Have we reached "Peak Bunnings"?
ASX-listed BWP Trust, which owns many of the sites occupied by Wesfarmers strongest chain, the hardware group Bunnings stores, may have just gone ex growth.
Security holders in the trust were warned yesterday not to expect any growth in distributions this year which it said would at least be at the level of 2017-18 (which edged up 1.7%).
The company said in its annual results commentary yesterday it expects to complete the divestment of as many as four of its properties in the 2019 financial year.
As well, the $2.2 billion property trust plans to transition other of its former Bunnings Warehouse stores to alternative uses. Bunnings had told the trust in 2016-17 that it intended to vacate up to seven trust owned stores and relocate to other locations. That process is continuing.
"The Trust is in a strong financial position at year end with a high quality core portfolio of well-located Bunnings Warehouse properties, balance sheet flexibility and good future prospects for Trust-owned properties that Bunnings has vacated, or is considering vacating,” the trust said yesterday in its 2017-18 results release.
"For any properties owned by the Trust that Bunnings decides to vacate, a detailed assessment is undertaken as to the best alternative use of the property, which in some cases may include divestment.
"During the year the Trust took advantage of favourable market conditions to enter into agreements to divest five properties that Bunnings has vacated, or is in the process of vacating.
"A number of acquisition opportunities to grow the portfolio were reviewed during the year, however none met the Trust’s short or longer term return requirements on a risk adjusted basis, nor were they considered to be uniquely valuable from a location perspective.
"In November 2017, the Trust completed the sale of its Dandenong, Victoria property which had previously been occupied by Bunnings. The net sale proceeds were $15.9 million.
In February 2018, the Trust advised that four other properties which had been vacated, or were soon to be vacated by Bunnings, were subject to option agreements. These properties included: Altona, Victoria; Burleigh Heads, Queensland; Oakleigh South, Victoria and Epping, Victoria,” directors said yesterday.
That will have “some impact on overall rental income” for the year the company said, but it expects to at least maintain distribution growth equivalent to the 2018 financial year. Directors said "Capital profits will be utilised to support distributions as required during this period of transition.”
Revenue edged up to $153.4 million from $152.5 million – an indication of the slowing of property price growth and rents.
BWP Trust’s net profit fell for the 2018 financial year by 18% to $183.1 million, mainly due to a 37% fall in the amount from property revaluations – $69.88 million as against $111.34 million in 2016-17.
That saw total net profit of $183.09 million, down from $223.79 million for the previous year.
Total distribution rose 1.7% to 17.81 cents a security from 17.51 with a final of 9.03 (8.888c). That looks like being the best for the year to June 30, 2019.
The results and warning about a this year’s distribution saw the securities close down 1.8% at $3.25. They are still up around 3% for the year so far.
