Segro Plc · LSE:SGRO
Segro — H1 2020 Earnings Presentation
56 slides from Segro's earnings presentation, Aug 5, 2020
Slide 1: 2020 Half Year Results
2020 HALF YEAR RESULTS 5 AUGUST 2020
Slide 2: A clear purpose and a responsible approach to business
A clear purpose and a responsible approach to business “We create the space that enables extraordinary things to happen” 2
Slide 3: Over £1m of community assistance in response to the pandemic
Over £1m of community assistance in response to the pandemic • Accelerated the launch of the £10 million SEGRO Centenary Fund − £771,000 awarded as grants to projects across the Group in H1 2020 − £465,000 of assistance in kind SUPPLIERS Enfield Community Hub Warsaw Hospital City Harvest Foodbank Mu
Slide 4: Continued growth - structural trends accelerating
Continued growth - structural trends accelerating Further earnings and NAV growth Resilient operational performance Structural trends accelerating Continuing to invest for growth - momentum going into H2 4
Slide 5: Continued growth - structural trends accelerating
Continued growth - structural trends accelerating Further earnings and NAV growth Resilient operational performance Structural trends accelerating Continuing to invest for growth - momentum going into H2 SEGRO Logistics Park Martorelles 5
Slide 6: Further earnings and NAV growth
Further earnings and NAV growth Income Statement H1 2020 H1 2019 Change Adjusted profit before tax (£m) 140.4 131.8 +6.5% Adjusted EPS (pence) 1 12.5 12.2 +2.5% Dividend per share (pence) 6.9 6.3 +9.5% Balance Sheet 30 June 2020 31 Dec 2019 Change Portfolio value (£m) 11,246 10,251 +0.7%2 Adjusted N
Slide 7: 7.4% growth in adjusted net rental income
7.4% growth in adjusted net rental income Proportionally consolidated net rental income (excluding joint venture fees), H1 2019-20, £ million £16.9m £2.5m £188.3m2 (£0.7m) JVs £(5.5)m £43.2m £2.7m £175.4m JVs £(3.0)m1 Group £38.9m £145.1m Group: +2.0% UK: +2.9% CE: +0.5% Group Group £136.5m £145.1m
Slide 8: Growth in net rental income drives earnings
Growth in net rental income drives earnings H1 2020 H1 2019 Change Adjusted income statement £m £m • Total cost ratio 21.2% (H1 Gross rental income 187.2 173.4 2019: 22.0%) Property operating expenses1 (42.1) (36.9) • 18.6% excl share based Net rental income 145.1 136.5 +6.3% payments (H1 2019: 19.2
Slide 9: 2.6% increase in Adjusted NAV
2.6% increase in Adjusted NAV1 Components of Adjusted NAV change, 31 December 2019 to 30 June 2020 6p 13p 7p 718p 6p 700p (14)p Development gains: 5.5p 31 December H1 2020 2019 final Realised and Equity Placing Exchange rate 30 June 2020 2019 1 Adjusted EPS dividend unrealised gains and other 1 Adju
Slide 10: Portfolio value £11.2 billion (+0.7%)
Portfolio value £11.2 billion (+0.7%) Portfolio yield: 4.8%2 ERV growth: 0.8% +0.9% London ERV London 4.4% UK: Heathrow +0.9% Slough 5.0% +1.4% +1.0% Park Royal +1.1% UK Big Box 4.9% Yields unchanged from 31 +0.6% N&E London +0.6% December 2019 Germany 4.7% +0.4% CE by owner ERV Italy 5.3% +0.0% Con
Slide 11: Portfolio value £11.2 billion (+0.7%)
Portfolio value £11.2 billion (+0.7%) Portfolio: +0.7% UK: +0.1% Continental Europe: +1.8% £100m Whole portfolio valuation uplift £80m After £20.5m of £60m acquisition costs £40m £20m £0m Total Slough UK Big London Germany France Italy Spain Poland Box Whole portfolio (including 0.7% 1.2% 0.7% (0.6)
Slide 12: Over £1bn of new financing to further strengthen balance sheet
Over £1bn1 of new financing to further strengthen balance sheet Equity Placing • High liquidity: £1.5bn2 of cash and available • £680m gross proceeds facilities • 83m new shares – RCFs extended by 1 year to 2025 • 820p per share • Significant headroom to financial covenants US Private Placement Debt
Slide 13: Balance sheet positioned to support further development-led growth
Balance sheet positioned to support further development-led growth LTV ratio and average cost of debt (incl share of joint ventures), 2012-20 • Proforma average cost of debt 1.6% 60% 4.6% 5.0% 4.2% 4.2% • Proforma average debt maturity 4.0% 10.7 years Average cost of debt 3.5% 3.4% 40% 3.0% LTV rati
Slide 14: Further earnings and NAV growth
Further earnings and NAV growth • 2.5% adjusted EPS growth • 2.6% NAV growth to 718p • Loan-to-value ratio of 22% • 2020 interim dividend increased by 9.5% SEGRO Park Enfield 14
Slide 15: Continued growth - structural trends accelerating
Continued growth - structural trends accelerating Further earnings and NAV growth Resilient operational performance Structural trends accelerating Continuing to invest for growth - momentum going into H2 SEGRO Park Düsseldorf Süd 15
Slide 16: Strong leasing and asset management results
Strong leasing and asset management results High levels of customer retention and Capturing reversion from renewals Continued leasing momentum in 1H202 continued low vacancy1 and reviews New rent contracted 9 90 Annualised rental income, £m +17.8% 45 Net new rent on existing space 20 Rent change on
Slide 17: Developments completing on schedule despite Covid-19
Developments completing on schedule despite Covid-19 • 24 projects - 358,500 sq m of new space • £22m potential headline rent (64% leased) • 7.2% average yield on cost • All developments expected to achieve BREEAM ‘Excellent’ or ‘Very Good’1 SEGRO Park Kettering Gateway, Midlands Milan South DC 1,00
Slide 18: Continued growth - structural trends accelerating
Continued growth - structural trends accelerating Further earnings and NAV growth Resilient operational performance Structural trends accelerating Continuing to invest for growth - momentum going into H2 Paris Air2 18
Slide 19: E-commerce: 3-5 years of growth in as many months
E-commerce: 3-5 years of growth in as many months UK online sales as a % of total retail sales Proportion of internet sales (%) Source: ONS Source: CBRE, Euromonitor, Forrester, Oxford Economics 25% 35 2019 2024 30 20% 25 15% 20 15 10% 10 5% 5 0 0% FR PL NL DE IT CR Sep-14 Sep-15 Sep-16 Sep-17 Sep-1
Slide 20: E-commerce: Acceleration across Europe driving occupier demand
E-commerce: Acceleration across Europe driving occupier demand “We are experiencing the “The pandemic has biggest boom in online expedited the already retailing in the UK’s history, phenomenal growth of and are making online shopping and we see unprecedented investments no sign of this changing.” in
Slide 21: Structural trends accelerating occupier demand
Structural trends accelerating occupier demand Supply chain optimisation Greater warehouse Increased data usage and resilience automation Martijn de Lange, CEO of Hermes– 20th July 2020 Tim Steiner, CEO of Ocado - Interim Results, 14th July 2020 21
Slide 22: Continued growth - structural trends accelerating
Continued growth — structural trends accelerating Further earnings and NAV growth Resilient operational performance Structural trends accelerating Continuing to invest for growth - momentum going into H2 SEGRO CityPark Frankfurt 22
Slide 23: Net investment of £631 million in H1 2020
Net investment of £631 million in H1 2020 Asset acquisitions Land and development Disposals • Acquisition of Perivale Park, prime • £265m of development capex and • Remaining assets and land in Austria, urban warehouse scheme in West infrastructure concluding our presence there London • £202m invest
Slide 24: Strong current pipeline of mostly de-risked development activity
Strong current pipeline of mostly de-risked development activity • 34 projects - 809,500 sq m under construction • £45m potential rent (85% leased) SEGRO Park Purfleet, London SEGRO Park Rainham Phase 2, London • 6.5% average yield on cost Novara DC1, Milan SEGRO Park Malsfeld, Germany Paris DC8 SEG
Slide 25: £270m+ of potential rental income from future development
£270m+ of potential rental income from future development SEGRO land bank Estimated cost to (30 June 2020) gross rent (£m) complete (£m) Development Development Proportion Expected Potential pipeline delivery pre-let (sq m) yield3 Area Current 809,450 3032 45 6.5% 85% 1-12 months Near-term1 451,021
Slide 26: Potential to grow rental income significantly
Potential to grow rental income significantly Annualised gross cash passing rent1, £ million (as at 30 June 2020) £198m from land bank and land options £186m potential from current activity 694 1294 794 33 45 56 52 378 410 378 Plus: further uplift potential from indexation and driving rental values
Slide 27: Modern, sustainable warehouses in prime locations
Modern, sustainable warehouses in prime locations Portfolio split by geography and asset type (at 30 June 2020) Our key markets: Italy, £1.1bn Other, £0.7bn Poland, London, £1.0bn £4.2bn AUM France, £13.3bn £1.6bn Thames Valley, Germany, £1.8bn £1.8bn UK Midlands, £1.1bn Other (3%) Urban (65%) Big b
Slide 28: Momentum going into H2
Momentum going into H2 Prime portfolio of warehouses in key strategic locations Substantial land bank to generate further development led growth Structural trends accelerating as a result of impacts of Covid-19 pandemic DC1 Verona 28
Slide 29: 2020 Half Year Results Q&A
WE CREATE THE SPACE THAT ENABLES EXTRAORDINARY THINGS TO HAPPEN S EG RO 100 YEARS OF THE EXTRAORDINARY 2020 HALF YEAR RESULTS Q&A
Slide 30: Appendix I: Portfolio and Financial Data
APPENDIX I PORTFOLIO AND FINANCIAL DATA
Slide 31: Adjusted income statement (JVs proportionally consolidated)
Adjusted income statement (JVs proportionally consolidated) H1 2020 H1 2019 Group JVs Total Group JVs Total £m £m £m £m £m £m Gross rental income1 187.2 58.9 246.1 173.4 52.6 226.0 Property operating expenses1 (42.1) (15.7) (57.8) (36.9) (13.7) (50.6) Net rental income 145.1 43.2 188.3 136.5 38.9 17
Slide 32: Balance sheet (JVs proportionally consolidated)
Balance sheet (JVs proportionally consolidated) 30 June 2020 31 December 2019 Group JVs Total Group JVs Total £m £m £m £m £m £m Investment properties 9,208.1 2,086.1 11,294.2 8,401.7 1,898.3 10,300.0 Trading properties 29.2 – 29.2 20.2 1.0 21.2 Total properties 9,237.3 2,086.1 11,323.4 8,421.9 1,899
Slide 33: Pro forma H1 2020 accounting net rental income
Pro forma H1 2020 accounting net rental income Group JVs Total • Pro forma H1 2020 net rental income £m £m £m assuming disposals, acquisitions and let developments completed as at 1 January H1 2020 net rental income 145.1 43.2 188.3 2020 • One-off items (e.g. rates refunds) removed Full year impact
Slide 34: Total Cost Ratio
Total Cost Ratio Total cost ratio, H1 2019-20 (proportionally consolidated) Incl. joint ventures at share H1 2020 H1 2019 £m £m Gross rental income (less reimbursed costs) 214.4 200.4 Property operating expenses 42.1 36.93 Administration expenses 24.9 23.6 JV operating expenses 21.1 18.63 JV and oth
Slide 35: EPRA performance measures
EPRA performance measures 30 June 2020 30 June 2019 31 December 2019 £m £p per share £m £p per share £m £p per share EPRA Earnings 138.8 12.5 130.6 12.2 264.1 24.4 EPRA NTA (Adjusted NAV) 8,568.8 718 7,314.5 666 7,712.1 700 EPRA NRV 9,281.7 778 7,917.8 721 8,370.7 760 EPRA NDV 8,290.2 695 7,131.7 65
Slide 36: EPRA capital expenditure analysis
EPRA capital expenditure analysis H1 2020 H1 2019 • Approximately 60% of completed properties capex was for major Group JVs Total Group JVs Total refurbishment, infrastructure and fit- £m £m £m £m £m £m out costs prior to re-letting. Acquisitions 420.2 9.6 429.8 21.1 67.4 88.5 Development1 235.9 28.
Slide 37: Maintaining long term debt profile with limited refinancing risk
Maintaining long term debt profile with limited refinancing risk Debt maturity by type and year, £ millions (as at 30 June 2020) 1,400 JV undrawn at share 1,200 • Maturity of main revolving SEGRO undrawn credit facilities extended to 1,000 JV debt at share 2025 800 SEGRO PP notes • Debt maturity 9.4
Slide 38: Euro currency exposure and hedging
Euro currency exposure and hedging Balance sheet, £m 30 June 2020 • €1.10:£1 as at 30 June 2020 Assets 64% hedged • € assets 64% hedged by € liabilities 4,000 • €1,484m (£1,258m) of residual exposure – 15% of Group NAV Other euro 3,000 liabilities • Illustrative NAV sensitivity vs €1.10: Euro curren
Slide 39: Look-through loan-to-value ratio and cost of debt
Look-through loan-to-value ratio and cost of debt 30 June 2020 Weighted average cost of debt, % £m Gross debt, excluding Net debt, including commitment fees and non- commitment fees and cash interest non-cash interest Group gross borrowings 2,002 1.8 Group cash & equivalents (203) Group net borrowin
Slide 40: Rent collection update
Rent collection update As at 31 July 2020 UK CE Group • UK rents typically billed Q2 Q3 Q2 Q3 Q2 Q3 quarterly in advance Paid or expected shortly1 87% 80% 92% 86% 89% 82% • CE rents vary between monthly and quarterly billing Re-profiled 12% 18% 7% 4% 10% 14% by market Outstanding 1% 2% 1% 10% 1% 4%
Slide 41: EPRA Vacancy Rate
EPRA Vacancy Rate Vacancy rate reconciliation, 31 December 2019 to 30 June 2020 5.2% 0.9% (0.2)% Speculative 4.0% 0.5% development1 2.0% Speculative development1 1.4% Existing Existing standing assets standing assets 2.6% 3.2% 31 December 2019 Net takebacks New developments Disposals 30 June 2020 1
Slide 42: Urban and big box warehouses – complementary asset types
Urban and big box warehouses – complementary asset types Portfolio by type: Urban warehouses (65%) (valuation, SEGRO share) Big boxes (32%) Data as at 30 June 2020 • Smaller units, generally <10,000 sq m Other • Larger units, generally over 10,000 sq m 3% • Diverse range of uses (including ‘last mil
Slide 43: A very diversified customer base
A very diversified customer base Customer sectors (headline rent, SEGRO share) Over 1,200 customers Transport & logistics 24% Top 20 customers = Wholesale & retail distrib - 10% 31% of total Retail 16% group headline Food & general rent manufacturing Parcel 18% delivery 10% 43
Slide 44: Enhanced, de-risked development programme
Enhanced, de-risked development programme Development-led growth1 The majority of which is pre-let 1,000 100% 900 Expected H2 Development completions, ‘000 sq m Completions 80% 800 700 600 60% 500 400 40% 300 200 20% 100 0 0% 2013 2014 2015 2016 2017 2018 2019 1H20 2014 2015 2016 2017 2018 2019 1H20
Slide 45: UK Logistics Park update
UK Logistics Park update SEGRO Logistics Park East Midlands Gateway (SLPEMG) • 700 acre site with planning consent for 600,000 sq m of warehousing • Strategic Rail Interchange (SRFI) operated by Maritime Modal now operational • Five warehouses complete (200,000 sq m of total space), let to customers
Slide 46: Land bank provides optionality and opportunity for growth
Land bank provides optionality and opportunity for growth 800 7.0% Net land utilisation, 2015-1H20 (Based on opening book value or acquisition value) 700 6.0% Land bank value, £m 600 Land Acquired 5.0% 300 Land utilised for development 500 4.0% Land disposed 400 200 Net 3.0% 300 134 133 100 Land val
Slide 47: SEGRO European Logistics Partnership (SELP) headline figures
SEGRO European Logistics Partnership (SELP) headline figures Land and Equivalent €4.6bn 5.1% Assets under management assets yield (as at 30 June 2020) €1.3bn Assets under management, €bn 1.4 €1.1bn AUM Growth 1.2 AUM at inception Capital value €907m 0.6% 0.2% ERV growth change 1.0 €662m 0.8 0.6 0.4
Slide 48: Appendix II: Market Data
WE CREATE THE SPACE THAT ENABLES EXTRAORDINARY THINGS TO HAPPEN S EG RO JOO YEARS: (OF THE EXTRAORDINARY APPENDIX II MARKET DATA
Slide 49: European industrial investment volumes
European industrial investment volumes European industrial investment volumes European industrial investment volumes By geography, €bn By quarter, €bn 45 50 40 45 35 40 30 35 30 25 25 20 20 15 15 10 10 5 5 0 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2006 2007 2008
Slide 50: Prime logistics yields vs 10 year bond yields
Prime logistics yields vs 10 year bond yields 12.0 10.0 8.0 6.0 Warsaw: 5.8% London: 4.5% Paris: 4.0% 4.0 Dusseldorf: 3.6% 2.0 UK 10yr bond: 0.2% 0.0 Germany 10yr bond: (0.5)% -2.0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 1H20 Source: CBRE, Bloomberg (data corr
Slide 51: Favourable demand-supply conditions: UK supply shortage
Favourable demand-supply conditions: UK supply shortage UK Big Box supply-demand dynamics1 Speculative UK Big Box completions2 (m sq m) (m sq m) 3.0 2.5 3.0 14% Take-up / availability, m sq m 2.5 2.5 12% 2.0 No. of years’ supply 2.0 10% Completions, m sq m 1.5 2.0 1.5 8% 1.0 1.5 1.0 6% 0.5 1.0 0.5 4
Slide 52: European industrial and logistics supply dynamics
European industrial and logistics supply dynamics Logistics space under construction1 France logistics supply-demand dynamics2 (m sq m) (m sq m) 3.5 5.0 2.5 3.0 Take-up / availability, m sq m 4.0 2.0 2.5 No. of years’ supply 2.0 3.0 1.5 1.5 2.0 1.0 1.0 1.0 0.5 0.5 0.0 0.0 0.0 Germany Italy UK France
Slide 53: European industrial and logistics — take-up statistics
European industrial and logistics — take-up statistics Take-up of warehouse space >100,000 sq ft – UK1 Take-up of warehouse space >5,000 sq m – France2 (m sq m) (m sq m) 3.0 5.0 4.0 2.0 3.0 1.0 2.0 1.0 0.0 0.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 1H19 1H20 2007 2008 2009 2010
Slide 54: European industrial and logistics — availability statistics
European industrial and logistics — availability statistics Availability of Grade A warehouse space >100,000 sq ft– UK1 Availability of warehouse space >5,000 sq m – France2 (m sq m) (m sq m) 3.0 5.0 2.0 4.0 3.0 1.0 2.0 0.0 1.0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 1H20 0.0 2009 2010 201
Slide 55: The overall European logistics vacancy rate remains low
The overall European logistics vacancy rate remains low Low European big box vacancy rate of 4.9% European big box vacancy rate 2006-2020 (Rates at 30 June 2020, source: JLL) (Source: JLL) 10.0 3.7 8.4 6.9 4.0 16% 3.6 3.9 14% 5.0 12% Percentage 2.4 10% 8% 2.4 6% 2.0 4% 2% 2.7 8.7 NB: All data relate
Slide 56: Forward-looking statements and Disclaimer
Forward-looking statements and Disclaimer This document has been prepared by SEGRO plc (‘SEGRO’) solely for use at the presentation of SEGRO’s results announcement in respect of the six months ended 30 June 2020. For the purposes of this disclaimer, “Presentation” shall mean this document, the oral