Segro beats on full-year EPS, but analysts see room for improvement

Segro beat analysts' direst post-Brexit predictions with both its full-year earnings per share and net asset value coming in ahead of forecasts, thanks to the robustness of the industrial property markets.

Indeed, the property developer touted the resilience shown by occupier and investor demand for modern warehousing throughout the period, especially from retailers racing to adapt their supply chains to the rapid growth of internet retailing.

In adjusted terms earnings per share were higher by 7.1% to 19.7p (consensus: 19.6p) with like-for-like net rental income ahead by 4.0%.

On an IFRS basis EPS was 53.9p, down from 91.7p in 2015.

Commenting on the results, David Sleath, Chief Executive, said: "We have a high quality pipeline of developments under construction and more under discussion, reflecting the continuing strength of occupier demand for, and short supply of, well located, modern urban and big box warehouses."

Sleath stressed how the Slough-based company had delivered 422,000 sq km of new warehouse space during the year, of which 80% was now let.

The vacany rate came in at 5.7%, with the company describing it as low.

EPRA net asset value per share up 8.0% to 500p, driven by a 4.8% like-for-like which the company linked to growth in the value of the portfolio, reflecting development gains, UK rental growth and asset management activities.

ANALYSTS SEE ROOM FOR IMPROVEMENT ...

Robert Duncan at Numis on the other hand had a more critical view on the company.

In a research note sent to clients the day before, ahead of the latest set of figures from the company, he said: "Our view on SGRO, however, is more holistic, and we continue to note that for all the success of those high quality assets surrounding London there are a number where the rental prospects are weaker, not least in Central and Southern European countries where SGRO continues to lack scale despite an attempt to build it over a number of years. We continue to believe that SGRO P/L could be more streamlined, and feel that the investment case would be enhanced if SGRO dividend yield was more closely aligned to the yield on its assets than the current c.3.5%."

Looking to the future, Sleath struck an upbeat note, saying: "Notwithstanding the current degree of political and economic uncertainty. We have had an active start to 2017 and we continue to see opportunities to grow our business through further disciplined investment, matched by a prudent approach to financing."

The final dividend was hiked by 5.7% to 11.2p versus 10.6p for 2015.