Region Group (ASX:RGN) Announces 1H FY25 Results
Financial Highlights
Region Group reported a statutory net profit after tax of $81.8 million for 1H FY25. Funds from operations (FFO) were 7.6 cents per security, while adjusted funds from operations (AFFO) stood at 6.7 cents per security. The distribution declared was 6.7 cents per security, representing a payout ratio of 89% of FFO and 100% of AFFO. Assets under management increased by 8.0% to $5.2 billion, with net tangible assets of $2.42 per security and a portfolio weighted average market capitalisation rate of 6.08%. The company’s gearing is at 32.8%, within the target range of 30-40%, and the weighted average cost of debt (WACD) is 4.3% per annum with all debt hedged or fixed. Additionally, Region Group completed $1.4 billion in forward-starting interest rate derivative transactions for FY26-FY29.
Operational Highlights
The portfolio occupancy remained stable at 98.1%, with 256 leasing deals completed at an average specialty leasing spread of 2.1%. Tenant retention was strong, with 85% of expiring tenants renewed. The portfolio experienced a comparable market-adjusted turnover (MAT) growth of 2.0%, driven by supermarket sales growth of 2.5% and non-discretionary specialty sales growth of 3.2%. Tenant arrears were maintained at a low 1.4% of billings.
Value Creation Achievements
The funds management platform grew to over $680 million with the establishment of Metro Fund 2 in November 2024. Region Group completed a $200 million capital recycling program, reinvesting proceeds into a $36.8 million co-investment in Metro Fund 2 and $138.5 million in acquisitions to enhance the core portfolio, including the $64.5 million purchase of Kallo Town Centre. The divestment of Warrnambool Shopping Centre for $17.9 million was completed in early February 2025, with settlement expected in March 2025. Key tenants at the 10,691 sqm expansion of Delacombe Town Centre are now operational, with the development’s practical completion anticipated in early 2025. A total of $43.2 million was invested in capital expenditure for centre repositioning, developments, sustainability, and partnerships with anchor tenants.
Outlook and Earnings Guidance
Region Group remains focused on delivering defensive and resilient cashflows to support secure and growing long-term distributions to its security holders. The company anticipates opportunities driven by the resilient Australian consumer and declining retail floorspace per capita, supported by its centre repositioning program. A disciplined approach to acquisitions and divestments will continue. Assuming stable market conditions, FY25 earnings guidance is FFO of 15.5 cents per security and AFFO of 13.7 cents per security, with a distribution payout ratio of approximately 90% of FFO and 100% of AFFO.
Motley Fool contributor Abbie Stokes has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Region Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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