2HFY20 Highlights
- Distributable Income up 81.7% to S$124.9 million
- FLCT portfolio valued at approximately S$6.2 billion as at 30 September 2020, representing a valuation uplift of S$93.7 million; NAV per unit increased 19.6% y-o-y to S$1.10
- Maintained high portfolio occupancy rate of 97.5% as at 30 September 2020, and WALE of 4.9 years with 174,761 sq m of leasing completed in 2HFY20, in a challenging pandemic environment
- Healthy aggregate leverage of 37.4% as at 30 September 2020
Summary of results2
S$’000 |
2HFY20 |
2HFY19 |
Variance (%) |
FY2020 |
FY2019 |
Variance (%) |
Revenue |
213,284 |
109,610 |
94.6 |
332,029 |
217,076 |
53.0 |
Adjusted Net Property Income3 |
161,355 |
89,366 |
80.6 |
258,335 |
176,641 |
46.2 |
Distributable Income |
124,863 |
68,730 |
81.7 |
201,080 |
135,098 |
48.8 |
DPU (Singapore cents) |
3.65 |
3.46 |
5.5 |
7.12 |
7.00 |
1.7 |
SINGAPORE, 6 NOVEMBER 2020
Frasers Logistics & Commercial Asset Management Pte. Ltd., the manager of Frasers Logistics & Commercial Trust (“FLCT” and the manager of FLCT, the “REIT Manager”), today announced FLCT’s results for the six-month period ended 30 September 2020 (“2HFY20”) and financial year ended 30 September 2020 (“FY2020”).
Review of financial performance
FLCT achieved a record revenue of S$213.3 million and Adjusted Net Property Income of S$161.4 million for 2HFY20, representing an increase of 94.6% and 80.6% respectively, from S$109.6 million and S$89.4 million in the corresponding financial period (“2HFY19”). The year-on-year (“y-o-y”) increases were contributed by the Merger, German Properties Acquisition, and the FY2019 and FY2020 Acquisitions, and partially offset by the effects of the FY2019 Divestments, the Heatherton Road Divestment4, as well as S$5.7 million in rental waivers granted and provisions for doubtful debt for mainly qualifying SME tenants due to the Covid-19 pandemic. Accordingly, distributable income rose 81.7% to S$124.9 million for 2HFY20, from S$68.7 million a year ago.
The distribution per unit (“DPU”) for 2HFY20 was 3.65 Singapore cents, up 5.5% from 3.46 Singapore cents in 2HFY19 and represents a full payout of FLCT’s 2HFY20 distributable income. Together with a DPU of 3.47 Singapore cents reported for 1HFY20, FLCT’s total distribution for the period from 1 October 2019 to 30 September 2020 (“FY2020”) amounted to 7.12 Singapore cents, an increase of 1.7% from 7.00 Singapore cents a year ago.
Portfolio update
In 2HFY20, FLCT executed 36 leasing transactions across its logistics and commercial portfolio, representing a lettable area of 174,761 square metres (“sq m”)5, of which 55,187 sqm were completed during the period from 1 July 2020 to 30 September 2020 (“4QFY20”). Accordingly, this brings the total leasing activity in FY2020 to 64 transactions for 267,996 sq m or 10.5% of total portfolio lettable area6.
On 3 August 2020, the REIT Manager announced the proposed acquisition of two 100% occupied freehold properties in Australia and the United Kingdom (“UK”), and the proposed divestment of FLCT’s remaining 50% interest in the property at 99 Sandstone Place, Parkinson, Queensland, Australia (the “Divestment”). As at 30 September 2020, the two acquisitions had been completed, with the Divestment targeted for completion by end December 2020.
As at 30 September 2020, the FLCT portfolio had an occupancy rate of 97.5%, a weighted average lease expiry (“WALE”) of 4.9 years7, and lease expiries representing 7.9% of gross rental income for the financial year ending 30 September 2021. In July 2020, FLCT also completed lobby modernisation works at its 50%- owned Central Park office tower in Perth, Australia. This initiative transformed the lobby with a new café and exhibition space, to enhance user experience while increasing amenities for tenants and the public.
The total value of FLCT’s portfolio was approximately S$6.2 billion as at 30 September 2020, from approximately S$3.3 billion a year ago. The increase was mainly due to the inclusion of the FCOT portfolio post-merger in April 2020, acquisitions in the UK and Australia during the year, as well as a S$93.7 million valuation uplift of FLCT’s investment properties. Accordingly, the net asset value (“NAV”) per unit rose 19.6% to S$1.10 as at 30 September 2020, from S$0.92 a year ago.
Mr. Robert Wallace, Chief Executive Officer of the REIT Manager, said, “Our solid performance, with a full- year DPU of 7.12 Singapore cents delivered amid the COVID-19 pandemic, testifies to the strength and resiliency of the FLCT portfolio. The proactive efforts of our portfolio management team in engaging with our customers has enabled FLCT to report a stable portfolio occupancy of 97.5% as at 30 September 2020.”
“Following our merger with Frasers Commercial Trust in April 2020 to form what is today the seventh largest REIT in Singapore8, we continue to execute FLCT’s growth strategies in a disciplined manner, acquiring two fully-occupied properties in Melbourne, Australia and Thames Valley, UK in August 2020, and at the same time announcing the divestment of the remaining 50% stake in a specialised cold-storage facility in Queensland, Australia at an attractive premium to book value.”
Capital management
As at 30 September 2020, FLCT’s aggregate leverage was 37.4%. Total borrowings were S$2,454 million, 54.6% of which were at fixed interest rates. The weighted average interest rate for borrowings excluding upfront debt related expenses for 2HFY20 was 1.9%9 per annum compared to 2.4% a year ago.
Distribution
FLCT’s total distributions for the six-month period from 1 April 2020 to 30 September 2020 amounted to 3.65 Singapore cents per unit. This comprises a distribution of 3.39 Singapore cents per unit for the period from 15 April 2020 to 30 September 2020, which will be paid out on 17 December 2020, and an advanced distribution of 0.26 Singapore cents per unit for the period from 1 April 2020 to 14 April 2020, which was paid on 26 June 2020.
Outlook
The global spread of COVID-19 continues to disrupt the business environment and operating conditions across global markets. There remains significant uncertainty on the duration and extent of the spread of the pandemic, which impacts how long the shut-down and containment measures implemented by governments must last, especially in view of recent infection resurgences. Accordingly, the operating environment is expected to remain challenging in the months ahead.
In Australia, even as the number of COVID-19 cases has continued to decline as a result of stringent mitigation strategies, COVID-19 remains a major public health issue and is having significant effects on the domestic economy and financial system. There are also concerns relating to the deterioration of relationships between both the Australian and Chinese governments and any implications that may arise as a result of any trade restrictions implemented by China. In October 2020, the Australian Government reported a record 7.0% decline in GDP for the June quarter, and anticipates national GDP growth for the September quarter to remain subdued. According to Reserve Bank of Australia in August 2020, the full-year 2020 GDP is expected to contract by around 6.0% given the resurgent outbreak of the virus in the state of Victoria in July 2020 and the associated reintroduction of restrictions on activity, as well as the impact that uncertainty and diminished confidence have on household spending and business hiring and investment plans.
In Singapore, the COVID-19 outbreak has progressively come under control and the authorities are gradually easing containment restrictions, including allowing more people to return to workplaces since end- September 2020, subject to meeting social distancing conditions. The Singapore economy contracted by 7.0% on a y-o-y basis in the third quarter of 2020, an improvement from the 13.3% y-o-y contraction in the previous quarter, according to the Ministry of Trade and Industry. The improved performance came on the back of the phased re-opening of the economy following the Circuit Breaker restrictions that were implemented between 7 April and 1 June 2020. MTI announced on 11 August 2020 that it expects 2020 GDP contraction of -7.0% to -5.0%.
In Germany, the UK and the Netherlands, following a surge in infection cases across Europe, the respective authorities have tightened their COVID-19 restrictions to contain the spread of virus. Accordingly, the pandemic is expected to have significant adverse effects on the German, British and Dutch economies. According to the World Bank, the German, British and Dutch economies may contract by 6.0%, 5.4% and 9.8% respectively in 2020.
As we continue to navigate through this period of global uncertainty, FLCT will continue to remain focused on managing any financial implications arising from COVID-19 and will continue to work closely with our tenant community to overcome this trying period together.
There has been no material impact to the FLCT portfolio to-date, although the situation remains dynamic with continued uncertainties. Capital and liquidity management remains a key strategic priority. FLCT’s resilient portfolio, strong balance sheet and financial flexibility, well positions the REIT to face the current challenging global environment.
Looking ahead, the REIT Manager will continue to focus on proactive asset and lease management strategies to generate sustainable long-term value for FLCT unitholders.