Funds from operations, although its a number that the fund...

Funds from operations, although its a number that the fund managers like to use because its 'attractive', its also misleading.
At a minimum one should use AFFO, ie adjusted funds from operations.
As Volf highlighted about FFO don't include a number of expense items.

For myself I look at the investor presentation for management's comments and then I wiz straight to the formal accounts: The Financial Reports.

A quick view of the financial reports shows a picture that is not nearly as harmonious and glowing as the investor presentation.

Firstly the P&L above.
Forget Net loss on fair value of investment properties, this is just a valuation of property thing, irrelevant when share price is trading deeply below book value.

$85m revenue (round number) less
Rates, finance costs, management fees, loss on fair value of derivative (we need this because this will be movements in interest rate hedges), other expenses = $65m (round numbers)

$85-$65 = $20m
Shares on issue 597.3
$20/597.c = 0.033c

So in quick basic P&L english 3.3c earned. But dividends for six months was 6c.

So Volf is correct, COF is paying at least part of the dividends out of capital (or by borrowing more).

Next the Balance Sheet:


For me this goes into the 'too hard basket, this time around'.
Why: there is not significant movement, some writedowns on investment properties, current assets sufficient for current liabilities, non-current liabilities pretty static.


Next....

Lets go to the cash flow statement:


Now cash flow statements are good and bad. Good because no BS. Its hard cash and no accounting financial policy rubbish. Cash in and cash out: simple.

But bad because it can be too simplistic, and may not show 'nuances' in the evolution of the financial statements over time. Especially movements in debtors, creditors and other issues. Sure a super sluth can then tie back to balance sheet, but I prefer to be approximately right, than precisely wrong!!!

Anyway, I think this is what Volf is picking up on, and whilst he can be dramatic and uber bear, he is not entirely wrong.

Net cash from operating activities is $36m
$36m/597m shares = 6c. Yes enough to cover the 2 dividends of 3c each. Just...

Cash flows from investing activities: $8m but only after selling a couple of properties to pay for lease incentives and maintenance cap ex. In the long run this doesn't work, if you keep selling properties you eventually end up with no properties.
So from this, it just tells me, to expect future lower both revenue under P&L (properties sold) and lower future cash flows from operating activities (property sold). I will ignore the $8m as its peanuts and doesn't move the needle.

Cash flows from financing activities:
Basically this is the balancing item from the two above items, with the difference being movement in cash on hand. In this case nothing to see, the answers lies in the two above cash flows from operating activities and cash flows from investing activities.

Conclusion:
With current information, I expect a future dividend cut after FY24.