Bank and Bondholder presentation 19 September 2013 0 Geopost, - PowerPoint PPT Presentation

Bank and Bondholder presentation 19 September 2013 0 Geopost, Enfield

Agenda  Welcome and strategic overview (David Sleath, CEO)  Operational and financial performance (Justin Read, Group Finance Director)  Funding overview (Andrew Pilsworth, Head of Corporate Finance)  Wrap-up (David Sleath, CEO) and Q&A  Appendices 1

SEGRO attendees Andrew Pilsworth David Sleath Justin Read Head of Corporate Finance CEO Group Finance Director Octavia Peters Shilpa Mandalia Simon Clubbs Head of Tax & Corporate Treasury Dealer Group Tax Manager Finance Manager 2

Strategic Overview 3 Selig, Slough Trading Estate

A clear strategy to create a successful income-focused REIT GOAL THE BEST OWNER-MANAGER AND DEVELOPER OF ‘INDUSTRIAL’ PROPERTIES AND A LEADING INCOME-FOCUSED REIT OUR STRATEGY DISCIPLINED OPERATIONAL CAPITAL ALLOCATION EXCELLENCE ALLOCATE CAPITAL TO THE DELIVER GREAT CUSTOMER MARKETS AND ASSETS LIKELY TO SERVICE AND OPTIMISE PRODUCE THE BEST RISK- PERFORMANCE FROM OUR ASSETS ADJUSTED RETURNS EFFICIENT CAPITAL AND CORPORATE STRUCTURE UNDERPIN OUR PROPERTY PERFORMANCE WITH AN EFFICIENT AND PRUDENT CAPITAL STRUCTURE AND LEAN SUPPORT FUNCTIONS 4

Progress against strategic priorities Strategic Priorities Achievements  1. Recycle capital out of non-core assets: £1.6bn £985m of disposals, including 4 of the “Big Six” non-strategic - Older property or management intensive characteristics assets  - Weaker or sub-scale markets Average exit yield of c.7%  Remaining non-core assets of £560m  2. Reinvest in growth areas Development expenditure incurred or committed since 2011 - “Edge of town” warehousing & “higher value uses” in major of £236m; typical yields on total development costs of 8% - conurbations 10%  - Larger bulk distribution warehouses in key markets for national / £379m spend on acquisitions; average yield of c.7% regional logistics OPERATIONL EXCELLENCE  3. Capital Management Borrowing reduced by £725m (pro-forma), LTV from 48% to - Reduce borrowings: targeting 40% LTV over medium term 44% (“look through” basis)  - Utilise 3 rd party capital to enhance returns and fund growth Creation of pan-European logistics property JV with PSP, announced July 2013 ALLOCATE TO THE MARKETS AND DELIVER GREAT CUSTOMER ASSETS LIKELY TO PRODUCE THE  SERVICE AND OPTIMISE 4. Operational excellence to drive portfolio returns Vacancy rate reduced from 11.4% to 8.9% BEST RISK-ADJUSTED RETURNS  PERFORMANCE FROM OUR ASSETS - Leasing & development pre-lets £33m of new annualised income generation since H1 2011 - Customer relationship management of asset optimisation (existing buildings only)  - Operational efficiency and cost reduction 43 development projects completed or started with annualised rental income of £30m  Cost ratio down from 30% to 23% EFFICIENT CAPITAL AND CORPORATE STRUCTURE UNDERPIN OUR PROPERTY PERFORMANCE WITH AN EFFICIENT AND PRUDENT CAPITAL STRUCTURE AND LEAN SUPPORT FUNCTIONS 5

Key trends supporting our strategy Limited supply of modern Attractive structural demand drivers warehouse assets  Growth in internet retailing, convenience shopping and B2B UK supply (millions sq ft) distribution requiring local delivery/fulfilment solutions 30  On-going supply chain improvements by retailers, manufacturers 25 & third party logistics providers 20  Increasing need for electronic data storage solutions driving 15 demand for data centres 10 5  Recovery in high-tech/engineering-led production 0 H2 H2 H2 H2 H2 H2 H2 H1 2006 2007 2008 2009 2010 2011 2012 2013 Source: JLL UK online retail sales UK e-commerce related parcel volume increase Global data volume increase (£ billion) (billions of items) (zetabytes) 60 2.5 40 35 50 2 30 40 25 1.5 30 20 1 15 20 10 0.5 10 5 0 0 0 2012 2017 2012 2017 2012 2020 Source: IMRG, 2013 Source: Forrester, European online retail forecast 2013 Source: Capital Science Corporation, 2013 6

Land bank well located to capitalise on the favourable demand/supply dynamics Current land holdings by value (as at 30 June 2013) Residual land bank £86m (231 ha) Potential development Current projects projects £200m (310 ha) £49m (31 ha) Potential development projects  £77m of potential future annual rent  £608m estimated development costs  9.5% estimated yield on TDC 1  12.7% estimated yield on new money 7 1 Total development cost (including land)

€1bn Continental European logistics JV to take advantage of growth opportunities  50/50 JV with PSP to create a leading Continental Europe logistics platform  Seeded with SEGRO’s €1 billion Continental European logistics portfolio, including 84 hectares of development land  Provides access to long term capital to accelerate growth and take advantage of consolidation opportunities in Continental Europe  Leverages SEGRO’s asset management platform, generates management and development fees, improves risk adjusted returns  In line with strategic objective to increase use of third party capital  Net disposal that reduces on balance sheet leverage Built Assets Location 8 Land Holdings Location

Summary  Strong operational performance  Significant progress with strategic portfolio repositioning  Investment market strengthening  Well positioned for future growth Creating the best owner-manager and developer of industrial properties and a leading income-focused REIT 9

Operational Performance Justin Read Finance Director 10

Strong operational performance Interim results for the 6 months to 30 June 2013  122 new lettings generating £16.7m of new rental income (up 30%) - £2.6m additional rental income in solicitors’ hands  53 lease re-gears and renewals, securing £7.5m of rental income - Retention rate of 75% (H1 2012: 63%)  Group vacancy rate 9.5% (core: 8.1%), or 8.9% pro forma for after period end disposals  £126 million invested or committed to developments; 9% yield on cost  Further reduction in administrative expenses 11

Financial highlights Interim results for the 6 months to 30 June 2013  EPRA PBT down £5.9m despite £26.6m NRI impact of disposals/ Neckermann  Further reduction in central costs and in cost ratio adjusted for Neckermann  Dividend maintained  Stable asset values  Balance sheet strength – significantly greater financial flexibility to reinvest 12

Net rental income lower due to net effect of capital recycling and Neckermann £7.0m £(19.5)m £6.2m £2.1m £(7.1)m £(0.6)m £(0.3)m £130.9m £118.7m H1 2012 H1 2012 Currency Developments Acquisitions Disposals Neckermann Like for like net Surrender H1 2013 H1 2013 translation impact rental income premiums & other 13

Further cost savings achieved (including vacant property costs) 35 EPRA total cost ratio 1 (%) 30.4% 29.9% 28.1% 30 24.5% 23.5% 25 22.9% 22.4% 20 Excluding Neckermann 15 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 H1 2013 H1 2013 H1 2012 Change £m £m % Gross rental income (inc. share of JVs) 165.3 176.5 (6.3) Property operating expenses (25.9) (26.0) (0.4) Administrative expenses (12.1) (13.1) (7.6) Net JV costs (0.8) (0.6) 33.3 Total costs (38.8) (39.7) (2.3) 14 1 Total costs as a percentage of gross rental income. Total costs include vacant property costs

EPRA NAV per share unchanged 1.8p 9.2p (9.9)p (1.1)p 294p 294p EPRA NAV per EPRA NAV per EPRA EPS FX movements Dividend Realised and share as at 31 share as at 30 unrealised December 2012 June 2013 valuation movements 15

Positive portfolio valuation movements H1 2013 Core warehouse portfolio by asset type 2.5%  2.0% Core ‘industrial’ +0.8% 1.5% 1.0% 0.5%  Offices 0.0% 0.0% -0.5% -1.0% -1.5%  Non core (2.4)% Logistics Light industrial & Data centres Other business urban distribution space H1 2013 Core warehouse portfolio by geography  Total portfolio +0.3% 4.0% 3.0% 2.0% 1.0%  IPD UK Index 0.0% -1.0% - All property (0.4)% -2.0% -3.0% - Industrial 0.0% -4.0% Heathrow Park STE LPP Rest of Germany France Poland Royal Greater London 16 Valuation including joint ventures at share (including land and development) and in relation to the completed properties only

Significant reduction in pro forma look through LTV ratio  £855 million of net proceeds receivable in H2 2013  Used to pay down net debt and pursue profitable reinvestment opportunities  Pro forma on balance sheet net debt of £1.3bn 2 at 30 June 2013 (3)% (4)% (1)% 52% 44% IQ Winnersh SELP Neckermann LTV ratio at Pro forma LTV ratio 30 June 2013 at 30 June 2013 Gross proceeds 1, 5 (£m) 571 2 245 39 Book value 1 (£m) 416 3, 4 228 39 Share of JV bank debt 1 (£m) n/a 166 n/a 1 Based on average and closing exchange rate for H1 2013 of €1.17 / £1 2 Includes £129m of deferred consideration from PSP and £4m gain on sale from 7% coupon on deferred consideration. Net of SEGRO equity contribution to SELP and £3m of transaction costs incurred to date 17 3 50% of value of properties sold 4 Excludes £30m to acquire Belgian JV assets and capex 5 Gross proceeds before rent guarantees, top ups and transaction costs

Funding strategy Andrew Pilsworth Head of Corporate Finance 18 Geopost, Enfield