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Segro Rises as Earnings Gain Eases Concern About Dividend

Aug. 2 (Bloomberg) -- Segro Plc climbed the most in more than six months after the U.K. real estate investment trust reported higher first-half earnings and said it will pay an unchanged dividend. Investors were concerned Segro would reduce the payout, Jefferies International analyst Robert Duncan said.

Segro, the U.K.’s largest owner of industrial properties, gained 11.2 pence, or 4.9 percent, to 238 pence in London. The shares had fallen 24 percent in the 12 months through yesterday, the worst performance among stocks in the 11-member FTSE 350 Real Estate Investment trust Index, which dropped 5 percent.

Earnings excluding items and changes in asset values rose to 9.9 pence a share from 9.4 pence a year earlier, Segro said in a statement today. This profit measure determines the size of the company’s dividend payments. Segro will pay a first-half dividend of 4.9 pence a share.

“Things are starting to come together for Segro as the performance of the core portfolio supports the dividend,” Duncan said by phone. The London-based analyst has a hold rating on the stock.

Segro still needs to reduce its debt further and faces a challenge in selling peripheral assets, most of which are in continental Europe, Duncan said.

Asset Sale

The company today announced the sale of 10 properties in the U.K. to an unnamed fund for 111 million pounds ($173 million). That brought the proceeds from disposals this year to 503 million pounds. Segro had aimed to raise as much as 500 million pounds from asset sales by the end of the year.

“There will be a slower rate of progress on disposals,” Chief Executive Officer David Sleath said in a telephone interview.

The company based in Slough, 22 miles west of London, aims to sell 816 million pounds more peripheral assets, including five large office and industrial campuses in Belgium, Germany and Italy. Most were designed for their current occupiers, making them harder to sell, Sleath said.

Segro said it will “at least maintain the dividend” at the same level this year, analysts at UBS AG said in a note to investors, reiterating their buy rating of the shares. The company had previously indicated that it was prepared to make payouts that weren’t fully covered by earnings as it restructured its real estate, according to the analysts.

Net asset value declined 6.7 percent to 317 pence a share, reflecting additional writedowns for properties that it’s seeking to sell. The largest, which accounted for 47 percent of the writedowns, was for a property in Frankfurt leased by Neckermann.de GmbH, which filed for insolvency last month.

Today’s gains lifted the value of the company to 1.77 billion pounds.

To contact the reporter on this story: Simon Packard in London at packard@bloomberg.net.

To contact the editor responsible for this story: Andrew Blackman at ablackman@bloomberg.net.

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