Property For Industry lifts first-half earnings 17% as low interest rates cut costs

Tuesday 9th August 2016

Property For Industry, which specialises in industrial property investment, lifted first-half earnings 17 percent as lower interest rates helped cut costs while lease reviews and new purchases lifted rental income.

Distributable earnings excluding management fees rose to $17.6 million, or 3.92 cents per share in the six months ended June 30, from $15 million, or 3.64 cents, a year earlier, the Auckland-based company said in a statement. That was ahead of First NZ Capital's forecast for earnings of $16.5 million, and PFI said it expects annual distributable profit of 7.7 cents per share, up from 7.4 cents in 2015. The property investor lifted operating revenue 9.7 percent to $35.2 million, while expenses fell 8.3 percent to $14.1 million.

"The first half of 2016 has delivered strong leasing outcomes. The company's results have also been assisted by the low interest rate environment," chairman Peter Masfen said. "These conditions are expected to continue for the remainder of 2016."

The board declared a second-quarter dividend of 1.75 cents per share, taking total cash dividends for the six-month period to 3.5 cents. Despite the lift in earnings outlook, the board maintained guidance for annual dividends of 7.3 cents per share, "which would result in a more conservative dividend payout ratio than in the prior year."

The shares last traded at $1.66 and have increased 3.4 percent so far this year, lagging behind the 14 percent gain on the S&P/NZX All Index over the same period.

PFI's 84 properties were valued at $1.01 billion as at June 30, up from $986.6 million six months earlier, and with a shorter weighted average lease term of 4.87 years compared to 5.18 years. The occupancy rate was 99.5 percent, with about 1.4 percent of contract rent due to expire before the end of the calendar year.

The property investor completed 41 rent reviews in the period, and its annual contract rent was $72.6 million, up from $72.3 million as at Dec. 31 and $69.7 million a year earlier.

PFI's net borrowings were $336.3 million at the balance date, with a gearing ratio of 33.4 percent, below its self-imposed limit of 40 percent and bank covenants of 50 percent. The property investor's interest costs and bank fees fell to $8.9 million in the half from $9.6 million a year earlier with negotiating a cheaper $375 million banking facility in the period.

(BusinessDesk)

BusinessDesk.co.nz

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