Dexus Convenience Retail REIT Reports Resilient FY23 Performance Amidst Challenging Market Conditions

Sydney, 7 August 2023 – Dexus Convenience Retail REIT (ASX:DXC) has released its financial results for the year ending 30 June 2023, highlighting a robust performance in the face of economic headwinds. The result showcases the REIT's strategic positioning and active management efforts in a challenging market.

Guidance Met with FFO and Distributions DXC achieved its fiscal year 2023 guidance by delivering Funds From Operations (FFO) of $29.8 million, translating to a distribution of 21.6 cents per security. This steady performance, despite a 5.3% decline from the prior year, demonstrates the REIT's ability to navigate market challenges.

Source: Kapitales Research

Resilient Portfolio and Income Growth

The REIT's portfolio showcased resilient property income growth, with a solid average rent review of 3.7% during the period. Like-for-like net operating income growth reached 2.7%, further contributing to its steadfast performance. The portfolio's strategic focus on high-quality tenant covenants played a significant role in maintaining top-line growth.

Strengthened Capital Position and Divestment Strategy

DXC made strides in strengthening its capital position through an expanded divestment program, generating $52.3 million in proceeds. This initiative not only bolstered the balance sheet but also improved the overall quality and operating metrics of the portfolio. The REIT's pro forma gearing was reduced to 31.8%, falling within its targeted range of 25% to 40%.

Outlook and Sustainability Initiatives

Looking ahead, DXC remains committed to generating defensive income with embedded growth for its investors. The REIT plans to preserve its portfolio attributes, maintain prudent capital structures, and actively optimize its holdings. DXC's dedication to sustainability is evident through its renewable energy sourcing and collaboration with tenants on emission-reduction strategies.

Positive Industry Resilience

DXC's relative valuation resilience, especially in the service station and convenience retail asset sectors, highlights the predictability of cash flows and strong tenant covenants. The weighted average cap rate's positive spread against the marginal cost of debt adds to the REIT's resilience.

FY24 Guidance and Distribution Yield

DXC has provided guidance for the upcoming fiscal year 2024, projecting FFO and distributions within the range of 20.7 to 21.1 cents per security. This outlook offers an attractive distribution yield of over 8%, supported by contracted rental increases and current interest rate expectations.

In a subdued market environment, Dexus Convenience Retail REIT's results underscore its ability to navigate challenges, capitalize on strategic divestments, and uphold its commitment to sustainability. As the market evolves, DXC remains poised to leverage its expertise and capitalize on growth opportunities while delivering value to its stakeholders

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