Segro Plc Earnings Call: Balanced Outlook Amid Growth and Challenges

Segro Plc (Reit) ((GB:SGRO)) has held its Q2 earnings call. Read on for the main highlights of the call.

The recent earnings call for Segro Plc (Reit) presented a balanced outlook, reflecting both strengths and challenges. The company showcased strong performances in its existing portfolio and promising developments in the data center sector. However, challenges in the pre-let markets and geopolitical uncertainties were also highlighted as factors impacting growth prospects.

Strong Portfolio Performance

The existing portfolio has demonstrated impressive growth, with a 7.8% increase in like-for-like net rental income. This growth has been a significant driver for the 6.5% rise in earnings per share, underscoring the robust performance of Segro’s core assets.

Dividend Growth

Segro continues its tradition of rewarding shareholders with a 6.5% increase in earnings and dividends per share. The company has recommended an interim dividend of 9.7p, marking a 12-year streak of annual dividend growth, which reflects its commitment to delivering consistent returns to investors.

Data Center Expansion

The company is making significant strides in expanding its data center platform. Plans include a 2.3 gigawatt land-enabled power bank and a joint venture to develop its first fully fitted data center, highlighting Segro’s strategic focus on tapping into the growing demand for data infrastructure.

Asset Value Stabilization

Segro’s portfolio value has increased to GBP 18.5 billion, with a slight uptick in like-for-like valuation. This indicates a stabilization in asset values, providing a solid foundation for future growth.

Strong Balance Sheet

With a loan-to-value ratio of 31% and nearly GBP 2 billion in liquidity, Segro maintains a stable A- credit rating. This strong financial position equips the company with the flexibility to pursue growth opportunities as they arise.

Slower Pre-Let Markets

The European pre-let markets have experienced a slowdown over the past 18 months, attributed to macro and geopolitical uncertainties. This has impacted development prospects, presenting a challenge for Segro’s expansion plans.

Reduced CapEx Guidance

Due to lower-than-expected pre-let signings, Segro has reduced its CapEx guidance for FY ’25 to GBP 400 million. This adjustment reflects the cautious approach the company is taking in response to current market conditions.

Geopolitical and Macro Uncertainty

Geopolitical and macroeconomic issues have delayed significant investment decisions and affected occupier decision-making. These factors continue to pose challenges for Segro’s growth trajectory.

Investment Activity

Investment activity has resulted in a net loss of GBP 3 million of income, primarily due to higher-than-normal disposals in 2024. This reflects the company’s strategic repositioning efforts amidst a challenging market environment.

Forward-Looking Guidance

CEO David Sleath emphasized key performance metrics during the SEGRO Half Year 2025 Results Call. The company reported a 7.8% growth in like-for-like net rental income, leading to a 6.5% increase in earnings per share. The portfolio’s value rose to GBP 18.5 billion, with a NAV per share increase to 910p, marking the first uptick since 2022. Despite slower pre-let markets, development prospects are improving, with a promising near-term pipeline. An interim dividend of 9.7p was declared, aligning with past growth trends. Segro is advancing its data center platform, focusing on sustainable and diversified growth.

In summary, Segro Plc’s earnings call highlighted a balanced perspective, with strong portfolio performance and strategic data center expansion being key positives. However, challenges in the pre-let markets and geopolitical uncertainties remain hurdles. The company’s robust financial position and strategic focus on growth provide a solid foundation for navigating these challenges and capitalizing on future opportunities.