Ann: HALFYR: PFI: PFI Announces Interim Results

• Release Date: 13/08/14 08:30
• Summary: HALFYR: PFI: PFI Announces Interim Results
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					PFI
13/08/2014 08:30
HALFYR

REL: 0830 HRS Property for Industry Limited

HALFYR: PFI: PFI Announces Interim Results

PFI ANNOUNCES INTERIM RESULTS

HIGHLIGHTS

- Profit after tax for the six months to 30 June 2014 of $14.4 million or
3.50 cents per share;
- Distributable profit (1) for the six months to 30 June 2014 of 3.80 cents
per share, 10.5% ahead of the previous corresponding period;
- Second quarter cash dividend of 1.75 cents per share, total cash dividends
for the first six months of 2014 of 3.50 cents per share, 2.9% ahead of the
previous corresponding period;
- $350 million syndicated bank loan facility refinanced on competitive terms;

- $11.3 million (2) generated from the disposal of four non-core properties
in the six months to 30 June 2014, $15.9 million (2) to be generated from the
disposal of two non-core properties after balance date;
- $15.4 million acquisition of 143 Hutt Park Road, Seaview, to be completed
in August 2014;
- $3.6 million development commenced for Z Energy at 9 Narek Place, Wiri.

NZX listed industrial property landlord Property For Industry Limited (PFI)
today announced its interim results for the six months to 30 June 2014 and a
second quarter cash dividend of 1.75 cents per share.

PFI Chairman Peter Masfen said: "PFI marked the end of its first full year
following the merger with Direct Property Fund by recording a sound financial
performance in the first half of 2014."

FINANCIAL PERFORMANCE

Operating revenues for the six month period of $32.1 million were more than
double the previous corresponding period, primarily due to the 1 July 2013
merger with Direct Property Fund.

Operating expenses for the six month period of $13.0 million were also up
more than double the previous corresponding period, but the ratio of
operating expenses to operating revenues of 40.5% was in line with the
previous corresponding period (2013: 40.2%). The effective current tax rate
(3) of 20.6% was in line with the previous corresponding period (2013:
20.2%).

After allowing for non operating income and expenses and deferred tax, PFI
recorded profit after tax of $14.4 million or 3.50 cents per share (2013:
$11.9 million or 5.38 cents per share).

DISTRIBUTABLE PROFIT & DIVIDENDS

PFI recorded an interim distributable profit of 3.80 cents per share, an
increase of 0.36 cents per share or 10.5% over the prior period (2013: 3.44
cents per share).

The PFI board has resolved to pay a second quarter cash dividend of 1.75
cents per share. The dividend will have imputation credits of 0.4705 cents
per share attached and a supplementary dividend of 0.2135 cents per share
will be paid to non-resident shareholders. The record date for the dividend
is 27 August 2014 and the payment date is 5 September 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.

The second quarter dividend will take cash dividends for the first six months
of 2014 to 3.50 cents per share (2013: 3.40 cents per share).

Guidance for the financial year ending 31 December 2014 remains unchanged,
with total cash dividends expected to be approximately 7.25 cents per share
based on a pay-out ratio of 95% to 100% of annual distributable profit.

PFI continues to deliver strong, stable returns, with total shareholder
returns (4) since listing in 1994 standing at 8.68% per annum (31 December
2013: 8.60%).

BALANCE SHEET & CAPITAL MANAGEMENT

PFI's portfolio was not independently valued during the six months ended 30
June 2014. The next independent valuation will be performed as at 31 December
2014. Accordingly, the company's net tangible assets were unchanged at 123
cents per share.

PFI's $350 million syndicated bank loan facility was refinanced during the
period. The facility, provided by existing lenders ANZ, BNZ, CBA and Westpac,
comprises two $175 million dollar tranches committed for four and five year
terms, the refinance extending the average term to expiry to 4.34 years (5)
at 30 June 2014. At the same time, the cost of the facilities has reduced.

PFI carries current hedging (6) of $288 million at an average rate of 4.22%
for an average duration of 2.31 years (7). Based on current hedging and debt
levels, an average of 73% of the company's debt will be hedged for the
remainder of 2014. When combined with PFI's loan facility this hedging
provides the company with a weighted average cost of debt of 5.74% (8) (31
December 2013: 5.51%).

The company ended the interim period with gearing (9) at 37.4%, in line with
gearing at 31 December 2013 and well within PFI's self imposed gearing limit
of 40% and bank covenants of 50%. Gearing will remain at this level following
the settlements of recent acquisition and disposal activity.

PORTFOLIO PERFORMANCE

PORTFOLIO SNAPSHOT
As at / 30 June 2014 (Adjusted)(10) / 31 December 2013 (11) / 30 June 2013
(12)
Number of properties / 79 / 83 / 50
Number of tenants / 136 / 136 / 85
Contract rent / $65.6 million / $65.4 million / $33.3 million
Occupancy / 99.0% / 97.1% / 98.1%
Weighted average lease term / 5.36 years / 5.31 years / 4.72 years

In the first six months of 2014 PFI sold four non-core properties for a
combined gross sale proceeds of $11.3 million. A further two non-core
properties sold for a combined gross sales proceeds of $15.9 million after
balance date.

$15.4 million of the proceeds will be reinvested in mid-August on acquisition
of a new 7,245 sqm warehouse development at Seaview, Wellington. The property
has been purchased on a yield of 7.6% and on settlement a new 10 year lease
to NZX listed EBOS Group Limited subsidiary Masterpet Corporation Limited
will commence.

$3.6 million of the proceeds has been committed to a new development at 9
Narek Place, Auckland. The 2,500 sqm design build warehouse development is
currently under construction and on completion of the project in April 2015,
a new 10 year lease to Z Energy Limited will commence.

Complimenting this activity, more than 63,000 square metres of space was
leased during the six month period (13) to 18 new and existing tenants for an
average term of 4.0 years.

In addition PFI also completed rent reviews on 28 leases, representing more
than $12.3 million of contract rent, during the first six months of the year.
These reviews resulted in an average annual uplift of 1.9%, with fixed or
index-linked review mechanisms, a feature of nearly 60% (14) of PFI's leases,
contributing much of the growth.

PFI's near term leasing outlook remains positive: the company's vacancy at 30
June 2014 stood at just 1.0% and only 3.1% of contract rent is due to expire
within the remainder of 2014. The largest single vacant property represents
just 0.6% of rent, and the largest single 2014 expiry represents just 1.0% of
rent.

MARKET, OUTLOOK AND STRATEGY

Market conditions during the first half of 2014 have continued to evidence
firm investment yields being achieved, which is reflective of future rental
growth expectations and the weight of capital seeking property exposure,
particularly industrial assets with long term leases.

This increased investment activity has assisted PFI's strategy to divest
non-core assets where a compelling opportunity presents and reinvest capital
into the acquisition and development of investment grade industrial assets.

PFI General Manager (Joint) Nick Cobham noted: "Our view of the remainder of
2014 is that the compression of prime industrial yields - which have firmed
to levels at or below the previous 2007 peak - may moderate over the balance
of the year as recent interest rate rises start to impact. However, rental
growth, which is already beginning to gain strength, will continue to gather
momentum, reflecting the pass through of increasing land values, construction
costs and improving occupancy rates across the industrial sector."

PFI General Manager (Joint) Simon Woodhams added: "Our strategy remains the
same. This year's focus includes managing the company's lease expiries and
vacancy. Whilst the programme for divesting non-core assets in 2014 is
largely complete we will continue to seek to recycle 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 79 industrial properties in Auckland, Hamilton, Mount
Maunganui, Wellington and Christchurch, is leased to 136 tenants.

www.propertyforindustry.co.nz

ATTACHED

PFI - Appendix 1 - 30 June 2014
PFI - Appendix 1 - Interim Financial Statements - 30 June 2014
PFI - Appendix 7 - 30 June 2014
PFI - Interim Results Presentation - 30 June 2014

See attachments for announcement appendix.

(1) 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.
(2) Gross sales proceeds.
(3) That is, the ratio of current taxation to operating earnings.
(4) Income yield plus change in share price, assuming dividends are
reinvested.
(5) 2.54 years as at 31 December 2013.
(6) PFI defines hedging as any debt that has an interest rate secured for
more than three months.
(7) PFI also carries forward starting hedging of $75 million at an average
rate of 4.57% for an average duration of 4.40 years, resulting in total
hedging of $363 million at an average rate of 4.29% for an average duration
of 2.74 years.
(8) As at 30 June 2014. Weighted average cost of funds comprises BKBM,
hedging, margins and all borrowings related fees.
(9) That is, the ratio of total borrowings as a percentage of the most recent
property valuation.
(10) Incorporates 143 Hutt Park Road (purchased subsequent to balance date),
19 Omega Street and 18 Ron Driver Place (disposed subsequent to balance
date); the leasing of previously vacant space between 30 June 2014 and 13
August 2014; and pre-leased development at 9 Narek Place. Excludes the
remaining development land at 9 Narek Place.
(11) Excludes development land at 9 Narek Place.
(12) PFI merged with Direct Property Fund Limited on 1 July 2013. As a
result, PFI's portfolio increased by 33 properties and 52 tenants on that
date.
(13) Includes the leasing of previously vacant space between 30 June 2014 and
13 August 2014.
(14) 58% of rent.
End CA:00253762 For:PFI    Type:HALFYR     Time:2014-08-13 08:30:25