Segro: Warehousing giant’s profit hits £200m as UK property values increase

Warehousing giant Segro has seen its profit soar to more than £200m after the value of its UK properties increased for the first time in two years.

The London-listed company increased its pre-tax profit to £227m in the first six months of 2024, up from £198m in the same period last year.

Segro said this increase had been driven by its focus on European locations with a limited supply of warehousing and key big box markets.

The company’s UK portfolio saw a value increase of just under one per cent – the first positive change since 2022.

However its Central European portfolio decreased in value by 1.4 per cent during the six months, following a 5.1 per cent drop in its 2023 financial year.

In total, Segro had a property portfolio worth £17.8bn by the end of the period.

David Sleath, chief executive, said: “Segro has continued to perform well during the first half of 2024, signing £48m of new rent.

“The balance of supply and demand for modern warehouse space remains supportive of further rental growth and development gains in the attractive European markets in which our portfolio is concentrated.

“Valuations have stabilised with the UK seeing its first increase since the cycle turned in 2022. The strength of our local networks and balance sheet have enabled us to invest selectively in profitable new opportunities, putting to work some of the capital raised in February.

“In a sector that continues to benefit from long-term, attractive structural drivers, Segro is well placed for further growth through a combination of active asset management of our irreplaceable, prime portfolio of existing assets and our profitable development programme, which includes a sizeable data centre pipeline.

“These factors, together with the competitive advantage of our market-leading operating platform, give us confidence that we will continue to deliver attractive and compounding increases in both earnings and dividends.”

“The results investors have been waiting for”

Oli Creasey, property analyst at Quilter Cheviot, described these latest results from Segro as a “welcome return to growth”.

He said: “Segro’s half year results appear to mark an inflection point in the values of its UK industrial property portfolio, with property values nudging up +1% during the period.

“It’s a relatively small move, but with values having been on a downward trajectory since mid-2022, it’s a welcome return to growth, nonetheless.

“Segro also has a European property portfolio, where values fell marginally over the same period, meaning the overall property revaluation was flat over the HY.

“The indication is that values are expected to find a trough in Europe in the very near future – it’s possible that this data set will prove to be the low point. However, it’s clear that Continental valuation trends are trailing those in the UK by several quarters, despite rate cuts first occurring in Europe.

“The company’s Net Asset Value (NAV) has slightly underperformed these metrics, down -1.8% because of an equity raise that took place in February. But the company’s operations remain strong, with rents up over +5% on a like-for-like basis, and development completions adding a further £27m of new rent to the income statement as well. Earnings have increase by +7%, and the company’s dividend has grown by +5%.

“These are the results that a lot of property & REIT investors have been waiting for – providing further evidence that property values in the right sectors and right geographies have bottomed out and returned to positive growth.

“Those previously concerned with catching a falling knife can now start to buy with increased confidence that the danger of further capital losses (assuming no shocks such as spiking inflation/higher interest rates) are over, at least for the time being.”