Kiwi Property lifts earnings 4.5% on lower costs, to raise $151.9m

Kiwi Property Group [NZX: KIP], the country's biggest listed property investor, increased annual earnings 4.5% as it benefited from lower costs after bringing management inhouse, and is seeking to raise $151.9 million to help fund the expansion of its Sylvia Park retail precinct.

Distributable earnings after tax, which strip out movements in the value of its property portfolio, rose to $79.7 million in the 12 months ended March 31, from $76.3 million a year earlier, the Auckland-based company said in a statement. Net rental income rose 4.4% to $155.3 million. As a result of the internalisation of the management contract, net management expenses fell to $9.2 million from $12.6 million a year earlier.

Net profit rose 14% to $115.2 million, including a $58.3 million gain in the value of its investment properties.

"Internalisation of management in December 2013, coupled with corporatisation in December 2014, is enabling us to deliver benefits to shareholders, including cost savings," chairman Mark Ford said. "Our business is now underpinned by both a lower-cost management platform and by a strategy that is singly focused on achieving our shareholder goals."

Last December, Kiwi Property agreed to buy the Apex Mega Centre for $64 million next to its flagship Sylvia Park site to increase its footprint in Auckland.

It also announced a one-for-nine entitlement offer to raise $151.9 million to help fund the Sylvia Park expansion and repay bank debt. The shares would be sold at $1.20 each and won't be entitled to the dividend announced in today's earnings result.

Kiwi Property's board declared a 3.25c a share final dividend, taking the total annual payout to 6.5c, up from 6.4c a year earlier. Mr Ford said the company expects to increase the annual dividend to 6.6c in 2016.

The shares, which last traded at $1.285, have been halted pending a bookbuild for institutional investors. The retail offer will open on May 21 and close on June 9.

Chief executive Chris Gudgeon said the company is evaluating a 20,000sq m  retail expansion at an estimated cost of $150 million, and a 7500sq m  office development estimated to cost about $45 million as part of the Sylvia Park expansion.

The value of Kiwi Property's investment property portfolio rose 6.8% to $2.28 billion as at March 31 from a year earlier due to gains in the value of its Auckland assets and the Mega Apex acquisition, offset by the sale of a Queen St property and the devaluation of its Wellington assets.

The occupancy rate rose to 98.4% from 97.8% a year earlier, while the weighted average lease term slipped to 4.5 years from 4.7 years.

(BusinessDesk)