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Cromwell Operating Profit Up 7.6%


Cromwell Property Group reported half-year (HY19) statutory profit of $111.1 million, up 37.5% on the prior period (HY18 $80.8 million) and an operating profit of $82.6 million, up 7.6% on the prior period (HY18 $76.8 million)

Highlights

  • Statutory profit of $111.1 million, up 37.5% (HY18 $80.8 million);

  • Operating profit of $82.6 million, up 7.6% (HY18 $76.8 million);

  • Net Tangible Assets (NTA), up $0.06 to $0.99 (HY18 $0.93);

  • 2 for 13 non-renounceable rights offer raises $228 million;

  • Group gearing of 33.7% below bottom of target range;

  • Weighted Average Lease Expiry (WALE) of 7.2 years and debt tenor of 4.7 years; and

  • Total assets under management (AUM) of $11.5 billion.

Direct Property

The direct property investment segment reported segment profit of $62.7 million, a 1.6% increase on the prior year. The portfolio is valued at $2.5 billion and has three components:

  1. The Core portfolio comprises ten assets representing two thirds of the portfolio by value and has a WALE of 9.7 years. It has full occupancy (99%) and has generated Net Operating Income (NOI) growth of 4.2%, above Cromwell’s rolling target of 3.0%;

  2. The Core+ portfolio comprises seven assets or 29% of the portfolio, has 95% occupancy, a WALE of 3.6 years and has generated NOI growth of 8.3%; and

  3. The Active portfolio consists of three assets or 4.3% of the portfolio. The WALE is 2.4 years, and, as might be expected for active assets, has occupancy of 62% and showed a decline in NOI growth of 3.6% as buildings identified for redevelopment become vacant.

During the year, the weighted average cap rate tightened by 0.20% to 5.84% with a fair value increase in investment property of $44.4 million net of property improvements, lease costs and incentives.

The tenant customer profile remains weighted to the strongly performing New South Wales and Victorian markets which provided nearly 63% of gross passing income between them. The WALE was 7.2 years due to strong leasing outcomes with 45 transactions executed for 46,350 sqm split between 15,007 sqm of new deals and 31,343 sqm of renewals.

Indirect Property

The Indirect Property segment includes Cromwell’s 35.3% interest in CEREIT, a 50% ownership interest in Cromwell Partners Trust which owns Northpoint as well as other smaller co-investments in Europe and Australia.​ Operating profit for the segment was $19.4 million up from $7.9 million in the prior year. Cromwell’s equity accounted share of CEREIT’s operating profit for the year was $19.0 million (2017: $2.8 million).

Funds Management

Cromwells Fund Management segment profit was $18.6 million, down from the prior year amount of $25.4 million. Total AUM was unchanged at $8.7 billion.

Outlook

Cromwell maintained FY19 guidance. Operating profit is expected to be no less than 8.00 cps and distributions no less than 7.25 cps, representing an operating profit per security and distributions per security yield of 7.31% and 6.62% respectively based on a closing price of $1.095 per security on 27 February 2019.

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