SEGRO INVESTMENT CASE - 30 July 2021
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
SEGRO
INVESTMENT CASE
30 July 2021
UK FTSE 100 LISTED COMPANY
ESTABLISHED IN 1920
SEGRO IS THE UK’S LARGEST LISTED REIT
8.8 MILLION 8 £17.1 BILLION 1,408
SQ M OF SPACE COUNTRIES OF ASSETS UNDER CUSTOMERS
MANAGEMENT
WE CREATE
THE SPACE
THAT ENABLES
EXTRAORDINARY
THINGS
TO HAPPEN
3
SEGRO INVESTMENT CASE
Supportive
structural
trends
Restricted
land
Strong balance availability
sheet limits supply
response
Pan-European Prime
operating portfolio
platform of existing
assets
Exceptional
landbank for
development
4
MODERN ASSETS IN PRIME LOCATIONS
AN ESTABLISHED PAN-EUROPEAN OPERATING PLATFORM
Portfolio split by geography and asset type
(at 30 June 2021)
Other,
£1.2bn
Poland
£1.1bn
London
Italy £5.3bn
£1.6bn
AUM
£17.1bn
France
£2.1bn
Thames Valley
Germany £2.2bn
£2.2bn
National
Logistics
£1.4bn
Other
(2%)
Urban (67%) Big box (31%)
5
URBAN AND BIG BOX WAREHOUSES
– COMPLEMENTARY ASSET TYPES
Urban warehouses (67%) Big boxes (31%)
Portfolio by type:
- Smaller units, generally
A VERY DIVERSIFIED CUSTOMER BASE
Customer sectors
(headline rent, SEGRO share)
1,408 customers
Services &
Other utilities
7% 7% Transport and
logistics Top 20 customers =
Technology,
Media and
22%
30% of total group
Telecoms
9% headline rent
Wholesale and
Retail Retail
Distribution 18%
10%
Post and
Manufacturing Parcel
17% Delivery
10%
7
SEGRO PORTFOLIO YIELD AND RENTAL PROFILE
Property yield2: 4.2% (-30bp) ERV growth: 2.8%
London 3.9% -10bp +4.2% London ERV
Thames
4.4% -30bp +3.0%
UK: Heathrow +2.3%
Valley
+3.6% Park Royal +5.0%
National +2.1%
4.3% -30bp Other London +7.5%
Logistics
Germany 3.8% -30bp
+1.0% Continental Europe ERV
France 4.6% -30bp +2.0% Cont.
Eur: Urban +1.8%
Italy 4.2% -60bp +2.5%
+1.5%
Big box +1.4%
Poland 5.6% -40bp +0.0%
30-Jun-21 31-Dec-20
1 Yield on standing assets at 30 June 2021; ERV growth based on assets held throughout H1 2021.
2 Net true equivalent yield.
8
TOTAL PROPERTY RETURN – CONSISTENTLY
OUTPERFORMING THE BENCHMARK
MSCI bespoke
SEGRO
industrial benchmark
25 18.0
+167ps
16.0 +350bps
+185bps +182bps
15.4
20
14.0 14.3
14.7
14.2
All Assets Total Property Return (%)
13.6
Total Property Return (%)
650p 12.0
12.2 12.2
15
10.0 10.8
8.0
10
6.0
4.0
5
2.0
0 0.0
2014 2015 2016 2017 2018 2019 2020 7 Year 5 Year 3 Year 1 Year
9
DELIVERING STRONG RETURNS
Passing Rent Adjusted NAV1 per share
500 900
Adjusted NAV per share,
450 800
Passing rent, £m
400
700
350
pence
600
300 462 814
250 350 378 500
650 700
324 556
288 400
200 478
150 300
2016 2017 2018 2019 2020 2016 2017 2018 2019 2020
Adjusted earnings per share Dividend per share
(Distribution policy of 85-95% of full year adjusted earnings)
25
25
Dividend per share, pence
Adjusted EPS, pence
20 20
24.4 25.4
23.4 22.1
15 19.9 15 20.7
18.8 18.80
15.7 16.6
10 10
2016 2017 2018 2019 2020 2016 2017 2018 2019 2020
1 Adjusted NAV is in line with EPRA NTA which was introduced 1 January 2020. The 31 December 2019 net asset value has been restated. 10DISCIPLINED CAPITAL ALLOCATION KEY TO OUR STRATEGY
Our goal is to be the leading owner- Disposal and investment activity since 1
manager and developer
of industrial properties January 2012 (£bn)
in Europe and the
partner of choice 8
for our customers
and other 7
stakeholders
Dvpt
6 capex
£2.9bn
5
4 £4.7bn
Land & infra
£1.4bn
3
£2.8bn
2
1
0
Disposals Asset acquisitions Development
11STRONG OPERATIONAL METRICS
High levels of customer retention Capturing reversion from Record leasing performance3
12
and continued low vacancy1 renewals and reviews2
50
9 100 45
Rent change on review and renewal, %
Retention 25
90 40
Annualised rental income, £m
8
80 +19.1%
7 20 +17.8% 35
Customer retention rate, %
70
6 30
Vacancy rate, %
60 15
5 25
+12.1%
50
4 20
40 +9.5% +8.8%
10
3 Vacancy
15
30
+5.4%
2 20 5
10
+3.3%
1 10 5
0 0 0 0
2015
2016
2017
2018
2019
2020
1H21
2013
2014
2015
2016
2017
2018
2019
2020
1H21
1H15
2H15
1H16
2H16
1H17
2H17
1H18
2H18
1H19
2H19
1H20
2H20
1H21
New rent contracted Net new rent on existing space
1 Vacancy rate based on ERV at 30 June 2021; customer retention rate based on headline rent retained in the same or alternative SEGRO premises.
2 Uplift in 2019 and 2020 included re-gears on the peppercorn leases in the Heathrow portfolio so capture of reversion was higher – all of the re-gears have now been completed.
3 Net new rent on existing space reflects headline rent agreed on new leases less passing rent lost from space taken back during the year; new rent contracted is total headline rent secured or (in the case of developments)
agreed in the year.ENHANCED, DE-RISKED DEVELOPMENT PROGRAMME
Development-led growth1 The majority of which is pre-let
600 100%
500
80%
Development capex, £m
400
60%
300
40%
200
100 20%
0 0%
1H21
2012
2013
2014
2015
2016
2017
2018
2019
2020
2013 2014 2015 2016 2017 2018 2019 2020 1H21
1 Capex on developments and infrastructure £m (SEGRO share). Pre-let Speculative Let at 30 June 2021
13POSITIONING SEGRO TO DELIVER ON ITS PURPOSE
Championing LOW-CARBON
GROWTH
Investing in our local COMMUNITIES
and ENVIRONMENTS
Nurturing TALENT
14DRIVING FUTURE GROWTH
SUPPORTIVE LONG-TERM STRUCTURAL DRIVERS
DIGITALISATION
OF OUR URBANISATION
ECONOMIES
SUPPLY CHAIN
EFFICIENCY & SUSTAINABILITY
RESILIENCE
16FAVOURABLE MARKET DYNAMICS
Continued strong take 33 million sqm of space
up across Europe needed over next 5 years across Europe to
support growth of e-commerce1
Less than a year of Record levels of investment
supply in major European into industrial assets
logistics markets2
1 Source: CBRE. 17
2 Source: JLL, see slide 34.DEMAND-SUPPLY CONDITIONS SUPPORTIVE OF FURTHER
RENTAL GROWTH
SEGRO SEGRO
Demand Supply
Property Type Region % of portfolio1 3 year average ERV growth
conditions conditions
ERV growth expectations
UK 54% STRONG LIMITED 4.1%
Urban
2-5% pa
warehouses Continental
13% STRONG LIMITED 2.0%
Europe
UK 9%2 STRONG MODERATE 1.5%
Big box
1-2% pa
warehouses Continental
22% STRONG MODERATE 1.6%
Europe
…with £36m of reversionary potential to capture
1 Percentage of portfolio based on valuations as of 30 June 2021. 2% of the portfolio in other uses of industrial land, e.g. self-storage, car showrooms, offices
2 Includes big box warehouses in the Midlands (within National Logistics) and South East England
18CONTINUED MOMENTUM IN THE
DEVELOPMENT PIPELINE
60
Current Pipeline Completed in H1 21
Expected H2 21 Completions
50 Space (sq m) 1.1 million 104,000
Potential new headline rent, £m
Number of projects 50 13
40
Potential headline rent
74 8
(£m)
30
Rent secured (%) 72 75
20
Average yield on cost
6.5 6.7
(%)
10
We target BREEAM ‘Excellent or ‘Very Good’
0 (or local equivalent) on all of our developments.
2014 2015 2016 2017 2018 2019 2020 H121
19£280M+ OF POTENTIAL RENTAL INCOME
FROM FUTURE DEVELOPMENT
SEGRO land bank (30 June 2021)
gross rent (£m)
Estimated cost
Development
Development
to complete
Proportion
Expected
Potential
delivery
pipeline
pre-let
(sq m)
yield3
(£m)
Area
1-12
Current 1.1m 3372 74 6.5% 72%
months
Near-term 12-18
183,084 186 22 7.9% 90%
pre-lets1 months
1-7
Future1 2.4m 1,239 122 6-7% -
years
Optioned 1-10
c1.1m c1,000 66 c6% -
land years
1-10
Total 4.8m 2,762 284 6-7% -
years
Potential annualised gross rent from current, near-term and Potential annualised gross rent from current, near-term and
future pipeline4, by asset type (£218 million at 30 June 2021) future pipeline4, by region (£218 million at 30 June 2021)
Other
(5%)
Big box (67%) Urban (28%) UK (53%) Continental Europe (47%)
1 Future development pipeline in the 2021 Half Year Property Analysis Report. | 2 Total development cost of £1.1bn including opening land value and capex already incurred
3 Estimated average yield on total development cost | 4 Excludes optioned land
20LAND BANK PROVIDES OPTIONALITY
AND OPPORTUNITY FOR GROWTH
800 7.0%
700 Net land utilisation, 2015-H1 2021
Land bank value, £m
6.0%
(Based on opening book value or acquisition value)
600
5.0% 400
500 300
4.0%
Land value, £m
200
400 134
100 95
3.0% 69
300 0 (28)
(74) 54
-100 (97)
2.0%
200
-200
100 1.0% -300
2015 2016 2017 2018 2019 2020 1H21
0 1H21 0.0%
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Land Acquired Land utilised for development Land disposed Net
Alternative use Future development pipeline
Long-term and residual land bank As % of portfolio (right hand scale)
21POTENTIAL FOR SIGNIFICANT INCOME GROWTH
Annualised gross cash passing rent1, £ million
(as at 30 June 2021)
£201m potential from current activity £188m from land bank
and land options 4
66
1224 850
22
74
63
42
461
Plus: further growth potential from
rising ERVs and indexation
Passing rent at Rent in Reversion (£36m) and Current development Near-term pre-let Future Land held Current
30 June 21 rent-free vacant space (£27m) pipeline (72% let) development pipeline3 under option Potential
opportunities2,3
1 Including JVs at share | 2 Near-term development opportunities include pre-let agreements subject to final conditions such as planning permission, which
are expected to commence within the next 12 months | 3 Total rent potential of £144m from near-term development opportunities and future pipeline.
22
4 Estimated. Excludes rent from development projects identified for sale on completion and from projects identified as “Near-term opportunities”.APPENDIX Portfolio and Financial Data
STRONG FINANCIAL RESULTS
£168m 13.8p 7.4p
Adjusted profit before tax Adjusted earnings per share Dividend per share
+19% +10% +7%
£14.4bn 909p 21%
Portfolio valuation (at Adjusted NAV per share Loan to value
share) +10% +12%
24£1.3BN VALUATION SURPLUS DRIVES INCREASE IN NAV
Portfolio UK Continental Europe
+10.2% +9.6% +11.1%
£1,600m
Whole portfolio valuation uplift
£1,400m
£1,200m
650p £1,000m
£800m
£600m
£400m
£200m
£0m
Total London Thames Valley UK Big Box Germany France Poland Italy Spain
Held throughout 8.5% 8.4% 8.5% 9.5% 6.6% 6.0% 6.5% 16.3% 14.2%
Whole portfolio (including
10.2% 8.4% 12.7% 9.2% 9.2% 6.9% 7.6% 20.2% 19.1%
land & developments)
25INVESTMENT ACTIVITY TO CAPITALISE ON FAVOURABLE
MARKET CONDITIONS
LAND ACQUISITIONS DEVELOPMENT DISPOSALS
• Securing future development opportunities in • £364m of development capex • SEGRO sales to SELP
London, Paris, Lyon, Venice, Bologna, Madrid • Including £42m of infrastructure • Freehold sale in East London
and Barcelona
• Anticipate spending c£750m in FY21 • Car showroom in Reading
• Expect to dispose of c£300m in FY21 including
£109m Italian portfolio in July 2021
£92m £364m £154m
26BALANCE SHEET POSITIONED TO SUPPORT FURTHER
GROWTH
New €500m SELP Green Bond
LTV ratio and average cost of debt 0.875% coupon, 8 year maturity
(incl share of joint ventures), 2016-21
Net debt £3.1bn
60% 4.0% (FY 2020: £3.1bn)
3.4%
Debt maturity 9.7 years
3.0%
(9.9 years at end-2020)
Average cost of debt
40%
2.1%
LTV ratio
1.9%
1.7% 2.0% £1.2bn liquidity
1.6% 1.5% cash and available bank facilities
20%
1.0%
33%
30%
29%
24%
24%
21%
0% 0.0%
2021: c£750m
development capex
H1 2021
2016
2017
2018
2019
2020
2021: c£300m
LTV ratio Ave cost of debt disposals
27FURTHER IMPROVEMENTS TO THE DEBT STRUCTURE
Debt maturity by type and year, £ millions
(as at 30 June 2021)
1,400
1,200
1,000
800
600
400
200
0
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
SEGRO bank debt JV undrawn at share SEGRO undrawn JV debt at share SEGRO PP notes SEGRO bonds
28EURO CURRENCY EXPOSURE AND HEDGING
Balance sheet, £m - €1.17:£1 as at 30 June 2021
(30 June 2021) - € assets 64% hedged by € liabilities
5,000
- €1,994m (£1,704m) of residual exposure – 16% of Group NAV
4,000 Assets 64% - Illustrative NAV sensitivity vs €1.17:
hedged
3,000 - +5% (€1.23) = -£81m (-c6.7p per share)
2,000 - -5% (€1.11) = +£90m (+c.7.5p per share)
1,000
0
Euro gross assets Euro debt Euro currency swaps Other euro liabilities - Loan to Value (on look-through basis) at €1.17:£1 is 21%,
- Sensitivity vs €1.17:
- +5% (€1.23) LTV -0.7%
Income Statement, £m - -5% (€1.11) LTV +0.7%
(6 months to 30 June 2021)
100
- Average rate for 6 months to 30 June 2021 €1.15:£1
Income 32%
hedged - € income 32% hedged by € expenditure (including interest)
50
- Net € income for the period €67m (£58m) – 35% of Group
- Illustrative annualised net income sensitivity versus €1.15
- +5% (€1.21) = -£2.8m (c.0.2p per share)
0 - -5% (€1.09) = +3.1m (c.0.3p per share)
Euro income Euro Costs
29SEGRO EUROPEAN LOGISTICS PARTNERSHIP (SELP)
HEADLINE FIGURES
Assets under Management
(as at 30 June 2021) Land and assets Equivalent yield
€1,727m €6.1bn 4.3%
1.8
Assets under management, €bn
1.6
Capital value change ERV growth
€1,320m
1.4 €1,223m 7.9% 1.4%
1.2 €1,098m
1.0
Headline rent ERV
0.8
€262m €271m
0.6
€403m
0.4 €370m
Occupancy rate LTV ratio
0.2
97% 31%
0.0
France
Spain
Italy
Poland/
Netherlands
Germany
Czech
AUM at inception AUM Growth
30POSITIONING SEGRO TO DELIVER ON ITS PURPOSE
Investing in our local
Championing Low-carbon growth Nurturing talent
communities and environments
Segro recognises that the world faces a climate SEGRO is an integral part of the communities in SEGRO’s people are vital to and inseparable from
emergency and we are committed to playing our which it operates, and we are committed to its success, and we are committed to attracting,
Context
part in tackling climate change, by limiting global contributing to their long-term vitality. enhancing and retaining a diverse range of talented
temperature rise to less than 1.5 degrees, in individuals in our business.
tandem with growth in our business and the wider
economy.
We will be net-zero carbon by 2030 We will create and implement Community We will increase the overall diversity of our own
Investment Plans for every key market in our workforce throughout the organisation
Targets
portfolio by 2025
We will aim to reduce carbon emissions from We will work with our customers and suppliers We will provide a healthy and supportive working
our development activity and the operation of to support our local businesses and economies. environment, develop fulfilling and rewarding
our existing buildings, and eliminate them careers, foster an inclusive culture and build
We will help improve the skills of local people to
where possible. diverse workforce.
Actions
enhance their career and employment opportunities,
We will implement plans to absorb any by investing in local training programmes.
residual carbon
Equally, we will enhance the spaces around our
buildings, working with local partners to ensure
we meet the needs of our communities.
31E-COMMERCE PENETRATION
E-commerce penetration grew significantly in 2020…. … and is set to grow further by 2025
50%
2025 2020
30 France Germany 45%
Italy Netherlands
Internet sales as a % of total retail sales
Spain UK
40%
Internet sales as a % of total retail sales
25
35%
20 30%
25%
15
20%
10 15%
10%
5
5%
0 0%
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
France
UK
Spain
Netherlands
Italy
Germany
Republic
Czech
Source: CBRE.
32EUROPEAN INDUSTRIAL INVESTMENT VOLUMES
European industrial investment volumes European industrial investment volumes
By geography, €bn By quarter, €bn
50 50
45 45
40 40
35 35
30 30
25 25
20 20
15 15
10 10
5 5
0 0
1H21
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
1H21
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
UK Germany France CEE Rest of Europe Q1 Q2 Q3 Q4
Source: CBRE.
33EUROPEAN TAKE-UP AND AVAILABILITY
European take-up by year European take-up versus supply
Years of supply
25
0.86 1.46 0.41 0.82 0.64 0.79 0.97
20
7
6
Take up, m sq m
15
Take up, m sq m
5
10 4
3
5 2
1
0 0
2016
2017
2018
2019
2020
2021
France
UK
Spain
Poland
Italy
Neth.
Germany
Q1 Q2-4 5 year average
Supply Speculative development under construction Take-up 12 month rolling
Source: JLL.
34EUROPEAN LOGISTICS VACANCY
Low European big box
vacancy rate of 4.7% 6.0
3.6
(Rates at 30 June 2021) 7.9
6.9
5.0
3.5
6.6
2.1
2.6 2.0
2.2
8.4
1 Source: JLL.
35HEATHROW AIRPORT CARGO AND PASSENGER VOLUMES
Heathrow Airport cargo volumes Heathrow Airport passenger volumes
(million metric tonnes) (millions)
160,000 90
140,000 80
120,000 70
60
100,000
50
80,000
40
60,000
30
40,000
20
20,000
10
0 0
Nov-19
Nov-20
Sep-19
May-19
Sep-20
May-20
Jul-19
Jan-20
May-21
Jul-20
Jan-21
Mar-19
Mar-20
Mar-21
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Jan-17
Jan-18
Jan-19
Jan-20
Jan-21
Cargo Volumes Rolling annual 10yr ave Rolling annual
Source: Heathrow Airport.
36HEATHROW CARGO AREA
Central Terminal Area
Terminal 5
Terminal 4
‘Zulu’ Shoreham Road
Sandringham Road Cul-de-sac (The Horseshoe)
37SEGRO GREATER LONDON PORTFOLIO
38FORWARD-LOOKING STATEMENTS AND DISCLAIMER
This Presentation does not constitute an offer to sell or an invitation to buy securities in SEGRO or an invitation or inducement to engage in or enter into any contract or
commitment or other investment activity. No part of this Presentation, nor the fact of its distribution, should form the basis of, or be relied on in connection with, any
contract or commitment or investment decision whatsoever.
This Presentation may contain 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. Some of these forward-looking statements may be based on data provided by third
parties. All forward-looking statements are subject to assumptions, risks and uncertainties. Many of these assumptions, risks and uncertainties relates 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 as at the date of
the statement. 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 Presentation, including information provided by third parties, is given as at the date of this Presentation 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 any 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 Presentation should be construed as a profit estimate or profit forecast.
Contact details:
Claire Mogford
Head of Investor Relations
+44 (207) 451 9048
claire.mogford@segro.com
30th July 2021
39You can also read
