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Segro falls to losses in H1 as NAV falls a further 12%
Segro saw the value of its UK assets slump by 10% in H1 as it suffered from the downturn in the property market. The valuation loss of £389million wiped out profits to result in a pre-tax loss of £315.3million, and a 12% fall in NAV to 605p.
Although rental income was up 23.1%, largely due to acquisitions, the company warned that the commercial property market would fall further before it hit the bottom.
Chief executive Ian Coull said: "I don't think we are over the worst in the UK. I expect to see further falls in capital values over the balance of this year and first half of next year."
However Mr Coull said that Segro's move into the western and eastern European property markets meant the company had the flexibility to offset falling markets. He said the company would now be concentrating on its acquisition programme in Eastern Europe as it looked to mitigate falling values in the UK.
He said: "The business model we have developed over the last three years we think is a good, robust model to deal with changing and different market conditions around the world."
On the abolition of empty rates relief he said: "It was never a sensible idea but it was a particularly stupid tax in the current economic circumstances." The Government ended business rate relief on empty commercial property from 1 April, whereas previously empty retail and office space received full relief for three months and 50% thereafter, while industrial space, warehouses and factories, received full relief permanently.
Evidence is mounting that landlords are choosing to demolish buildings rather than pay extortionate rates on empty property,
Mr Coull said: "I feel very strongly about it. It is an unfair tax. It penalises regeneration opportunities and it is then that buildings will get demolished more quickly and we are seeing signs of that already." The British Property Federation has been campaigning for the tax relief to be reapplied at 50%, as allowed for in the legislation.
Segro said it had undertaken 450,000 sq ft of demolitions in the first half of this year, compared with 400,000 sq ft for the whole of last year. Mr Coull stressed that the introduction of the tax was not the sole reason for the demolitions, but he said it had "definitely been a factor".
Segro expects to pay £8million in empty property tax for the full financial year.
However, the company said the changes to tax legislation surrounding rates on empty commercial property cost the company an additional £2million. The company said it would leave its half-year dividend, payable on October 3, unchanged at 8.3p.
Despite the results Mr Coull said that operationally Segro was performing well. Segro shares fell 14¼ to 406p.
Although rental income was up 23.1%, largely due to acquisitions, the company warned that the commercial property market would fall further before it hit the bottom.
Chief executive Ian Coull said: "I don't think we are over the worst in the UK. I expect to see further falls in capital values over the balance of this year and first half of next year."
However Mr Coull said that Segro's move into the western and eastern European property markets meant the company had the flexibility to offset falling markets. He said the company would now be concentrating on its acquisition programme in Eastern Europe as it looked to mitigate falling values in the UK.
He said: "The business model we have developed over the last three years we think is a good, robust model to deal with changing and different market conditions around the world."
On the abolition of empty rates relief he said: "It was never a sensible idea but it was a particularly stupid tax in the current economic circumstances." The Government ended business rate relief on empty commercial property from 1 April, whereas previously empty retail and office space received full relief for three months and 50% thereafter, while industrial space, warehouses and factories, received full relief permanently.
Evidence is mounting that landlords are choosing to demolish buildings rather than pay extortionate rates on empty property,
Mr Coull said: "I feel very strongly about it. It is an unfair tax. It penalises regeneration opportunities and it is then that buildings will get demolished more quickly and we are seeing signs of that already." The British Property Federation has been campaigning for the tax relief to be reapplied at 50%, as allowed for in the legislation.
Segro said it had undertaken 450,000 sq ft of demolitions in the first half of this year, compared with 400,000 sq ft for the whole of last year. Mr Coull stressed that the introduction of the tax was not the sole reason for the demolitions, but he said it had "definitely been a factor".
Segro expects to pay £8million in empty property tax for the full financial year.
However, the company said the changes to tax legislation surrounding rates on empty commercial property cost the company an additional £2million. The company said it would leave its half-year dividend, payable on October 3, unchanged at 8.3p.
Despite the results Mr Coull said that operationally Segro was performing well. Segro shares fell 14¼ to 406p.
Thu, 28th Aug 2008