Segro ‘far more optimistic’ for 2010 than year gone

Segro said the industrial occupier market was stabilising and it made a positive start to the integration of rival Brixton, acquired last summer.

Cost savings of £12.8m a year had been delivered after the takeover of Brixton, which brought with it 3.2m sq ft in Trafford Park to add to its 2.5m sq ft at Heywood Distribution Park (pictured) in Rochdale. In addition to ongoing savings, Segro, which has extensive assets across Europe as well as the UK, incurred one-off exceptional costs of £10.7m after the acquisition.

Commenting on the company's performance in the 12 months to the end of December 2009, Ian Coull, chief executive of Segro, said: "2009 was one of the most extraordinary years in Segro's 89-year history. Faced with the twin headwinds of rapidly falling asset prices and a weakening global economy at the start of the year, with the support of our shareholders we weathered the storm, and completed the transformational acquisition of Brixton.

"Whilst UK commercial property prices have surprised on the upside in the last quarter of the year and the situation in Continental Europe appears to be stabilising, we remain cautious about occupier markets, particularly in the UK where we expect the wider economy to lag much of the Continent for the coming year at least. Nonetheless, the Group is in a strong position and is well placed to benefit from any recovery."

Net rental income across the group rose 10.0% to £269.4m (2008: £244.9m) and pre-tax profit was up 16.8% to £104.3m, reflecting the inclusion of Brixton's results for the last four months of the year.

Group vacancy rate (by rental value) of 13.5% compared with 10.9% at June 2009 and 9.5% at December 2008, mainly down to the higher voids in the Brixton portfolio.

The UK portfolio showed vacancy levels, excluding Brixton assets, of 10.8% compared with 10.3% at June 2009 and 9.1% at December 2008. The increase reflected the disposal of let assets during 2009.

Brixton's portfolio vacancy of 22.1% compared with 20.6% at June 2009, due to the sale of the Great Western Industrial Estate in West London and net takebacks.

Segro said it had seen an encouraging start to 2010 with momentum building up in the lettings pipeline.

Coull added: "We currently have approximately 39,000 sq m under development and a further 10,000 sq m of committed development starts (of which 71% is pre‑let), which is expected to generate income of £10.5m per annum with remaining expenditure to be incurred of approximately £21m.

"In conclusion, whilst markets have come a long way in the last 12 months, the recovery is still in its early stages. We look forward to 2010 with considerably more optimism than was the case a year ago, but our priorities remain largely unchanged."

Net debt at year-end stood at £2.42bn (2008: £2.50bn), with cash and undrawn bank facilities of £824.5m. The adjusted gearing ratio was 91.0% (2008: 119.0%).

Earnings per share were down to 18.3p (2008: 29.1 pence), reflecting a £500m rights issue in April and placing for £242m in July to cover the Brixton acquisition. The group made a loss for the year of £234.1m (2008: £938.1m) and basic loss per share of 41.3p (2008: 312.2p). A final dividend of 9.4p a share, making 14p for the full year (2008: 13.7 pence), is proposed.