17 February 2023
If you are covering Segro’s full year results, please see the following comment from Oli Creasey, equity research analyst at Quilter Cheviot:
"Segro’s full year results are painful, but no more than expected. The NAV was down -15%, driven by outward yield shift on the industrial properties held by the company.
"That yield shift was widely expected, given the rises in interest rates observed over H2’22. However, our feel is that investors and commentators have been fixated on the yields, which are only half of the valuation story. In H2, values fell -17%, but this fall would have been much worse had rents not been growing at the same time – like-for-like net income was up almost +7% on the year, and the market ERV grew +11% (and at a steady rate comparing H1 to H2).
"Early indications are that the investment market has now begun to stabilise, and Segro management appear to agree, having the confidence to increase their spending on development land (the most volatile part of the market) at current prices. The short term outlook for yields is still somewhat uncertain – more outward shift wouldn’t be a huge surprise, although not of the magnitude of 2022 (+100bps), but the outlook for rent growth is universally strong."
