AOF trims Earnings Guidance but maintains Distributions

30 March 2020

Australian Unity Office Fund has trimmed its earnings but retains distributions after making provisions for COVID19.


Recently appointed Fund Manager, James Freeman said, "In light of the escalating impacts of the COVID-19 pandemic, we conducted a thorough review of AOF's portfolio. Given some uncertainty, particularly with our smaller tenants, we felt it prudent to make some provisions against our FY20 income profile and as such we have revised our guidance to reflect the rapid economic slowdown that is occurring."


"AOF is primarily an income focused REIT and has no 'active' earnings relating to funds management or development fees. AOF's portfolio remains well positioned with approximately 65% of income underpinned by State and Commonwealth Government departments, Telstra, Boeing Defence Australia and GE Capital Finance, with no major lease expiries until June 2022. We will continue to engage with all of our tenants and other stakeholders to work through this challenging period."


The AOF Board has made provisions against the forecast FY20 rental income, resulting in the FY20 FFO guidance for AOF being revised down from the previously advised 17.3–17.7 cpu to 16.0–17.0 cpu. Full year FY20 distribution guidance is reaffirmed at 16.0 cpu , noting that AOF's payout ratio is expected to remain within the 80–100% target range set by the Board.


The Board notes that the circumstances are changing daily and indicated they would update the market should circumstances materially change.


The Board also noted that AOF remains in a strong capital position. As at 31 December 2019, gearing was 29.9% and the interest coverage ratio was 4.4x, providing significant headroom to its debt covenants. Following the refinancing and extension of its debt facility announced on 19 March 2020, AOF has approximately $40 million of combined cash and undrawn debt facilities with a weighted average debt term of 3.7 years and no debt expiring until October 2022.


The estimated distribution for the period from 1 January 2020 to 31 March 2020 of 4.0 cents per unit which was previously announced is expected to be paid on 16 April 2020.