Segro PLC (LON:SGRO) saw a record level of development completions in 2017, almost all of which have been leased, helping drive its profits higher.
The FTSE 100-listed industrial property developer said its adjusted pre-tax profit increased by 25.7% to £194.2mln in the full-year to 31 December 2017, up from £154.5mln a year earlier.
The group put down the improvement to its focus on customer and portfolio management delivering high customer retention rates, like-for-like rental growth and a low vacancy rate.
The warehousing specialists said its future earnings prospects were underpinned by 1.2mln square metres of development projects under construction or in advanced pre-let discussions, equivalent to almost one-fifth of our current portfolio.
It added that the current development pipeline is capable of generating £43mln of rent, equating to a yield on cost of nearly 8%, over half of which has been secured through pre-lets and lettings prior to completion
Segro pointed out that it completed £2.7bn of financing activity in 2017, including a rights issue, which reduced the group’s average cost of debt to 2.1% and improved the efficiency and strength of its balance sheet.
Early 2018 demand strong
David Sleath, Segro’s chief executive, said: “Occupier demand in early 2018 is strong across all our markets and supply of modern warehouse space remains constrained.
“The prospects for rental growth, particularly in the UK, remain good, and rental values are improving in our Continental Europe urban warehouse portfolio. Investor appetite for prime warehouses remains unsated, attracted by the occupational market fundamentals.”
The firm increased its final dividend by 6.1% to 11.35p, up from 10.7p in 2016.
In late morning trading, SEGRO shares were up 7.1% at 594.8p.