In what could be the first in a number of similar statements from listed CBD and retail property companies, GPT, the big office block and shopping mall owner and investor has withdrawn its full year earnings guidance and distribution forecasts.
It is the second year in a row that Covid has forced GPT to abandon its guidance for investors and analysts and it will likely be the first of quite a few similar statements from others in the sector.
The question now for investors is the GPT decision a one-off or the apocryphal canary in the mine of a weakening outlook for property and retailing thanks to the Delta variant of Covid.
Those others with possible plans to warn on guidance include Mirvac (CBD, units and retail), Dexus (CBD and retail), Stockland (residential property and retail), as well as mall operators like Scentre, SCA Property group (Shopping Centres of Australia) and Vicinity.
All have interim (Scentre) or full year results due next month (Mirvac, Stockland, Vicinity and SCA, Dexus).
Other companies with retail mall interests include Lendlease, Charter Hall.
This time round there’s no JobKeeper to support the sector and its hundreds of thousands of employees, just two lower schemes with smaller payments and no help to allow employers to retain employees.
That is going to see a rise in unemployment in NSW in coming months with the Sydney lockdown to persist.
As well there are some chains that might follow GPT when they report June 30 results – JB Hi Fi, Super Retail Group, Bapcor, Mosaic Brands, Accent.
GPT dropped its 2020 guidance on March 19 last year as the country went into a national lockdown as the first wave of the virus disrupted businesses at all levels.
Guidance was not reinstated until the release of the group’s December 31 financial report and annual results in April of this year.
But on Monday, July 26, GPT again dropped the forecasts for the December 31 full year, blaming the new lockdowns, especially in Sydney and Victoria.
“The GPT Group today announced that given the uncertainty in relation to the duration and impacts of the measures being implemented to suppress the spread of COVID-19 in both Sydney and Melbourne, it is appropriate to withdraw its Funds From Operations (FFO) and distribution guidance for the 12 month period to 31 December 2021.
GPT CEO Bob Johnston said in the statement to the ASX: “In line with strengthening economic conditions, we have seen a strong recovery across our retail portfolio during the course of the first six months of this year.”
“However, given the recent restrictions in both Sydney and Melbourne and the uncertainty as to when these restrictions will be lifted and the ongoing risk of additional measures, we believe it is prudent to withdraw FFO and distribution guidance for the full year.
“GPT has a high-quality diversified portfolio, an exceptionally strong balance sheet and liquidity position, and we expect that we will see a recovery once normal trading conditions resume as we have experienced previously.”
In April, GPT forecast an increase in Funds from Operations of 8% in 2021 compared with 2020 and a 12% in distributions per security. The new guidance was released on the proviso that Australia’s economic recovery continues and there are no pandemic disruptions.
GPT’s 2020 Funds From Operations fell 9.6% to $557.4 million in 2020. GPT also booked a net loss of $213.1 million after $866.5 million was wiped from the value of its retail portfolio.
Given the new lockdowns, a decision on valuation in the interim results is on the cards, but the company will probably delay any final decision to the annual valuations at the end of the year to allow for more clarity on the length of the Sydney lockdown.
GPT will release its 2021 Interim Result on 16 August 2021 and will provide an update on trading conditions at this time.
