In morning trade the Rural Funds Group (ASX: RFF) share price is trading lower following the release of its half year results.
At the time of writing the agricultural-focused real estate property trust's shares are 2.5% lower to $1.88.
How did Rural Funds perform in the first half?
For the six months ended December 31, Rural Funds delivered a 22% increase in property revenue over the prior corresponding period to $37.6 million.
This strong growth was driven by the JBS feedlot acquisitions, cattle acquisitions, development capital expenditure, and lease indexation. Positive revaluations were also received on macadamia orchards and cattle properties. Management advised that the latter reflects the rollout of productivity improvements.
Rural Funds' adjusted funds from operations (AFFO) per unit also grew strongly. It increased 11% over the prior corresponding period to 7.1 cents.
It was the same for its total comprehensive income earnings per unit, which increased by 16% to 8.9 cents.
This allowed the board to declare distributions totalling 5.42 cents per unit during the half, up 3.8% on the prior corresponding period. However, these distributions have already been paid to unitholders.
Key metrics.
At the end of the period the company's portfolio remained highly diversified through the ownership of 38 properties across five agricultural sectors.
Management notes the quality of its lessees and counterparties, with 78% corporate and/or listed entities such as Costa Group Holdings Ltd (ASX: CGC) and Select Harvests Limited (ASX: SHV).
It also advised that its weighted average lease expiry profile now stands at 11.5 years, with structured rental growth expected through indexation and market rent review mechanisms.
And with its gearing at 26.4%, below its target of 30% to 35%, management notes it has the capacity for further acquisitions.
Outlook.
In light of its positive half, management has increased its FY 2020 AFFO forecast to 13.5 cents per unit. It continues to expect to pay distributions of 10.85 cents per unit for the full year.
Looking to FY 2021, the company has provided distributions per unit guidance of 11.28 cents. This is in-line with its 4% growth target and implies a yield of 5.6% based on its last close price.
