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Abacus Property shares close higher on 1H20 results

The Abacus Property Group (ASX: ABP) share price rose 3.05% today to close at $4.05 on the back of the property group’s first-half earnings release for FY20.

Abacus is a diversified property group that specialises across Australia’s commercial property markets. It invests in a range of activities including office, retail and industrial properties, and self-storage facilities; and also participates in property ventures, developments and property funds management.

What did Abacus report?

During the six months to 31 December 2019, Abacus reported it had acquired over $600 million of business transforming investments.

The company increased exposure to its key focus sectors of Office and Self-Storage through a series of acquisitions and joint ventures during the period.

In today’s ASX release, Abacus also reported it has undertaken several transactions to reduce exposure to its non-core legacy investments. It has done this particularly in the Residential Land and Mortgages legacy sector.

These transactions, combined, have resulted in the successful transformation of Abacus’ balance sheet, with 92% of investment assets deployed into some of its key sectors.

Decline in profit, but an increase in funds from operations

Abacus reported group statutory profit of $82.1 million in HY20, a 36% decline from the $127.8 million reported in the prior corresponding period (pcp). However, Abacus Funds from Operations (FFO) came in at $67.3 million which was a 3% increase from the $65.3 million reached in HY19.

FFO per security came in at 10.59 cents, down 6% from 11.27 cents that Abacus recorded HY19. Meanwhile, Abacus announced distribution per security of 9.45 cents for the half-year period, up 2.2% on the pcp.

Gearing came in at 16.2%, down 810 basis points on the 2019 financial year, while proforma gearing was 26.8%, up 270 basis points on FY19. Net tangible assets per stapled security came in at $3.41 which was up 2.4% on FY19.

Over $600 million of capital deployed

During the period, Abacus reported the deployment of over $600 million of capital. This included a $311 million acquisition in North Sydney; a $202 million acquisition for a 32% interest in Elizabeth Street, Sydney; and the progressing development of its co-owned building in Church Street, Richmond Victoria.

Abacus also recorded non-core capital recycling of over $150 million in both the residential and retail sectors.

Outlook

To round out its results, Abacus remains positive on its outlook and market positioning in the Office and Self-Storage sectors and confirmed distribution guidance of 2% to 3% growth for FY20.

Commenting on the results, Abacus Managing Director Steven Sewell said, “Abacus remains committed to executing on its investment strategies as evidenced in HY20, resulting in Abacus increasing its investment in quality Office and Self Storage assets in target markets and strengthening recurring earnings.”

“Our clear focus remains on acquiring assets that will provide income growth, create value over the longer term and deliver superior risk adjusted returns for our investors,” he added.

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Motley Fool contributor Phil Harpur has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.