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Kiwi Property first-half profit rises 5% on rental income growth; portfolio valuations flat

Monday 20th November 2017

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Kiwi Property Group lifted first-half profit 5 percent as the country's biggest listed property investor's rental portfolio benefited from new tenants coming on stream, even as the value of its portfolio was flat. 

Net profit rose to $47.9 million, or 3.53 cents per share, in the six months ended Sept. 30, from $46 million, or 3.56 cents, a year earlier. Earnings per share slipped due to a $161 million share issue in the period. Rental income rose 9.4 percent to $95.1 million due to full contributions from H&M and Zara at the Sylvia Park shopping mall in Auckland, and the acquisition of Westgate Lifestyle and The Base in the prior period. Funds from operations, the company's new preferred earnings measure which strips out a number of items including fair value movements, rose 14 percent to $54.2 million. 

The property investor didn't get a tailwind from any fair value gains in its property portfolio, which was valued at $3.06 billion as at Sept. 30 compared to $2.97 billion a year earlier, with the gains from Kiwi Property's acquisition and development. The property investor has reaped a total of $304.7 million from fair value gains to its property portfolio between 2013 and 2017, with its last unrealised loss reported in the 2012 March year. 

"We have a strategy that favours property exposures expected to outperform, a healthy balance sheet, a pipeline of future development opportunities, and a well-tenanted portfolio with a long weighted average lease term," chief executive Chris Gudgeon said in a statement. "We are also equally confident that our property diversification strategy provides our investors with through-cycle resilience." 

Kiwi Property has been reshaping its property portfolio selling assets to fund new developments in areas such as Drury south of Auckland and expanding the Sylvia Park mall, and reducing its level of debt to strengthen its balance sheet. Last week, the company agreed to sell its Majestic Tower office block in Wellington for $123.2 million and today said it's marketing its North City mall in Porirua, north of the capital city. 

The company will pay an interim dividend of 3.425 cents per share, up 1.5 percent from a year earlier, on Dec. 20, and the board affirmed its guidance for the annual return to be 6.85 cents. 

The shares rose 0.4 percent to $1.35, having slipped 2.5 percent so far this year. 


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