Segro, the industrial property company, said the investment market was showing signs of stability again although it warned about future occupier demand in the sector.

Reporting a widening loss in its first results since completing the takeover of rival Brixton this week, Ian Coull, Segro’s chief executive, said that prices for well-let property were now beginning to firm.

Adjusted net asset value per share fell to 353p in the first half to June 30, from 698p in December. This reflects the decline in value in Segro’s portfolio of 11.3 per cent, down 13.7 per cent in the UK and 7.2 per cent in Europe, slightly worse than the benchmark index.

Mr Coull said that further disposals would be made of non-core assets, although the company was now comfortable with its balance sheet position.

Segro raised £500m in April through a rights issue and separately renegotiated bank covenants. Its adjusted gearing ratio has been reduced to 98 per cent from 119 per cent at December. Segro has more than £1bn of funds available, Mr Coull said, with £72.4m of cash and £986.5m of undrawn bank facilities.

The company raised a further £241m to help complete the acquisition of Brixton. With its reserves, this has helped buy back Brixton bonds, including most maturing in 2010, and pay bank debt. The results do not include the acquisition of Brixton.

Net rental income rose 8.7 per cent to £130m, reflecting newly let developments and an increase in like-for-like rental income of 3.1 per cent, but Mr Coull warned the occupier market remained difficult with downward pressure on rental levels. He predicted that rents would fall a further 5 per cent in the second half of the year. The shares fell 11.1p to 335p.

The company’s vacancy rate increased to 11.3 per cent, from 9.8 per cent, while its pre-tax loss widened from £315m to £493m. The interim dividend is 4.6p, down from 8.3p in 2008.

FT Comment

With the acquisition of Brixton, Segro is certainly bigger, but needs to achieve the synergies promised to be better, as well as reduce the 22 per cent of vacancies in Brixton’s properties. Despite stabilising yields, rents are falling and vacancies increasing, with little hope of an increased dividend. Results were broadly in line, and with shares at a premium to 2009 and 2010 NAV analyst estimates, there is little compelling reason to invest now, other than a boost on likely entry to the FTSE 100.

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