The Group Treasury function operates within a formal policy covering all aspects of treasury activity, including funding, counterparty exposure and management of interest rate, currency and liquidity risk.
Gearing and financial covenants
The key leverage metric for SEGRO is its loan to value ratio (LTV), which incorporates assets and net debt on SEGRO’s balance sheet and SEGRO’s share of assets and net debt on the balance sheets of its joint ventures. The LTV at 31 December 2023 on this ‘look-through’ basis was 34 per cent (31 December 2022: 32 per cent).
Our borrowings contain gearing covenants based on Group net debt and net asset value, excluding debt in joint ventures. The gearing ratio of the Group at 31 December 2023, as defined within the principal debt funding arrangements of the Group, was 45 per cent (31 December 2022: 41 per cent). This is significantly lower than the Group’s tightest financial gearing covenant within these debt facilities of 160 per cent.
Property valuations would need to fall by around 44 per cent from their 31 December 2023 levels to reach the gearing covenant threshold of 160 per cent. A 44 per cent fall in property values would equate to an LTV ratio of approximately 62 per cent.
Interest cover is the Group’s other key financial covenant within its principal debt funding arrangements, requiring that net interest before capitalisation be covered at least 1.25 times by net property rental income. The ratio for 2023 was 2.7 times, comfortably ahead of the covenant minimum.
Net property rental income would need to fall by around 54 per cent from 2023 levels, or interest rates would need to rise to 7.4 per cent from the full year average interest rate of 3.5 per cent to breach the interest cover covenant threshold.
Leverage is also monitored on a net debt/EBITDA basis of which the ratio was 10.4 times at the end of 2023 (2022: 11.7 times).
FX Hedging
The Group has negligible transactional foreign currency exposure, but does have a potentially significant currency translation exposure arising on the conversion of its substantial foreign currency denominated assets (mainly euro) and euro denominated earnings into sterling in the Group consolidated accounts.
The Group seeks to limit its exposure to volatility in foreign exchange rates by hedging at a level between the period-end Group LTV percentage and 100 per cent of its foreign currency gross assets through either borrowings or derivative instruments.
At 31 December 2023, the Group had gross foreign currency assets which were 74 per cent hedged by gross foreign currency denominated liabilities (including the impact of derivative financial instruments).
Interest Rate
The Group’s interest rate risk policy is designed to ensure that we limit our exposure to volatility in interest rates.
The policy states that between 50 and 100 per cent of net borrowings (including the Group’s share of borrowings in joint ventures and associates) should be at fixed or capped rates, including the impact of derivative financial instruments.
As at 31 December 2023, including the impact of derivative instruments, 95 per cent (31 December 2022: 95 per cent) of the net borrowings of the Group (including the Group’s share of borrowings within joint ventures and associates) were at fixed or capped rates.
Overview and strategy
This page features an overview and information on sources of debt funding, debt maturity profile, credit rating, loan to value and cost of debt.
Find out moreUS private placements
Full details regarding the US Private Placement portfolio as at 31 December 2023
Find out moreJoint venture debt
SEGRO owns 50% of the SEGRO European Logistics Partnership (SELP) joint venture.
Find out moreDebt investor relations contacts
Visit this page for details on the relevant debt investor relations contacts
Find out more