PFI delivers record full-year distributable profit and earnings

News release to New Zealand Stock Exchange

February 21, 2011

Listed industrial property investor Property For Industry (PFI) has delivered a record full-year distributable profit and earnings and has maintained a consistent dividend to shareholders for the third consecutive year.

Announcing PFI’s result for the full year to 31 December 2010, general manager Ross Blackmore said the company’s rentals were up 3.5 percent to $32.526 million due to new developments, rent reviews and an acquisition late in the previous year.

“PFI’s continued high occupancy level has contributed to our performance – our year-end occupancy rate was 99.5 percent,” Mr Blackmore commented.

Interest costs for the year – the company’s largest single expense item – rose 2.6 percent to $8.122 million, with higher debt levels offset by lower interest rates.

Tax was down $1.443 million or 39.1 percent to $2.245 million as a result of prior-year tax adjustments.

PFI’s net operating profit after tax for distribution (distributable profit) for the year was $18.198 million, representing a 14.3 percent increase on the previous year. However, on a normalised basis (excluding the tax adjustments and other non-recurring items), the increase was approximately 4.9 percent.

Net earnings per share, based on distributable profit, were up 13.0 percent to 8.43 cents per share.

PFI’s directors have maintained the net dividend at the same level as the previous year, and PFI shareholders will therefore receive a fourth-quarter dividend for 2010 of 2.425 cents per share plus imputation credits of 0.255 cents. This brings the total net dividend paid for 2010 to 7.18 cents per share – the same as the previous year.

The record date for the fourth-quarter dividend is 7 March 2011 and payment will be made on 17 March. 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.

PFI’s annual independent portfolio revaluation as at 31 December 2010 resulted in a small unrealised net reduction in portfolio value of $2.590 million or 0.74 percent over the 12 months.

In combination with other NZ IFRS non-cash adjustments such as unrealised changes in the fair value of interest rate swaps, the unrealised reduction in portfolio value means that PFI recorded a full-year profit after tax of $10.012 million, compared with a loss of $12.514 million the previous year.

Net tangible assets per share (NTA) reduced to $1.08 from $1.10 a year earlier.

The company’s gearing (total debt to total assets) at 31 December 2010 was 31.0 percent and will reduce to 29.9 percent on settlement of a recent unconditional property sale.

In common with other property entities, PFI has taken the opportunity to early-adopt the amendment to NZ IAS 12: Income Taxes, allowing the company to reverse the one-off non-cash adjustment to the balance of deferred tax liabilities on building valuations shown in its interim financial statements to 30 June 2010.

However, the removal of the ability to depreciate buildings with useful lives of more than 50 years for tax purposes – announced in the Government Budget in May 2010 – has taken effect for PFI from 1 January 2011. The company has previously indicated that it expects its 2011 distributable profit to be reduced by approximately 4-5 percent as a result of a higher effective tax rate.

Mr Blackmore said the highlights of 2010 had included:

The sales of four properties for a total of almost $16 million during 2010, with an unconditional contract for the sale of a further property secured since balance date
A new five-year bank debt facility of $150 million, secured with a syndicate of two banks, with notable features of the new arrangement being both the tenor and the diversity provided by having two major trading banks as banking partners
Completed or committed development projects with a total value of $10.2 million (see image below)
Stabilisation of industrial property values, yields and rents.

“PFI’s resilient performance throughout the recession has proven that we have the right buildings in the right locations,” said Mr Blackmore.

“The portfolio is well positioned, with quality buildings and quality tenants, to take advantage of a gradual improvement in market conditions and meet the challenges of higher tax and a higher cost of credit.

“PFI’s portfolio valuation has confirmed the stabilisation of industrial rents and values, and recent research showing that the wider Auckland industrial vacancy rate has improved from 5 to 4.5 percent is further evidence of a gradual recovery.”

PFI is New Zealand’s only listed company specialising in industrial property investment, and is managed by AMP Capital Investors. Following the revaluation and sales, PFI’s portfolio of 52 properties now has a total gross value of approximately $348.7 million.

Image below: PFI's completed redevelopment of 76 Carbine Road, Mt Wellington, for Atlas Gentech (NZ), which has taken an eight-year lease

For further information:
Ross Blackmore, General Manager, Property For Industry
Ph 09-307 8393 or 029-307 8393
Email ross.blackmore@ampcapital.co.nz