Everyone, thank you for joining the SEGRO half- year 2026 results call. My name is Lucy, and I will be coordinating your call today. During the presentation, you can register a question by pressing star followed by one on your telephone keypad. If you change your mind, please press star followed by two to remove yourself from the questions queue. If you have joined us on the webcast, you can submit a question via the Questions tab above the slides. It is now my pleasure to hand over to David Sleath, Chief Executive Officer, to begin. Please go ahead when you are ready.
Thank you, Lucy. Good morning, everybody, and thank you for joining us for today's presentation of our half- year results. I am, of course, joined by Susanne Schroeter, our Chief Financial Officer. We spoke extensively over the last few weeks about the significant growth and value- creation opportunities that we have within our business. In the context of the offer period we are now in, and in light of the recent announcements, we will be giving a shorter update today, focusing mainly on our business performance in 2026. We will also only be answering questions on these results today rather than anything to do with the potential offer from Prologis. Let's get into the presentation. We have had a strong first half. The improving occupier market sentiment that we referred to in February and again in April has continued to build.
That has fed some good leasing performance and a step up in development activity. We have made important progress on our data center strategy, adding to our power bank, advancing planning and power infrastructure works, and signing a further powered shell pre-let at SLAM. The great work of our asset management teams in capturing reversion, combined with tight cost control, has enabled us to report a 5.3% increase in like-for-like net rental income and a 6.6% increase in adjusted earnings per share. The reduction in EPRA NTA reflects a small valuation decline in the U.K. portfolio, as we reported with our trading update on the 8th of July. That aside, this is a strong financial performance, and we are well-positioned for further growth in the future. Let's now get into some more detail. I will start by covering the industrial and logistics portfolio.
In the first half, we contracted GBP 53 million of new headline rent across the portfolio. That reflects a continuation of the improvement in demand that we reported in the second half of last year, both for existing and new space. The red part of the bars represents rent signed on the existing portfolio, which amounted to GBP 27 million. Development lettings, the pink part of the bar, contributed GBP 26 million. We signed GBP 24 million of pre-lets during the period versus just GBP 3 million in the first half of 2025. Again, this shows a continuation of the improvement we witnessed in the second half of last year when we signed GBP 23 million worth of pre-lets.
Pre-let deals signed this period included a powered- shell data center and transactions with post and parcel companies, third-party logistics operators, a fiber optic cable manufacturer, and a number of food and beverage- related businesses; you can see some of the names on the right-hand side. In a few moments, I'll talk about the pipeline of future opportunities, which look very encouraging. Expert asset management always remains a key driver of performance for our existing portfolio. With a particular focus on supporting our customers' needs whilst also seeking to increase rents and capture reversion. During the period, we were able to secure GBP 11 million of additional rent through indexation rent reviews and renewals, driven primarily by the U.K. portfolio, which saw a 44% average uplift.
Rent review dates are weighted to the second half of the year, we expect this number to materially increase for the full year. Occupancy decreased very slightly but remains well within our target range. Within the period, we saw occupancy improvements in the U.K. following the leasing of a speculatively developed big- box unit in Coventry. Whilst U.K. vacancy remains elevated, particularly in some of the London submarkets, there's been a noticeable pickup in inquiry levels in recent months. With over 1/3 of the vacant space in the U.K. now under offer or in advanced negotiations, we expect to see good progress in the second half of the year. On the continent, occupancy remains high at 96%. We completed a number of speculative development schemes, which are leasing well, but also had some expected take- backs, which explains the slightly lower than usual customer retention rate of 77%.
However, again, the reletting rate looks promising with active negotiations in progress on much of this space. An active approach to asset management continues to translate into attractive like-for-like net rental income growth. This should continue, which was, sorry, which was 5.3% in the first half of 2026. This should continue, as we have GBP 157 million of current opportunity embedded in the existing portfolio, comprising of GBP 101 million of marked market rental potential and GBP 56 million of ERV from vacant space. Turning to capital allocation, our approach remains disciplined and is focused on driving performance through proactive asset recycling and redeploying funds into higher- returning opportunities, primarily in the form of development. Back in February 2026, we said that this year will be an active one for disposals as we increasingly look to self-fund our growth.
We've made great progress with that, having completed or exchanged on GBP 308 million of disposals so far this year. This included a portfolio of bespoke Amazon delivery stations in Italy, an older warehouse in Paris, and several holdings in and around London where we identified special purchasers and were able to crystallize gains over book value. During the half, we bought GBP 37 million of land, including a very rare and attractively priced 45-acre site near Heathrow Airport, in an off-market transaction. We also secured some good plots in Italy and the Czech Republic for near-term development. We continue to allocate most of our capital to our very profitable development pipeline, in which we invested GBP 176 million during the period. With over 750,000 sq m of space now under construction, development CapEx is increasing.
Accordingly, we've narrowed our guidance for the full year to a range of GBP 500 million-GBP 550 million, and with a significant number of further prelets at various stages of negotiation, this bodes well for 2027 CapEx and development volumes. We also announced a couple of weeks ago that we've agreed heads of terms on a U.K. big- box joint venture to develop out and co-own our completed assets in Coventry, Northampton, and Radlett. If this completes as expected in the second half of the year, it'll see SEGRO contribute a GBP 1 billion seed portfolio of standing assets and land into the venture, with future equity requirements being funded 50/50 with our partner. On development, during the first half, we completed 116,000 sq m of space, representing GBP 12 million of headline rent once fully leased.
This consisted mainly of speculatively built urban schemes across Germany, Barcelona, Warsaw, and a small scheme in West London. Leasing momentum on these spec schemes is excellent, with 58% of the rent already secured at the period end, and good interest in the remaining space. The average expected development yield of 6.5% reflects the weighting of projects to Germany, where yields on standing assets are also lower. All the completions were, or expected to be, BREEAM excellent or better, reinforcing the sustainability credentials of the portfolio. Looking ahead to the second half, the increased number of projects now under construction means we anticipate a significant step up in completions over the balance of the year. So let's bring you right up to date in terms of the ongoing and look-forward development program.
For the first time with this set of results, we're splitting out the data center opportunities from industrial and logistics. This is just focused on the industrial and logistics part of the pipeline. You can see our pipeline of current and near-term projects, which includes those where we've agreed terms but have not yet signed an agreement for lease. They add up to GBP 90 million of new rent, which is a record level. 75% of this rent is associated with prelets, and the projects are expected to deliver an attractive 7.4% development yield on average. Beyond this, the future pipeline on land already owned by SEGRO represents GBP 223 million of potential rent, and we have options over land which provide GBP 128 million of further potential headline rent opportunity. Overall then, we have GBP 441 million of potential rent from industrial and logistics development. Excuse me.
I'll now move on to data centers, where we've made further important progress. We provided extensive updated details on our data center strategy during our presentation on the 8th of July, and I'm not going to repeat it all today. However, to summarize, we have a significant opportunity to create value in this super attractive sector by virtue of our unique land holdings, our power reservations, and our planning positions. In aggregate, our power bank now stands at 3 GVA, one of the largest disclosed opportunities in Europe, with all of it focused on established and emerging availability zones. This includes half a GVA of existing operational capacity.
We have 1.4 GVA of near- to- mid-term development opportunities, with an associated GBP 460 million of potential rent based on an assumption of 12 sites to be developed in joint ventures as fully fitted projects and two wholly owned power shells. On top of this, there is a further 1.1 GVA of additional power, which we haven't included in these numbers as specific plans are still being developed, or in some cases, they are longer-dated opportunities.
To briefly summarize the progress we made during the first half of 2026 and to summarize, in fact, the headlines from what we shared on the 8th of July, we signed a power shell data center prelet on the Slough Trading Estate with VIRTUS, an existing customer. We have obtained planning approval for our first fully fitted project in West London and are engaging with hyperscalers interested in securing all of that capacity.
We remain on track to sign and prelet there by the end of this year or early 2027. We have continued to advance and expand the power bank. We have added 0.5 GVA of further reservations, and we have continued progressing infrastructure works in Slough in anticipation of the significant confirmed power allocation we have coming from the Uxbridge Moor substation upgrade in 2029 and 2030. Now I will hand over to Susanne, who will take you through the financial performance and summarize the growth opportunity ahead.
Thank you, David. We delivered a strong financial performance in the first half, driven by the operational performance David has just outlined and our disciplined approach to capital allocation. Adjusted profit before tax increased by 6.3% to GBP 268 million. Adjusted earnings per share increased by 6.6% to GBP 0.193. The dividend per share increased by 4.5% to GBP 0.1014. This is due to the limit placed by the Prologis best and final offer, and not indicative of our full- year expectations. EPRA NTA per share was GBP 9.02, down 2.5%, reflecting a modest valuation decline driven by yield expansion. This NTA is consistent with the GBP 9.05 pro forma adjusted NAV we announced in our H1 2026 trading update after adjusting for profits, dividends, and currency movements in the period. The LTV remained stable at 31%, comfortably within our target range. Turning to earnings.
Adjusted profit after tax increased by 6.5%. Adjusted earnings per share increased from GBP 0.181 to GBP 0.193, an increase of 6.6%. The bridge on this slide shows the key drivers of that growth. The largest contributor was like-for-like net rental income growth, which added GBP 16 million and reflects a 5.3% growth across the portfolio. The U.K. delivered particularly strong growth at 6.6%, while Continental Europe delivered 3.3%. Completed developments contributed a further GBP 5 million, and net investment activity added GBP 2 million. These benefits were partly offset by GBP 11 million of higher finance costs following the refinancing activities completed earlier this year, and offset in part by GBP 2 million of tax savings. We still expect around GBP 70 million of capitalized interest in 2026. Our total cost ratio improved to 17.4%, excluding share-based payments, reflecting cost discipline and improved operational leverage.
Overall, this was another period of good earnings growth, driven by the quality of the portfolio and supported by active asset management and development completions. Turning now to the portfolio valuation. At the 30th of June, the portfolio was valued at GBP 19 billion a share, a decline of 1.2%. This was mostly driven by the application of higher yields by the group's incoming U.K. valuer. On that basis, the portfolio's net true equivalent yield is 5.6%. U.K. values declined by roughly 2% for the reasons I've just mentioned. In Continental Europe, values are broadly stable, increasing by 0.1%, with development gains offsetting the impact of yield expansion. Encouragingly, ERV growth strengthened during the period to 1.8% across the group, including 2.3% in the U.K. and 1.1% in Continental Europe. Our balance sheet remains strong and provides flexibility.
LTV was at 31%, with net debt to EBITDA at 8.3x . The average debt maturity was six point three years, and the average cost of debt was 2.8%. We ended the period with GBP 1.5 billion of cash and undrawn committed facilities. Our credit rating with stable outlook continues to support good access to a broad range of capital sources. We are therefore well-positioned to fund future growth opportunities while maintaining a disciplined approach to leverage. Looking ahead and bringing together the opportunities across our existing portfolio and development pipelines, we see over GBP 1 billion of additional income opportunity embedded within the business.
Around GBP 224 million comes from our standing portfolio, including reversion, vacancy reduction, and the expiry of rent-free periods. Our industrial and logistics development pipeline represents a further GBP 441 million of potential income. The 1.4 GVA allocated data center pipeline adds approximately GBP 464 million.
These figures exclude the impact of future acquisitions and disposals. They also exclude future ERV growth, indexation, selective redevelopment opportunities, and the additional 1.1 GVA of power capacity within the wider data center pipeline. Taken together, this provides a substantial opportunity to continue growing earnings and dividends over the coming years. With this, I will now hand it back to David.
Thank you, Susanne, and thank you all for listening. To conclude, the first half has seen a strong financial performance with momentum building in our industrial and logistics occupier markets. We're making further encouraging progress with our data center strategy, and we're well-placed to deliver further attractive growth in the months and years ahead. We'll now move to your questions, and as I noted at the start, we're only going to be answering questions about our half- year results that we presented. For anything related to the potential offer from Prologis, feel free to reach out to the investor relations team separately. Lucy, will you please open the line for questions?
Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad now. If you change your mind, please press star followed by two to remove yourself from the question queue. When preparing to ask your question, please ensure your device is unmuted locally. If you've joined on the webcast, you can submit a question via the Questions tab above the slides. The first question today comes from Frederic Renard of Kepler Cheuvreux . Your line is now open. Please go ahead.
Good morning, Fred. Okay, Lucy, we can't hear Fred, maybe go to the next one.
Of course. The next question comes from Suraj Goyal of Green Street. Your line is now open. Please go ahead.
Good morning. Just one quick question. Given the positive interactions you are experiencing in real time, I know you touched on it a little earlier, do you expect the occupancy number to increase in the second half? On the customer retention ratio, as it's significantly lower than last year, you mentioned that there's a sort of higher take- backs during the period, are you able to share some color on why? Are there maybe some affordability concerns for occupiers? Thank you.
Sure, yes, Suraj. Thanks for your questions. Occupancy in the second half, yes, we do expect it to improve. We've got, as I said during the presentation, quite a lot of- I'd say more than just active interest, strong interest in quite a few of the vacant assets in London. The take- backs that I referred to, which fed into the low retention rate, it does ebb and flow a bit. It doesn't always stay at that kind of high 80s or 90s level. 77% is fine. We had some space that came back, principally in continental Europe, in Poland, for example, and in the Netherlands. Actually, we're not too worried about that because it gives us a chance to reset the rents, capture erosion quicker than we might otherwise have done.
I think that Ryan's saying that all of the space that came back in the first half, or a substantial part of it, is either already leased or in pretty advanced discussions. Feeling pretty good, I said, consistent with what we said earlier around the overall occupier markets. It's clearly very demonstrably there in the prelets that we've been signing over the last 12 months. It's also coming through in terms of the vacant spaces also looking like they're moving pretty well now.
Perfect. Thank you, David.
Thank you. The next question comes from John Vuong of Kempen. Your line is now open. Please go ahead.
Hi, good morning. Thanks for taking my questions. Just trying to understand the occupier activity a bit better. Are you seeing any difference in demand for, say, different sizes of assets? Say, smaller units versus mid boxes versus big boxes.
I'd say probably, as a general statement, the bigger logistics units are more in demand right now. I think a lot of that demand has been held back over the last few years; that's really been coming back strongly from a variety of retailers, food and beverage and general retailers, third- party logistics operators, either working for or on behalf of consumer goods companies. There's been, I'd say, a resurgence of demand from companies just looking to upgrade for best- in- class, more modern, sustainable logistics supply chains, more efficiency. That's a general theme. Plus, we've seen quite a lot of e-commerce activity, not just from the established players, but also from some of the Asian operators. There are several of them, they're all looking to take space in Europe right now. That's affected actually big boxes, but also some of the small last- mile facilities.
Generally, in terms of the leasing activity that's been done and the prelets, it's been more the larger units in logistics. What I've mentioned on the call is we're also now seeing a lot of great interest in some of the London spaces. On that theme, Germany is where we've delivered a number of spec schemes, urban schemes in the last few months. Again, they've been leasing up really well. I wouldn't say the numbers are skewed by some of the big prelets on logistics, but I would say generally across the board, we're seeing pretty good demand in most sizes of units.
Okay, that's clear. Based on your conversations with these occupiers, what has driven them to really start making decisions now?
I think it'll always be occupier- specific; a number of them will have had plans that they've perhaps put on hold during the last two or three years of macro and geopolitical uncertainty, and they've kind of just felt they need to get on. There are many and varied reasons why people will be taking decisions right now. There's definitely a sense that decision- making has been delayed and demand has been pent up for a while. All of the structural drivers that we often talk about, they're still there. They've just been a bit more muted by some of the geopolitical and macro headwinds of the last few years, they're still there, and they look like they're beginning to reassert themselves.
Okay, that's clear. Thank you.
Thank you.
Thank you.
The next question comes from Tom Musson of Berenberg. Your line is now open. Please go ahead.
Hi. Thanks, team. Good morning. Just a question on Ofgem's proposed connection fees to access the grid that was in when the U.K. press yesterday. Was that new news to you? I'm just interested in any early thoughts on how that might affect how you think about the economics of your data center pipeline.
Yeah.
I guess, is there a reason we might expect similar proposals in continental Europe?
Well, I don't know about the rest of Europe, what's happening in the U.K. is Ofgem has announced a consultation, which, if it follows through as the headlines would say, you have to pay a lot of money down upfront if you want to make a grid reservation. You get that credited back to you once you energize your scheme. What it's aimed at doing, I understand, is to try and sift out, let's say, the more speculative applications for someone who's got a bit of land and hopes they can build a data center, slaps an application in for some power, and then clogs up the system for everybody else. It's not really targeted at people like us who are serious, established data center operators with a strong track record.
I think it's, overall, Tom, whilst the details have to be worked through and we don't know quite how it's going to play, always the devil is in the detail, I think overall, it's probably good news for people like us because it will cut away some of the more speculative opportunities and some of our longer-dated sites where we'll be waiting for more grid connections to be established in places like Uxbridge Moor, for example. If some of those speculative applications are withdrawn because they haven't got the money, or they're not willing to put the capital down, I think that could be good news for us in terms of accelerating some of our opportunities.
Clear. Thank you.
Thank you. The next question comes from Frederic Renard of Kepler Cheuvreux. Your line is now open. Please go ahead.
Good morning. Can you hear me now?
Yes, Fred, we can. Good morning.
Yes, Fred.
Perfect. That's great. Wanted to touch base on the reversion. I see it's slightly increasing, GBP 101 versus GBP 99 at the end of Q4. Was just wondering, because I guess some part of the reversion was captured in H1. Is it just ERV growth, or is there something else? That's the first question. Second question, I saw an article yesterday in a French newspaper mentioning a data center in Le Bourget for which the permit was not granted, or was initially granted and now has been pushed back by the new mayor. Anything to add there versus what you communicated a few weeks back? Thank you.
Sure. Fred, thank you. Thanks for your questions. On the reversion one, I mean, it's basically, I think the amount of reversion potential has gone from GBP 99 million to GBP 101. You saw that we captured GBP 11 million of uplift, the rest will essentially be ERV growth. That would be the main movement that's happened in the period. That's that. On Le Bourget. Le Bourget is one of the opportunities in our data center pipeline in Paris. The situation there is we received a valid building permit. We had a change of mayor in the recent elections. The mayor is not in favor of data center development at the moment, and he withdrew the building permit. We challenged that, but the court did not accept our initial challenge. This has got a long way to run.
I think what it means is, it proves just how scarce and valuable these rare sites are, but it does mean you have to be patient. Frankly, working through these difficult planning processes is what our team on the ground is particularly good at. It doesn't change our level of confidence in terms of our ability to bring that through. It may mean it takes a bit longer to deliver than we had originally hoped for.
Okay, that's clear. Just to come back on the first one, you mentioned that you kept your GBP 11 million, the rest was ERV growth. ERV was, like, 2%. Is it maybe some part of the portfolio which was under review or just the data center increase?
I don't know, Fred. We'll have to dig into.
Okay.
The detail to work that out. Maybe Claire can help with that if that's.
I'll come back to you, Fred.
That's helpful.
I'm pretty sure it's all ERV growth because we haven't made any acquisitions, but I'll come back to you.
Right. Thanks.
Thank you. The next question comes from Marios Pastou of Bernstein. Your line is now open. Please go ahead.
Thank you. Good morning, and for taking my questions and the presentation. Just two questions from my side. A couple of follow-ups, actually. Firstly, just back on those Ofgem proposals. Of course, we need more detail, and it's only consultation at this stage, but can I just ask a very basic question over whether that would relate to your existing secured power or whether this would relate to new connections that would be applied for down the line beyond your existing powered land bank as we see it today?
My understanding, Marios, Good morning, by the way. My understanding is that it's only for new applications, not for existing established capacity. Because the concept is you pay a deposit, basically, you pay a refundable deposit upon the application, but you get it back when you energize the scheme. All of ours are energized, obviously, the existing ones.
Okay. Very clear. Thank you. Then just turning back to your London-based assets and the leasing discussions you're having there. How are the discussions trending on things like rent levels and incentives? Are they in line with your expectations, or are tenants coming back with a higher cost base and pushing maybe for some greater incentives to come and take that space again?
Yeah, it's fair to say. We talk about London, but London breaks down into various sub-markets. Our biggest concentration is in Heathrow and Park Royal. Heathrow is super strong with very little space available. You saw that we've secured a land acquisition there, which we're really excited about because it's so hard to get land around Heathrow, and there's very little space that can be developed there. Park Royal is also pretty strong right now and quite a number of good things happening. Where the vacancy in London is, where we have a chunk, and the market has more vacancy, are in the smaller sub-markets in places like South London, Croydon, East London, Dagenham, Barking, Dagenham, and to an extent, North London, Enfield. There has to be more supply there.
They're smaller markets, so it takes a while to come through, and it has been quite slow for a couple of years. It is, as I said on the call earlier, it is starting to pick up, and it is a bit more competitive, so incentives and rental levels are under a bit more pressure. I don't think they're going down, but they're probably not going to be the ones that are pushing overall headline rents forward. I think the rental performance is probably going to continue to be driven in the near term by what's happening in Heathrow and Park Royal and West London generally, rather than some of those other markets.
Absolutely. Thank you very much.
Thank you. The next question comes from Paul May of Barclays. Your line is now open. Please go ahead.
Thanks for taking the questions. Just a couple on the reversion potential moving forward. Just one super reversion in the portfolio, especially in the U.K. Just looking at the lease event schedule, and uplift does drop off quite materially through the next few years. Just similarly on that same table, just wonder if the ERV is headline or net effective? A final one just on the SELP JV, and actually you could argue including the new U.K. JV, are there any change of control issues or factors that PSP may be able to exercise on in the event of the Prologis situation? Thank you.
A few questions in there. I think the first one, Paul, is around what happened to the reversion potential in the coming years. You are right that there is quite a concentration of opportunity which happens this year and a fair bit next year. There's plenty to go at. This is based upon the dates of rent reviews, so the reality of getting all of it in the year in which it falls is limited. We expect to get a very good chunk of it this year. Some will spill over into next year and some the year after. I think, for the next couple of years, we are well set for some very good reversion capture, and that will drive like-for-like rental growth.
After that, it's going to depend more on the amount of ERV growth that we're able to drive in the marketplace, which continues to be pretty solid. It's within our target range. Yeah, I'm fairly comfortable with that. Your question around what do we disclose as, what is ERV? ERV, it does vary a little bit by market, and I think values have different approaches in different geographies. By and large, it represents the net effect, and it should take account of the incentives that you're giving. Although it may vary in some of the smaller markets, it may be a little less clear that that is the case. By and large, for somewhere like the U.K., for example, with both the portfolio, it's going to be pretty close to the net effective rather than the headline rent. Susanne, on the-
Yeah.
SELP question.
Sure. On your second question, Paul, there was no change of control in SELP that would be triggered by a potential offer from Prologis. I think on the U.K. big box joint venture, as you know, we've only announced heads of terms. I think that's a separate question. You could assume that in general, as for SELP, with any large JVs, we would not include change of control provisions given we are a publicly listed company.
Perfect. Thank you very much. Sorry, just one last one. When should we be concerned at all by the customer retention declining, for example, the occupancy falling? Is there anything we should be concerned about, or is it just a timing issue, certain big deals that fell through, that sort of thing?
Yeah.
Should improve from here.
Yeah. I think I covered that earlier. I think it is just timing issues, a couple of take- backs in particular in continental Europe, and the delivery of quite a number of specialty development schemes. The spec developments are leasing really well, but it's very unusual to have them fully leased before you get to practical completion. That's the nature of that type of urban spec scheme. Those two factors have caused both a bit of a pickup in continental European vacancy, but also the take- backs are why the retention rate dropped. They're just timing factors. We're super confident about the progress that we're making, the leasing of those spec schemes, the re-leasing of the units that have come back to us.
As I said earlier on the call, the leasing progress and the activity in London are also giving us cause for confidence that vacancy rates are coming down.
Excellent. Many thanks.
Thank you.
Thank you. We have no further questions on the phone lines or webcast at this point.
Okay.
I'd like to hand back to David for closing comments.
Well, any questions on the-
Nothing.
Nothing on the webcast? Right. Okay, very good. Thank you very much, everybody, for listening. I know it's a busy day and a busy time of year for you all, so thanks for joining us and have a great summer when you get there.