Segro said it was ‘well-placed to deliver attractive returns’ in 2024 on Friday as it released full-year results.
The Real Estate Investment Trust manages 10.4 million square metres of warehousing and industrial in the UK and across Europe.
The rising interest rate environment hasn’t been kind to real estate companies, but Segro today demonstrated it was adapting to higher borrowing costs and successfully passing them on to customers in the form of higher rents. Elevated interest rates weighed on the portfolio’s NAV which fell 6.1%.
The company has a strong landbank and investors will be encouraged by the ability to grow rental income amid economic concerns.
Segro’s like-for-like rental income grew 6.5% over the past year as total rental income, including new completions, rose 12.5%.
Higher rents were being passed on to investors in the form of a 5.7% increase in the full-year dividend.
“Segro investors have endured a bumpy ride over the last couple of years. However, this morning’s strong earnings report will give shareholders a lot to be positive about. An increase in pre-tax profits and rental incomes, while great news for Segro, is perhaps an even bigger reflection of a resilient economy, highlighting the strong demand for commercial premises,” said Mark Crouch, analyst at eToro.
“The warehouse and industrial property owner expects to increase passing rents by more than 50% over the next three years and while macroeconomic and geopolitical uncertainty remain heightened, Segro has kept up their glowing trend of increasing the dividend, something they’ve done each year for over a decade.”
Segro were confident the year ahead would be more favourable for the company and said they were ‘well-placed to deliver attractive returns and continued growth in earnings and dividends.’
“SEGRO delivered a strong operating performance in 2023, despite the weaker macroeconomic backdrop. Significant rental uplifts on the standing portfolio and our profitable development programme have driven further growth in both earnings and dividends,” said David Sleath, Chief Executive of SEGRO.
“Last year, tighter monetary conditions resulted in a modest, yield-driven valuation decline; however, we are reassured by continued rental growth across our markets. Market expectations for lower interest rates, if sustained, provide a positive backdrop for a recovery of investment market sentiment as the year progresses.”
