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Abacus in Transition to Annuity Model


Abacus announced its results for the half-year ended 31 December 2018 this week with underlying profit down 7% and funds from operations down 18% as the group shifts its focus away from residential developments toward annuity style office and self storage assets.

Financial results

  • Group statutory profit of $127.8 million in HY19, up 9% from $117.5 million in HY18

  • Abacus underlying profit of $72.0 million, down 7% from $77.3 million in HY18

  • Distribution per security (DPS) of 9.25 cents, up 2.8% on HY18

  • Distribution payout ratio 82% of FFO (65.5% at HY18)

  • Abacus Funds from operations (FFO) of $65.3 million, down 18% from $79.3 million in HY18

  • FFO per security of 11.3 cents, down 18%

  • Net tangible assets (NTA) per stapled security of $3.29, up 3.5% on FY18

  • Gearing at 22.8%, down 50 basis points on FY18

Abacus' Managing Director, Steven Sewell, commented "Our focused and evolving strategy together with our people and active strategic investment approach has underpinned the result for the half year ended 31 December 2018."

Commercial portfolio

  • $33.8 million FFO contribution, from Commercial portfolio valued at $1.365 billion

  • Like for like rental growth in Office up 9.2%, driven by eastern seaboard CBD

  • Acquisitions completed within the Commercial portfolio during the half including:

  • 50% interest in "Kingsgate", a quality fringe office asset in Brisbane OLD, in partnership with Heitman LLC

  • 50% interest in fringe office development site in Church Street, Richmond VIC, in partnership with Salta Properties.

Self Storage portfolio

  • $23.6 million FFO contribution, with Self Storage portfolio valued at $835 million

  • 16.1 % compound annual growth in Self Storage AUM, since HY14

  • Strong passing yield of 7.0% on established portfolio

  • Multi-pronged growth strategy in Self Storage with $153 million of acquisitions, developments and

  • operating platform initiatives including acquisition of a minority 25% stake in Storage King, driving self storage profitability and synergistic benefits.

The Group remains increasingly cautious as macro factors continue to negatively impact on market conditions, particularly in the Residential and discretionary Retail asset sectors. Accordingly, Abacus continue to review the short to medium term strategy, project by project in the residential developments business while seeking to repatriate capital from several long-held investments in the residential land and mortgages business.

Where appropriate (e.g. in the case of the first stage of Riverlands in Milperra, and the large Camellia site in Paramatta) Abacus will continue value enhancement activity such as, Gazettal, planning approvals, sub-division etc, and aim for optimal market conditions in which to realise our equity.

Abacus are actively exploring improvements and during HY19 have commenced a solar panel program across many of their Self Storage sites - an initiative forecast to both reduce its environmental footprint and concurrently enhance forecast returns.

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