6th Nov 2008 07:00
SEGRO PLC INTERIM MANAGEMENT STATEMENT 6 November 2008
SEGRO plc today announces its interim management statement for the nine months ended 30 September 2008.
Key Points
* Continuing robust performance from existing tenant base, despite worsening
market environment * Maintaining good momentum in leasing activities, particularly in Europe
* Development starts significantly reduced and focused on areas of highest
market demand
* Strong financial discipline with tight control of capital expenditure and
costs Occupier market conditions
* The Group has continued to maintain good momentum in its leasing
activities, letting a total of 457,000 sq m in the nine months to the end
of September, compared with 397,000 sq m in the equivalent period last
year. 174,000 sq m was let in the third quarter of the year (2007: 86,000
sq m). * The overall vacancy rate was 9.5% at the end of September, a slight increase from the 9.3% seen at the end of June and entirely due to development completions in the period.
* We have seen no increase in the level of tenant insolvencies and rents have
continued to be paid in line with previous experience. Nonetheless, we are
monitoring our customers carefully in anticipation of some weakness in the
months ahead.
* Enquiries for new space have slowed in the UK in the third quarter,
although are still at similar levels seen in the corresponding periods in
2006 and 2005; enquiry levels in Continental Europe have remained good,
particularly in Poland.
Development activity
* We have made good progress with our existing development schemes,
comprising a combination of pre-lets and speculative product, underpinned
by good demand. 308,000 sq m of developments have been completed in 2008
(151,000 sq m in Q3), 68% of which has been let or sold, whilst 42% of the
285,000 sq m of developments under construction, has already been pre-let
or sold.
* As noted at the time of our Half Year Results Announcement in August, new
construction starts are being tightly controlled. Notwithstanding the
current robust occupier demand being experienced in certain markets, we are
being very cautious about any new speculative development starts.
Property values
* As previously reported, SEGRO's UK investment property portfolio recorded a
10.4% reduction in value for the six months ended 30th June 2008, partially
offset by a surplus of 0.7% in Continental Europe.
* Since then, the severe stress in global financial markets has continued to
have a negative effect on investment market conditions, with property
values showing further declines.
* Whilst the next valuation of the Group's properties will not be until 31
December, the Investment Property Databank (IPD) indicates that capital
values of UK industrial properties have declined by 6.1% over the third
quarter of 2008 (a decrease of 14.0% in capital values from December 2007).
Due to the relative scarcity of transactions in the market, the IPD index
may not be fully reflective of the "true market". * In Continental Europe, investment market conditions are also weakening. Accordingly, we expect there to be a softening of yields in Continental Europe in the second half of the year but, as with the UK, there is relatively limited market evidence to guide valuers.
Financial position:
* In the nine months to the end of September, SEGRO has invested c.‚£179m in
its development pipeline and has realised c.‚£264m of cash from disposals,
leaving the Group with net debt of c.‚£2,190m.
* Cash and un-drawn debt facilities at the end of September were c.‚£808m.
* SEGRO has a widely diversified funding base. Approximately ‚£1bn of borrowings are syndicated with a strong group of banks. A further ‚£1.3 billion of term funding is provided by 7 separate, unsecured fixed rate Sterling Eurobond issues held by institutional investors.
* The average maturity of outstanding debt is 9.5 years and only ‚£140m of the
Group's committed facilities are due for repayment or rollover before the
end of 2009. OutlookGeneral economic conditions across the UK and Europe have deteriorated markedlyover recent months. Whilst we have made good progress with our own letting anddevelopment programme, we are cautious about the outlook both for occupiermarkets and investment markets. We anticipate some weakening in demand forindustrial space in the months ahead and expect property values to show furtherdeclines until such time that debt markets stabilise.In this environment, we are exercising strong financial discipline and expectto commence relatively little by way of new developments, particularly those ofa speculative nature. We continue to pursue opportunities to generate cash fromdisposals where acceptable prices can be achieved.
Ian Coull, Chief Executive said:
"Our carefully planned development programme which has been concentrated inattractive markets, coupled with our active approach to asset and customermanagement, has enabled us to continue delivering excellent letting results.Nonetheless we are cautious about the near term outlook for our markets and forproperty values.Looking further ahead, I believe there will be some very attractive investmentopportunities in the coming years. We are managing the business in a cautiousand disciplined manner to ensure that SEGRO is well placed to take fulladvantage of such opportunities."
Ends
CONFERENCE CALL FOR INVESTORS AND ANALYSTS
There will be a conference call for investors and analysts at 9:30 AM today GMT, hosted by Ian Coull, Chief Executive, and David Sleath, Finance Director.
To participate in the call, please dial:
UK Tel: 0203 037 9101 International Tel: +44 203 037 9101 US Tel: +1 646 843 4608
For further information please contact:
SEGRO Tel: +44 1753 213 400 Tamarin Shore Maitland Tel: + 44 207 379 5151 Colin Browne / Liz Morley About SEGROSEGRO is the leading provider of Flexible Business Space in Europe.Headquartered in the UK, SEGRO is listed on the London Stock Exchange and onEuronext in Paris. The Company is a UK Real Estate Investment Trust (REIT) withoperations in ten countries, serving a diversified base of 1,700 customersoperating in a wide range of sectors, representing both small and largebusinesses, from start-ups to global corporations. With property assets of ‚£5.1billion as at 30 June 2008 and around 5.0 million sq m of business space, SEGROhas an annual rent roll of approximately ‚£290 million (Note: these metricsinclude trading properties, development assets and the Group's share of jointventures). www.segro.com APPENDIX
Details of recent transactions and performance in 2008 include:
UK
Lettings
* c.114,000 sq m of space has been let in the nine months to the end of September (2007: c.152,000 sq m). * c.40,000 sq m of space was let in the third quarter, the same as in the comparable period in 2007.
* Pre-let of c.10,800 sq m data centre facility to Equinix (London) Limited
in October 2008. Vacancy Rates
* The vacancy rate improved marginally to 11.1% compared to the position at
the end of June. Development
* c.18,000 sq m of developments have been completed so far this year of which
58% have been pre-let or sold.
* c.59,000 sq m of space is currently under construction of which c.66% has
already been pre-let or sold.
Disposals
* c.108,000 sq m of non-core industrial assets were disposed of in August and
September for ‚£110m at 2.8% less than the June 2008 book value (comprising
63,000 sq m to The Crown Estate and c.45,000 sq m to a client of Protego
Real Estate Investors LLP).
CONTINENTAL EUROPELettings
* c. 293,000 sq m of space has been let in the nine months to the end of
September (2007: 214,000 sq m) of which c.119,000 sq m was let in the third
quarter (2007: 46,000 sq m).
* Letting highlights in the third quarter included 17,000 sq m to Ernst &
Young in Pegasus Park 1 (Belgium), 20,750 sq m to Hammer GmbH in Krefelder
(Germany), 17,500 sq m let to ABX Logistics in Alzenau (Germany), 10,600 sq
m to Cerva Logistics in the Czech Republic, 12,200 sq m to Cosmetic Essence
in Strykow F (Poland), and 15,700 sq m to ...»abka Polska in Komorniki 2A
(Poland).
* Of the 46,000 sq m pre-lets signed in the third quarter, c.30,000 sq m were
in Poland. In addition, a 6,000 sq m pre-let was signed with SAP at
Vimercate Energy Park (Italy).
Vacancy Rates
The vacancy rate increased from 6.8% in June to 7.9% at the end of September due to development completions in the third quarter.
Development
* c.290,000 sq m of developments have been completed, with c.68% already
pre-let or sold.
* c.226,000 sq m of additional space is under construction, of which c.36%
has already been pre-let or sold; of this, approximately 110,000 sq m is in
Central Europe of which c.35% has been pre-let or sold. We continue to
experience good levels of enquiries for new space in most Continental
European markets.
Disposals
* Sale of c.29,200 sq m logistics scheme in Hungary on 5th November to SEB
for c.¢â€š¬20m.
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Note: Lettings include licenses
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