Segro plunges to main loss as interest rate rises and financial uncertainty hit real estate valuations

  • The property developer mentioned web rental earnings rose by 18.9% to £522m final yr
  • It posted a £1.97bn pre-tax loss, in contrast to a £4.4bn revenue the earlier yr
  • Interest charges hikes have led to a devaluation within the group property portfolio 

Segro acquired a document stage of rental earnings in 2022, though this failed to cease the agency from plummeting to a loss following a droop within the worth of its property portfolio.

The industrial property developer mentioned web rental earnings rose by 18.9 per cent to £522million final yr, thanks to improvement being completed on virtually 640,000 sq. metres of latest house and robust demand within the UK, Germany and France.

Rent roll additionally grew by a document £98million as the corporate signed new leases with information centre operators benefiting from a cloud computing growth and a number of clients within the transport and logistics industries.

Results: SEGRO said net rental income rose by 18.9 per cent to £522million last year, although it still posted a pre-tax loss of £1.97billion (Pictured: SEGRO Logistics Park, Northampton)

Results: SEGRO mentioned web rental earnings rose by 18.9 per cent to £522million final yr, though it nonetheless posted a pre-tax loss of £1.97billion (Pictured: SEGRO Logistics Park, Northampton)

Amazon continued to be Segro’s largest buyer, having snapped up a big quantity of warehouse house within the early levels of the Covid-19 pandemic when on-line retail was booming.

Yet the enterprise posted a pre-tax loss of £1.97billion, in contrast to a £4.36billion revenue the earlier yr, as property valuations tumbled amid rising world financial volatility.

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The Bank of England and different central banks have hiked interest charges on quite a few successive events to attempt to dampen hovering inflation ensuing from loosening Covid-19 restrictions and the Ukraine battle.

This has pushed up borrowing prices and depressed demand to lease warehouses, main Segro’s funding and buying and selling portfolio to be devalued by roughly £2.2billion final yr.

In the UK, the London-based agency’s belongings recorded a 15.5 per cent decline in worth, having grown by greater than a 3rd in 2021, whereas they contracted by 8.8 per cent in Continental Europe.

Nonetheless, the group famous that the necessity for warehouses remained considerably elevated, with occupancy charges at 96 per cent, and mentioned it was well-placed to profit from the traits in the direction of urbanisation and e-commerce.

It added that the majority of its websites have been positioned in important clusters the place land provide is low and sure to stay stunted by increased financing and building prices even with growing demand, thereby offering a bump to rental earnings. 

Chief govt David Sleath remarked: ‘Our fashionable, well-located and extremely sustainable warehouses proceed to be in excessive demand from a various vary of occupiers, underpinned by long-term structural drivers.

‘Our technique over the previous decade has centered on cultivating a novel portfolio positioned in essentially the most supply-constrained European city and logistics markets, backed by a robust stability sheet to allow SEGRO to outperform via the property cycle.’ 

Segro’s most distinguished websites embrace the Slough Trading Estate close to Heathrow Airport, house to the UK headquarters of Mars, Ferrari’s Northern European division and Belgian pharmaceutical group UCB. 

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SEGRO shares closed buying and selling 3.6 per cent up at 866.2p on Friday, making them the most important riser on the FTSE 100 Index. Over the previous 12 months, although, they’ve dived by round 35 per cent.

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