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Argosy boosts first-half earnings 29% as benefits of internalisation kick in

Thursday 29th November 2012

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Argosy Property, whose shareholders agreed to corporatise the company after buying out its ANZ Bank-owned manager last year, lifted first-half earnings 29 percent as it reaped the benefits of a cheaper cost structure from bringing management inhouse.

Distributable income, the favoured profit measure for property investors as it strips out unrealised value changes in property portfolios, rose to $20.2 million, or 3.6 cents per share, in the six months ended Sept. 30, from $15.7 million, or 2.84 cents, a year earlier, the Auckland-based company said in a statement.

The property investor made a net profit of $5.9 million, or 0.81 cents per share, compared to a loss of $19.3 million, or 3.62 cents, in 2011 when it had to buy out its external manager.

Argosy's board declared a dividend of 1.5 cents per share in the second quarter and expects the annual pay-out to be 6 cents. The record date is Dec. 13, payable on Dec. 21.

"The cost savings from internalisation have been considerable and are in line with that originally indicated to shareholders," the company said. "Proactive and hands-on management of tenant relationships has translated directly into improved shareholder returns."

The shares were unchanged at 92.5 cents and have gained 16 percent this year. The stock is rated an average 'hold' based on five analyst recommendations compiled by Reuters with a median target price of 88 cents.

The company has been selling underperforming properties over the past year, with two sold below book value in the six-month period.

Argosy's property income slipped to $35.4 million in the period from $35.6 million a year earlier, even with a smaller portfolio. Its industrial property portfolio attracted rents of $11.6 million, unchanged from 2011, while commercial income increased to $11.2 million from $11 million and retail property income fell to $12.7 million from $13 million.

"The property market remains challenging, however the company's portfolio is well-placed with quality properties in good locations," the company said. "The movement in leased space has been positive in the Auckland industrial and commercial markets, where the majority of Argosy's portfolio is located."

Argosy increased occupancy to 96.3 percent from 94.1 percent as at March 31, improved its weighted average lease term to 5.3 years from 4.77 years in the same period.

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