Motley Fool Australia

Results: GPT share price on watch as net profit falls 247%

Real Estate Investment Trust

The GPT Group (ASX: GPT) share price is one to watch this morning after the Aussie real estate investment trust (REIT) reported a 247.2% drop in half-year net profit.

Why is the GPT share price on watch?

Net profit after tax for the half-year ended 30 June 2020 (1H20) fell 247.2% lower to total a $519.1 million loss.

However, the Aussie REIT did announce an interim distribution of 9.3 cents per stapled security, expected to be paid on 28 August.

Funds from Operations (FFO), a key metric for REIT earnings, fell 23.3% from 1H19 numbers to $244.5 million. That’s despite FFO from GPT’s Office and Logistics segments climbing 0.9% and 12.8%, respectively.

However, the big drag on earnings was the REIT’s Retail arm which saw FFO plummet 49.7% lower to $79.2 million.

GPT’s adjusted FFO, taking into account maintenance capex and lease incentives, fell 18.6% to $197.1 million.

The GPT share price will be one to watch in early trade as investors consider the 9.3 cent interim distribution, down 29.1% from 1H19.

GPT reported a total portfolio valuation of $14.41 billion, down from $14.85 billion as at 31 December 2019 (FY19).

The Retail portfolio ($5.70 billion) slumped in value while Office and Logistics portfolios edged higher on FY19 numbers.

GPT’s occupancy numbers also climbed higher during the last 6 months. Portfolio occupancy came in at 98.1%, up from 96.5% in December 2019.

That’s despite Retail and Office occupancy falling to 98.0% and 94.4%, respectively. The Logistics portfolio was again a strong performer with occupancy rocketing from 94.4% to 99.8% as at 30 June.

GPT’s weighted average lease expiry (WALE) totalled 4.9 years, down from 5.0 years in FY19. The group’s weighted average capitalisation rate edged 5 basis points higher to 5.00% during the half-year.

How has COVID-19 impacted on earnings?

Clearly, the coronavirus pandemic has had an impact on GPT’s earnings and the GPT share price.

Centre sales growth in GPT’s Retail portfolio from March to June varied between -21.3% to -59.0% per month.

Positively, the percentage of stores opened recovered to 91% in June compared to just 36% in April.

Despite some headwinds for retail, GPT’s percentage of rent collected climbed to 53.3% in June compared to just 25.8% in April.

GPT’s net asset valuations were also revised downwards due to the pandemic which contributed to a 300 basis point jump in net gearing to 25.1%. This is at the low end of the REIT’s target range of 25% to 35%.

Foolish takeaway

The GPT share price will be one to watch in early trade after this morning’s result.

Shares in the ASX REIT are down 32.5% for the year as investors have sold out of many real estate shares.

By comparison, the S&P/ASX 200 Index (ASX: XJO) is down 10.3% in 2020 as at Friday’s close.

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Motley Fool contributor Ken Hall 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.

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