The HomeCo Daily Needs REIT (ASX: HDN) share price is in the red today despite the company reporting a massive rise in profit for the 2022 financial year (FY22) this morning.
Shares of the real estate investment trust (REIT) are currently trading for $1.28 each, a fall of 3.03% on Wednesday's closing price.
HomeCo describes itself as a property company that invests in convenience-based assets across target sub-sectors of neighbourhood retail, large format retail, and health and services.
Let's go over the key metrics of its financial report.
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What did HomeCo report?
Highlights from HomeCo's FY22 results include:
- Revenue from ordinary activities up 338.7% year-on-year (YoY) to $198.3 million
- Profit from ordinary activities up 970.6% YoY to $335.1 million
- Earnings before interest, taxes, depreciation, and amortisation (EBITDA) up 368.65% YoY to $125.6 million
- Funds from operations (FFO) up 30% YoY to $105.6 million or 8.85 cash distribution per unit (CPU)
- Distribution per unit (DPU) of 8.28 CPU, up 18% YoY
HomeCo said its growth in earnings is reflected in its recent acquisitions and developments, as well as the merger with Aventus, which it completed in March this year.
The Aventus merger will reportedly unlock $500 million for its property pipeline in the future.
The company made six acquisitions in 2022 worth $2.64 billion.
With the new acquisitions and mergers, HomeCo has a $4.6 billion property portfolio. The portfolio reportedly performs strongly with a 99% occupancy and 99% cash collection in FY22.
What else happened in FY22?
The merger with Aventus and acquisitions saw net assets increase in FY22 by 165.21% to $3.137 billion.
HomeCo joined the S&P/ASX 200 Index (ASX: XJO) in April 2022.
The company also updated investors on its environmental, social, and governance (ESG) policies, with a net-zero emissions target for FY28.
What did management say?
Commenting on the FY22 results, HomeCo Chair Simon Shakesheff said:
Today's result builds on HDN's strong track record since listing in November 2020 … The transformational merger with Aventus has been successfully integrated and the management team has maintained strong operational momentum with over 99% occupancy and 99% rent collection in FY22.
The management team is capitalising on HDN's enhanced portfolio scale to drive rental growth in a higher inflation and interest rate environment as demonstrated by positive leasing spreads of +5.7% and comparable NOI growth of +5.1%.
How did Homeco's performance compare with expectations?
HomeCo reported that it either met or exceeded previous guidance estimates across its key financial metrics.
The company's FFO of 8.85CPU exceeded the guidance of 8.8CPU. Its DPU was also in line with expectations.
What's next?
HomeCo gave guidance for the rest of this year. The company expects an 8.6CPU with a DPU guidance of 8.3 cents. The expected DPU reflects a 97% payout ratio.
Moving forward, the company will focus on its development pipeline that's helped by a 30.6% pro forma gearing, which is at the bottom of its 30% to 40% target gearing range.
Some $75 million worth of developments is expected to be delivered in FY23 with a 7% return on invested capital (ROIC).
HomeCo share price snapshot
The HomeCo share price is currently down 17.5% year to date.
Meanwhile, the S&P/ASX 200 A-REIT Index (ASX: XPJ) is down 19% over the same period.
HomeCo has a market capitalisation of $2.73 billion.
