Image: Canva, The Property Tribune.
  • Delivered strong top line growth
  • FFO was up 2% to $15.6M
  • NTA per security was $3.94

Dexus Convenience Retail REIT (ASX: DXC) has announced its HY23 results, with the company confirming a distribution of 10.6 cents per security.

Jason Weate, DXC Fund Manager said: “Our portfolio continues to deliver solid top line growth, which provides income certainty backed by high-quality tenant covenants. While the macroeconomic environment remains uncertain, and higher net finance costs will continue to impact our results into the second half, we have narrowed our FY23 guidance range due to increased visibility into floating rates and remain well positioned for the long term.”

Among the company’s highlights, DXC increased its funds from operations (FFO) by $0.3 million to two per cent to $15.6 million. The company said this was driven by property portfolio like-for-like net operating income growth of 2.4 per cent and full period contributions from acquisitions, partly offset by the impact of higher net finance costs and reduced income from divestments.

FFO per security was, however, down 0.8 per cent to 11.3 cents, the company said this reflected the increase in securities on issue following the equity raising undertaken in HY22.

DXC also divested six assets totalling $25.4 million, reflecting an average discount to last stated book value of 1.3 per cent, including $10.1 million of assets expected to settle post 31 December 2022.

The company also noted it has a solid capital position with gearing of 34.1 per cent, within its 25 per cent to 40 per cent target range, as well as 63 per cent of debt hedged across HY23 with a weighted average hedge maturity of 3.7 years.

Weate said: “Today’s results demonstrate the capability of our portfolio to provide investors with a defensive portfolio income stream, further supported by our disciplined approach to capital allocation.

“We divested six assets at an overall discount to book value of 1.3 per cent amidst complex market conditions with transaction volumes approximately 50 per cent lower than the prior year due to cautious buyer sentiment in response to increases in cost of capital. $10.1 million of proceeds from these sales are expected to be received in the coming months, which will further enhance balance sheet strength through reducing gearing and increasing hedging levels.

“The announced divestments have enhanced portfolio quality by reducing our exposure to older tank technology and regionally located assets, while also retaining a diverse tenant base and increasing our exposure to non-fuel tenants” he said.

Statutory net profit after tax was reported at $3.1 million for the half, down $36.9 million or 92.2 per cent, primarily driven by $14.9 million of valuation declines on investment properties, compared to valuation gains of $18.5 million in HY22.

The company had 25 investment properties independently valued in the six months to 31 December 2022, with the remainder subject to internal valuations. DXC said the external and internal valuations resulted in a net devaluation of $14.9 million, representing a 1.8 per cent decrease on prior book values. Net tangible assets decreased nine cents or 2.1 per cent to $3.94 as at 31 December 2022.

DXC’s portfolio includes 109 assets valued at $822 million as at 31 December 2022, weighted 84 per cent to metropolitan and highway assets, with regional properties comprising the remainder.

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