ARG
21/11/2013 08:30
HALFYR
REL: 0830 HRS Argosy Property Limited
HALFYR: ARG: Argosy Interim Result and Dividend Announcement
FOR THE PERIOD ENDING 30 SEPTEMBER 2013
Highlights:
- Distributable income increased to $23.7 million (increase of 17.8%)
- Net property income increased to $40.3 million (increase of 13.7%)
- Total portfolio value increased to $1.13 billion
- Debt to total assets lowered to 34.2%
- Weighted average lease term (WALT) increased to 5.9 years
- Occupancy (by rental) increased to 97.3%
- Bank facility restructured on favourable terms
- Successful completion of 1 for 7 renounceable rights issue, raising $86.9
million
- Acquisition of 4 high quality properties
- 6 cents per share guidance to annual dividend maintained, payable quarterly
Argosy Property Limited (Argosy) is pleased to report its interim results for
the period ending 30 September 2013.
Argosy has continued to execute the strategy that was reaffirmed earlier in
the year and has continued to improve its key operating metrics such as
occupancy and weighted average lease term. In line with the Company's
overall strategy, Argosy has acquired four high quality assets during the
interim period and these acquisitions will significantly enhance the
portfolio.
Net property income was $40.3 million (2012: $35.4 million), an increase of
13.7% on the previous interim period.
Net distributable income for the six months was $23.7 million (2012: $20.2
million), an increase of 17.8% on the previous interim period. Profit before
tax was $39.7m, compared with $5.5 million in the previous interim period.
Profit before tax and net distributable income are alternative performance
measures used to assist investors in assessing the Company's underlying
operating performance and to determine income available for distribution to
shareholders. Please refer to Note 13 of the financial statements for a full
reconciliation between the two measures.
Interest expense was $12.9 million for the period, which is an increase of
$0.5 million compared with the previous interim period, reflecting the impact
of higher capitalised interest in the previous interim period. Approximately
$0.5 million of interest costs have been capitalised to the Stout St
redevelopment project. (2012: $2.1 million was capitalised to the
subdivisions at Manawatu Business Park and Albany E Block).
Argosy made a net gain on derivatives of $16.0 million compared with a loss
of ($13.0) million in the previous interim period, reflecting the recent
increases in long term interest rates.
Dividends
The board confirms its guidance that the full year dividend is expected to be
6.0 cents per share.
A cash dividend of 1.50 cents per share, consistent with the first quarter,
has been declared for the September quarter. There are no imputation credits
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 5 December 2013 and the payment
date will be 19 December 2013.
Governance
At the Annual Meeting, Mike Smith and Peter Brook were re-elected as
directors and Chris Hunter and Jeff Morrison were both elected for the first
time.
Capital Management
In August 2013, Argosy successfully raised $86.9 million through a 1 for 7
renounceable rights issue. The funds raised were used to repay bank debt
incurred to complete recent property acquisitions and provide the Company
with the balance sheet flexibility to pursue further acquisitions that fit
within Argosy's investment criteria. As a result, Argosy has reduced its
debt levels to 34.2% of total assets (31 March 2013: 33.1% and 30 September
2012: 40.7%). This level of gearing is slightly under the Company policy of
maintaining a debt-to-total assets ratio of 35-40% in the medium term.
Acquisitions and Divestments
During the six month period to 30 September 2013, Argosy acquired four
significant property assets. These acquisitions included 80-120 Favona Rd,
Mangere for $74 million, 15 Stout St, Wellington for $33.2 million and 101
Carlton Gore Rd, Newmarket for $22.3 million.
The Company also unconditionally entered into an agreement to purchase a new,
purpose-built warehouse at 19 Nesdale Ave, Wiri for $38 million. This
property has a 15 year lease to Cardinal Logistics and is expected to settle
in December 2013.
As part of the Company's strategy, approximately $113 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. While no
disposals were made in the first half of this financial year, the divestment
of these properties remains a key focus for Argosy.
Developments
In December 2012, Argosy announced that it was acquiring two high profile
Wellington properties for redevelopment. The New Zealand Post Building
settled in the previous financial year. The contract to complete the
redevelopment will be awarded in late November 2013 and development is due to
commence in early 2014.
Argosy settled the acquisition of 15 Stout St on 31 July 2013. The
redevelopment of this building is progressing well, is on budget and is
expected to be completed by mid-2014. During the interim period, Argosy also
completed a significant refurbishment of The Warehouse building in Cavendish
Drive, Manukau, which included the purchase of the adjoining building for
$2.3 million.
Leasing
Leasing activity in the first half of the current financial year has been
strong. The occupancy rate (by rental income) has improved to 97.3% (31
March 2013: 96.2% and 30 September 2012: 96.3%). Outstanding lease expiries
have reduced and enquiry levels from potential tenants remain at encouraging
levels.
During the period, 35 lease transactions were completed, including 22 new
leases and 13 lease renewals and extensions. The weighted average lease term
as at 30 September has improved significantly to 5.91 years, up from 5.24
years at 31 March 2013 and 5.30 years at 30 September 2012.
Valuations
Following an analysis of the property portfolio and the current market the
Board did not consider there was sufficient movement to justify a revaluation
of the portfolio at 30 September 2013. Independent property valuations will
be completed at year end as usual.
Bank Facility
The $500 million bank facility was renegotiated in June 2013 on significantly
improved terms. The expiry of the first tranche is now 30 June 2016 and the
second tranche is 30 June 2018. Argosy is now receiving further margin and
line fee savings (after including upfront fees) of approximately $0.7 million
per annum. As at 30 September 2013, $391 million was drawn down on the
facility.
Argosy maintains strong relationships with its banking partners and remains
well within its banking covenants.
Outlook
Improving consumer and business confidence both point to a continuation of
GDP growth in 2014. Our focus remains on adhering to our clearly articulated
strategy, while continuing to increase the portfolio's occupancy and tenant
retention rates. Argosy is well positioned, with its diversified portfolio,
to continue to provide appropriate returns to our shareholders.
End CA:00244080 For:ARG Type:HALFYR Time:2013-11-21 08:30:27
