Consistently-high occupancy lifts PFI earnings

News release to New Zealand Stock Exchange

November 1, 2010

Consistently-high portfolio occupancy continues to flow through to earnings for listed industrial property investor Property For Industry (PFI).

Announcing PFI’s result for the nine months to 30 September 2010, general manager Ross Blackmore said the company’s rentals were 4.0 percent higher than the previous corresponding period, at $24.565 million.

The increase is due to new developments and rent reviews completed in 2009 and so far in 2010, along with PFI’s $22 million acquisition of the DHL Supply Chain property in Mt Wellington in December 2009. Portfolio occupancy remains high at 99.6 percent, and the company’s $1.7 million redevelopment of 76 Carbine Rd, Mt Wellington, is now complete and the eight-year lease to Atlas Gentech has commenced.

Mr Blackmore said PFI’s interest costs for the nine months – the company’s largest single expense item – were again in line with the previous corresponding period at $5.963 million, with higher debt levels offset by lower interest rates.

PFI’s net operating profit after tax for distribution (distributable profit) was $13.701 million, showing a 15.3 percent increase on the previous corresponding period. However, Mr Blackmore noted that this included two prior-year tax credits. On a normalised basis (excluding these and other non-recurring items), PFI’s distributable profit was up approximately 5 percent, highlighting the resilience of the portfolio.

Balancing this, Mr Blackmore said the company was mindful that tax changes announced in the Government Budget will increase PFI’s effective tax rate from 1 January 2011, and higher credit costs are also anticipated going forward.

PFI’s net earnings per share for the nine months, based on distributable profit, were 6.36 cents per share (2009: 5.58 cents per share).

PFI’s directors have again maintained the net dividend at the same level as the previous corresponding period, and PFI shareholders will therefore receive a third-quarter dividend for 2010 of 1.65 cents per share plus imputation credits of 0.296 cents. This will bring the total net dividend paid so far in 2010 to 4.75 cents per share – the same level as the previous corresponding period.

The record date for the third-quarter dividend is 15 November 2010 and payment will be made on 25 November. 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.

NZ IFRS accounting standards require non-cash adjustments such as unrealised gains or losses in the fair value of interest rate swaps and deferred taxation to be taken into account in reporting net profit after taxation. As previously advised, as a result of the tax changes, PFI has this year been required to show an additional $35.311 million in deferred tax liability relating to depreciation of building structure.

This is a one-off, non-cash adjustment required under NZ IFRS and results from the fact that PFI will no longer be entitled to claim tax depreciation on its building structures. This adjustment is not a liability payable to Inland Revenue.

On this basis, PFI recorded a net loss after tax and unrealised losses of $25.747 million for the first nine months of 2010. The comparative result for 2009 (which also included a $20.917 million unrealised net reduction in portfolio value) was a net loss after tax and unrealised losses of $11.140 million.

PFI’s net tangible assets per share (NTA) remained steady at $0.93. Excluding the impact of the one-off, non-cash adjustment to deferred tax liability, the company’s NTA as at 30 September 2010 was $1.09, also the same as three months earlier.

Gearing (debt to property assets) as at 30 September 2010 was 32.2 percent.

PFI is New Zealand’s only listed company specialising in industrial property investment, and is managed by AMP Capital Investors. PFI’s portfolio of 54 properties has a total value of $363.5 million.

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