Bunnings’ property arm, BWP Trust, has posted a solid 48 per cent increase in net profit for the 2016 financial year, backed by some big revaluations and higher rental growth.
BWP Trust made a net profit of $310.5 million in FY16, with revenue up 4 per cent to $150.2 million.
Underlying profit improved 6 per cent to $107.8 million, with the net profit result driven by an 87 per cent surge in revaluations of BWP's investment properties to $202.6 million.
In a statement, the company said the income result was mostly due to rental growth from its existing property portfolio, as well as additional rental income from store expansions completed during the year.
“Finance costs of $24.3 million were 5.8 per cent lower than last year, with higher borrowing levels being offset by a lower weighted average cost of debt,” it said.
“The weighted average cost of debt for the year was 5 per cent, compared to 5.5 per cent for the previous year. The reduced cost of debt was the result of lower interest rates and reduced bank fees and margins compared to the previous year.”
BWP declared a final dividend of 8.5 cents a share, fully franked – that’s up 4 per cent on its FY15 final payout.
Chairman Erich Fraunschiel said the company expected further rental growth from its existing property portfolio in FY17 after taking into account expectations of low inflation in the future.
“The current macro-economic environment continues to drive strong demand for property assets, particularly assets with long lease terms, and strong financial covenants,” he said.
“While this is positive for the valuation of the trust’s existing property portfolio, it is currently very challenging creating value for the trust from new store acquisitions.
“The trust remains financially disciplined in this regard and will only invest in additional new properties where there is potential for good rental growth and asset valuation upside over the medium term.
“While these market conditions prevail, the trust will focus on store upgrades and the re-leasing/development of any properties vacated by Bunnings.
“Store upgrades will enable Bunnings to enhance its offer to customers and, in so doing, generate additional rental income and increased lease tenure for the trust.”
BWP shares were unchanged at $3.75 each at the close of trade.