Argosy Property 1H earnings rise 22% as the value of portfolio lifts

Wednesday 23rd November 2016

Argosy Property, the country's fifth-biggest listed property investor by market value, increased first-half earnings 22 percent as it benefited from the rising value of its portfolio and extra cash from the surrender of a lease agreement.

Profit rose to $56.2 million, or 6.9 cents per share, in the six months ended Sept. 30, from $46.1 million, or 5.74 cents, in the year earlier period, the Auckland-based company said in a statement. Net property income rose 11 percent to $53.7 million, which included a $5.4 million benefit from New Zealand Post's move to surrender a lease agreement for three floors of New Zealand Post House in Wellington.

The property investor also recorded a $35.8 million gain on the value of its properties in the first half, ahead of a $27.6 million gain in the year earlier period.

Argosy has been rejigging its $1.4 billion property portfolio, and aims to have core long-term investments make up between 75 percent and 85 percent of the value of the portfolio, with the remaining assets designated as value add. The company has earmarked about $55 million of property for sale which it deems neither 'core' nor 'value add'. In the first half it agreed to sell a Palmerston North property for $3.3 million in December, and an Auckland property for $6 million in June next year. Since balance date, it's agreed to sell another Auckland property for $7.6 million in March next year.

"The first half of the financial year has seen Argosy take further steps towards advancing the quality of the portfolio," said chief executive Peter Mence. "We are making the most of a very buoyant economy and property market."

Argosy's occupancy rate by rental income slipped to 97.9 percent as at Sept. 30, from 99.4 percent at March 31, mainly due to the expiry of a lease to Fonterra in Napier, however the company said outstanding lease expiries for the period ending March 31, 2017, have reduced and enquiry levels from potential tenants are encouraging. Its weighted average lease term remained stable at 5.26 years, from 5.24 years at March 31.

The company will pay a dividend of 1.525 cents per share on Dec. 21 for the second quarter, consistent with the payment for the first quarter. It reiterated that it expects its annual dividend for the 2017 year to amount to 6.10 cents per share, up from 6.025 cents in the 2016 year, and said it expects the dividend will increase "modestly" again in the 2018 year.

Its shares last traded at $1.05.

BusinessDesk.co.nz

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