Argosy profit drops 25% after returning to tax paying position, rental income rises

Thursday 28th May 2015

Argosy Property reported a 25 percent drop in annual profit, while its rental income rose, as the listed property investor returned to a tax paying position for the first time in four years and paid more interest.

Profit for the year fell to $64.4 million in the year ended March 31, from $85.6 million a year earlier, the Auckland based company said in a statement. Distributable income, the preferred measure for property investors as it strips out unrealised movements in fair value, fell to $48 million, or 6.02 cents per share, from $50 million, or 6.69 cps.

The company's bottom line was weighed on by a $23.2 million loss on a derivative financial instruments, compared to a gain of $20.6 million the year earlier, which Argosy said caused a loss on its interest rate swaps due to the lowering of the interest rate curve during the period. Distributable income dropped after the company faced an $11.6 million tax expense, the first time since 2011, Argosy said.

Net property income rose 11 percent to $90.9 million as it benefited from acquisitions in the year and a refurbished Stout St office block came online, starting a 12 year lease with the Ministry of Business, Innovation and Employment.

The board declared a final dividend of 1.5 cents per share, taking the annual payout to 6 cents, in line with guidance.

Argosy shares rose 0.5 percent to $1.11 and have gained 2.3 percent since the start of the year. The stock is rated an average 'hold' based on five analyst recommendations compiled by Reuters, with a median target price of $1.13.

The property investor has been diversifying its portfolio outside Auckland, focusing on industrial sites rather than malls and retail investments. Last year it identified $70 million worth of property to divest. Argosy bought five Lower Hutt sites for $59 million in the year, marking its first Wellington based industrial site renting foray.

Across its 68 properties, which have a market value of $1.3 billion, the occupancy rate was 99.2 percent with a weighted average lease term of 5.54 years.

About 39 percent of the portfolio is industrial, 37 percent office space, and 11 percent retail, while the weighting to Auckland was 65 percent and 28 percent in Wellington. Of its properties, 83 percent are considered core, 11 percent were value add, and 6 percent are properties or land the company is looking to sell.

BusinessDesk.co.nz

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