Rural Funds Group

For FY26, net property income from leased assets rose 6% to over $100 million, adjusted funds from operations were $45.4 million or $0.117 per unit, and reported earnings were $124 million, up $100 million year over year. Distributions for the year totaled $0.1173 per unit, with a payout ratio of 100.6%. On a pro forma basis after announced asset sales, adjusted total assets were about $1.9 billion, adjusted NAV per unit increased from $3.08 to $3.22, interest-bearing liabilities fell to $607 million, and gearing dropped from 39.8% to 31.8%. For FY27, management guided to AFFO of $0.117 per unit and distributions of $0.1173 per unit, both unchanged from FY26; Tim Sheridan said AFFO would have been closer to $0.125 per unit absent the macadamia price decline and weaker Central Queensland dryland crops.

David Bryant framed the strategy as developing agricultural assets to lift both income and capital growth, citing examples like Kaiuroo, Rookwood, and Rewan. He emphasized that the current development cycle is nearing completion, with the group moving from intensive capex toward lower committed expenditure, and said the balance sheet now has capacity to pursue new opportunities. His tone was candid and somewhat frustrated about flat AFFO, but he repeatedly said the group will “do something about it” and expects growth drivers from lease indexation, completed developments, and potentially new accretive opportunities.

Tim Sheridan focused on the financial reset: net property income increased 6%, AFFO reached $45.4 million, earnings were $124 million, and distributions were $0.1173 per unit. He highlighted that contracted sales were completed at about an 18% premium to book, reduced debt to $607 million pro forma, and brought gearing down to 31.8%, within the 30% to 35% target range. He also noted facilities of $891 million, about $301 million of undrawn headroom, a 3.26x interest cover ratio versus a 1.5x covenant, 82.3% of debt hedged or fixed, and a weighted average cost of debt of 4.69%.

Analysts pressed on whether lower macadamia prices could hurt leasing at Rookwood; management said the weaker market is a near-term deterrent, but leasing prospects should improve as the cycle turns and the orchards mature. Questions also focused on how the extra pro forma headroom will be used; management declined to specify opportunities, saying the capacity will be deployed to increase FFO per unit. On capex, management said FY27 should be about $47 million and then decline further, with Tim Sheridan suggesting around $30 million in FY28 and minimal capex by FY30. Management also said FY27 AFFO would have been closer to $0.125 per unit without the macadamia price cut and dry-season crop weakness.