Results Announcement for the Six Months to 30 June 2007

29 August, 2007

CONTINUING GROWTH ACROSS EUROPE

“We have delivered strong results, with profits up by 27 per cent and there is real momentum behind our successful growth in Continental Europe”

Ian Coull, Chief Executive

Excellent performance - adjusted profit before tax up 27.0%

Good NAV growth - valuation surpluses of 9.1% in Continental Europe and 2.1% in UK

Continuing strong growth and successful capital deployment in Continental Europe

• Acquisitions of around €430m announced so far in 2007
• Development completions 131,000 sq m (76% let/sold), construction in progress 263,000 sq m
• Excellent letting successes (59,000 sq m of new pre-lets),with strong occupier demand

Good progress in managing UK assets; tougher investment market, strong occupier market

• Prime quality portfolio, valued on a 4.7% initial yield
• 143,000 sq m of lettings, up by 46 per cent on H1 2006, resulting in £8.4m of net new income
• Divestments of £170.7m of investment properties, 2% premium over book value
• UK rent reviews deliver 2.9% growth over 2006 ERV, overall UK rental growth of 0.9% 

Successful and well timed $2.9bn US disposal 
 
Special dividend of £250m (53p per share), payable 31 August

• Interim dividend up 20.3%, full year dividend anticipated to show similar increase

Strong financial position - post sale of US business

• 33 per cent debt to equity gearing – capacity to support significant growth programme
• £1.6bn development investment set to increase size of Continental Europe to c50% of portfolio
• Diversified occupier base, over 1,600 customers, 8.6 years average unexpired income
• Weighted average cost of debt 5.7%, 88% at fixed rates, average maturity 11.7 years

Ian Coull, Chief Executive said:

In the first half of 2007, the Group delivered another strong financial and operational performance.  We benefited from yield compression across our portfolio (although modest in the UK) but our results have been driven primarily by management activity in all sectors of our business. NAV growth came from our development activity, good asset management and our strong profitability, both in the UK and in Continental Europe. 

We also realised the significant value we had created in our biotechnology real estate business in California.  Following the payment of the £250 million special dividend, the remaining net proceeds from this well timed sale will be invested in our focused European business, with a growing number of prime assets located in key business centres.

Our REIT status in the UK and our equivalent French SIIC status are facilitating our materially improved tax efficiency across Europe.  REIT status has also helped us to declare a substantial 20.3 per cent increase in our interim dividend and in the absence of unforeseen events, the directors anticipate that the full year dividend, including PID and regular dividend, will show a similar level of year on year increase.

Across the portfolio we remain confident about the opportunities for continuing growth, with a large and strong development pipeline and with healthy occupier demand.  Our business model is focused on growing cash flows from the underlying real estate assets by concentrating on our customers’ needs, by delivering growth from development and through earnings accretive acquisitions.  We have an extremely robust income profile, serving a wide spread of customers and industries, a long average lease length and mostly fixed rate debt. 

We are continuing to find very attractive acquisitions in Continental Europe where we can exploit the still very positive gap between investment and development yields and the cost of borrowing.  Our Group’s 2.2 million sq m development pipeline dwarfs that of any other UK based industrial company.

Our portfolio predominantly consists of good quality, well located, resilient prime property.  For these reasons, whilst we have been and will continue planning our UK business on the prudent assumption of a tougher investment market, we do so with confidence in our team’s ability to deliver. 

We are financially strong and have very good cash flow. I believe this places us in an excellent position to take advantage of the opportunities that will, undoubtedly, arise in the coming months.

About SEGRO
SEGRO is the leading provider of Flexible Business Space in Europe. Headquartered in the UK, SEGRO is listed on the London Stock Exchange and on Euronext in Paris. The company is a UK Real Estate Investment Trust (“REIT”) with operations in ten countries (it completed the exit from its US business in August 2007), serving a diversified customer base of over 1,600 customers operating in a wide range of sectors, representing both small and large businesses, from start ups to global corporations. With investment property assets of £4.6 billion (£5.1 billion including trading properties and development assets) and around 3.6 million sq m of business space, SEGRO has an annual rental income in excess of £200 million. www.segro.com


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