Region Group (RGN) H2 2024 earnings summary

Executive summary

• Statutory net profit after tax was AUD 17.3 million, 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 552 leasing deals completed, specialty vacancy reduced to 4.7%, and tenant retention at 83%.

• AFFO per security was AUD 0.136 (13.6 cps), down 11.1% year-over-year, with a distribution of 13.7 cps and a 101% payout ratio.

• Capital management included AUD 177 million of non-core property divestments and a AUD 74 million acquisition of Cooleman Court.

• Balance sheet remains strong with AUD 262 million liquidity and pro forma gearing at 32.3%, at the lower end of the 30-40% target range.

Financial highlights

• FFO per security was AUD 0.154 (15.4 cps), down 9.2% year-over-year, mainly due to a 0.9% increase in weighted average cost of debt.

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

• Interest expense increased by 29% due to higher debt costs.

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

• Net rental arrears reduced to AUD 4.7 million, about 1% of billings.

Outlook and guidance

• FY 2025 guidance: FFO of AUD 0.155 (15.5 cps) per security and AFFO of AUD 0.137 (13.7 cps) per security, with a target 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 comp NOI growth despite elevated expense growth, with high hedging limiting interest rate headwinds (96% hedged in FY25).

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