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Property for Industry 1H earnings fall 4.9%, flags reduced dividend

Monday 6th August 2012

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Property for Industry, whose management contract was sold to DPF Management last year, reported a 4.9 percent drop in first-half earnings after shrinking its portfolio, and warned the annual dividend will be smaller than a year ago.

Distributable earnings, the favoured profit measure for property companies because it strips out unrealised changes in the fair value of its portfolio, fell to $7.6 million, or 3.5 cents per share, in the six months ended June 30, from $8 million, or 3.7 cents per share, a year earlier, the Auckland-based company said in a statement. That was slightly ahead of Forsyth Barr analyst Jeremy Simpson's forecast of $7.4 million, or 3.4 cents per share.

Operating revenue declined 5.9 percent to $14.7 million from a smaller portfolio and lower occupancy rate.

"The fall in gross rental income reflects sales of properties in the prior period and lower average occupancy," general manager Nick Cobham said. "We are confident PFI's financial strength combined with our strong position in the industrial property market leaves us well placed to continue to deliver for shareholders."

The annual dividend will be between 6.5 cents per share and 6.9 cents per share, lower than the 7.2 cents per share return last year. It first flagged a smaller payment at its annual meeting in May.

PFI declared a second-quarter dividend of 1.55 cents per share, with imputation credits of 0.4336 cents per share to be paid on Aug. 29. That takes the first-half return to 3.1 cents per share, or $6.8 million.

"The company's earnings and dividends will continue to be impacted by the leasing of PFI's vacant properties and expiring leases and a change to the company's deductible capital expenditure profile," it said.

PFI had 49 properties with 90 tenants as at June 30, with contract rent of $30.2 million, down from 51 properties with 96 tenants and rent of $30.6 million a year earlier. Its occupancy rate fell to 96.1 percent from 97.4 percent, though its weighted average lease term rose to 4.5 years from 4.08 years.

The shares fell 1.3 percent to $1.155 on Friday, and are down 0.4 percent this year. The stock is rated an average 'underperform' based on five analysts' recommendations compiled by Reuters, with a median target price of $1.095.

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