UPDATE: Kiwi Property lifts annual profit 15%

Article – BusinessDesk

UPDATE: Kiwi Property lifts annual profit 15% as valuations rise
(Updates with further details from par 8)

By Jenny Ruth

May 20 (BusinessDesk) – Kiwi Property Group says annual net profit rose 15 percent, driven mainly by the rising values of its properties.

Kiwi’s net profit for the year ended March rose to $138.1 million from $120.1 million the previous year.

Revaluations added $47.7 million to the latest result compared with the previous year’s $26.5 million gain.

Funds from operations fell 4 percent to $106.9 million, reflecting the short-term impact of selling two non-core assets and reinvesting the proceeds into “superior development opportunities at Sylvia Park in Auckland.”

Property and property management income fell 5.4 percent to $237.5 million while interest costs fell to $37.6 million from $42.6 million.

Kiwi shares rose half a cent to $1.54 in morning trading, up 11 percent in the past 12 months, which is less than the benchmark S&P/NZX 50 Index’s more than 18 percent gain.

Chair Mark Ford says Kiwi’s portfolio has been reweighted towards Auckland “and the golden triangle where about 50 percent of New Zealand’s population lives and much of the country’s economic activity takes place.”

Kiwi will pay a final dividend of 3.475 cents per share on June 20 to those holding shares on June 5. That takes the annual per-share payout to 6.95 cents, up from 6.85 cents.

That’s 9 percent more than the 6.4 cents per share of adjusted funds from operations.

The company is forecasting a 7.05 cents per share dividend for the current year, “absent material adverse events or unforeseen circumstances.”

Kiwi shares’ net asset backing was $1.43 at March 31, up 3 cents from a year earlier.

Chief executive Clive Mackenzie says Kiwi is intensifying its large landholdings by developing mixed-use communities, growing income from existing assets and establishing a team to investigate funds management opportunities.

“Over the 2020 financial year, we will continue to realign our business to these core strategic objectives,” Mackenzie says.

At year-end, Kiwi’s portfolio was 99.3 percent occupied with a weighted average lease term of 5.2 years.

The property company had previously reported that although its overall portfolio’s value had increased by $47 million, or 1.5 percent, to $3.2 billion at March 31, the value of its retail portfolio had fallen by $28 million, or 4.5 percent, to $598 million.

That was excluding its mixed-use Sylvia Park and LynnMall properties, both in Auckland, and The Base in Hamilton, which collectively gained $20 million, or 1.3 percent, in value to $1.53 billion.

“Our asset teams have done a great job growing income with 747 new leases or rent reviews executed across the entire portfolio, providing a 4 percent lift over prior passing rentals,” Mackenzie says.

The results showed rentals from new leases and renewals increased 9.1 percent on Kiwi’s mixed-use centres, 9.3 percent on its office properties but fell 3.5 percent on retail properties, reflecting falling rentals at Centre Place North in Hamilton

Mackenzie told analysts that centre is non-core although Kiwi hasn’t put it up for sale yet.

Kiwi delivered its first office building at Sylvia Park during the year and the dining development, Langdons Quarter, at Northlands in Christchurch, he says.

It also completed the first of two new multi-level carparks at Sylvia Park. Construction activity for the arrival of a new Kmart store and a major galleria retail expansion at the shopping centre is well in train, he says.

The expansion will be larger than previously planned, costing an extra $35 million, but increasing projected development profit on the now $258 million expansion to 13 percent of project cost. Completion is due in mid-2020.

“We are finalising negotiations with exciting international and national tenants to provide further strength for the project in addition to the two-level Farmers department store and other retail tenancies already secured.”

Kiwi was 31 percent geared at balance date, comfortably within its target bank of 25-35 percent.

(BusinessDesk)

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