DEXUS
DGAP-Ad-hoc: Dexus Finance Pty Limited / Key word(s): Half Year Results
Dexus Finance Pty Limited: HY21 Results announcement
09-Feb-2021 / 00:04 CET/CEST
Disclosure of an inside information acc. to Article 17 MAR of the Regulation (EU) No 596/2014, transmitted by DGAP - a
service of EQS Group AG.
The issuer is solely responsible for the content of this announcement.
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Dexus (ASX: DXS)
ASX release
9 February 2021
2021 Half year results - Focus on growth in capital efficient funds management business
Dexus today announced its results for the half year ended 31 December 2020, confirming a distribution of 28.8 cents per
security.
Highlights
. Stable, independent asset valuations supported by the continued investment demand for quality assets enabled a Net
profit after tax of USD442.9 million. Although a strong result, this was down 55.5% primarily due to net revaluation
gains being lower than those recognised in the previous corresponding period
. Adjusted Funds from Operations (AFFO) and Distribution of 28.8 cents per security, up 7.1% and 6.7% respectively on
the previous corresponding period, primarily driven by trading profits
. Rent collections were at 96.0% for the Dexus portfolio in the six months to 31 December 2020
. Gearing (look-through)^[1] remains conservative at 24.9%
. USD1.7 billion of cash and undrawn debt facilities
. Continued leadership in environmental, social and governance performance through Dexus retaining its number 1
position for the global real estate industry on the Dow Jones Sustainability Index, and maintaining a leading
position in GRESB and on the CDP Climate A list
. All funds performing with Dexus Wholesale Property Fund (DWPF) continuing to outperform its benchmark across all
time periods and Healthcare Wholesale Property Fund (HWPF) achieving an exceptional one-year return of 15.3%
. Launched the marketing of unlisted opportunity fund, Dexus Real Estate Partnership 1 (DREP1)
. Raised circa USD287 million of equity for existing unlisted funds
. High occupancy^[2] of 96.0% for the Dexus office portfolio and 95.5% for the Dexus industrial portfolio
. Achieved 140 basis points of outperformance in the Dexus office portfolio relative to the relevant MSCI/PCA
benchmark^[3] over the year to 30 September 2020, driven by the quality of the portfolio
. Completed USD248 million of developments
. Progressed planning for city-shaping projects in the group's USD11.4 billion development pipeline
. Realised USD47.1 million of trading profits (post tax) in HY21 while contracting future trading profits
The COVID-19 pandemic continues to cloud the outlook for the operating environment as a number of clusters emerged
across Australia over the holiday period. Globally however, Australia has performed very well in suppressing the
transmission of the virus through various restrictions, supporting the return to a sense of normality across the
general population. The imminent roll out of the vaccine, as well as the impact of both fiscal stimulus and
historically low interest rates, are supporting economic activity, with both business and consumer confidence returning
to pre-COVID levels.
Dexus Chief Executive Officer, Darren Steinberg said: "Despite the widespread impact of the pandemic, the first half of
FY21 has been characterised by increased leasing activity, relatively strong rent collections, initiatives to grow our
funds management business and the selective recycling of assets. Our high quality portfolio, the strength of investment
demand for quality assets, and our platform capabilities will enable us to drive performance in this next stage of the
real estate cycle."
Strategy
Darren Steinberg said: "We have been active in growing our business while maintaining a strong balance sheet. Since
2012 we have successfully grown our total funds under management to USD32.1 billion, through transactions, developments
and favourable asset valuations, while at the same time recycling USD11.6 billion through asset sales.
"The pandemic has reinforced the importance of having a diversified business model and strategy that can deliver
through the cycle, demonstrated by our strong cash flow and resilient asset values. Our agile and high performing
workforce will take advantage of the changed market conditions by focusing on strategic initiatives that will help us
unlock the relative value of our business and strengthen the platform for the future.
"These strategic initiatives include increasing the resilience of portfolio income streams, expanding and diversifying
the funds management business and progressing the group development pipeline.
"In the year ahead, this will see us continue to implement active leasing strategies to maximise office portfolio cash
flow generation, increase weightings toward sectors with strong tailwinds and expand our flexible workspace offering.
We will also look to make changes to simplify the corporate structure of the group^[4]."
Financial result
Dexus's net profit after tax was USD442.9 million, a decrease of USD551.3 million or 55.5% from the previous corresponding
period. The reduction in net profit was primarily driven by net revaluation gains of investment properties of USD160.8
million, which were USD563.6 million lower than the previous corresponding period.
At 31 December 2020, 111 of Dexus's 122 office and industrial properties were independently valued by external valuers.
Most of the valuation uplift was seen across the industrial portfolio which increased by 4.8%, with the office
portfolio remaining in line with prior book values as a result of softer valuer assumptions, offset by successful
leasing at some assets.
Valuation gains across the total property portfolio for the period to 31 December 2020 contributed to the 10 cent or
0.9% increase in net tangible asset (NTA) per security to USD10.96 at 31 December 2020.
The total property portfolio weighted average capitalisation rate tightened 4 basis points over the period to 5.01%.
The weighted average capitalisation rate of the Dexus office portfolio tightened 2 basis points from 4.97% at 30 June
2020 to 4.95% at 31 December 2020, and for the Dexus industrial portfolio tightened
30 basis points from 5.66% at 30 June 2020 to 5.36% at 31 December 2020.
Underlying Funds from Operations (FFO) per security of 30.1 cents, which excludes trading profits, reduced by 5.6% as a
result of the impact of rent relief provided, divestments including the second tranche of the Dexus Australian
Logistics Trust (DALT) portfolio, and a reduction in the contribution from management operations.
AFFO and distribution per security of 28.8 cents was up 7.1% and 6.7% respectively on the previous corresponding period
primarily due to the amount and timing of the receipt of trading profits in the first half of FY21. The distribution
payout ratio remains in line with free cash flow in accordance with Dexus's distribution policy. The distribution will
be paid to Dexus Security holders on Friday, 26 February 2021.
Rent collections were at 96.0% for the Dexus portfolio in the six months to 31 December 2020.
As part of Dexus's active approach to capital management and in response to security price volatility, Dexus continued
its on-market securities buy-back program to acquire up to 5% of Dexus securities on issue. In the six months to 31
December 2020, 2,147,026 Dexus securities were acquired on market as part of this buy-back. To date, in FY21, Dexus has
bought back circa 5 million Dexus securities at pricing ranging from USD8.65-USD9.04, resulting in 1,086,065,010 securities
on issue as at 9 February 2021.
Dexus continued to maintain a strong and conservative balance sheet with gearing (look-through)^1 at 24.9%, well below
the target range of 30-40%, and USD1.7 billion of cash and undrawn debt facilities.
Chief Financial Officer, Alison Harrop said: "The extension of the National Commercial Code of Conduct^[5] in some
States and the continued economic impacts of the pandemic are expected to have a moderate impact on property portfolio
income over the coming months, however this has already been assumed in our full year FY21 guidance for distribution
per security.
"We continued to selectively recycle assets, receiving the proceeds from the sale of 45 Clarence Street, Sydney in late
December 2020. We also utilised the on-market securities buy-back and will buy back securities when we see the
opportunity to enhance returns for Security holders."
Dexus has manageable debt expiries over the next 12 months and remains within all of its debt covenant limits,
retaining its credit ratings of A-/A3 from S&P and Moody's respectively.
Funds Management
Dexus manages USD15.6 billion of funds across its diversified funds management business, which includes eight vehicles.
All funds and partnerships have performed well despite the market conditions with DWPF continuing to outperform its
benchmark over one, three, five, seven and ten years. HWPF continued to deliver strong performance, achieving an
exceptional one-year return of 15.3%.
Executive General Manager, Funds Management, Deborah Coakley said: "We are making progress on growing our relationships
with existing and new third party capital partners, progressing discussions with a number of investors for our new
unlisted opportunity fund."
During the period, Dexus made an initial approach on behalf of DWPF to the Responsible Entity of the AMP Capital
Diversified Property Fund (ADPF), in response to ADPF investor encouragement, to consider a merger of ADPF with DWPF.
Discussions continue to progress with the advisers of the Responsible Entity of ADPF, on a proposal for consideration
by both sets of investors.
DWPF also sold 452 Flinders Street, a 22-level A-grade tower in the Melbourne CBD, for USD454 million^[6] representing an (MORE TO FOLLOW) Dow Jones Newswires
February 08, 2021 18:06 ET (23:06 GMT)
