Kiwi Property lifts first-half earnings by 5.2% as drop in interest costs offsets weaker rentals

Wednesday 18th November 2015

Kiwi Property Group posted a 5.2 percent decline in distributable income after New Zealand's largest listed property investor cut interest costs, making up for weaker rental income.

Distributable income after tax fell to $42.4 million in the six months ended Sept. 30, from $40.3 million a year earlier, the Auckland based company said in a statement. Net rental income fell 0.9 percent to $76.3 million. Net profit jumped 51 percent to $36 million as a litigation settlement made up for increased non-operating expenses.

Kiwi Property has focused on keeping interest costs under control as it contemplates investments including the expansion of Auckland's Sylvia Park shopping mall. The company lowered its gearing ratio to 30.3 percent as at Sept. 30, from 33.5 percent at March 31, having reduced interest payments when mandatory convertible notes converted in December 2014, and using a net $148 million via an entitlement offer in June to repay debt.

Last week, Kiwi Property said it had refinanced all of its $775 million of bank facilities, extending the terms and reducing the borrowing costs. Net interest expense fell to $16.8 million in the first half from $27.5 million a year earlier, which also reflected more favourable interest rates, it said.

Development work at several properties resulted in a temporary loss of income, including floors kept empty at its Majestic Centre in Wellington, and at two sites on The Terrace. It also began expansion work at LynMall last January, it noted. On a comparable basis, rental income rose 4.3 percent in the first half, it said.

The company will pay an interim cash dividend of 3.3 cents a share, in line with guidance, from 3.25 cents a year earlier, and maintained its cash dividend forecast of 6.6 cents for the full year.

“From a property market perspective, we expect retail sales to grow at least in line with GDP, while underlying demand matched with limited short-term supply will be positive for the Auckland office market. In Wellington our focus on securing long-term government leases at our core office assets positions us strongly for the future,” said chief executive Chris Gudgeon.

Its tax expense rose to $9 million from $2.7 million, reflecting tax credits available in the year-earlier period. Property assets were valued at $2.39 billion at Sept. 31, from $2.28 billion at March 31. Occupancy stood at 97.2 percent from 96.1 percent at March 31 and its weighted average lease term rose to 8 years from 7.6 years on that basis.

The shares last traded at $1.365 and have gained about 11 percent this year.

BusinessDesk.co.nz

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