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Segro's re-balancing boosts valuations

Segro's half-year report suggests last year's portfolio rejig is having the desired effect on the company's book value.
July 30, 2014

A 4.4 per cent increase in the portfolio valuation at Segro (SGRO) over the half year highlights the benefits of 2013's rationalisation programme. But last year's disposals also resulted in a dip in the industrial landlord's net rental income - down by a quarter on the 2013 interim to £87.5m under European Public Real Estate Association (EPRA) accounting standards. That reduced adjusted profits and left no room for a dividend increase.

IC TIP: Buy at 360p

On a like-for-like basis, Segro achieved net rental growth of 4.9 per cent in the UK portfolio, driven by a healthy level of leasing activity against an improving market backdrop. Unfortunately, that was offset by poor performance in France, which saw a number of tenants go bust in late 2013. At least group vacancy rates headed in the right direction, down 20 basis points from the December year-end to 8.3 per cent.

In a separate announcement, Segro confirmed it had bought the remaining 50 per cent interest in its Logistics Property Partnership (LPP) joint venture from Moorfield Real Estate Fund II for £95.6m. The gross value of the properties amounts to £350m and provides a net rental yield of 5.4 per cent, based on the purchase price.

Oriel Securities expects book value of 355p a share at the 2014 year-end, rising to 404p a year later.

SEGRO (SGRO)
ORD PRICE:360pMARKET VALUE:£2.7bn
TOUCH:359p-361p12-MONTH HIGH379pLow: 279p
DIVIDEND YIELD:3.2%TRADING PROPERTIES:£126m
PREMIUM TO NAV:7.5%NET DEBT:67%
INVESTMENT PROPERTIES:£3.1bn

Half-year to 30 JunNet asset value (p)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
2013297202.24.9
201433522729.44.9
% change+13+1035+1236-

Ex-div: 20 Aug

Payment: 2 Aug