The BWP Trust (ASX: BWP) share price is on the move on Wednesday following the release of its half year update.
At the time of writing, the commercial property company's shares are up 1% to $4.33.
How did BWP perform in the first half?
This morning the Bunnings landlord delivered a half year result that was largely flat on the prior corresponding period.
For the six months ended 31 December, BWP reported revenue of $76.1 million, which compares to $76.25 million for the same period last year.
It was a similar story for its profit before gains on investment properties, which came in at $56.9 million. This compares to $57.15 million a year earlier.
However, its overall profit for the first half climbed 6% over the prior corresponding period to $144 million. This was driven by an 11% increase in gains in the fair value of investment properties to $2.6 billion. The latter was in line with the value of its properties at the end of FY 2020.
In light of its flat profit before gains on investment properties, the BWP board has opted to maintain its interim distribution at 9.02 cents per unit. This was in line with management's guidance for flat distributions in FY 2021.
What about other metrics?
At the end of the period, BWP reported like-for-like rental growth of 2% for the 12 months to 31 December 2020.
It finished the period with a weighted average lease expiry of 4.3 years, with 97.4% of its properties leased.
BWP's gearing (debt/total assets) stood at 17.8% and its weighted average cost of debt was 3.2% per annum for the six-month period.
Outlook
Management advised that the company is well positioned in the current COVID-19 environment due to the significant majority of its rental income coming from Bunnings and other national large format retailers. It notes that these are all trading well during this time.
Rent reviews are expected to contribute incrementally to property income for the second half. It advised that there are 41 leases to be reviewed to the CPI or by a fixed percentage increase during the second half of FY 2021. There are also 19 market rent reviews of Bunnings Warehouses that remain unresolved and are in the process of being finalised.
In addition, it expects demand for Bunnings Warehouse properties to remain relatively stable in the near-term given the current low interest rate environment and the strength of the Bunnings covenant.
BWP's primary focus for the remainder of FY 2021 will be on leasing vacancies in the portfolio, progressing store upgrades, and extending existing leases with Bunnings through the exercise of options.
Once again, management reiterated that it expects its full year distribution to be similar to the one paid in FY 2020. Though, it warned that its distribution may be reviewed in the event that COVID-19 impacts are more severe or prolonged than anticipated.
