Final Results

RNS Number : 7591B

SEGRO PLC

24 February 2011

PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2010

SEGRO, EUROPE'S LEADING INDUSTRIAL REIT, DELIVERS FURTHER IMPROVEMENT IN OCCUPANCY

	Year to 31 December 2010	Year to 31 December 2009	Change %
Net rental income (£m)	282.1	269.4	4.7
Profit/(loss) before tax (£m)	197.2	(248.1)	-
EPRA profit before tax - recurring rental profits (£m)	127.3	104.3	22.1
Earnings/(loss) per share (p)	28.5	(41.3)	-
EPRA earnings per share - recurring rental profits (p)	17.1	18.3	(6.6)
Dividend per share (p)	14.3	14.0	2.1

	31 December 2010	31 December 2009	Change %
Gross assets (£m)	5,297.5	5,519.3	(4.0)
Net assets (£m)	2,709.0	2,593.2	4.5
Net asset value per share (p)	366	354	3.4
EPRA net asset value per share (p)	376	367	2.5
Net borrowings (£m)	2,203.2	2,420.1	(9.0)
Gearing (%)	80	91	(12.1)

Financial results

· EPRA profit before tax up 22.1 per cent to £127.3 million, reflecting the full year impact of the acquisition of Brixton

· EPRA earnings per share 17.1 pence down from 18.3 pence, reflecting the dilutive impact of the rights issue in 2009

· Recommending final dividend of 9.6 pence per share - total dividend of 14.3 pence (2.1 per cent increase on 2009)

Continued progress made with our key priorities:

Improving occupancy

· Group vacancy reduced to 12.0 per cent - down from 13.5 per cent at 31 December 2009

· Strong lettings performance - £37.7 million of new annualised rental income generated (2009: £31.0 million)

· Level of takebacks continues to reflect challenging occupier markets - £29.3 million of annualised rental income lost (2009: £24.9 million)

Capitalising on opportunities to profitably grow and improve the portfolio

· Heathrow portfolio materially enhanced through APP transaction - significant opportunities to generate additional value in this recovering market

· Momentum building in pre-let development pipeline - eight projects now under construction and a further four signed, in aggregate representing around £9 million of annualised rental income

Prudently managing financial position

· Gearing reduced to 80 per cent - £485.9 million of new and extended bank facilities agreed

Capital value of completed portfolio increased by 1.9 per cent

· UK increase of 4.4 per cent - outperforming IPD Industrial Index (quarterly version)

· Continental Europe decline of 3.9 per cent - impact of specific factors on certain assets in Germany and Italy

· EPRA NAV per share of 376 pence - 2.5 per cent increase from 31 December 2009

Commenting on the results, Ian Coull, Chief Executive said:

"Our positive lettings momentum continued in the fourth quarter and we recorded a significant reduction in our Group vacancy rate to 12.0 per cent. Enquiry levels remain robust and we have a very healthy pipeline of attractive pre-let projects. We remain focused on our key priorities to increase occupancy, improve the portfolio and prudently manage our financial position. Although we expect many of the challenges in 2010 to continue into 2011 we are confident that, given our high quality portfolio and strong team, SEGRO is well positioned to continue to make progress and to benefit from the emerging recovery."

WEBCAST AND CONFERENCE CALL FOR INVESTORS AND ANALYSTS

A live webcast of the results presentation will be available from 09.30 hours at SEGRO's website at: http://www.segro.com/segro/Investors/Investors-Home.htm

A conference call facility will also be available at 09.30 hours on the following numbers:

UK:	+44 (0)20 7806 1957
US:	+1 212 444 0413
Access code:	1989714#

From midday the conference call will be available on a replay basis on the following numbers:

UK:	+44 (0) 20 7111 1244
US:	+1 347 366 9565
Access code:	1989714#

CONTACT DETAILS FOR INVESTOR / ANALYST AND MEDIA ENQUIRIES RESPECTIVELY:

SEGRO	Alex Shorland-Ball	Mob: +44 (0) 7702 910 149 (24 February)
		Tel: + 44 (0) 20 7451 9043
The Maitland Consultancy	Liz Morley	Tel: + 44 (0) 20 7379 5151

The timetable for the 2010 final dividend will be as follows:

Ex-Dividend date	13 April 2011
Record Date	15 April 2011
AGM	28 April 2011
Payment Date	5 May 2011

The terms used in this report are defined in the Glossary of Terms on page 36. This announcement, the most recent Annual Report and other information are available on the SEGRO website at http://www.segro.com/segro/Investors/Investors-Home/.

Neither the content of SEGRO's website nor any other website accessible by hyperlinks from SEGRO's websites are incorporated in, or form, part of this announcement.

Forward-looking statements: This announcement may contain certain forward-looking statements with respect to SEGRO's expectations and plans, strategy, management objectives, future developments and performance costs, revenues and other trend information. These statements and forecasts involve risk and uncertainty because they relate to events and depend upon circumstances that may occur in the future. There are a number of factors which could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements and forecasts. Certain statements have been made with reference to forecast price changes, economic conditions and the current regulatory environment. Any forward-looking statements made by or on behalf of SEGRO speak only as of the date they are made. SEGRO does not undertake to update forward-looking statements to reflect any changes in SEGRO's expectations with regard thereto or any changes in events, conditions or circumstances on which any such statement is based. Nothing in this announcement should be construed as a profit forecast. Past share performance cannot be relied on as a guide to future performance.

About SEGRO

SEGRO is Europe's leading provider of flexible business space. The Group is a Real Estate Investment Trust (REIT), listed on the London Stock Exchange. SEGRO's portfolio comprises £5.3 billion of predominantly industrial and warehouse assets concentrated in and around major business centres and transportation hubs such as ports, airports and motorway intersections. The Group serves over 1,700 customers spread across many geographies and different industry sectors. It has 5.6 million sq m of built space and a passing rent roll of £326 million (as at 31 December 2010).

CHIEF EXECUTIVE'S REVIEW

Overview

During 2010, we successfully built on the acquisition of the Brixton portfolio in August 2009, making substantial in-roads into our vacancy with our Group rate falling to 12.0 per cent from 13.5 per cent at the end of 2009. We have made good progress with the former Brixton portfolio where the vacancy level is now 18.6 per cent and we are well on our way to reducing this to our stated target of 15.0 per cent by the end of 2012. Our overall UK vacancy has fallen from 14.8 per cent at the beginning of the year to 13.3 per cent. In Continental Europe, a strong lettings performance has seen our vacancy reduce from a high of 12.8 per cent at 31 March 2010 to 8.9 per cent by year end.

Lettings momentum grew throughout the year and we delivered a strong performance with 339 new leases signed. The challenging economic conditions, particularly in the first half of the year, were reflected in the relatively high level of takebacks.

Alongside our key priority of improving occupancy, we have continued to exploit opportunities to profitably grow and improve our portfolio. In June 2010, we significantly enhanced our presence in the Heathrow market when we completed a two phase transaction. This resulted in SEGRO acquiring 50 per cent of the Airport Property Partnership ("APP"), a joint venture with Aviva Investors, and the enlargement of the APP portfolio through the injection of £237.1 million of SEGRO's existing assets at Heathrow. The Heathrow market provides an exciting opportunity for the Group and we see real potential to add value here through active management of our portfolio.

Pre-let developments provide us with an attractive opportunity to generate good returns from our well located land bank. During 2010, interest in pre-let developments has increased as customers look to take advantage of lower costs to develop a building which matches their specifications in the right location. We finished the year with a strong pipeline of projects. Eight projects are now on site, a further four signed and seven more are approved internally and in active negotiations.

Towards the end of the year we completed a review of our Continental European portfolio. We have now put in place a plan to refine the Continental European business to focus on our key geographies of Germany, France, Poland and Benelux to fully leverage our expertise in serving key cities and transportation hubs with flexible business space. We have also completed a number of disposals of assets in 2010 where these did not fit well within the portfolio including the sale of the Westcore portfolio and Treforest Industrial Estate towards the end of the year.

Finally, we have made good progress with our third priority to prudently manage our financial position. Improvements to asset valuations and disposals in the year have enabled us to reduce gearing levels to 80 per cent and our loan to value ratio is now 46 per cent. We have significantly extended our maturity profile and have no material near-term refinancing requirements.

Portfolio value increased by 1.9 per cent

Our portfolio of completed properties recorded a valuation gain of 1.9 per cent in the year versus declines in both 2009 and 2008.

Completed properties in the UK recorded a valuation gain of 4.4 per cent for the period, ahead of the 3.5 per cent recorded by the quarterly IPD Industrial Index for the twelve months. The strength of the investment market and our lettings performance flowed through into a sharpening of yields, which offset the valuers' more conservative assumptions for rental values particularly on our higher vacancy estates. London, which represents 43 per cent of our UK portfolio, was again the best performing region with good gains in areas such as Park Royal where there is limited investment availability and strong institutional demand for product combined with rental growth.

The Continental European portfolio of completed properties recorded a valuation decrease of 3.9 per cent reflecting a reduction in rental assumptions on certain assets and a number of one off factors. The German portfolio recorded a valuation decline of 9.7 per cent, due principally to three issues: the return of properties following the Karstadt-Quelle insolvency; unexpected refurbishment costs on one estate highlighted by the heavy snowfall; and revised assumptions on our estate in Frankfurt in part to reflect the reduction by a year in the remaining term of the lease.

Our portfolio in Benelux reported a valuation decrease of 3.1 per cent while the French portfolio remained stable. Reflecting the continued reduction in vacancy, good rental levels and increasing investor demand, our Polish portfolio recorded a valuation gain of 6.8 per cent.

The remaining 9 per cent of our Continental European portfolio recorded a valuation decline of 11.5 per cent principally as a result of the decline in the value of the Italian portfolio following the exercise of a 2012 break option by a customer occupying 48,100 sq m at Energy Park, Vimercate. We are currently working with this customer on their future plans. Energy Park is a well located, high quality estate and we have seen good demand during the year with 4,500 sq m of new lets signed and our office development completed at the site in 2009 is now fully occupied.

Improving occupancy

Our primary focus in 2010 was on reducing vacancy and we have made good progress during the period reducing the overall Group vacancy from a peak of 14.1 per cent at the end of the first quarter to 12.0 per cent. This figure has benefitted from 1.5 per cent due to short term lets (2009: 1.7 per cent). Improving our occupancy levels is both a function of new lettings but equally important is the management of our existing customers to minimise the quantum of takebacks on lease breaks and expiries.

Our lettings performance has been strong during the year with £37.7 million of new annualised rental income generated across the business, excluding the value of agreements for pre-let developments which will be delivered in future years. Our performance in letting up our existing space (excluding lettings of newly developed space) was particularly pleasing, up 100 per cent on 2009.

We lost £29.3 million of annualised rental income as a result of takebacks in the year. This relatively high level of takebacks reflects the difficult economic conditions during 2010, but was in line with our expectations at the start of the year. As a Company we are committed to customer service and aim to stay close to our customers to anticipate and address their space needs as they change and evolve. This focus helped us to deliver a retention rate of 63 per cent for the Group.

UK

In the UK, we started the year with a vacancy rate of 14.8 per cent, reflecting the acquisition of the high vacancy Brixton portfolio. By the end of the year we had reduced this to 13.3 per cent. We generated strong lettings in the former Brixton portfolio and the former Brixton vacancy has been reduced by 3.5 per cent in the twelve months to 18.6 per cent.

In total, we signed 245 new lettings in the UK representing £26.3 million of annualised rental income, a significant increase on the £16.2 million generated in 2009.

Demand has been particularly strong in West London where our estates at and around Park Royal have performed well. In total, we signed 24 new leases in Park Royal, representing a total of 60,100 sq m including the letting of the Verdus building in Greenford on a long lease in October. At Heathrow, we have seen an encouraging pick up in activity as the year has progressed and cargo volumes have risen. This is beginning to flow through into our lettings numbers with a total of 27 new leases signed at Heathrow in the year (included leases signed in the APP portfolio since June) and an increased level of enquiries particularly in the fourth quarter. The Heathrow market presents exciting opportunities for the Group as we look into 2011.

Our industrial portfolio in the Thames Valley performed well, with a total of 60 new leases signed for a total of 54,400 sq m. The suburban office portion of our Thames Valley portfolio has been more subdued and, although we signed a total of 29 leases for an aggregate of 22,700 sq m, including the completion of a 12,600 sq m pre-let development for Fluor at IQ Farnborough in the first half of the year, vacancy in this portfolio remains higher than we would like.

In the less than 20 per cent of our UK portfolio that is located outside the South East, occupier markets were more difficult but we continued to make progress with 83 new lettings signed. At our estates in Manchester, we let 63,800 sq m with good progress made on the letting up of the former Brixton properties.

Although we continue to take a flexible and pragmatic approach to lettings, we are pleased that, in general, the strong lettings performance we have achieved has not been at the expense of overall rental levels or by giving away unusually large rental incentives. In fact, over the year we saw modest growth in transactional rental levels in the UK. Overall headline rental levels on the new lettings and lease renewals completed in 2010 were an average of 0.7 per cent above December 2009 ERVs. These figures mask considerable regional differences with strong rental growth in areas such as Park Royal and more difficult conditions in markets outside the South East, particularly those with an excess supply of second hand space. Rental incentives for the year were an average of 11.2 per cent of the committed rents (2009: 11.3 per cent).

Our UK retention rate increased to 55 per cent (2009: 52 per cent). Customers continue to focus on space consolidation and in total, we lost £20.2 million of annualised rental income as a result of space returned in 2010 in the UK, in line with the £20.4 million lost in 2009. Many of our larger takebacks related to development opportunities and a number of these customers were relocated into other SEGRO buildings, including the premises in Camberley previously occupied by Fluor. In 2011 we have a total of £27.9 million of rental income in the UK subject to a potential break or expiry and managing our customer relationships to minimise the amount of this space which is returned remains a key focus for the business.

Continental Europe

The vacancy in our Continental European business was impacted by the expected return of the Karstadt-Quelle space in Germany in the first quarter, which pushed the vacancy rate up to 12.8 per cent at 31 March 2010. Our local team has done a great job in managing this with 52 per cent, by rental value, re-let or sold by the year end. This, combined with excellent lettings figures across the rest of the portfolio, enabled us to reduce our Continental European vacancy rate to 8.9 per cent by the end of the year.

In total, we generated £11.4 million of new annualised rental income in Continental Europe with 94 new lettings signed representing 261,900 sq m.

Demand in Germany recovered through the year reflecting the strengthening of the local economy. In total, we completed 42 lettings in Germany representing 95,600 sq m. Leasing performance in France was steady through the year with particular strength around Paris and in total we signed 10 new leases for 63,200 sq m. We also made progress in Benelux with 36,600 sq m let under 17 new leases including continued success with lettings at Pegasus Park in Belgium. Our Polish business had a good year, reflecting both the strength of that economy and the quality and location of our assets. We let a total of 59,100 sq m in Poland in 2010 and at the year end our vacancy rate was only 2.6 per cent.

Overall headline rental levels on the new lettings and lease renewals completed in Continental Europe were an average of 2.2 per cent below December 2009 ERVs. Rental incentives averaged 6.8 per cent for the year (2009: 9.0 per cent).

Our Continental European retention rate was strong at 75 per cent. Space returned in the year represented £9.1 million of annualised rental income (£4.5 million excluding the space returned as a result of the Karstadt-Quelle insolvency) (2009: £4.5 million). In 2011, £11.0 million of rental income is subject to potential break or expiry in Continental Europe.

Capitalising on opportunities to profitably grow and improve the portfolio

The second priority we set at the outset of the year was to exploit opportunities to profitably grow and improve the portfolio. We have reviewed the assets in our portfolio during the year both in the UK and Continental Europe. This has confirmed our objective of clustering our assets into core markets which, we believe, will assist us in delivering attractive returns. In the UK, we completed the APP transaction in June which significantly enhanced our presence at Heathrow, which is a core cluster for the Group and in Continental Europe, we have put in place a plan to refocus on certain core geographies. Generating income and returns from our land bank is a priority and we have capitalised on the growth in demand for pre-let developments during the year, creating a strong pipeline of projects particularly in our core markets. We also completed a number of disposals of poorer quality assets where they did not fit well within the portfolio.

Heathrow market presents significant opportunity

We completed the acquisition of a 50 per cent interest in APP at the end of the first half for £111.5 million cash. The APP portfolio consisted of 17 properties primarily around Heathrow and three indirect investments in aggregate valued at £446.6 million (based on the purchase price at 100 per cent). We then sold £237.1 million of our existing assets at Heathrow into the joint venture. APP funded the acquisition through drawing on committed debt facilities together with £70.3 million of new equity injected from each partner. In aggregate, taking account of the sale of our assets and the purchase of our interest in APP, these transactions generated net cash proceeds of £55.3 million for the Group (before acquisition costs).

In total, we now have over £1.0 billion of assets under management clustered around Heathrow including the APP assets within the airport perimeter which complement our existing portfolio and allow us to manage customer requirements both air and land side. Since June, we have taken over the asset management of the APP portfolio and begun to look at ways in which we can deliver additional value through economies of scale, development opportunities and the potential re-gearing of existing leases.

The prospects for the Heathrow market are positive. Supply is limited in key locations both airside and close to the airport perimeter and access points. Alongside this, although demand has been impacted by the economic downturn it is now beginning to improve as air cargo volumes recover to above the levels seen before the recession. In 2011, we will continue to exploit the significant opportunities we see in this core market.

Growing pre-let development pipeline with 12 projects signed

Our development activity has been lower in 2010, reflecting the uncertain economic conditions, particularly at the beginning of the year. As 2010 has progressed we have seen an increase in the level of interest in pre-let developments and we are capitalising on this growing demand.

We are currently on site with four pre-let projects in the UK, three in London at Southall, Enfield and Heathrow and one on the Slough Trading Estate. The Southall development is currently expected to complete in the second quarter of 2011, the Enfield and Slough Trading Estate developments in the third quarter of 2011 and the Heathrow project by the end of the year.

In Continental Europe, we have four further projects under construction at Ostrava in Czech Republic, Gliwice in Poland, Gonesse to the north of Paris (France) and Hamburg in Germany. Completion is expected on the Ostrava project during the first quarter of 2011. Gliwice is expected to complete in the second quarter of 2011. The Hamburg and Gonesse projects are expected to complete in the third quarter of 2011.

We finished the year with a robust pipeline of pre-let developments with a further four projects signed in the UK. In aggregate our signed and under construction projects (excluding those currently in negotiations) represent around £68 million of capital expenditure and will generate £9 million of annualised rental income. A further seven projects are approved internally and under active negotiation (two in the UK and five in Continental Europe) but not yet signed.

We made a decision in the middle of the year to restart a limited programme of speculative development in specific markets in Continental Europe where we have excellent development sites and there is a shortage of good quality light industrial space plus strong market demand for the product. The sites we have identified are in Lodz (Poland), Dusseldorf and Berlin (Germany) and Paris (France). In the fourth quarter we commenced construction at Lodz of a small speculative development of light industrial units. This development is expected to be completed during the first quarter of 2011. We currently expect to commence speculative development of small light industrial schemes at the other three sites in 2011.

Continue to recycle assets with disposals of £479.4 million

We completed a total of £479.4 million of disposals during the year (including the £237.1 million injection of assets into APP). In aggregate, these disposals were completed in line with book values and included the following sales: the Westcore portfolio of estates around Heathrow to Hermes Real Estate for £79.3 million, the Treforest Industrial Estate to Hansteen Property Unit Trust for £27.7 million, a building to Fluor as part of their new premises at IQ Farnborough for £21.0 million, 13 acres of land at Farnborough to TAG for £14.8 million and The Hub, Heywood Distribution Park, to Fowler Welch Coolchain for £13.6 million.

Refocusing our Continental European portfolio

During the year, we conducted a review of our Continental European portfolio under Andy Gulliford's leadership. We have now put in place a plan to refocus the Continental European business into a smaller number of key geographies to leverage our expertise in serving key cities and transportation hubs with flexible business space.

Going forward we will be focused on our key geographies: Germany, France, Poland and Benelux. In each of these geographies we plan to realign our portfolio to the key cities which we believe provide more attractive growth opportunities and have proved to be more resilient to the economic downturn. In Italy and the Czech Republic we have good quality assets where we see opportunities to add significant further value. We will develop these assets but do not currently expect to add to our holdings in these countries.

We have made a decision to exit Spain and Hungary given our view of the likely outlook for the industrial property sector in these countries. We have closed our local offices and, in December, we completed the sale of the majority of our Spanish assets for £15.4 million.

Prudently managing our financial position

Our third priority was to prudently manage our financial position. Our balance sheet remains strong and we have strengthened our maturity profile with the completion of £485.9 million of new and extended bank facilities during the year. This has moved the weighted average maturity of the Group's debt from 9.5 years to 9.8 years and we have no material near-term refinancing requirements.

Net borrowings at the end of the year were £2,203.2 million, down from £2,420.1 million at 31 December 2009 and we have reduced our gearing from 91 to 80 per cent. Our loan to value ratio is now 46 per cent down from 47 per cent at 31 December 2009. We could absorb a decline in property valuations of more than 28 per cent before the tightest of our financial gearing covenants would be breached and with just 19 per cent of our net borrowings at floating rates, we only have limited exposure to interest rate increases.

Further details of the financial position, including sensitivities to interest rate and currency fluctuations, are provided in the financial review.

Dividends

The Board has recommended a final dividend of 9.6 pence per share. The final dividend will be paid 50 per cent as a normal cash dividend and 50 per cent as a Property Income Dividend on 5 May 2011 to shareholders on the register at the close of business on 15 April 2011. The total dividend for the year amounts to 14.3 pence.

There will be no scrip alternative. Shareholders who previously elected for scrip dividends need take no action.

Outlook

Our strategy remains to maximise total shareholder returns by applying our business model to 'Buy Smart, Add Value and Sell Well' in our core geographies supported by an efficient capital structure.

At the beginning of 2010, we set ourselves three priorities: to improve occupancy, capitalise on opportunities to improve the portfolio and to prudently manage our financial position. We have made good progress on all three of these in the twelve months.

Looking ahead, we continue to focus on these three priorities as we move into 2011. We have transformed SEGRO over the last few years to concentrate our portfolio and our emphasis now is on operational delivery. Reducing our vacant property is the largest near-term opportunity we have to generate additional value for our shareholders and is the main priority of the management team. We estimate that, at today's rental levels, a reduction of one per cent in our current vacancy rate would add around £6 million of additional annualised earnings. In addition our significant, well located, land bank both in the UK and Continental Europe gives us an opportunity to generate further value as we continue to capitalise on the growing demand for pre-let developments.

The economic environment has been challenging in 2010 and although sentiment has improved during the year we believe that 2011 will also bring challenges. The pattern of lettings and takebacks in 2011 is unlikely to be uniform, quarter on quarter, and we may see movements in the vacancy rate in any given quarter which reflect this. We are confident however, given our high quality portfolio and strong team, that SEGRO is well positioned to continue to make progress and to benefit from the emerging recovery.

Ian Coull, Chief Executive

VALUATION DATA - COMPLETED PROPERTIES - 31 DECEMBER 2010

	Valuation
	Investment properties £m	Trading properties £m	Joint ventures £m	Total £m	Value per sq m £	Valuation movement ⁽¹⁾ 2010 %
UK
By asset type
Logistics warehousing	181.7	-	81.7	263.4	1,093.0	10.9
Other business space	2,184.6	10.1	366.2	2,560.9	1,051.3	4.2
Offices	648.3	4.0	2.0	654.3	2,508.0	2.8
	3,014.6	14.1	449.9	3,478.6	1,184.0	4.4
By geography
Thames Valley	1,308.6	4.0	-	1,312.6	1,569.2	3.5
London Markets	1,055.1	1.6	449.9	1,506.6	1,316.1	5.1
National Markets	650.9	8.5	-	659.4	689.3	4.6
	3,014.6	14.1	449.9	3,478.6	1,184.0	4.4
Continental Europe
By asset type
Logistics warehousing	444.1	110.1	18.2	572.4	435.6	4.1
Other business space	541.2	99.0	0.8	641.0	536.0	(8.8)
Offices	172.1	-	-	172.1	1,674.5	(8.6)
	1,157.4	209.1	19.0	1,385.5	530.3	(3.9)
By geography
France	334.0	42.2	-	376.2	577.2	-
Germany	268.3	129.9	-	398.2	392.9	(9.7)
Benelux	255.9	-	19.0	274.9	926.3	(3.1)
Poland	191.0	14.4	-	205.4	434.2	6.8
Other	108.2	22.6	-	130.8	734.8	(11.5)
	1,157.4	209.1	19.0	1,385.5	530.3	(3.9)

Group total	4,172.0	223.2	468.9	4,864.1	876.3	1.9

1 The valuation movement percentage is based on the difference between the opening and closing valuations, allowing for capital expenditure and disposals.

Please see www.SEGRO.com/SEGRO/Investors for further details of our property portfolio in our 2010 Property Analysis.

VALUATION YIELDS - COMPLETED PORTFOLIO - 31 DECEMBER 2010

	Net initial yield %	Net true equivalent yield %
UK
By asset type
Logistics warehousing	5.1	7.1
Other business space	5.7	7.9
Offices	6.0	7.7
	5.7	7.8
By geography
Thames Valley	6.0	7.9
London Markets	5.2	7.6
National Markets	6.2	8.3
	5.7	7.8
Continental Europe
By asset type
Logistics warehousing	6.7	8.6
Other business space	7.4	7.8
Offices	6.1	6.7
	6.9	8.0
By geography
France	6.4	8.9
Germany	7.2	7.4
Benelux	5.8	7.5
Poland	8.1	8.5
Other	8.4	7.5
	6.9	8.0
Group
By asset type
Logistics warehousing	6.2	8.1
Other business space	6.0	7.9
Offices	6.0	7.5
Group total	6.0	7.9
By ownership
Wholly owned	6.1	7.9
Joint ventures	5.5	7.5
Group total	6.0	7.9

Lettings analysis

	Area (000's sq m)				Rent pa (£m⁾⁽²⁾
	Lettings⁽¹⁾		Space returned		Lettings⁽¹⁾		Space returned
	2010	2009	2010	2009	2010	2009	2010	2009
UK
Lettings of new developments	27.4	41.4			5.2	7.6
Existing vacant	270.7	134.2			21.1	8.6
	298.1	175.6	267.3	299.7	26.3	16.2	20.2	20.4
Continental Europe
Lettings of new developments	45.9	169.5			2.7	8.5
Existing vacant	216.0	136.8			8.7	6.3
	261.9	306.3	237.2⁽³⁾	75.4	11.4	14.8	9.1⁽³⁾	4.5

Group total	560.0	481.9	504.5	375.1	37.7	31.0	29.3	24.9

1 Lettings exclude lease renewals, break options not exercised and income from short term licence agreements.

2 Annualised rental income, after the expiry of any rent free periods.

3 Of which, £4.6 million and 162,200 sq m relates to Karstadt-Quelle which became insolvent in H2 2009.

Vacancy analysis

	2010	2009
	Total %	Total %
UK
Logistics warehousing	13.0	12.6
Other business space	13.3	16.4
Offices	13.2	8.0
	13.3	14.8
Brixton portfolio	18.6	22.1
SEGRO (excluding Brixton)	10.8	10.8
	13.3	14.8
Continental Europe
Logistics warehousing	6.3	6.4
Other business space	10.4	14.7
Offices	12.9	13.6
	8.9	10.7
Group
By asset type
Logistics warehousing	8.1	8.0
Other business space	12.7	16.1
Offices	13.1	9.5
Group total	12.0	13.5
By ownership
Wholly owned	12.7	14.7
Joint ventures	5.4	7.5
Group total	12.0	13.5

The vacancy rate excluding short term lettings for the Group at 31 December 2010 is 13.5% (2009: 15.2%).

Weighted average lease length ⁽¹⁾ - 31 DECEMBER 2010

	Break years	Expiry years
Lease length
UK	6.6	9.1
Continental Europe	4.6	6.6
Group total	6.0	8.3

1 Weighted by headline rent.

Reconciliation between passing rent and ERV

	UK £m	Continental Europe £m	Group £m
Total passing rent⁽¹⁾ as at 31 December 2010	218.7	107.7	326.4
ERV of space occupied on a short term basis	5.2	1.0	6.2
Passing rent of rent frees on let properties at 31 December 2010	30.1	12.0	42.1
ERV of vacant properties	38.5	10.6	49.1
Reversion to ERV of occupied properties	(2.6)	(12.3)	(14.9)
ERV of entire portfolio	289.9	119.0	408.9

1 Gross before the deduction of any property operating expenses.

DEVELOPMENT PIPELINE - 31 december 2010

	Hectarage ha	Space to be built sq m	Current book value¹£m	Estimated cost to completion² £m	Total estimated book value at completion £m	ERV when complete³£m	Indicative yield⁴%
Current projects
UK	11.9	41,505	28.8	42.4	71.2	5.9	8.3
Continental Europe	17.2	70,692	15.9	29.4	45.3	4.1	9.1
	29.1	112,197	44.7	71.8	116.5	10.0	8.6
Percentage pre-let						89%
Potential projects
UK	47.5	243,070	75.2	285.3	360.5	35.4	9.8
Continental Europe	346.8	1,605,578	210.1	793.3	1,003.4	92.4	9.2
	394.3	1,848,648	285.3	1,078.6	1,363.9	127.8	9.4
Awaiting development plans
UK	112.6		79.0	-	79.0
Continental Europe	95.0		44.9	-	44.9
	207.6		123.9	-	123.9
Total development pipeline
UK	172.0	284,575	183.0	327.7	510.7	41.3	9.6
Continental Europe	459.0	1,676,270	270.9	822.7	1,093.6	96.5	9.2
Group total	631.0	1,960,845	453.9	1,150.4	1,604.3	137.8	9.3
Analysed as
Wholly owned
Investment properties - development			347.0
Trading properties - development			81.8
Joint ventures
Investment properties - development			9.7
Trading properties - development			15.4
Group total			453.9

1 Includes land plus all costs incurred to date which are revalued during the development period.

2 Estimated costs to completion include estimated finance charges which are capitalised to the end of the construction period.

3 ERV based upon market rents as at 31 December 2010.

4 Indicative yield is the expected gross yield based on estimated rental value when fully let, divided by the current book value, plus estimated remaining costs to complete.

Note that, as developments are revalued during the construction phase, yields will tend towards the yield for a completed investment property as each property nears completion.

Financial review

HIGHLIGHTS

	31 December 2010	31 December 2009
Total property return (%)	6.8	(1.0)
Net asset value (NAV) per share (p)	366	354
EPRA⁽¹⁾ NAV per share (p)	376	367
Realised and unrealised property gain/(loss) (£m)	26.0	(344.0)
Earnings/(loss) per share (EPS) (p)	28.5	(41.3)
EPRA⁽¹⁾ EPS (p)	17.1	18.3
Profit/(loss) before tax (£m)	197.2	(248.1)
EPRA⁽¹⁾ profit before tax (£m)	127.3	104.3

1 EPRA NAV, EPRA EPS and EPRA profit before tax are alternate metrics to their IFRS equivalents that are calculated in accordance with the Best Practices Recommendations of the European Public Real Estate Association (EPRA). SEGRO uses these alternative metrics as they highlight the underlying recurring performance of the property rental business, which is our core operational activity. The EPRA metrics also provide a consistent basis to enable a comparison between European property companies.

TOTAL PROPERTY RETURN

Total property return is a measure of the ungeared return from the portfolio and is calculated as the total realised and unrealised property gain or loss plus net rental income, expressed as percentage of capital employed.

Total property return for the year was 6.8 per cent, a significant improvement on the negative return for 2009 and is largely attributable to the unrealised property valuation gain recognised in 2010 compared to a valuation deficit in 2009.

NAV AND EPRA NAV PER SHARE

A reconciliation of EPRA net assets to total net assets attributable to ordinary shareholders and the corresponding NAV and EPRA NAV per share calculations is provided in note 13 to the financial information.

EPRA NAV per share at 31 December 2010 was 376 pence, compared with 367 pence as at 31 December 2009. The increase is largely as a result of the growth in property values particularly in the first half of the year and recurring profit generated, offset by dividends paid and the impact of exchange rate movements.

The EPRA net assets attributable to ordinary shareholders and the corresponding EPRA NAV per share calculation have changed from that used in the previous reporting period in order to achieve consistency with the most recent update to the EPRA Best Practices Recommendations. EPRA NAV includes adjustments to include the unrecognised fair value uplift on trading properties and to exclude the fair value of derivatives and the 2009 opening position has been changed accordingly. Excluding these adjustments, the 2009 EPRA NAV as previously reported was 362 pence per share. The 2010 EPRA NAV under the old basis is 372 pence per share.

	£m	Shares million	Pence per share
EPRA net assets attributable to ordinary shareholders at 31 December 2009⁽¹⁾	2,686.9	733.2	367
Realised and unrealised property gains	26.0		3
EPRA profit before tax	127.3		17
Dividends (2009 final and 2010 interim)⁽²⁾	(81.3)		(11)
Dilutive element of 2009 final scrip dividend	-		(4)
Joint ventures' EPRA adjustments	31.1		4
Exchange rate movement	(17.6)		(2)
Other	10.9		2
EPRA net assets attributable to ordinary shareholders at 31 December 2010	2,783.3	740.3	376

1 Amended following change in definition as discussed in more detail in note 13 to the financial information.

2 Net of increase in share capital and premium due to scrip dividend.

REALISED AND UNREALISED PROPERTY GAIN/(LOSS)

A total realised and unrealised gain on property of £26.0 million (2009: £344.0 million loss) has been recognised in 2010, which includes an unrealised valuation surplus on investment properties of £32.4 million (2009: £271.2 million deficit). Losses of £2.8 million and £0.1 million arose in 2010 on disposal of investment and trading properties, respectively (2009: £54.7 million loss and £0.6 million profit, respectively). Impairment provisions of £3.6 million (2009: £16.1 million) were recorded on certain trading properties as the fair value is deemed to be less than the original cost. The total realised and unrealised property gain for the year is further analysed in note 7 to the financial information.

In addition to the property gains outlined above, our share of realised and unrealised property gains generated from joint venture interests was £31.1 million (2009: £1.9 million) and are further analysed in note 6 to the financial information.

The Group's trading property portfolio (including share of joint ventures) has an unrealised valuation surplus of £30.2 million at 31 December 2010 (2009: £27.1 million), which has not been recognised in the financial information as they are recorded at the lower of cost or fair value.

EPS AND EPRA EPS

An EPS of 28.5 pence was achieved for 2010, compared to a loss of 41.3 pence in 2009. The main driver behind this turnaround was the unrealised property gains in 2010 compared to losses in 2009.

EPRA EPS of 17.1 pence per share is lower than the 2009 equivalent (18.3 pence per share) as a result of the dilutive impact of the rights issue that occurred in April 2009. While earnings have increased in 2010, the rights issue occurred part way through the previous period and, accordingly, the weighted average number of shares was much lower in 2009 than in 2010.

EPRA PROFIT

EPRA profit can be analysed as follows:

	2010 £m	2009 £m
Gross rental income	344.6	328.4
Property operating expenses	(62.5)	(59.0)
Net rental income	282.1	269.4
Joint venture management fee	1.9	-
Administration expenses, excluding prior year exceptional items	(39.2)	(40.3)
Share of joint ventures' EPRA profits⁽¹⁾	10.8	2.8
EPRA operating profit	255.6	231.9
Net finance costs excluding fair value movements on derivatives	(128.3)	(127.6)
EPRA profit before tax	127.3	104.3
Tax on EPRA profit	(4.3)	(1.5)
EPRA profit after tax	123.0	102.8

1 Comprises net property rental income less administration expenses, net interest expenses and taxation.

A reconciliation between EPRA profit before tax and IFRS profit/(loss) before tax is provided in note 2 to the financial information.

EPRA profit before tax increased by £23.0 million compared to 2009, primarily due to the impact of the Brixton acquisition and other acquisitions and disposals which drove a significant increase in net rental income, as described below.

NET RENTAL INCOME

Net rental income increased by £12.7 million, with an increase of £21.9 million (13.2 per cent) in the UK, is offset by a decrease of £9.2 million (8.9 per cent) in Continental Europe.

In the UK, the net impact of acquisitions and disposals led to an increase in net rental income of £15.2 million. The Brixton acquisition contributed £28.2 million to the increase (£23.7m is reflected in the properties acquired line, while £4.5 million is included in the properties sold line as some of the acquired Brixton assets have since been sold), partially offset by the loss of income due to disposals, primarily the portfolio sold to APP in June 2010 and the Westcore portfolio sold in December 2010. The remaining increase is largely a result of development lettings (£7.5 million) and increased surrender premiums (£5.9 million, including a large individual amount of £4.5 million), offset by a reduction in "like for like" rents as a result of rent lost from takebacks and insolvencies within the original SEGRO portfolio.

In Continental Europe, the decrease in net rental income is due to a reduction in like for like rent (£3.6 million) and exchange rate movements (£4.4 million), offset by an increase in development lettings (£3.0 million). The reduction in like for like rent is largely a result of rent lost from the insolvency of Karstadt-Quelle in Germany and the takeback of some space from Neckermann also in Germany, combined with higher unrecoverable costs from those properties being vacant.

	United Kingdom		Continental Europe		Group
Like for like rental income	2010 £m	2009 £m	2010 £m	2009 £m	2010 £m	2009 £m
Completed properties owned throughout 2010 and 2009 (like-for-like rents)	105.7	109.5	85.9	89.5	191.6	199.0
Development lettings	7.7	0.2	6.9	3.9	14.6	4.1
Properties taken back for development	0.2	0.9	-	-	0.2	0.9
Net rental income pre acquisitions/disposals	113.6	110.6	92.8	93.4	206.4	204.0
Properties acquired	49.2	25.3	-	-	49.2	25.3
Properties sold	14.2	22.9	1.4	5.6	15.6	28.5
Net rental income before surrenders, dilapidations and exchange	177.0	158.8	94.2	99.0	271.2	257.8
Lease surrenders and dilapidations	10.3	4.4	-	-	10.3	4.4
Rent lost from lease surrenders	0.6	2.8	-	-	0.6	2.8
Exchange rate movement	-	-	-	4.4	-	4.4
Net rental income per accounts	187.9	166.0	94.2	103.4	282.1	269.4

TOTAL COSTS

The Group is focused on carefully managing its cost base and regards the total cost ratio as a key measure of performance. The total cost ratio is calculated by expressing the sum of property operating expenses (net of service charge recoveries and third party asset management fees) and administration expenses (excluding exceptional items) as a percentage of gross rental income and includes the Group's share of costs and revenue from joint ventures.

The total cost ratio for 2010 was 28.1 per cent compared to 29.9 per cent in 2009. The 180 basis point improvement in this ratio was achieved by keeping our total costs almost flat, despite the significant increase in the size of the portfolio under management. One of the Group's largest costs is associated with empty properties whereby property taxes, maintenance and other estate service expenses are borne by the Group. Such costs amounted to £22.7 million (2009: £21.2 million) in the year. Excluding empty property costs, the cost ratio for the 2010 was 21.9 per cent (2009: 23.6 per cent).

NET FINANCE COSTS

Excluding fair value gains and losses on interest rate swaps and other derivatives, net finance costs increased by £0.7 million from £127.6 million to £128.3 million. The increase is mainly attributable to a decrease in development activity reducing the amount of interest capitalised and exchange differences which are partially offset by a reduction in the interest charge from lower floating rates in the year and lower average debt levels.

UNDERLYING TAX RATE

The underlying tax rate for the year ended 31 December 2010 on an EPRA profits basis was 3.4 per cent, which is within the range of 3 to 5 per cent targeted by the Group. The Group's target tax range reflects the tax exempt status as a REIT in the UK and a SIIC in France.

The overall tax position for the period was a credit of £11.1 million (2009: £14.0 million) which included the benefit of provision releases related to the prior year.

CASH FLOW

A summary of cash flows for the year is set out in the table below:

	2010 £m	2009 £m
Cash flow from operations	244.9	222.1
Finance costs (net)	(141.1)	(144.7)
Dividends received (net)	8.8	12.9
Tax paid (net)	(6.0)	(11.0)
Free cash flow	106.6	79.3
Net cash inflow arising on acquisition of Brixton	-	54.7
Settlement of Brixton derivatives	-	(126.3)
Capital expenditure (excluding trading properties)	(63.9)	(191.2)
Investment property sales (including joint ventures)	397.0	421.3
Dividends paid	(82.8)	(59.2)
Rights issue and placing and open offer net proceeds	-	741.4
Cost of derivatives close out	23.4	(64.4)
Investment in joint ventures	(195.4)	6.7
Other items	8.8	0.8
Net funds flow	193.7	863.1
Settlement of Brixton debt	-	(507.7)
Net decrease in other borrowings	(260.6)	(379.5)
Net cash outflow	(66.9)	(24.1)
Opening cash and cash equivalents	111.9	162.5
Exchange rate movements	(0.4)	(26.5)
Closing cash and cash equivalents	44.6	111.9

Free cash flow generated from operations was £106.6 million in 2010, an increase of £27.3 million from 2009. This is primarily due to the increase in net rental income with a full year impact of the Brixton acquisition and increased proceeds from the sale of trading properties.

Other significant movements include proceeds received from investment property sales (in particular to APP), offset by outflows in respect of the acquisition of the 50 per cent interest in the APP joint venture, dividend payments and the reduction of borrowings, including the repayment of a £125 million bond. Overall this resulted in a net cash outflow of £66.9 million (2009: £24.1 million) during the period.

CAPITAL EXPENDITURE/DIVESTMENT

The Group has taken a cautious approach to the deployment of capital over the past 2 years; accordingly, during 2010, there was a net divestment of capital amounting to £195.9 million compared with £240.7 million in 2009.

	2010 £m	2009 £m
Capital expenditure⁽¹⁾
Development expenditure on investment properties	48.0	161.3
Acquisitions	14.6	49.7
Expenditure on trading properties	20.9	27.1
Total capital expenditure	83.5	238.1
Less book value of disposals of:
Investment properties	(390.7)	(453.3)
Trading properties	(55.0)	(6.6)
Joint ventures	(11.8)	(12.2)
Total disposals	(457.5)	(472.1)
Net investment/(divestment) in joint ventures	178.1	(6.7)
Net capital divestment	(195.9)	(240.7)

1 Values are stated on an accruals rather than a cash flow basis.

The Group acquired a 50 per cent interest in APP in 2010 for £111.5 million and sold a number of assets into the venture for net proceeds of £237.1 million. The Group generated net cash proceeds of £55.3 million (before acquisition costs of £13.8 million) from these transactions after allowing for a £70.3 million equity contribution into APP to fund SEGRO's share of the acquisition of the £237.1 million assets referred to above.

Contractual obligations in respect of future development expenditure on projects currently in progress or committed will amount to approximately £69.2 million.

principal risks and uncertainties

Principal risks and uncertainties are discussed in full in the annual report.

TREASURY POLICIES AND GOVERNANCE

Group Treasury operates within a formal treasury policy covering all aspects of treasury activity including funding, counterparty exposure and management of interest rate, currency and liquidity risks. Group Treasury policies are reviewed by the Board at least once a year and Group Treasury reports on compliance with these policies on a quarterly basis to the Treasury Risk Committee which includes the Chief Executive and is chaired by the Finance Director.

FINANCIAL POSITION AND FUNDING

At 31 December 2010 the Group's net borrowings were £2,203.2 million (31 December 2009: £2,420.1 million) comprising gross borrowings of £2,247.8 million (31 December 2009: £2,532.8 million) and cash balances of £44.6 million (31 December 2009: £112.7 million).

During the year the Group agreed new or extended bank facilities totalling £485.9 million. On 6 December 2010 SEGRO plc was substituted for Brixton Limited as the Issuer of all of the outstanding 5.25% bonds due 2015 and the 6.00% bonds due 2019.

At 31 December 2010 the weighted average maturity of the gross borrowings of the Group was 9.8 years. Secured borrowings at 31 December 2010 were £61.3 million representing just 3 per cent of the Group's total gross borrowings.

The market value of the gross borrowings of the Group at 31 December 2010 was £2,323.3 million, £75.5 million higher than the carrying value. The net market value of the Group's derivative portfolio of interest rate swaps and forward foreign exchange and currency swap contracts at 31 December 2010 was a net asset of £11.1 million.

GEARING AND FINANCIAL COVENANTS

The loan to value ratio (net borrowings divided by property assets) at 31 December 2010 was 46 per cent (2009: 47 per cent).

The gearing ratio of the Group at 31 December 2010 (consolidated net borrowings divided by consolidated net worth with deferred tax added back) was 80 per cent (2009: 91 per cent) significantly lower than the Group's tightest financial gearing covenant of 160 per cent. Property valuations would need to fall by more than 28 per cent from their 31 December 2010 values to reach the gearing covenant threshold of 160 per cent.

The Group's other key financial covenant is interest cover requiring that net interest before capitalisation be covered at least 1.25 times by net property rental income. At 31 December 2010 the Group comfortably met this ratio at 2.2 times (2009: 2.0 times).

LIQUIDITY POSITION

Funds availability at 31 December 2010, totalled £527.1 million comprising £44.6 million of cash and £482.5 million of undrawn bank facilities of which only £14.9 million were uncommitted. The Group has a favourable debt funding maturity profile with less than £70 million of committed debt facilities maturing before 31 December 2011.

GOING CONCERN

Whilst wider economic conditions remain challenging, the Group has completed significant bank refinancing activity during 2010 and, as a result, has a strong liquidity position, a favourable debt maturity profile, significant headroom against financial covenants and can reasonably expect to be able to continue to have good access to capital markets and other sources of funding.

Having made enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly it continues to adopt the going concern basis in preparing the Annual Report and Accounts.

INTEREST RATE RISK EXPOSURE

A revised Group interest rate risk policy was approved by the Board in February 2010. Between 60 and 100 per cent of net borrowings should be at fixed or capped rates, both at a Group level and by major borrowing currency (currently euro and sterling) including the impact of derivative financial instruments.

At 31 December 2010, including the impact of derivative instruments, £1,790.4 million of borrowings were at fixed rates representing 81 per cent of the net borrowings of the Group. Furthermore 76 per cent of the euro denominated net borrowings of the Group of £1,244.6 million and 88 per cent of the remaining net borrowings (predominantly sterling) of £958.6 million respectively were at fixed rates.

The weighted average maturity of fixed rate cover, £1,790.4 million at 31 December 2010 was 9.3 years at an average fixed interest rate of 5.6 per cent. Including the impact of derivative financial instruments, floating rate gross borrowings at 31 December 2010 were £457.4 million at an average interest rate (including margin) of 3.3 per cent giving a weighted average interest rate for gross borrowings at that date, before commitment fees and amortised costs of 5.1 per cent or 5.5 per cent after allowing for such items.

The Group has decided not to elect to hedge account its interest rate derivatives portfolio. Therefore movements in the fair value are taken to the income statement but, in accordance with EPRA recommendations, these gains and losses are eliminated from EPRA profit before tax and EPRA EPS.

FOREIGN CURRENCY TRANSLATION EXPOSURE

The Group has negligible transactional foreign currency exposure, but does have a significant currency translation exposure arising on the conversion of its substantial foreign currency denominated net assets (mainly euro) into sterling in the Group consolidated accounts.

The Group policy is to hedge between 50 per cent and 90 per cent of foreign currency denominated assets with liabilities of the same currency to protect the Group's reported consolidated net asset value, earnings, cash flows and financial gearing covenant.

As at 31 December 2010, the Group had gross foreign currency assets amounting to £1,759.4 million, which were 81 per cent hedged by gross foreign currency denominated liabilities (including the impact of derivative financial instruments) of £1,417.4 million.

A 10 per cent movement in the value of sterling against all currencies in which the Group operates at 31 December 2010 would have changed net assets by approximately £32 million and reported adjusted gearing by less than 1 per cent. Including the impact of forward foreign exchange and currency swap contracts used to hedge foreign currency denominated net assets the impact on adjusted gearing would have been approximately 3 per cent.

The average exchange rate during 2010 was €1.17: £1. Based on the hedging position at 31 December 2010 and assuming that this position had applied throughout 2010, if the euro had been 10 per cent weaker than it was against sterling throughout the year (€1.29: £1), EPRA profits after tax for year would have been approximately £4 million (3%) lower than those reported.

David Sleath, Finance Director

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The statement of Directors' Responsibilities below has been prepared in connection with the Company's full Annual Report for the year ending 31 December 2010. Certain parts of the Annual Report have not been included in this announcement as set out in note 1 of the financial information.

We confirm that to the best of our knowledge:

· the financial statements, prepared in accordance with IFRSs as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and

· the management report, which is incorporated into the Directors' Report, includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

This responsibility statement was approved by the board of directors on 23 February 2011 and is signed on its behalf by:

Ian Coull		David Sleath
Chief Executive		Finance Director

Group income statement

For the year ended 31 December 2010

	Notes	2010 £m	2009 £m
Revenue	3	433.6	365.5
Gross rental income	3	344.6	328.4
Property operating expenses	4	(62.5)	(59.0)
Net rental income		282.1	269.4
Joint venture management fee income	3	1.9	-
Administration expenses	5	(39.2)	(48.1)
Share of profit from joint ventures after tax	6	41.9	4.6
Realised and unrealised property gain/(loss)	7	25.9	(342.0)
(Loss)/gain on sale of investment in joint ventures	6	(0.5)	12.9
Other investment income/(loss)	8	5.8	(8.0)
(Amounts written off)/gain recognised on acquisitions	9	(13.9)	8.6
Operating profit/(loss)		304.0	(102.6)
Finance income	10	55.8	13.6
Finance costs	10	(162.6)	(159.1)
Profit/(loss) before tax		197.2	(248.1)
Tax	11	11.1	14.0
Profit/(loss) after tax		208.3	(234.1)
Attributable to equity shareholders		210.3	(233.1)
Attributable to non-controlling interests		(2.0)	(1.0)
		208.3	(234.1)
Earnings per share
Basic and diluted earnings/(loss) per share	13	28.5p	(41.3p)

Group statement of comprehensive income

For the year ended 31 December 2010

	Notes	2010 £m	2009 £m
Profit/(loss) for the year		208.3	(234.1)
Other comprehensive income
Foreign exchange movement arising on translation of international operations		(17.6)	(35.5)
Valuation surplus/(deficit) on owner occupied properties	7	0.1	(2.0)
Actuarial loss on defined benefit pension schemes		(0.1)	(3.8)
Increase in value of available-for-sale investments		4.5	-
Fair value movements on derivatives in effective hedge relationships		1.3	-
Tax on items taken directly to equity		-	1.9
Net loss recognised directly in equity		(11.8)	(39.4)
Transfer to income statement on sale and impairment of available-for-sale investments		(3.3)	(1.9)
Total comprehensive profit/(loss) for the year		193.2	(275.4)
Attributable to equity shareholders		195.2	(274.4)
Attributable to non-controlling interests		(2.0)	(1.0)
Total comprehensive profit/(loss) for the year		193.2	(275.4)

Balance Sheet

As at 31 December 2010

	Notes	2010 £m	2009 £m
Assets
Non-current assets
Goodwill and other intangibles		1.7	1.0
Investment properties	14	4,498.3	4,825.3
Owner occupied properties		7.8	8.1
Plant and equipment		7.3	7.5
Investments in subsidiaries	6	-	-
Investments in joint ventures	6	279.8	79.3
Finance lease receivables		8.5	8.9
Available-for-sale investments	15	26.8	25.9
		4,830.2	4,956.0
Current assets
Trading properties	14	289.9	337.8
Trade and other receivables	16	130.7	109.2
Tax recoverable		2.1	3.6
Cash and cash equivalents	18	44.6	112.7
		467.3	563.3
Total assets		5,297.5	5,519.3
Liabilities
Non-current liabilities
Borrowings	18	2,177.9	2,187.6
Deferred tax provision	11	47.9	56.9
Other provisions for liabilities and charges		15.2	16.3
Trade and other payables	17	20.1	15.4
		2,261.1	2,276.2
Current liabilities
Trade and other payables	17	229.4	263.5
Borrowings	18	69.9	345.2
Tax liabilities		28.1	41.2
		327.4	649.9
Total liabilities		2,588.5	2,926.1
Net assets		2,709.0	2,593.2
Equity
Share capital	19	74.2	73.5
Share premium		1,069.5	1,047.6
Capital redemption reserve		113.9	113.9
Own shares held		(13.3)	(13.5)
Revaluation reserve		0.2	0.1
Other reserves		194.9	196.8
Retained earnings		1,270.9	1,174.1
Total shareholders' equity		2,710.3	2,592.5
Non-controlling interests		(1.3)	0.7
Total equity		2,709.0	2,593.2
Net assets per ordinary share
Basic and diluted	13	366p	354p

STATEMENT OF CHANGES IN EQUITY

For the year ended 31 December 2010

	Balance 1 January 2010 £m	Exchange movement £m	Retained profit £m	Items taken directly to reserves £m	Shares issued £m	Other £m	Dividends £m	Transfers£m	Balance 31 December 2010 £m
Ordinary share capital	73.5	-	-	-	0.7	-	-	-	74.2
Share premium	1,047.6	-	-	-	21.9	-	-	-	1,069.5
Capital redemption reserve	113.9	-	-	-	-	-	-	-	113.9
Own shares held	(13.5)	-	-	-	-	0.2	-	-	(13.3)
Revaluation reserve⁽¹⁾	0.1	-	-	0.1	-	-	-	-	0.2
Other reserves:
Share based payments reserve	2.6	-	-	-	-	3.6	-	-	6.2
Fair value reserve for AFS⁽²⁾	4.8	0.2	-	4.5	-	(3.3)	-	-	6.2
Translation and other reserves	20.3	(8.2)	-	1.3	-	-	-	-	13.4
Merger reserve	169.1	-	-	-	-	-	-	-	169.1
Total other reserves	196.8	(8.0)	-	5.8	-	0.3	-	-	194.9
Retained earnings	1,174.1	(9.6)	210.3	(0.1)	-	-	(103.8)	-	1,270.9
Total equity attributable to equity shareholders	2,592.5	(17.6)	210.3	5.8	22.6	0.5	(103.8)	-	2,710.3
Non-controlling interests	0.7	-	(2.0)	-	-	-	-	-	(1.3)
Total equity	2,593.2	(17.6)	208.3	5.8	22.6	0.5	(103.8)	-	2,709.0

For the year ended 31 December 2009

	Balance 1 January 2009 £m	Exchange movement £m	Retained loss £m	Items taken directly to reserves £m	Shares (cancelled) /issued £m	Other £m	Dividends £m	Transfers⁽³⁾ £m	Balance 31 December 2009 £m
Ordinary share capital	118.3	-	-	-	(44.8)	-	-	-	73.5
Share premium	370.6	-	-	-	677.0	-	-	-	1,047.6
Capital redemption reserve	-	-	-	-	113.9	-	-	-	113.9
Own shares held	(13.4)	-	-	-	-	(0.1)	-	-	(13.5)
Revaluation reserve⁽¹⁾	438.4	(11.1)	-	(1.2)	-	-	-	(426.0)	0.1
Other reserves:
Share based payments reserve	3.9	-	-	-	-	1.1	-	(2.4)	2.6
Fair value reserve for AFS⁽²⁾	8.1	(0.7)	-	-	-	(2.6)	-	-	4.8
Translation and other reserves	24.6	(3.5)	-	-	-	-	-	(0.8)	20.3
Merger reserve	-	-	-	-	169.1	-	-	-	169.1
Total other reserves	36.6	(4.2)	-	-	169.1	(1.5)	-	(3.2)	196.8
Retained earnings	1,057.0	(20.2)	(233.1)	(3.8)	-	-	(55.0)	429.2	1,174.1
Total equity attributable to equity shareholders	2,007.5	(35.5)	(233.1)	(5.0)	915.2	(1.6)	(55.0)	-	2,592.5
Non-controlling interests	1.7	-	(1.0)	-	-	-	-	-	0.7
Total equity	2,009.2	(35.5)	(234.1)	(5.0)	915.2	(1.6)	(55.0)	-	2,593.2

1. The revaluation reserve is shown net of deferred tax.

2. AFS is the term used for 'Available-for-sale investments' and is shown net of deferred tax.

3. In the prior year a transfer reclassifying cumulative revaluation movements on investment and development properties from revaluation reserves to retained earnings was made, as discussed further in note 14.

cash flow statement

For the year ended 31 December 2010


	Notes	2010 £m	2009 £m
Cash flows from operating activities	20	244.9	222.1
Interest received		16.4	3.7
Dividends received		8.8	12.9
Interest paid		(157.5)	(148.4)
Tax paid		(6.0)	(11.0)
Net cash received from operating activities		106.6	79.3
Cash flows from investing activities
Net cash inflow arising on the acquisition of Brixton		-	54.7
Purchase and development of investment properties		(61.1)	(187.5)
Sale of investment properties		385.7	396.2
Purchase of property, plant and equipment		(2.8)	(3.7)
Sale of property, plant and equipment		-	0.2
Purchase of available-for-sale investments		(6.3)	(2.3)
Sale of available-for-sale investments		13.1	2.9
Sale of investment in joint ventures		11.3	25.1
Investment in joint ventures		(195.4)	6.7
Net decrease in loans to joint ventures		1.9	-
Net cash received from investing activities		146.4	292.3
Cash flows from financing activities
Dividends paid to ordinary shareholders		(82.8)	(59.2)
Proceeds from new bonds		-	296.2
Repayment of bonds		(142.3)	-
Net decrease in other borrowings		(118.3)	(675.7)
Net settlement of foreign exchange derivatives		23.4	-
Cost of early closure of financial derivatives		-	(64.4)
Close out of Brixton debt and derivatives		-	(634.0)
Proceeds from the issue of ordinary shares		0.1	741.4
Net cash used in financing activities		(319.9)	(395.7)
Net decrease in cash and cash equivalents		(66.9)	(24.1)
Cash and cash equivalents at the beginning of the year		111.9	162.5
Effect of foreign exchange rate changes		(0.4)	(26.5)
Cash and cash equivalents at the end of the year		44.6	111.9
Cash and cash equivalents per balance sheet	18	44.6	112.7
Bank overdrafts		-	(0.8)
Cash and cash equivalents per cash flow		44.6	111.9

notes to the financial information

1. Financial information

The preliminary financial information (financial information) set out in this announcement does not constitute the consolidated statutory accounts for the years ended 31 December 2010 and 2009, but is derived from those accounts. Statutory accounts for 2009 have been delivered to the Registrar of Companies and those for 2010 (approved by the Board on 23 February 2011) will be delivered following the company's annual general meeting. The external auditors, Deloitte LLP, have reported on those accounts; their reports were unqualified, did not draw attention to any matters by way of emphasis without qualifying their report and did not contain statements under s498(2) or (3) of the Companies Act 2006.

Giving due consideration to the nature of the Group's business and financial position, including the financial resources available to the Group, the directors consider that the Group is a going concern and this financial information is prepared on that basis.

The financial information set out in this announcement is based on the consolidated financial statements which are prepared in accordance with International Financial Reporting Standards (IFRS) as adopted for use by the European Union and complies with the disclosure requirements of the Listing Rules of the UK Financial Services Authority. The financial information is in accordance with the accounting policies set out in the 2009 financial statements except for the adoption of new accounting standards in 2010, none of which had a material impact on the current or prior year reported results.

The principal exchange rates used to translate foreign currency denominated amounts are:

Balance sheet: £1 = €1.17 (31 December 2009: £1 = €1.13)

Income statement: £1 = €1.17 (2009: £1 = €1.12)

2. Segmental analysis

The Group's reportable segments are the geographic locations of the United Kingdom and Continental Europe, which are managed and reported to the Board as separate distinct locations.

	United Kingdom		Continental Europe		Group
	2010 £m	2009 £m	2010 £m	2009 £m	2010 £m	2009 £m
Segment revenue	267.8	219.8	165.8	145.7	433.6	365.5
Gross rental income	233.5	207.0	111.1	121.4	344.6	328.4
Property operating expenses	(45.6)	(41.0)	(16.9)	(18.0)	(62.5)	(59.0)
Net rental income	187.9	166.0	94.2	103.4	282.1	269.4
Joint venture management fee income	1.9	-	-	-	1.9	-
Administration expenses (excluding exceptional items)	(24.7)	(24.5)	(14.5)	(15.8)	(39.2)	(40.3)
Share of joint ventures' EPRA profit after tax	9.7	2.6	1.1	0.2	10.8	2.8
EPRA operating profit before interest and tax	174.8	144.1	80.8	87.8	255.6	231.9
Net finance costs	(95.3)	(86.9)	(33.0)	(40.7)	(128.3)	(127.6)
EPRA profit before tax	79.5	57.2	47.8	47.1	127.3	104.3
Adjustments:
Exceptional administration expenses	-	(7.8)	-	-	-	(7.8)
Adjustments to the share of profit/(loss) from joint ventures after tax⁽¹⁾	31.8	1.8	(0.7)	-	31.1	1.8
Loss on sale of investment properties	(2.4)	(52.2)	(0.4)	(2.5)	(2.8)	(54.7)
Valuation surplus/(deficit) on investment and owner occupied properties	94.4	(100.2)	(62.0)	(171.6)	32.4	(271.8)
(Loss)/profit on sale of trading properties	0.7	(0.1)	(0.8)	0.7	(0.1)	0.6
Increase in provision for impairment of trading properties	(1.3)	(0.3)	(2.3)	(15.8)	(3.6)	(16.1)
(Loss)/gain on sale of investment in joint ventures	(0.5)	12.9	-	-	(0.5)	12.9
Other investment income/(loss)	5.8	(8.0)	-	-	5.8	(8.0)
(Amounts written off)/gain recognised on acquisitions	(13.9)	8.6	-	-	(13.9)	8.6
Net fair value gain/(loss) on interest rate swaps and other derivatives	23.6	(9.4)	(2.1)	(8.5)	21.5	(17.9)
Total adjustments	138.2	(154.7)	(68.3)	(197.7)	69.9	(352.4)
Profit/(loss) before tax	217.7	(97.5)	(20.5)	(150.6)	197.2	(248.1)
Tax
On EPRA profits	-	1.4	(4.3)	(2.9)	(4.3)	(1.5)
In respect of adjustments	9.8	(8.1)	5.6	23.6	15.4	15.5
	9.8	(6.7)	1.3	20.7	11.1	14.0
Profit/(loss) after tax
EPRA profit after tax	79.5	58.6	43.5	44.2	123.0	102.8
Adjustments	148.0	(162.8)	(62.7)	(174.1)	85.3	(336.9)
Group profit/(loss) after tax	227.5	(104.2)	(19.2)	(129.9)	208.3	(234.1)
Summary balance sheet
Total property assets	3,175.1	3,423.7	1,620.9	1,747.5	4,796.0	5,171.2
Investments in joint ventures	255.3	54.6	24.5	24.7	279.8	79.3
Net borrowings	(1,202.4)	(1,090.7)	(1,000.8)	(1,329.4)	(2,203.2)	(2,420.1)
Other net (liabilities)/assets	(81.3)	(480.0)	(82.3)	242.8	(163.6)	(237.2)
Segment net assets	2,146.7	1,907.6	562.3	685.6	2,709.0	2,593.2
Capital expenditure in the year	44.6	143.2	39.9	98.0	84.5	241.2

1. A detailed breakdown of the adjustments to the share of profit/(loss) from joint ventures is included in note 6.

Revenues from the most significant countries within Continental Europe were Germany £55.4 million (2009: £42.4 million) and France £33.3 million (2009: £37.2 million).

The adjustments outlined above arise from adopting the Best Practices Recommendations of European Public Real Estate Association (EPRA) or relate to the exceptional items that are disclosed separately due to their size or incidence to enable better understanding of performance. The EPRA profit measures highlight the underlying recurring performance of the property rental business, which is our core operational activity and also provide a consistent basis to enable a comparison between European property companies.

3. Revenue

	2010 £m	2009 £m
Rental income from investment properties	304.9	295.8
Rental income from trading properties	19.5	22.1
Rental income from short term licences	1.0	0.5
Rent averaging	11.2	5.7
Surrender premiums	7.4	3.6
Interest received on finance lease assets	0.6	0.7
Gross rental income	344.6	328.4
Joint venture management fee	1.9	-
Service charge income	32.2	30.2
Proceeds from sale of trading properties	54.9	6.9
Total revenue	433.6	365.5

4. PROPERTY OPERATING EXPENSES

	2010 £m	2009 £m
Vacant property costs	22.7	21.2
Letting, marketing, legal and professional fees	11.9	10.4
Bad debt expense	3.4	1.9
Other expenses, net of service charge income	9.6	11.0
Property management expenses	47.6	44.5
Property administration expenses⁽¹⁾	16.1	15.9
Costs capitalised	(1.2)	(1.4)
Total property operating expenses	62.5	59.0

1. Property administration expenses predominantly relate to the employee staff costs of personnel directly involved in managing the property portfolio.

5. ADMINISTRATION EXPENSES

	2010 £m	2009 £m
Directors' remuneration	4.1	3.6
Depreciation	2.6	2.1
Other administration expenses	32.5	34.6
Administration expenses - excluding exceptional items	39.2	40.3
Exceptional administration expenses	-	7.8
Total administration expenses	39.2	48.1

Exceptional administration expenses in 2009 related to one-off integration costs in relation to the acquisition of Brixton.

6. Investments in joint ventures and subsidiaries

6(i) - Share of profit from joint ventures after tax

The table below presents a summary income statement of the Group's largest joint ventures.

	Airport Property Partnership £m	Heathrow Big Box Industrial and Distribution Fund £m	Other £m	2010 £m	2009 £m
Gross rental income	12.7	7.1	4.0	23.8	12.9
Property operating expenses	(2.7)	(0.3)	(0.6)	(3.6)	(2.6)
Net rental income	10.0	6.8	3.4	20.2	10.3
Net finance costs	(5.0)	(2.6)	(2.0)	(9.6)	(6.1)
EPRA profit before tax	5.0	4.2	1.4	10.6	4.2
Tax	-	-	0.2	0.2	(1.4)
EPRA profit after tax	5.0	4.2	1.6	10.8	2.8
Adjustments:
Profit on sale of investment properties	0.5	-	-	0.5	1.7
Valuation surplus on investment properties	15.4	17.2	-	32.6	4.5
Profit/(loss) on sale of trading properties	-	-	0.3	0.3	(0.2)
Increase in provision for impairment of trading properties	-	-	(2.3)	(2.3)	(4.1)
Net fair value gain on interest rate swaps and other derivatives	0.1	-	0.4	0.5	(0.3)
Tax on adjustments	-	-	(0.5)	(0.5)	0.2
Total adjustments	16.0	17.2	(2.1)	31.1	1.8
Profit/(loss) after tax	21.0	21.4	(0.5)	41.9	4.6

Trading properties held by joint ventures were externally valued resulting in an increase in the provision for impairment of £2.3 million (2009: £4.1 million). Based on the fair value at 31 December 2010, the Group's share of joint ventures' trading property portfolio has an unrecognised surplus of £5.1 million (2009: £5.0 million).

6(ii) - Summarised balance sheet information in respect of the Group's share of joint ventures

	Airport Property Partnership £m	Heathrow Big Box Industrial and Distribution Fund £m	Other £m	2010 £m	2009 £m
Investment properties (completed and development)	357.3	102.0	4.5	463.8	100.3
Other investments	8.4	-	-	8.4	-
Total non-current assets	365.7	102.0	4.5	472.2	100.3
Trading properties	-	-	36.4	36.4	42.7
Other receivables	3.3	-	7.7	11.0	8.9
Cash	9.2	2.1	3.1	14.4	3.4
Total current assets	12.5	2.1	47.2	61.8	55.0
Total assets	378.2	104.1	51.7	534.0	155.3
Borrowings	160.7	45.0	0.5	206.2	45.7
Deferred tax	-	-	1.5	1.5	1.3
Other liabilities	5.9	1.4	7.9	15.2	7.9
Total non-current liabilities	166.6	46.4	9.9	222.9	54.9
Borrowings	-	-	11.4	11.4	14.0
Other liabilities	13.4	2.2	4.3	19.9	7.1
Total current liabilities	13.4	2.2	15.7	31.3	21.1
Total liabilities	180.0	48.6	25.6	254.2	76.0
Group share of net assets	198.2	55.5	26.1	279.8	79.3

In June 2010, the Group acquired a 50 per cent interest in the Airport Property Partnership ("APP") for £109.7 million and a further injection of £70.3 million, giving a total investment of £180.0 million. In conjunction with the acquisition, the Group sold £237.1 million of property and joint venture investments to the APP joint venture.

6(iii) - Investments by the Group

	2010 £m	2009 £m
Cost or valuation at 1 January	79.3	67.5
Exchange movement	(1.0)	(3.4)
Acquisition	180.0	42.4
Disposals	(11.8)	(12.2)
Loan repayments	(1.9)	(6.7)
Dividends received	(8.8)	(12.9)
Share of profit after tax	41.9	4.6
Items taken directly to reserves	2.1	-
Cost or valuation at 31 December	279.8	79.3

The amount of loans advanced by the Group to joint ventures is £127.2 million (2009: £152.0 million). The Group's investment (50 per cent stake) in Colnbrook Industrial Limited Partnership was sold to APP in 2010 for net proceeds of £11.3 million, resulting in a loss on sale of £0.5 million. The Group's investment (50 per cent stake) in Shopping Centres Limited was sold in 2009 for net proceeds of £25.1 million, resulting in a profit on sale of £12.9 million.

7. REALISED AND UNREALISED Property gain/(loss)

	2010 £m	2009 £m
Loss on sale of investment properties	(2.8)	(54.7)
Valuation surplus/(deficit) on investment properties	32.4	(271.2)
Valuation deficit on owner occupied properties	-	(0.6)
(Loss)/profit on sale of trading properties	(0.1)	0.6
Increase in provision for impairment of trading properties	(3.6)	(16.1)
Total realised and unrealised property gain/(loss) - income statement	25.9	(342.0)
Valuation surplus/(deficit) on owner occupied properties	0.1	(2.0)
Total realised and unrealised property gain/(loss) - other comprehensive income	0.1	(2.0)
Total realised and unrealised property gain/(loss)	26.0	(344.0)

8. Other investment income/(loss)

		2010 £m	2009 £m
Net profit/(loss) on available-for-sale investments		2.5	(2.0)
Transfer of fair value surplus realised on sale of available-for-sale investments		3.3	3.0
Impairment of available-for-sale investments	- in the year	-	(8.0)
	- recycled from reserves	-	(1.0)
Total other investment income/(loss)		5.8	(8.0)

9. (AMOUNTS WRITTEN OFF)/GAIN RECOGNISED ON Acquisitions

	2010 £m	2009 £m
Acquisition of APP	(13.8)	-
Amortisation of intangibles	(0.1)	-
Acquisition of Brixton	-	8.6
Total (amounts written off)/gain recognised on acquisitions	(13.9)	8.6

APP

Amounts written off on acquisition in the current period relate to the APP acquisition (further details are included in note 6). The total cost of acquisition exceeded the fair value of net assets acquired by £13.8 million, primarily due to stamp duty costs. Given that the underlying assets are carried at fair value, this excess has been written off to the income statement. The Group acquired a management contract for £1.8 million as part of the APP acquisition, which is being treated as an intangible asset and amortised over 10 years, the length of the contract. The amortisation charge in the year is £0.1 million.

Brixton

On 24 August 2009, the Group acquired 100 per cent of the voting equity in Brixton, in a share for share exchange for £186.8 million. The acquisition has been accounted for in accordance with IFRS 3, Business Combinations. The fair value of assets acquired was £195.4 million and consequently a gain of £8.6 million arose on acquisition which was immediately credited to the income statement. Brixton was previously an investor in industrial and warehousing property in the UK, listed on the London Stock Exchange.

10. NET Finance costs

Finance income	2010 £m	2009 £m
Interest received on bank deposits and related derivatives	23.8	3.7
Fair value gain on interest rate swaps and other derivatives	31.4	8.4
Return on pension assets less unwinding of discount on pension liabilities	0.6	-
Exchange differences	-	1.5
Total finance income	55.8	13.6

Finance costs	2010 £m	2009 £m
Interest on overdrafts, loans and related derivatives	(149.2)	(132.5)
Amortisation of issue costs	(6.1)	(7.0)
Unwinding of discount on the pension liabilities less return on assets	-	(0.2)
Total borrowing costs	(155.3)	(139.7)
Less amounts capitalised on the development of properties	2.9	6.9
Net borrowing costs	(152.4)	(132.8)
Fair value loss on interest rate swaps and other derivatives	(9.9)	(26.3)
Exchange differences	(0.3)	-
Total finance costs	(162.6)	(159.1)

Net finance costs	(106.8)	(145.5)

The interest capitalisation rates for 2010 were: UK 6.25 per cent (2009: 6.25 per cent) and in Continental Europe, rates ranging from 1.7 per cent to 2.0 per cent (2009: 1.7 per cent to 5.0 per cent). Interest is capitalised gross of tax relief.

11. Tax

11(i) - Tax on profit/loss

	2010 £m	2009 £m
Tax on:
EPRA profits	4.3	1.5
Adjustments	(15.4)	(15.5)
Total tax credit	(11.1)	(14.0)
Current tax
United Kingdom
Adjustments in respect of earlier years	(9.8)	-
	(9.8)	-
Continental Europe
Current tax charge	4.3	3.1
Adjustments in respect of earlier years	1.4	1.1
	5.7	4.2
Total current tax (credit)/charge	(4.1)	4.2
Deferred tax
Origination and reversal of temporary differences	2.1	6.4
Released in respect of property disposals in the year	(2.3)	(4.4)
On valuation movements	(10.0)	(22.7)
Total deferred tax in respect of investment properties	(10.2)	(20.7)
Other deferred tax	3.2	2.5
Total deferred tax credit	(7.0)	(18.2)
Total tax credit on profit/loss on ordinary activities	(11.1)	(14.0)

A tax credit of £10.9 million is included within current tax in the UK due to the release of provisions made at the time of the acquisition of Brixton which are no longer required.

11(ii) - Factors affecting tax credit for the year

The tax credit is lower than the standard rate of UK corporation tax. The differences are:

	2010 £m	2009 £m
Profit/(loss) on ordinary activities before tax	197.2	(248.1)
Add back valuation (surplus)/deficit in respect of UK properties not taxable	(94.3)	100.2
	102.9	(147.9)
Multiplied by standard rate of UK corporation tax of 28 per cent (2009: 28 per cent)	28.8	(41.4)
Effects of:
Exempt SIIC & REIT (gains)/losses	(39.8)	11.5
Permanent differences	(0.8)	(0.1)
Profit on joint ventures already taxed	(0.2)	(1.2)
Higher tax rates on international earnings	4.4	2.7
Adjustments in respect of earlier years and assets not recognised	(3.5)	14.5
Total tax credit on loss on ordinary activities	(11.1)	(14.0)

11(iii) - Deferred tax provision

Movement in deferred tax was as follows:

Group - 2010	Balance 1 January £m	Exchange movement £m	Recognised in income £m	Balance 31 December £m
Valuation surpluses on properties	5.4	(0.1)	(12.3)	(7.0)
Accelerated tax allowances	53.9	(1.9)	2.1	54.1
Deferred tax asset on revenue losses	(6.8)	-	1.8	(5.0)
Others	4.4	-	1.4	5.8
Total deferred tax provision	56.9	(2.0)	(7.0)	47.9

At the balance sheet date, the Group has recognised revenue tax losses of £20.0 million (2009: £35.0 million) available for offset against future profits. Further unrecognised tax losses of £496.0 million also exist at 31 December 2010 (2009: £508.0 million) of which £40.0 million (2009: £41.0 million) expires in 15 years.

11(iv) - Factors that may affect future tax charges

No deferred tax is recognised on the unremitted earnings of international subsidiaries and joint ventures. In the event of their remittance to the UK, no net UK tax is expected to be payable.

The standard rate of UK corporation tax is due to fall in stages to 24 per cent by 2014. This is unlikely to significantly impact the Group's tax charge.

12. Dividends

	2010 £m	2009 £m
Ordinary dividends paid
Interim dividend for 2010 @ 4.7 pence per share	34.8	-
Final dividend for 2009 @ 9.4 pence per share	69.0	-
Interim dividend for 2009 @ 4.6 pence per share	-	31.6
Final dividend for 2008 @ 5.4 pence per share	-	23.4
Total dividends	103.8	55.0

The Board has proposed a final dividend for 2010 of 9.6 pence (2009: 9.4 pence) which will result in a further distribution of £71.1 million (2009: £69.0 million). The total dividend paid and proposed per share in respect of the year ended 31 December 2010 is 14.3 pence (2009: 14.0 pence).

The final dividend for 2009 was partially satisfied by an issue of 7.1 million shares (£0.7 million ordinary share capital and £21.8 million share premium) under the scrip dividend scheme.

13. Earnings and net assets per share

The earnings per share calculations use the weighted average number of shares in issue during the year and the net assets per share calculations use the number of shares in issue at year end. Both earnings per share and net assets per share calculations exclude 1.3 million shares held on trust for employee share schemes (2009: 1.3 million).

On 7 April 2009, the Company issued 5,240.7 million new ordinary shares (pre-share consolidation) through a rights issue. The rights issue was offered at 10 pence per share and represented a discount to the fair value of the existing shares. An adjustment factor of 6.92 has been applied to the number of shares prior to the rights issue in the comparative period EPS calculation based on the Company's share price of 136.5 pence per share on 20 March 2009, the day before the new shares commenced trading on the London Stock Exchange and the theoretical ex-rights price at that date of 19.73 pence per share. In addition, the impact of the 10 for 1 share consolidation has also resulted in an adjustment to the number of shares prior to the consolidation used in the comparative period EPS calculation.

13(i) - Earnings per ordinary share (EPS)

	2010			2009
	Earnings £m	Shares million	Pence per share	Earnings £m	Shares million	Pence per share
Basic EPS	210.3	737.9	28.5	(233.1)	563.8	(41.3)
Dilution adjustments:
Share options and save as you earn schemes	-	0.1	-	-	0.2	-
Diluted EPS	210.3	738.0	28.5	(233.1)	564.0	(41.3)

Adjustments to profit before tax⁽¹⁾	(69.9)		(9.4)	352.4		62.5
Tax adjustments:
- deferred tax on investment property which does not crystallise unless sold	(8.5)		(1.2)	(14.4)		(2.6)
- other tax	(6.9)		(0.9)	(1.1)		(0.2)
Non-controlling interest on adjustments	1.0		0.1	(0.4)		(0.1)
EPRA EPS	126.0	738.0	17.1	103.4	564.0	18.3

1 Details of adjustments are included in note 2.

13(ii) - Net assets per share - (NAV)

	2010			2009
	Equity attributable to ordinary shareholders £m	Shares million	Pence per share	Equity attributable to ordinary shareholders £m	Shares million	Pence per share
Basic NAV	2,710.3	740.2	366	2,592.5	733.0	354
Dilution adjustments:
Share options and save as you earn schemes	-	0.1	-	-	0.2	-
Diluted NAV	2,710.3	740.3	366	2,592.5	733.2	354

Fair value of adjustment in respect of derivatives - Group	(11.1)		(2)	7.2		1
Fair value of adjustment in respect of derivatives - Joint ventures	6.8		1	-		-
Fair value adjustment in respect of trading properties - Group	25.1		4	22.1		3
Fair value adjustment in respect of trading properties - Joint ventures	5.1		1	5.0		1
Deferred tax in respect of depreciation	54.1		7	54.6		7
Deferred tax in respect of valuation surpluses	(7.0)		(1)	5.5		1
EPRA NAV	2,783.3	740.3	376	2,686.9	733.2	367

Fair value adjustment in respect of debt	(75.5)		(11)	38.0		5
Tax effect of fair value adjustment in respect of debt	21.1		3	(10.6)		(1)
Fair value adjustment in respect of derivatives - Group	11.1		2	(7.2)		(1)
Fair value adjustment in respect of derivatives - Joint ventures	(6.8)		(1)	-		-
Deferred tax in respect of depreciation	(54.1)		(7)	(54.6)		(7)
Deferred tax in respect of valuation surpluses	7.0		1	(5.5)		(1)
EPRA triple net NAV (NNNAV)	2,686.1	740.3	363	2,647.0	733.2	362

The EPRA NAV calculation has changed from that used in the previous reporting periods in order to achieve consistency with the Best Practices Recommendations of EPRA (issued in October 2010) and the 2009 comparatives have been changed accordingly. EPRA NAV now includes adjustments to include the unrecognised fair value uplift on trading properties and to exclude the fair value of derivatives and, excluding these adjustments, the 2009 EPRA NAV as previously reported was 362 pence per share.

14. Properties

14(i) - Investment properties

	Completed £m	Development £m	Total £m
At 1 January 2009	3,935.0	334.6	4,269.6
Reclassification	(105.9)	105.9	-
Exchange movement	(101.3)	(18.6)	(119.9)
Acquisitions arising from business combinations	1,105.4	36.8	1,142.2
Property acquisitions	-	49.7	49.7
Additions to existing investment properties	9.0	152.3	161.3
Disposals	(445.3)	(8.0)	(453.3)
Transfers on completion of development	191.4	(191.4)	-
Revaluation deficit during the year	(204.6)	(66.6)	(271.2)
At 31 December 2009	4,383.7	394.7	4,778.4
Add tenant lease incentives, letting fees and rental guarantees	46.9	-	46.9
Total investment properties	4,430.6	394.7	4,825.3
At 1 January 2010	4,383.7	394.7	4,778.4
Exchange movement	(44.2)	(6.0)	(50.2)
Property acquisitions	2.8	11.8	14.6
Additions to existing investment properties	9.5	38.5	48.0
Disposals	(369.5)	(21.2)	(390.7)
Transfers on completion of development	70.6	(70.6)	-
Revaluation surplus during the year	32.6	(0.2)	32.4
At 31 December 2010	4,085.5	347.0	4,432.5
Add tenant lease incentives, letting fees and rental guarantees	65.8	-	65.8
Total investment properties	4,151.3	347.0	4,498.3

For further details on the Group's portfolio, please refer to the Property Analysis booklet available at www.SEGRO.com/SEGRO/investors. The information in the Property Analysis booklet is unaudited and does not form part of the financial statements.

Investment properties are stated at market value as at 31 December 2010 based on external valuations performed by professionally qualified valuers. The Group's wholly owned property portfolio is valued by DTZ Debenham Tie Leung ("DTZ"). Valuations for some of the joint venture properties within the UK portfolio are performed by King Sturge and Colliers CRE. The valuations conform to International Valuation Standards and were arrived at by reference to market evidence of the transaction prices paid for similar properties.

DTZ, Colliers CRE and King Sturge also undertake some professional and letting work on behalf of the Group, although this is limited in relation to the activities of the Group as a whole. All three firms have advised us that the total fees paid by the Group represent less than 5 per cent of their total revenue in any year.

From 1 January 2009, all development properties are accounted for under IAS 40. As a result, properties under development that
were previously classified as investment property have been reclassified to development property so that all properties being developed are grouped together.

Development properties includes land available for development, land under development and construction in progress.

The historical cost of investment and development properties was £4,222.2 million (2009: £4,660.4 million) and the cumulative valuation surplus at 31 December 2010 amounted to £276.1 million (2009: £164.9 million).

Long-term leasehold values within investment properties amount to £10.1 million (2009: £9.8 million). All other properties are freehold.

Prepaid operating lease incentives at 31 December 2010 were £42.5 million (2009: £32.7 million).

14(ii) - Trading properties

	Completed £m	Development £m	Total £m
At 1 January 2009	282.7	75.1	357.8
Exchange movement	(19.1)	(5.3)	(24.4)
Property acquisitions	-	1.8	1.8
Additions	2.3	23.0	25.3
Disposals	(4.5)	(2.1)	(6.6)
Transfers on completion of development	4.1	(4.1)	-
Revaluation (deficit)/surplus during the year	(16.2)	0.1	(16.1)
At 31 December 2009	249.3	88.5	337.8

	Completed £m	Development £m	Total £m
At 1 January 2010	249.3	88.5	337.8
Exchange movement	(8.2)	(2.5)	(10.7)
Additions	4.1	16.8	20.9
Disposals	(33.5)	(21.5)	(55.0)
Revaluation (deficit)/surplus during the year	(4.1)	0.5	(3.6)
At 31 December 2010	207.6	81.8	289.4
Add tenant lease incentives, letting fees and rental guarantees	0.5	-	0.5
Total trading properties	208.1	81.8	289.9

Development properties include land available for development, land under development and construction in progress.

Trading properties were externally valued resulting in a net increase in the provision for impairment of £3.6 million (2009: £16.1 million). Based on the fair value at 31 December 2010, the portfolio has an unrecognised surplus of £25.1 million (2009: £22.1 million).

15. Available-for-sale investments

		2010 £m	2009 £m
Valuation at 1 January		25.9	41.9
Exchange movement		0.7	(3.7)
Additions		6.3	2.3
Fair value movement	- Income statement	-	(8.0)
	- Other comprehensive income	4.5	-
Disposals and return of capital		(10.6)	(6.6)
Valuation at 31 December		26.8	25.9

Available-for-sale investments comprise holdings in private equity funds investing in UK, Continental Europe and USA and a UK gilt investment of £3.4 million (2009: £nil) which is held by the Company.

16. Trade and other receivables

	2010 £m	2009 £m
Current
Trade receivables	30.2	53.2
Other receivables	36.2	12.0
Prepayments and accrued income	25.5	26.4
Fair value of interest rate swaps - non hedge	30.6	-
Fair value of forward foreign exchange and currency swap contracts - non hedge	0.9	8.2
Fair value of forward foreign exchange and currency swap contracts - hedge	0.1	-
Amounts due from related parties	7.0	9.2
	130.5	109.0
Non-current
Other receivables	0.2	0.2
Total trade and other receivables	130.7	109.2

Group trade receivables are net of provisions for doubtful debts of £5.4 million (2009: £3.8 million).

17. Trade and other payables

	2010 £m	2009 £m
Due within one year
Trade payables	52.4	47.6
Non-trade payables and accrued expenses	156.5	200.5
Fair value of interest rate swaps - non hedge	17.4	15.4
Fair value of forward foreign exchange and currency swap contracts - non hedge	2.8	-
Fair value of forward foreign exchange and currency swap contracts - hedge	0.3	-
Total trade and other payables due within one year	229.4	263.5
Due after one year
Obligations under finance leases	0.6	0.4
Other payables	19.5	15.0
Total other payables due after one year	20.1	15.4

18. net Borrowings

	2010 £m	2009 £m
Secured Borrowings:
Euro mortgages (repayable within 1 year)	5.9	30.7
Euro mortgages (repayable within 1 to 4 years)	33.8	24.4
Euro mortgages (repayable within 4 to 16 years)	21.6	39.6
Total secured (on land, buildings and other assets)	61.3	94.7
Unsecured Borrowings:
Bonds
6.0% bonds 2010	-	17.3
7.125% bonds 2010	-	124.9
5.25% bonds 2015	135.1	134.7
6.25% bonds 2015	148.9	148.6
5.5% bonds 2018	198.5	198.3
6.0% bonds 2019	199.3	198.8
5.625% bonds 2020	247.4	247.3
6.75% bonds 2021	296.4	296.2
7.0% bonds 2022	149.0	148.9
6.75% bonds 2024	221.4	221.1
5.75% bonds 2035	198.1	198.0
Notes
6.0% unsecured loan notes 2010	-	5.2
7.417% euro notes 2011	42.7	44.1
	1,836.8	1,983.4
Bank loans and overdrafts	349.4	454.4
Preference shares held by subsidiary	0.3	0.3
Total unsecured	2,186.5	2,438.1
Total borrowings	2,247.8	2,532.8
Cash and cash equivalents	(44.6)	(112.7)
Net borrowings	2,203.2	2,420.1

The maturity profile of borrowings is as follows:

Maturity profile of borrowings	2010 £m	2009 £m
In one year or less	69.9	345.2
In more than one year but less than two	39.7	188.6
In more than two years but less than five	606.2	167.2
In more than five years but less than ten	665.8	718.6
In more than ten years	866.2	1,113.2
In more than one year	2,177.9	2,187.6
Total borrowings	2,247.8	2,532.8
Cash and cash equivalents	(44.6)	(112.7)
Net borrowings	2,203.2	2,420.1

Maturity profile of undrawn borrowing facilities	2010 £m	2009 £m
In one year or less	20.4	101.3
In more than one year but less than two	-	173.7
In more than two years	462.1	314.6
Total available undrawn borrowing facilities	482.5	589.6

19. Share capital

Issued and fully paid	Number of shares Shares m	Par value of shares £m
Ordinary shares of 10p each at 1 January 2010	734.3	73.5
Shares issued	7.2	0.7
Ordinary shares of 10p each at 31 December 2010	741.5	74.2

Shares issued include 7.1 million (£0.7 million) in respect of the scrip dividend allotted in May 2010.

Following the AGM in April 2010, the Company resolved to remove the requirement to have an authorised share capital in accordance with the Companies Act 2006. Disclosure of authorised share capital is therefore no longer required.

20. notes to the cash flow statements

20(i) - Reconciliation of cash generated from operations

	2010 £m	2009 £m
Operating profit/(loss)	304.0	(102.6)
Adjustments for:
Depreciation of property, plant and equipment	3.2	2.8
Share of profit from joint ventures after tax	(41.9)	(4.6)
Loss on sale of investment properties	2.8	54.7
Loss/(gain) on sale of investment in joint ventures	0.5	(12.9)
Cost/(gain) recognised on acquisitions	13.9	(8.6)
Revaluation (surplus)/deficit on investment and owner occupied properties	(32.4)	271.8
Gain on sale of available-for-sale investments	(5.8)	(1.0)
Impairment of available-for-sale investments	-	9.0
Other provisions	2.1	3.5
	246.4	212.1
Changes in working capital:
Decrease/(increase) in trading properties	22.4	(2.1)
(Increase)/decrease in debtors and tenant incentives	(18.4)	20.1
Decrease in creditors	(5.5)	(8.0)
Net cash inflow generated from operations	244.9	222.1

20(ii) - Deposits

Term deposits for a period of three months or less are included within cash and cash equivalents.

20(iii) - Analysis of net debt

	At 1 January 2010 £m	Exchange movement £m	Cash flow £m	Non-cash¹ adjustment £m	At 31 December 2010 £m

Banks loans and loan capital	2,568.2	(26.9)	(260.6)	-	2,280.7
Capitalised finance costs²	(36.2)	-	(2.8)	6.1	(32.9)
Bank overdrafts	0.8	-	(0.8)	-	-
Total borrowings	2,532.8	(26.9)	(264.2)	6.1	2,247.8
Cash in hand and at bank	112.7	(0.4)	(67.7)	-	44.6
Net debt	2,420.1	(26.5)	(196.5)	6.1	2,203.2

1 The non-cash adjustment relates to the amortisation of issue costs offset against borrowings.

2 Capitalised finance costs cash flows are recognised in interest paid in the cash flow statement.

Glossary of terms

BASIS POINT

A unit that is equal to 1/100th of 1 per cent.

BRIXTON

On 24 August 2009, SEGRO plc acquired the entire issued capital of Brixton plc (company number 202342). On acquisition of Brixton plc, shares were delisted and the company was re-registered as Brixton Limited.

DEVELOPMENT PIPELINE

The Group's current programme of developments authorised or in the course of construction at the balance sheet date, together with potential schemes not yet commenced on land owned or controlled by the Group.

Enlarged Group

With effect from 24 August 2009, the combined SEGRO Group and Brixton Group.

EPRA

The European Real Estate Association, a real estate industry body, who have issued Best Practices Recommendations in order to provide consistency and transparency in real estate reporting across Europe.

EQUIVALENT YIELD

The internal rate of return from an investment property, based on the value of the property assuming the current passing rent reverts to ERV and assuming the property becomes fully occupied over time. True equivalent yield assumes rent is received quarterly in advance.

Estimated rental value (ERV)

The estimated annual market rental value of lettable space as determined biannually by the Company's valuers. This will normally be different from the rent being paid.

Estimate to complete (ETC)

Costs still to be expended on a development or redevelopment to practical completion (not to complete lettings), including attributable interest.

gearing

Net borrowings divided by total shareholders' equity excluding intangible assets and deferred tax provision.

GROSS RENTAL INCOME

Contracted rental income recognised in the period, including surrender premiums and interest receivable on finance leases. Lease incentives, initial costs and any contracted future rental increases are amortised on a straight line basis over the lease term.

Hectares (Ha)

The area of land measurement used in this analysis. The conversion factor used, where appropriate, is 1 hectare = 2.471 acres.

JOINT VENTURE

An entity in which the Group holds an interest and which is jointly controlled by the Group and one or more partners under a contractual arrangement whereby decisions on financial and operating policies essential to the operation, performance and financial position of the venture require each partner's consent.

loan to value (LTV)

Net borrowings divided by the carrying value of total property assets (investment, owner occupied and trading properties).

NET INITIAL YIELD

Annualised current cash passing rent less non-recoverable property expenses such as empty rates, divided by the property valuation plus notional purchasers' costs. This is in accordance with EPRA's Best Practices Recommendations.

NET RENTAL INCOME

Gross rental income less ground rents paid, service charge expenses and property operating expenses.

PASSING RENT

The annual cash rental income currently receivable on a property as at the balance sheet date (which may be more or less than the ERV).

PRE-LET

A lease signed with an occupier prior to completion of a development.

REIT

A qualifying entity which has elected to be treated as a Real Estate Investment Trust for tax purposes. In the UK, such entities must be listed on a recognised stock exchange, must be predominantly engaged in property investment activities and must meet certain ongoing qualifications. SEGRO plc and its UK subsidiaries elected for REIT status with effect from 1 January 2007.

RENT ROLL

See passing rent.

Square metres (sq m)

The area of buildings measurements used in this analysis. The conversion factor used, where appropriate, is 1 square metre = 10.639 square feet.

takeback

Rental income lost due to lease expiry, exercise of break option, surrender or insolvency.

topped up net initial yield

Net Initial Yield adjusted to include notional rent in respect of let properties which are subject to a rent free period at the valuation date. This is in accordance with EPRA's Best Practices Recommendations.

Total Property Return (TPR)

A measure of the ungeared return for the portfolio and is calculated as the total realised and unrealised property gain or loss plus net rental income, expensed as a percentage of capital employed.

Total shareholder return (TSR)

Total shareholder return based upon share price movement over the period and assuming reinvestment of dividends.

*For full Glossary of Terms go to http://www.segro.com/segro/Investors/Shareholder-Information/Key-Definitions-Glossary.htm

This information is provided by RNS

The company news service from the London Stock Exchange

END

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SEGRO (SGRO)

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Final Results

WEBCAST AND CONFERENCE CALL FOR INVESTORS AND ANALYSTS

About SEGRO

Overview

Portfolio value increased by 1.9 per cent

Improving occupancy

UK

Continental Europe

Capitalising on opportunities to profitably grow and improve the portfolio

Heathrow market presents significant opportunity

Growing pre-let development pipeline with 12 projects signed

Continue to recycle assets with disposals of £479.4 million

Refocusing our Continental European portfolio

Prudently managing our financial position

Dividends

Outlook

Ian Coull, Chief Executive

VALUATION DATA - COMPLETED PROPERTIES - 31 DECEMBER 2010

Lettings analysis

Weighted average lease length (1) - 31 DECEMBER 2010

Reconciliation between passing rent and ERV

DEVELOPMENT PIPELINE - 31 december 2010

HIGHLIGHTS

TOTAL PROPERTY RETURN

NAV AND EPRA NAV PER SHARE

REALISED AND UNREALISED PROPERTY GAIN/(LOSS)

EPS AND EPRA EPS

EPRA PROFIT

NET RENTAL INCOME

NET FINANCE COSTS

UNDERLYING TAX RATE

CASH FLOW

CAPITAL EXPENDITURE/DIVESTMENT

principal risks and uncertainties

TREASURY POLICIES AND GOVERNANCE

FINANCIAL POSITION AND FUNDING

GEARING AND FINANCIAL COVENANTS

LIQUIDITY POSITION

GOING CONCERN

INTEREST RATE RISK EXPOSURE

FOREIGN CURRENCY TRANSLATION EXPOSURE

Ian Coull

David Sleath

For the year ended 31 December 2010

For the year ended 31 December 2010

As at 31 December 2010

For the year ended 31 December 2010

For the year ended 31 December 2009

For the year ended 31 December 2010

1. Financial information

2. Segmental analysis

3. Revenue

6(ii) - Summarised balance sheet information in respect of the Group's share of joint ventures

7. REALISED AND UNREALISED Property gain/(loss)

Brixton

10. NET Finance costs

11(ii) - Factors affecting tax credit for the year

14. Properties

14(ii) - Trading properties

17. Trade and other payables

20(iii) - Analysis of net debt

BASIS POINT

BRIXTON

DEVELOPMENT PIPELINE

Enlarged Group

EPRA

EQUIVALENT YIELD

Estimated rental value (ERV)

Estimate to complete (ETC)

gearing

GROSS RENTAL INCOME

Hectares (Ha)

JOINT VENTURE

loan to value (LTV)

NET INITIAL YIELD

NET RENTAL INCOME

PASSING RENT

PRE-LET

REIT

RENT ROLL

Weighted average lease length ⁽¹⁾ - 31 DECEMBER 2010