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PFI announces first-half result and stable dividend


Monday 8th August 2011

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Listed industrial property investor Property For Industry (PFI) has announced its financial result for the six months to 30 June 2011, along with the conditional sale of a Wellington property.

PFI general manager Ross Blackmore said rentals for the six months were 4.7 percent lower than the previous interim period, at $15.621 million, primarily due to previous property sales totalling $21.45 million. This was partially offset by new revenue from completed developments and recent rent reviews.

PFI's gearing following the property sales was down to 30.4 percent as at 30 June 2011 and the company's average debt level through the period was $108 million (2010: $122 million). However, despite lower debt levels, the higher costs associated with the new five-year bank debt facility entered into late last year meant the company's interest costs were broadly in line with the previous interim period, at $4.122 million.

Taxation costs were also higher as a result of two factors: firstly, the removal of the company's ability to depreciate building structures with useful lives of more than 50 years for tax purposes, and secondly, prior-year tax adjustments received by PFI during the previous interim period.

PFI's net operating profit after tax for distribution (distributable profit) was down 13.1 percent to $8.033 million. On a normalised basis - excluding the tax adjustments from the previous interim period and other one-off items - the decrease in distributable profit was approximately 7 percent.

PFI's net earnings per share for the interim period, based on distributable profit, were 3.69 cents per share (2010: 4.29 cents per share).

PFI's directors have again maintained the net dividend at the same level as the previous corresponding period, and PFI shareholders will therefore receive a second-quarter dividend for 2011 of 1.55 cents per share plus imputation credits of 0.4366 cents.

The record date is 22 August 2011 and payment will be made on 31 August. The company's dividend reinvestment scheme is in place for the dividend and the discount rate for shares issued under the scheme remains at 2.5 percent.

NZ IFRS accounting standards require non-cash adjustments such as unrealised gains or losses in the fair value of interest rate swaps and deferred taxation to be taken into account in reporting net profit after taxation. On this basis, PFI recorded a net profit after tax and unrealised losses of $6.649 million for the first half of 2011.

Blackmore said key industrial property market indicators were improving, with CB Richard Ellis showing industrial vacancy rates at 4.4 percent and prime industrial vacancy as low as 2.9 percent.
Rental levels continue to improve, particularly for prime industrial property, where some growth is resulting from a reduction in incentives. Well-leased industrial property continues to sell, although at lower volumes because such investments are tightly-held by existing owners and acquisition opportunities are therefore scarce.

PFI's occupancy as at 30 June 2011 was 97.4 percent following the lease expiry over a 7,000 sqm warehouse in Mt Wellington.

The company has sold its property at 11 Barnes St, Wellington, along with 6,751 sqm of non-income producing land on an adjoining property, to an owner-occupier for $7.35 million. The sale is subject only to subdivision consent and settlement is scheduled for November.

With continued high portfolio occupancy, Blackmore said the company's focus has been on lease restructuring activity and work with existing customers. "It is pleasing that customers such as Bidvest, ASB Bank, Wickliffe NZ and Gough Gough & Hamer have all recently entered into new agreements with PFI, for various combinations of additional premises, refurbished premises or extended leases on existing premises," said Blackmore.

PFI is New Zealand's only listed company specialising in industrial property investment, and is managed by AMP Capital Investors. PFI's portfolio of 50 properties has a total value of $350.8 million.

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