Kiwi Property Group Limited (NZX: KPG) reports 164% profit growth, delivers on strategy

Monday 22nd November 2021

Kiwi Property today announced a robust financial result for the six months ended 30 September 2021, reporting an uplift in all key operating metrics on the prior comparable period, including growth in income, profitability, asset values and interim dividend, despite the impact of COVID-19.

Net profit after tax was $143.2 million, up 164.1% on the same time last year, underpinned by a $93.6 million increase in the fair value of the company’s investment properties. Operating profit before tax rose 8.0% to $62.5 million, driven by an increase in net rental income, which grew 11.5% to $94.0 million.

Kiwi Property’s mixed-use, office and other properties were worth $3.5 billion as at 30 September 2021, up 2.8%, highlighting the strength of the company’s portfolio. Office was once again the highest performing of the asset classes recording a fair value gain of 4.9% to $1.1 billion. Kiwi Property’s mixed-use portfolio, including Sylvia Park, LynnMall and The Base, also experienced a valuation uplift, climbing 2.5% to $1.7 billion.

Kiwi Property Chief Executive Officer, Clive Mackenzie said the company’s solid half-year performance was particularly pleasing given the financial headwinds caused by the pandemic.

“Kiwi Property’s financial position and diversified property portfolio have remained resilient, despite the impact of COVID-19. The opening of the Sylvia Park Level 1 expansion had a positive impact on sales, driving increases in both income and operating profit. We’re operating in a challenging market and the full financial impact of recent lockdowns won’t be known until the second half of our financial year. We enter that period in good shape though, well placed to tackle whatever comes next.”

Resilient tenant portfolio

Recent COVID-19 lockdowns have placed a number of businesses under significant pressure. Kiwi Property is committed to sharing a fair proportion of the financial impact of the pandemic and supporting its small and medium sized tenants, in particular, to successfully navigate the pandemic. A $7.4 million rent relief provision was recorded in the first half of the financial year and a similar cost is expected for the second half.

Kiwi Property’s customer-centric approach has enabled the company to minimise vacancy, maintain productive shopping centres, and helped safeguard the long-term performance of the company’s assets. At the half-year, Kiwi Property’s assets were 99.8% occupied, with a robust weighted average lease expiry of 5.2 years and rental growth of approximately 3.0%.

Delivering on strategy

“Over the past six months we’ve made significant progress on our mixed-use ambition; breaking ground on new developments, launching a new asset class and identifying new funding streams,” said Mackenzie.

“Despite the volatile macro-economic climate, our evolution into a creator of integrated retail, office and residential communities has more momentum than ever,” he added.

Build-to-rent

Kiwi Property has begun construction of New Zealand’s first major build-to-rent development, marking an important milestone in the delivery of the company’s mixed-use strategy. The $221 million, 295 apartment complex will be located at Sylvia Park in Auckland, accelerating the site’s evolution into an integrated retail, office and residential community. The development has a target stabilised net yield of approximately 4.5% and 10 year property internal rate of return of over 8.0%.

“Build-to-rent is poised to become an important part of our portfolio, further diversifying our asset base, unlocking growth and promoting valuation uplift. With our large mixed-use landholdings, including Sylvia Park and LynnMall, we’re in a unique position to deliver build-to-rent at scale in this country. Based on current plans, more than 1,200 residential apartments could potentially be added to Sylvia Park in the next decade,” said Mackenzie.

Dividend and outlook

Kiwi Property will pay an interim dividend of 2.75 cents per share for the period ended 30 September 2021. Despite the expected cost of COVID-19 rental abatements, the company continues to target a total dividend of no less than 5.30 cps for the 2022 financial year, up from 5.15 cps the year before.

Outlook

Kiwi Property Chair, Mark Ford said “Kiwi Property took a number of important steps forward in the delivery of its strategy over the past six months. Our priority is to maintain this pace of execution, while continuing to unlock additional growth and development opportunities. COVID-19 will invariably cause challenges in the months ahead, but we will tackle them head-on, as we continue striving to create long-term value for our shareholders and other stakeholders.”

Please see the links below for details

KPG Interim results NZX release 1H22

KPG Interim report 1H22

KPG Interim results presentation 1H22

KPG Interim results distribution notice 1H22

KPG Interim results announcement 1H22

Source: Kiwi Property Group Limited

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