- Revenue: Not explicitly mentioned.
- AFFO: $516 million.
- Divestments: $1.7 billion of Dexus divestments, with circa $700 million exchanged since FY23 results.
- FFO from Management Operations: $143 million.
- Performance Fees: $28 million.
- Net Finance Costs: Reduced due to lower average debt balance.
- Distributions: $0.48 per security, in line with guidance.
- Portfolio Valuation Decline: $1.9 billion or 12.9% on prior book values.
- Office Portfolio Valuation Decline: 15.6%.
- Industrial Portfolio Valuation Decline: 3.3%.
- Look-Through Gearing: 32%, towards the lower end of the 30% to 40% target range.
- Net Tangible Assets (NTA): $8.97.
- Debt Extensions: $1 billion arranged during the year.
- Weighted Average Debt Maturity: 4.8 years.
- Debt Headroom: $2.5 billion.
- Debt Hedging: 92% of debt hedged during FY24.
- Committed Development Pipeline Spend: $1.8 billion remaining, with $625 million to be spent in the coming year.
- Office Portfolio Occupancy: 94.8%.
- Office Incentives: 27.9%.
- Industrial Portfolio Effective Like-for-Like Growth: 3.9%.
- Industrial Portfolio Incentives: 16.5%.
- Industrial Portfolio Under-Rented: 15.4%.
- Funds Management Business: $40 billion diversified across sectors and investor types.
- Distribution Policy (from FY25): 80% to 100% of AFFO.
- FY25 AFFO Guidance: $0.445 to $0.455 per security.
- FY25 Distribution Guidance: $0.37 per security.
Release Date: August 19, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Dexus (DEXSF, Financial) maintained high occupancy rates across both office and industrial portfolios, ensuring strong cash flows with AFFO of $516 million.
- The company successfully raised over $300 million for the second fund in its opportunistic series, indicating strong investor interest.
- Dexus (DEXSF) continued its capital recycling strategy, with $1.7 billion of divestments, contributing to a strong balance sheet.
- The company has a diversified $40 billion funds management business, which outperformed benchmarks and facilitated redemption requests.
- Dexus (DEXSF) is globally recognized for its leadership in sustainability, with initiatives like the circular economy principles in the Waterfront Brisbane development.
Negative Points
- Higher interest rates and transactional evidence led to a total portfolio decline of $1.9 billion or 12.9% on prior book values.
- Office portfolio valuations reduced by 15.6%, and industrial portfolio valuations reduced by 3.3%, impacting overall asset values.
- Group corporate costs increased due to the AMP Capital transaction and inflation, affecting overall profitability.
- The company faces a challenging capital raising market, particularly in the core space, impacting fund flows.
- Dexus (DEXSF) expects AFFO for FY25 to be lower, with a guidance range of $0.445 to $0.455 per security, reflecting ongoing market challenges.
Q & A Highlights
Q: Are you seeing any subsector inflows and outflows within the various funds management platforms? And can you give any indication of where new fund interest might be?
A: It has been a tough capital raising market globally, particularly in the core space. However, there is strong demand for higher-return strategies like DREP2, where we raised over $300 million in the first close. Core capital has been difficult, but secondary trades and repricing are showing signs of stabilization, which should see fund flows stabilize over the next 12 to 18 months. (Ross Du Vernet, CEO)
Q: Do you have a target level for co-investment in the funds?
A: The level of co-investment will depend on the strategy and client preferences. We aim to have meaningful skin in the game, typically between 10% and 50%, depending on the strategy. (Ross Du Vernet, CEO)
Q: Can you provide guidance on AFFO being down around 6% for FY25?
A: Higher net finance costs alone are a circa 6% headwind. Trading profits are expected to be lower, and the management business will be broadly flat. We expect modest growth in the property portfolio and lower tax. Divestments will also impact the range. (Keir Barnes, CFO)
Q: Will the management business be flat due to cost savings and one-offs?
A: Yes, headwinds from valuations, transactions, and inflation are offset by cost management post-integration and operating model refresh. Performance fees are expected to be higher in FY25. (Keir Barnes, CFO)
Q: Do you need to accelerate office sales to get sector exposure below 50%?
A: We won't accelerate sales that destroy shareholder value. We have a high-quality portfolio and development pipeline. Transaction markets are stabilizing, and we expect better liquidity as the market normalizes. (Ross Du Vernet, CEO)
Q: Can you give some color on redemptions across your platform?
A: Redemptions continue to be a feature, particularly for core managers. We sold $1.3 billion for redemptions in FY24, with outstanding redemptions at about $2.5 billion. New demand is coming from high-returning value-add strategies like DREP2. (Ross Du Vernet, CEO)
Q: What is the expected increase in the weighted average cost of debt for FY25?
A: The weighted average cost of debt for FY24 was 4.1%, and we expect it to move to mid-fours in FY25, contributing to the 6% headwind. (Keir Barnes, CFO)
Q: Is there potential to become more capital light on the committed development spend?
A: The majority of the development spend relates to office projects held in joint ventures. We may reduce spend on projects like Atlassian as they near completion and transaction markets stabilize. (Ross Du Vernet, CEO)
Q: How do you see the trajectory of incentives and CapEx for the next 12 months?
A: We expect stay-in-business CapEx to be broadly flat, with some reduction in maintenance CapEx due to higher incentives already committed from prior leasing. (Andy Collins, Executive General Manager - Office)
Q: Can you give a rough breakdown of the $2 billion in planned divestments over the next three years?
A: The majority will be office assets, contributing to our goal of reducing sector exposure below 50%. Some assets will leave the platform, while others may be sold to clients depending on the asset and pricing considerations. (Ross Du Vernet, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
