SKG -8.3%: disappointed the market with their FY26 result today with a material reset to FY27 distributions as higher/restructured financing costs flow through earnings. FY27 distribution guidance of 4.5c per security was well below Citi’s 6.35c estimate, overshadowing an otherwise relatively resilient operating result.
Key results:
- Funds from Operations (FFO) of $82.1m, down 3.4% YoY.
- Total revenue per available metre of $341/sqm, up 0.7%.
- Australian revenue per available metre rose 2.7% to $348/sqm, while New Zealand fell 11.7% to $295/sqm.
- Rental rates increased 1.3% to $378/sqm.
- Occupancy declined 100bps to 90.2%.
- FY27 distribution guidance of 4.5c, with an 80-100% payout ratio.
The underlying portfolio is holding up reasonably well, particularly in Australia, but the financing restructure has materially lowered near-term distributable earnings. New Zealand remains another soft spot, while the decline in occupancy suggests there is still some pressure across the portfolio.
MM’s view: The magnitude of the distribution cut explains today’s sell-off, particularly for a REIT where income is central to the investment case. However, FY27 now looks like a reset year, with the lower distribution rebasing expectations and financing costs. The operational performance is more resilient than the share-price reaction suggests, but investors will need greater confidence around occupancy.
