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Investore annual earnings rise 16% as Bunnings acquisitions bolster rental income

Monday 28th May 2018

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Investore Property, the large-format retail landlord spun out of Stride Property, boosted annual earnings 16 percent as the acquisition of three Bunnings stores added to rental income and reduced its reliance on Countdown supermarkets.

Distributable profit, a favoured measure of listed property firms which strips out revaluation movements and the impact of property sales, rose to $20.5 million in the 12 months ended March 31 from $17.6 million a year earlier, largely in line with its 2016 prospectus forecasts. Net rental income rose 27 percent to $44.5 million as the company's property portfolio grew to 40 sites with 78 tenants, up from 39 properties with 73 tenants a year earlier. 

Net profit jumped 62 percent to $46.2 million, tracking ahead of the $27 million forecast in the firm's offer document, which included a $23.1 million gain on the value of the portfolio and a $2.9 million gain on the sale of properties. The portfolio was valued at $738.3 million as at March 31, up from $660.4 million a year earlier, with a weighted average lease term of 13.1 years. 

Investore started diversifying its portfolio last year with the acquisition of the Bunnings sites and a development property in Timaru, while selling two South Island supermarkets, which it said would diversify its customer base from the Woolworths Group-owned Countdown supermarkets that account for almost three-quarters of its rents. 

"The board considers that Investore’s current portfolio provides an excellent basis for considered growth," chair Mike Allen said in the annual report. "We have an exceptionally stable underlying portfolio, which puts Investore in a great position to maintain predictable income streams and gives us the ability to consider growth opportunities."

Allen said the company may sell more properties to "ensure the key portfolio characteristics that underpin Investore’s strategy are maintained". 

NZX-listed Stride manages Investore having spun it out as a standalone entity in 2016, and retained a 19.9 percent stake in the firm. Investore's management fees rose 56 percent to $4.1 million in the year, which Allen said reflected the asset sales and a bond issue raising $100 million in April. 

Investore's bank debt was $306.9 million as at March 31, although that was reduced after the balance date by the $100 million raised through the bond and the firm expects to refinance more debt this financial year. The firm's loan-to-value ratio was 41.6 percent as at March, and the board has changed the LVR target policy to a maximum of 48 percent from approximately 48 percent. 

The board declared a quarterly dividend of 1.88 cents per share, payable on June 13, and taking the annual return to 7.46 cents, up from 5.34 cents in 2017. It's targeting annual dividends of 7.46 cents for the 2019 financial year. 

The shares last traded at $1.46 and have declined 2 percent so far this year. The shares were sold at $1.49 apiece in the 2016 initial public offering when it was spun out of Stride. 


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