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Kermadec posts drop in first-half profit, sees economic pickup in late 2010

Tuesday 10th November 2009

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Kermadec Property Fund Ltd, the property investor managed by brothers Chris and Mark Francis’ Augusta Funds Management, posted a 17.5% decline in first-half profit and said New Zealand’s economic recovery will gather speed in the second half of 2010. 

The Auckland-based company made a distributable profit (earnings before revaluation and taxation) of $2.12 million in the six months ended Sept. 30, down from $2.57 million a year earlier. Net profit was $2.14 million, or 2.70 cents a share, compared to a $3.71 million loss, or 4.79 cents a share, in 2008.  

“Some economic uncertainty remains and on balance it seems New Zealand should expect a slow recovery, but with an improved economic trajectory in the second half of the 2010 financial year,” chairman Peter Wilson said in a statement. “We need to remind ourselves that we have come through an extraordinary downturn and while caution must be maintained, the prospects for a steady recovery are evident.” 

Kermadec’s board came under fire at its annual meeting in August, when shareholder Peter Blackwell raised concerns about a $17.5 million deal with Peter Francis, the father of Augusta’s directors. The property fund’s share price also came under scrutiny at the meeting, and it has shed some 46% since it was floated in 2006 in a $61 million IPO. The stock was unchanged at 54 cents in trading today, and has jumped 20% in the past six months.  

Wilson said Augusta’s 15.1% shareholding gave a “significant alignment” between the interests of the manager and the shareholders, “something that does not exist anywhere else in the New Zealand listed property sector.”  

AMP New Zealand Office Trust recently announced it was overhauling its management fee structure to better align the interests of the company’s stakeholders.  

Kermadec reported a 4.8% decline in net revenue to $4.96 million after it boosted rental income to $5.48 million from $5.39 million a year ago and operating costs rose. It kept its occupancy rate at 93% after securing five new tenants to replace four expired leases.  

The company said it had resumed its annual revaluation of its property portfolio, and will only depart from this practice “when we consider there has been a significant negative movement in portfolio values.”  

Wilson said there had been an increase in property transactions over the past six months and the “evidence suggests there has not been a material impact on Kermadec’s March 2009 overall portfolio valuations.” 


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