Abacus Group’s Rising Gearing and Storage King Stake Pose Future Risks
Abacus Group delivered a strong FY25 result with a significant profit increase and steady distributions, underpinned by resilient office and retail portfolios and a strategic focus on capital partnering.
- Statutory net profit surged to $26.9 million, up $267.9 million from FY24
- Funds from Operations rose 1.7% to $82.7 million, distribution steady at 8.5 cents
- Office portfolio operating earnings grew 9.8%, driven by rent growth and leasing activity
- Retail earnings increased 8.8%, with stable occupancy and tightening capitalisation rates
- Maintained gearing at 34.5% and secured an A+ credit rating from Japan Credit Rating Agency
Robust Financial Performance in FY25
Abacus Group (ASX – ABG) has reported a standout financial year ending June 30, 2025, with a statutory net profit of $26.9 million, marking a dramatic increase of $267.9 million compared to the previous year. This surge reflects a combination of strong operational earnings and strategic asset management across its diversified property portfolio.
Funds from Operations (FFO), a key measure of cash earnings, rose modestly by 1.7% to $82.7 million, supporting a distribution of 8.5 cents per security, consistent with prior guidance. The group’s net tangible assets per security slightly declined by 2.3% to $1.72, while the weighted average capitalisation rate increased by 27 basis points to 6.77%, indicating a cautious but stable valuation environment.
Office and Retail Portfolios Drive Growth
The office segment demonstrated resilience with operating earnings up 9.8%, fueled by rent reviews averaging 3.7%, leasing spreads of 5.8%, and notable surrender fees totaling $8.3 million from key properties in North Sydney and Brisbane. The group completed 89 leasing deals covering over 44,000 square meters, with an average leasing spread of 7.9% on new agreements, signaling healthy demand particularly in Sydney and Brisbane’s A-grade office markets.
Meanwhile, the retail portfolio posted an 8.8% increase in like-for-like operating earnings, supported by stable occupancy at 95.5% and a tightening weighted average capitalisation rate to 6.46%. These results suggest strengthening retail sentiment and effective asset management despite broader economic uncertainties.
Self Storage and Investment Management Contributions
Abacus Group’s 19.8% stake in Abacus Storage King (ASK) contributed $16.8 million in equity returns, up 4.3% year-on-year. ASK’s portfolio showed robust performance with revenue per available meter (RevPAM) increasing 4.5%, driven by rental rate growth and occupancy rising to 91.2%. Investment management fees from ASK and commercial management added $19.6 million, representing 12% of operating earnings, highlighting the growing importance of management services in the group’s earnings mix.
Capital Management and Strategic Outlook
Abacus maintained a disciplined capital position with gearing at 34.5%, comfortably within its target range, and an interest coverage ratio steady at 2.5 times. The Japan Credit Rating Agency affirmed the group’s financial strength with an A+ credit rating and stable outlook, enhancing its capital market flexibility.
Looking ahead, the group provided FY26 distribution guidance of 8.5 cents per security, targeting a payout ratio of 85%-95% of FFO, assuming stable business conditions. Management emphasized ongoing portfolio optimisation, divestment of non-core assets, and a strategic focus on capital partnering and joint ventures to drive long-term value creation.
CEO Steven Sewell underscored the group’s commitment to navigating evolving market dynamics through selective investment and proactive asset management, signaling confidence in delivering resilient performance through the property cycle.
Bottom Line?
Abacus Group’s FY25 results underscore steady growth and strategic discipline, setting the stage for cautious optimism amid evolving market conditions.
Questions in the middle?
- How will changes in the management and ownership structure of Abacus Storage King impact future earnings?
- What specific non-core assets might Abacus divest to enhance portfolio quality and capital efficiency?
- How will rising office rents and leasing spreads influence occupancy and incentives in FY26?