Interim Management Statement

SEGRO plc Interim Management Statement


April 29, 2009

SEGRO plc today announces its interim management statement covering the three
months ended 31 March 2009.


Introduction

The first quarter of 2009 has seen continuing operational resilience across the
Group's business, despite challenging market conditions. Positive lettings
momentum has been maintained, both in the UK and in Continental Europe,
although as expected, new enquiry levels are slowing across our markets.

Investment market conditions throughout Europe have continued to weaken with
relatively few transactions being reported in the first quarter of 2009.

During the period, SEGRO successfully launched a fully underwritten Rights
Issue, generating net proceeds of approximately £500m, which were received in
April, and concluded a renegotiation of its main banking covenants. Taken
together, these actions have significantly strengthened the Group's financial
position.

Occupier market conditions

  * The Group delivered a good leasing performance in Q1 09 - total space let
    of 160,200 sq m compares with 107,600 sq m in the equivalent period in 2008
    and139,500 sq m let in Q4 08
   
  * Whilst we continue to receive a reasonable number of enquiries for new
    space, the overall quantity and quality of such enquiries has reduced in Q1
    09 and the time taken to convert enquiries to new lettings has lengthened
   
  * Vacancy rates by area have increased in the UK to 10.5% (Q4 08: 9.9%)
    whilst in Continental Europe the rate has risen to 12.2% (Q4 08: 9.4%), as
    a result of planned development completions in the first quarter
   
  * As expected, the number of customer insolvencies has started to rise in the
    UK and March 2009 rental collections were more challenging than in recent
    quarters; 11 properties were returned to us due to customer insolvencies in
    Q1 09 (Q1 08: 9 cases) representing annual rental income of £911,000 (Q1
    08: £373,000). A further £3.6 million of rent is at risk with 30 customers
    currently in administration or going through a liquidation process,
    representing approximately 2% of the UK rent roll
   
  * The Continental European customer base has, so far, shown relatively few
    signs of distress with 4 buildings (Q1 08: 2 buildings) having been
    returned to us through insolvency in the period, representing approximately
    £485,000 (Q1 08: £200,000) of annual income
   
  * Lease renewal rates are in line with expectations at this early stage of
    the year
   
  * Rental levels on new leases, rent reviews and renewals have generally been
    at or slightly below December 2008 ERVs (valuers' Estimated Rental Values)
    and there is continuing downward pressure on market rents and a general
    increase in lease incentives in most markets
   
  * See Appendix for supplementary details of occupier market and lettings
    performance
   
Development activity

  * The Group continues to exercise tight control on new development activity. 
    Whilst a number of previously announced and pre-contracted development
    projects were commenced in the quarter, no new capital expenditure or
    development starts have been authorised in Q1 09, reflecting the Group's
    aims of reducing its near term development exposure and preserving capital
   
  * 147,400 sq m of developments were completed in the period (100,900 sq m in
    Q4 08), 50% of which have been let or sold. 63% of the 159,400 sq m of
    developments under construction are already pre-let or sold
   
Property values

  * The Group's property portfolio valuation was updated as at 31 January 2009
    for the purposes of the Rights Issue and this showed an overall decline of
    2.9% from 31 December, 2008, in line with the Investment Property Databank
    (IPD) capital value fall of 3% for UK industrial property
   
  * The IPD index indicates that capital values of UK industrial properties
    have declined by 7.3% over the first quarter of 2009, outperforming the all
    property index which showed a decline of 8.9%
   
  * In Continental Europe, transaction volumes were very limited in Q1 09 but a
    general softening in investment yields appears to be occurring across most
    geographic markets and asset classes
   
  * These market trends are likely to result in a reduction in the carrying
    value of the Group's properties, and will affect the Group's ability to
    achieve profitable trading property disposals this year
   
  * The next valuation of the Group's properties will be as at 30 June 2009
   
Financial position

  * Net debt at 31 March 2009 was £2,536m (31 December 2008: £2,496m),
    reflecting development expenditure of £55m, partially offset by £24m
    generated from disposals
   
  * Cash and undrawn bank facilities, before the proceeds of the Rights Issue,
    were £664m as at 31 March 2009. The subsequent completion of the Rights
    Issue generated net proceeds of £501m in April 2009, increasing pro-forma
    funds availability to £1,165m and reducing pro-forma net debt to £2,035m
   
  * £386m of the Group's bank facilities (of which £294m are drawn) and £130m
    of bonds/notes are due for repayment or rollover before the end of 2010 and
    are fully covered by existing committed bank lines. Even if none of the
    maturing bank facilities were renewed and allowing for forthcoming bond
    repayments, all committed capital expenditure and the proceeds from the
    Rights Issue, the projected cash and fully committed undrawn bank
    facilities as at 31 December 2010 amount to more than £450m
   
  * The Group remained fully compliant with all its lending covenants as at 31
    March 2009 and, following the successful renegotiation of bank covenants
    and the Rights Issue, has significant headroom against all such covenants
   
  * Subsequent to 31 December 2008, the Group has closed out a number of
    interest rate and currency swaps for an aggregate cash cost of
    approximately £62m, but having no impact on net asset value as the total
    settlement amounts were in line with the amounts recorded in the 31
    December balance sheet.  Following this and allowing for the higher margin
    payable as a result of the bank covenant amendment, the Group's weighted
    average cost of debt is 5.3%
   
Ian Coull, Chief Executive commented:


"Despite difficult market conditions, we have achieved good levels of lettings
in the first quarter, although new enquiry levels have weakened across the
markets in which we operate.

Our priorities continue to be to stay close to our customers, to manage our
balance sheet prudently and to optimise the Group's position in the present
market conditions.

We were pleased with the success of the recently completed Rights Issue which,
I believe, underlines the confidence that investors have in SEGRO's business
and which places the Group in a strong position to cope with the challenging
market conditions and to benefit from future opportunities as and when they
arise."

                                   - Ends -                                    


CONFERENCE CALL FOR INVESTORS AND ANALYSTS

There will be a conference call for investors and analysts at 9:30 AM today
GMT, hosted by Ian Coull, Chief Executive, and David Sleath, Finance Director.

To participate in the call, please dial:

UK                      Tel: [phone]                 
International           Tel: [phone]              
US                      Tel: [phone]               

For further information please contact:                                        
                                                                               
SEGRO                     [phone]           Tamarin Shore / Siva Shankar      
Maitland                  + 44 207 379 5151          Colin Browne / Liz Morley 



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, serving a diversified customer base of 1,700
customers operating in a wide range of sectors, representing both small and
large businesses, from start-ups to global corporations. With property assets
of £4.8 billion as at 31 December 2008 and around 5.1 million sq m of business
space, SEGRO has an annual rent roll of approximately £314 million. (Note:
these metrics include trading properties, development assets and the Group's
share of joint ventures). www.segro.com


APPENDIX


Supplementary Details

UK

Lettings(excluding short term licences)

  * 51,500 sq m of space has been let in the three months to the end of March
    (Q1 08: c.39,700 sq m), representing 53 transactions and generating
    annualised income of £2.6m
   
  * 9,000 sq m (96,600 sq ft) letting of warehouse and office space to Geodis
    Wilson completed on 1st April 2009, the largest letting in the Heathrow
    market for two years.
   
  * Take backs of 70,500 sq m for the quarter are in line with management
    expectations and reflect a number of buildings taken on short term licences
    in the last quarter of 2008
   
Vacancy Rates

  * The vacancy rate by area increased from 9.9% compared to 10.5% at the end
    of December
   
Development

  * 7,900 sq m of developments have been completed so far this year - 47%
    already pre-let or sold
   
  * 66,600 sq m of space currently under construction of which 79% has already
    been pre-let or sold
   

CONTINENTAL EUROPE

Lettings(excluding short term licences)

  * 108,700 sq m of space has been let in the three months to the end of March
    (Q1 08: 67,900 sq m), reflecting 19 deals and generating annual income of £
    4.9m
   
  * Letting highlights include 11,000 sq m in Germany let to Oettinger
    Brauerei, 10,700 sq m in France let to Novostrat in Lyon (now 100%
    occupied) and 44,700 sq m take up of previously contracted pre-lettings
    (including Black & Decker, Gliwice; Zabka, Korminiki; Navo Formax Athletic
    in Nadarzyn - all in Poland)
   
  * 28,200 sq m of take-backs occurred over first quarter (Q1 08: 12,312 sq m)
    largely within German portfolio, including 11,000 sq m subsequently re-let
    to Oettinger Brauerei as above and one insolvency for 4,200 sq m at
    Darmstadt. 6,300 sq m taken back due to the relocation of a client at
    Strykow, Poland, is also included
   
Vacancy Rates

  * The vacancy rate increased from 9.4% at December 2008 to 12.2% at end of
    March 2009 mainly due to timings of completions in Gonesse Aeropark in
    France (20,000 sq m), and Gliwice in Poland ( 32,000 sq m)
   
  * Without the Q1 09 completions, the vacancy rate as at 31 March 2009 would
    have been 9.6%
   
Development

  * 139,500 sq m of developments have been completed in the period, with 50%
    already pre-let or sold
   
  * 92,900 sq m of additional space under construction, of which 52% has
    already been pre-let or sold
   
Disposals

  * 5,800 sq m of office space in Nanterre, France for €23.1m, representing an
    initial yield of 6.75%
   

Note: vacancy data by rental value is prepared half-yearly