Abacus Securityholder Review & Annual Financial Report 2016 - page 9

Securityholder
Review
07
2016
We always seek to improve and reweight
the balance sheet to larger, higher quality
assets with a focus on disciplined capital
management strategies.
Abacus securities delivered another strong
return during the year with a 13.7% total return
for the 12 months to 30 June 2016. Pleasingly,
Abacus also experienced strong growth in its
balance sheet assets during the year, driving
net tangible assets (NTA) per security growth
of 6.8% from $2.49 to $2.66 at 30 June 2016.
This contributed to a return on equity for
securityholders for the 12 months to 30 June
2016 of 13.7%.
The Group’s annual financial report includes
our operating and financial review (OFR).
The objectives of the OFR are to provide our
securityholders with a narrative and analysis to
supplement the financial report and assist in
understanding our operations, financial position,
business strategies and prospects. It contains
information you need to make an informed
assessment of the Group. We encourage you to
read the OFR.
Sustainability
Abacus is constantly improving and expanding
our progress across our sustainability activities.
We are pleased to report that we took another
step forward on our sustainability reporting
journey by engaging a specialist to begin our
Global Reporting Initiative (GRI) G4 gap analysis
and materiality assessment. We will deliver a
GRI G4 core sustainability report in FY17 which
will be prepared in accordance with the Global
Reporting Initiative’s G4 reporting guidelines
‘core’ requirements which have become the
global framework for sustainability reporting.
We have started this process and are well
on our way. We are continually evolving our
processes, enabling us to better benchmark the
sustainability of
the Group.
We are very proud of our sustainability protocol
and strategies throughout the year. This report
illustrates the environmental footprint from the
Group’s operations, and management and key
performance indicators over time, to help us
manage and reduce our consumption of natural
resources. We encourage you to read this report.
Abacus is an active core plus manager. We
acquire assets that we believe are mispriced
by the market and fix that mispricing through
active management. This strategy may result in
mature assets that have been transformed being
returned to the market. We believe this strategy
has a positive impact on the environment as we
extend and rejuvenate the life cycle of assets that
may be on their way to becoming obsolete and
ultimately end in demolition and rebuilding. This
causes a negative impact on the environment
and the use of additional natural resources.
(Unfortunately, any asset that has benefited from
these sustainability initiatives and has been sold
is not captured in our metrics.)
We continue to improve the environmental
sustainability of our property portfolio through
active ongoing property management to
incorporate more efficient plant and equipment.
The environmentally focused management of our
buildings contributes to capital appreciation of
these assets over time.
Outlook
Abacus has once again delivered a strong
financial result. We are particularly pleased
to have generated positive returns across our
business segments. The benefits of our multi-
business model have been validated. Strong
contributions from our self-storage and property
ventures businesses offset reductions in income
from our commercial portfolio (resulting from
recent asset sales). We have successfully
invested across our self-storage and residential
development platform, selectively adding strong
assets in sectors offering the best risk-adjusted
returns at this time in the cycle.
Our focus in FY17 is the completion of a number
of our residential development projects in our
property ventures business. We anticipate
almost $125 million of realisations from
residential developments over the next year,
which will reduce our exposure to residential
by 30%. We expect to reinvest this additional
capital in our core business to grow our
recurring earnings through investments into
the commercial portfolio and self-storage
facilities. This will provide scope to grow
distributions to securityholders in the future.
The business remains strong with a conservative
balance sheet and capacity for future
opportunities. We have a suite of assets and
projects that we believe can deliver strong
income and capital growth. We continue to
remain active in the market despite the tight
asset pricing and challenges across leasing
markets and we remain confident that our
residential development opportunities, which
are 73% exposed to the strong Sydney market,
should deliver strong risk adjusted returns over
the next two years.
Finally we and the other members of our Board
would like to thank you, our investors and our
other stakeholders, for your continuing support.
We are pleased with what we have been able
to achieve and we are confident that we are
positioning Abacus to be able to continue to
deliver strong long term total returns. This would
not be possible without the dedication and
hard work of everyone at Abacus. Therefore, on
behalf of the Board, we would like to thank our
executive team and all our staff.
John Thame,
Chairman
Frank Wolf,
Managing Director
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