SEGRO H1 2025 Earnings Report

SEGRO EPS Results

• Actual EPS: GBX 18.10
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

SEGRO Revenue Results

• Actual Revenue: N/A
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

SEGRO Announcement Details

• Quarter: H1 2025
• Date: 7/31/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, July 31, 2025
• Conference Call Time: 3:30AM ET

SEGRO (LON:SGRO) is a UK Real Estate Investment Trust (REIT), and a leading owner, asset manager and developer of modern warehousing and industrial property.

SEGRO H1 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Our existing portfolio delivered a 7.8% like-for-like net rental income growth, driving a 6.5% uplift in EPS and marking the first NAV increase since mid-2022.
• Positive Sentiment: Despite a softer European pre-let market, our near-term development pipeline is picking up with advanced deals signaling a return to mid- to high-single-digit EPS and dividend growth.
• Positive Sentiment: We’re expanding our data centre platform with a 2.3 GW land-enabled power bank and a joint venture to develop a 56 MW fully fitted data centre, targeting a 9% return on equity.
• Neutral Sentiment: The balance sheet remains strong with a 31% loan-to-value ratio, nearly £2 billion of liquidity and low refinancing needs, supporting future growth capacity.
• Negative Sentiment: Given delayed pre-let signings, FY 2025 CapEx guidance is reduced to ~£400 million, reflecting a slower start to development activity.

Presentation

[Operator]

Ladies and gentlemen, thank you for attending today's Seagull Half Year twenty twenty five Results Call. My name is Ada, and I will be your operator today. I would now like to pass the conference over to our host, David Sviz, CEO of Seagroup. David, please go ahead.

[David Sleath, CEO at SEGRO]

Thank you, Ada. Good morning, everybody. Welcome to our half year twenty twenty five results presentation. Thanks for taking the time to join in on what is clearly a very busy morning for you all. We're going to take a slightly different approach today with audio only webcast, but we're live here in New Burlington Place, and we'll be taking your questions at the end even if you can't see us.

[David Sleath, CEO at SEGRO]

So let me start by highlighting three key points that we'd like you to take away from today's announcement. The first is that our existing portfolio is performing well. We've seen the first NAV uptick since mid-twenty twenty two, consistent with the view that we shared earlier this year that capital values have stabilized. And the active asset management by our teams on the ground has driven an impressive 7.8% growth in like for like net rental income. That's been the key driver of the 6.5% uplift in earnings per share, and it's set to continue.

[David Sleath, CEO at SEGRO]

Second point is that whilst European pre let markets have been significantly slower over the past eighteen months, thanks to the macro and geopolitical uncertainty, which has slowed down occupier decision making. Development prospects are now improving, and our near term pipeline of deals in advanced stages of negotiation has picked up well in recent months. This is an important leading indicator of pre let signings to come. All of this bodes well for the future, meaning that we are well placed to continue delivering mid- to high single digit EPS and dividend growth over the medium term. And then finally, we're progressing with the build out of our data center platform.

[David Sleath, CEO at SEGRO]

We're progressing plans for our 2.3 gigawatt land enabled power bank, and we've signed our joint venture to develop our first fully fitted data center. So we'll go into all of these points in more detail shortly, but first, let me hand over to Sherman, who, for the last time, will be taking you through the key features of today's results. Sherman?

[Soumen Das, CFO at SEGRO]

Thank you very much, David. Good morning, everybody. So starting on Slide four. The key takeaway, as David mentioned, from the first half results is that our leasing activity within the existing portfolio is continuing to drive really attractive earnings and dividend growth. And you can really see that illustrated on the top half of this slide, which is illustrating our key financial metrics.

[Soumen Das, CFO at SEGRO]

We delivered 6.5% growth in earnings and in dividends per share. We're recommending an interim dividend of 9.7p. That's in line with our usual practice of setting at onethree of the prior year's full dividend. But I would just note that we have an exceptional track record of delivering growth in our dividend every year for the past twelve years, and we're well positioned to continue doing this going forward. The portfolio value increased to £18,500,000,000 with a small increase in the like for like valuation, which continues to demonstrate the stabilization asset values.

[Soumen Das, CFO at SEGRO]

NAV per share is up 3p to 9.10p, the first increase since 2022 and further supports our view that we have passed the inflection point in values. And the balance sheet is in good shape with loan to value at 31%, providing considerable capacity for growth. Turning to Slide five now on the income statement. So the wholly owned portfolio saw 10% growth rental income during the period, which I'll break down for you on the next slide. But before we get there, just a couple of things to note on this slide.

[Soumen Das, CFO at SEGRO]

Capitalized interest was £32,000,000 in the first half, similar to the 2024, and we expect the full year number to be around £65,000,000 And on costs, pleasingly, the cost ratio is down for the full year at 19%. I would hope to maintain this in the second half of the year and could potentially reduce this further as we expect our rental income to grow faster than costs. Net finance costs fell £7,000,000 due mostly to interest rates. And also just to note that the differential growth rate between adjusted profit and EPS was down due to the higher average share count this half year as a result of the equity raise and the interim dividend scrip take up during the 2024. Turning to Slide six now and looking at that growth in net rental income in some more detail.

[Soumen Das, CFO at SEGRO]

We delivered strong growth in net rent, up £22,000,000 an increase of 7%. The largest contributor to that growth was the £21,000,000 of rent that we captured from the existing portfolio with an impressive 7.8% like for like growth rate. The UK grew really strongly at 8.4%, benefiting the higher capture of reversion alongside asset management initiatives across the portfolio. The continent showed excellent like for like growth of 6.7%, which we know is well ahead of inflation due mainly to the better performance of our urban portfolio. Development completions added GBP 17,000,000 during the period.

[Soumen Das, CFO at SEGRO]

Investment activity resulted in a net loss of GBP 3,000,000 of income due to a higher than normal amount of disposals in 2024. We expect that impact to be lower going forward as we return to a more normal level of disposals. The last bar of other of £13,000,000 is a mix of take back to development, FX and nonrecurring items like lease surrender premiums. Now looking ahead from here, strong like for like growth, especially from the reversion in the portfolio and new income from the development pipeline will continue to drive rental income strongly in the coming years. Slide seven on the valuation.

[Soumen Das, CFO at SEGRO]

Now the upward trend has continued from last year with a further small increase in asset values in the first half in both The UK and in Continental Europe. And this, along with our investment and development activity, has helped the portfolio grow to £18,500,000,000 Yields pretty flat across the board. ERV group growth for the group was 1%, with The U. K. Delivering 1.4% growth and the continent delivering 0.4%.

[Soumen Das, CFO at SEGRO]

But you can see there are some quite big differences between our markets. Those that have been more active in terms of letting activity saw the strongest growth, particularly The U. K, Germany and Spain. On the other hand, our more development led markets such as Italy and The Czech Republic saw less progression as the absence of large pre let meant there was less evidence to support moving ERVs on. Now you can also see on the boxes on the right hand side that our urban portfolio outperformed the big box, both in The U.

[Soumen Das, CFO at SEGRO]

K. And on the continent, as we typically expect due to the tighter land supply in these markets. Turning now to Slide eight on the balance sheet, which remains in great shape and provides significant firepower for growth with almost 2,000,000,000 of available liquidity. Loan to values increased slightly to 31%. Our credit rating is stable at A minus and our debt metrics are in good shape with net debt to EBITDA 8.8 times and interest cover at over four times.

[Soumen Das, CFO at SEGRO]

And on to Slide nine. We have low refinancing requirements in the next few years due to the financing activity of the past year, including new bonds out of both Seagro and CELP. We've got a diversified long duration debt profile with an average debt maturity of six point six years, which, as you can see in the graph stretching out till 02/1942. Now the graph on the right helped to quantify the impact of what's to come in terms of interest costs from refinancing, and it hasn't changed much since the full year. Based on refinancing debt as it comes due at current rates in the same currency, the overall cost of debt moves up only 10 basis points this year and by 50 basis points to twenty twenty seven, but only up to a level that's still lower than in 2023.

[Soumen Das, CFO at SEGRO]

And as a reminder, that's about £25,000,000 so not immaterial, but it's much, much lower than the reversion we hope to capture in that period. So it absolutely supports the earnings growth going forward. So to conclude from me on Slide 10. The existing portfolio has delivered an impressive 7.8% like for like NRI growth during the 2025, and that's helped support 6.5% growth in earnings and in dividends. That really shows that our business is capable of delivering some of the strongest earnings and dividend growth in our sector even when our development engine is turning more slowly.

[Soumen Das, CFO at SEGRO]

And we believe this growth is sustainable due to the reversion we have available to capture, which Dave will come on to shortly. We saw an increase in NAV for the first time since 2022, supporting our view that we're past the inflection point. And we have a strong balance sheet with limited near term refinancing needs. And so with that, I'll hand you back to David.

[David Sleath, CEO at SEGRO]

Thank you very much, Sherman. Okay. Well, let's now start to dig into those areas that lie behind the financials, starting with the performance from our existing portfolio. As we said before, we have a great portfolio of assets concentrated in Europe's most attractive submarkets, particularly the major business and population centers and distribution corridors. We have an excellent land bank.

[David Sleath, CEO at SEGRO]

We have a market leading operating platform with local teams everywhere dedicated to staying close to customers and other key stakeholders. We believe these factors create a competitive advantage, which help us to deliver great results and source new opportunities. We argue, therefore, that SeaGrow is structurally advantaged to outperform over the medium term. And that advantage is further enhanced by the weighting of our portfolio, with twothree of our economic interests concentrated in the largest, most congested and densely populated cities of Europe, where land supply is highly constrained and, in many cases, shrinking where the occupier base is both diverse and dynamic and where our ability to drive performance through active asset management is strongest. The remaining onethree is represented by Big Box Logistics assets.

[David Sleath, CEO at SEGRO]

Here, we own and manage one of the best positioned, most modern portfolios in Europe, offering stable, secure income with more moderate rental growth and asset management opportunities, but with more development potential. No one else has this quality and structure portfolio, and it's simply irreplicable. Let's now take a moment to talk about occupier demand, which continues to be supported by these four enduring long structural trends. Undoubtedly, these forces have been dampened by the macro over the past eighteen months, most recently by all the noise associated with potential trade wars following Liberation Day. But that said, overall European take up remains close to pre pandemic averages.

[David Sleath, CEO at SEGRO]

But what's been missing from the market are the larger pre let or build to suit projects as occupiers have chosen to delay big investment decisions in the face of this macro uncertainty. We know from direct conversations with customers that they do want to expand and take new space, but uncertainty has meant that they've been less keen to commit to something that might not be fully operational for two or three years. And instead, they're being much more short term focused to often taking secondhand or speculatively developed space to satisfy their immediate needs rather than committing forward. Right now, though, we do feel more optimistic about the market. The e commerce sector is becoming more active again.

[David Sleath, CEO at SEGRO]

One particular global online retailer is out looking for space after a two year hiatus, and we're also seeing new players enter the European market. For example, we've signed six deals with one particular Chinese e commerce business in the last month alone, covering multiple geographies. And we're observing more activity amongst 3PLs. Generally, we're seeing good new inquiries and a strengthening of our pipeline of near term pre lets in recent months. But what have we actually signed in the 2025?

[David Sleath, CEO at SEGRO]

Well, you can see here, it's thirty one million pounds of new rent commitments with the vast majority coming from the existing portfolio. The relatively small contribution from development, which is the red bit of the bar, is reflecting exactly what I've just been talking about. In fact, if you also look at the bar for the second half of twenty twenty four, you'll see that development lettings have been low for a good twelve months. I'll talk about the future pipeline shortly. But in the meantime, our asset management teams have delivered some impressive performance from the existing portfolio.

[David Sleath, CEO at SEGRO]

We signed over 60 lettings of existing space, some with existing occupiers expanding or moving around within the portfolio and also welcomed several new customers into the portfolio. And the logos on the right give you just a flavor of some of the active customers. We've continued to push rents where we can. For example, we achieved a new record rent of £35 per square foot on one of our estates in Park Royal. But the highlight of the period is that we completed over 100 rent reviews, renewals and regears, which have produced about £10,000,000 of new income.

[David Sleath, CEO at SEGRO]

Now with the timing of lease events being weighted to the second half and a more encouraging development picture, we're expecting the second half of the year to be quite a lot stronger than H1 in terms of new rent commitments. Digging into that reversion a bit more, we achieved on average a 55 uplift in our UK rent reviews and renewals, with over 80% being achieved on some leases in Heathrow and East London. This is our fourth consecutive year of impressive reversion capture, and it's set to continue. Meanwhile, occupancy has improved very slightly to 94.3, and retention has stayed very high at 90%. This partly reflects the market dynamics I referred to earlier with more occupiers tending to stay put rather than expand into new space, but it also reflects, I believe, the quality and the mission critical nature of the space we provide, along with our excellent customer service.

[David Sleath, CEO at SEGRO]

You can see here that the portfolio is currently 15% reversionary, most of which has arisen since 2021 and mostly in The U. K. Since we have annual indexation uplifts on the continent. That gives us 116,000,000 of rental uplift to capture, pounds 67,000,000 of which comes up for review or renewal in the next three years. This will more than offset the £25,000,000 impact of refinancing that Shoman told you about and should support attractive earnings and dividend growth even before considering the contribution from development.

[David Sleath, CEO at SEGRO]

Before moving on to development, just a few remarks about our investment activity. We went into quite a lot of detail with our full year results as to our approach to capital allocation and how our focus on total returns drives our portfolio choices. After active and successful year of disposals in 2024, we've not pushed the button on too many sales so far this year. Frankly, that's because investor sentiment has been dampened by the macro, and we feel better pricing will come later. We've remained selective about investment acquisitions.

[David Sleath, CEO at SEGRO]

These, of course, tend to be opportunistic in terms of timing and always depend on us finding the right quality of assets that complement our existing portfolio and offer accretive risk adjusted returns. The acquisitions we completed so far this year have all been via SELP, which included the former Tritex Eurobox assets in Germany and The Netherlands plus a modern logistics partner in Prague, which together represent great additions to the SELP portfolio. Development remains the focus of our capital deployment, given the more attractive returns it offers to us. However, the lower than expected level of pre let signings in the first half does mean that we've pushed back the start dates of some projects, and so we are reducing our CapEx guidance for FY 'twenty five, which we now expect to be around £400,000,000 So let's now talk about development. We completed six projects in the first half, equating to £19,000,000 of new rent.

[David Sleath, CEO at SEGRO]

92% of it was leased as of the June, and it's expected to deliver an attractive yield of 7.7%. All of it was rated BRIAM excellent or higher, reflecting our determination to develop the most sustainable and energy efficient space for our customers. Looking forward, we have £50,000,000 of rent in our current and near term pipeline, pounds 34,000,000 of which is projects currently under construction and £16,000,000 is associated with near term pre lets. Combined, they're expected to deliver a 7.3% development yield. Roughly 50% of it is pre leased or 32% if you look solely at what's under construction.

[David Sleath, CEO at SEGRO]

Now that's lower than our usual 60% to 70% run rate. But as you can see from the chart on the top right, the absolute volume of spec development is actually pretty similar to normal levels. So the missing piece, again, is the big pre lets that I mentioned earlier. Regarding the spec space that's under construction, half of it is in our German urban portfolio, where we're seeing strong demand and about half of that is already leased under offer or part of active leasing conversations. There's also some quite encouraging news potential pre lets, which we refer to as our near term pipeline.

[David Sleath, CEO at SEGRO]

These are projects which are signed subject to some conditionality or where we've agreed terms with the occupier but are going through legal documentation. The volume of these dropped off quite materially during 2024, and you can see that they remained low through to the end of the year. And that explains why we've signed fewer pre lets in the last twelve months. However, as you can also see, it's picked up again. We currently have seven projects in that near term pipeline, representing £16,000,000 of rent.

[David Sleath, CEO at SEGRO]

And while that's not quite back at the level we've been running for most of the last decade, it's much healthier than it was. Behind this, we're discussing about 30 other customer requirements. On top of the current and the near term projects, we have an estimated $356,000,000 of additional rent associated with our remaining land bank, which we'll build out over the coming years. From the bars on the or the pictures on the right hand side, you can see that the opportunity set is weighted slightly towards urban, and it's also weighted more to The U. K.

[David Sleath, CEO at SEGRO]

Than the continent. And you'll see from the map that we have opportunities in most of our existing markets, and what I can tell you is these are absolutely terrific sites in great locations. The returns from this land bank are attractive with an average development yield of about 7.5% or above 10% on a cash on cash basis, excluding the land cost. On top of that, we also have a pipeline of land options providing an additional £123,000,000 of further opportunity. So bringing together the opportunity from our existing portfolio and our development pipeline as we usually do, we still have the ability to more than double our rent roll over the coming years.

[David Sleath, CEO at SEGRO]

The existing portfolio offers the potential to add £255,000,000 through rent freeze burning off, leasing up the vacant space and capturing reversion. The development pipeline offers a further £529,000,000 of opportunity through completing our current and near term development projects as well as building out our land bank and options, including the assumption of PowerShell data centers only. So there's additional upside in the form of redevelopments of existing assets. The chart doesn't factor in any further ERV growth or indexation. It doesn't include the accretive effects of our capital recycling activities, and it doesn't include the potential upside from the development of fully fitted as opposed to PowerChill data centers, which brings me to the final section of our presentation.

[David Sleath, CEO at SEGRO]

As you know, we've been operating in the data center market for over twenty years We have a strong understanding of that market, relationships with the major data center operators and an established data center team. And therefore, we've had a head start on most others in this space. Today, we have 34 data centers leased as powered shells or land leases, and our data center portfolio represents £56,000,000 of headline rent growing to over £60,000,000 with projects under construction, so around 7% or 8% of rent roll. This equates to zero five gigawatt of capacity, and mostly, it's in slough. We've been working hard over the last couple of years to expand the opportunity set by sourcing land and power across the established and emerging data center markets of Europe.

[David Sleath, CEO at SEGRO]

And in February, we shared an overview of our 2.3 gigawatt land enabled power bank, showing the 1.8 gigawatt of development potential, and we also provided an indication of the key markets where this capacity sits. We've not updated the numbers on this slide. We intend to do that annually. However, we have been progressing the pipeline, firming up the certainty and timing of energy commitments and adding to the size of the opportunity. But even what we've shown you here represents a massive opportunity for Seagro.

[David Sleath, CEO at SEGRO]

It's one of the biggest power banks that anyone in Europe controls. It's across multiple geographies with about 30 different sites. Most of these sites are located in attractive established availability zones near major population centers and business centers, where demand is expected to grow faster than the supply of sites with power. In most cases, we have certainty or at least a high degree of confidence that power and planning will be forthcoming. Now given the scale of the opportunity in front of us, we've also been reviewing our data center strategy.

[David Sleath, CEO at SEGRO]

And in March, we announced the creation of a joint venture with Pure Data Centers Limited to develop our first fully fitted data center. This was a neat deal that brought together a piece of land in Park Royal that we'd recently taken back for redevelopment with 70 mega 70 MVA of power that our joint venture partner has brought to the table. Jointly, we intend to develop a 56 megawatt IT load data center that we're targeting to pre let to a hyperscaler on a net lease basis. It's a large potential investment, about GBP 1,000,000,000 of growth capital, but the funding structure using nonrecourse development finance means that our equity commitment is relatively modest. And the anticipated returns are good with a 9% attractive return on equity for Seagram.

[David Sleath, CEO at SEGRO]

By making our first steps into the fully fitted space in this way, Seagram will benefit from the experience and impressive capabilities of our joint venture partner whilst creating a lot of value out of a relatively small plot of land. Today, the JV itself is up and running and is on track to submit a planning consent in the second half of this year, and we're targeting to sign a pre let next year. So with that in mind, what is our data center strategy going forward? It's very clear. It's all about optimizing the value creation opportunity and making the most of the sought after and scarce land and power positions that we control.

[David Sleath, CEO at SEGRO]

Now let me explain what I mean. So in some respects, PowerShells and fully fitted data centers are similar. At least the building structure is going to be the same for each. But for the fully fitted model, we would also build the internal data halls and install the machinery and equipment, so things like backup generators, cooling systems, etcetera, whilst the customer would install and operate their own IT equipment, equipment, so the servers. So there's considerably more technical complexity involved in building a fully fitted data center, which is why we're likely to work with experienced partners on our initial ventures into this space.

[David Sleath, CEO at SEGRO]

There's also a lot more capital intensity involved in developing a fully fitted DC. But since we expect both these models to deliver returns well above capital, there is an attraction in deploying the additional capital into fully fitted DCs since the economic profit generation or the value creation, if you like, should be considerably higher. It's these potentially superior economics that have attracted us to move further up the value curve in the right circumstances so that we can capture more of the economic profit embedded within these rare sites. We're not saying that everything will be fully fitted from here onwards. It's going to be very much a case by case, site by site assessment, evaluating the commercial opportunity, the supplydemand dynamics, the timing considerations and ultimately, the expected returns and the risks involved in each opportunity.

[David Sleath, CEO at SEGRO]

And the truth is there are rarely two sites that will look the same. So we will be flexible in our approach. We've successfully developed and leased over 20 pound shells in recent years, and I'm sure we'll do more in the future. But now we have the capability and the flexibility to follow both models. And indeed, there'll also be some situations where we choose to simply sell the land.

[David Sleath, CEO at SEGRO]

I know the analysts listening today will be keen to get an idea of how many fully fitted data centers we might do, along with the timing and more precise figures to help with the modeling. And I'm afraid we're just not going to provide that information at this stage because there are too many moving parts. But to give you a rough idea, we're currently looking at a handful of sites with something in the region of 300 MVA capacity that could potentially go down this fully fitted route. So to conclude and maybe coming back to the key messages that I shared with you at the start of the presentation. Our prime portfolio of assets in the most supply constrained markets is delivering strong like for like growth in rental income, which is underpinning attractive earnings growth.

[David Sleath, CEO at SEGRO]

Embedded rent reversion plus the leasing up of good quality vacant space will support more of this in the coming years. And we'll add to this through indexation, further market rental growth and the benefits of our active asset management. And there's further upside from development. Right now, development volumes are relatively modest, particularly compared to the past few years and where the future potential sits. But as I've explained, there are encouraging signs that development pre lets are picking up again.

[David Sleath, CEO at SEGRO]

And with over £500,000,000 of estimated rent at a DUI of between 78% compared to the current marginal cost of funding of, say, 4%, there is every reason to believe that as development volumes improve, we can drive our earnings growth rate towards the high single digit level that we've averaged over the past eight years. On top of that, the 1.8 gigawatt of capacity in our land enabled power bank and our flexibility to deliver on this both as powered shells and fully fitted data centers provides us with a very significant further value creation opportunity. These factors mean that Seagrove is well primed to continue delivering profitable growth in both income and dividends in the years ahead. So thank you for your attention. We're going to move now to questions, We'll be joined for those by James Craddock, our U.

[David Sleath, CEO at SEGRO]

K. MD Marcus Simonetti, who runs Continental Europe and Andrew Pillsworth, who leads on data centers. We'll take the first questions from the conference call line, and then we'll go to the webcast. So Ada, I think over to you to run the Q and A, please. If you can, by the way, please

[Operator]

limit Yes, I

[David Sleath, CEO at SEGRO]

was just going say, could you please limit it to one question for Sartus just to give everybody a chance to answer a question?

[Operator]

Thank you so much, David. So first question comes from Frederic Rinard from Kepler Cheuvreux. Please go ahead.

[Frédéric Renard, Co-Head of European Listed Real Estate at Kepler Cheuvreux]

Hi, good morning guys. Thank you for taking my question. Just wanted to come back on one of your comment. You said that you expect H2 to be quite a lot stronger in terms of rent commitment. Just wanting to have a view on where do you think it will happen?

[Frédéric Renard, Co-Head of European Listed Real Estate at Kepler Cheuvreux]

And maybe liaising back with your development requirement CapEx that you cut by around 20%, do you think you could surprise up positively the market if development come back?

[David Sleath, CEO at SEGRO]

Yes, sure. I mean the comment I made about the second half being stronger than the first half is a combination of two things, really. One is that we know the timing of lease events. In other words, we know what date rent reviews are due, and we know where current negotiations are on a bunch of open rent reviews. And that's why I think I said we secured £10,000,000 of rent from reviews in the first half.

[David Sleath, CEO at SEGRO]

We've got great visibility that we'll be reporting quite a bit more than that in the second half. So even before taking kind of space under offer and there's some of that vacant space that's under offer, we're pretty sure the second half will be stronger. That's the primary driver on that piece. And then the second bit is around development pre lets. I mentioned we've got £16,000,000 of pre let income that is quite well advanced, some of it actually has already become unconditional in the second half, and hopefully, the rest it will do also.

[David Sleath, CEO at SEGRO]

So two reasons why we think both of the bar both parts of the bar that we showed you in the first half will be bigger in the second half. In terms of what does that do for CapEx, I think it depends on how quickly we get on-site with some of those pre lets. That's the key factor. But realistically, we don't think we will will have got on-site fast enough to have, you know, materially changed the likely CapEx that we'll have in the full year this year. So we still think probably 400 is is the right number for this year.

[David Sleath, CEO at SEGRO]

But clearly, on-site with those projects sooner rather than later will be a key determinant of how much we spend next year.

[Frédéric Renard, Co-Head of European Listed Real Estate at Kepler Cheuvreux]

Thank you.

[Operator]

Next question comes from Rob Jones from BNP Paribas. You may proceed.

[Robert Jones, Operations Oversight Analyst at BNP Paribas]

Thank you. Good morning, team. My one question was just on the London Urban Logistics portfolio. If you had any figure for either the change in occupancy over the last six months or how ERVs are growing in that specific part of your wider portfolio? Thank you.

[David Sleath, CEO at SEGRO]

Yes. Good morning, Rob. Thanks for your question. James is sitting right here. I'll let him answer that one.

[James Craddock, MD - UK at SEGRO]

Yes. Thanks, David. Good morning, Rob. Yes, as you know, so we report on our urban vacancy, which is circa 90% at the moment, which is broadly stable from the last period. What I can tell you is that we've got some good interest and conversations on existing portfolios, about a third of our London vacancy is either under offer in active conversations or with proposals out to customers.

[David Sleath, CEO at SEGRO]

The vacancy is 10%, not 90%. Sorry.

[Robert Jones, Operations Oversight Analyst at BNP Paribas]

Cheers, guys. Thank you.

[Operator]

Next question is from Mario Spesto from Bernstein. You may proceed.

[Marios Pastou, Senior Equity Research Analyst at Bernstein]

Great.

[Marios Pastou, Senior Equity Research Analyst at Bernstein]

You very much. Thank you for taking my question. Just on your fully fitted data scheme, maybe if you could provide some comments around any discussions you're having with a potential occupier. I appreciate this is a targeting of pre let in 2026, but if you could maybe provide a bit of an update here, will be useful.

[David Sleath, CEO at SEGRO]

Yes.

[David Sleath, CEO at SEGRO]

I mean Andrew Pillsworth here. He's spending a lot of time on that and all matters data center. So why don't you cover that, Andrew?

[Andrew Pilsworth, Chief of Staff at SEGRO]

Yes. Absolutely. The key focus for us on our site at Premier Park right now, we're making good progress. And the key focus for us, as David mentioned in his script, is progressing the ePlanning application.

[Andrew Pilsworth, Chief of Staff at SEGRO]

So we're in continual discussion with customers, including hyperscalers, and we're very, very confident about the prospects for this site. And as David also mentioned, the target remains to do a pre let in 2026.

[Marios Pastou, Senior Equity Research Analyst at Bernstein]

Okay. Very clear. Thank you very much.

[Operator]

You. The next question comes from Zachary Gage from UBS. Please go ahead.

[Zachary Gauge, Equity Research Analyst at UBS Group]

Yes, thanks. Good morning, everyone. Just a question for me on capitalized interest. I think you're guiding to that being give or take flat this year versus last year. Could you just sort of talk through the mechanics of that?

[Zachary Gauge, Equity Research Analyst at UBS Group]

Because I don't think about this too simplistically, but I would have thought as your CapEx guidance has fallen and you're obviously spending less on development and you've schemes which have now sort of started to complete from previous years of stronger pre let activity, that that number should be coming down. And if it's not coming down in this year, should we be expecting it to start come down in 2026 and '27?

[Soumen Das, CFO at SEGRO]

So I'll take that, Zach. You're absolutely right. We capitalized interest against projects that are active. Obviously, the most visibly active are the ones that we are building new buildings on for pre let or through spec. But we're also active on sites like Radlet in Berlin and others, where we're putting infrastructure work in place to be able to build the buildings in future.

[Soumen Das, CFO at SEGRO]

And so that work is also capitalized as well. But that but when we start the work on-site, the whole project and therefore the land with it goes into our capitalized bucket. That's why you're not seeing the capitalized number fall so much.

[Zachary Gauge, Equity Research Analyst at UBS Group]

Okay. So just trying to think about that though in terms of earnings growth, is it fair to assume that unless the pre lets therefore pick up and start to generate the rental income off those sites, that is going to be a headwind at some point?

[Soumen Das, CFO at SEGRO]

No, I don't think it is. In the extreme event that we never lease those or never lease the buildings on that land, then yes. But that's, I think, an extreme case. What I think we've got is obviously a delay that we're seeing in terms of when we're getting these pre let signed up. It actually will not really change the ultimate outcome, which is when these buildings are finished and leased, you'll see the rent come on to the income statement and you'll see the interest that applies to essentially both the build cost, the infrastructure cost and the land also come on to the income statement as well.

[Soumen Das, CFO at SEGRO]

So actually, it will make no difference to the earnings impact at all.

[Operator]

Next question is from Suraj Goya from Green Street. So

[Suraj Goyal, Senior Associate - Equity Research at Green Street Advisors, LLC]

it's just on the ERVs. If I understand correctly, the ERV guidance across the big box and urban on average is approximately 3% to 4%. But obviously, RV only grew by 1% in the first half, particularly the week on the continent at 0.4%. Are you I appreciate there were some nuances, but are you confident that this will pick up towards the end of the year towards 3%? Or is this now the expectation for the foreseeable future?

[David Sleath, CEO at SEGRO]

I think it ultimately depends on the occupier markets, and it's very hard to give any real forecast on a three or six month basis because it's such a short period. It depends on lease events. Mean, quite often. I mean, if you look at the overall in a number of pre lets done in the market, that's low. We know that.

[David Sleath, CEO at SEGRO]

And that's that that means the opportunity to create and set new market evidence is more limited in that in that space. I think our if you look across our numbers, trailing the the twelve month average is 2.7% rental growth, so slightly below our long term guidance range. But at this stage, we don't see any reason to change our forward guidance. We're still comfortable with what we've put out there. Second half, we'll see.

[David Sleath, CEO at SEGRO]

I mean, we signed 60 lettings in the first half of the year. I can't tell you at this juncture where the 60 or 70 lettings we'll do in the second half are going to settle. But certainly, we feel that rents are moving forward, but we you know, they're not quite at the same rate that we expect, on the midterm basis.

[Suraj Goyal, Senior Associate - Equity Research at Green Street Advisors, LLC]

Thank you.

[Operator]

Next question comes from John Kwong from Kempen. You may proceed.

[John Vuong, Director - Equity Research at Van Lanschot Kempen]

Questions. When highlighting that your dispose were below run rate by H1, you mentioned that investor sentiment has been dampened and that you expect better pricing for your disposals later. Taking this into consideration, how do you see potential for opportunistic acquisitions being on the other side of the table?

[David Sleath, CEO at SEGRO]

Yes. I mean we've got our eyes and ears open across the business, always looking for accretive opportunities where the returns look great and the portfolio fit is strong. But I think we've made it very clear. We've got a ton of opportunity in our development pipeline through the existing industrial and logistics plans we have plus data centers. So our priority, given the choice, to deploy capital through the development route.

[David Sleath, CEO at SEGRO]

But we'll certainly make accretive acquisitions if the right ones come along.

[Operator]

Okay. We will move to next question from Jonathan Koonator from Goldman Sachs. Please go ahead.

[Jonathan Kownator, Executive Director at Goldman Sachs]

Good morning. You had impressive reversion obviously this half. Your overall reversion in portfolio is now 15% and there is increasing supply chains in the market from market data. So can you explain how you're seeing that reversion shape up over the next sort of twelve, eighteen months? Are you going to be able to continue capturing these levels?

[Jonathan Kownator, Executive Director at Goldman Sachs]

Or is that going to fall quickly as you obviously capture that reversion, that impressive track record that you're developing at this stage?

[David Sleath, CEO at SEGRO]

Yes. Look, Jonathan, the we put a slide in, didn't we, showing the timing of when the reversion comes up for capture. And clearly, that's assuming flat rents. But we're not expecting rents to be flat. We as we've said, we're expecting rents to revert to the or the growth rate to revert to our long term guidance.

[David Sleath, CEO at SEGRO]

So whilst we're not going to be I don't think we're going be putting 5% or 10% per annum on market rents. We we we think it's perfectly, you know, reasonable to expect, you know, three, four, 5%, that kind of level. So, yes, the total amount of reversion will shrink over time, but it's, you know, it's it's over a multiyear basis. I mean, you know, we don't the reversion never gets captured in one year. So even if you've got a year or two of softer market rental growth, as long as it reverse to the level we think it will, that should mean we can sustain strong like for like growth for quality years to come.

[David Sleath, CEO at SEGRO]

So we're not too worried about that tailing off. And, frankly, you know, if it if it's a little bit if it if it's if it's a little bit lower, you know, sooner or later, the the the development engine that Shoman referred to us will will start turning faster as well. So I think what's really attractive about this portfolio is the combination of the strong like for like rental growth and the ability to really run that development engine quite fast with data centers offering some cream on top of that.

[Jonathan Kownator, Executive Director at Goldman Sachs]

And so the new supply that you're seeing is not something that we're betting with your asset?

[David Sleath, CEO at SEGRO]

No. We're not really not worried about supply levels anywhere, frankly. In the submarkets we're in, it's pretty well constrained. Vacancy rates are a little bit up on where they were, for example, during the pandemic and soon thereafter. But overall, vacancy rates in in all of our key markets are are are pretty modest, frankly.

[David Sleath, CEO at SEGRO]

And there's not a you know, we didn't talk about it in the presentation. There's not a lot of new space being built on a speculative basis right now in our markets.

[Jonathan Kownator, Executive Director at Goldman Sachs]

So it's mostly old or low is it your thing?

[David Sleath, CEO at SEGRO]

There's a bit of older space coming back, but mostly not competing with what we're offering and where we're located.

[Soumen Das, CFO at SEGRO]

I mean, John, the good news is, as David said, you've seen vacancy tick down in our portfolio as a whole. You've seen ERBs up 1%, which tells you that there's still good rental tension there. And incentives on our standing portfolio are actually down a touch across half 124 to half 125. So yes, there's the underlying operating conditions are still pretty healthy. So that reversion capture and we sort of laid out the 25,000,026 million pounds £27,000,000 amounts totaling £67,000,000 I think we are they're very visible and we're very confident of capturing them and more frankly as more rental growth comes through.

[Jonathan Kownator, Executive Director at Goldman Sachs]

Great. Thank you. Very helpful.

[Operator]

Next question is from Paul May from Barclays.

[Paul May, Director & Head - Real Estate Equity Research at Barclays]

Just keeping it to one at the moment. So you're confident to the full year on sort of developments and the outlook for the operational market and tenant take up, which subsequently proved to be a bit too optimistic given the upturn over the first half and obviously the guidance reduction in CapEx now. You're now confident again that we're going to get an uptick in that improvement coming through in the occupied markets and developments. What risk is there that actually that also proves to be too optimistic and we don't see that coming through? I think you're seeing from some of your European peers a little bit of a more subdued outlook?

[Paul May, Director & Head - Real Estate Equity Research at Barclays]

So just wondering the sort of differentiation you're seeing in your optimism that it will pick up now? And is there any risk to that?

[David Sleath, CEO at SEGRO]

Yes. And I think the it's a fair challenge, Paul. I think we've had various points over the last twelve months, know, right back to, you know, mid last year when we were starting to see some green shoots, some, you know, optimistic things we're going to pick up. But the frankly, the geopolitics and the macro has produced a few routes out of the hat. So, you know, it'd be wrong to say we're through all that because who knows where some of these trade deals are going to settle.

[David Sleath, CEO at SEGRO]

But I'd say the most the real reason why we've got more confidence at this time, it will actually be the start of something, is that though is that pipeline of near term pre lets that we've actually got ready start. If you look back at each of the quarterly statements we've put out for right back to the mid of last year, we didn't have those near term projects ready to go. We do now. We know we've got customers who want to take that space despite having factored in all that macro uncertainty. I think there comes a point when occupiers say, we we need to get on and take some decisions and start planning for the future, and it feels like that's there.

[David Sleath, CEO at SEGRO]

Now, you know, what what the geopolitics does over the next couple of months, who knows? Because that you you can't discount that having an impact. But right now, the evidence is in that near term pipeline that things are picking up.

[Paul May, Director & Head - Real Estate Equity Research at Barclays]

Thank you.

[Operator]

Next question is from Colin Marley from Colytics. Please go ahead.

[Callum Marley, Equity Analyst at Kolytics]

Good morning, guys. Thank you for taking my question. Just kind of a follow-up to that, I guess. You've outlined the strong organic and earnings growth and mentioned that the portfolio is impossible to replicate yet performance year to date has been one of the lowest kind of in the global industrial sector across global REITs. When you're speaking to investors and potential new investors, what are they waiting to see to get excited about the growth story again?

[Callum Marley, Equity Analyst at Kolytics]

Put another way, what do investors not understand about the CGO growth story?

[Soumen Das, CFO at SEGRO]

I hesitate to to answer that given I'm speaking to a call full of listeners. So telling you what I think you're what I think you're thinking is a slightly dangerous place to start. However, I'll start with only on a struck by just this morning. We've had a real glut of results announcements in the last twenty four hours, as I think all of you are aware. I haven't checked this precisely, but I think our earnings and dividend growth is right up there.

[Soumen Das, CFO at SEGRO]

And it's funny, when I look at some of the commentary attached to some of the others, which are described as strong, in our case, that earnings dividend growth is sort of we've seen that done that, let's talk optionality that comes from a fantastic land bank to increase that overall return potential through development, and it's in that order. And then we haven't even started talking about data centers in terms of the results over the last twenty four hours. I'm sure you'll all have seen Meta and Microsoft last night. You've added a lot more around the kind of the investment they intend to make into the world of AI, which then will further support our data center story. So I think there's a little bit of looking at a single area, which is development, which is actually one part of a much wider business. And I'd say actually at these levels where our shares offer 4.5% dividend yields and a very, very high confidence and visible ability to grow that at very healthy levels from here, I think that's probably I think there's a little bit of glass half empty when I sort of look at it glass half full from where I'm sitting.

[David Sleath, CEO at SEGRO]

Yes.

[Operator]

Is the last question from the telephone line. We will now move to questions on the webcast.

[Claire Mogford, Head - Investor Relations at SEGRO]

Yes. We have just a couple of questions from the webcast. The first one is with regards to the mention of record rents at Park Royal. Can you give us any more color on this? What sort of occupied demand are you seeing in this part of the portfolio, etcetera?

[David Sleath, CEO at SEGRO]

James, do you want to answer that?

[James Craddock, MD - UK at SEGRO]

Yes. No, sure. Look, I think as I've referred back to our Capital Markets Day, our London portfolio generally, in particular, our West London portfolio has incredibly diverse customer base. And there isn't a single isn't a single sector that's necessarily dominates in terms of the deals that we're seeing. So again, I think diversity of customer base is one of the strengths of the London portfolio, and we're continuing to see that play through.

[Claire Mogford, Head - Investor Relations at SEGRO]

Thank you. And then we have another question on particularly on strength of structural trends on the continent and what we're seeing there in terms of e commerce led demand and weather defense, given some of the recent announcements, could be a potential source of demand.

[David Sleath, CEO at SEGRO]

Marco, do you want to pick that one up?

[Marco Simonetti, MD - Continental Europe at SEGRO]

Yes. Good morning, all. This is an emerging sector, and we are monitoring defense as many other sectors that David before in the speech.

[Claire Mogford, Head - Investor Relations at SEGRO]

Perfect. And there's one more that's just come through. Some news recently on open market rent reviews in The UK. Do we think there's any impact of that on the Seagram portfolio?

[James Craddock, MD - UK at SEGRO]

Can I have a James one? Yes, thanks. So I think coming from a Seagram perspective, we anticipate the impacts of that to be limited. As we've already seen, we've got an under rented portfolio, you can see that from the reversion that we've still got there to capture in the portfolio. But also, it's this piece that we have curated the portfolio in The UK that we are in strongest markets, which we expect to perform better than anywhere else over the medium and longer term.

[James Craddock, MD - UK at SEGRO]

So ultimately, we're still primed for good rental growth. So it should be limited impact. Yeah.

[David Sleath, CEO at SEGRO]

Not really something we lose any sleep over that one. Okay.

[Claire Mogford, Head - Investor Relations at SEGRO]

That's it. Nothing we're done.

[David Sleath, CEO at SEGRO]

Great.

[David Sleath, CEO at SEGRO]

Thank you very much, everybody, for listening. Have a great day. We'll look forward to catching up with many of you, no doubt, in the in the coming days and weeks. Have a good summer.

[Claire Mogford, Head - Investor Relations at SEGRO]

Thank you.

Participants

Executives

• David Sleath, CEO
• Soumen Das, CFO
• James Craddock, MD - UK
• Andrew Pilsworth, Chief of Staff
• Claire Mogford, Head - Investor Relations
• Marco Simonetti, MD - Continental Europe

Analysts

• Frédéric Renard, Co-Head of European Listed Real Estate at Kepler Cheuvreux
• Robert Jones, Operations Oversight Analyst at BNP Paribas
• Marios Pastou, Senior Equity Research Analyst at Bernstein
• Zachary Gauge, Equity Research Analyst at UBS Group
• Suraj Goyal, Senior Associate - Equity Research at Green Street Advisors, LLC
• John Vuong, Director - Equity Research at Van Lanschot Kempen
• Jonathan Kownator, Executive Director at Goldman Sachs
• Paul May, Director & Head - Real Estate Equity Research at Barclays
• Callum Marley, Equity Analyst at Kolytics