Growthpoint share price lags ASX 200 despite 'strong performance' in FY22

The ASX-listed REIT announced its full-year earnings today. Here are the details.

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Key points

  • Growthpoint has revealed its full-year results, with revenue up but net profit down
  • The REIT recorded distribution of 20.8 cents per share for the year
  • The risk of further interest rate hikes along with higher inflation is clouding its outlook

The Growthpoint Properties Australia Ltd (ASX: GOZ) share price has been stuck in the mud today after the company released its FY22 results.

The ASX-listed real estate investment trust (REIT) is currently down 0.53% to $3.72. In comparison, the S&P/ASX 200 Index (ASX: XJO) is enjoying a day in the green, up 0.5%.

Let's review Growthpoint's FY22 results.

What did the company report?

These were the highlights of Growthpoint's full-year results for FY22:

  • Revenue lifted by 5.9% to $311.5 million relative to FY21
  • Net profit attributable to security holders fell 17% from $553.2 million to $459.2 million
  • Distribution of 20.8 cents per share for the year, 4% higher than FY21
  • Net tangible assets (NTA) per security went up by 9.4%
  • The portfolio occupancy rate remained consistent at 97%

The increase in white-collar workers returning to the office meant rental income and other revenue from the office segment rose substantially.

Office revenue increased from $183.4 million in FY21 to $193.9 million in FY22.

Industrial revenue improved marginally with a $0.9 million uptick in FY22.

There was a strong property valuation uplift of 7.9% within the portfolio, which is currently valued at $5.4 billion.

The weighted average lease expiry (WALE) increased slightly from 6.2 years to 6.3 years.

Growthpoint secured more capital through refinancing $715 million of its debt facilities and entering into $350 million of new facilities to assist with strategic acquisitions this financial year.

What else happened?

In February 2022, Growthpoint extended its on-market buyback program for up to 2.5% of issued capital.

Growthpoint only acquired 499,458 securities (0.06% of issued capital) as the company's share price recovered for the majority of the financial year.

In early August, Growthpoint announced it had acquired Fortius Funds Management Pty Ltd, which is expected to be completed in the first quarter of FY23.

What did management say?

Commenting on the FY22 results, Growthpoint managing director Tim Collyer said:

We have a had a strong performance this year, delivering a robust set of results which reflects the successful execution of the Group's growth strategy and underlying strength of the business.

The Group's portfolio continues to be leased to predominantly government, listed or large organisations and has maintained its high occupancy of 97% and WALE of 6.3 years as at 30 June 2022.

Growthpoint successfully leased approximately 234,000 square metres of accommodation, with key leases signed or renewed with Samsung, Fox Sports, Scope and Bunnings in the office portfolio and Woolworths, Linfox and Eagers Automotive in the industrial portfolio.

Regarding the outlook for the company, Collyer said:

Going into FY23, Growthpoint is positioned to manage the business through a period of higher inflation and higher interest costs, with 61% of its debt fixed at 30 June 2022 and ample headroom to debt covenants.

The Group's gearing of 31.6% at 30 June 2022 remains below the target range of 35% to 45%, providing flexibility to invest in property or funds where we see value for security holders.

We intend to grow the recently announced funds management business, targeting 10% to 20% of Group EBIT, over the medium term delivering incremental growth to earnings and income stream diversification for security holders. Growthpoint remains committed to providing securityholders with sustainable income returns and capital appreciation over the long term.

What's next for Growthpoint?

Management noted the changing environment has made it a challenging period for the Australian REIT sector.

There are concerns over the potential impact of further central bank rate rises, increasing interest costs, and higher inflation.

The company believes its industrial and metropolitan office properties will provide a resilient foundation for the group.

Growthpoint provided guidance for funds from operations of between 25 cents per share and 26 cents per share compared to 27.7 cents per share in FY22.

As for FY23 distribution, Growthpoint expects this to be 21.4 cents per share. This is premised on an average FY23 floating cash rate of 2.8%.

Growthpoint share price snapshot

The Growthpoint share price has fallen almost 8% in the past six months and by a similar amount in the past year. However, it is up by 3% over the past month.

In comparison, the ASX 200 has slipped more than 6% in the last year but has improved in the past six months, posting a drop of 2.50%.

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. Motley Fool contributor Raymond Jang has no position in any of the stocks mentioned.

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