Financial Information

Consolidated statement of total return

  Group
1QFY18 A$'000 1QFY17 A$ ‘000 Change %
Revenue 42,430 39,678 6.9
Property operating expenses (7,642) (6,314) (21.0)
Net property income 34,788 33,364 4.3
Managers' management fee
- Base fee (2,003) (1,825) (9.8)
- Performance fee (1,203) (1,130) (6.5)
Trustees' fees (84) (71) (18.3)
Trust expenses (430) (513) 16.2
Finance income 444 81 448.1
Finance costs (4,770) (4,098) (16.4)
Exchange gains (net) 445 943 (52.8)
Net income 27,187 26,751 1.6
Net change in fair value of derivative financial instruments 3,957 (770) N.M
Total return for the period before tax 31,144 25,981 19.9
Tax expenses (4,182) (3,126) (33.8)
Total return for the period 26,962 22,855 18.0
Distribution Statement
Total return after tax 26,962 22,855 18.0
Tax related and other adjustments (1,108) 2,022 N.M
Income available for distribution to Unitholders 25,854 24,877 3.9

Statements of financial position

  Group Trust
  31/12/2017 (A$ ‘000) 30/9/2017 (A$ ‘000) 31/12/2017 (A$ ‘000) 30/9/2017 (A$ ‘000)
Non-current assets
Investment properties 1,927,405 1,910,975 - -
Investment in subsidiaries - - 805,691 789,746
Loans to a subsidiary - - 1,087,231 1,065,658
Derivative financial instruments 2,346 3,077 2,346 3,077
Total non-current assets 1,929,751 1,914,052 1,895,268 1,858,481
Current assets
Cash and cash equivalents 47,985 56,097 27,410 48,495
Trade and other receivables 7,802 5,719 13,890 4,208
Derivative financial instruments 1,543 456 1,543 456
Total current assets 57,330 62,272 42,843 53,159
Total assets 1,987,081 1,976,324 1,938,111 1,911,640
Current liabilities
Trade and other payables 17,391 41,348 1,848 1,296
Derivative financial instruments - 2,870 - 2,870
Current tax liabilities 1,051 1,793 67 56
Total current liabilities 18,442 46,011 1,915 4,222
Non-current liabilities
Trade and other payables 2,255 2,336 - -
Borrowings 608,571 574,109 608,571 574,109
Deferred tax liabilities 18,077 16,352 - -
Total non-current liabilities 628,903 592,797 608,571 574,109
Total liabilities 647,345 638,808 610,486 578,331
Net assets attributable to Unitholders 1,339,736 1,337,516 1,327,625 1,333,309
Represented by:
Unitholders' funds 1,339,736 1,337,516 1,327,625 1,333,309

Review of performance

Review of Performance for the quarter from 1 October 2017 to 31 December 2017 ("1QFY18") vs 1 October 2016 to 31 December 2016 ("1QFY17")

Adjusted NPI for 1QFY18 at A$33.4 million was A$2.7 million higher than 1QFY17. The four completed properties in the Acquisition Transaction and the Beaulieu and Stanley Black & Decker facilities, which had achieved practical completion on 13 October 2017 and 17 November 2017 respectively, contributed adjusted NPI of A$1.9 million. 1QFY18 also recorded the full quarter's contribution from the Martin Brower call option property which was acquired on 30 November 2016.

Finance income of A$0.4 million for 1QFY18 included the coupon interest income on the initial payment for the three development properties in the Acquisition Transaction.

1QFY18 finance costs of A$4.8 million was A$0.7 million higher than 1QFY17. This was due mainly to higher borrowings of A$75 million drawn to finance the Acquisition Transaction. Actual weighted average interest rate for 1QFY18 and 1QFY17 was 2.8% per annum. At 31 December 2017, 68% (31 December 2016: 78%) of borrowings were hedged.

The actual total return for 1QFY18 of A$ 27.0 million was A$4.1 million higher than 1QFY17 which included a A$4.8 million of fair value gain on foreign currency forward contracts to hedge the currency risk on distributions to Unitholders.

Tax expenses for 1QFY18 of A$4.2 million was A$1.1 million higher than 1QFY17. This was due mainly to higher withholding tax paid on interest income and higher distributable income.

Commentary

Commentary on the significant trends and competitive conditions of the industry in which the group operates and any known factors or events that may affect the group in the next reporting period and the next 12 months

For the 12 months ended 31 December 2017, the supply of industrial space in Australia remained around the 10 year average with over 1.6 million sq m of space added to the market, of which the three major markets of Melbourne, Sydney and Brisbane accounted for 93% of the new development. While the annual supply is also above the long term average, most of the new space has been leased prior to completion. In addition to a strong pre-lease market, occupier demand for existing space stayed strong, with 2017 national take-up surpassing the 10-year average by 17%. Sydney continues to be the strongest performing capital city in terms of both capital and rental growth, which is underpinned by high levels of infrastructure investment together with a shortage of developable land. Melbourne has experienced some rental growth over most precincts due to stronger demand from large-scale occupiers and fewer available leasing options. In Brisbane, prime net rents remained stable from the previous quarter but elevated incentives have persisted. Occupiers are continuing to take advantage of the incentives being offered by developers and are relocating into new warehouses from older and less efficient facilities.

According to JLL (as defined below), 2017 national investment volume of A$3.7 billion is below the five-year annual average of A$5 billion, which is a reflection of fewer assets being offered to the market. Given limited access to assets and the desire to quickly increase exposure to the Australian industrial market, portfolio sales have been highly sought after by both domestic and offshore investors.1

Looking ahead, the REIT Manager will continue to grow FLT's prime industrial portfolio with a focus on generating sustainable, long-term value for our unitholders.

  1. Sources: JLL Real Estate Intelligence Service ("JLL") - Industrial Market Snapshot 4Q 2017; Jones Lang LaSalle Real Estate Data Solution - Industrial Occupier Moves from 4Q07 to 4Q17, Industrial Sales Transactions from 4Q07 to 4Q17, Construction Projects from 4Q07 to 4Q17

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