GPT share price lifts despite 30% profit plunge

Here's how GPT Group is shaking off a poor headline figure to move higher today…

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Key points

  • The GPT Group share price is up 5.35% to $4.53 on Monday
  • Net profit after tax fell 30% to $529.7 million for the six-months ending 30 June 2022
  • Rising interest rates are expected to impact the group

The GPT Group (ASX: GPT) share price is making a commendable move upwards today following the release of its interim results for 2022.

At the time of writing, shares in the diversified property group are 5.7% in the green. As a result, the group's share price is swapping hands at $4.545 apiece. Meanwhile, the S&P/ASX 200 Index (ASX: XJO) is 0.48% into positive territory on Monday.

GPT share price jumps on mixed numbers

  • Funds from operations (FFO) improved 8% to $326.5 million compared to the prior corresponding period
  • Net tangible assets (NTA) per security up 2.8% to $6.26
  • Net profit after tax (NPAT) down 30% to $529.7 million
  • Interim distribution down 4.5% to 12.7 cents per share
  • Portfolio occupancy finished at 97.5%
  • Available cash of $1,124 million at the end of the half

What else happened in the half?

Pleasingly for GPT shareholders, the six-month period involved another round of portfolio revaluation increases. In total, the group saw its assets increase in value by $219.5 million, taking the total valuation to $16.4 billion as at 30 June 2022.

GPT's logistics portfolio was the greatest contributor to a heightened valuation during the half. Specifically, this segment increased 2.6% to $115.4 million as a result of leasing outcomes and higher rents. This segment's solid performance might explain the positive GPT share price movement today.

Comparatively, the group's office and retail portfolios experienced a $6.8 million (0.1%) and a $97.3 million (1.8%) increase respectively.

While GPT managed to achieve a 99.3% occupancy across its retail portfolio, the office market continues to struggle. For example, at 30 June the group recorded an occupancy rate of 92% across its portfolio. With more available leasing inventory, the office market was said to remain competitive.

What did management say?

Commenting on the result, GPT Group CEO Bob Johnston said:

The Group delivered a solid result in the half, despite the ongoing impacts of the global COVID-19 pandemic and the uncertain economic environment driven by high inflation and rising interest rates. All three business segments reported increased Funds From Operations on the prior corresponding period.

Further adding,

Ongoing structural tailwinds in the logistics sector saw continued momentum in tenant demand, driving vacancy rates lower and resulting in strong market rental growth. Our Logistics portfolio maintained high occupancy and we continue to make good progress with the build-out of our development pipeline and our partnership with QuadReal.

What's next?

Looking to the future, management addressed the elephant in the room for the group's FY22 guidance, interest rates.

The group highlighted the increased cost of debt and potential softening in valuation increases. Additionally, management stated it expects moderation in retail sales growth coinciding with higher rates in response to inflation.

Despite this, GPT Group is anticipating 32.4 cents per security in FFO for the full year.

GPT Group share price snapshot

The backdrop of a booming property market has failed to provide much assistance to the GPT Group share price so far in 2022. While the benchmark index is in the red by 7%, GPT shares are down by roughly 16.5%.

Based on the current valuation, the property group has a dividend yield of 5.4%.

Motley Fool contributor Mitchell Lawler 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 Scott Phillips.

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