Ann: FLLYR: PFI: PFI Announces Annual Results

• Release Date: 17/02/15 08:37
• Summary: FLLYR: PFI: PFI Announces Annual Results
• Price Sensitive: No
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					PFI
17/02/2015 08:37
FLLYR
PRICE SENSITIVE
REL: 0837 HRS Property for Industry Limited

FLLYR: PFI: PFI Announces Annual Results

PFI ANNOUNCES ANNUAL RESULTS

HIGHLIGHTS

- Profit after tax for the year of $59.9 million or 14.55 cents per share;
- Distributable profit (1) for the year of 7.53 cents per share, 3.7% ahead
of the prior year;
- Fourth quarter final cash dividend of 1.95 cents per share, total cash
dividends for the year of 7.25 cents per share;
- $36.3 million or 4.3% portfolio revaluation uplift (2) contributing to a
5.9% increase in net tangible assets to 130.2 cents per share;
- 67% of contract rent varied, leased or reviewed during the year;
- Occupancy improved to 98.5% and weighted average lease term consistent at
5.26 years; and
- Total shareholder returns (3) for the year of 24.6% per annum.

NZX listed industrial property landlord Property For Industry Limited (PFI)
today announced its annual results for the year to 31 December 2014, the
company recording a per share increase in each of profit after tax,
distributable profit, dividends and net tangible assets.

PFI Chairman Peter Masfen said: "The company has recorded strong financial
and operational results in the first full financial year following the merger
with Direct Property Fund."

PFI's total shareholder returns (3) for the year of 24.6% per annum exceeded
both the NZX Property Index return (24.2% per annum) and the NZX 50 Index
(17.6% per annum). Total shareholder returns (3) since listing in 1994 were
8.98% per annum as at 31 December 2014, up from 8.60% as at 31 December 2013.

FINANCIAL PERFORMANCE

Operating revenues for the year of $63.8 million were up $15.7 million or
32.6%, primarily due to the 1 July 2013 merger with Direct Property Fund.

Operating expenses for the year of $26.9 million were up $5.7 million or
27.1%, also due to the merger, but the ratio of operating expenses to
operating revenues of 42.2% was in line with the prior year (2013: 44.0%).

The effective current tax rate (4) increased from 17.9% to 19.3% due to
one-off merger deductions in prior year.

After allowing for non-operating income and expenses and deferred tax, PFI
recorded profit after tax of $59.9 million or 14.55 cents per share (2013:
$40.5 million or 12.79 cents per share).

DISTRIBUTABLE PROFIT & DIVIDENDS

PFI recorded distributable profit of 7.53 cents per share, an increase of
0.27 cents per share or 3.7% over the prior year (2013: 7.26 cents per
share).

The PFI board has today resolved to pay a fourth quarter final cash dividend
of 1.95 cents per share. The dividend will have imputation credits of 0.3127
cents per share attached and a supplementary dividend of 0.1419 cents per
share will be paid to non-resident shareholders. The record date for the
dividend is 3 March 2015 and the payment date is 12 March 2015.

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 fourth quarter final dividend will take cash dividends for the year to
7.25 cents per share (2013: 7.20 cents per share).

PFI Chairman Peter Masfen said: "Looking to next year we expect distributable
profit to be approximately 7.35 cents per share and cash dividends to be
approximately 7.30 cents per share, subject as always to economic
conditions."

BALANCE SHEET & CAPITAL MANAGEMENT

Further to the announcement in December, PFI recorded a net portfolio uplift
of $36.3 million or 4.3% from independent valuations to $876.0 million, the
increase being largely attributable to continued market cap rate compression.

PFI's net tangible assets per share increased by 7.2 cents per share or 5.9%
from 123.0 to 130.2 cent per share. This increase was driven by the increase
in the fair value of investment properties (+8.8 cps), but was partially
offset by the loss on disposals of investment properties (-0.5 cps) and a
reduction in the fair value of PFI's derivatives (-1.6 cps). Other changes
accounted for the remaining +0.5 cps.

Treasury initiatives, coupled with the ongoing application of PFI's treasury
policies, have ensured PFI continues to maintain a strong balance sheet.

PFI's $350 million syndicated bank loan facility was refinanced during the
second quarter of the year. 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 extended the average term to
expiry to 3.8 years (5) as at 31 December 2014. At the same time, the cost of
the facilities was reduced.

PFI carries current hedging (6) of $278 million at an average rate of 4.46%
for an average duration of 2.5 years (7). Based on current hedging and debt
levels, an average of 77% of the company's debt will be hedged during 2015.

When combined with PFI's loan facility this hedging provides the company with
a weighted average cost of debt of 5.96% (8), up from 5.51% as at 31 December
2013, this increase being largely attributable to the rise in floating
interest rates during the year.

The company ended the year with gearing (9) at 35.8%, down from 37.4% as at
31 December 2013 and well within PFI's self imposed gearing limit of 40% and
bank covenants of 50%. The interest cover ratio (10) was maintained at 3.0
times, in line with the prior year of 3.2 times and well within bank
covenants of 2.0 times.

PORTFOLIO PERFORMANCE

PORTFOLIO SNAPSHOT
As at / 31 December 2014 / 31 December 2013
Number of properties / 79 / 83
Number of tenants / 134 / 136
Contract rent / $65.8 million / $65.4 million
Occupancy / 98.5% / 97.1%
Weighted average lease term / 5.26 years / 5.31 years

During the year PFI sold five non-core properties for a combined gross sale
proceeds of $26.6 million. As previously announced, $19.0 million of the
proceeds were reinvested in the acquisition of a new warehouse at 143 Hutt
Park Road, Seaview, Wellington and a design build development at 9 Narek
Place, Manukau, Auckland.

Since year end, a further $10.0 million has been committed to a 10,000 sqm
design and build bulk storage warehouse development at PFI's 124 Hewletts
Road site in Mount Maunganui. Subject only to consents, construction is
programmed to commence in April 2015. Completion is estimated for September
2015, at which time RMD Bulk Storage Limited will commence a 12 year lease
term.

Simon Woodhams PFI General Manager (Joint) said: "We are pleased to secure a
second development for this property, following the completion of the
Ballance Agri-Nutrients development in 2013. With an estimated return of 10%
on incremental capital invested this project provides accretive returns to
the company."

More than 103,000 square metres of PFI's existing portfolio was leased during
the year to 32 new and existing tenants for an average term of 5.1 years. The
company also completed rent reviews on 68 leases, representing more than
$34.6 million of contract rent, during the year. These reviews resulted in an
average annual uplift of 1.8%, with fixed or index-linked review mechanisms,
a feature of more than 65% (11) of PFI's leases, contributing much of the
growth.

PFI's near term leasing outlook remains positive: the company's vacancy at 31
December 2014 stood at just 1.5% and only 6.2% of contract rent is due to
expire during 2015. The largest single vacant property represents just 0.7%
of rent, and the largest single 2015 expiry represents just 1.6% of rent.

MARKET, OUTLOOK & STRATEGY

Leasing demand in 2014 has been solid, a continuing trend over the last two
years and reflected in total occupancy across the portfolio ending the year
at a robust 98.5%. This compares favourably with the wider industrial market
with CBRE Research reporting that vacancy rates across the Auckland
industrial market particularly, where 86% of PFI's assets are located,
declined by a third in 2014 from 3.7% in December 2013 to 2.5% as at December
2014.

Coupled with the increased demand from occupiers PFI continued to benefit
from the strong investor sentiment toward industrial investment property in
2014. This confidence in the sector has flowed through to market
capitalisation rates firming markedly for investment grade industrial
property in 2014. Yields firmed across the whole industrial sector but this
was particularly evident for prime property with long term leases and
inherent rental growth during the term. This view is supported by a recent
Colliers International report that states average prime industrial yields
pushed below 7% at the end of 2014, the first time in their 20-year
historical time series of reviewing performance of the sector.

PFI General Manager (Joint) Nick Cobham noted: "The opportunity to acquire
prime industrial property accretive to shareholder returns looks a continuing
challenge in 2015 given the dearth of investment grade property available and
the competition to acquire, particularly from private investors and owner
occupiers.  However, consistent with our strategy for managing the company's
lease expiries and vacancy, we continue to review our portfolio and seek to
take advantage of the buoyancy in the market to recycle capital out of
non-core assets, reposition existing properties and undertake development on
expansion land within the portfolio when an accretive opportunity presents."

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 134 tenants.

www.propertyforindustry.co.nz

ATTACHED

PFI - Appendix 1 - 31 December 2014
PFI - Appendix 1 - Financial Statements - 31 December 2014
PFI - Appendix 7 - 31 December 2014
PFI - Annual Results Presentation - 31 December 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) Unrealised fair value gain on investment properties.
(3) Cash dividends plus change in share price from 1 January 2014 to 31
December 2014, assuming dividends are reinvested.
(4) That is, the ratio of current taxation to operating earnings.
(5) 2.5 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 4.4 years, resulting in total
hedging of $353 million at an average rate of 4.48% for an average duration
of 2.9 years.
(8) As at 31 December 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) That is, the ratio of interest expense and bank fees to operating
earnings excluding interest expense and bank fees.
(11) 66% of contact rent.
End CA:00260697 For:PFI    Type:FLLYR      Time:2015-02-17 08:37:29