Kiwi Property earnings climb 8.2% as acquisitions, finished developments spur higher rents

Kiwi Property Group, Company results, Finance

Kiwi Property Group lifted annual earnings 8.2 percent as the real estate investor's rental income was boosted by the completion of several developments and new acquisitions, although smaller revaluation gains led to a fall in bottom line profit.

Funds from operations, the company's new preferred earnings measure which strips out a number of items including fair value movements, rose to $111.3 million in the 12 months ended March 31 from $102.8 million a year earlier, with rental income up 5.2 percent to $192.1 million, the Auckland-based company said in a statement. Earnings per share slipped to 7.84 cents from 7.95 cents, reflecting a $157 million equity raise in the period.

Net profit fell to $120.1 million from $143 million a year earlier, due largely to a 35 percent decline in the property investor's fair value gains to $26.5 million. Kiwi Property's portfolio of 13 buildings and development land was valued at $3.05 billion as at March 31 compared to $2.97 billion a year earlier.

"In the 2018 financial year we continued to grow revenues while improving the quality of our investment portfolio through the sale of non-core assets, strategic acquisitions and the commencement of new development projects," chair Mark Ford said. "We have also improved our conservative gearing position and executed strongly on capital management initiatives."

Kiwi Property has been reshaping its property portfolio, selling assets to fund new developments in areas such as Drury south of Auckland and expanding the Sylvia Park mall, and reducing its level of debt to strengthen its balance sheet.

The real estate investor's net debt shrank to $902.8 million as at March 31 from $1.02 billion a year earlier, with its gearing ratio falling to 29.7 percent from 34.5 percent.

The board declared a final dividend of 3.425 cents per share payable on June 21 with a June 6 record date, taking the annual payment to 6.85 cents, meeting guidance and up from 6.75 cents in 2017. Kiwi Property projects a 6.95 cents per share dividend will be paid in 2019.

"Our key focus in the year ahead will be on progressing our development projects underway at Sylvia Park and Northlands, while also progressing our town centre vision for our development land at Drury, south of Auckland," Ford said.

The shares last traded at $1.39 and have declined 1.1 percent so far this year, lagging behind a 3.12 percent increase in the S&P/NZX 50 index over the same period.

Kiwi Property's occupancy rate improved to 99.6 percent as at March 31 from 98.8 percent last year, while its weighted average lease term slipped to 5.3 years from 5.6 years. About 68 percent of the company's portfolio is in retail property, spearheaded by its flagship Sylvia Park mall, with office space at 27 percent and other property at 5 percent.

The annual result will be Chris Gudgeon's last as chief executive, with the long-serving head leaving in September after 10 years. The board has interviewed international and domestic candidates for his replacement, and will make an announcement on the new CEO in the near future, the annual report said.