Abacus Property Group (ASX:ABP) has reported 85% profit growth in its HY21 result, though it reported a decline in the distribution.
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Abacus Property Group (ASX: ABP) has reported a significant increase in statutory profit in its FY21 half-year result.
Abacus is a property business that owns two large property portfolios – one is office and the other is self-storage.
Why did Abacus Property’s profit soar?
The property group announced that its statutory profit went up 85% to $151.8 million. The business disclosed that the revaluation process of its property portfolio resulted in a net increase in the investment property values for the first half of FY21 of $93.9 million.
There was a gain of $97.5 million, or 8.4%, across the self-storage portfolio. However, the office portfolio suffered a $3.6 million decline, or 0.2%, across the commercial portfolio.
In terms of the operating rental profit, the funds from operations (FFO) fell 9.9% to $60.6 million. The FFO per security dropped 14.4% to 9.06 cents.
What else did it report?
Over the course of the first half of FY21, Abacus deployed $205 million of capital into the real estate sectors of office and self storage. This was done through both acquisitions and joint ventures, funded through a combination of debt and divestment of non-core assets.
Abacus said that it continues to reduce exposure to its non-core legacy investments, particularly in the residential land and mortgages sector.
The net tangible assets (NTA) per security of $3.26 reduced by 1.8% compared to FY20.
In terms of debt levels, Abacus said that its gearing reduced by 830 basis points to 18.2%.
Discussing the result, Abacus managing director Steven Sewell said:
Following an active half year including the entitlement offer, Abacus is in a position to extend its strong track record of investing into long term value enhancing assets. Realisation of non-core assets, together with the funds raised from the entitlement offer provides substantial acquisition capacity, ensuring Abacus will be in a strong position to continue to take advantage of opportunities in our key sectors of office and self storage.
Due to the reduction of the funds from operations per security, the Abacus distribution declined by 10.1% to 8.5 cents per security.
This distribution represented a payout ratio of 94% of FFO.
The real estate investment trust (REIT) said that it remains a strong asset-backed, annuity-style Australian REIT. Given the prevailing market conditions, the board is expecting that the FY21 distribution will be paid with a payout ratio of between 85% to 95% of FFO.
Mr Sewell, the managing director, commented:
A combination of established and new collaborative joint ventures has created enduring investment opportunities and facilitated our debt recycling program. With 89% of total assets now deployed in office and self storage investments, the size, nature and market positioning of these key sector investments will permit the group to deliver recurring income and value creation over the long term.
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.