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Investore FY profit falls 16% on smaller valuation gain, signals flat dividend for 2020

Tuesday 21st May 2019

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Investore Property posted a 16 percent decline in annual profit as it reaped a smaller valuation gain on its large-format retail property portfolio than a year earlier. 

Net profit fell to $38.6 million in the 12 months ended March 31 from $46.2 million a year earlier. The year-earlier period was bolstered by a $23.1 million uplift in the value of its property portfolio and a $2.9 million gain on an asset sale, compared to a valuation gain of $17.2 million in the latest period. 

Distributable earnings, which the property investor bases its dividends on, increased 2 percent to $20.9 million, as revenue rose 7.4 percent to $47.4 million. The board declared a fourth-quarter dividend of 1.935 cents per share, payable on June 14 with a record date of June 7. 

That takes the annual dividend to 7.6 cents per share, up from 7.46 cents the previous year. The board expects to pay the same amount in dividends for the 2020 financial year. 

Chair Mike Allen said the board's focus for the upcoming year is targeted yield growth, with the underlying property portfolio in a position to maintain predictable income streams. It will also pursue investment opportunities when they arise. 

"The board considers that Investore’s current portfolio provides an excellent basis for disciplined and considered investment," he said in the annual report. 

Stride Property spun out Investore in 2016, and manages the large-format retail store investor through its Stride Investment Management Ltd unit. 

The board reviewed Stride's management during the period, including the fee structure, to ensure it remains fair and broadly consistent with comparable listed entities. 

"This was a valuable process and the board continues to feel well supported by SIML, who assists Investore day-to-day in the execution of a number of important initiatives," Allen said.

Stride's annual asset management fee is 0.55 percent of Investore's portfolio up to $750 million, 0.45 percent above $750 million, while the performance fee is calculated and paid quarterly as 10 percent of the actual increase in the share price adjusted for dividends and changes in capital structure, which is above 2.5 percent and below 3.75 percent. If the gain is below 2.5 percent or above 3.5 percent, the deficit or excess is carried forward to future calculations for the next seven quarters. 

Total fees rose to $5.6 million from $4.9 million a year earlier, with the base fee up almost 11 percent at $4.1 million and a performance fee of $493,000 paid when no fee was paid the year earlier. Stride also owns 19.9 percent of Investore, and received dividends of $3.9 million, down from $4 million a year earlier. 

Investore's 40 properties were valued at $761.2 million, up from $738.3 million a year earlier. Its net contract rental was $47.6 million, up from $46.9 million a year earlier, and its number of tenants was unchanged at 78. 

The occupancy rate was unchanged at 99.9 percent, while its weighted average lease term declined to 12.4 years from 13.1 years. 

The board said it's ended a share buyback, having acquired 1.7 million shares for $2.6 million, or about $1.53 a share. The stock closed at $1.68 yesterday, and has gained 9.8 percent so far this year. 

Allen said the company is considering new capital management initiatives, such as a second bond issue. In April last year, it raised $100 million through a six-year bond paying 4.4 percent, which last traded at a yield of 3.45 percent. The bond issue helped extend Investore's weighted debt maturity to 3.1 years from 2.2 years. 

Investore had drawn $319 million of its $370 million debt facilities. Its loan-to-value ratio was 41.8 percent,  0.2 of a percentage point higher than a year earlier, and below the company's policy maximum of 48 percent. 

Director Kate Healy announced her resignation from the board, effective from tomorrow, saying she wants to pursue other opportunities in Australia where she now lives. Healy has been a director of Investore since it listed in 2016 and chairs the audit and risk committee. She was re-elected at last year's annual meeting. 

The board has started a formal process to find a new independent director. 


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