Segro Plc · LSE:SGRO

Segro — FY2013 Earnings Presentation

51 slides from Segro's earnings presentation, Feb 26, 2014

  1. Slide 1: 2013 Full Year Results

    2013 Full Year Results 26th February 2014 Slough Trading Estate, UK

  2. Slide 2: Delivering on our strategic priorities; well positioned for growth

    Delivering on our strategic priorities; well positioned for growth  Significant progress against strategic priorities o £591m of disposals; £250m invested in acquisitions and developments o Creation of €1bn European logistics partnership; LTV reduced to 42%  Encouraging operational performance o £

  3. Slide 3: Financial Review

    Financial Review Justin Read, Group Finance Director Burton-Upon-Trent, UK

  4. Slide 4: Financial highlights

    Financial highlights  Earnings reduction reflects net divestment of £342m and SELP JV during 2013  Balance sheet considerably strengthened by Group’s actions and valuation uplift 31 Dec 2013 31 Dec 2012 Change % EPRA PBT (£m) 134.1 144.9 (7.5) EPRA EPS (pence) 17.7 19.3 (8.3) EPRA NAV per share1 (

  5. Slide 5: Net rental income 12.3% lower; EPRA PBT 7.5% lower at £134m

    Net rental income 12.3% lower; EPRA PBT 7.5% lower at £134m 31 Dec 2013 31 Dec 2012 £m £m Gross rental income 273.8 305.4 Property operating expenses (50.4) (50.6) Net rental income 223.4 254.8 Share of joint ventures’ EPRA profit1 26.3 20.2 Joint venture fee income 7.1 7.4 Administration expenses (

  6. Slide 6: Movement in net rental income impacted by portfolio reshaping

    Movement in net rental income impacted by portfolio reshaping £288.3m SELP JV JVs at Thales, MPM, share IQ Winnersh £4.2m £263.9m £11.2m £2.4m £33.5m Other £12.4m JVs at £(2.8)m £(40.5)m or (1.5)% share £(11.3)m £40.5m Group £254.8m Group £223.4m FY2012 2012 Disposals Impact of Acquisitions Complete

  7. Slide 7: Pro forma net rental income adjusting for the incremental impact of 2013 transactions

    Pro forma net rental income adjusting for the incremental impact of 2013 transactions Group JVs Total £m £m £m 2013 net rental income 223 41 264 Incremental impact of: 2013 disposals (16) (1) (17) Creation of SELP JV (44) 211 (23)1 2013 acquisitions 5 - 5 2013 completed developments let 1 1 2 Pro fo

  8. Slide 8: Further reduction in total costs achieved

    Further reduction in total costs achieved  6.5% reduction in administrative expenses delivering lower total costs  Operating expenses included £2.9m of Neckermann-related costs in 2013  Cost ratio increased to 24.2% due to impact of disposals and SELP JV on gross rent Inc. JVs at share 2013 2012

  9. Slide 9: Balance sheet considerably strengthened

    Balance sheet considerably strengthened 31 Dec 2013 31 Dec 2012 Group only: Net borrowings (£m) 1,459 2,090 Available Group cash & undrawn facilities (£m) 982 449 Weighted average cost of debt1 (%) 4.5 4.6 Average duration of debt (years) 8.7 8.3 Interest cover2 (times) 2.2 2.3 Including JVs at shar

  10. Slide 10: 6.1% increase in EPRA NAV per share

    6.1% increase in EPRA NAV per share (+7.5% before swaps close out) +17.0p +17.7p (0.5)p (3.7)p +2.6p (14.8)p 316p 312p 294p EPRA NAV EPRA EPS Dividend Profit on sale Unrealised FX & other Early close EPRA NAV per share at of properties1 valuation movements out of Euro per share at movements interest

  11. Slide 11: Positive valuation movement of £151m

    Positive valuation movement of £151m (UK +7.0%; Continental Europe -3.1%) Portfolio surplus/(deficit)1 £200m +7.1% +4.1% £150m +7.3% £100m +6.5% £50m +4.5% £0m (3.1)% (0.8)% (6.5)% (7.1)% (£50m) Greater Thames Northern Southern Central UK Europe Total Total London Valley & Europe Europe Europe Core

  12. Slide 12: Financial summary

    Financial summary  2013: results reflect success with strategy implementation o Earnings lower due to net disposal activity, but dividend remains well covered at 14.8p o Balance sheet considerably strengthened, funding sources diversified o Positive valuation uplift leading to 6% NAV increase  201

  13. Slide 13: Delivering on our strategic priorities

    Delivering on our strategic priorities David Sleath, Chief Executive Marly La Ville, Paris

  14. Slide 14: Our strategic priorities

    Our strategic priorities Reshape the  Divesting non-core assets 1 existing portfolio  Improving asset utilisation (land & vacant property) Deliver profitable  Generating attractive returns by building a high quality, 2 growth by reinvesting modern portfolio with critical mass in target markets, t

  15. Slide 15: £591m of disposals; 5% above Dec-12 value

    £591m of disposals; 5% above Dec-12 value  Disposals ahead of target for 2013 Reshape 1 existing portfolio  Average yield on disposals of 7.2%1  £440m of non-core assets remaining (11% of portfolio) Deliver 2 profitable growth Distribution of non-core assets 31 Dec 2013 Total portfolio – Core vs.

  16. Slide 16: 15 developments completed during 2013 totalling 144,000 sq m

    15 developments completed during 2013 totalling 144,000 sq m of new space Reshape  Annual rent of £6.6m (now 85% let) 1 existing portfolio  Average profit on cost of 23% (yield on total cost of 9.7%) North Feltham, London (8,096 sq m) Alzenau, Frankfurt (17,398 sq m) Deliver 2 profitable growth Re

  17. Slide 17: 18 current developments (245,000 sq m) over the next 2 years

    18 current developments (245,000 sq m) over the next 2 years across UK and Europe Reshape  Annual rent of £16.9m (60% let) – 9.6% yield on cost 1 existing portfolio  £89m development cost (exc. land)  78,500 sq m of speculative projects Progress in securing rental income Deliver Asics at Krefeld,

  18. Slide 18: £141m reinvested in modern warehouses and land for future development

    £141m reinvested in modern warehouses and land for future development Zeran Park II, Warsaw (£37m) Reshape 1 existing portfolio Deliver 2 profitable growth Barking, East London (£30m) Reduce debt & introduce 3 third party  49,900 sq m of urban distribution space  25,500 sq m modern logistics wareh

  19. Slide 19: £70m of property swaps improving future portfolio return prospects

    £70m1 of property swaps improving future portfolio return prospects Reshape PURCHASED: 1 existing portfolio Decathlon, Northampton  17,600 sq m distribution warehouse  Let to Tesco until December 2018  Sub-let for Decathlon’s sole UK Deliver 2 profitable growth logistics hub, serving national out

  20. Slide 20: €1bn SELP JV to increase exposure to European logistics

    €1bn SELP JV to increase exposure to European logistics  Seeded with €1bn of Continental European logistics assets/land Reshape 1 existing portfolio  81 ha land bank; 22 ha (80,000 sq m of space) already under development  Agreement to acquire a further €472m of prime logistics assets Deliver Pro

  21. Slide 21: £30m of new rental income contracted, +17% compared with 2012

    £30m of new rental income contracted, +17% compared with 2012  Significant pick-up in pre-lets on future developments Reshape 1 existing portfolio  Vacancy +30bps to 8.5% mainly due to impact of disposals  Improvement in customer satisfaction levels Deliver 2 profitable growth Inc. JVs at share 2

  22. Slide 22: Significant Strategic Progress

    Significant Strategic Progress Reshape the  £591m of disposals at 5% above Dec-12 value 1 existing portfolio  Non-core now only 11% of total assets (Nov-11: 31%) Deliver profitable  £338m of acquisitions adding £22m of new rent1 2 growth by reinvesting  £108m invested into the development progra

  23. Slide 23: Well positioned for growth

    Well positioned for growth Total UK logistics availability1  Economic conditions generally improving (m sq m) 5.0  Supply conditions remain tight 4.0 3.0 2.0  Structural drivers of occupier demand accelerating 1.0 0.0  Improving investor appetite for logistics warehouses 2005 2007 2009 2011 2013

  24. Slide 24: Portfolio well positioned to benefit from growth drivers

    Portfolio well positioned to benefit from growth drivers Analysis of buildings by use Analysis of buildings by geography (% of gross passing rent1) (% of portfolio value, inc. JVs at share) Airport Rest of Cargo Europe (7%) Poland (8%) Urban (6%) Offices Distribution (14%) (10%) Germany (7%) Greater

  25. Slide 25: Land bank well located to capitalise on favourable demand/supply dynamics

    Land bank well located to capitalise on the favourable demand/supply dynamics Current land holdings by value (as at 31 Dec 2013) Residual land bank £55m (147 ha) Current Potential projects development £95m projects (58 ha) £198m (341 ha) Potential development projects  £74m of potential future annu

  26. Slide 26: 70,000 sq m of recent additions to the development pipeline so far in 2014

    70,000 sq m of recent additions to the development pipeline so far in 2014 Origin, Park Royal, Greater London Phase 2 Phase 1 Volkswagen, Poznan (32,000 sq m) Origin, Phase 1, Park Royal (14,700 sq m) Takko, Hamburg (22,860 sq m extension) 25

  27. Slide 27: Attractive income growth profile from existing assets and committed investments

    Attractive income growth profile from existing assets and committed investments Annualised gross cash passing rent1 £46.0m £13.2m £16.9m £26.0m £10.2m pre-let £25.0m £(5.0)m £334.4m +29% £258.3m Gross passing Gross passing Expiry of rent ERV of vacant/ Reversion to Current SELP logistics Potential g

  28. Slide 28: Summary

    Summary  Significant progress against strategic priorities  Encouraging operational performance  Positive valuation performance driving 6% increase in NAV  Well positioned for growth o Improving economic environment o Structural drivers of occupier demand; supply conditions remain tight o Invest

  29. Slide 29: Q&A

    Q&A Slough Trading Estate, UK

  30. Slide 30: Appendix I: Portfolio & financial data

    Appendix I Portfolio & financial data

  31. Slide 31: EPRA performance measures

    EPRA performance measures 2013 2012 £m Pence £m Pence EPRA earnings 131.4 17.7 143.0 19.3 EPRA NAV 2,312.6 312 2,176.0 294 EPRA NNNAV 2,086.8 282 1,939.9 262 EPRA net initial yield 6.3% 6.8% EPRA “topped-up” net initial yield 6.9% 7.7% EPRA vacancy rate 8.5% 8.2% EPRA cost ratio (including vacant pr

  32. Slide 32: Positive portfolio valuation movements

    Positive portfolio valuation movements  Core ‘industrial’ 5.5% FY 2013 Core warehouse portfolio valuation movement by asset type 10% 8% 7.2% 7.6%  Offices 2.8% 6% 4.0% 4% 3.2%  Non-core (6.5)% 2% 0% Logistics Light industrial & Data centres Other business  Total portfolio 4.1% urban distribution

  33. Slide 33: Improved rental income profile

    Improved rental income profile  Retention rate of 69% in 2013 (2012: 65%)  Portfolio vacancy reduced from 13.5% to 8.5% since 2009  Weighted average lease length increased from 7.7 years to 8.9 years since 2009 2013 2012 2011 2010 2009 Retention rate (%) 69 65 74 55 52 Portfolio vacancy rate (%)

  34. Slide 34: Movement in portfolio vacancy

    Movement in portfolio vacancy +0.6% +0.1% (0.1)% (0.2)% (0.1)% 8.2% 8.5% 31 Dec 20122012 Acquisitions & Impact of new Neckermann Existing vacant Valuation 31 2013 Dec 2013 (Core:7.6%) (Core: 7.6%) Disposals development campus space Movement (Core: (Core:8.2%) 8.2%) 33

  35. Slide 35: £440m of non-core assets remaining representing 11% of total assets

    £440m of non-core assets remaining representing 11% of total assets At 31 Dec 2013 Valuation Net initial yield1 True equivalent yield1 Income2 Inc. JVs at share £m % % £m ‘Big 2’ assets 163 11.2 9.9 16 UK smaller non-core 74 6.4 9.1 6 European smaller non-core 203 9.7 9.7 18 Total 440 9.5 9.7 40 Peg

  36. Slide 36: EPRA profit before tax: JVs proportionally consolidated

    EPRA profit before tax: JVs proportionally consolidated 2013 2012 Group JVs Total Group JVs Total £m £m £m £m £m £m Gross rental income 273.8 48.5 322.3 305.4 40.0 345.4 Property operating expenses (50.4) (8.0) (58.4) (50.6) (6.5) (57.1) Net rental income 223.4 40.5 263.9 254.8 33.5 288.3 Joint vent

  37. Slide 37: EPRA net assets: JVs proportionally consolidated

    EPRA net assets: JVs proportionally consolidated 2013 2012 Group JVs Total Group JVs Total £m £m £m £m £m £m Investment properties 2,910.0 1,079.6 3,989.6 3,795.7 621.5 4,417.2 Trading properties 138.7 12.8 151.5 193.3 29.1 222.4 Owner occupied properties 4.1 - 4.1 4.3 - 4.3 Total properties 3,052.8

  38. Slide 38: Net borrowings profile

    Net borrowings profile  £1,459m of Group net debt as at 31 December 2013, excluding JVs o £197m share of JV acquisitions to complete in Q2 2014 (of which equity of £118m) o £89m committed to complete current development projects 31 Dec 2013 Weighted average £m cost of gross debt1 Group gross borrow

  39. Slide 39: Euro currency exposure and hedging

    Euro currency exposure and hedging Balance Sheet (as at 31 December 2013)  €1.20:£1 as at 31 December 2013  € assets 78% hedged by € liabilities 1,174 Euro gross assets1  €324m (£270m) of residual exposure - 12% of Group NAV 83  NAV sensitivity versus €1.20:£1: Euro debt € million +5% (€1.26) =

  40. Slide 40: Debt Maturity Profile

    Debt Maturity Profile £750m £500m £250m £0m 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024+ SEGRO Bonds SEGRO bank debt Non-recourse JV debt at share SEGRO cash SEGRO Undrawn bank facilities 39

  41. Slide 41: SEGRO European Logistics Partnership (SELP) Balance Sheet

    SEGRO European Logistics Partnership (SELP) Balance Sheet SEGRO share 31 Dec 2013 European logistics Total portfolio acquisition1 (£m) (£m) (£m) Portfolio valuation 417 197 614 - France 142 29 171 - Germany/Belgium/Neth. 95 126 221 - Poland/Czech Republic 180 42 222 Net borrowings (136) (79) (215) O

  42. Slide 42: Appendix II: Supplementary market data

    Appendix II Supplementary market data

  43. Slide 43: European Industrial investment volumes

    European Industrial investment volumes European Industrial investment volumes European Industrial investment volumes By quarter (€bn) By country (€bn) 25.0 25.0 20.0 20.0 15.0 15.0 10.0 10.0 5.0 5.0 0.0 0.0 2006 2007 2008 2009 2010 2011 2012 2013 2006 2007 2008 2009 2010 2011 2012 2013 Q1 Q2 Q3 Q4 U

  44. Slide 44: Investment market yields declined in 2013, even as interest rates increased

    Investment market yields declined in 2013, even as interest rates increased Prime net yields by major logistics markets 10% 8% Warsaw: 7.5% (2012: 7.5%) Paris: 7.0% (2012: 7.3%) Dusseldorf: 6.5% (2012: 6.7%) 6% London: 5.8% (2012: 6.0%) 4% UK 10-year bond: 3.0% (2012: 1.8%) German 10-year bond: 1.9%

  45. Slide 45: Improving market outlook for occupational demand

    Improving market outlook for occupational demand European Real GDP growth1 UK industrial rents vs UK GDP growth2 (2008 = 100) (2005 = 100) 130 115 Forecast 125 110 120 115 105 110 100 105 100 95 95 90 90 2008 2009 2010 2011 2012 2013 2014 2015 2005 2006 2007 2008 2009 2010 2011 2012 2013 Germany Fra

  46. Slide 46: Continued growth in online sales a key driver for logistics demand

    Continued growth in online sales a key driver for logistics demand % of population making an online Value of online spending2 purchase within the last 3 months1 (€bn) 75% 120 +17% (yoy) 100 50% 80 +13% 60 (yoy) +44% (yoy) 25% 40 20 0% 0 UK France Germany Neth. Belgium Poland UK France Germany 2008 2

  47. Slide 47: Supply of new space remains significantly constrained

    Supply of new space remains significantly constrained Logistics space under construction1 Total UK Logistics availability2 (m sq m) (m sq m) 3.0 5.0 4.0 2.0 3.0 2.0 1.0 1.0 0.0 0.0 UK Germany France Belgium Neth. Poland 2005 2006 2007 2008 2009 2010 2011 2012 2013 Pre-let Speculative New / Early Mar

  48. Slide 48: European logistics take-up

    European logistics take-up UK - Take up1 (m sq m) France - Take up2 (m sq m) 3.0 4.0 2.5 3.0 2.0 2.0 1.5 1.0 1.0 0.5 0.0 0.0 2005 2007 2009 2011 2013 2005 2007 2009 2011 2013 Grade A Other Lease turnkey and New Secondhand owner-occupier development Poland - Take up3 (m sq m) Germany - Take up2 (m sq

  49. Slide 49: European logistics availability

    European logistics availability UK - Availability1 (m sq m) France - Availability2 (m sq m) 5.0 5.0 4.0 4.0 3.0 3.0 2.0 2.0 1.0 1.0 0.0 0.0 2005 2007 2009 2011 2013 2005 2007 2009 2011 2013 Grade A Other Space under construction New / Early Marketed Secondhand Poland - Availability1 (m sq m) 1.5 1.0

  50. Slide 50: Erosion of London industrial land

    Erosion of London industrial land 49 Source: Deloitte/ONS

  51. Slide 51: Forward-looking statements

    Forward-looking statements This presentation may contain certain forward-looking statements with respect to SEGRO’s expectations and plans, strategy, management’s objectives, future performance, costs, revenues and other trend information. These statements and forecasts involve risk and uncertainty

Segro — FY2013 Earnings Presentation on 6ix