Property: PFI boots profit by sticking to its knitting

By Campbell McIlroy

Friday 22nd February 2002

Sticking to its knitting has seen Property For Industry provide a remarkably solid return of 17.93% to investors over the last year.

This week's annual result reported a net profit of $11.18 million which, while in line with analysts' expectations, was up a solid 21%.

The main driver behind the result was last year's sale for $8.3 million of five properties, which no longer met the company's strategic criteria, and the acquisition of two properties for $9.8 million.

The new properties, along with a small portfolio bought in late 2000, added $4.1 million to the company's rent roll.

The figures for the year speak for themselves with operating surplus before tax up 18% to $13.9 million; rental revenue up 15% to $22.1 million; earnings before interest and tax (before unrealised revaluations but including realised gains) up 21% to $19.04 million; and the company's portfolio was valued up $790,000 compared with last year's $5 million-plus write-off.

One analyst described the result as "really good" with a 5.6% increase in earnings per share.

Analysts also noted the company had managed to pull back its general operating costs for the year.

But because of the strength of the result AMP Henderson Global Investors has managed to earn a little extra in management fees.

The fee structure is an incentive base with AMP earning a bonus if the return to investors is over 10%.

As a result the company's management expense ratio (MER) increased from 0.73% to 0.97%.

But PFI general manager Peter Alexander said the point was shareholder wealth had increased by $28 million.

"If it hadn't the MER would have been down at 0.71%. The returns have been more than satisfactory and I think its a result we can be proud of."

Mr Alexander said the company was now well positioned for the year ahead with occupancy at 99% and with capacity to expand its portfolio further to the tune of about $19 million before it reaches its self-imposed debt to asset limit of 35%.

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