Precinct first half earnings rise 10% on improved occupancy, raising $174.1m

Precinct Properties New Zealand [NZX: PCT], which has been rebalancing its portfolio to Auckland, reported a 10 percent gain in first-half earnings on better occupancy rates at its buildings and will raise $174.1 million to fund a major development programme in the country's biggest city.

Net operating income, which adjusts for non-cash items, rose to $35.3 million, or 3.33 cents per share, in the six months ended Dec. 31, from $32 million, or 3.1 cents, a year earlier, the Auckland-based company said in a statement. Net profit dropped 20 percent to $31.6 million, or 2.98 cents per share, owing to a $5.3 million unrealised loss on the value of interest rate swaps.

The property investor announced a fully underwritten one-for-seven accelerated entitlement offer to raise $144.1 million at $1.15 a share, which will part-fund three key developments in Auckland's downtown and Wynyard projects, and the upgrade of the Bowen campus in Wellington. The development activity is expected to take four to six years, and the rest of the funding will come from more asset sales and new bank debt.

"Our long term strategy will uplift the quality of the Precinct portfolio through creating new high quality assets and the sale of some older existing assets," chief executive Scott Pritchard said. "We remain focused on putting Precinct in a strong long-term position, while maintaining stable and secure dividends for shareholders."

The board declared a second-quarter dividend of 1.35 cents per share, payable on April 17 with a March 31 record date. Dividend guidance for the 2015 year was kept unchanged at 5.4 cents per share, with operating earnings expected to be about 6.1 cents per share.

Precinct said short-term earnings may be affected by reducing debt levels ahead of earlier guidance, but anticipates that a higher quality portfolio will deliver better earnings over the longer term. It expects to maintain its current level of dividend in the 2016 financial year, it said.

The property investor had a 98 percent portfolio occupancy as at Dec. 31 with a weighted average lease term of 5.3 years, down from 5.5 years a year earlier.

Its portfolio was valued at $1.64 billion as at Dec. 31 from $1.57 billion a year earlier.

The shares last traded at $1.225 and have increased 2.9 percent this year. Trading was halted to allow a bookbuild for the equity raising. The offer is fully underwritten by Credit Suisse and First NZ Capital and reflects a 6.1 percent discount to the last trading price.

The retail component of the offer opens on March 2 and closes on March 25

(BusinessDesk)