PFI posts stable half-year profit and dividend
News release to New Zealand Stock Exchange
August 3, 2009
Listed industrial property investor Property For Industry (PFI) has posted a steady distributable profit and dividend for the first half of 2009.
General manager Ross Blackmore said the company had sold four properties over the past year. The asset sales – totalling $45.35 million – had achieved their objective of reducing the company’s debt levels, but until the funds were reinvested, usually also had the downstream effect of lower returns. However, new rentals from development projects and the company’s rent review programme partly offset this, as well as reductions in some costs.
PFI’s rentals for the six months to June 30, 2009, were 4.0 percent lower than the first half of 2008, at $15.848 million.
Lower levels of borrowings meant that PFI saved 15.9 percent or $754,000 in interest costs (which were $3.984 million for the six months). Management fees were also lower, reflecting reduced portfolio values.
PFI’s net operating profit after tax for distribution for the six months was 1.6 percent lower than the first half of 2008, at $7.920 million. Net earnings per share, based on distributable profit, were down 2.4 percent to 3.72 cents per share.
The second-quarter net dividend has been maintained at the same level as in 2008, at 1.550 cents per share plus imputation credits of 0.387 cents per share, meaning that PFI shareholders have for the year to date received the same level of dividends as in 2008.
The record date for the second-quarter dividend is August 17, 2009 and payment will be made on August 27. The company’s dividend reinvestment scheme is in place for the dividend and the discount rate for shares issued under the scheme remains at 2.5 percent.
A further valuation review of PFI’s portfolio as at June 30, 2009 has been carried out and has resulted in an unrealised net reduction in portfolio value of $20.917 million or 5.65 percent over the six months.
In combination with other NZ IFRS non-cash adjustments such as unrealised losses on the mark-to-market value of PFI’s interest rate swaps, this led to a net loss after taxation and unrealised losses of $15.737 million for the six months.
PFI’s portfolio now has a total gross value of $349.751 million. Net asset backing at balance date was $1.12 per share, compared with $1.24 six months earlier.
Mr Blackmore said the average capitalisation rate of PFI’s properties following the valuation review was 8.8 percent, up from 8.55 (1) percent as at December 31, 2008. Approximately $0.6 million of the reduction was due to a decline in the value of PFI’s small amount of non-income producing land, with the balance shared evenly between softening capitalisation rates and easing market rentals.
Mr Blackmore said PFI’s portfolio occupancy at balance date was 97.9 percent, with a weighted average lease term (WALT) of 4.47 years.
Portfolio highlights from the interim period included the sale of PFI’s property at 11 Dalgety Drive, Manukau, for $11.7 million. The sale price (before deducting costs) was above the December 31, 2008 book value.
The proceeds from the four asset sales have been used to reduce the company’s gearing ratio (debt to total assets) and are progressively being reinvested into PFI’s in-house development pipeline. PFI’s gearing at balance date – following the valuation review – was 29.3 percent, well below the company’s self-imposed maximum of 35 percent.
Two new office/warehouse developments were completed during the interim period – one in North Harbour for Brewcraft and the other at PFI’s Peninsula Business Park in Avondale for Dorma – adding a total of $400,000 to PFI’s annual rent roll.
Mr Blackmore said PFI’s 2009 rent review programme is also progressing well. Eleven of the 32 rent reviews scheduled for the year have been completed, adding $234,000 to the company’s annual rent roll. The average increase of 7.45 percent equates to 2.88 percent compounding annually over the average 2.5-year review periods.
Eight new leases were also secured, representing an annual rent roll of more than $712,000. Mr Blackmore said PFI had now dealt with 12 of the 16 leases scheduled to expire this year, and while the economic environment remained challenging, the company’s exposure to lease expiries in the current year was now relatively small.
In addition, PFI’s largest potential lease expiry for 2010 had now been resolved, with longstanding tenant Caroma signing a six-lease lease extension on its 5,716 sqm East Tamaki premises. Caroma represented approximately 25 percent of PFI’s 2010 lease expires by rent roll.
Mr Blackmore said the leasing enquiry levels on PFI’s vacant space and the new developments being marketed had responded to a modest improvement in business confidence in recent months. However, tenants continued to experience challenging trading conditions and this, along with the speed at which the company could find new tenants for space which had recently become vacant, would have a bearing on performance for the remainder of the year.
PFI is New Zealand’s only listed company specialising in industrial property investment, and is managed by AMP Capital Investors.
Footnote:
1. December 31, 2008 comparative figure adjusted to exclude the two properties sold since this time.
For further information:
Ross Blackmore, General Manager, Property For Industry
Ph 09-307 8393 or 029-307 8393
Email ross.blackmore@ampcapital.co.nz