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NPT posts unchanged annual profit as new manager Augusta lines up acquisitions

Tuesday 29th May 2018

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NPT reported flat annual earnings in a year where the listed property investor was wooed by rivals for its management contract and ultimately won by cornerstone shareholder Augusta Capital, which plans to expand NPT's small portfolio. 

Net profit was largely unchanged at $3.1 million, or 1.91 cents per share, in the 12 months ended March 31, with a $4.5 million gain on the sale of NPT's management contract more than offset by a $3 million loss on the sale of a building and a $2.9 million negative revaluation. Rental income dipped 1.2 percent to $17 million from its portfolio of three buildings valued at $123.3 million. 

NPT's operations have been disrupted over the past year by a fight between Augusta and Kiwi Property Group for the management contract, which incurred transactions costs of $430,000 in the latest financial year and $1.3 million in 2017. Augusta won over its fellow shareholders having shelved an earlier proposal that was rejected by the then-board. 

"With Augusta, the board have now identified a defined value-add strategy in which the company will seek to acquire properties with the potential to reposition, redevelop and lease; all with the aim of creating future value," chair Bruce Cotteril said in a statement. "The future strategy differentiates NPT from the sector and provides a framework for relative outperformance."

NPT's portfolio is being overhauled with one property sold in the year ended March 31 and another divestment due to settle in July, which will give it headroom to fund new acquisitions. The property investor had $25.5 million available in a $70 million facility with Bank of New Zealand, representing a loan-to-value ratio of 26.6 percent compared to $11.5 million available at a 33.1 percent LVR a year earlier. 

Net tangible assets shrank to 70.6 cents per share from 72.3 cents a year earlier, reflecting the asset sale and revaluation, compared with a share price of 58.5 cents, which was down 2.5 percent since the start of the year. 

"The board is confident that Augusta has the necessary capability and track record in the sector to source such opportunities," NPT said. "The primary focus is to close the share price gap to NTA through active management and prudent investment selection." 

NPT will also get rebranded this year, ditching the moniker it adopted in 2010 to corporatise what was then the National Property Trust and brought management in-house. 

The board declared a final quarterly dividend of 0.9 cents per share, taking the annual return to 3.6 cents, unchanged from a year earlier. 

Augusta reported its annual earnings last week and said it believes its "value-add story" for NPT fits the current environment and will differentiate the listed property investor from its peers. The funds management firm plans to build a diversified commercial property portfolio for NPT with a 'Yield Plus Growth' strategy, targeting long-term total returns that beat the NZX property sector index. 

Augusta said it will maintain a strong balance sheet for NPT with debt-to-assets at a ratio of about 35 percent and adopt an active management style. 


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