APN Earnings up 31% from diversified funds platform

20 February 2020

APN Property Group Limited reported a statutory net profit after tax for the six months ended 31 December 2019 of $17.4 million. Operating Earnings was $6.4 million (up 33%) or 2.03 cents per security (up 31%) and the Board has declared an interim distribution of 1.60 cents per security for the period ended 31 December 2019, to be paid on 13 March 2020 to those securityholders registered as at 26 February 2020.


APN’s Chief Executive Officer, Mr Tim Slattery, said “In the first half APN delivered a 33% increase in its operating profit as a result of strong growth in assets under management which now exceed $3 billion. Our growth has been achieved without changing our attitude to risk and through our team’s excellent underlying asset and investment management outcomes which have been delivered across our range of funds.


APN’s income-focused commercial property investments remain very well positioned in the current market environment to deliver strong risk adjusted returns for our customers and we are continuing to see very good investor demand from a number of different sources. In this regard, APN has had an excellent start to calendar 2020 with strong results and market trading performances delivered by our two ASX listed REITs and our real estate securities division.


APN beleives they remains exceptionally well positioned to continue to execute on their strategy of building value for our securityholders through improving the scale and profitability of our business by focusing on investment performance delivered with outstanding service.


Funds and Performance Continue to Deliver Strong Risk Adjusted Returns

APN has an established and diversified funds management platform, operating 12 funds with a total of $3.1 billion in managed funds, including over 100 properties in its direct funds. APN’s real estate securities funds have continued to deliver strong returns in line with our ‘property for income’ philosophy.


The APN AREIT Fund delivered a 15.5% return for calendar year 2019 and has delivered annualised returns since inception of 13.6%. The APN Asian REIT Fund delivered 23.8% over the year to December 2019 and 15.0% per annum since its inception in July 2011, and grew FUM by 30% to $58 million in the HY2020 period. During the period both of APN’s listed REITs were strongly supported by their investors to fund acquisitions to grow their income streams, raising a combined total of almost $100 million of new equity.


APN Industria REIT’s (ASX: ADI) FUM reached $848 million as at December 2019, including $57 million of acquisitions in the period. Leasing activity remained strong, with continued active management of the portfolio leading to 29 leasing transactions over ~7,000 sqm. With conservative gearing of 29%, it maintains the balance sheet capacity to take advantage of additional opportunities to deliver additional value through income growth for Industria’s securityholders.


APN Convenience Retail REIT (ASX: AQR) announced $79 million of acquisitions for the period, with FUM increasing to $399 million. The fund will deliver continued income growth to investors throughout the remainder of FY2020 and FY2021 as it reaches completion on its previously announced development pipeline of over $40 million.


In our unlisted direct property activities, APN successfully completed the APN Steller Development Fund, providing a successful outcome for investors with an equity IRR of 17.7% over the fund life.


As part of APN’s continued active approach to asset management, it completed a number of capital expenditure projects that assisted with leasing activity, including both attracting and retaining tenants.


Growth Opportunities and Outlook

In the period, our team was very active in the analysis and origination of new direct property opportunities, assessing almost $2 billion of opportunities while remaining disciplined in applying our acquisition criteria. We continue to assess new fund opportunities across the real estate securities and direct property teams.


Stapling Completed;

APN announced on 16 December 2019 that it had completed the stapling of shares in APD to units in the APD trust. As a result of its new stapled structure, APN investor distributions will now generally be a combination of a franked dividend from APD and distributions from the APD Trust (potentially including a tax deferred component).


APN will declare its final FY2020 distribution before 30 June 2020, with a record date of 30 June 2020. The Board has declared an interim distribution of 1.60 cps which will comprise a 1.13 cps fully franked dividend and a trust distribution of 0.47 cps.


Distribution Guidance Reaffirmed

The Board reaffirms distribution guidance of 3.15 cps for the full year FY2020 (based on current market conditions).