Region Group delivered a robust FY25 with a $212.5 million statutory profit driven by property revaluations, steady distributions, and strong portfolio metrics. The REIT also advanced sustainability goals and announced CEO retirement plans, setting the stage for strategic continuity.
- Statutory net profit surged 1,128% to $212.5 million
- Funds from Operations per security rose modestly to 15.5 cents
- Distributions maintained at 13.7 cents per security, fully covered by AFFO
- Portfolio occupancy steady at 97.5% with 3.2% NOI growth
- CEO Anthony Mellowes to retire in May 2026; succession planning underway
Strong Financial Performance
Region Group (ASX – RGN) reported a standout full-year result for FY25, posting a statutory net profit after tax of $212.5 million, a remarkable 1,128% increase over the prior year. This surge was largely driven by positive revaluations of its investment property portfolio, reflecting improved market conditions and active asset management.
Underlying operational earnings, measured by Funds from Operations (FFO), showed a modest increase to 15.5 cents per security, up 0.6% from FY24. Adjusted Funds from Operations (AFFO), a key cash earnings indicator, also edged higher to 13.7 cents per security, supporting the Group’s steady distribution payout of 13.7 cents per security, fully covered by AFFO.
Portfolio and Operational Highlights
The Group’s portfolio of 87 convenience-based retail properties, valued at $4.37 billion, maintained a high occupancy rate of 97.5%. Comparable net operating income (NOI) grew by 3.2%, underpinned by strong leasing activity and rental growth, including specialty leasing spreads averaging 3.7%. The weighted average lease expiry (WALE) remains healthy at 4.9 years, with anchor tenants Woolworths and Coles securing over 97% of properties.
Region Group continued its capital recycling strategy, acquiring the Kallo Town Centre for $64.5 million and completing the Delacombe Town Centre Stage 2 development, now 88% leased. The Group divested seven non-core assets for $227.5 million, demonstrating disciplined portfolio management aligned with its investment criteria.
Capital and Sustainability Initiatives
With assets under management (AUM) growing 8.7% to $5.2 billion, the Group’s balance sheet remains robust. Gearing was maintained at 32.5%, within the target range, and 97% of debt was hedged or fixed, mitigating interest rate risk. Available liquidity stood at $313.3 million, with no debt maturities until FY27.
Region Group also advanced its sustainability agenda, investing $14 million in solar photovoltaic (PV) installations and embedded networks, progressing towards its target of net zero Scope 1 and 2 greenhouse gas emissions by FY30. The Group’s social initiatives included supporting 196 students through its partnership with The Smith Family.
Leadership Transition and Remuneration
In a significant leadership update, CEO Anthony Mellowes announced his retirement effective May 2026. The Board has initiated a formal succession process aligned with its approved plan, aiming for a smooth transition. Executive remuneration outcomes for FY25 reflected the Group’s performance, with short-term incentives awarded at 66% of maximum for the CEO and incoming CFO David Salmon, linked to financial and sustainability targets.
The remuneration framework for FY26 will introduce a new performance metric focused on reducing specialty vacancy, alongside continued emphasis on AFFO growth and net operating income, reinforcing management’s commitment to resilient cash flows and long-term security holder value.
Outlook
Region Group’s FY26 guidance anticipates FFO of at least 15.9 cents per security and AFFO of 14.0 cents, with a distribution payout ratio targeting approximately 90% of FFO and 100% of AFFO. The retail property sector’s defensive fundamentals remain intact, supported by non-discretionary retail tenants and long leases, positioning Region Group well for sustainable growth.
Bottom Line?
With a strong FY25 behind it and leadership succession underway, Region Group is poised to navigate retail property challenges while advancing sustainability and growth.
Questions in the middle?
- Who will succeed Anthony Mellowes as CEO, and what strategic shifts might follow?
- How will national tenant administrations impact future rental income and portfolio risk?
- Can Region Group accelerate funds under management growth to diversify earnings further?