Treasury policy

Gearing

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 and associates. The LTV at 30 June 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 and associates. The gearing ratio of the Group at 30 June 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 45 per cent from their 30 June 2023 levels to reach the gearing covenant threshold of 160 per cent.

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 30 June 2023, the Group had gross foreign currency assets which were 77 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 30 June 2023, including the impact of derivative instruments, 91 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.