ARG
19/11/2014 08:30
HALFYR
REL: 0830 HRS Argosy Property Limited
HALFYR: ARG: Argosy Interim Result
FOR THE PERIOD ENDING 30 SEPTEMBER 2014
Argosy Property Limited ("Argosy" or the "Company") is pleased to report its
interim results to 30 September 2014.
The first six months of the 2015 financial year has been a period in which
Argosy has continued the positive momentum from the prior year: increasing
net property income, improving key property metrics, completing the major
building development at 15 Stout Street, Wellington and divesting non-Core
assets.
Highlights:
- Portfolio revaluation gain of $24.9 million (increase of 2.0%)
- Gross distributable income increased to $29.1 million (increase of 22.7%)
- Net distributable earnings 2.95 cents per share
- Net property income increased to $43.8 million (increase of 8.7%)
- Weighted average lease term (WALT) strong at 5.77 years
- Occupancy (by rental) increased to 99.1%
- Bank facility restructured on favourable terms
- Further divestment of non-Core properties
- 6 cents per share guidance to annual dividend maintained, payable quarterly
Financial Results
Gross distributable income for the six months to 30 September 2014 increased
by 22.7% to $29.1 million (2013: $23.7 million). Net distributable income for
the same period decreased to $23.4 million (2013: $23.7 million). This
decrease is due to tax payments made for the first time since the 2011
financial year.
Net property income was $43.8 million (2013: $40.3 million), an increase of
8.7% on the previous interim period. Profit before tax was $42.8 million,
compared with $39.7 million in the previous interim period.
Interest expense was $12.6 million for the period, a decrease of $0.3 million
compared with the previous interim period, despite higher average debt during
the period. This has resulted from lower fixed interest rates following the
restructuring of the Company's interest rate swaps in March and June 2014,
the renegotiation of the Company's banking facilities and the capitalisation
of $1.3 million (2013: $0.5 million) of interest expense relating to the
Stout Street development in Wellington.
Dividends
A cash dividend of 1.50 cents per share, consistent with the first quarter,
has been declared for the September quarter. Imputation credits of 0.4865
are attached to the dividend and the dividend reinvestment plan ("DRP") will
continue with a discount of 1% applied to the price at which the shares will
be issued under the DRP. The record date is 3 December 2014 and the payment
date will be 17 December 2014.
The Board is pleased to confirm that, based on current projections for the
portfolio, a dividend of 6 cents per share, is expected to continue for the
year to 31 March 2015. It is anticipated that this may marginally exceed net
distributable income as Argosy has returned to a tax-paying position. While
projections beyond March 2015 are heavily dependent on the market and
legislative environment, based on current conditions, it is envisaged that
the current 6 cents per share dividend, paid from net distributable income,
will be a minimum level for the years following the 2015 financial year.
Total Shareholder Return
Argosy's Total Shareholder Return (TSR), which combines share price
appreciation and dividends paid, has outperformed the NZX 50 Gross Index
(11.0%) and the NZX Gross Property Index (12.3%) for the 12 months to 30
September 2014. Argosy's TSR for this period was 14.6%.
Governance
At the Annual Meeting held in Auckland in August 2014, both Andrew Evans and
Mark Cross were re-elected. Effective from the Annual Meeting, Trevor Scott,
one of the Company's original directors, resigned from the Argosy board. We
thank Trevor for his years of service to the Company since listing in 2002
and wish him all the best for his future endeavours.
Capital Management
As has been previously communicated, the Company policy is to maintain a
debt-to-total assets ratio of 35-40% in the medium term. As at 30 September
2014, the ratio was 37.2% and is therefore sitting comfortably within the
target range.
Divestment of non-Core Assets
During the six month period to 30 September 2014, Argosy successfully
divested and settled $13.9 million of non-Core assets. Argosy also announced
the unconditional sale of the Waitakere Mega Centre for $45.75 million, which
is due to settle in late March 2015 and will be managed by Argosy in
consultation with the purchaser until settlement.
As part of the Company's strategy, approximately $70 million of property,
including vacant land, has been designated as neither Core nor Value Add and
these properties will be divested as market conditions allow.
Developments
During the interim period, the redevelopment of Argosy's building at 15 Stout
Street in Wellington was completed and officially opened, with the Ministry
of Business, Innovation and Employment (MBIE), moving in from July 2014. The
leasing to MBIE was part of the new accommodation strategy for the Crown,
managed by the Property Management Centre of Excellence (PMCoE).
The upgrade of the New Zealand Post building, also in Wellington, is
continuing with the expectation that this upgrade will be completed by late
2016.
The recently completed redevelopment at 143 Lambton Quay, tenanted to Te Puni
K?kiri, was awarded a merit award at the Property Industry Awards in the
Commercial Office Property Section. This building is the first Wellington
building to gain a 5 Green Star NZ - Office Built Rating from the New Zealand
Green Building Council and has also been awarded a 4 star NABERSNZ rating,
signifying excellence in energy performance.
Leasing
Argosy has achieved some significant leasing success in the first half of the
current financial year. Of particular note was the inclusion of two of
Argosy's properties on the short list for consideration by PMCoE for future
government accommodation options in Wellington.
The occupancy rate (by rental income) has continued to improve and is now
99.1% at 30 September 2014 (31 March 2014: 98.7% and 30 September 2013:
97.3%). Outstanding lease expiries have reduced and enquiry levels from
potential tenants remain at very encouraging levels.
During the period, 21 lease transactions were completed, including 8 new
leases and 13 lease renewals and extensions. The weighted average lease term
at 30 September 2014 continues to be strong at 5.77 years, largely unchanged
from 5.68 years at 31 March 2014 and 5.91 years at 30 September 2013.
Valuations
For the first time since September 2009, Argosy has performed an independent
interim revaluation of the portfolio. This was completed due to evidence of
a material change in market conditions since the last valuation date of 31
March 2014. The revaluation has resulted in an increase in property values
of $24.9 million, which is a 2.0% increase on book values immediately prior
to the interim revaluation. Independent property valuations will also be
completed at year end as usual.
Bank Facility
The $500 million bank facility was extended for a further year in June 2014
on significantly improved terms. The expiry of the first tranche is now 30
June 2017 and the second tranche is 30 June 2019. Argosy is now receiving
further margin and line fee savings (after including upfront fees) of
approximately $0.7 million per annum.
Argosy continues to maintain strong relationships with its banking partners
and remains well within its banking covenants.
Outlook
As the property market shows signs of continued buoyancy, our focus will
remain firmly on adhering to our strategy. Our goals for the remainder of
the 2015 financial year are to continue to manage the portfolio's occupancy
and lease expiry profile, while searching for opportunities to improve the
quality and balance of our property assets.
Argosy is well positioned, with our diversified portfolio, to continue to
provide excellent returns to shareholders.
- ENDS -
Press enquiries
Peter Mence
Chief Executive Officer
Argosy Property Limited
Telephone: 09 304 3411
Email: [email protected]
Dave Fraser
Chief Financial Officer
Argosy Property Limited
Telephone: 09 304 3469
Email: [email protected]
Scott Lunny
Investor Relations Manager
Argosy Property Limited
Telephone: 09 304 3426
Email: [email protected]
Argosy Property Limited
Argosy Property Limited is one of the largest diversified property funds
listed on the New Zealand Stock Exchange. It has a $1.22 billion portfolio of
63 properties across the retail, office and industrial sectors. Argosy is,
and will remain, invested in a portfolio that is diversified by primary
sector, grade, location and tenant mix. The portfolio is located in the
primary Auckland and Wellington markets with modest tenant-driven exposure to
provincial markets.
End CA:00257809 For:ARG Type:HALFYR Time:2014-11-19 08:30:06
