PFI 0.86% $1.75 property for industry limited

Ann: FLLYR: PFI: PFI Announces Annual Results

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    17/02/2015 08:37
    REL: 0837 HRS Property for Industry Limited
    FLLYR: PFI: PFI Announces Annual Results
    - Profit after tax for the year of $59.9 million or 14.55 cents per share;
    - Distributable profit (1) for the year of 7.53 cents per share, 3.7% ahead
    of the prior year;
    - Fourth quarter final cash dividend of 1.95 cents per share, total cash
    dividends for the year of 7.25 cents per share;
    - $36.3 million or 4.3% portfolio revaluation uplift (2) contributing to a
    5.9% increase in net tangible assets to 130.2 cents per share;
    - 67% of contract rent varied, leased or reviewed during the year;
    - Occupancy improved to 98.5% and weighted average lease term consistent at
    5.26 years; and
    - Total shareholder returns (3) for the year of 24.6% per annum.
    NZX listed industrial property landlord Property For Industry Limited (PFI)
    today announced its annual results for the year to 31 December 2014, the
    company recording a per share increase in each of profit after tax,
    distributable profit, dividends and net tangible assets.
    PFI Chairman Peter Masfen said: "The company has recorded strong financial
    and operational results in the first full financial year following the merger
    with Direct Property Fund."
    PFI's total shareholder returns (3) for the year of 24.6% per annum exceeded
    both the NZX Property Index return (24.2% per annum) and the NZX 50 Index
    (17.6% per annum). Total shareholder returns (3) since listing in 1994 were
    8.98% per annum as at 31 December 2014, up from 8.60% as at 31 December 2013.
    Operating revenues for the year of $63.8 million were up $15.7 million or
    32.6%, primarily due to the 1 July 2013 merger with Direct Property Fund.
    Operating expenses for the year of $26.9 million were up $5.7 million or
    27.1%, also due to the merger, but the ratio of operating expenses to
    operating revenues of 42.2% was in line with the prior year (2013: 44.0%).
    The effective current tax rate (4) increased from 17.9% to 19.3% due to
    one-off merger deductions in prior year.
    After allowing for non-operating income and expenses and deferred tax, PFI
    recorded profit after tax of $59.9 million or 14.55 cents per share (2013:
    $40.5 million or 12.79 cents per share).
    PFI recorded distributable profit of 7.53 cents per share, an increase of
    0.27 cents per share or 3.7% over the prior year (2013: 7.26 cents per
    The PFI board has today resolved to pay a fourth quarter final cash dividend
    of 1.95 cents per share. The dividend will have imputation credits of 0.3127
    cents per share attached and a supplementary dividend of 0.1419 cents per
    share will be paid to non-resident shareholders. The record date for the
    dividend is 3 March 2015 and the payment date is 12 March 2015.
    The PFI board has again resolved to suspend the dividend reinvestment scheme,
    and will continue to assess whether to operate or suspend the dividend
    reinvestment scheme on a quarter-by-quarter basis.
    The fourth quarter final dividend will take cash dividends for the year to
    7.25 cents per share (2013: 7.20 cents per share).
    PFI Chairman Peter Masfen said: "Looking to next year we expect distributable
    profit to be approximately 7.35 cents per share and cash dividends to be
    approximately 7.30 cents per share, subject as always to economic
    Further to the announcement in December, PFI recorded a net portfolio uplift
    of $36.3 million or 4.3% from independent valuations to $876.0 million, the
    increase being largely attributable to continued market cap rate compression.
    PFI's net tangible assets per share increased by 7.2 cents per share or 5.9%
    from 123.0 to 130.2 cent per share. This increase was driven by the increase
    in the fair value of investment properties (+8.8 cps), but was partially
    offset by the loss on disposals of investment properties (-0.5 cps) and a
    reduction in the fair value of PFI's derivatives (-1.6 cps). Other changes
    accounted for the remaining +0.5 cps.
    Treasury initiatives, coupled with the ongoing application of PFI's treasury
    policies, have ensured PFI continues to maintain a strong balance sheet.
    PFI's $350 million syndicated bank loan facility was refinanced during the
    second quarter of the year. The facility, provided by existing lenders ANZ,
    BNZ, CBA and Westpac, comprises two $175 million dollar tranches committed
    for four and five year terms. The refinance extended the average term to
    expiry to 3.8 years (5) as at 31 December 2014. At the same time, the cost of
    the facilities was reduced.
    PFI carries current hedging (6) of $278 million at an average rate of 4.46%
    for an average duration of 2.5 years (7). Based on current hedging and debt
    levels, an average of 77% of the company's debt will be hedged during 2015.
    When combined with PFI's loan facility this hedging provides the company with
    a weighted average cost of debt of 5.96% (8), up from 5.51% as at 31 December
    2013, this increase being largely attributable to the rise in floating
    interest rates during the year.
    The company ended the year with gearing (9) at 35.8%, down from 37.4% as at
    31 December 2013 and well within PFI's self imposed gearing limit of 40% and
    bank covenants of 50%. The interest cover ratio (10) was maintained at 3.0
    times, in line with the prior year of 3.2 times and well within bank
    covenants of 2.0 times.
    As at / 31 December 2014 / 31 December 2013
    Number of properties / 79 / 83
    Number of tenants / 134 / 136
    Contract rent / $65.8 million / $65.4 million
    Occupancy / 98.5% / 97.1%
    Weighted average lease term / 5.26 years / 5.31 years
    During the year PFI sold five non-core properties for a combined gross sale
    proceeds of $26.6 million. As previously announced, $19.0 million of the
    proceeds were reinvested in the acquisition of a new warehouse at 143 Hutt
    Park Road, Seaview, Wellington and a design build development at 9 Narek
    Place, Manukau, Auckland.
    Since year end, a further $10.0 million has been committed to a 10,000 sqm
    design and build bulk storage warehouse development at PFI's 124 Hewletts
    Road site in Mount Maunganui. Subject only to consents, construction is
    programmed to commence in April 2015. Completion is estimated for September
    2015, at which time RMD Bulk Storage Limited will commence a 12 year lease
    Simon Woodhams PFI General Manager (Joint) said: "We are pleased to secure a
    second development for this property, following the completion of the
    Ballance Agri-Nutrients development in 2013. With an estimated return of 10%
    on incremental capital invested this project provides accretive returns to
    the company."
    More than 103,000 square metres of PFI's existing portfolio was leased during
    the year to 32 new and existing tenants for an average term of 5.1 years. The
    company also completed rent reviews on 68 leases, representing more than
    $34.6 million of contract rent, during the year. These reviews resulted in an
    average annual uplift of 1.8%, with fixed or index-linked review mechanisms,
    a feature of more than 65% (11) of PFI's leases, contributing much of the
    PFI's near term leasing outlook remains positive: the company's vacancy at 31
    December 2014 stood at just 1.5% and only 6.2% of contract rent is due to
    expire during 2015. The largest single vacant property represents just 0.7%
    of rent, and the largest single 2015 expiry represents just 1.6% of rent.
    Leasing demand in 2014 has been solid, a continuing trend over the last two
    years and reflected in total occupancy across the portfolio ending the year
    at a robust 98.5%. This compares favourably with the wider industrial market
    with CBRE Research reporting that vacancy rates across the Auckland
    industrial market particularly, where 86% of PFI's assets are located,
    declined by a third in 2014 from 3.7% in December 2013 to 2.5% as at December
    Coupled with the increased demand from occupiers PFI continued to benefit
    from the strong investor sentiment toward industrial investment property in
    2014. This confidence in the sector has flowed through to market
    capitalisation rates firming markedly for investment grade industrial
    property in 2014. Yields firmed across the whole industrial sector but this
    was particularly evident for prime property with long term leases and
    inherent rental growth during the term. This view is supported by a recent
    Colliers International report that states average prime industrial yields
    pushed below 7% at the end of 2014, the first time in their 20-year
    historical time series of reviewing performance of the sector.
    PFI General Manager (Joint) Nick Cobham noted: "The opportunity to acquire
    prime industrial property accretive to shareholder returns looks a continuing
    challenge in 2015 given the dearth of investment grade property available and
    the competition to acquire, particularly from private investors and owner
    occupiers.  However, consistent with our strategy for managing the company's
    lease expiries and vacancy, we continue to review our portfolio and seek to
    take advantage of the buoyancy in the market to recycle capital out of
    non-core assets, reposition existing properties and undertake development on
    expansion land within the portfolio when an accretive opportunity presents."
    For further information please contact:
    Nick Cobham
    General Manager (Joint)
    Phone: +64 9 303 9656
    Email: [email protected]
    Simon Woodhams
    General Manager (Joint)
    Phone: +64 9 303 9652
    Email: [email protected]
    PFI is New Zealand's only listed company specialising in industrial property.
    PFI's portfolio of 79 industrial properties in Auckland, Hamilton, Mount
    Maunganui, Wellington and Christchurch, is leased to 134 tenants.
    PFI - Appendix 1 - 31 December 2014
    PFI - Appendix 1 - Financial Statements - 31 December 2014
    PFI - Appendix 7 - 31 December 2014
    PFI - Annual Results Presentation - 31 December 2014
    See attachments for announcement appendix.
    (1) Distributable profit is a non-GAAP performance measure used by the PFI
    board in determining dividends to shareholders. Please refer to the appendix
    for more detail as to how this measure is calculated.
    (2) Unrealised fair value gain on investment properties.
    (3) Cash dividends plus change in share price from 1 January 2014 to 31
    December 2014, assuming dividends are reinvested.
    (4) That is, the ratio of current taxation to operating earnings.
    (5) 2.5 years as at 31 December 2013.
    (6) PFI defines hedging as any debt that has an interest rate secured for
    more than three months.
    (7) PFI also carries forward starting hedging of $75 million at an average
    rate of 4.57% for an average duration of 4.4 years, resulting in total
    hedging of $353 million at an average rate of 4.48% for an average duration
    of 2.9 years.
    (8) As at 31 December 2014. Weighted average cost of funds comprises BKBM,
    hedging, margins and all borrowings related fees.
    (9) That is, the ratio of total borrowings as a percentage of the most recent
    property valuation.
    (10) That is, the ratio of interest expense and bank fees to operating
    earnings excluding interest expense and bank fees.
    (11) 66% of contact rent.
    End CA:00260697 For:PFI    Type:FLLYR      Time:2015-02-17 08:37:29
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