2017 HALF YEAR 25 JULY 2017

Transcription

1 2017 HALF YEAR RESULTS 25 JULY 2017

2 Strong financial results and robust balance sheet Driving performance through operational excellence and disciplined capital allocation High quality pipeline of growth opportunities Optimistic outlook B+S, Frankfurt 2

3 Strong financial results and robust balance sheet Driving performance through operational excellence and disciplined capital allocation High quality pipeline of growth opportunities Optimistic outlook B+S, Frankfurt 3

4 Strong financial results and robust balance sheet Strong earnings growth Benefits of APP acquisition Asset management gains capturing rent reversion Development completions Robust balance sheet 4.9% portfolio value growth 1.1 billion of financing, including rights issue and inaugural US private placement +23% +3.2% +3.9% +5.4% 29% Adjusted pre-tax profit Adjusted EPS, 9.7p Like-for-like net rental income growth EPRA NAV per share 504p Loan to Value ratio (FY 2016: 33%) 2017 interim dividend increased by 5% 5.25p Dividend per share (2016: 5.0p) 4

5 3.9% growth in like-for-like net rental income Proportionally consolidated net rental income (excluding joint venture fees 1 ), H , million 120.9m 10.6m 4.4m 8.6m (0.8)m (5.9)m 4.1m 130.7m JVs at share 32.3m (11.2)m JVs at share 27.3m APP acquisition Group 88.6m Mainly 2016 disposals and disposals to part-fund APP acquisition Group: +3.9% UK: +5.9% CE: 0.0% Vacancy stable at 5.5% Group 103.4m H net rental income Disposals Acquisitions Like-for-like net rental income Completed Space taken developments back for development Other (incl surrender premiums) Currency translation H net rental income 5

6 23% increase in Adjusted PBT Adjusted income statement H H Gross rental income Property operating expenses (23.9) (22.1) Net rental income Share of joint ventures adjusted profit Joint venture fee income Administration expenses (17.5) (15.5) Adjusted operating profit Net finance costs (33.3) (33.5) Adjusted profit before tax Tax on adjusted profit 0.7% 1.1% APP performance fee generated nonrecurring profit of 3.2m FY 2017 JV fee income expected to be c 24m On-going JV fee income c 16m pa H adjusted EPS based on average 934m shares FY adjusted EPS expected to be based on c966m shares (before impact of scrip dividend) Cost ratio of 22.9% (H1 2016: 23.2%) 20.4% excl share based payments (H1 2016: 21.5%) 1 Net property rental income less administrative expenses, net interest expenses and taxation 6

7 5.4% increase in EPRA NAV Components of EPRA net asset value change, 31 December 2016 to 30 June p 2p 10p (8)p 504p 478p (after applying bonus adjustment factor of to reported 500p) (11)p 31 December 2016 H Adjusted EPS 2016 Final Dividend Realised and unrealised gains Exchange rate and other Net impact of financing activity 30 June

8 1.1bn of new financing raised to strengthen balance sheet further Rights Issue 557m net proceeds 166m new shares bonus adjustment factor Private Placement Issue 650m of new debt 11yr average duration 1.9% average coupon To be drawn in August m cash consideration for APP 341m for future development capex 75% allocated to identified projects Repay 200m 2018 bonds early 5.5% coupon bonds repaid in June Repay 320m APP secured debt 2.5% average cost, repaid in July LTV ratio and average cost of debt (incl share of JVs, 2012-H1 2017) LTV ratio 60% 40% 20% 0% H1 17 LTV ratio 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Ave cost of debt Average cost of debt 8

9 Robust financial position Balance sheet and gearing metrics (look-through basis), 31 December June 2017 Including joint ventures at share 30 June December 2016 Weighted average cost of debt 1 (%) Average maturity of debt (years) m of cash and available facilities Attractive marginal cost of Group bank borrowings of c1.4% (UK) and 1.1% (CE) 3 Fixed rate debt as proportion of net debt (%) Net borrowings () 2,086 2,091 LTV ratio (%) Based on gross debt, excluding commitment fees and amortised costs 2 Pro forma for repayment of APP secured debt and drawing of US private placement debt 3 Marginal borrowing costs after commitment fee H1 2017: 215m capex on development and infrastructure FY 2017: 350m+ estimated development capex (and further c 50m of infrastructure capex) 9

10 Strong financial results and robust balance sheet Strong earnings growth Robust balance sheet 2017 interim dividend increased by 5% Geodis, Paris 10

11 Strong financial results and robust balance sheet Driving performance through operational excellence and disciplined capital allocation High quality pipeline of growth opportunities Optimistic outlook B+S, Frankfurt 11

12 Favourable market conditions Economic growth outlook is supportive (GDP average annual growth rates ; source: OECD) UK logistics supply continues to fall short of demand (UK logistics take up and average availability; source: JLL) 4.0% 3.0% 2.0% 1.0% 0.0% 3.4% 3.4% 1.6% 2.0% 1.0% 1.4% 2.4% 1.3% 0.6% 0.9% Poland Germany France UK Italy Take-up / availability, m sq m Take-up for H and H H No. of years supply Historic ( ) Forecast ( ) Average availability Take-up No. of years' supply Online sales continue to gain market share (Online purchases as share of total retail sales; source: Centre for Retail Research) Supply of speculative development remains low (Speculative UK big box warehouse completions; source: JLL) UK Germany France Europe ave Poland Italy 0.0% 5.0% 10.0% 15.0% 20.0% Completions, m sq m In dvpt 12

13 Driving performance: operational excellence and disciplined capital allocation Leasing and Asset Management 28m contracted headline rent, +28% from H Developments 79,000 sq m new space completed: 5m of potential rent, 91% secured Completed development 15% uplift on UK rent reviews and renewals Low vacancy rate of 5.5%, 92% customer retention 18m new pre-lets signed; 3m potential from new speculative development starts 920,000 sq m under construction Acquired Amazon, Munich Disposals Acquisitions 207m of asset disposals Part consideration for APP 150m Non-strategic German light industrial 47m 550m of asset acquisitions 50% interest in APP portfolio Ave topped-up NIY of 4.2% (5.2% excl Cargo Area) Sold APP portfolio Former Northfields industrial estate sold to residential developer Average yield of 4.4% (3.1% incl land) 34m of land acquisitions Primarily land for immediate development in Germany, Italy and Spain Nelson Trade Park 13

14 Portfolio value change driven by improving yields and asset management 1 400m 350m 300m +4.6% UK +5.5% Slough Trading Estate +7.1% Park Royal +8.8% Heathrow +3.0% UK big box logistics % Continental Europe +2.3% SELP +1.1% SEGRO wholly-owned +4.1% 250m 200m +5.7% 150m 100m +5.2% +3.7% 50m 0m Total Greater London Thames Valley & National Logistics 2.3% +0.1% Northern Europe Southern Europe Central Europe ERV growth 0.8% 0.9% 0.9% 0.6% 0.6% 0.0% UK: 0.9% Continental Europe: 0.4% 1 Percentage change relates to completed properties, including JVs at share. 2 Includes big box warehouses part of the Greater London portfolio 14

15 Strong financial results and robust balance sheet Driving performance through operational excellence and disciplined capital allocation High quality pipeline of growth opportunities Optimistic outlook B+S, Frankfurt 15

16 High quality pipeline of growth opportunities Income growth potential through active asset management of existing portfolio Significant growth from current development pipeline Optionality over future development through land bank and options Azymut, Strykow 16

17 Growth from the existing portfolio Reversion capture 2.7m potential reversion from general UK rent reviews in H ( 13m in total) 6.2m (55%) of Heathrow Cargo Area 2019 peppercorn rent reversions secured or under negotiation ( 11m in total) Rapid leasing of speculative space (Letting status of development completions in , %) 100% 80% Further vacancy reduction c 5.5m (25%) of vacancy is in five UK buildings 2 big box warehouses in Midlands 3 urban warehouses in London 60% 40% 20% Index-linked uplifts c40% of portfolio (c 140m of headline rent) contains indexation provisions Almost all Continental Europe leases c10% of UK leases (most with cap and collar) 0% H Speculative Pre-let Let at 30 June

18 Current development pipeline: 46m of rent, 40 projects, 1m sq m of space Yoox pre-let, Milan Martorelles, Barcelona FedEx pre-let, Paris Amazon pre-let, Rome SEGRO Park Rainham, East London Premier Inn, Slough Trading Estate 18

19 Significant development opportunities within SEGRO s control 1 Current development pipeline 2 920,400 sq m of space Current book value 431m; 231m cost to complete 46m potential gross rent; 31m (68%) secured through pre-lets Projected 7.7% yield on total cost Near term development projects 243,000 sq m of space 146m potential capex 14m potential gross rent 63% rent related to potential pre-lets Projected 7.6% yield on total cost 3 Future development pipeline m sq m of space c 1.1bn potential capex 113m potential gross rent Projected c8% yield on total cost Land under option 750,000 sq m of space c 50m potential gross rent Expected blended yield of c7% on total cost, including land Capital deployment ahead of expectations at the time of 2016 equity placing and 2017 rights issue 1 Excludes near-term projects and potential developments on land held under option. 19

20 Substantial opportunity to grow rental income Annualised gross cash passing rent 1, million (as at 30 June 2017) 126m potential from current activity 163m from land bank and land options Passing rent at 30 Jun 17 Rent in rent-free Reversion and vacant space Current development pipeline (68% let) Near-term development opportunities 2,3 (63% pre-lets) Future pipeline 2 Land held under option Total Potential 1 Including JVs at share 2 Near-term development opportunities include pre-let agreements subject to final conditions such as planning permission, and speculative developments subject to final approval, which are expected to commence within the next 12 months 3 Total rent potential of 127m from near-term development opportunities and Future pipeline 4 Estimated. Excludes rent from development projects identified for sale on completion and from projects identified as Near-term opportunities 20

21 Outlook Supply-demand dynamics remain supportive Investor demand for warehouses remains strong Future earnings prospects underpinned by asset management and development Optimistic outlook B+S, Frankfurt 21

22 2017 HALF YEAR RESULTS Q&A

23 APPENDIX I PORTFOLIO AND FINANCIAL DATA

24 EPRA performance measures 30 June June December 2016 p per share p per share 2 p per share 2 EPRA 1 Earnings (9.8) (19.7) EPRA NAV 5, , (475) 4, (500) EPRA NNNAV 4, , (435) 3, (459) EPRA net initial yield 4.7% 4.9% 4.8% EPRA topped-up net initial yield 5.0% 5.4% 5.3% EPRA vacancy rate 5.5% 4.8% 5.7% EPRA 1 cost ratio (including vacant property costs) EPRA 1 cost ratio (excluding vacant property costs) 22.9% 23.2% 23.0% 20.7% 20.4% 20.8% 1 For the periods presented, EPRA EPS is the same as Adjusted EPS. 2 Per share metrics in parentheses are as reported before application of the rights issue bonus adjustment factor. 24

25 Adjusted income statement (JVs proportionally consolidated) Group H H JVs Gross rental income Property operating expenses (23.9) (10.0) (33.9) (22.1) (6.0) (28.1) Net rental income JV management fee income Administration expenses (17.5) (0.4) (17.9) (15.5) (0.1) (15.6) Adjusted operating profit Net finance costs (33.3) (3.4) (36.7) (33.5) (6.2) (39.7) Adjusted profit before tax Tax and non-controlling interests (0.7) (1.4) (2.1) (0.8) (0.5) (1.3) Adjusted profit after tax Total Group JVs Total 25

26 Balance sheet (JVs proportionally consolidated) Group 30 June December 2016 JVs Investment properties 6, , , , , ,319.4 Trading properties Total properties 6, , , , , ,345.4 Investment in joint ventures (761.3) 1,066.2 (1,066.2) Other net liabilities (88.2) (48.5) (136.7) (25.5) (46.8) (72.3) Net debt (1,741.6) (344.6) (2,086.2) (1,598.4) (492.6) (2,091.0) Net asset value 1 5, , , ,182.1 EPRA adjustments (0.6) (20.0) EPRA NAV 5, ,162.1 Total Group JVs Total 1 After minority interests 26

27 Pro forma H accounting net rental income Group JVs Total H net rental income Half year impact of: Disposals since 1 January 2017 (3.9) (4.0) (7.9) APP fees within JV net rental income Acquisitions since 1 January Developments completed and let during H One-off items (0.4) (0.4) Pro forma H net rental income Annualised gross rental income (on a cash flow basis) after the expiry of rent-free periods 27

28 EPRA Cost Ratio Total cost ratio, (proportionally consolidated) Incl. joint ventures at share H H Gross rental income (less reimbursed costs) Property operating expenses Administration expenses JV operating expenses JV management fees (10.0) (8.8) Total costs Of which share based payments Total costs excluding share based payments Total cost ratio 22.9% 23.2% Total cost ratio excluding share based payments 20.4% 21.5% 1 Total costs include vacant property costs of 3.6m for H (H1 2016: 4.2m) 2 Includes JV property management fee income of 9.0m and management fees of 1.0m (H1 2016: 8.2m and 0.6m respectively) 28

29 EPRA Vacancy Rate Vacancy rate reconciliation, 31 December 2016 to 30 June % 0.1% 0.6% 5.5% Speculative development 1 1.6% (0.1)% (0.3)% (0.3)% (0.2)% Speculative development 1 1.3% Existing standing assets 4.1% Existing standing assets 4.2% 31 December 2016 Long-term lettings Short-term take-backs New developments Acquisitions Disposals Other 30 June Speculative developments completed in preceding two years 29

30 EPRA capital expenditure analysis Group H H JVs Total Group JVs Total Approximately 50% of completed properties capex is directly linked to generating rents Acquisitions 1, , Development c 5m of maintenance capex within Completed properties Completed properties Other TOTAL 1, , Includes wholly-owned capitalised interest of 2.5 million (H1 2016: 2.4 million) and share of JV capitalised interest of 0.3 million (H1 2016: 0.5 million). 2 Completed properties are those not deemed under development during the year. Incorporates minor refurbishment (not deemed to be directly ERV enhancing), and infrastructure expenditure and major refurbishment and fit-out of existing buildings (which are considered ERV enhancing) 3 Tenant incentives, letting fees and rental guarantees 30

31 Look-through loan-to-value ratio 30 June 2017 Weighted average 31 December 2016 cost of gross debt, % 1 Weighted average cost of gross debt, % 1 Group gross borrowings 1, , Group cash & equivalents (63) (32) Group net borrowings 1,742 1,598 Share of joint venture net borrowings SEGRO net borrowings including joint ventures at share Total properties (including SEGRO share of joint ventures) 2, , ,277 6,345 Look-through loan to value ratio 29% 33% 1 Figures exclude commitment fees and amortised costs 31

32 Debt maturity profile at 30 June 2017 (pro forma), Debt maturity by type and year, millions (as at 30 June 2017, pro forma for repayment of APP secured debt and drawing of US private placement debt due in August 2017) JV undrawn at share SEGRO undrawn JV debt at share SEGRO PP notes SEGRO bonds

33 Euro currency exposure and hedging Balance sheet, 30 June Assets 68% hedged 2,500 2,000 1,500 1,000 Other euro liabilities Euro currency swaps Euro debt 1.14: 1 as at 30 June 2017 assets 68% hedged by liabilities 741m ( 650m) of residual exposure 13% of Group NAV Illustrative NAV sensitivity vs 1.14: + 5% ( 1.20) = - c. 31m (-c.3.1p per share) - 5% ( 1.08) = + c. 34m (+c.3.4p per share) Euro gross assets Loan to Value (on look-through basis) at 1.14: 1 is 29%, sensitivity vs 1.14: +5% ( 1.20) LTV -0.6%-points Income Statement, 6 months to 30 June Income 37% hedged Euro income Euro costs -5% ( 1.08) LTV +0.6%-points Average rate for 6 months to 30 June : 1 income 37% hedged by expenditure (including interest) Net income for the period 37m ( 32m) 35% of Group Illustrative annualised net income sensitivity versus 1.16: + 5% ( 1.22) = c 1.5m (c0.2p per share) - 5% ( 1.10) = +c1.7m (c0.2p per share) 1 Pro forma for repayment of APP secured debt (in July 2017) and drawing of US private placement (in August 2017). 33

34 SEGRO Continental Europe assets under management Assets under management, m 1,400 1,200 1, ,207 1, Germany France Poland Other European 3.9bn AUM at 30 June 2017 ( 3.4bn) SELP joint venture focuses on big box logistics assets Other European countries comprise: The Netherlands, Belgium and Austria supported by our platform in Germany Italy and Spain supported by our platform in France Czech Republic and Hungary supported by our platform in Poland SELP SEGRO wholly-owned 34

35 Current development pipeline Current development pipeline (as at 30 June 2017) Current development projects, asset type by ERV (30 June 2017) 920,400 sq m 46m ERV Urban warehouses 21% 31m rent secured (68%) Gross rent from development completions, (as at 30 June 2017, including joint ventures at share) Amazon, Rome Logistics 60% 231m cost to complete % Yield on cost H H H H Pre-let Speculative 35

36 Future development pipeline Development land bank (30 June 2017) Geographic split of land bank, by potential ERV 1 (30 June 2017) Near-term projects 243,000 sq m c 14m of rent (63% related to pre-lets) 146m of potential capex Poland 9% Italy/Spain 14% Germany 18% UK 41% Future pipeline (2.3m sq m 2 ) 1.1bn estimated development costs 2 113m of potential annual rent 2 8% estimated yield on TDC 1 10% estimated yield on new money 1 And land held under option 750,000 sq m 50m of potential annual rent All figures include joint ventures at share. 1 Future development pipeline including near-term projects but excluding land under option. 2 Excludes near-term projects and potential developments on land held under option. Estimated blended yield of 7% on total cost, incl land 36

37 Land bank provides optionality and opportunity for growth Land bank value, % 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 39m of land bank subject to conditional sale for alternative (residential) use 0 0.0% H Additional opportunity from land held under option Alternative use Future development pipeline Long-term and residual land bank As % of portfolio (right hand scale) 37

38 APPENDIX II MARKET DATA

39 European industrial investment volumes European industrial investment volumes By country, m 30,000 25,000 20,000 15,000 10,000 5,000 - European industrial investment volumes By quarter, m 30,000 25,000 20,000 15,000 10,000 5, H17 UK Germany France CEE Rest of Europe H17 Q1 Q2 Q3 Q4 Source: CBRE 39

40 Prime logistics yields vs 10 year bond yields Warsaw: 6.0% Paris: 5.0% Dusseldorf: 4.8% London: 4.5% H17 UK 10yr bond: 1.3% Germany 10yr bond: 0.5% Source: CBRE, Bloomberg (data correct at 30 June 2017) 40

41 Favourable demand-supply conditions: UK supply shortage UK Big Box supply-demand dynamics 1 Speculative UK Big Box completions 2 (m sq m) (m sq m) Take-up / availability, m sq m Take-up for H and H No. of years supply Completions, m sq m % 12% 10% 8% 6% 4% % Average availability H In dvpt 0% Take-up Available space as multiple of annual take-up Construction Vacancy 1 Source: JLL (logistics warehouses >100,000 sq ft, Grade A); take up reflects H and H Source: JLL 41

42 European industrial and logistics supply dynamics Logistics space under construction 1 (m sq m) France logistics supply-demand dynamics 2 (m sq m) Take-up / availability, m sq m Take-up for H and H No. of years supply UK Germany France Belgium Neth. Poland Italy Spain Average availability H17 Pre-let Speculative Take-up Available space as multiple of annual take-up 1 Source: 1Q 2017, JLL 2 Source: CBRE 42

43 European industrial and logistics take-up statistics Take-up of warehouse space >100,000 sq ft UK 1 (m sq m) New Second hand H17 Take-up of warehouse space >5,000 sq m France 2 (m sq m) H17 Take-up of warehouse space Poland 1 (m sq m) Q17 Net demand Lease renewals 1 Source: JLL 2 Source: CBRE 43

44 European industrial and logistics availability statistics Availability of Grade A warehouse space >100,000 sq ft UK 1 (m sq m) New / Early Marketed Second hand H Availability of warehouse space >5,000 sq m France 2 (m sq m) H Warehouse space under construction and vacancy rate Poland 1 (m sq m) Q17 Pre-let Speculative Vacancy (RHS) 15% 10% 5% 0% 1 Source: JLL 2 Source: CBRE 44

45 Heathrow Airport cargo and passenger volumes Heathrow Airport cargo volumes (million metric tonnes) Heathrow Airport passenger volumes (millions) Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 10yr ave Rolling annual 10yr ave Rolling annual Source: Heathrow Airport 45

46 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 because they relate to events and depend upon circumstances that may occur in the future. There are a number of factors which could cause actual results or developments to differ materially from those expressed or implied by these forward looking statements and forecasts. The statements have been made with reference to forecast price changes, economic conditions and the current regulatory environment. Nothing in this presentation should be construed as a profit forecast. Past share performance cannot be relied on as a guide to future performance. 46