17th Feb 2017 09:03
LONDON (Alliance News) - SEGRO PLC was the best performer on the FTSE 250 on Friday morning after its net asset value rose in 2016 and it said there has been little apparent impact from the Brexit vote on occupier or investor demand for warehousing.
Shares in SEGRO were up 3.6% at 500.40 pence on Friday morning.
"The UK's decision to leave the European Union has undoubtedly caused uncertainty for the property industry generally. It is likely to take months, if not years, for occupier demand to adjust to the new situation, so we are not complacent about the impact it could have on our business," the mid-cap warehouse property investor said.
However, SEGRO noted that it has seen "little, if any, impact on occupier and investor demand" for its warehouses since the referendum result, and said there is currently "no evidence of over-supply" in any of its markets.
Alongside this, although the scope for further yield compression is "limited", SEGRO said both rental growth and development profits should provide support for the value of our portfolio in 2017.
The positive outlook came as SEGRO reported EPRA net asset value per share of 500.00p at December 31, up 8.0% over the year, driven by a 4.8% like-for-like increase in the value of its portfolio to GBP6.34 billion from GBP5.78 billion.
However, this GBP246.0 million growth in valuation was much smaller than last year, when its valuation surplus came in at GBP461.5 million. As such, its IFRS earnings per share declined 41% to 53.90p from 91.70p.
On an adjusted basis, though, earnings per share rose 7.1% over the year to 19.70p from 18.40p the prior year.
SEGRO said the increase in both net asset value and adjusted earnings per share came thanks to development gains, UK rental growth and asset management activities.
SEGRO said it invested GBP90.0 million buying modern warehouses in the year, at an average topped-up net initial yield of 6.3%, and focused on expanding in its existing markets during the year.
Around GBP325.0 million was raised in new equity, which SEGRO said will be used to fund development that has been invested or committed to projects identified in December.
Its current land bank can support 2.7 million square feet of development it said, with the land bank identified for future development valued at GBP392.0 million.
SEGRO reported 6.0% growth in the UK net rental income over the year, offsetting the 0.7% decline in Continental Europe, reflecting lower vacancy throughout the year and strong rental growth in the UK.
SEGRO contracted GBP45.0 million of net rent in the period, up 14% year-on-year, and its vacancy at the end of the year came in at 5.7%. This was slightly up from 4.8% the prior year, primarily as a result of speculative development completions during the year and the expected take-back of large UK warehouse in November.
Looking to 2017, SEGRO said it expected development capital expenditure to be in excess of GBP300.0 million. Its committed development pipeline is 61% pre-let and expected to deliver GBP27.0 million of headline rent.
SEGRO declared a final dividend of 11.20p per share, taking its dividend for the year to 16.40p per share, up 5.1% from the 15.60p per share offered a year earlier.
"Occupier demand remains strong from a broad range of business sectors, particularly from retailers adapting their supply chains to the rapid growth of internet retailing," SEGRO said in a statement.
By Hannah Boland; [email protected]; @Hannaheboland
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