Region Group (RGN) H2 2024 earnings summary

Executive summary

• Statutory net profit after tax was AUD 17.3 million for FY24, a turnaround from a AUD 124 million loss in the prior year, driven by resilient non-discretionary retail and strong leasing activity.

• Portfolio occupancy reached 98.1%, with specialty vacancy reduced to 4.7% and 552 leasing deals completed at 83% tenant retention.

• AFFO per security was 13.6 cps (down 11.1% year-over-year), FFO per security was 15.4 cps (down 9.2%), and statutory profit after tax improved significantly.

• Capital management included AUD 176.7 million of non-core property divestments and a AUD 74 million acquisition of Cooleman Court.

• Balance sheet remains strong with AUD 262.4 million liquidity and pro forma gearing at 32.3%, at the lower end of the 30-40% target range.

Financial highlights

• Property income rose 2.6% to AUD 383.5 million, with net operating income up 0.7% to AUD 251.2 million.

• FFO per security was 15.4 cps, down 9.2% year-over-year, mainly due to higher debt costs; AFFO per security declined 11.1% to 13.6 cps.

• Distribution per security was 13.7 cps, representing 89%-101% payout of FFO/AFFO.

• Net tangible assets per security decreased 5.1% to AUD 2.42.

• Gearing at 32.9%, with no debt expiries until FY27 and AUD 262.4 million in available liquidity.

Outlook and guidance

• FY25 guidance: FFO of 15.5 cps and AFFO of 13.7 cps per security, with a payout ratio of ~90% of FFO and 100% of AFFO.

• Targeting medium to long-term FFO and AFFO growth of at least 3%-4% per annum, driven by NOI growth and portfolio reinvestment.

• Expecting comparable NOI growth of 3% for FY25, with high hedging limiting interest rate headwinds.

• Portfolio positioned to benefit from constrained retail supply and strong population growth.