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Results: Dexus share price set to slump after 26% profit decrease

Kenneth Hall
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The Dexus Property Group (ASX: DXS) share price could slump lower this morning after announcing a 25.9% decrease in net profit after tax (NPAT) in its latest full-year result.

What did Dexus announce this morning?

Dexus announced that it had achieved 5.5% adjusted funds from operations (AFFO) per security growth and 5.0% distribution per security growth for FY19, and confirmed its guidance of  ~5% distribution per security growth for FY20.

A summary of the company’s financial and operational performance is set out below:

  • Revenue of $795.1 million, down 5.4% from FY18 figures

  • AFFO per security of 50.3 cents, up 5.5% on FY18

  • Distribution per security of 50.2 cents, up 5.0% on FY18

  • Net profit after tax of $1.28 billion, down 25.9% primarily due to net revaluation gains of investment properties being lower than those recognised in FY18

  • Return on contributed equity (ROCE) of 10.1% gearing (look-through) of 24.0%

  • Leased a total of 567,039 square metres across the total Dexus portfolio, maintaining  high portfolio occupancy of 98.0% for Dexus office and 97.0% for Dexus industrial portfolios

  • Established the circa $2 billion Dexus Australian Logistics Trust (DALT) and attracted new investors across three other managed funds

  • Delivered $34.7 million of trading profits (post-tax) in FY19

  • Achieved a strong employee Net Promoter Score of +40 and customer Net Promoter Score of +46.

What did management have to say about the result?

In the release, Dexus Chief Executive Officer, Darren Steinberg said: ‘We entered the year with a clear strategy and readiness to respond to both market opportunities and challenges.”

He added:

Our focus on maintaining a leading position in the Australian property market has been achieved  through the performance of our property portfolio, selective acquisitions with future value-add, growth in our funds management business and the delivery of trading profits, all contributing to our strong financial result.

In a year of significant transaction activity, we secured $3.1 billion of quality acquisition opportunities, increasing our office exposure in core markets and enhancing our embedded pipeline of office development projects in both the Melbourne and Sydney CBDs.

Foolish takeaway

I’d expect to see investors punish the Dexus share price this morning given the 5.4% and 25.9% fall in full-year revenue and net profit, respectively.

While the Aussie property group reported increases in both FFO and AFFO for the year, and increased its distributions to security holders, I don’t think it will be enough to prevent a share price slump in early trade.

The Dexus result could serve as a red flag ahead of the August results season for the Aussie property developers and real estate investment trusts (REITs), but I’d be sitting tight to see who is set to benefit from the lower interest rate environment.

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Motley Fool contributor Kenneth Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019