2016 Half Year Results Summary Strong operational performance - - PowerPoint PPT Presentation

2016 Half Year Results — Summary

• Strong operational performance

– Favourable occupational market fundamentals – Step-up in development – Active asset management

• Stable investment market

– Portfolio outperformance from active management, rental growth and development

• Substantial de-risked development pipeline

– Underpins future earnings growth

Too e early ly t to assess ‘B ‘Brexit it’ ’ im impacts but in init itia ial s l sig igns are e encouragin ing

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Financial Summary

• Good earnings momentum

– Healthy like-for-like net rental income growth – Strong contribution from development – Offsets loss of income from disposals

+6. 6.5% 5%

Adjusted EPS, 9.8p

+4. 4.1% 1%

Like-for-like net rental income growth

4. 4.8% 8%

Vacancy rate (FY 2015: 4.8%)

• 2.6% increase in NAV

– Capital value growth from asset management actions, developments and UK ERV growth – Stable yields

475p 475p

EPRA NAV per share

+1. 1.9% 9%

Capital value growth

• Strong financial structure

– Net divestment during the period

36% 36%

Loan to Value ratio (FY 2015: 38%)

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(£20m) £0m £20m £40m £60m £80m £100m £120m Greater London Thames Valley & National Logistics Northern Europe Southern Europe Central Europe Total

+2.5% +1.1% (0.4)% +1.2% +0.9% +1.5%

1 Percentage change relates to completed properties, including JVs at share. 2 Includes big box warehouses part of the Greater London portfolio

ERV gr growth 3. 3.6% 6% 2. 2.1% 1% 0. 0.1% 1% (0.2)% 0. 0.1% 1% 2. 2.0% 0% UK: 2. 2.9% 9% Cont

• nt. Eur

urope pe: 0 0.0%

UK UK +1. 1.9% 9% Slough Trading Estate +0.5% Park Royal +4.4% Heathrow +1.1% UK big box logistics2 +1.0% Cont ntine nent ntal E Eur urope pe +0. 0.4% 4% SELP +0.6% SEGRO wholly-owned +0.2%

Portfolio value change driven by asset management and ERV growth1

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1 Based on gross debt, excluding commitment fees and amortised costs 2 Net rental income / EPRA net finance costs (before capitalisation) on an annualised basis 3 Fixed for an average period of 6.8 years 4 Marginal borrowing costs after commitment fee

30 J June une 2016 2016 £m 31 D Dec ecem ember er 2015 2015 £m Group o up onl nly Net borrowings (£m) 1,707 1,807 Group cash and undrawn facilities (£m) 440 234 Weighted average cost of debt1 (%) 3.7 3.7 Interest cover2 (times) 2.4 2.5 Inc ncludi uding J ng JVs at s sha hare Net borrowings (£m) 2,112 2,193 LTV ratio (%) 36 38 Average maturity of debt (years) 6.3 6.0 Fixed rate debt as proportion of net debt (%) 83 75 Weighted average cost of debt3 (%) 3.4 3.5

• Net debt (incl JVs) fell £81m

reflecting net divestment during the period

• Attractive marginal cost of Group

bank borrowings of c1.3% (UK) and 0.7% (CE)4

• No scheduled Group debt

maturities until mid-2018

• Estimated development capex:

FY 2016: c£300m FY 2017: c£250-300m

Solid financial position

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Delivering on our strategic priorities in H1 2016

Asset M Mana nage gement nt Dis Disposals als Acqui quisitions ns

• Record low vacancy rate of 4.8%
• 4.1% like-for-like net rental

income growth

• 3.9% uplift from rent reviews and

renewals

• Lower priority given asset pricing
• £14.5m spent on urban

warehouses in Continental Europe

• £44m spent on land and £49m
• n land options
• £383m of disposals completed in

the period

• Bath Road offices £325m
• SELP transfers €97m1
• Other non-strategic £20m

1 At 100%

Dev evel elopmen ent

• 14 projects completed: £10m

potential rent, 83% leased

• Leasing of speculative projects

ahead of appraisals

• 10 pre-let agreements signed in

the period

Innova Park, Enfield Coslada, Madrid Gatwick International Distribution Centre Leased Acquired Sold

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5 10 15 20 (15.9) 5.5 8.8

Like-for-like net rental income Completed developments Acquisitions Disposals

Capital value growth of £108m

H1 2016 portfolio realised and unrealised valuation movement, £ millions

Net rental income growth of £4.3m

H1 2016 accounting net rental income, £ millions

20 40 60 80 100 120 Held throughout Acquisitions Development Total portfolio Asset disposals 1.1% (6.7)% 14.2% 1.9% 0.4%

…leading to strong operating and capital performance in H1

3.8

NAV pe per s sha hare up 2. up 2.6% 6% t to 475p 475p Adj djus usted d EPS up 6. up 6.5% 5% to 9. 9.8p 8p

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Significant development momentum

Compl pleted de d developm pment nts Ne Near-term pi pipe peline ne ( (12 12-18 m 18 mont nths hs) Cur urrent nt pi pipe peline ne ( (c6-8 m 8 mont nths hs)

• £82m of capital invested
• £10m of potential rent, 83%

secured

• Fully-let yield of 7.9%
• £210m invested; £125m cost to

complete

• £26.5m rent, 67% pre-let
• 7.9% yield on cost
• £228m of potential capex
• £24m of rent
• 63% of rent associated with pre-lets

signed or in advanced discussion

12 Liverpool Road, STE – spec, now let as data centre Navigation Park, Enfield Beam Reach 5, East London

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Further development opportunities

Fut utur ure pi pipe peline ne o

• n

n cur urrent nt land b nd bank nk ( (1-5 ye year ars)

• SEGRO-owned land bank
• £900m potential capex (excl land)
• £100m potential rent

Land unde nd under opt ption ( n (1-10 y 10 years)

• SEGRO control
• £850m potential capex (incl land)
• £70m potential rent

Current land bank

(30 June 2016)

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276.4 30.7 9.8 26.5 24.3 319.0 369.8 Annualised gross cash passing rent1, £ millions

1 Including JVs at share; excludes rental value of vacant properties of £17.5m 2 Estimated. Excludes rent from development projects identified for sale on completion

2.1

30 Jun 16 Rent in rent-free Reversion to ERV 2015/16 speculative developments still to let Potential (completed properties) Rent from current pipeline (67% let) Near-term pipeline Potential (total) Land bank Land held under option

Substantial opportunity to grow rental income

1002 702 £93.4m from near-term opportunities £170m from medium/long-term opportunities

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Outlook

• Optimistic about occupational markets
• Structural demand drivers, supply likely to remain constrained
• Too early to assess the impact of the EU referendum
• Encouraging early signs
• Asset values likely to out-perform wider real estate market
• Well positioned to take advantage of suitable investment opportunities

Fut utur ure earni nings ngs gr growth h unde underpi pinne nned by d by de developm pment nts

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APPE PPENDIX IX

0% 20% 40% 60% 80% 100% 2012 2013 2014 2015 2016 Pre-let Speculative Let at 30 Jun 16

Rapid leasing of speculative space

(Letting status of development completions in 2012-16, %)

Near-term pipeline (12-18 months)

Spe pecul ulat ative ve pr projects (165,000 sq q m)

• Significant optionality over timing,

depending on strength of occupier demand

• Focused on urban warehouses in

Continental Europe (84% potential rent)

• £68m future development capital

expenditure

• Projected annual rents of £9m
• 9.1% yield on TDC

Pr Pre-let pro rojects (328, 328,000 s 000 sq m)

• Involve pre-let agreements signed

subject to planning permission or in advanced negotiation

• Continental Europe 68%;

UK 32%

• £160m development capital

expenditure

• Projected annual rents of £15m
• 7.4% yield on TDC

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Cur urrent nt pi pipe peline ne ( (440,500 sq m q m)

• £125m development cost to complete
• Projected annual rents of £26.5m, 67% pre-let
• 7.9% estimated yield on total development cost2

Logistics 28%

Current development projects, asset type by ERV1

(30 June 2016)

Logistics 49%

Development projects by type and geography

Germany 26% UK 21%3 Italy/Spain 20%3 Poland 11% France 8%3

Future pipeline, geography by ERV1 3

(30 June 2016)

Fut Futur ure pi pipe peline ne (2.4m s sq m q m)3

• £950m estimated development costs
• £106m of potential annual rent, 8.5% estimated yield on TDC2
• 40% ERV from urban warehouses

1 Including joint ventures at share 2 Total development cost includes land 3 Excludes potential developments on land held under option.

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Building scale in Italy through Vailog

One Express, Bologna Geodis, Bologna Dascher, Paris 71.4 152.5 17.5 33.1 30.5 50 100 150 200 250 Acquisition Investment Value uplift June 2016 Dvpt pipeline Italy France

• Vailog acquired in June 2015 with €89m of

standing assets, land and development in Italy and France

• AUM in Italy already projected to be near

€200m by end-2016

• Accretive developments:
• Compl

pleted: d: 111,000 sq m in Milan and Piacenza, pre-let to OVS and Leroy Merlin

• Un

Underway: way: 147,000 sq m pre-let projects to TNT, One Express, ExorNaturasi, Yoox in Paris, Milan and Bologna

• In

n the he pi pipe peline ne: 240,000 sq m pre-let agreements in France and Italy

• Three assets in Italy transferred into SELP during

the period

• 13% capital gains since acquisition

Assets under management from Vailog acquisition, €m 14

Future opportunities under option — East Plus

• 1.4m sq ft of urban distribution space in a major regeneration area of London
• Capex of c£180m over 10 years
• Partly funded by sales of completed assets when fully let
• 2016

2016 — Be Beam R Reach h 5 P 5 Pha hase 1: 1: Planning permission granted; £30m capex, 240,000 sq ft, 7.3% yield on TDC

• 2017

2017 — Jenk nkins ns Lane ne P Pha hase 1: 1: Pre-let discussions for 120,000 sq ft warehouse; £27m capex, 6.1% yield on TDC

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• Exclusive partnership with Roxhill
• Potential to create 10m sq ft of big box logistics in

Midlands and SE England over 10 years

• Small initial investment; potential total investment of
• ver £800m at blended 7% estimated development

yield

• Optionality over development timing
• Taken control of sites at Kettering and East Midlands

Gateway during H1

1

Coventry (2 sites)

2

East Midlands Gateway

3

Dartford

4

Kettering

5

Maidstone

6

Northampton

7

Reading

8

Rushden

10

Wellingborough Tilbury

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SEGRO existing asset

Future opportunities under option — Roxhill

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Future opportunities under option — East Midlands Gateway

M1 East Midlands International Airport

Airport freight volumes, 2015

Heathrow 65% East Midlands 13% Stansted 9% Manchester 4% Gatwick 3% Others 6%

• 5.8m sq ft of big box logistics space
• Adjacent to East Midlands International Airport – 2nd

largest cargo airport in the UK; 24-hour operations

• Capex of £330m over 10 years, including

infrastructure and land cost

• Initial interest in first two units

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0.00 1.00 2.00 3.00 4.00 Poland Euro area Germany France Italy United Kingdom

GDP growth expected across our major markets1

(% pa, 2015-18e)

0% 5% 10% 15% 20% 25% 20 40 60 80 100 2014 2015 2016e 2017e 2018e 2019e 2020e

Rapid growth of online retail sales continues2

(Volume of UK online sales (£bn) and as % of UK retail sales)

E-commerce sales % of total retail sales 2 4 2011 2012 2013 2014 2015 H1 2016 UK Grade A demand not being satisfied by supply3

(million sq m of Grade A take-up vs supply)

Average availability Take up Sources: 1 Economist Intelligence Unit July 2016, 2 eMarketer June 2016, 3 JLL (H1 2016 take-up reflects rolling annual take-up), 4 CBRE, Bloomberg (data at period-end)

• 2

2 4 6 8 10 2009 2010 2011 2012 2013 2014 2015 1H16 Attractive prime yield spread over risk free rates4

(Prime yields vs UK and German 10y bond yields, %)

UK Poland Germany France UK 10y Germany 10y

Market backdrop has remained supportive

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0.0 0.5 1.0 1.5 2.0 2.5 0.0 1.0 2.0 3.0 2011 2012 2013 2014 2015 H1 2016

• No. of years’ supply

Take-up / availability, m sq m Average availability Take-up Available space as multiple of annual take-up

UK Big Box supply-demand dynamics1

(m sq m)

1 Source: JLL (logistics warehouses >100,000 sq ft, Grade A); H1 2016 take-up is rolling annual take-up 2 Source: JLL

Speculative UK Big Box completions2

(m sq m)

0% 2% 4% 6% 8% 10% 12% 14% 0.0 1.0 2.0 3.0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 1H16 Under construction UK big box warehouse vacancy rate Completions, m sq m Construction Outside core market Vacancy

Supply of UK big box warehouses falling behind levels of demand

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0.0 0.5 1.0 1.5 2.0 2.5 3.0 UK Germany France Belgium Neth. Poland Italy Spain Pre-let Speculative Logistics space under construction1

(m sq m)

1 Source: 1Q 2016, JLL 2 Source: CBRE; take-up for H1 2016 reflects rolling annual take-up

European industrial and logistics supply dynamics

0.0 0.5 1.0 1.5 2.0 2.5 0.0 1.0 2.0 3.0 4.0 5.0 2010 2011 2012 2013 2014 2015 1H16

• No. of years’ supply

Take-up / availability, m sq m Average availability Take-up Available space as multiple of annual take-up

France logistics supply-demand dynamics2

(m sq m)

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• €1.20:£1 as at 30 June 2016
• € assets 89% hedged by € liabilities
• €214m (£178m) of residual exposure – 5% of Group NAV
• Illustrative NAV sensitivity vs €1.20:
• +5% (€1.26) = –c£8m (c.1.1p per share)
• 5% (€1.14) = +c£9m (c.1.2p per share)

Loan to Value (on look-through basis) at €1.20:£1 is 36%, sensitivity vs €1.20:

• +5% (€1.26) LTV -0.7%-points
• 5% (€1.14) LTV +0.8%-points
• Average rate for 6 months to 30 June 2016 €1.28:£1
• € income 53% hedged by € expenditure (including interest)
• Net € income for the period €25m (£20m) – 19% of Group
• Illustrative annualised net income sensitivity versus €1.28:
• +5% (€1.34) = –c.£1.9m (c0.2p per share)
• 5% (€1.22) = +c.£2.1m (c0.3p per share)

500 1,000 1,500 2,000 2,500 Other Euro liabilities Euro currency swaps Euro debt Euro gross assets 10 20 30 40 50 60 Euro income Euro costs Balance sheet, £m

30 June 2016

Income Statement, £m

H1 2016

Assets 89% hedged Income 53% hedged

Euro currency exposure and hedging

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200 400 600 800 1,000 1,200 2016 2017 2018 2019 2020 2021 2022 2023 2024 … 2035 SEGRO bonds SEGRO bank debt JV debt at share SEGRO undrawn

Debt maturity profile at 30 June 2016, £m

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This presentation may contain certain forward-looking statements with respect to SEGRO’s expectations and plans, strategy, management’s objectives, future performance, costs, revenues and other trend information. These statements and forecasts involve risk and uncertainty because they relate to events and depend upon circumstances that may occur in the future. There are a number of factors which could cause actual results or developments to differ materially from those expressed or implied by these forward looking statements and forecasts. The statements have been made with reference to forecast price changes, economic conditions and the current regulatory environment. Nothing in this presentation should be construed as a profit forecast. Past share performance cannot be relied on as a guide to future performance.

Forward-looking statements

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Har Harry Stok Stokes Head of Investor Relations & Research +44 (0) 20 7451 9124 harry.stokes@segro.com

Contact details

29 July 2016

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