Property For Industry lifts first-half earnings 17%

Property For Industry [NZX: PFI], the commercial property investor, lifted first-half earnings 17% as lower interest rates helped cut costs and lease reviews and new purchases lifted rental income.

Distributable earnings excluding management fees rose to $17.6 million, or 3.92 cents per share in the six months ended June 30 from $15 million, or 3.64c, a year earlier, the Auckland-based company said. That was ahead of First NZ Capital's forecast for earnings of $16.5 million, and PFI said it expects annual distributable profit of 7.7 cents per share, up from 7.4c in 2015. The company lifted operating revenue 9.7% to $35.2 million, while expenses fell 8.3% to $14.1 million.

"The first half of 2016 has delivered strong leasing outcomes. The company's results have also been assisted by the low interest rate environment," chairman Peter Masfen said. "These conditions are expected to continue for the remainder of 2016."

The board declared a second-quarter dividend of 1.75c per share, taking total cash dividends for the six-month period to 3.5c. Despite the lift in earnings outlook, the board maintained guidance for annual dividends of 7.3c  per share, "which would result in a more conservative dividend pay-out ratio than in the prior year."

The shares last traded at $1.66 and have increased 3.4% so far this year, lagging behind the 14% gain on the the S&P/NZX All Index over the same period.

PFI's 84 properties were valued at $1.01 billion as at June 30, up from $986.6 million six months earlier, and with a shorter weighted average lease term of 4.87 years, compared to 5.18 years in the prior period. The occupancy rate was 99.5%, with about 1.4% of contract rent due to expire before the end of the calendar year.

Some 41 rent reviews occurred in the period and its annual contract rent was $72.6 million, up from $72.3 million as at December 31 and $69.7 million a year earlier.

PFI's net borrowings were $336.3 million at June 30, with a gearing ratio of 33.4%, below its self-imposed limit of 40% and bank covenants of 50%. Interest costs and bank fees fell to $8.9 million in the half from $9.6 million a year earlier with a lower cost $375 million banking facility negotiated in the period. 

BusinessDesk

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