Company Interview / Region Group lifts guidance as 1H profit more than doubles

Key points:

Region Group (ASX:RGN) statutory net profit after tax more than doubles to $180 million Occupancy rates improve with annual escalations supporting NOI growth Interest rate exposure is well managed through comprehensive hedging Recent acquisition in WA adds strategic and operational value - Commitment to sustainability with a 2030 net zero target and solar initiativesRegion Group (ASX:RGN) has achieved a significant increase in first half statutory net profit after tax, rising to $180 million from $81.8 million in the previous year. David Salmon attributes this remarkable gain to both portfolio growth and higher operating earnings, underpinned by strong capital management. Funds from operations (FFO) per security lifted by almost 4% to 7.9 cents, with a distribution of 6.9 cents per security. The group has upgraded its full-year outlook, guiding FFO to approximately $0.16 per security.

Salmon highlights improved occupancy rates, now at 97.7%, and points to annual escalations embedded in leases and positive leasing spreads, driving comparable net operating income (NOI) growth between 3% and 3.5%. The uplift in statutory profit mainly stems from increased property valuations, driven by NOI growth and capitalisation rate tightening. With interest rates in focus, Salmon notes Region Group’s robust hedging strategy, fully hedged for the current year and well covered for the next two years at attractive rates around 3%.

The group recently acquired a shopping centre in Western Australia for $53 million at a yield of 6.37%, illustrating a disciplined approach to acquisitions. Sustainability remains a core focus, with a net zero target by 2030 and an extensive solar programme in place across its centres.