SEGRO (SGRO) H1 2024 earnings summary

Executive summary

• Achieved 14.6% year-over-year growth in adjusted profit before tax to £227 million and 6.9% increase in adjusted EPS to 17.0p, with strong operational performance and focus on rental reversion and asset management.

• Interim dividend per share rose 4.6% to 9.1p; portfolio valuation stable at £17.8 billion, with UK values up 0.9% and Continental Europe down 1.4%.

• Strong balance sheet with 30% LTV and 8.5x net debt:EBITDA, supported by a £907 million equity placing in February 2024.

• Market conditions are normalizing, with logistics and data center demand supported by e-commerce, digitalization, and supply chain shifts.

• Achieved £48 million in new headline rent commitments in H1 2024, up from £44 million in H1 2023, with a 28% average uplift in rent reviews and renewals.

Financial highlights

• Net rental income grew 7% year-over-year to £306 million, with like-for-like growth of 5.3% and development completions adding £15 million.

• Adjusted NAV per share decreased 1.8% to 891p, mainly due to equity placing and FX movements.

• IFRS profit after tax was £220 million (H1 2023: £23 million loss); IFRS EPS 16.9p (H1 2023: -1.9p).

• Portfolio yield stable at 5.3%; ERV growth of 1.4% in the first half.

• Adjusted operating profit up 6% to £265 million; net finance costs decreased by £14 million due to lower net borrowings.

Outlook and guidance

• Expects to add over 50% to current rent roll by end of 2026 through capturing reversion and development pipeline; £133 million of future additional income underpinned by rent reversion.

• Medium-term ERV growth guidance unchanged: 2%-4% for logistics, 3%-6% for urban markets.

• Development capex for FY 2024 expected at around £500 million; disposals expected at 1-2% of GAV per annum.

• Data centre segment offers c.£200 million additional rent opportunity with 8-12% yield on cost.

• Asset values at inflection point in UK, bottoming in Continental Europe; interest rate cuts anticipated to support recovery.