The Segro Plc Board has concluded that it is appropriate to recommend an increase in the final dividend per share by 1.3 pence to 18.2 pence (2021: 16.9 pence) which will be paid as an ordinary dividend. The Board’s recommendation is subject to approval by shareholders at the Annual General Meeting, in which event the final dividend will be paid on 4 May 2023 to shareholders on the register at the close of business on 17 March 2023.
In considering the final dividend, the Board took into account:
- the policy of targeting a payout ratio of between 85 and 95 per cent of Adjusted profit after tax;
- the desire to ensure that the dividend is sustainable and progressive throughout the cycle; and
- the results for 2022 and the outlook for earnings.
The total dividend for the year will, therefore, be 26.3 pence, a rise of 8 per cent versus 2021 (24.3 pence) and represents distribution of 85 per cent of Adjusted profit after tax.
The Board has decided to retain a scrip dividend option for the 2022 final dividend, allowing shareholders to choose whether to receive the dividend in cash or new shares. In 2021, 41 per cent of the 2021 final dividend and 3 per cent of the 2022 interim dividend were paid in new shares, equating to £79 million of cash retained on the balance sheet.
Other financial highlights include:
- Adjusted pre-tax profit of £386 million up 8.4 per cent compared with the prior year (2021: £356 million). Adjusted EPS increased by 6.5 per cent to 31.0 pence (2021: 29.1 pence, 28.0 pence excluding the 1.1 pence SELP performance fee recognised in 2021 resulting in a 10.7 per cent increase).
- Adjusted NAV per share down 15.0 per cent to 966 pence (31 December 2021: 1,137 pence) driven by a portfolio valuation decline of 11.0 per cent (2021: 13.1 per cent increase, H2 2022 16.6 per cent decrease). This was primarily driven by market-wide yield expansion in the second half, partly offset by estimated rental value growth (ERV) of 10.9 per cent, portfolio asset management successes and development profits.
- Net rental income of £522 million, up 18.9 per cent (2021: £439 million), driven by strong like-for-like rental growth of 6.7 per cent and development completions.
- Strong occupier demand, with customer focus and active management of the portfolio generating a record £98 million of new headline rent commitments during the period (2021: £95 million), including £41 million of new pre-let agreements, and a 23 per cent average uplift on rent reviews and renewals.
- Net capital investment of £1.3 billion (2021: £1.5 billion) in asset acquisitions, development projects and land purchases, less disposals.
- 639,200 sq m of development completions delivered during 2022, at a yield on cost of 7.4 per cent. 80 per cent of this is already let to customers from a diverse range of sectors.
- Continued momentum in the development pipeline with 915,600 sq m of projects under construction or in advanced pre-let discussions equating to £86 million of potential rent, of which 75 per cent has been or is expected to be pre-let, supporting growth in earnings over the year ahead and into 2024.
- Significant progress with their Responsible SEGRO strategic priorities, de-risking and investing in the future of their business, including a ten per cent reduction in the average embodied carbon intensity of their development programme; the launch of ten Community Investment Plans (CIPs); and meaningful changes to promote diversity and inclusion across their business.
- £3.1 billion of new financing helping to maintain their long-average debt maturity of 8.6 years and providing high visibility on funding costs with no significant near-term debt maturities. Average cost of debt at 31 December 2022 of 2.5 per cent, and interest cover of 4.5 times.
- Strong balance sheet providing capacity to invest in their development programme and allowing us flexibility to make further commitments. They have access to £2.2 billion of available liquidity and a modest level of gearing reflected in LTV of 32 per cent at 31 December 2022 (31 December 2021: 23 per cent).
