Transcription of Finance News Network Interview with GPT Group Limited (ASX:GPT) CEO and Managing Director, Michael CameronJohn Treadgold: Hello I’m John Treadgold and joining me today from GPT Group Limited
(ASX:GPT) is CEO and Managing Director, Michael Cameron. Michael welcome to FNN.
Michael Cameron: John, great to be here.
John Treadgold: GPT Group is one of Australia’s largest diversified listed property groups; you’ve just released your interim results for the first six months of this year. What were some of the highlights?
Michael Cameron: Well firstly we were really pleased to deliver an EPS (earnings per share) growth number of 4.5 per cent, which seemed to exceed market expectations. And that was driven by a few things, but probably the standout was the growth in our funds management business, which grew 18 per cent over the six months.
John Treadgold: The Group’s net profit for the first six months of 2014 was $240.6 million; it was slightly down on last year’s result. What was behind the change?
Michael Cameron: It’s interesting; we are required to include in our net profit any market to market improvements in derivatives and foreign currency movements. There was about a $36 million change between last year and this year, and that’s the real driver to the reported number. As far as the rest of the business, it performed very strongly and we saw an increase in EPS period on period.
John Treadgold: Earnings per share growth of 4.5 per cent shows strong returns for investors. Was this in line with Group strategy and forward guidance?
Michael Cameron: Yes we’ve been talking about a number for the full year of around three per cent. And today we’ve said that we would deliver a number of at least three percent for the full year. So the 4.5 per cent is a relatively strong number against the expectations.
John Treadgold: The Group has two fund management platforms, the Wholesale Office Fund and the Wholesale Shopping Centre Fund. What sort of returns have they offered this year?
Michael Cameron: Yes we’ve been getting between 9.5 and 10 per cent total return for GPT. And that’s a combination of distributions and also the fees that we get from that business. But we’ve seen great growth across the business; we’ve grown by about $1.1 billion from the start of the year, and that’s been well above what’s happened in the rest of the market. That’s 18 per cent and I think the rest of the market has grown around six per cent.
John Treadgold: GPT prides itself on the strength of its balance sheet. What’s the debt position?
Michael Cameron: Our gearing at the moment is just under 25 per cent and that’s at the bottom end of our range. So it gives us significant capacity, both on our balance sheet and within our funds to look at opportunities, either to acquire more of our own shares or any acquisitions that might come up from time to time.
John Treadgold: The Company is spread across retail, office and business parks. Which performed best for the Group in the first half of the year?
Michael Cameron: Well one of the things, one of the benefits about being diversified, is those three sectors have very different characteristics. The retail performed probably the strongest, but we also saw good performances in the office and logistics portfolio.
John Treadgold: The market is sending mixed messages about the strength of the retail sector. How is your retail portfolio performing?
Michael Cameron: The retail portfolio has been quite strong. 11 of the last 12 months have seen positive improvement in sales and out of 3,300 shops, we’ve only got 35 vacancies. So all of the leading metrics around sales traffic have all shown positive signs of improvement, which is really pleasing. That’s off the back of a few things, firstly stable interest rates, job security and improving house prices.
John Treadgold: Office leasing is a role that GPT is well recognised for. Have there been improvements in that sector for the Group?
Michael Cameron: The office leasing market continues to be pretty tough. Although what we’ve seen in the last six months, is over 100,000 square metres of leasing done and that’s sensational. We’ve dramatically reduced our exposure to expiries when I look back five years, compared to the next five years. So we’re in a good position.
John Treadgold: Many of our viewers may have noticed the activity at the MLC Centre in Martin Place, in Sydney. What can we expect there?
Michael Cameron: Yes what you see at the moment is a refurb of the exterior of the building, that’s costing about $63 million and will take a couple of years. But what you don’t see yet, which is emerging is a complete repositioning of the retail downstairs, the food court and the office upstairs. So it’s going to be a fantastic building and will crystalize enormous value from that asset, as we go forward.
John Treadgold: What is the outlook for the Group performance over the full year?
Michael Cameron: Yes we’re confident of delivering EPS growth of at least three per cent, and we’re right on track to deliver our total return of nine per cent for the full year.
John Treadgold: Michael Cameron, thank you for giving us a closer insight into GPT Group’s first half result. We hope to see you again soon.
Michael Cameron: Thanks John, a pleasure.
