Property companies riding a $2.9b profit wave

Property companies riding a $2.9b profit wave

Goodman Group's planned development at Oakdale West Industrial Estate in Sydney’s west secures Australia Post as tenant.

 

Australian property companies have capitalised on prime market conditions to post robust earnings in the latest half year.

Many companies reporting today across the property spectrum from the residential to commercial and industrial sectors have delivered double and triple-digit growth in the wake of demand from industry and consumers.

The strong results build on the big profit swings announced earlier this week by property investor Dexus (ASX: DXS) and shopping centre owner Vicinity Centres (ASX: VCX), following positive signs earlier this month from Mirvac (ASX: MGR), Dexus Industria (ASX: DXI), SCA Property (ASX: SCP) and Centuria Office REIT (ASX: COF).

Improved property valuations are the hallmark of many of the latest company results, with Goodman Group (ASX: GMG) delivering a mammoth $2 billion bottom-line profit for the first half of FY21 – driven by a 346 per cent increase in the value of its property investments.

This is Business News Australia’s wrap of today’s notable earnings results in the property sector, with seven companies that have delivered combined net earnings of more than $2.9 billion in the first half of FY22.

Goodman Group

If there was any doubt that the industrial market is hot property, Goodman Group put that to rest after reporting a $2 billion bottom-line profit in the six months to the end of December 2021.

The result was driven by a $1.65 billion increase in Goodman’s share of investments which largely comprise a portfolio of global industrial assets.

The bottom line was accompanied by an impressive underlying result with Goodman posting a 28 per cent increase in operating profit to $786.2 million. The result has led Goodman to forecast a 20 per cent increase in earnings per share for the FY22 full year.

Goodman reports portfolio occupancy remains high at 98.4 per cent and that like-for-like net property income growth stands at 3.4 per cent.

The group is upping the ante with its development portfolio, with $12.7 billion across 81 projects under way - 51 per cent higher than a year ago.

Despite the solid performance, Goodman has held its interim distribution steady at 15c per security.

Growthpoint Properties Australia

A resurgence in the office market is reflected in the latest earnings from Growthpoint Properties Australia (ASX: GOZ) which reported a net profit of $374.3 million for the December half – up 81.9 per cent from the previous corresponding period.

The result was buoyed by a $267.1 million increase in the value of group investments which comprise a portfolio of 57 office and industrial properties across Australia. The company bolstered the portfolio during the period through acquisitions totalling $300 million in NSW, ACT and Victoria as well as new securities in Dexus Industria REIT (ASX: DXI).

Growthpoint negotiated leases over 106,000 square metres in the first half, accounting for 10 per cent of its portfolio income, with tenant retention of 93 per cent across its property assets.

The group has lifted its interim distribution to 10.4c per security.

Abacus Property Group

Abacus Property Group (ASX: ABP) has affirmed the continued strength of the self-storage sector after reporting a net profit of $314.8 million for the December half, or 107.4 per cent up on the same time last year.

Funds from operations (FFO) of $81.1 million rose 33.7 per cent, with the group’s self-storage portfolio making a substantial contribution to the total with results from this division increasing 62.7 per cent over the period.

Abacus has invested more than $1 billion in its key sectors of office and self-storage assets so far in FY22.

“Since FY17 Abacus has invested approximately $3.2 billion into our key sectors and has transformed into a strong asset-backed, annuity-style investment house positioned to deliver on our vision to create exceptional value for our customers and stakeholders as an owner and manager of real estate and operator of storage locations,” says Abacus managing director Steven Sewell.

Abacus has lifted its interim distribution to 8.75c per security.

Hotel Property Investments

Despite the challenges of the past couple of years, a return to more stable conditions for Hotel Property Investments (ASX: HPI) has led the group to report a 301 per cent increase in bottom-line profit for 1H22 to $120.1 million.

The result was driven by a fair value gain on investment property of $100.7 million. Without this, HPI would have suffered a fall in net earnings.

However, HPI is making gains at the operating level by reporting a 21.7 per cent increase in revenue for the period to $31.5 million. The company is also expected to reap future benefits from a number of acquisitions during the period, including the addition of seven South Australian hotels acquired from Saturno Group for $66.1 million.

HPI is making an interim distribution of 10.2c per security.

Garda Property Group

Garda Property Group (ASX: GDF) has benefitted from an uplift in property valuations in the December half, which drove the group’s net profit 520 per cent higher to $64.74 million.

The improved asset valuations accounted for $54.24 million of the result, although Garda’s true measure of performance, funds from operations (FFO), edged marginally lower to $8.0 million for the period despite a lift in revenue to $15.72 million.

Garda has 17 industrial and office properties on Australia’s eastern seaboard from Melbourne to Cairns with its portfolio now valued at $562 million.

The positives for the group are that there was no impact from the pandemic in its latest six-month period.

Among its acquisitions during the period was 30,351sqm of industrial land for development at Richlands in Brisbane’s west for $6.82 million.

Garda is paying a December quarter distribution of 1.8c per security.

Sunland Group

Brisbane-based property developer Sunland Group (ASX: SDG) has more than doubled its net profit to $35.9 million in the first half of FY21, with projects in Sydney and the Gold Coast among the big drivers of growth at an operating level.

The group achieved a 20.8 per cent increase in cashflow from property settlements totalling $240 million during the period. Sunland’s development margin of 25 per cent also exceeded its target of 20 per cent, highlighting the strength of property pricing in the current market.

Sunland, which has been selling down development assets with a view to winding down the business, included $94.8 million in revenue from the selldown delivering the company $18.3 million in profit after tax.

Sunland is scheduled to settle more than $136 million in development asset sale in the current half year, comprising assets in its landmark The Lanes project on the Gold Coast and its former Grace on Coronation site in Brisbane.

Settlements from the 272 Hedges Avenue high-rise on the Gold Coast and the Montaine Residences development in Sydney are expected to bolster the company’s current half-year result.

Sunland is paying 22c final dividend, which includes a special dividend of 10c a share.

AVJennings   

Residential developer AVJennings (ASX: AVJ) has rebounded from a lacklustre performance a year ago to post an $8.1 million profit in the December half, up 47.2 per cent.

While the result was achieved on lower volumes, with 340 lots settled during the period down from 415 a year earlier, it was aided by a higher average contract value which reflected demand for residential products. Revenue rose 2 per cent to $116.9 million.

Average gross margins were up 4.4 percentage points to 28.7 per cent, buoyed by the strength of demand for its projects at Cobbitty and Spring Farm in Sydney.

Revenue from integrated housing and apartments contributed a bigger share to the latest result, or 53.5 per cent of total revenue. This was due to settlements from the Empress building at Waterline Place in Williamstown, Melbourne, and some legacy apartments in the Indigo and Viridian buildings in Subiaco, Perth.

AVJennings is expecting significant revenue in the second half to come from Waterline Place and its Ara Hills project at Orewa in New Zealand.

The company is paying a final dividend of 0.7c per share.

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