Goodman Property profit shrinks as it pays back debt; credit rating affirmed

Thursday 5th November 2009

Goodman Property Trust (GMT), the property investor, posted a smaller half-year distributable profit as it paid down debt and lost some tenants.

Standard & Poor’s reaffirmed the company’s BBB investment grade rating following the announcement.

The company reported a $38.5 million distributable profit in the six months ended Sept. 30 from $42.7 million a year earlier, according to John Dakin, chief executive of Goodman NZ Ltd., the trust’s manager.

The trust made a $13.2 million net profit compared to an $11.3 million loss in 2008, and operating revenue rose 5% to $53.5 million.

S&P said the company has a “strong market position in the New Zealand industrial and office sectors” and low gearing.

“GMT is well-placed to withstand the current volatile property market environment given its strong liquidity, high occupancy rates, and manageable development exposure," S&P credit analyst Craig Parker said in a statement.

The trust is looking to raise $100 million through a bond issue to repay its bank borrowings and diversify its sources of debt funding, it said in a separate statement.

The bond has been rated an investment grade BBB+ by S&P and is expected to open on Nov. 16, when the minimum interest rate will be announced. The final rate will be made public on Dec. 14.

Greg Goodman, acting chairman of Goodman NZ, said “a strong balance sheet has been an important focus” for the company and it has undertaken a number of initiatives to retain good cash flow.

“The next step in this comprehensive capital management programme is to diversify the trust’s sources of funding,” he said in a statement.

The trust has raised more than $100 million through asset sales to repay debt and fund development activity. The level of debt has dropped to 35.5% of property assets.

The shares drifted down 1% to $1.02 in trading today, but are up 24% in the past six months. The stock is rated ‘outperform’ by a Reuters survey of analysts, where two recommend investors ‘hold’, three recommend ‘outperform’ and one recommends ‘buy’.

The trust’s board reaffirmed original earnings guidance of 9 cents to 9.5 cents per unit, with an expected full-year cash distribution of 8.5 cents per unit.

Distributable earnings after tax was 4.54 cents per unit for the period, down from 5.11 cents in 2008. Net tangible assets fell to $1.03 from $1.23 in 2008.

The fair value of Goodman Property’s total property assets barely moved at $1.295 billion, from $1.296 billion a year earlier.

Businesswire.co.nz

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