Ann: FLLYR: PFI: PFI Announces Annual Results

• Release Date: 17/02/14 11:07
• Summary: FLLYR: PFI: PFI Announces Annual Results
• Price Sensitive: No
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					PFI
17/02/2014 09:07
FLLYR

REL: 0907 HRS Property for Industry Limited

FLLYR: PFI: PFI Announces Annual Results

PFI ANNOUNCES ANNUAL RESULTS

Highlights

- Successful merger with Direct Property Fund Limited (DPF);
- Profit after tax for the year increased to $40.5 million equating to 12.79
cents per share;
- Distributable profit (i) of 7.26 cents per share 9.3% ahead of the prior
year;
- Fourth quarter final dividend of 2.01 cents per share, total dividends for
the year of 7.20 cents per share;
- $19.9 million (ii) or 2.4% portfolio revaluation uplift contributing to an
8.4% increase in net tangible assets to 123 cents per share;
- 47% of contract rent varied, leased or reviewed during the year;
- Occupancy consistent at 97.1% and weighted average lease term extended to
5.31 years;
- Top performing NZX50 listed property vehicle of 2013(iii).

NZX listed industrial property landlord Property For Industry Limited (PFI)
today announced its annual results for the year to 31 December 2013, the
company recording an increase in profit after tax, distributable profit,
dividends and net tangible assets per share.

PFI Chairman Peter Masfen said: "PFI has produced strong financial and
operational results. The merger has exceeded expectations, and PFI's quality
portfolio continues to retain and attract new tenants."

PFI's share price has also performed well, the company ending the year as the
top performing NZX50 listed property vehicle of 2013. Total shareholder
returns (iii) for the year were 11.6% with annualised returns since listing
in 1994 of 8.6% per annum.

Financial performance

PFI's financial performance for the first six months following the merger has
been pleasing, with operating revenues and profit after tax in excess of the
merger Information Memorandum (iv) and ahead of the prior year.

Operating revenues for the year of $48.1 million were $18.7 million or 63.4%
higher than the prior year, the increase comprising not only the $16.3
million of additional rental income as a result of the merger, but also $2.2
million of rental income from acquisition and disposal activity in the last
quarter of 2012 and the first quarter of 2013.

Operating expenses were $9.0 million or 73.8% higher than the prior year, but
the ratio of operating expenses (v) to operating revenues of 41.0% was in
line with the prior year.

The effective current tax rate (vi) reduced to 18% from 21%, the saving being
driven by one off tax deductions associated with the merger.

After allowing for non operating income and expenses and deferred tax, PFI
recorded an increased profit after tax of $40.5 million or 12.79 cents per
share.

Distributable profit & dividends

With the growth in operating revenue outweighing increased operating expenses
and current tax, PFI recorded a distributable profit of 7.26 cents per share.
The increase of 0.62 cents per share represents a 9.3% increase on the prior
year (6.64 cents per share) and is 3.1% higher than the forecasts contained
in the merger Information Memorandum (7.04 cents per share).

With distributable profit ahead of forecast, PFI will pay a final cash
dividend of 2.01 cents per share, resulting in total cash dividends of 7.20
cents per share for the year.

The dividend will have imputation credits of 0.2585 cents per share attached
and a supplementary dividend of 0.1173 cents per share will be paid to
non-resident shareholders. The record date for the dividend is 3 March 2014
and the payment date is 12 March 2014.

The PFI board has again resolved to suspend the dividend reinvestment scheme,
and will continue to assess whether to operate or suspend the dividend
reinvestment scheme on a quarter-by-quarter basis.

PFI Chairman Peter Masfen said: "Following a slight reduction in 2012, PFI's
dividends have returned to the level paid from 2008 to 2011. Looking to next
year we expect cash dividends to be approximately 7.25 cents per share,
subject as always to economic conditions."

Both the final dividend and 2014 guidance reflect a minor amendment to PFI's
dividend policy, whereby the pay-out ratio has been changed to a range of 95%
to 100% of distributable profit, compared to 100% previously.

Balance sheet & capital management

As announced in December, PFI recorded a net portfolio uplift of $19.9
million or 2.4% from independent valuations to $841.8 million, the increase
being largely attributable to continued market cap rate compression. The
company has recorded positive valuation results since 2011, the cumulative
impact of these valuations totalling $35.8 million.

PFI's net tangible assets per share rose by 4.8 cents per share as a result
of this year's valuation increase. Coupled with an increase as a result of
the merger of 2.4 cents per share, an increase in the fair value of PFI's
interest rate swaps resulting in an increase of 2.0 cents per share, changes
in deferred tax of 0.5 cents per share and other changes totalling (0.2)
cents per share, PFI's net tangible assets per share rose a total of 9.5
cents per share or 8.4% to 123 cent per share. The forecast increase
contained in the merger Information Memorandum of 119 cents per share was
also exceeded.

Treasury initiatives carried out during the merger of PFI with DPF resulted
in significant changes to PFI's loan facilities and hedging. Coupled with the
ongoing application of PFI's treasury policies, these initiatives and
policies have ensured PFI continues to maintain a strong balance sheet.

As part of the merger all four major banks were retained on competitive terms
as part of a revised $350 million syndicated facility. The facility now has
an average term of two and a half years (vii) until expiry. Changes were also
made to the company's self imposed gearing limit, with the limit being
increased to 40%. The company's gearing stands at 37.4% at year end.

The interest rate hedging restructure outlined in the merger Information
Memorandum was completed immediately prior to the merger and, coupled with
interest rate hedging activity carried out since then, has resulted in PFI
carrying total current and forward starting hedging of $378.5 million at an
average rate of 3.8% for an average duration of 2.3 years.

When combined with the new loan facility, the hedging restructure and
subsequent activity has allowed PFI to achieve a significant reduction in its
weighted average cost of debt to 5.5% as at 31 December 2013, down from 7.3%
as at 31 December 2012.

Portfolio performance

Portfolio snapshot
As at / 31 Dec 2013 / 31 Dec 2012
Number of properties / 83 / 50
Number of tenants / 136 / 86
Contract rent / $65.4 million / $32.6 million
Occupancy / 97.1% / 97.4%
Weighted average lease term / 5.31 years / 4.80 years

The merger with DPF resulted in a significant shift in PFI's portfolio
statistics during 2013, including extending PFI's weighted average lease term
by 0.79 years. Complementing this, more than 52,000 square metres of space
was leased during 2013 (viii) to 16 new and existing tenants for an average
term of 5.2 years.

The $4.1 million redevelopment of 15 Copsey Place and the $2.6 million
warehouse development on expansion land at 54 Carbine Road & 6a Donnor Place
have now both been completed and are fully leased. PFI General Manager
(Joint) Nick Cobham said: "The redevelopment of existing property and the
development on non income earning expansion land are key drivers for
enhancing the financial performance of PFI. Accordingly, we continue to
pursue every feasible opportunity to satisfy existing and prospective
tenants' future accommodation requirements."

PFI also completed rent reviews on 48 leases, representing more than $25
million of contract rent, during the year. These reviews resulted in an
average annual uplift of 2.4%, with fixed or index-linked review mechanisms,
a feature of nearly 60% (ix) of PFI's leases, contributing more than 90% of
the growth in contract rental income.

Vacancy at year end stood at 2.9% and only 6.5% of contract rent is due to
expire within the remainder of 2014. With the largest single vacant property
representing just 1.4% of contract rent, and the largest single 2014 expiry
representing just 1.2% of contract rent, PFI's near term leasing outlook is
positive.

Market, Outlook and Strategy

High occupancy rates, stable cash flow and increases in capital value have
resulted in a positive sentiment towards industrial property. It is expected
that this positive sentiment will continue to benefit PFI, with the larger
entity also benefiting from an increase in diversification of geography,
property and individual tenancy risks as a result of the merger.

PFI has begun 2014 taking advantage of this positive sentiment with the
disposal of a non-core property, the $2.2 million (x) sale of 174B Marua Road
completing on 31 January 2014. Over the past two years, PFI has disposed of
$17.7 million of non-core property.

PFI General Manager (Joint) Simon Woodhams notes: "Our strategy remains the
same. This year's focus includes managing the company's lease expiries and
continuing to consider the disposal of selected non-core properties,
recycling the capital into accretive core industrial opportunities."

Contact

For further information please contact:
Nick Cobham
General Manager (Joint)
Phone: +64 9 303 9656
Email: [email protected]

Simon Woodhams
General Manager (Joint)
Phone: +64 9 303 9652
Email: [email protected]

About PFI

PFI is New Zealand's only listed company specialising in industrial property.
PFI's portfolio of 82 industrial properties in Auckland, Hamilton, Mount
Maunganui, Wellington and Christchurch, is leased to 136 tenants.

www.pfi.co.nz

Attached

PFI - Appendix 1 - 31 December 2013
PFI - Appendix 1 - Financial Statements - 31 December 2013
PFI - Appendix 7 - 31 December 2013
PFI - Annual Results Presentation - 31 December 2013

Appendix
See attachment

i. Distributable profit is a non-GAAP performance measure used by the PFI
board in determining dividends to shareholders. Please refer to the appendix
for more detail as to how this measure is calculated.
ii. Two valuation processes were carried out during the year. Former DPF
properties were valued twice: once at year end and once as part of the
business combination accounting for the merger of PFI with DPF. The valuation
process as part of the business combination accounting resulted in an uplift
of $7.6 million, which is included the $19.9 million above.
iii. Based on after tax income yield plus change in share price, assuming
dividends are reinvested.
iv. The term merger Information Memorandum is used throughout this
announcement and relates to the Information Memorandum in relation to the
merger of PFI with DPF dated 22 May 2013.
v. Excluding $1.4 million of transaction costs associated with the merger.
vi. That is, the ratio of current taxation to operating earnings.
vii. As at 31 December 2013.
viii. Includes transactions for former DPF properties since 1 July 2013 only.

ix. 59% of merged contract rent.
x. Gross sales proceeds.
End CA:00247048 For:PFI    Type:FLLYR      Time:2014-02-17 09:07:17