Kiwi Property Group first half profit edges up as asset sales trim interest bill
By Paul McBeth
Nov. 19 (BusinessDesk) - Kiwi Property Group lifted its first-half profit 0.9 percent as the real estate investor's smaller bank debt carried a lower interest cost.
Net profit increased to $48.3 million in the six months ended Sept. 30 from $47.9 million a year earlier, due to an 18 percent decline in interest costs to $18.4 million. A smaller tax bill of $10.9 million compared to $13.8 million a year earlier also helped the bottom line.
The listed real estate investor sold North City Plaza in Porirua and the Majestic Tower in the Wellington CBD, using the proceeds to cut interest-bearing debt to $900.9 million as at Sept. 30 from $959.1 million a year earlier.
The loss of those properties and their income weighed on underlying earnings. Funds from operations, the measure used to determine dividends, fell 3.4 percent to $52.3 million. The board declared a second-quarter dividend of 3.475 cents per share, and expects an annual payout 6.95 cents, up from 6.85 cents a year earlier.
"Our successful efforts to rebalance our portfolio have provided us with greater balance sheet flexibility, enabling us to focus on growth through developments and considered acquisitions, while still maintaining conservative levels of debt," chief executive Clive Mackenzie said in a statement.
Kiwi Property has been reshaping its portfolio over the past year, selling assets to fund new developments in areas such as Drury south of Auckland and expanding the Sylvia Park mall. It had $181 million of development commitments as at Sept. 30.
"For the balance of the 2019 financial year, we will be focused on completing and advancing development projects underway at Sylvia Park and Northlands, and progressing zoning outcomes for our Drury landholdings," Mackenzie said.
Kiwi Property owns 12 properties valued at $2.9 billion, with the cornerstone being the $891.9 million Sylvia Park mall. Occupancy was at 99.3 percent as at Sept. 30, down from 99.6 percent six months earlier, while the weighted average lease term of 5.4 years compared to 5.3 years at March 31.
Its gearing ratio of 29.4 percent was down from 31.2 percent a year earlier.
Since the balance date, Kiwi Property raised $100 million through a bond issue, cancelled $92 million of short-dated banking facilities, and bought 8.6 hectares of development land in Drury for $9 million.
The shares last traded at $1.36, down 3.2 percent since the start of the year, compared to a 4.9 percent gain on the benchmark S&P/NZX 50 index.