Bank and Bondholder presentation 21 March 2012 0
Agenda � Overview and Strategy � 2011 Results and 2012 Outlook � Funding and Treasury overview � Summary and Q&A � Appendices 1
Overview and strategy David Sleath, Chief Executive 2
SEGRO today – a strong platform for an income-focused REIT � A leading European REIT � industrial specialist � an attractive asset class 68% � Strong market positions with excellent quality assets 32% � UK: London & SE England � France/Germany/Poland UK Continental Europe � High quality, diversified customer base � £333m of annualised rental income; 1,600 customers 17% � Experienced operational team 54% � Leasing, customer & asset management, development � Local expertise in each key market 21% Key statistics at 31 December 2011 8% Net initial yield (%) 6.4 Net true equivalent yield (%) 7.8 Industrial Logistics Weighted average lease term to expiry (years) Offices & other business space Development & land 8.2 Adjusted NAV (per share) (pence) 340 * JVs included at 100% 3 Gearing (loan to value ratio %) 50
Industrial – an attractive asset class IPD Total Returns % by Economic Cycle IPD Income Returns % by Economic Cycle (annualised to 2010) (annualised to 2010) 10 16 9 14 8 12 7 10 6 5 8 4 6 3 4 2 2 1 0 0 1986-1995 1996-2004 2005-2010 1986-1995 1996-2004 2005-2010 Industrial Office Retail All Property Industrial Office Retail All Property IPD Income Returns % from 1986 to 2010 IPD Total Returns % from 1986 to 2010 (annualised to 2010) (annualised to 2010) 9 12 8 10 7 6 8 5 6 4 3 4 2 2 1 4 0 0 Industrial Office Retail All Property Industrial Office Retail All Property
Industrial and logistics focus – an attractive asset class Logistics warehousing Logistics warehousing Industrial Logistics � Multi occupier estates with buildings in � Large distribution warehouses – typically various sizes 10,000 sq m and above � Located in and around conurbations � International, national and regional distribution � Light industrial and similar uses � Ports, airports and transportation corridors � Urban logistics serving conurbations Good yield with the potential for rental Higher yield with limited cost leakage & potential to scale up with 3 rd party capital growth & alternative use upgrade 5
Well-located industrial land provides potential to develop higher value uses Illustrative rental levels – South East England (Rent per sq ft) 35 £23-30 30 £24-25 25 20 £16 £12.5-15.5 £9-15 15 £9-12 10 £6-7 5 0 Older Modern Other high Airport Data Airport Suburban industrial industrial value uses (landside) centres (airside) Offices 6
A strong platform to create a successful income-focused REIT GOAL: High quality, progressive, sustainable dividends and NAV growth STRATEGY TO CREATE VALUE FOR SHAREHOLDERS: Disciplined Operational Capital Excellence Allocation • Leasing, Customer & Asset • Right Portfolio Shape nManagement • Active Portfolio Management • Development • Right Capital Structure • Operational Efficiency A STRONG Industrial and Strong Experienced Diversified PLATFORM logistics market positions operational customer FOR focus base team 7 SUCCESS:
Disciplined capital allocation Right portfolio shape Active portfolio management Right capital structure � Critical mass in strongest � Moderate gearing levels European markets • 40% LTV target � Prime, modern assets � Focused use of third-party capital � • Enhance risk-adjusted Low vacancy, sustainable returns portfolio • Facilitate growth / achieve competitive � Modest land holdings scale 8
Challenges with existing portfolio � Large, long-term development sites � Mid-long term upside inadequate Sub-urban office parks to justify short-term dilution � Older & more secondary industrial estates and/or � Investments in smaller/weaker markets causes cost inefficiency � Sub-scale investments in certain locations Split of current portfolio 9% 16% 75% Core Smaller non-core industrial holdings and land Large non strategic assets 9 *Based on December 2011 valuations with JVs @ 100%
Four key strategic priorities to create a successful income-focused REIT Re-shape the existing portfolio 1 � Divest assets which do not fit our strategic criteria � Reduce land holdings and other non-income producing assets as a proportion of the total portfolio 2 Re-invest – grow AUM in a smaller number of markets through development and acquisition � Light industrial in the largest and most vibrant conurbations � Logistics assets in major distribution markets � Exploit opportunities to create higher value uses on industrial land 3 Reduce financial leverage over time and introduce third-party capital � 40% mid-term LTV target 4 Retain focus on operational excellence and drive further improvements 10
Early progress with strategic priorities � New organisation structure announced and implemented � COO and CIO roles created � Non-core disposals � £111m smaller, secondary estates sold in 2011 � £80m divestment of five estates to Ignis in February 2012 � Guidance: £300-500m disposals in 2012 � Acquisition of UK Logistics Fund in partnership with Moorfield � £314m portfolio of prime logistics warehouses 11
2011 Performance Justin Read, Finance Director 12
Operational excellence created strong earnings momentum for FY 2011 � £38.4m of new annualised rental income from existing space and pre-lets Leasing, � Transactional rental values 1.7% above December 2010 ERVs Customer and � Lease incentives of 11% Asset � Retention rate up to 74%, takebacks down 28% to £21.0m Management � Vacancy rate 9.1% � 14 developments completed; £9m annualised rental income Development � 20 developments under construction or contracted – 78% pre-let � Current pipeline £117m capex and £19m annualised rental income � Total costs down by 15% year on year (£15m) Operational � Cost ratio reduced to 24.3% Efficiency � New management and operating structure to drive further efficiencies in 2012 and beyond 13
Key financial highlights 2011 2010 Change % EPRA PBT (£m) 138.5 127.3 8.8 EPRA EPS (pence) 18.4 17.1 7.6 Dividend per share (pence) 14.8 14.3 3.5 2011 2010 Change % EPRA NAV per share¹ (pence) 340 376 (9.6) Net borrowings (£m) 2,303.4 2,203.2 4.5 LTV (%) 50 46 1. EPRA NAV per share and excluding fair value of interest rate derivatives but including trading property uplifts 14
Strong operating performance delivered 8.8% EPRA PBT growth 2011 2010 £m £m Gross rental income 326.1 344.6 Property operating expenses (54.9) (62.5) Net rental income 271.2 282.1 Joint venture management fee 5.9 1.9 Share of joint ventures’ EPRA profit after tax 1 16.6 10.8 Administration expenses (32.1) (39.2) EPRA operating profit 261.6 255.6 Net finance costs (excluding fair value movements on derivatives) (123.1) (128.3) EPRA profit before tax 138.5 127.3 1. Net property rental income less administrative expenses, net interest expenses and taxation. 15
Good progress with cost reduction 35 30.4% Total cost ratio* (%) 29.9% 30 28.1% 24.3% 25 20 2008 2009 2010 2011 2011 2010 Movement (£m) (£m) (%) Property operating costs 54.9 62.5 (12.2) Administration expenses 32.1 39.2 (18.1) *Total costs as a percentage of gross rental income. Total costs include property operating expenses 16 (net of service charge income and management fees) and recurring administration expenses.
FY 2011 EPRA PBT bridge (£m) 5.2 138.5 7.1 (10.9) 127.3 5.8 4.0 17 EPRA PBT 2010 Net rental income JV management fee Share of JV EPRA PBT Administrative expenses Net finance cost EPRA PBT 2011
FY 2011 cash flow summary 2011 2010 £m £m Cash flow from operations 239.0 244.9 Net finance costs (120.3) (141.1) Dividends received (net) 10.4 8.8 Tax paid (4.9) (6.0) Free cash flow 124.2 106.6 Capital expenditure (excluding trading properties) (187.1) (61.1) Investment property sales (including joint ventures) 79.9 397.0 Investment in joint ventures (15.9) (193.5) Net settlement of derivatives (8.1) 23.4 Dividends paid (107.4) (82.8) Other items 7.9 4.1 Net funds flow (106.5) 193.7 18
FY 2011 EPRA NAV per share bridge (pence) (1) 19 (1) (3) (15) (35) 376 340 EPRA NAV per share EPRA PBT Exchange rate Other Unrecognised Dividends Realised and EPRA NAV per share as 31 Dec 2010 movement valuation movement unrealised valuation as 31 Dec 2011 on trading properties movement (including JVs) 19
FY 2011 core and non-core valuation movements* Property assets H1 2011 (£m) H2 2011 (£m) Core 19.9 (54.6) Non-Core (33.6) (187.0) Total (13.7) (241.6) 50 Valuation movement (£m) 0 -50 -100 -150 -200 Core Non-Core 20 *Valuation movement relates to the total portfolio (completed properties, land and development). Joint ventures shown at share.
Funding and Treasury Andrew Pilsworth, Head of Corporate Finance 21
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