Segro sees profits rise and ups its dividend payout

Segro shares jumped sharply in early morning trading on Friday, becoming the top riser on the FTSE 100 index.

The real estate investment trust saw its adjusted full-year pre-tax profit increase by 20 per cent to £356million, amid strong rental growth demand in key cities like London and Paris, where land is in short supply.

The group upped its full-year dividend by 10 per cent to 24.3p, its results today revealed. 

Boss David Sleath said: ‘2021 was a highly successful year for Segro as reflected in our full-year results which include a £4.1billion portfolio valuation uplift and record levels of rental growth. 

‘Investor and occupier supply-demand dynamics in the industrial and logistics sector remain very favourable, led by the long-term trends of digitalisation, supply chain resilience and an increasing focus on sustainability.’    

He added: ‘Our established and experienced pan-European operating platform remains focused on delivering excellence in customer service which, when combined with the strong relationships and reputation that we have with our stakeholders, provides us with a distinct advantage in an increasingly competitive sector. 

‘These capabilities enabled us to invest almost £2billion in 2021 to further expand our pipeline of opportunities to support future growth. 

‘This pipeline, alongside the high quality of our existing portfolio, the compounding effect of rental growth and the strong start we have made in 2022, gives us continued confidence in our ability to drive further sustainable growth in earnings and dividends over the coming years.’

The group’s share price increased by around 4 per cent earlier today, but is currently up around 0.5p to 1,278.00p. 

The FTSE 100-listed group highlighted that strong occupier demand, customer focus and the active management of its portfolio generated £95million of new headline rent commitments during the period.

This included £49million of new pre-let agreements, and a 13 per cent average uplift on rent reviews and renewals. 

Segro also saw a 15 per cent increase in adjusted earnings per share to 29.1p, and a 40 per cent rise in its adjusted net asset value per share to 1,137.0p, driven by portfolio valuation growth of 29 per cent.

Victoria Scholar, head of investment at Interactive Investor, said: ‘While the pandemic has expedited existing shifts and created existential questions for many sectors of the property market including office space and high street retail, there has been a boom in demand for industrial property rentals, driven by the surge in e-commerce, a shift that Segro has benefited from. 

‘As a result Segro was able to raise its final dividend by 11 per cent to 16.9p. The explosion of “Q-commerce” services or quick commerce, referring to on-demand delivery of groceries and other goods looks set to provide a major tailwind for Segro over the coming year as well.

‘Although shares have been struggling since the start of the year, Segro has still rallied more than 50 per cent since March last year with the potential for further upside to retest the recent highs.’     

Colm Lauder, real estate analyst at Goodbody, said: ‘Segro is operating well ahead of expectations and delivered its most impressive year yet in 2021 given the buoyancy of the logistics property market. 

‘The strong revaluations continued to be supported by healthy occupier demand and an ambitious development pipeline, all of which added to the rent roll and provides for future growth avenues. 

‘Growth is expected to be highest where developable land is in short supply, for example in urban markets such as London and Paris. Segro also note that the supply and demand imbalance has created significant accumulated rental reversion in the portfolio. 

‘The high inflationary environment is not a concern and they expect to be able to offset these by capturing the significant reversion in lease reviews and renewals as well as benefiting from indexation provisions in its leases. This remains one to own.’