Ann: FLLYR: AUG: Preliminary Report on Unaudited Financial Result

• Release Date: 21/05/15 09:20
• Summary: FLLYR: AUG: Preliminary Report on Unaudited Financial Result
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					AUG
21/05/2015 09:20
FLLYR
PRICE SENSITIVE
REL: 0920 HRS Augusta Capital Limited

FLLYR: AUG: Preliminary Report on Unaudited Financial Result

Preliminary Report on the Consolidated Unaudited Result for the year ended 31
March 2015

Financial Results

The unaudited results for the year ended 31 March 2015 reflect the
acquisition of KCL Property Limited and Investment Property Titles Limited
effective 1 April 2014, the costs associated with those acquisitions and a
favourable revaluation of Augusta's owned portfolio. These factors give rise
to a statutory profit of $10.39 million which is materially ahead of the 2014
statutory result of $1.99 million.

The principal components of the result are;

1. Improved net earnings driven from the Funds Management business, up $2.2
million on last year. This includes the successful promotion of five new
proportionate investment schemes generating gross income of $4.6 million.
2. A positive revaluation gain of $4.4 million compared with a valuation
decrease in 2014 of $2.2 million.
3. Reduced net rental income of $2.7 million due to divestment, lease
surrender and material vacancies that have subsequently been filled.
4. Costs associated with the merging of KCL Property and Investment Property
Titles of $1 million.

Distributable cash profit (net profit after cash tax paid, excluding
revaluations, mark to market of interest rate swaps, deferred tax and one off
transactions) increased by 5% from $4.63 million to $4.86 million. The table
on the following page notes the changes year on year. On a normalised basis
the funds management business contributed $1.8 million of increased after tax
earnings offset against  lower net rental earnings of $1.6 million after tax
derived from the directly owned portfolio.

This year has been one of structural change with the business acquisitions,
establishing the new corporate team and the movement towards a greater
emphasis on the funds management element of the business.

Your Board considers the result to be satisfactory and note that considerable
revenue from incurred costs prior to 31 March will not be received until
first quarter of the year ended 31 March 2016. This will be a feature of
earnings from proportional ownership schemes and funds management generally
and will give rise to some earnings volatility.

The directly owned investment property portfolio performance was impacted by
material vacancies at the Finance Centre resulting from the departure of
Brookfields Lawyers. The successful leasing of this space has restored the
net rental income to previous levels as at the reporting date but the
material impacts of this new leasing will be reflected in the next financial
year.
The funds management sector includes the KCL and IPT acquisitions.
Metroclean remains subscale but with growth opportunities within the managed
portfolio.

Property Portfolio

The company continued its strategy of re-investing in the core portfolio and
capital expenditure of $3.1 million for the year reflects this. The uplift in
valuations is driven by increased rental levels on refurbished floors,
sharpening cap rates, increased WALE and occupancy.
The valuations have also been prepared on the basis of a new retail title at
the Finance Centre where all retail tenancies are being subdivided onto a
separate title. The Finance Centre Carpark is now also being valued
separately from the Finance Centre Podium.
The Bunnings Silverdale property held as an asset for sale last year was sold
into a new property syndicate established by the Group on 8 May 2014. Augusta
still holds a bare land portion which is under contract and subject to
subdivision at balance date. During the year the balance of the Lambie Drive
units were sold.

Leasing and Occupancy

Six new leases and three lease renewals, with an annual net rental value of
$1.34 million were arranged during the year. Overall portfolio occupancy was
94% at year end, up from 84% at March 2014.

Market rentals have increased in refurbished tenancies at 19 Victoria Street
West while the retail market rents have also increased primarily as a result
of the Countdown supermarket and other major brand tenants within the area.

The company had a weighted average lease expiry (WALE) of 5.9 years at 31
March 2015, a significant increase on the 4.8 years as at March 2014.

Portfolio Valuations

Under NZ IFRS accounting standards, the company's investment properties are
re-valued to fair market value at the end of each financial year. Independent
valuers Jones Lang LaSalle provided valuations of the company's portfolio as
at 31 March 2015.
A revaluation gain of $4.37 million was achieved representing a 4.5% increase
in carrying book values. The average cap rate for the portfolio as at 31
March 2015 was 8.09% (2014 8.31%). The valuations also reflected higher
market rental levels at both 19 Victoria Street West and the retail
tenancies.

Proportionate Ownership Schemes - Property Not Owned Directly

Proportionate Ownership Schemes are not owned directly by Augusta Capital
Limited. Augusta Funds Management Limited (a subsidiary of Augusta Capital
Limited) owns the management contract rights. The average revaluation uplift
for the year ended 31 March 2015 for the syndicated portfolio was 2.01%. The
average cap rate (yield) for the year also firmed to 7.89% from 8.23% last
year. The portfolio of Augusta property syndicates had a total value of $858
million as at 31 March 2015, with a weighted average lease term (WALE) of 6.6
years and occupancy of 98.9%. The balance of the managed portfolio is owned
by private individuals.

Balance Sheet and Treasury

Total assets were $124.4 million at year end compared to $126.2 million as at
March 2014 and
liabilities decreased from $65.5 million to $55.2 million due to the sale of
assets held for sale last year. There was also a decrease in the deferred
taxation liability primarily due to a $2.8 million adjustment for
depreciation previously claimed on building fit outs.

The company's constitution limits borrowings to a ratio of 50% of the gross
asset value (GAV), and Augusta Capital Limited's lenders (ASB) require
borrowings to not exceed 45% of GAV for core debt linked to the directly
owned assets. Our internal treasury policy is for a long term target ratio of
approximately 35%. At balance date this ratio was 37.6%. (2014 46.2%)

Most of the Group's core banking facilities with ASB run through to June
2016. The Group has restructured the loan facilities resulting in a decrease
in margins. The facilities are subject to annual review and extension to give
a running two year facility at all times.

Net asset backing per share was 83.0 cents but reduced to 79.0 cents on issue
of a further 3,638,792 shares on 23 April 2015 (2014 75.0 cents).  This
issuance was pursuant to the contracted earn out for the KCL Property
acquisition.

Augusta Funds Management Limited

Five new syndication deals were completed generating $4.6 million of upfront
fee income including Building C of Spark City, the Bunnings Silverdale
property as well as some private placement arrangements.
A further $2.9 million of fees are in the pipeline and will be contractually
recognised in the 1st quarter of the March 2016 financial year including the
Southgate Takanini property, the PMP Christchurch property and an Australian
private syndicate in Brisbane.
The Southgate deal settled on 30 April 2015 and Augusta currently holds $8.9
million of units in terms of the underwrite. The PMP deal settles on 19 June
2015 and Augusta has provided a partial underwrite of $3 million. The Board
is happy to carry these investments on balance sheet but expects the sell
down to new investors will be completed quickly.

Management's focus is to grow the recurring income stream from funds under
management. Current annualised base management fees are $4.3 million.

Acquisition of KCL Property Limited & Investment Property Titles Limited

The acquisitions of KCL Property Limited (KCL) and Investment Property Titles
Limited (IPT) was completed on 1 April 2014. The transaction establishes
Augusta Capital as New Zealand's pre-eminent property funds manager with
total funds under management of approximately $1.3 billion ($350 million as
at 31 March 2014).
KCL shareholders Bryce Barnett and Phil Hinton have joined the Augusta
Capital executive team.
The acquisition price of $15 million for the KCL business comprised $10
million in cash and $5 million in AUG shares. $2 million of shares were
issued on settlement with a further $3 million of shares linked to an earn
out.

In relation to the earn out a further 3,638,792 shares were issued on 23
April 2015 at $0.80 cents (reflecting 97% of the earn out which had been
completed in respect to the year ended 31 March 2015. The balance of the earn
out will be settled next year). There were also retentions of approximately
$802,000 of which $424,000 has now been paid.

The IPT business was acquired from Bayley Corporation Limited for $444,470.
The sale of the property management contract to Bayleys yielded $4.77
million.

Reflecting the size, complexity and geographic spread of the combined
portfolio, Augusta Capital has entered into a strategic alliance with New
Zealand's largest real estate group - Bayleys. Bayleys now provide property
and facilities management of the property portfolio as well as a number of
other mutually beneficial arrangements. These include a plan to offer, on a
co-branded basis, a range of new managed property offers in both listed and
un-listed formats.

Outlook

Augusta has continued to grow its business through diversification of its
income from directly owned property to funds management revenue that is not
capital demanding. It is the company's strategy to achieve this growth both
organically and by way of acquisition which to date we have been able to
achieve without having to seek shareholder support. We expect the future
income to provide improved shareholder returns and want to grow sustainable
income to deliver enhanced dividends.

Property is a fundamental part of investment portfolios. We see the New
Zealand market for managed property funds as being relatively small and we
see growth opportunities in that space as a consequence. We are building our
skill base and relationships to develop a more diverse range of investment
products with both capital growth and cash yield characteristics and have the
ability to continue to use our balance sheet capacity to secure new assets to
support the growth of the funds management business.

We approach 2016 with a stable team and structure and with the New Zealand
economy remaining buoyant opportunities will arise.  Our new scale and
funding capacity should allow us to identify quality offers for release and
we will continue to apply a disciplined approach to our assessments.

The Board has been strengthened by the appointment of Martin Goldfinch and
Mark Petersen. Both bring strong governance and specific property related
experience and have contributed very well since appointed.
These appointments will enable the planned retirement of the Chairman to take
place this year.

 The Board's expectation is for the year ahead to maintain the improving
trend in earnings.

-ENDS-

For further information please contact:

Mark Francis
Managing Director

Augusta Capital Limited | Level 2, 4 Viaduct Harbour Ave | Auckland | New
Zealand
PO Box 37953 Parnell | P:+649 300 6161 | F:+649 300 6162   www.augusta.co.nz
End CA:00264612 For:AUG    Type:FLLYR      Time:2015-05-21 09:20:17