Profit up 82%: Dexus (ASX:DXS) share price steady on active half year results

The property giant came in with a strong set of results.

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Key points

  • Dexus announced its half year results today, as shares remain rangebound from the open 
  • The company grew profits substantially and completed several acquisitions during the half 
  • In the last 12 months, the Dexus share price has climbed a little over 17% 

Property management company and REIT Dexus Property Group (ASX: DXS) today announced its results for the half year ended 31 December 2021.

At the time of writing, shares in Dexus are rangebound from the open and are trading less than 1% in the red at $10.14 apiece.

Dexus share price steady as profits, rent collection grows

The company advised on several investment takeouts this half, including:

  • Net profit after tax (NPAT) of $803.2 million, up 82% year on year (YoY)
  • Adjusted Funds from Operations (AFFO) of 28.1 cents per security, down 2.4%
  • A distribution of 28 cents per security, down 2.8% YoY, primarily driven by lower trading profits of $21.6 million (post tax) in HY22
  • Rent collections remained strong at 97.9%
  • Gearing remains conservative at 31.1%
  • $1.6 billion of cash and undrawn debt facilities
  • High occupancy of 95.1% for the Dexus office portfolio and 98.6% for the Dexus industrial portfolio
  • Raised $1.3 billion of new equity across existing funds since 30 June 2021

What else happened this half for Dexus?

The key takeout was Dexus carrying $803.2 million through to NPAT for 1H FY22. This represents an increase of $362 million, or 82% on the same time last year.

Dexus notes the gain was underscored by "net revaluation gains of investment properties of $486.2 million, which were $341.5 million higher than the previous corresponding period".

The REIT also saw a valuation uplift on 124 of its office, industrial and healthcare assets. This resulted in a valuation increase across the industrial portfolio of 9%. Meanwhile, the office portfolio increased 1.1% on prior book values "on the back of leasing success at some assets".

As a result, valuation gains across the total property portfolio this half resulted in a 3.1% gain in net tangible asset (NTA) per security to $11.77.

Furthermore, Dexus' total property portfolio weighted average capitalisation rate decreased 0.15% over the past six
months to 4.76%.

The amount of profit carried through to Dexus' bottom line enabled its board to approve a distribution per security of 28 cents, although this was down roughly 3% YoY. The company notes this is mainly due to "the amount of trading profits in the first half of FY22 being lower than those in the first half of FY21, as well as higher maintenance capital expenditure and incentives".

Even still, the distribution payout ratio remains in line with free cash flow in accordance with Dexus's
distribution policy, the release notes.

Finally, Dexus integrated the funds of APN Property Group onto its platform, acquiring both Dexus Convenience Retail REIT (ASX: DXC) and Dexus Industria REIT (ASX: DXI) in the process.

Management commentary

Speaking on the announcement, Dexus Chief Executive Officer, Darren Steinberg said:

Despite impacts from the pandemic, it has been an active start to the year with growth in our funds management business, continued leasing activity, as well as new acquisitions and selective asset sales. This momentum demonstrates our continued focus on leveraging our platform capabilities to drive performance across our portfolio and in our third party funds.

Our strategy is to deliver superior risk-adjusted returns from high-quality real estate and seek opportunities that can deliver sustainable income streams while growing and diversifying our funds management business

What's next for Dexus?

The release noted that Dexus maintains its guidance of "delivering distribution per security growth of not less than 2% for the 12 months ended 30 June 2022".

It bases these forecasts on current COVID-19 expectations and "barring unforeseen circumstances".

Also, two of its latest sales are expected to settle this year. The sale of 383 Kent Street, Sydney for net proceeds of $385 million is expected to occur in July 2022, whereas 140 and 150 George Street should settle in August with net proceeds of $155 million.

Dexus share price snapshot

In the last 12 months, the Dexus share price has climbed a little over 17%, although it has slipped 8% into the red so far this year.

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. 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.

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