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Segro completes record developments

The warehouse space provider is also deploying the £450m raised in February
July 24, 2019

Shares in Segro (SGRO) rose to their highest level since the 2008 financial crash, after the logistics warehouse provider unveiled solid like-for-like rental growth and completed a record number of developments during the first half of 2019. In the UK, new rents agreed at review and renewal were almost 17 per cent higher, boosted by sharp rises in previously nominal rents in the group's £1bn Heathrow portfolio. Encouragingly, continental European rates also returned to growth, posting a 0.6 per cent increase.

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Together with a reduction in the vacancy rate to just 4.8 per cent, those renewals helped add £8.4m in rent roll from existing space, compared with £1.4m last year. Demand for ‘last mile’ urban warehouses – which account for almost two-thirds of assets – was particularly strong in both the UK and Europe.

Around 700,000 sq metres of developments are under construction or in advanced pre-let discussions, and could generate £50m in rent – equivalent to a yield on cost of 7 per cent. Sixty per cent of the pipeline is in mainland Europe, where the ecommerce market is at a “tipping point” in terms of demand, chief financial officer Soumen Das said.

Analysts at Panmure Gordon expect adjusted NAV of 690p a share at the December 2019 year-end, up from 650p the same time the prior year.

SEGRO (SGRO)    
ORD PRICE:773pMARKET VALUE:£8.45bn
TOUCH:772.6-773.2p12-MONTH HIGH:778pLOW: 578p
DIVIDEND YIELD:2.5%TRADING PROP:£11.7m
PREMIUM TO NAV:16%  
INVESTMENT PROP:£9.3bn*NET DEBT:33%
Half-year to 30 JunNet asset value (p)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201860157155.45.55
201966841137.16.30
% change+11-28-33+14
Ex-div: 15 Aug   
Payment: 23 Sep   
*Includes investments in joint ventures