Growthpoint (ASX:GOZ) talks FY16 results and outlook


by Carolyn Herbert

Transcription of Finance News Network with Growthpoint Properties Australia Limited (ASX:GOZ) Managing Director, Tim Collyer

Carolyn Herbert: Hello I’m Carolyn Herbert from the Finance News Network and joining me from Growthpoint Properties Australia Limited (ASX:GOZ), to discuss the companies FY16 results is Managing Director, Tim Collyer. Tim, welcome back.

Tim Collyer: Great to be back Carolyn.

Carolyn Herbert: Starting with your full year results for FY2016, what were the highlights?

Tim Collyer: I think the highlights were very good financial performance. We returned 7.4 per cent this year, total security holder return. But over the last five years, we’ve returned 19.6 per cent per annum compound. Our earnings were very strong, we exceeded our guidance at the start of the year of 21.3 cents, per security. So a distributable income of 21.9 and of course, we met our guidance for distribution to investors of 20.5 cents per security.

Carolyn Herbert: Now to your property portfolio in more detail, how did it perform?

Tim Collyer: It performed very well. The key highlights during the year were an excellent leasing result. We leased 39,000 square metres of industrial and office space and subsequent to balance date, we’ve leased a further amount. So a very good leasing performance. We extended our weighted average lease expiry. So currently we have a lease expiry profile of about 6.9 years, and at the start of the year it was 6.7. So we have extended that. Of course with acquisitions and new tenants, we have some great new tenants as well.

Carolyn Herbert: What about acquisitions and disposals?

Tim Collyer: Yes we acquired five properties valued at $328 million. So we have been concentrating on more office properties relative to our industrial. So we purchased three industrial properties in Melbourne and Canberra as well. So a property in South Melbourne, $166 million an office building leased to the Government for 11 years in Canberra, and a development, an office development in Mulgrave Victoria. We also purchased about $40 million of industrial property as well.

Carolyn Herbert: What about the company’s gearing and average term of its debt. How has this changed from the previous corresponding period?

Tim Collyer: The gearing is slightly up, it’s within our range of 35 to 45 per cent, at about 42.6 per cent. It may go up a tad after the GMF (GPT Metro Office Fund) takeover and we’ll look to reduce that over a period of time. During the year, we continued with a successful debt issuance of about $250 million for a seven-year term. And that follows a $200 million debt issuance of a 10-year term in 2015. So now we have fairly long term debt averaging about 4.2 years.

Carolyn Herbert: Now to your takeover offer of GMF. Can you give us a brief recap of the terms of the offer and where are you at with it?

Tim Collyer: It has been in the news and people have been following it quite closely. So we made a takeover offer to the GMF unitholders on the 1st of July 2016. And effectively our offer was $2.50 and roughly half cash and half scrip. So people could take up Growthpoint shares and become Growthpoint security holders. There is also a cash alternative that people could take $2.50 cash. So we had the independent Board recommend the bid, to accept our bid and on the 1st of July also, we took a 13 per cent stake in GMF.

Carolyn Herbert: So assuming it does go through, what does it mean for Growthpoint?

Tim Collyer: It’s a really good portfolio. There are six A-grade offices predominantly Sydney based, they’re very modern, they’re well leased. And of course, we’ll add some great tenants to our portfolio, such as Samsung Electronics Co Limited (KRX:005930), Lion Nathan Limited (ASX:LNN), Optus Systems Pty Limited and so forth. So very good quality properties, obviously issuing shares to GMF security holders. There’ll be a greater liquidity and a free flow in Growthpoint, so hopefully more trading, which is good for price. We’ll have a more robust portfolio of about $3.2 billion and more diversified geographically and by tenant. And of course, our operating cost base is much lower than that of GMF.

Carolyn Herbert: Finally Tim, FY16 has been another solid year for the company. So what’s your outlook for FY17, and where would you like to see the company 12 months from now?

Tim Collyer: Certainly a positive outlook for Growthpoint. We have a very strong portfolio and we believe the environment in which we operate will assist, and make Growthpoint a strong investment for potential investors. Considering the inflation outlook, bonds will remain low, property interest rates will remain low as well, so a very attractive investment option.

As far as the company itself, we look to bed down the GMF acquisition. Obviously welcome new security holders to Growthpoint, the previous GMF security holders. And we’ll look to acquire more property and possibly divest a few properties as well. So we have guidance out there of 22.2 cents for earnings and 21.3 cents for distribution. So a strong growth of about 3.9 per cent, so we think that’ll be an attractive option for people who want to buy some good property investments.

Carolyn Herbert: Tim Collyer, thanks for the update on Growthpoint Properties Australia.

Tim Collyer: Thanks very much.


Carolyn Herbert

Finance News Network
Carolyn joined FNN in August 2015 as the Head of News and also presented the Market at Midday and the Market Wrap. With more than five years of broadcast journalism experience, Carolyn has worked as a finance anchor on the Sky News Business channel and as an anchor and reporter for ABC News. She is also a qualified corporate lawyer specialising in IPOs, takeovers and mergers and acquisitions.