The Dexus (ASX: DXS) share price is under pressure on Tuesday.
In early trade, the ASX 200 real estate stock is down 8.5% to $6.85.
This follows the release of its FY 2024 results this morning.
ASX 200 stock sinks on results
- Total investments funds from operations (FFO) down 4% to $765.2 million
- Underlying FFO up 0.7% to $693.1 million
- Adjusted FFO down 7% to $516.3 million
- Distributions down 7% to 48 cents per share
What happened during the year?
For the 12 months ended 30 June, Dexus reported a 4% decline in total investments FFO to $765.2 million. This reflects a 7.3% decline in Office property FFO and a 13.9% decline in Industrial property FFO, which was offset partly by a 95.8% increase in co-investments in pooled funds.
Management advised that its Office property FFO decreased primarily due to the impact of divestments. This was partly offset by fixed rent increases and development completion at 123 Albert Street.
It was a similar story for its Industrial property FFO, which decreased due to the impact of divestments, partly offset by higher one-off income, recently completed developments, and fixed rent increases.
On the bottom line, the ASX 200 stock posted a 7% decline in adjusted FFO to $516.3 million for the year. This meant the Dexus board elected to cut its distribution by 7% to 48 cents per share.
Management commentary
The ASX 200 stock's CEO and managing director, Ross Du Vernet, appeared to be pleased with the company's performance in a difficult market. He said:
In a challenging environment we have maintained high occupancy across both our office and industrial portfolios, ensuring strong cashflows with AFFO of $516 million.
$1.7 billion of balance sheet divestments enabled us to maintain a strong balance sheet with gearing toward the low end of our target band despite the impact of valuation declines.
Outlook
Du Vernet spoke cautiously about the company's prospects in FY 2025 but remains positive on the long term. He said:
Markets move in cycles and while conditions are presently challenging, we invest for the long term.
The assets we own, manage and develop, the capabilities we build, and the relationships we forge with clients and customers continue to position us well to deliver superior risk-adjusted returns for Dexus Security holders and our capital partners over the long term.
The CEO also revealed that its distribution policy has been updated to pay out 80% to 100% of adjusted FFO from FY 2025 onwards. This is expected to lead to a sharp decline in its distribution year on year. He said:
Barring unforeseen circumstances, for the 12 months ending 30 June 2025 Dexus expects AFFO of circa 44.5-45.5 cents per security and distributions of circa 37.0 cents per security.
A 37 cents per share distribution would be down 23% year on year. It seems that investors are very disappointed with this and have been heading to the exits in a hurry this morning.
