LONDON (ShareCast) - Industrial property giant, Segro, grew the value of its portfolio by 12.9% to £4.8b in 2014 as it stayed on track of its three-year repositioning programme which saw the disposal of assets worth £1.6b.
"The portfolio re-positioning strategy is substantially complete and the tangible benefits are showing through," said chief executive David Sleath. Since 2012, Segro has been shedding assets which were no longer core to its strategy and instead investing in the development of new buildings in its core markets such as the UK and Continental Europe.

As such, the group has parked that cash it has raised from the disposals into logistics real estate as it seeks to gain more exposure to internet retailers and distributors. "Consumers across Europe continue to embrace e-commerce and convenience retailing which are driving a wave of demand for warehouse space," said Sleath.

In response to the shift to logistics from traditional High Street stores, Segro said that it is now building 240,000 sq m of new space and said that its already well-located (for logistics) strategic land bank potentially can deliver an additional 1.6 million sq m in the medium term.

Despite the fall in annual revenue to £290m in 2014 form £339.8m in 2013, Segro reported that pre-tax profits more than tripled to £654.4m last year from £212.1m, boosted by more than £400m in realised and unrealised property gain.

The group also reduced the net debt on its balance sheet by around £650m, or 28%, improving the loan to value ratio to 40% from a peak of 52%. As a result, the group's net asset value increased by 23%, allowing it to deliver a historically low vacancy rate of 6.3% together with 2.4% growth in like-for-like rental income.

Investec Securities expect Segro to continue benefiting from both structural growth and the cyclical recovery. "A high single digit NAV growth outlook coupled with an above sector average dividend yield (3.6%) remain attractive," added the broker.

Looking ahead, Segro said its appetite for investment is likely to remain strong, "supported by relatively high yields, the on-going low interest rate environment, quantitative easing in the euro zone and rental growth in U.K. industrial markets."

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