DNZ posts 66% gain in annual profit as it divests properties, reduces costs

DNZ Property Fund [NZX: DNZ], the sixth-biggest property stock on the NZX 50 Index by market capitalisation, posted a 66% gain in annual profit as it benefited from its property divestment plan, selling five properties and boosting the value of its remaining assets, and costs fell.

Net profit rose to $68.8 million, or 23.14c per share, in the 12 months ended March 31, from $41.6 million, or 14.47 cps, in the year earlier period, the Auckland-based company said in a statement. Net rental income was little changed at $57 million while corporate expenses fell 32% to $6.1 million and finance expenses declined 1.9% to $13 million.

Chief executive Peter Alexander joined the company in December 2013 with the aim of restructuring the property investor to boost returns. In the past year, DNZ sold $32 million of assets as part of a plan to divest $80 million of property. The remaining 41 urban commercial office, retail and industrial properties increased 5.1% in value over the period to $872.4 million.

"We will continue our targeted divestment programme which, together with the flexibility and capacity in our balance sheet, will enhance our performance and provide better returns in accordance with our strategy," Mr Alexander said.

DNZ, which is targeting 2.5% minimum annual dividend growth, will pay a 3.125cps dividend on June 19, taking its annual dividend to 10.25cps from 9cps the year earlier. It raised its guidance for the 2015 annual dividend on April 23, saying it would be no less than 10cps, up from an earlier forecast of 9.5cps. It forecast a dividend of at least 10.50cps for 2016.

Shares in DNZ last traded at $2 and have gained 4.7% so far this year.

In the last year, the company's occupancy rate slipped to 96.6% from 99.5% the year earlier, while its weighted average lease term fell to 5.1 years from 5.5 years.

DNZ said its NorthWest Shopping Centre development in Auckland, scheduled for completion in October, had 100 tenancies confirmed as at March 31, with construction 70% completed.

The completion of the centre will be a key activity in the coming year "and will have a very positive effect on earnings growth," Alexander said. He didn't provide further details.

The company said it expects to complete a review of redevelopment options for its Johnsonville Shopping Centre in Wellington by late 2015. In the 2014 financial year, the company wrote down the Johnsonville centre by $3.2 million as a delay in construction pushed costs up beyond what the finished project would be worth.

(BusinessDesk)