Financial Information

Financial information

Consolidated statement of total return

  Group
3QFY19 A$'000 3QFY18 A$ ‘000 Change %
Revenue 59,952 49,322 21.6
Property operating expenses (10,313) (8,209) 25.6
Net property income 49,639 41,113 20.7
Managers' management fee
- Base fee (3,095) (2,375) 30.3
- Performance fee (1,728) (1,388) 24.5
Trustees' fees (134) (84) 59.5
Trust expenses (650) (211) N.M.
Finance income 331 329 0.6
Finance costs (7,144) (6,506) 9.8
Exchange gains/(losses) (net) (4,172) (5,890) (29.2)
Net income 33,047 24,988 32.3
Gain on divestment of investment property 1,649 - N.M
Net change in fair value of investment properties 20,759 17,716 17.2
Net change in fair value of derivative financial instruments (286) (2,748) (89.6)
Total return for the period before tax 55,169 39,956 38.1
Tax expenses (9,489) (8,013) 18.4
Total return for the period 45,680 31,943 43.0
Attributable to:      
Unitholders of the Trust 45,358 31,796 42.7
Non-controlling interests 322 147 N.M
  45,680 31,943 43.0
Distribution Statement
Total return after tax 45,358 31,796 42.7
Tax related and other adjustments (8,425) (1,130) N.M.
Income available for distribution to Unitholders 36,933 30,666 20.4
For information:      
Adjusted NPI 48,882 39,287 24.4

Statements of financial position

  Group Trust
  30/6/2019 (A$ ‘000) 30/9/2018 (A$ ‘000) 30/6/2019 (A$ ‘000) 30/9/2018 (A$ ‘000)
Non-current assets
Investment properties 2,900,893 2,978,204 - -
Investment in subsidiaries - - 858,036 858,036
Loans to subsidiaries - - 1,622,368 1,568,967
Derivative financial instruments - 1,133 - 1,133
Total non-current assets 2,900,893 2,979,337 2,480,404 2,428,136
Current assets
Cash and cash equivalents 76,037 105,664 20,386 53,130
Trade and other receivables 13,670 9,691 24,439 26,154
Derivative financial instruments 306 283 306 283
Investment property held for sale 152,200 - - -
Total current assets 242,213 115,638 45,131 79,567
Total assets 3,143,106 3,094,975 2,525,535 2,507,703
Current liabilities        
Trade and other payables 32,267 40,404 1,583 2,408
Derivative financial instruments 1,217 148 1,217 148
Current tax liabilities 4,278 6,741 108 84
Borrowings 225,846 219,654 159,510 169,619
Total current liabilities 263,608 266,947 162,418 172,259
Non-current liabilities        
Trade and other payables 2,039 2,459 - -
Derivative financial instruments 7,090 620 7,090 620
Borrowings 880,117 845,121 584,933 495,722
Deferred tax liabilities 47,141 36,574 - -
Total non-current liabilities 936,387 884,774 592,023 496,342
Total liabilities 1,199,995 1,151,721 754,441 668,601
Net assets attributable to Unitholders 1,943,111 1,943,254 1,771,094 1,839,102
Represented by:        
Unitholders' funds 1,922,958 1,924,388 1,771,094 1,839,102
Non-controlling interests 20,153 18,866 - -
Total equity 1,943,111 1,943,254 1,771,094 1,839,102

Review of performance

Review of Performance for the quarter from 1 April 2019 to 30 June 2019 ("3QFY19") vs 1 April 2018 to 30 June 2018 ("3QFY18")

Adjusted NPI for 3QFY19 of A$48.9 million was A$9.6 million (or 24.4%) higher than 3QFY18. The higher Adjusted NPI for 3QFY19 was contributed by the FY2018 Australian Acquisition1, the FY2018 European Acquisition, the FY2019 Dutch Acquisition and other income of A$1.1 million which relates to the make good income for 63-79 South Park Drive, Dandenong South, Victoria and 610 Heatherton Road, Clayton South, Victoria. These were in part offset by the effect of the FY2018 Divestments2 and the South Park Drive Divestment.

3QFY19 finance costs of A$7.1 million were A$0.6 million higher than 3QFY18. This was due mainly to higher borrowings to finance the various acquisitions in FY2018 and FY2019 and after net proceeds from the FY2018 Divestments and the South Park Drive Divestment. The weighted average interest rate (excluding upfront debt related expenses) for 3QFY19 was 2.4% per annum and 2.5% per annum for 3QFY18. At 30 June 2019, 63% (30 June 2018: 81%) of borrowings were at fixed rates.

The total return attributable to Unitholders of the Trust for 3QFY19 of A$45.4 million was A$13.6 million (or 42.7%) higher than 3QFY18 which included (a) gain on the South Park Drive Divestment of A$1.6 million; (b) fair value gain on investment properties of A$20.8 million which was in part offset by (c) net exchange losses of A$4.2 million which relates to translation of the Trust's foreign currency borrowings partially offset by the exchange differences arising from settlement of foreign currency forward contracts; (d) fair value loss on foreign currency forward contracts of A$0.3 million to hedge the currency risk on distributions to Unitholders and (e) higher trust expenses of A$0.4 million due mainly to 3 months of expenses contributed by the FY2018 European Acquisition compared to only 1 month in 3QFY18.

Tax expenses for 3QFY19 of A$9.5 million were A$1.5 million (or 18.4%) higher than 3QFY18. This was due mainly to higher current income tax due mainly to higher distributable income and higher deferred tax.

The REIT Manager has elected to receive 85.3% of the 3QFY19 management fee in the form of units (3QFY18: 100%).

Income available for distribution to Unitholders was A$36.9 million, an increase of A$6.3 million (or 20.4%) over 3QFY18.

 

Review of Performance for the period from 1 October 2018 to 30 June 2019 ("9MFY19") vs 1 October 2017 to 30 June 2018 ("9MFY18")

Adjusted NPI for 9MFY19 of A$145.7 million was A$39.6 million (or 37.3%) higher than 9MFY18. The higher Adjusted NPI for 9MFY19 was contributed by the FY2018 Australian Acquisition, the FY2018 European Acquisition, the FY2019 Dutch Acquisition and other income of A$2.4 million which relates to the early surrender fee received for 63-79 South Park Drive, Dandenong South, Victoria and make good income for both 63-79 South Park Drive, Dandenong South, Victoria and 610 Heatherton Road, Clayton South, Victoria. These were in part offset by the effect of the FY2018 Divestments and the South Park Drive Divestment.

9MFY19 finance costs of A$21.9 million were A$5.7 million higher than 9MFY18. This was due mainly to higher borrowings to finance the various acquisitions in FY2018 and FY2019 and after net proceeds from the FY2018 Divestments and the South Park Drive Divestment. The weighted average interest rate (excluding upfront debt related expenses) for 9MFY19 was 2.4% per annum and 2.5% per annum for 9MFY18. At 30 June 2019, 63% (30 June 2018: 81%) of borrowings were at fixed rates.

The total return attributable to Unitholders of the Trust for 9MFY19 of A$108.7 million was A$26.1 million (or 31.6%) higher than 9MFY18 which included (a) the gain on the South Park Drive Divestment of A$1.6 million; (b) the fair value gain on investment properties of A$20.9 million; (c) the fair value gain on foreign currency forward contracts of A$0.3 million to hedge the currency risk on distributions to Unitholders which were in part offset by (d) net exchange losses of A$3.0 million which relate to the translation of the Trust's foreign currency borrowings and were partially offset by the exchange differences arising from settlement of foreign currency forward contracts and (e) higher trust expenses of A$1.2 million due mainly to 9 months expenses contributed by the FY2018 European Acquisition compared to only 1 month in 9MFY18.

Tax expenses for 9MFY19 of A$21.1 million were A$4.9 million (or 29.9%) higher than 9MFY18. This was due mainly to higher current income tax due mainly to higher distributable income and higher deferred tax.

The REIT Manager has elected to receive 89.4% of the 9MFY19 management fee in the form of units (9MFY18: 82.9%).

Income available for distribution to Unitholders was A$110.5 million, an increase of A$28.2 million (or 34.2%) over 9MFY18.

  1. On 31 August 2018, FLT announced the acquisition of a freehold property at 103 -131 Wayne Goss Drive, Berrinba, Queensland and a leasehold property at 3 Burilda Close, Wetherill Park, New South Wales for a total consideration of A$62.6 million (the "FY2018 Australian Acquisition").
  2. On 17 and 20 August 2018, FLT completed the divestment of Lot 102 Coghlan Road in South Australia and 80 Hartley Street in New South Wales respectively (the "FY2018 Divestments"). The former property was divested for A$8.75 million and the latter for A$90.5 million.

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

Australia1

Australian industrial take-up levels have been robust with approximately 2.45 million sq m leased over the 12-month period to June 2019, supported by demand from retail, 3PL and logistics occupiers. The strong demand for industrial space is largely attributable to strong population growth, public infrastructure spending and growth in the e-commerce sector. Australia's population growth over the next five years is projected to rank third amongst the world's advanced economies.

Industrial supply in the six months to 30 June 2019 was recorded at approximately 1.3 million sq m. There continues to be a strong pipeline of industrial developments primarily in Sydney and Melbourne. We note that developers are seeking to capitalise on the continued strength of the industrial market by constructing new stock on a speculative basis.

National take-up levels continue to exceed new completions and as a result, vacancies are at their lowest level in five years across the three major industrial markets of Sydney, Melbourne and Brisbane. Prime face rents have recorded steady year-on-year growths of 3.0% and 2.1% in Sydney and Melbourne respectively. We note that prime rents in Sydney and Melbourne are expected to normalise with modest growth forecasted for the remainder of 2019.

The Brisbane industrial market is recovering with prime rents returning to pre-2017 levels with 2.2% prime rental growth in the last 12 months. The recovery has been driven by stronger tenant demand, limited new development and declining vacancies. Tenant demand is expected to remain stable with rental growth expected over the next 12 months.

Investor demand for industrial space remains strong with evidence of further yield compression compared to the first quarter of 2019 however, the yield compression is forecast to stabilise. In the absence of capital growth, rental growth is expected to drive industrial returns in future years.

Germany and the Netherlands3

The German economy grew at a faster pace of 0.7% in the first quarter of 2019, from 0.6% in the preceding quarter, driven by construction, equipment and private household consumption spending. Solid domestic fundamentals, backed by a low unemployment rate of 3.2% in May 2019 provides support even as ongoing US-China trade tensions and Brexit continue to have an impact on economic growth.

In Germany, take-up levels for logistics and industrial properties of above 5,000 sq m remained high at 2.9 million sq m for the first half of 2019, as new supply for the rental market remained limited with users continuing to seek build-to-suit solutions. Average prime yields for the major German logistics hubs were at 3.9% for the first half of 2019.

The Dutch economy grew 1.7% in the first quarter of 2019, with support from household consumption, capital investments as well as a strong labour market. The unemployment rate on a seasonally adjusted basis remains low, coming in at 3.3% in May 2019, from 3.6% in December 2018.

For the Netherlands, take-up levels for logistics and industrial properties of above 5,000 sq m also remained high at 1.5 million sq m for the first half of 2019. Prime rents have largely remained unchanged from the preceding quarter, while prime yields remained stable, at 4.5% for the Venlo logistics market.

Overview

The REIT Manager continues to monitor developments on the global trade tensions and Brexit. Looking ahead, the REIT Manager will continue to grow FLT's prime industrial portfolio with a focus on generating sustainable long-term value for unitholders.

  1. Sources: JLL Research – Industrial Market Snapshot 2Q 2019; Knight Frank Research – Australian Capital View Outlook 2019
  2. Source: BNP Paribas Real Estate International Research, July 2019

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