Property For Industry [NZX: PFI], the industrial property investor, lifted first-half profit 21 percent, a year on from its merger with Direct Property Fund which increased its portfolio by two-thirds.
Profit rose to $14.42 million for the six months ended June 30, from $11.87 million a year earlier, the Auckland-based company said in a statement, just below Forsyth Barr’s forecast of $14.8 million. Rental income more than doubled to $32.07 million, while operating expenses jumped to $13 million,from $6.4 million, keeping in line with previous periods operating ratio at about 40 percent.
The merger with Direct Property last year boosted PFI's portfolio from 50 sites to 83. At balance date it had 79 locations after shedding four properties for a gross sale price of $11.3 million, as part of its strategy to sell non-core properties to invest in better suited sites. In July, after the balance date, it entered an unconditional agreement to buy a 14,995 square metre site in Wellington for $15.4 million.
"The programme for divesting non-core assets in 2014 is largely complete," said joint general manager Simon Woodhams. "We will continue to seek to recycle the capital into accretive core industrial opportunities."
Guidance was unchanged, with the property investor expecting cash dividends to be 7.25 cents, based on its dividend policy between 95 percent and 100 percent of annual distributable profit. In the first-half, distributable profit was $15.63 million, or 3.80 cents a share, from $7.59 million, or 3.44 cents, a year earlier.
"Our view of the remainder of 2014 is that the compression of prime industrial yields - which have firmed to levels at or below the previous 2007 peak - may moderate over the balance of the year as recent interest rate rises start to impact," said joint general manager Nick Cobham. "Rental growth, which is already beginning to gain strength, will continue to gain momentum, reflecting the pass through increasing land values, construction costs and improving occupancy rates across the industrial sector."
Second quarter cash dividend was 1.75 cents per share, taking total cash dividends for the first-half to 3.50 cents, 2.9 percent more than the previous year.
PFI shares last traded at $1.355 and have advanced 4.3 percent this year. The stock is rated an average of ‘hold’ according to three out of five analysts surveyed by Reuters, with a median price target of $1.34.