Annual Report and Accounts 2016 - SEGRO

1 Annual Report and Accounts 2016 SEGRO Annual Report and Accounts 2016 Financial Recordp08 Board of Directorsp64 OverviewThe right assets in the right places 01 Strategic ReportFinancial Record 08 Chairman s Statement 09 Business Review 10 Market Overview 12 Business Model 16 Key Performance Indicators 20 Chief Executive s Review 22 Regional Summary 32 Operational Review 34 Corporate Social Responsibility 40 Financial Review 48 Principal Risks 54 GovernanceChairman s Introduction 63 Board of Directors 64 Governance Framework 66 Governance Report 67 Nomination Committee Report 73 Audit Committee Report 77 Remuneration Committee Report 85 Remuneration Policy 98 Directors Report 103 Statement of Directors Responsibilities 105 Financial StatementsIndependent Auditor s Report 107 to the Members of SEGRO plcGroup Income Statement 113 Group Statement of 113 Comprehensive IncomeBalance Sheets 114 Statements of Changes in Equity 115 Cash Flow Statements 117 Notes to the Financial Statements 118 Five-Year Financial Results 169 Further InformationFinancial Information 170 Shareholder Information 171 Glossary of Terms 172 The Directors present the Annual Report for the year

2 Ended 31 December 2016 which includes the strategic Report , governance Report and audited financial statements for the year. References to SEGRO , the Group , the Company , we or our are to SEGRO plc and/or its subsidiaries, or any of them as the context may require. Pages 08 to 61 inclusive, comprise the Strategic Report , pages 103 to 104 inclusive comprise the Directors Report and pages 85 to 97 inclusive comprise the Directors Remuneration Report , each of which have been drawn up and presented in accordance with English company law and the liabilities of the Directors in connection with these sections shall be subject to the limitations and restrictions provided by such Annual Report contains forward-looking further information see inside back Statementsp106 Business Reviewp10 Chief Executive s Reviewp22 Governancep62 Chairman s Statementp0901 Strategic ReportGovernanceFinancial StatementsOverviewThe right assets in the right placesOur warehouses play a crucial role in the operations of our customers.

3 Enabling extraordinary things to happen. Our big box warehouses are located on Europe s major transport corridors, from which goods are distributed regionally, nationally and internationally. Our urban warehouses are located in and around Europe s major cities, allowing quick access to customers and easy access for companies workforces, and include workshops, laboratories, data centres, showrooms and distribution facilities, among a wide variety of other rise of e-commerce, in particular, has had a major influence on investor and occupier demand for warehousing: retailers are having to reconfigure their supply chains to cater for both their store networks and consumers who buy products online and expect them to be delivered quickly to locations convenient to is the only listed company to offer this combination and scale of big box and urban warehouses on a pan-European basis.

4 In response to this demand, we are reporting some of the strongest metrics in our recent history, with a record delivery of new developments and a strong pipeline of new space under construction capable of driving growth for the coming information More information on SEGRO s activities and performance can be found at , including investor presentations and the 2016 Property Analysis Report which contains details of the portfolio. More details on our Responsible SEGRO initiatives, as well as our Corporate Social Responsibility Reports, can be found at Annual Report and Accounts 2016An award winning being in the right placeBrompton s workshop is located close to the A40, M40 and M25, with direct access to the heart of London home to Brompton s flagship store as well as easy access to Heathrow from which the company can reach its 44 export markets.

5 Brompton is a British success story, exporting its iconic folding bikes all over the world. Its headquarters, in Greenford, West London, ensures that Brompton maintains its historic links to London, is easily reached by its highly skilled workforce and allows the company to consolidate four parts of its business into a single property. The facility includes a viewing platform which allows Brompton customers to watch their personally-specified bikes being ReportGovernanceFinancial to millionsSEGRO Annual Report and Accounts 201604 The 16,200 sq m facility was completed in 2016 and is fully let.

6 The warehouse boasts strong sustainability credentials. Photovoltaic panels, water saving measures and air source heat pumps ensure that CO2 emissions are 40% less than building regulation being in the right placeGetting distribution centre configuration and location right is crucial for parcel delivery companies. This warehouse, minutes away from Heathrow Airport, allows rapid delivery to London and the South-East region, as well as easy and efficient distribution of international parcels. Last minute ReportGovernanceFinancial mile deliverySupply chain Annual Report and Accounts 2016 Volkswagen Group Polska is an importer of six car brands and is the official original spare parts supplier for Poland and Belarus.

7 This new facility, ideally located next to the A2 motorway, has allowed Volkswagen Group Polska to increase the efficiency of its distribution network and to extend its Same Day Delivery being in the right placeSEGRO built a brand new, 32,000 sq m distribution facility for Volkswagen Group Polska in Pozna n, Poland, within easy reach of its Polish dealership network. SamochodyU keep Europe movingStrategic ReportGovernanceFinancial Statements07 Overview08 SEGRO Annual Report and Accounts 2016 Financial record:Important Explanatory Notes about Alternative Performance Metrics used in this Report1 EPRA and Adjusted metrics: The Financial Statements are prepared under IFRS.

8 SEGRO management monitors a number of adjusted performance indicators in assessing and managing the performance of the business which they believe reflect the underlying recurring performance of the property rental business which is the Group s core operating activity. These include those defined by EPRA as part of their mission to establish consistency of calculation across the European listed real estate sector. Pages 132-133 and page 165 of the Annual Report and Accounts contains more information about the adjustments and the reconciliation of these to IFRS equivalents. 2 Proportionally consolidated figures and metrics: SEGRO owns assets both wholly itself and through stakes in 50-50 joint ventures.

9 In the Financial Statements, the profit from joint ventures is stated as a single figure in the Income Statement and the net asset value of joint ventures is stated as a single equity figure on the Balance Sheet; Note 7 to the Financial Statements provides the component parts of these figures. In operational terms, SEGRO does not distinguish between assets held in joint ventures from those assets which are wholly-owned. Therefore, unless specifically stated, in the Strategic Report , performance metrics and financial figures are stated reflecting SEGRO s wholly-owned assets and its share of joint venture assets (known commonly as a proportionally consolidated basis).

10 Where the Strategic Report refers to the area of a property, it is stated at 100 per cent of the space, irrespective of whether the property is wholly-owned or held in a joint venture. 154. 5 MAdjusted profit before tax1 (2015: ) EPS1(2015: ) before tax(2015: 686. 5m)500 PEPRA net asset value per share1(2015: 463p) value2(2015: )16 .4 PTotal dividend per share (2015: )In this section:Business Review 10 Market Overview 12 Business Model 16 Key Performance Indicators 20 Chief Executive s Review 22 Regional Summary 32 Operational Review 34 Corporate Social Responsibility 40 Financial Review 48 Principal Risks 54 Strategic Report09 OverviewGovernanceFinancial StatementsStrategic ReportThis is my first Chairman s Letter and it is a pleasure to be able to Report such a strong set of results in what has been an invigorating and busy year.