Release Date: February 26, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Cromwell Property Group (ASX:CMW) successfully completed the sale of its European platform, significantly reducing net debt by 66% since 2021.
• The company's gearing has decreased to 29.1%, below its target range, providing financial stability.
• Strong asset management in Australia resulted in stable earnings of $78 million from the investment portfolio.
• The group has a strong tenant mix with 70% of portfolio income from low-risk tenants like government and major corporations.
• Cromwell Property Group (ASX:CMW) has significant undrawn debt available, offering flexibility for future growth opportunities.

Negative Points

• Underlying profit decreased by 34.4% compared to the prior period due to the sale of non-core assets.
• The company reported a statutory loss of $28.6 million for the six months ending December 2024.
• Investment portfolio valuations declined by $99 million, impacting tangible assets per security.
• Funds and asset management income decreased by 33% over the half year, with a notable 50% decline in European earnings.
• The distribution payout ratio was high at 106.4% to AFFO, indicating potential sustainability concerns.

Q & A Highlights

• Warning! GuruFocus has detected 9 Warning Signs with ASX:CMW.

Q: The business is significantly more simplified, but you still haven't provided OAPS guidance. Is there a reason for that? A: Jonathan, CEO, explained that the board has evolved a habit over the last three years of not providing guidance. Additionally, they are in a flux moment for capital deployment, which makes providing guidance problematic. The board will review this at each meeting and may change the practice at the end of the financial year.

Q: Post the EU sale, how will the corporate cost line evolve? A: Jonathan, CEO, mentioned that they expect the corporate cost line to decrease for the full year, and this change will be reflected in the full-year numbers.

Q: Can you comment on the effective rent spreads on the 16,000 square meters of leasing done recently? A: Rob, Chief Investment Officer, stated that the total reversion was about 2.6% down due to extending leases and reducing rents slightly. Incentives were about market level, except for one elevated case with the federal government in Collin Street.

Q: How is your physical occupancy tracking, especially with government tenants? A: Rob, Chief Investment Officer, noted that occupancy varies by location. New South Wales is performing better than Queensland and Canberra. Generally, occupancy is around three days a week, but this varies by state.

Q: What are your thoughts on the office sector given recent headwinds? A: Jonathan, CEO, believes that despite demand uncertainty and oversupply, investor demand will improve for well-located assets with affordable rents. They see potential in the retail sector, particularly in neighborhood convenience and large format retail real estate.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.