Argosy first-half profit drops 58%

Argosy first-half profit drops 58% on unchanged portfolio valuation, dip in rentals

By Paul McBeth

Nov. 21 (BusinessDesk) - Argosy Property posted a 58 percent decline in first-half profit as the firm became the latest listed property investor to report a little-changed portfolio valuation after several years of gains, and was faced with smaller rental income.

Net profit fell to $23.4 million, or 2.84 cents per share, in the six months ended Sept. 30 from $56.2 million, or 6.9 cents, a year earlier, the Auckland-based company said in a statement. The year-earlier period was boosted by a $35.8 million unrealised gain in the value of its property portfolio, which wasn't repeated in the latest period as the wider property market slows down after several years of rapid growth.

Distributable income, which strips out movements in the property portfolio, fell 14 percent to $31.2 million with the year-earlier period bolstered by a surrender payment from New Zealand Post after it exited three floors on the lease of NZ Post House in Wellington, offset by an insurance payment from the Kaikoura earthquake last November.

"There is now more visibility and certainty around New Zealand's medium-term position and we are confident there will be no material impact on our business," chair Mike Smith said. "The outlook for the New Zealand property market remains positive, with rental growth being achieved and good levels of inquiry for vacant space."

Argosy has been diversifying its property portfolio outside Auckland, buying industrial sites which now make up 40 percent of its portfolio. The firm's 63 properties were valued at $1.46 billion as at Sept. 30, with 185 tenants at a 98.1 percent occupancy rate. The weighted average lease term of 5.6 years was up from 5.26 years as at Sept. 30, 2016.

The board declared a second-quarter dividend of 1.55 cents per share, payable on Dec. 20 with a Dec. 6 record date. The board affirmed its view that it will pay an annual return of 6.2 cents per share.

Argosy's directors also signalled plans to change the dividend policy, linking payments to an adjusted funds from operations earnings measure, which has become popular among listed property companies. The gauge "was considered by some investors to represent a measure of dividend sustainability". Distributable earnings has been the previous measure favoured by those firms. Argosy's adjusted funds from operations dropped 11 percent to $23.5 million.

The shares last traded at $1.045 and have increased 3.5 percent so far this year, lagging behind the 18 percent increase on the S&P/NZX 50 index over the same period.

(BusinessDesk)

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