Abacus Property Group – Annual Financial Report 2018

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ABACUS PROPERTY GROUP DIRECTORS’ REPORT 30 June 2018 OPERATING AND FINANCIAL REVIEW (continued) GROUP RESULTS SUMMARY The Board monitors a range of financial information and operating performance indicators to measure performance over time. We use several measures to monitor the financial success of our overall strategy. The key measure is underlying profit. 2018 2017 Revenue ($ million) 307.9 251.6 Total income ($ million) 473.7 463.4 Statutory net profit excluding non-controlling interests ($ million) 243.7 285.1 Underlying profit^ ($ million) 183.3 186.8 Underlying profit per security^ (c) 31.73 32.71 Cashflow from operating activities ($ million) 194.3 116.2 Cashflow from operating activities per security (c) 33.53 20.35 Distributions per security^ (c) 18.00 17.50 Interest cover ratio 8.7x 7.4x Weighted securities on issue^ (million) 577.8 571.2 ^ Abacus The Group earned a statutory net profit excluding non-controlling interests of $243.7 million for the year ended 30 June 2018 (2017: $285.1 million). This profit has been calculated in accordance with Australian Accounting Standards. It includes certain significant items that need adjustment to enable securityholders to obtain an understanding of Abacus’ underlying profit of $183.3 million, a 2% decrease on the 2017 underlying profit of $186.8 million. 4
DIRECTORS’ REPORT 30 June 2018 ABACUS PROPERTY GROUP OPERATING AND FINANCIAL REVIEW (continued) GROUP RESULTS SUMMARY (continued) The underlying profit reflects the statutory profit as adjusted to present a figure which reflects the Directors’ assessment of the result for the ongoing business activities of Abacus, in accordance with the AICD / Finsia principles for reporting underlying profit. The consolidated profits / (losses) which belong to the securityholders of Abacus Hospitality Fund and Abacus Wodonga Land Fund are excluded as these profits cannot and do not form part of the distributable income of Abacus. The calculation of underlying profit excludes items such as unrealised fair value gains / losses on investment properties, unrealised provision gains / losses, adjustments arising from the effect of revaluing assets / liabilities carried at fair value (such as derivatives, financial instruments and investments), the consolidated profits / (losses) of managed funds which do not form part of the assessable or distributable profits of Abacus and other adjustments in the determination of underlying profit including transactions that occur infrequently and those that are outside the scope of Abacus’ core ongoing business activities. Underlying profit is the basis on which distributions are determined. The reconciliation between the Group’s statutory profit excluding non-controlling interests and Abacus’ underlying profit is below. This reconciliation and the underlying profit have not been reviewed or audited by the Group’s auditor. 2018 2017 Consolidated statutory net profit after tax attributable to members of the Group 243,709 285,097 add back: Consolidated profits relating to the managed funds (these profits are excluded as the profits of the managed funds cannot and do not form part of the assessable and distributable income of Abacus) 1,169 (27,165) Net profit attributable to Abacus securityholders 244,878 257,932 $'000 $'000 Certain significant items: Net change in fair value of investment properties held at balance date (60,724) (74,773) Net change in fair value of investments and financial instruments held at balance date 6,363 10,677 Net change in fair value of derivatives (730) (4,317) Net change in fair value of property, plant and equipment and investment properties included in equity (4,635) (718) accounted investments Net tax benefit on significant items (1,831) (1,999) Underlying profit attributable to Abacus securityholders 183,321 186,802 2018 2017 Basic earnings per security (cents) 42.18 49.91 Basic underlying earnings per security^ (cents) 31.73 32.71 Distribution per security^ (cents - including proposed distribution) 18.00 17.50 Weighted average securities on issue (million) 577.8 571.2 ^Abacus During the 12 months to 30 June 2018 the real estate markets across Australia continued to see historically low interest rates as the RBA maintained the cash rate at 1.5% while the forward guidance is for an ultimate increase in the cash rate. This outlook continues to support Australia as an appealing real estate market to global capital seeking high quality assets with attractive yields in a global low yield environment. These conditions saw further cap rate compression across the majority of sectors of the market from traditional asset classes lead by the highest quality of office, retail and industrial through to alternative asset classes of self-storage, healthcare facilities, manufactured homes and hotels/pubs. A strong leasing market, particularly in Sydney and Melbourne office markets and general industrial markets during the year also contributed to the attractiveness of real estate assets to domestic and global investors. Increased merger and acquisition activity in the listed real estate markets has also intensified valuations and interest in direct real estate markets. The strength of the market continues despite a backdrop of economic uncertainty and disparate economic activity throughout Australian States. 5
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Abacus Property Group Level 34 Aust
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Abacus Property Group – Annual Financial Report 2018

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