Strategy execution drives 11% increase in operating profit

  • Statutory profit of $159.9 million (FY18 $204.1 million);
  • Operating profit up 11.1% to $174.2 million (FY18 $156.8 million);
  • WALE of 6.9 years and NTA of $0.97 (FY18 $0.96);
  • Gearing of 35.0% with look-through gearing of 42.3% (pro-forma gearing of 23.9%);
  • FY19 operating profit 0.21 cps ahead of guidance at 8.21 cps (FY18 8.36 cps); and
  • FY19 distributions per security met guidance at 7.25 cps (FY18 8.34 cps).

Operating profit, considered by the Directors to best reflect the underlying earnings of Cromwell, was up 11.1% from the prior year to $174.2 million (FY18 $156.8 million). Post Cromwell’s institutional and retail capital raisings during the year, distributions met guidance at 7.25 cps.

Cromwell continues to execute its ‘Invest to Manage’ strategy which involves investing capital to acquire assets, create new funds and sell down to capital partners.

During the year Cromwell executed two large transactions on behalf of the Cromwell European REIT. One for 23 assets in five European countries and one for six assets in two, totalling €471 million ($775 million).

Cromwell also exchanged contracts to acquire 400 George Street in Brisbane for $524.75 million and recycled capital, by exchanging, subject to FIRB approval, on its 50% interest in Northpoint Tower for $300 million. A c.$1 billion pipeline of value-add development opportunities has been highlighted including the Seniors’ Living redevelopment at Greenway, ACT and flagged projects at Chatswood, NSW and 700 Collins Street, VIC.

Cromwell also exercised a pre-emptive right to acquire third party investor interests in the Cromwell Polish Retail Fund. The fund contains seven catchment dominating shopping centres with a gross asset value of €600 million ($990 million). The local team have been managing and developing the assets for over a decade.

Gross Domestic Product in Poland has grown by 4.20% on average over the last 25 years. It has been Europe’s fastest growing economy over the past five years, and has one of the highest expected growths in disposable income, consumer spending and retail sales globally.

“We have 34 professionals on the ground, managing 21 assets with more than 660 tenant customers and over 758,000 sqm of space,” said Cromwell CEO Paul Weightman.

“We propose to rollover the acquired interests into a new fund which will be offered to capital partners and intend to initially underwrite the fund for the purposes of taking a co-investment stake. We have two months in which to conclude the acquisition and a further update will be provided in due course,” he concluded.

FY20 operating profit is affirmed at the upper end of previous guidance at 8.30 cps and distributions at 7.25 cps. Cromwell’s securities closed at $1.24 on 28 August 2019 which means this represents an operating profit per security and distributions per security yield of 6.69% and 6.05% respectively.

Full details of the FY19 Results are available here.