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Augusta earnings fall as delayed fund pushes out fees, boosts costs

Friday 25th May 2018

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Augusta Capital’s annual earnings dropped 14 percent as delays to the launch of its $118 million industrial property fund meant anticipated fees didn’t eventuate in the period, unlike costs tied to the offer.

Adjusted funds from operations, the firm’s favoured earnings measure stripping out fair value movements of its portfolio, fell to $5.8 million, or 6.6 cents per share, in the 12 months ended March 31, from $6.8 million, or 7.7 cents, a year earlier, the Auckland-based company said in a statement.

Managing director Mark Francis said the delays to the launch of the Augusta Industrial Capital Fund weighed on earnings as it took more time to raise capital as well as a later settlement on the fourth and final property being poured into the fund.

That meant that Augusta will have to wait until June until it starts reaping about $573,000 of recurring management fees from overseeing the fund, having already taken on new staff which drove a 10 percent increase in corporate costs to $8.9 million.

The fund was set up to invest in industrial property, with its initial portfolio being three Auckland properties and one Wellington site with a valuation of about $118 million. The fund is raising $75 million through a public offer at $1 per share, which opened on May 8 and closes on June 11, with a view to listing the fund on the NZX once it hits $250 million of assets.

Augusta's net profit, which includes unrealised movements in the value of its portfolio, sank to $1 million in the March year from $10 million a year earlier. That included a $1.8 million unrealised loss in value of its investments, a 12 percent increase in the tax bill to $1.9 million, and a fair value gain on its investment property portfolio of just $800,000, compared to a gain of $4.1 million a year earlier. 

Revenue slipped 1 percent to $18.9 million as rental income dropped 11 percent to $7.1 million and funds management fees fell 8 percent to $13 million. The firm’s investment income more than doubled to $1.8 million.

Augusta manages 99 properties on both sides of the Tasman, worth $1.85 billion as at 31 March 2018, up from $1.68 billion a year earlier.

The firm has been reshaping its business in recent years, moving away from directly owning property and into property syndication and funds management. That includes its recently acquired management contract of NZX-listed property investor NPT for $4.5 million in March.

Chair Paul Duffy said the result reflects the nature of a business in the late stages of significant transformation.

“Augusta is progressively selling down all directly held properties from which the company’s revenues have historically been derived,” he said. “The result should reflect the bottom of a transition cycle to establishing a more resilient earnings profile from a greater pool of Australasian based property funds.”

The board declared a final dividend of 1.5 cents per share, up from 1.375 cents a year earlier. That takes annual dividends to 5.625 cents compared to 5.5 cents in the March 2017 year. The record date for the final dividend is June 11, payable on June 18.

The directors expect the 2019 dividend payout will rise to 6 cents per share, subject to quarterly reviews and unforeseen events.

The shares were unchanged at $1.05, and have slipped 2.8 percent so far this year. 


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