Financial information

Consolidated statement of total return

  Group
2QFY20 A$'000 2QFY19 A$ ‘000 Change %
Revenue 67,295 59,666 12.8
Property operating expenses (10,195) (10,698) (4.7)
Net property income 57,100 48,968 16.6
Managers' management fee
- Base fee (3,929) (3,047) 28.9
- Performance fee (1,958) (1,720) 13.8
Trustees' fees (124) (107) 15.9
Trust expenses (1,153) (614) 87.8
Finance income 111 242 (54.1)
Finance costs (7,770) (7,239) 7.3
Exchange gains (net) 2,249 2,731 (17.6)
Net income 44,526 39,214 13.5
Net change in fair value of derivative 2,442 462 N.M.
Net change in fair value of investment properties - - N.M.
Gain on divestment of investment property held for sale 954 - N.M.
Total return for the period before tax 47,922 39,676 20.8
Tax expenses (6,040) (5,697) 6.0
Total return for the period 41,882 33,979 23.3
Attributable to:      
Unitholders of the Trust 41,324 33,641 22.8
Non-controlling interests 558 338 65.1
  41,882 33,979 23.3
Distribution Statement
Total return after tax 41,324 33,641 22.8
Tax related and other adjustments 1,761 3,268 (46.1)
Income available for distribution to Unitholders 43,085 36,909 16.7
For information:      
Adjusted NPI 54,653 47,866 14.2

Statements of financial position

  Group Trust
  31/3/2020 (A$ ‘000) 30/9/2019 (A$ ‘000) 31/3/2020 (A$ ‘000) 30/9/2019 (A$ ‘000)
Non-current assets
Investment properties 4,017,557 3,554,142 - -
Investment in subsidiaries - - 928,794 914,938
Loans to subsidiaries - - 2,033,091 1,848,932
Derivative assets 10,007 2,117 10,007 2,117
Total non-current assets 4,027,564 3,556,259 2,971,892 2,765,987
Current assets
Cash and cash equivalents 162,279 128,381 48,276 47,608
Trade and other receivables 22,904 14,176 55,577 62,111
Derivative assets 3,132 2,070 3,132 2,070
Investment property held for sale - 18,000 - -
Total current assets 188,315 162,627 106,985 111,789
Total assets 4,215,879 3,718,886 3,078,877 2,877,776
Current liabilities        
Trade and other payables 58,700 53,217 4,015 3,445
Loans and borrowings 249,336 206,237 112,822 112,627
Derivative liabilities 1,760 1,072 1,760 1,072
Current tax liabilities 10,903 10,429 159 144
Total current liabilities 320,699 270,955 118,756 117,288
Non-current liabilities        
Trade and other payables 4,471 3,367 - -
Loans and borrowings 1,335,621 1,029,555 781,378 650,923
Derivative liabilities 76,029 9,674 73,553 6,647
Deferred tax liabilities 67,883 62,598 - -
Total non-current liabilities 1,484,004 1,105,194 854,931 657,570
Total liabilities 1,804,703 1,376,149 973,687 774,858
Net assets attributable to Unitholders 2,411,176 2,342,737 2,105,190 2,102,918
Represented by:        
Unitholders' funds 2,374,202 2,313,810 2,105,190 2,102,918
Non-controlling interests 36,974 28,927 - -
Total equity 2,411,176 2,342,737 2,105,190 2,102,918

Review of performance

Review of Performance for the quarter from 1 January 2020 to 31 March 2020 (“2QFY20”) vs 1 January 2019 to 31 March 2019 (“2QFY19”)

Adjusted NPI for 2QFY20 of A$54.7 million was A$6.8 million (or 14.2%) higher than 2QFY19. The higher Adjusted NPI for 2QFY20 was contributed by the FY2019 Acquisitions. These were in part offset by the effect of the FY2019 Divestments1.

Excluding the impact of the interest expense in lease liabilities recognised due to the adoption of FRS 116, 2QFY20 finance costs decreased by A$0.8 million as compared to 2QFY19. This was due mainly to interest savings from refinancing of borrowings and repayment of debt from the proceeds of the divestments in FY2019. The weighted average cost of debt for 2QFY20 was 1.9% per annum and 2.4% per annum for 2QFY19. At 31 March 2020, 61% (31 March 2019: 79%) of borrowings were at fixed rates.

The total return attributable to Unitholders of the Trust for 2QFY20 of A$41.3 million was A$7.7 million (or 22.8%) higher than 2QFY19 which included (a) a gain on divestment of investment property held for sale of A$1.0 million, (b) a fair value gain on foreign currency forward contracts of A$2.4 million to hedge the currency risk on distributions to Unitholders and (c) net exchange gains of A$2.2 million which relate to translation of the Trust’s foreign currency borrowings and are partially offset by the exchange differences arising from settlement of foreign currency forward contracts.

Tax expenses for 2QFY20 of A$6.0 million were A$0.3 million (or 6.0%) higher than 2QFY19. Current tax expenses were higher due mainly to income tax on the Group’s European entities.

The REIT Manager has elected to receive 100% of the 2QFY20 management fee in the form of units (2QFY19: 100%).

Income available for distribution to Unitholders was A$43.1 million, an increase of A$6.2 million (or 16.7%) over 2QFY19.


Review of Performance for the period from 1 October 2019 to 31 March 2020 (“1HFY20”) vs 1 October 2018 to 31 March 2019 (“1HFY19”)

Adjusted NPI for 1HFY20 of A$107.6 million was A$10.8 million (or 11.1%) higher than 1HFY19. The higher Adjusted NPI for 1HFY20 was contributed by the FY2019 Acquisitions. These were in part offset by the effect of the FY2019 Divestments1.

Excluding the impact of the interest expense in lease liabilities recognised due to the adoption of FRS 116, 1HFY20 finance costs decreased by A$2.3 million as compared to 1HFY19. This was due mainly to interest savings from refinancing of borrowings and repayment of debt from the proceeds of the divestments in FY2019. The weighted average cost of debt for 1HFY20 was 1.9% per annum and 2.4% per annum for 1HFY19. At 31 March 2020, 61% (31 March 2019: 79%) of borrowings were at fixed rates.

The total return attributable to Unitholders of the Trust for 1HFY20 of A$74.8 million was A$11.4 million (or 18.0%) higher than 1HFY19 which included (a) a gain on divestment of investment property held for sale of A$1.6 million, (b) a fair value gain on foreign currency forward contracts of A$0.6 million to hedge the currency risk on distributions to Unitholders and (c) net exchange gains of A$1.5 million which relate to translation of the Trust’s foreign currency borrowings and are partially offset by the exchange differences arising from settlement of foreign currency forward contracts.

Tax expenses for 1HFY20 of A$11.5 million were A$0.1 million (or 0.5%) lower than 1HFY19. This was due mainly to lower deferred tax expense.

The REIT Manager has elected to receive 100% of the 1HFY20 management fee in the form of units (1HFY19: 91.6%).

Income available for distribution to Unitholders was A$84.5 million, an increase of A$10.9 million (or 14.8%) over 1HFY19.


  1. 1 FLCT completed the divestment of 63-79 South Park Drive, Dandenong South, Victoria on 9 May 2019; 50% interest in 99 Sandstone Place, Parkinson, Queensland on 24 July 2019; and Lot 1 Heatherton Road Divestment on 29 October 2019 (collectively, the “FY2019 Divestments”)

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

Overview

The global spread of COVID-19 has severely disrupted the business environment and operating conditions across global markets. The pandemic, which has prompted authorities to implement travel bans and lockdowns, is slowing demand across almost all industries, created supply-chain disruptions and also resulted in an unprecedented oil price crash. There is significant uncertainty on how wide the outbreak will spread and how long it will last, which impacts how long the shutdown and various containment measures implemented by governments must last. Accordingly, the operating environment is expected to remain challenging in the months ahead.

In Australia, the growth in number of new COVID-19 cases has continued to decline as a result of mitigation strategies implemented over the past month, such as social distancing measures that had resulted in the partial or complete shutdown of several sectors. Nevertheless, COVID-19 remains a major public health issue and is having significant effects on the domestic economy and financial system. The Reserve Bank of Australia has also reported that national output in Australia is likely to fall by around 10% over the first half of 2020, with most of this decline taking place in the June quarter.

In Europe, the COVID-19 outbreak has gradually come under control in April for Germany and the Netherlands, with both countries announcing progressive steps to relax restriction measures. Nevertheless, the pandemic is expected to have significant adverse effects on the German and Dutch economies. Economic researchers have also highlighted that the German economy could shrink by over 4% in 2020. In the United Kingdom (“UK”), Oxford Economics forecast that the UK economy may contract by 1.4% in 2020 due to significant disruption to business activities from the COVID-19 outbreak.

In Singapore, given the unprecedented nature of the COVID-19 outbreak and the public health measures taken in many countries to contain the outbreak, the Ministry of Trade and Industry has also projected full year GDP contraction to be in the range of -4.0% to -1.0% for 2020.

Operationally, the REIT Manager is closely collaborating with tenants to provide support and roll out relief measures, as necessary. Such measures vary and will be reviewed on an individual basis, considering factors that include the impact of COVID-19 on the tenant, available government assistance, among others. The REIT Manager’s objective is to help tenants cope with their immediate cashflow constraints and extend as much flexibility as reasonable to accommodate their needs.

The REIT Manager is also focused on managing any financial implications arising from COVID-19 and will continue to work closely with FLCT’s customers to overcome this trying period together. Capital and liquidity management will continue to be a key strategic priority.

Update on merger with FCOT

On 2 December 2019, the respective managers of FLT and FCOT jointly announced the proposed merger of FLT and FCOT by way of a trust scheme of arrangement, with FLT acquiring all FCOT units held by FCOT unitholders in exchange for a combination of cash and new units in FLT. The proposed merger was approved by the unitholders of FLT and FCOT on 11 March 2020. On 15 April 2020, the respective managers of FLT and FCOT jointly announced that the trust scheme had become effective and binding on 15 April 2020. FCOT was delisted on 29 April 2020 with the merged entity renamed Frasers Logistics & Commercial Trust from 29 April 2020.

With the merger, FLCT’s enlarged portfolio of 99 quality industrial and commercial properties will maintain a high occupancy rate in excess of 97% as at 31 March 2020, and be a diversified portfolio across five countries and two different asset classes.

Looking ahead, the REIT Manager will continue to focus on its proactive asset and lease management strategies to generate sustainable long-term value for unitholders.

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