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DNZ boosts 1H earnings by a third, flags bigger dividend, share buyback

Thursday 17th November 2011

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DNZ Property Fund, which corporatised and listed on the NZX last year, boosted first-half distributable earnings by a third as it cut interest costs and had fewer management fees, allowing it to flag a higher dividend.

The Auckland-based company reported distributable earnings of $13 million, or 5.27 cents per share, in the six months ended Sept. 30, up from $9.8 million, or 4.69 cents per share, a year earlier. Property funds prefer to use distributable earnings as it strips out unrealised movements in the fair value of property portfolios.

Net profit was $8.2 million, or 3.28 cents per share, turning around a loss of $43.4 million, or 20.64 cents per share, when the company paid $35 million to internalise its management contract.

DNZ lifted the second-quarter cash dividend to 2.1 cents per share and is expecting an 8.3 cents per share return for the 2012 financial year. It also plans to introduce an on-market share buyback of up to 5 percent of shares on issue in a bid to lift the share price.

“The board believes that the market price of the shares is not reflective of the true value of DNZ, given the strong performance of the underlying property portfolio and the significant cost savings achieved by refinancing of DNZ’s debt facility,” chairman Tim Storey said in a statement.

DNZ’s operating revenue was flat at $25.9 million in the first half.

The property investor cut bank debt to $222 million as at Sept. 30 from $291 million a year earlier, and reduced its debt facility limit to $300 million from $350 million. DNZ’s loan to value ratio fell to 37.8 percent at the end of the period from 40.4 percent in 2010.

DNZ’s property portfolio value fell to $608 million as at Sept. 30 from $700 million a year earlier. That’s in a year where the property investor sold two properties to pay down bank debt, while at the same time buying three Foodstuffs supermarkets in Napier, New Plymouth and Wellington with fixed 18-year leases.

The shares rose 0.8 percent to $1.28 in trading today and have gained 6.7 percent this year.

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