The GPT Group (ASX: GPT) share price is edging higher today after the property group released its half-year FY20 result.
GPT is one of Australia’s largest diversified property groups and has been listed on the ASX since 1971. It owns and manages a $24 billion portfolio of offices, business parks and prime shopping centres across Australia.
GPT’s interim FY20 result
In the first half of FY20, GPT achieved funds from operations (FFO) of $244.5 million, down 17.4% from $295.9 million in 1H19. This was largely due to the adverse performance of its retail portfolio, which suffered COVID-related rent impacts of $75.5 million.
On the bottom line, GPT reported a net loss after tax of $519.1 million. This compares to a $352.6 million net profit after tax achieved in the first half of FY19. The difference between these two results lies in property valuation movements. While GPT recorded $130.8 million of revaluation gains in 1H19, it experienced a devaluation hit in the most recent half to the tune of $711.3 million.
Turning to capital management, GPT’s gearing ratio sat at 25.1% at the end of the period and it has a weighted average term debt of 7.8 years. The group’s net tangible assets per security fell 4.8% over the prior corresponding period to $5.52, primarily as a result of the decline in property valuations.
GPT said it has available liquidity in excess of $1.2 billion, which fully funds all of its current commitments until 2023. The group also maintains A and A2 credit ratings from S&P and Moody’s, respectively.
Funds management
GPT also operates a funds management business, comprising a wholesale office fund (GWOF) and a wholesale shopping centre fund (GWSCF).
The group reported $12.8 billion of assets under management at the end of the period and earnings of $24.4 million. The latter result represents a 6.6% increase over 1H19, which was driven by growth in GWOF.
GPT’s distribution
GPT declared an interim distribution of 9.3 cents per security this morning, down 29.1% from the interim distribution declared in 1H19. This represents a payout ratio of 99.6% of free cash flow (FCF), in line with management’s target to distribute between 95-105% of FCF.
Outlook
Commenting on GPT’s outlook, CEO Bob Johnston said: “GPT remains well placed despite the current uncertainty with a strong balance sheet, a high-quality portfolio of assets and a very experienced management team. We are focused not only on the current pandemic situation but also on positioning the business for the future. It is clearly a very challenging time for Australia, in particular Victorians, and we are doing what we can to support our people, customers, tenants and the community.”
Given the uncertain environment, particularly in light of the recent stage 4 restrictions imposed throughout Melbourne, GPT chose not to provide full-year FFO or distribution guidance.
Now what?
Along with uncertainties over lockdown restrictions in Victoria and potential second waves in other states, there’s also a big question mark over what happens to the commercial property sector once COVID is in the rearview mirror. The pandemic has shown that workforces are capable of working from home, which could lead to organisations downsizing and requiring less office space.
So if you’re searching for income in the current environment, here’s a better idea.
