Abacus Property Group – Annual Financial Report 2018

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.
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