ARG
16/11/2015 08:30
HALFYR
PRICE SENSITIVE
REL: 0830 HRS Argosy Property Limited
HALFYR: ARG: Argosy Interim Result
FOR THE PERIOD ENDING 30 SEPTEMBER 2015
Argosy Property Limited ("Argosy" or the "Company") is pleased to report its
interim results to 30 September 2015.
The ongoing execution of our strategy over the past six months has enabled
Argosy to produce another strong operating result.
Highlights:
o Gross distributable income of 3.74 cents per share (increase of 7.8%)
o Net distributable income of 3.10 cents per share (increase of 5.1%)
o Net property income increased to $48.6 million (increase of 11.1%)
o Portfolio revaluation gain of $27.6 million
o Weighted average lease term (WALT) of 5.39 years
o Occupancy (by rental) at 99.4%
o Bank facility restructured on favourable terms
o Acquisition of 8 Nugent Street, Grafton
o Further divestment of non Core properties
o 6 cents per share guidance to annual dividend maintained, payable quarterly
Financial Results
Gross distributable income for the six months to 30 September 2015 increased
by 9.3% to $30.1 million (2014: $27.5 million). Net distributable income? for
the same period increased by 6.2% to $24.9 million (2014: $23.4 million).
Net property income was $48.6 million (2014: $43.8 million), an increase of
11.1% on the previous interim period. Profit before tax was $50.3 million,
compared with $42.8 million in the previous interim period.
Interest expense was $14.2 million, an increase of $1.6 million compared with
the previous interim period. This is primarily due to capitalised interest
in the prior interim period of $1.3 million relating to the Stout Street
development (there is no capitalised interest in the period to 30 September
2015). The impact of a higher average level of debt has been partly offset by
a lower weighted average interest rate following the renegotiation of the
Company's banking facility.
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 0.3965
cents per share 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
2015 and the payment date will be 17 December 2015.
The Board is pleased to confirm that a dividend of 6 cents per share is
expected for the year to 31 March 2016. While projections beyond that date
are heavily dependent on the market and legislative environment, based on
current conditions, it is expected that the dividend will increase in the
2017 financial year.
Governance
At the Annual Meeting held in Auckland in August 2015, both Chris Hunter and
Jeff Morrison were re-elected.
Capital Management
Argosy's capital management policy is to maintain a debt-to-total assets
ratio of 35-40% in the medium term. As at 30 September 2015, the ratio was
39.3% and is therefore sitting within the target range. While this is at the
upper end of the range, it is important to remember that Argosy has further
divestments (totalling $20.3 million) settling in the second half of the
financial year which include 65 Upper Queen Street, Auckland, the Porirua
Mega Centre and 7 El Prado Drive in Palmerston North.
The debt-to-total assets ratio is expected to be in the order of 38% as at 31
March 2016.
Acquisitions
In September 2015, Argosy acquired the property at 8 Nugent Street, Grafton
in Auckland for $42.0 million. This is a quality building in an area where
Argosy already owns two properties (25 Nugent Street and 99 Khyber Pass
Road).
Divestment of non Core Assets
In August 2015, Argosy announced that it had entered into an unconditional
agreement to divest the non Core property at 65 Upper Queen Street in
Auckland for $6.5 million, with settlement to take place in December 2015.
Post 30 September 2015, the Porirua Mega Centre, which was sold for $11.5
million, was settled with $11.0 million received in October 2015 and the
remaining $500,000 due in October 2016. A further 11,000 square metres of
vacant land was settled at the Manawatu Industrial Park for $1.4 million.
As part of the Company's strategy, approximately $124.4 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.
Major Projects
Argosy has a five-year evergreen lease with NZ Post from the development
completion date over the entire building at 7-27 Waterloo Quay in Wellington.
Notwithstanding this lease, the requirements of NZ Post have changed and
subsequently progress on the development has slowed as we work with NZ Post
to determine their future requirements.
The construction contract for the redevelopment of the earthquake damaged
property at 8 Foundry Drive, Christchurch has been executed and demolition
work has commenced on site. This project is still in the very early stages
but remains on program and budget, with completion expected to be in late
2016.
Leasing
Argosy has achieved a number of leasing successes during the period, most
notably a 15 year lease over the property at 4 Henderson Place, Onehunga in
Auckland to Compac Sorting Equipment Limited.
The occupancy rate (by rental income) has remained stable since year end and
is now 99.4% at 30 September 2015 (31 March 2015: 99.2% and 30 September
2014: 99.1%). Outstanding lease expiries have reduced and enquiry levels
from potential tenants remain at encouraging levels.
During the period, 26 lease transactions were completed, including 12 new
leases and 14 lease renewals and extensions. The weighted average lease term
at 30 September 2015 continues to be very good at 5.39 years. This compares
to 5.54 years at 31 March 2015 and 5.77 years at 30 September 2014.
Valuations
Argosy has arranged an independent interim revaluation of the portfolio.
This was completed due to evidence of improved market conditions since the
last valuation date of 31 March 2015. The revaluation has resulted in an
increase in property values of $27.6 million, which is a 2.1% 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 bank facility was restructured in August 2015 on improved terms. The
expiry of the first tranche of $275 million is now 30 September 2018 and the
second tranche, also $275 million, is 30 September 2020. An additional
tranche of $50 million expires on 30 September 2016.
Argosy is now receiving further margin and line fee savings (after including
upfront fees) of approximately $420,000 per annum.
Argosy continues to maintain strong relationships with its banking partners;
ANZ Bank New Zealand Limited, Bank of New Zealand and The Hongkong and
Shanghai Banking Corporation Limited, and remains well within its banking
covenants.
Outlook
The soft economic environment that we are experiencing at the moment has
created some nervousness in financial markets around the world. The
situation of low inflation and low interest rates is becoming the norm, which
presents its own challenges for those in the property market. We are
confident that we have a diverse portfolio of increasing quality that is in a
good position to meet any challenges that may come our way.
Argosy as ever will remain focussed on adhering to our strategy. Our goals
for the remainder of the 2016 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.
- 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 NZX Main Board. It has a $1.37 billion portfolio of 67
properties across the industrial, office and retail sectors. Argosy is, and
will remain, invested in a portfolio that is diversified by sector, grade,
location and tenant mix. The portfolio is primarily located in the Auckland
and Wellington markets with modest tenant-driven exposure to provincial
markets.
End CA:00273445 For:ARG Type:HALFYR Time:2015-11-16 08:30:58
