June 2023 (restated)(1) 31 December 2022
GBPm GBPm GBPm
Operating
(loss)/profit (4) 1,557 (1,694)
Adjustments for:
Depreciation of
property, plant
and equipment 3 2 4
Share of
loss/(profit) from
joint ventures and
associates after
tax 28 (151) 144
(Profit)/loss on
sale of investment
properties (3) 1 (9)
Revaluation
deficit/(surplus)
on investment
properties 197 (1,164) 1,970
Other provisions 7 (5) (6)
228 240 409
Changes in working
capital:
Decrease in trading
properties 32 1 33
Increase in debtors
and tenant
incentives (14) (48) (6)
Increase in
creditors 8 32 43
Net cash inflow
generated from
operations 254 225 479
1. Cash and cash equivalents and Trade and other receivables
have been restated as at 30 June 2022 following IFRIC's agenda
decision in respect of Demand Deposits with Restrictions on Use
arising from a Contract with a Third Party. See Note 1 for further
details.
14(ii) Analysis of net debt
Non-cash movements
At 1 At 30
January Cash Cash Exchange Other non-cash June
2023 inflow(1) Outflow(2) movement adjustments(3) 2023
GBPm GBPm GBPm GBPm GBPm GBPm
Bank loans
and loan
capital 4,928 710 (277) (88) -- 5,273
Capitalised
finance
costs (44) -- (2) -- 4 (42)
Total
borrowings 4,884 710 (279) (88) 4 5,231
Cash in hand
and at bank (162) -- 59 -- -- (103)
Net debt 4,722 710 (220) (88) 4 5,128
1. Proceeds from borrowings of GBP710 million.
2. Cash outflow of GBP279 million, comprises the repayment of
borrowings of GBP277 million and capitalised costs of GBP2
million.
3. Total other non-cash adjustments of GBP4 million relates to
the amortisation of issue costs offset against borrowings.
15. RELATED PARTY TRANSACTIONS
There have been no undisclosed material changes in the related
party transactions as described in the last annual report.
16. SUBSEQUENT EVENTS
Since the period end, SEGRO agreed the conditional exchange of a
portfolio of UK big box assets in the Midlands, reflecting a price
above 30 June 2023 valuation. The conditions have subsequently been
met and the transaction is expected to complete in early
August.
SUPPLEMENTARY NOTES NOT PART OF CONDENSED FINANCIAL
INFORMATION
TABLE 1: EPRA PERFORMANCE MEASURES SUMMARY
Half year to Half year to Year to 31
30 June 2023 30 June 2022 December 2022
Pence Pence Pence
per per per
Notes GBPm share GBPm share GBPm share
EPRA Earnings Table 4 193 15.9 204 16.9 374 31.0
EPRA NTA (Adjusted
NAV) Table 5 11,500 937 15,139 1,249 11,717 966
EPRA NRV Table 5 12,669 1,032 16,520 1,363 12,879 1,062
EPRA NDV Table 5 11,983 976 15,257 1,259 12,170 1,004
EPRA LTV Table 6 36.1% 25.3% 34.2%
EPRA net initial
yield Table 7 3.8% 2.9% 3.7%
EPRA 'topped up'
net initial yield Table 7 4.2% 3.2% 3.9%
EPRA vacancy rate Table 8 4.5% 3.3% 4.0%
EPRA cost ratio
(including vacant
property costs) Table 9 20.4% 20.5% 20.3%
EPRA cost ratio
(excluding vacant
property costs) Table 9 18.2% 19.0% 18.5%
TABLE 2: INCOME STATEMENT, PROPORTIONALLY CONSOLIDATED
Half year to 30 June 2022
Half year to 30 June 2023 (represented(2) ) Year to 31 December 2022
JV and JV and JV and
Group associates Total Group associates Total Group associates Total
Notes GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Gross rental income 2, 6 266 66 332 239 56 295 488 119 607
Property operating
expenses 2, 6 (42) (4) (46) (36) (4) (40) (76) (9) (85)
Net rental income 224 62 286 203 52 255 412 110 522
Joint venture management
fee income(1) 2 16 (6) 10 15 (6) 9 30 (13) 17
Management and
development fee income 2 3 1 4 2 1 3 5 2 7
Net solar energy income 2 -- -- -- 1 -- 1 1 -- 1
Administrative expenses 2 (33) (1) (34) (31) (1) (32) (59) (3) (62)
Adjusted operating profit
before interest and tax 210 56 266 190 46 236 389 96 485
Net finance costs
(including adjustments) 2, 6 (52) (10) (62) (32) (7) (39) (74) (17) (91)
Adjusted profit before
tax 158 46 204 158 39 197 315 79 394
Tax on adjusted profit 2, 6 (5) (6) (11) (5) (4) (9) (11) (8) (19)
Adjusted earnings before
non-controlling
interests 153 40 193 153 35 188 304 71 375
Non-controlling interest
on adjusted profit -- -- -- -- -- -- (1) -- (1)
Adjusted earnings after
tax and non-controlling
interests (A) 153 40 193 153 35 188 303 71 374
Number of shares, million 1,213.9 1,204.2 1,206.6
Adjusted EPS, pence per
share 15.9 15.6 31.0
Number of shares, million 1,217.1 1,207.5 1,210.0
Adjusted EPS, pence per
share -- diluted 15.9 15.6 30.9
EPRA earnings
Adjusted earnings after
tax and non-controlling
interests (A) 153 40 193 153 35 188 303 71 374
Joint venture
performance fee income
(net) -- 16 --
EPRA earnings after tax
and non-controlling
interests 193 204 374
Number of shares, million 1,213.9 1,204.2 1,206.6
EPRA, EPS, pence per
share 15.9 16.9 31.0
Number of shares, million 1,217.1 1,207.5 1,210.0
EPRA, EPS, pence per
share -- diluted 15.9 16.9 30.9
1. Joint venture management fee income includes the cost of such
fees borne by the joint ventures which are shown in Note 6 within
net rental income.
2. Adjusted earnings and Adjusted EPS for the half year to 30
June 2022 have been represented. See Note 2 for further
details.
TABLE 3: BALANCE SHEET, PROPORTIONAL CONSOLIDATION
As at 30 June 2022
As at 30 June 2023 (restated)(2) As at 31 December 2022
JV and JV and JV and
Group associates Total Group associates Total Group associates Total
Notes GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Investment
properties 12, 6 15,234 2,929 18,163 17,209 3,276 20,485 14,939 3,022 17,961
Trading
properties 12, 6 2 -- 2 57 -- 57 35 -- 35
Total
properties 15,236 2,929 18,165 17,266 3,276 20,542 14,974 3,022 17,996
Investment in
joint ventures
and
associates 6 1,698 (1,698) -- 2,022 (2,022) -- 1,768 (1,768) --
Other net
liabilities (603) (281) (884) (808) (322) (1,130) (647) (283) (930)
Net borrowings 13,6 (5,128) (950) (6,078) (3,785) (932) (4,717) (4,722) (971) (5,693)
Total
shareholders'
equity(1) 11,203 -- 11,203 14,695 -- 14,695 11,373 -- 11,373
EPRA
adjustments 11 297 444 344
Adjusted NAV 11 11,500 15,139 11,717
Number of
shares,
million 11 1,227.4 1,212.1 1,212.5
Adjusted NAV
pence per
share 11 937 1,249 966
1. After non-controlling interests.
2. Cash and cash equivalents and Trade and other receivables
have been restated as at 30 June 2022 following IFRIC's agenda
decision in respect of Demand Deposits with Restrictions on Use
arising from a Contract with a Third Party. See Note 1 for further
details.
The portfolio valuation deficit of 1.4 per cent shown in the
Portfolio Performance section is not directly derivable from the
condensed financial statements and is calculated to be comparable
with published MSCI Real Estate indices against which SEGRO are
measured. Based on the condensed financial statements there is a
valuation deficit of GBP275 million (see Note 7) and property value
of GBP18,095 million (see Table 7) giving a valuation deficit of
1.5 per cent. The primary reason for the +0.1 per cent difference
is due to the portfolio valuation deficit excluding the impact of
rent-free incentives and capitalised interest.
TABLE 4: EPRA EARNINGS
Half year to 30
Half year to June 2022 Year to 31
30 June 2023 (represented(2) December
Notes GBPm ) GBPm 2022 GBPm
Equity shareholder
earnings per IFRS
income statement (23) 1,333 (1,927)
Adjustments to
calculate EPRA
Earnings,
exclude:
Valuation
deficit/(surplus)
on investment
properties 7 197 (1,164) 1,970
(Profit)/loss on
sale of investment
properties and
other investment
income 7 (9) 1 (9)
Profit on sale of
trading
properties 7 (2) (2) (7)
Decrease in
provision for
impairment of
trading
properties 7 -- (9) (15)
Tax on profits on
disposals(1) 3 16 15
Net fair value
(gain)/loss on
interest rate
swaps and other
derivatives 8 (23) 150 199
Deferred tax in
respect of EPRA
adjustments(1) (18) 13 (63)
EPRA adjustments to
the share of
loss/(profit) from
joint ventures and
associates after
tax(3) 68 (135) 215
Non-controlling
interests in
respect of the
above 2 -- 1 (4)
EPRA earnings 193 204 374
Basic number of
shares, million 11 1,213.9 1,204.2 1,206.6
EPRA Earnings per
Share (EPS) 15.9 16.9 31.0
Company specific
adjustment:
Exclude: Net impact
of joint venture
performance
fees(4) 2 -- (16) --
Adjusted earnings 193 188 374
Adjusted EPS 15.9 15.6 31.0
1. Total tax credit in respect of adjustments per Note 2 of
GBP15 million (H1 2022: GBP36 million charge, FY 2022: GBP48
million credit) comprises tax charge on profits on disposals of
GBP3 million (H1 2022: GBP16 million, FY 2022: GBP15 million),
deferred tax credit of GBP18 million (H1 2022: GBP13 million
charge, FY 2022: GBP63 million credit) and tax charge on joint
venture performance fee income of GBPnil (H1 2022: GBP7 million
charge, FY 2022: GBPnil). The tax charge on joint venture
performance fee income is included within the Company specific
adjustment in the table above.
2. Adjusted earnings and Adjusted EPS for the half year to 30
June 2022 have been represented. See Note 2 for further
details.
3. Total adjustments to share of profit from joint ventures and
associates after tax for the half year to 30 June 2022 of GBP116
million per Note 2 and 6 includes the impact of the performance fee
expense of GBP19 million. The performance fee expense is shown
within the company specific adjustment to exclude the net impact of
joint venture performance fees in the table above. There was no
performance fee expense in half year to 30 June 2023 and year to 31
December 2022.
4. See Note 2 for further details on the company specific
adjustment to exclude the net impact of joint venture performance
fees from Adjusted earnings.
TABLE 5: EPRA NET ASSET MEASURES
The European Public Real Estate Association ('EPRA') Best
Practices Recommendations (BPR) for financial disclosures by public
real estate companies sets out three net asset value measures: EPRA
net tangible assets (NTA), EPRA net reinstatement value (NRV) and
EPRA net disposal value (NDV).
The EPRA Net Tangible Assets (NTA) metric is considered to be
most consistent with the nature of SEGRO's business as a UK REIT
providing long-term progressive and sustainable returns. EPRA NTA
acts as the primary measure of net asset value and is also referred
to as Adjusted Net Asset Value (or Adjusted NAV).
A reconciliation of the three EPRA NAV metrics from IFRS NAV is
shown in the table below.
EPRA measures
EPRA NTA
As at 30 June 2023 (Adjusted NAV) EPRA NRV EPRA NDV
GBPm GBPm GBPm
Equity attributable to ordinary
shareholders 11,203 11,203 11,203
Fair value adjustment in respect of
interest rate derivatives --
Group 107 107 --
Fair value adjustment in respect of
trading properties -- Group 1 1 1
Deferred tax in respect of
depreciation and valuation
surpluses -- Group(1) 94 188 --
Deferred tax in respect of
depreciation and valuation
surpluses -- Joint ventures and
associates(1) 112 224 --
Intangible assets (17) -- --
Fair value adjustment in respect of
debt -- Group -- -- 670
Fair value adjustment in respect of
debt -- Joint ventures and
associates -- -- 109
Real estate transfer tax(2) -- 946 --
Net assets 11,500 12,669 11,983
Diluted shares (million) 1,227.4 1,227.4 1,227.4
Diluted net assets per share 937 1,032 976
1. 50 per cent of deferred tax in respect of depreciation and
valuation surpluses has been excluded in calculating EPRA NTA in
line with option 3 of EPRA BPR guidelines.
2. EPRA NTA and EPRA NDV reflect IFRS values which are net of
purchasers' costs. Purchasers' costs are added back when
calculating EPRA NRV.
EPRA measures
EPRA NTA
As at 30 June 2022 (Adjusted NAV) EPRA NRV EPRA NDV
GBPm GBPm GBPm
Equity attributable to ordinary
shareholders 14,695 14,695 14,695
Fair value adjustment in respect of
interest rate derivatives --
Group 161 161 --
Fair value adjustment in respect of
trading properties -- Group 10 10 10
Deferred tax in respect of
depreciation and valuation
surpluses -- Group(1) 139 278 --
Deferred tax in respect of
depreciation and valuation
surpluses -- Joint ventures and
associates(1) 143 286 --
Intangible assets (9) -- --
Fair value adjustment in respect of
debt -- Group -- -- 415
Fair value adjustment in respect of
debt -- Joint ventures and
associates -- -- 137
Real estate transfer tax(2) -- 1,090 --
Net assets 15,139 16,520 15,257
Diluted shares (million) 1,212.1 1,212.1 1,212.1
Diluted net assets per share 1,249 1,363 1,259
1. 50 per cent of deferred tax in respect of depreciation and
valuation surpluses has been excluded in calculating EPRA NTA in
line with option 3 of EPRA BPR guidelines.
2. EPRA NTA and EPRA NDV reflect IFRS values which are net of
purchasers' costs. Purchasers' costs are added back when
calculating EPRA NRV.
EPRA measures
EPRA NTA
As at 31 December 2022 (Adjusted NAV) EPRA NRV EPRA NDV
GBPm GBPm GBPm
Equity attributable to ordinary
shareholders 11,373 11,373 11,373
Fair value adjustment in respect of
interest rate derivatives --
Group 131 131 --
Fair value adjustment in respect of
trading properties -- Group 2 2 2
Deferred tax in respect of
depreciation and valuation
surpluses -- Group(1) 104 208 --
Deferred tax in respect of
depreciation and valuation
surpluses -- Joint ventures and
associates(1) 119 238 --
Intangible assets (12) -- --
Fair value adjustment in respect of
debt -- Group -- -- 672
Fair value adjustment in respect of
debt -- Joint ventures and
associates -- -- 123
Real estate transfer tax(2) -- 927 --
Net assets 11,717 12,879 12,170
Diluted shares (million) 1,212.5 1,212.5 1,212.5
Diluted net assets per share 966 1,062 1,004
1. 50 per cent of deferred tax in respect of depreciation and
valuation surpluses has been excluded in calculating EPRA NTA in
line with option 3 of EPRA BPR guidelines.
2. EPRA NTA and EPRA NDV reflect IFRS values which are net of
purchasers' costs. Purchasers' costs are added back when
calculating EPRA NRV.
TABLE 6: EPRA LTV, PROPORTIONAL CONSOLIDATION
As at 30 June 2022
As at 30 June 2023 (restated)(4,5) As at 31 December 2022
JV and JV and JV and
Group associates Total Group associates Total Group associates Total
Notes GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Borrowings(1,2) 2,468 27 2,495 1,505 131 1,636 2,085 15 2,100
Bonds(1,2) 2,805 970 3,775 2,455 862 3,317 2,843 996 3,839
Exclude:
Cash and cash
equivalents(4) 13 (103) (40) (143) (138) (55) (193) (162) (32) (194)
Net Debt (a) 5,170 957 6,127 3,822 938 4,760 4,766 979 5,745
Foreign currency
derivatives 13 (12) -- (12) (13) -- (13) 2 -- 2
Net payables(3,4) 378 72 450 432 28 460 362 57 419
EPRA Net Debt (b) 5,536 1,029 6,565 4,241 966 5,207 5,130 1,036 6,166
Investment
properties at
fair value
(excluding head
lease ROU
asset) 12 15,163 2,929 18,092 17,137 3,276 20,413 14,866 3,022 17,888
Trading
properties 12 2 -- 2 57 -- 57 35 -- 35
Total Property
Value (c) 15,165 2,929 18,094 17,194 3,276 20,470 14,901 3,022 17,923
Head lease ROU
asset 12 71 -- 71 72 -- 72 73 -- 73
Unrecognised
valuation
surplus on
trading
properties 12 1 -- 1 10 -- 10 2 -- 2
Other interest in
property 23 -- 23 28 -- 28 30 -- 30
Intangibles 17 -- 17 9 -- 9 12 -- 12
EPRA Total
Property Value
(d) 15,277 2,929 18,206 17,313 3,276 20,589 15,018 3,022 18,040
LTV (a/c) 34.1% 33.9% 22.2% 23.3% 32.0% 32.1%
EPRA LTV (b/d) 36.2% 36.1% 24.5% 25.3% 34.2% 34.2%
1.Total borrowings as at 30 June 2023 per Note 13 of GBP5,231
million (30 June 2022: GBP3,923 million; 31 December 2022: GBP4,884
million) consists of: Nominal value of borrowings from financial
institutions of GBP2,468 million (30 June 2022: GBP1,505 million;
31 December 2022: GBP2,085 million) less unamortised finance costs
of GBP14 million (30 June 2022: GBP12 million; 31 December 2022:
GBP14 million) and nominal value of bond loans of GBP2,805 million
(30 June 2022: GBP2,455 million; 31 December 2022: GBP2,843
million) less unamortised finance costs of GBP28 million (30 June
2022: GBP25 million; 31 December 2022: GBP30 million).
2. JV and associates borrowings as at 30 June 2023 per Note 6 of
GBP990 million at share (30 June 2022: GBP987 million; 31 December
2022: GBP1,003 million) consists of: Nominal value of borrowings
from financial institutions of GBP27 million (30 June 2022: GBP131
million; 31 December 2022: GBP15 million) less unamortised finance
costs of GBP1 million (30 June 2022: GBP1 million; 31 December
2022: GBP2 million) and nominal value of bond loans of GBP970
million (30 June 2022: GBP862 million; 31 December 2022: GBP996
million) less unamortised finance costs of GBP6 million (30 June
2022: GBP5 million; 31 December 2022: GBP6 million).
3. Net payables is calculated as the net position of the
following line items shown on the Balance Sheet: Non-current other
receivables, current trade and other receivables, tax asset,
non-current trade and other payables, non-current tax liabilities,
current trade and other payables and current tax liabilities.
4. Cash and cash equivalents and Trade and other receivables
have been restated as at 30 June 2022 following IFRIC's agenda
decision in respect of Demand Deposits with Restrictions on Use
arising from a Contract with a Third Party. See Note 1 for further
details.
5. Borrowings and bonds have been restated as at 30 June 2022 to
exclude unamortised finance costs.
TABLE 7: EPRA NET INITIAL YIELD AND TOPPED-UP NET INITIAL
YIELD
Combined property portfolio
including joint ventures and Continental
associates at share -- 30 UK Europe Total
June 2023 Notes GBPm GBPm GBPm
Total properties per financial
statements Table 3 11,510 6,655 18,165
Add valuation surplus not
recognised on trading
properties(1) 1 -- 1
Less head lease ROU assets 12 -- (71) (71)
Combined property portfolio
per external valuers' report 11,511 6,584 18,095
Less development properties
(investment, trading and
joint venture and
associates) (1,713) (1,083) (2,796)
Net valuation of completed
properties 9,798 5,501 15,299
Add notional purchasers' costs 665 281 946
Gross valuation of completed
properties including notional
purchasers' costs A 10,463 5,782 16,245
Income
Gross passing rents(2) 383 252 635
Less irrecoverable property
costs (1) (9) (10)
Net passing rents B 382 243 625
Adjustment for notional rent
in respect of rent frees 33 22 55
Topped up net rent C 415 265 680
Including fixed/minimum
uplifts(3) 12 2 14
Total topped up net rent 427 267 694
Continental
UK Europe Total
Yields -- 30 June 2023 % % %
EPRA net initial yield(4) B/A 3.7 4.2 3.8
EPRA topped up net initial
yield(4) C/A 4.0 4.6 4.2
Net true equivalent yield 5.0 5.2 5.1
1. Trading properties are recorded in the Financial Statements
at the lower of cost and net realisable value, therefore valuations
above cost have not been recognised.
2. Gross passing rent excludes short term lettings and
licences.
3. Certain leases contain clauses which guarantee future rental
increases, whereas most leases contain five yearly, upwards-only
rent review clauses (UK) or indexation clauses (Continental
Europe).
4. In accordance with the Best Practices Recommendations of
EPRA.
5. Total assets under management of GBP21,024 million includes
Combined property portfolio (including JV and associates at share)
of GBP18,095 million plus 50 per cent of JV and associates
properties not owned but under management of GBP2,929 million.
TABLE 8: EPRA VACANCY RATE
Half year to Half year to Year to
30 June 2023 30 June 2022 31 December 2022
GBPm GBPm GBPm
Annualised potential
rental value of vacant
premises 38 24 32
Annualised potential
rental value for the
completed property
portfolio 845 729 797
EPRA vacancy rate(1,2) 4.5% 3.3% 4.0%
1. EPRA vacancy rate has been calculated using the figures
presented in the table above in millions accurate to one decimal
place.
2. There are no significant or distorting factors influencing
the EPRA vacancy rate.
TABLE 9: TOTAL COST RATIO / EPRA COST RATIO
Half year to Half year to Year to 31
30 June 2023 30 June 2022 December
Total cost ratio Notes GBPm GBPm 2022 GBPm
Costs
Property operating
expenses(1) 5 42 36 76
Administrative
expenses 33 31 59
Share of joint
venture and
associates'
property operating
and administrative
expenses(2) 6 11 11 25
Less:
Joint venture and
associates'
property
management fee
income, management
fees and other
costs recovered
through rents but
not separately
invoiced(3) (19) (18) (37)
Total costs (A) 67 60 123
Gross rental
income
Gross rental income 4 266 239 488
Share of joint
venture and
associates
property gross
rental income 6 66 56 119
Less:
Other costs
recovered through
rents but not
separately
invoiced(3) (1) (1) (3)
Total gross rental
income (B) 331 294 604
Total cost ratio
(A)/(B)(4) 20.4% 20.5% 20.3%
Total costs (A) 67 60 123
Share-based
payments (5) (5) (9)
Total costs after
share based
payments (C) 62 55 114
Total cost ratio
after share based
payments
(C)/(B)(4) 18.8% 18.7% 18.8%
EPRA cost ratio
Total costs (A) 67 60 123
Non-EPRA
adjustments(5) -- -- --
EPRA total costs
including vacant
property costs
(D) 67 60 123
Group vacant
property costs (7) (4) (10)
Share of joint
venture and
associates vacant
property costs -- -- (1)
EPRA total costs
excluding vacant
property costs
(E) 60 56 112
Total gross rental
income (B) 331 294 604
Total EPRA costs
ratio (including
vacant property
costs) (D)/(B)(4) 20.4% 20.5% 20.3%
Total EPRA costs
ratio (excluding
vacant property
costs) (E)/(B)(4) 18.2% 19.0% 18.5%
1. Property operating expenses are net of costs capitalised in
accordance with IFRS of GBP6 million (H1 2022: GBP7 million, FY
2022: GBP11 million) (see Note 5 for further detail on the nature
of costs capitalised).
2. Share of joint venture and associates property operating and
administrative expenses.
3. Total deduction of GBP19 million (H1 2022: GBP18 million, FY
2022: GBP37 million) from costs includes: joint venture and
associates management fees income of GBP16 million (H1 2022: GBP15
million, FY 2022: GBP30 million), management fees of GBP2 million
(H1 2022: GBP2 million, FY 2022: GBP4 million) and other costs
recovered through rents but not separately invoiced, including
joint ventures and associates, of GBP1 million (H1 2022: GBP1
million, FY 2022: GBP3 million). These items have been represented
as an offset against costs rather than a component of income in
accordance with EPRA BPR Guidelines as they are reimbursing the
Group for costs incurred. Gross rental income of GBP266 million (H1
2022: GBP239 million, FY 2022: GBP488 million) does not include
joint venture and associates management fee income and management
fee income and these fees are not required to be included in the
total deduction to income.
4. Cost ratio percentages have been calculated using the figures
presented in the table above in millions accurate to one decimal
place.
5. Joint venture performance fee income and expense are not
included within the EPRA cost ratio, therefore no non-EPRA
adjustment is required for the performance fee in reconciling from
the Total cost ratio to the EPRA cost ratio.
GLOSSARY OF TERMS
Associate: An entity in which the Group has significant
influence but not control or joint control. This is generally the
case where the Group holds between 20 per cent and 50 per cent of
the voting rights.
BREEAM: BREEAM provides sustainability assessment and
certification for real estate assets.
Completed portfolio: The completed investment properties and the
Group's share of joint ventures and associates' completed
investment properties. Includes properties held throughout the
period, completed developments and properties acquired during the
period.
Covered land: Income-producing assets acquired with the explicit
intention to take back for redevelopment in the short to medium
term. Valued on the balance sheet as land plus remaining contracted
income.
Development pipeline: The Group's current programme of
developments authorised or in the course of construction at the
Balance Sheet date (Current Pipeline), together with potential
schemes not yet commenced on land owned or controlled by the Group
(Future Pipeline).
EPRA: The European Public Real Estate Association, a real estate
industry body, which has issued Best Practices Recommendations
Guidelines in order to provide consistency and transparency in real
estate reporting across Europe.
ESG: Environmental, Social and Governance issues.
Estimated cost to completion: Costs still to be expended on a
development or redevelopment to practical completion, including
attributable interest.
Estimated rental value (ERV): The estimated annual market rental
value of lettable space as determined biannually by the Group's
valuers. This will normally be different from the rent being
paid.
Gearing: Net borrowings divided by total shareholders' equity
excluding intangible assets and deferred tax provisions.
GRESB: An organisation which provides independent benchmarking
of ESG metrics for the property industry.
Gross rental income: Contracted rental income recognised in the
period in the Income Statement, including surrender premiums. Lease
incentives, initial costs and any contracted future rental
increases are amortised on a straight line basis over the lease
term.
Headline rent: The annual rental income currently receivable on
a property as at the balance sheet date (which may be more or less
than the ERV) ignoring any rent-free period.
Hectares (Ha): The area of land measurement used in this
analysis. The conversion factor used, where appropriate, is 1
hectare = 2.471 acres.
Investment property: Completed land and buildings held for
rental income return and/or capital appreciation.
Joint venture: An entity in which the Group holds an interest
and which is jointly controlled by the Group and one or more
partners under a contractual arrangement whereby decisions on
financial and operating policies essential to the operation,
performance and financial position of the venture require each
partner's consent.
Life cycle assessments: Life cycle assessment (LCA) is a
methodology for assessing the environmental impacts associated with
all the stages of the life cycle of a building.
Loan to value (LTV): Net borrowings excluding capitalised
transaction costs divided by the carrying value of total property
assets (investment, owner occupied and trading properties and
excludes head lease ROU asset). This is reported on a
'look--through' basis (including joint ventures and associates at
share) except where stated.
MSCI: MSCI Real Estate calculates indices of real estate
performance around the world.
Net debt: Borrowings less cash and cash equivalents.
Net initial yield: Passing rent less non recoverable property
expenses such as empty rates, divided by the property valuation
plus notional purchasers' costs. This is in accordance with EPRA's
Best Practices Recommendations.
Net rental income: Gross rental income less ground rents paid
and property operating expenses.
Net true equivalent yield: The internal rate of return from an
investment property, based on the value of the property assuming
the current passing rent reverts to ERV and assuming the property
becomes fully occupied over time. Rent is assumed to be paid
quarterly in advance, in line with standard UK lease terms.
Passing rent: The annual rental income currently receivable on a
property as at the Balance Sheet date (which may be more or less
than the ERV). Excludes rental income where a rent free period is
in operation. Excludes service charge income.
Pre-let: A lease signed with an occupier prior to commencing
construction of a building.
REIT: A qualifying entity which has elected to be treated as a
Real Estate Investment Trust for tax purposes. In the UK, such
entities must be listed on a recognised stock exchange, must be
predominantly engaged in property investment activities and must
meet certain ongoing qualifications. SEGRO plc and its UK
subsidiaries achieved REIT status with effect from 1 January
2007.
Rent-free period: An incentive provided usually at commencement
of a lease during which a customer pays no rent. The amount of rent
free is the difference between passing rent and headline rent.
Rent roll: See Passing Rent.
SELP: SEGRO European Logistics Partnership, a 50-50 joint
venture between SEGRO and Public Sector Pension Investment Board
(PSP Investments).
SIIC: Sociétés d'investissements Immobiliers Cotées are the
French equivalent of UK Real Estate Investment Trusts (see
REIT).
Speculative development: Where a development has commenced prior
to a lease agreement being signed in relation to that
development.
Square metres (sq. m): The area of buildings measurements used
in this analysis. The conversion factor used, where appropriate, is
one square metre = 10.7639 square feet.
Take-back: Rental income lost due to lease expiry, exercise of
break option, surrender or insolvency.
Topped up net initial yield: Net initial yield adjusted to
include notional rent in respect of let properties which are
subject to a rent free period at the valuation date. This is in
accordance with EPRA's Best Practices Recommendations.
Total accounting return (TAR): A measure of the growth in Net
Asset Value (NAV) per share calculated as change in Adjusted NAV
per share in the period plus dividend per share paid in the period,
expressed as a percentage of Adjusted NAV per share at the
beginning of the period.
Total property return (TPR): A measure of the ungeared return
for the portfolio and is calculated as the change in capital value,
less any capital expenditure incurred, plus net income, expressed
as a percentage of capital employed over the period concerned, as
calculated by MSCI Real Estate and excluding land.
Total shareholder return (TSR): A measure of return based upon
share price movement over the period and assuming reinvestment of
dividends.
Trading property: Property being developed for sale or one which
is being held for sale after development is complete.
Yield on cost: The expected gross yield based on the estimated
current market rental value (ERV) of the developments when fully
let, divided by the book value of the developments at the earlier
of commencement of the development or the balance sheet date, plus
future development costs and estimated finance costs to
completion.
Yield on new money: The yield on cost excluding the book value
of land if the land is owned by the Group in the reporting period
prior to commencement of the development.
CONTACT DETAILS FOR INVESTOR / ANALYST AND MEDIA ENQUIRIES:
SEGRO
Soumen Das
(Chief Financial Officer)
Tel: + 44 (0) 20 7451 9110
(after 11am)
Claire Mogford
(Head of Investor Relations)
Mob: +44 (0) 7710 153 974
Tel: +44 (0) 20 7451 9048
(after 11am)
FTI Consulting
Richard Sunderland / Eve Kirmatzis
Tel: +44 (0) 20 3727 1000
View source version on businesswire.com:
https://www.businesswire.com/news/home/20230726851648/en/
CONTACT:
SEGRO
SOURCE: SEGRO PLC
Copyright Business Wire 2023
(END) Dow Jones Newswires
July 27, 2023 02:00 ET (06:00 GMT)
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