Portfolio gain, rental income growth delivers record annual profit for Kiwi Property

Net profit rose to $250.8 million in the year ended March 31.

Kiwi Property Group [NZX: KPG], the country's biggest listed property investor by market value, reported a 118% jump in full-year profit reflecting an increase in its portfolio value, higher rental returns, and lower costs including interest charges.

Net profit rose to $250.8 million in the year ended March 31, from $115 million a year earlier, the Auckland-based company said in a statement. Total income grew 126% to $391 million and included a 2.3% gain in property revenue and a $176 million gain in the value of investment properties.

Kiwi lifted its cash dividend to 6.6c  per share, in line with guidance and up from 6.5c  a year earlier. It forecast an increase to 6.75c  for the 2017 year. The company has been "recycling" its capital, selling assets such as the Hamilton Centre Place South and targeting properties with greater growth potential, such as a 50% stake in The Base , which it has agreed to buy for $192.5 million, and Westgate Lifestyle, acquired for $82.5 million.

"As we look forward to the year ahead, Kiwi Property is well positioned relative to our shareholder goals, chairman Mark Ford said. "The New Zealand economy continues to grow positively and investment property fundamentals remain supportive, particularly in Auckland."

Rental income from its biggest retail property, Sylvia Park, rose 1% to $36.4 million, while income from its biggest office property, the Vero Centre, gained 5.2% to $20 million. Overall rental income from its retail portfolio rose 5.9% to $104.9 million and income from its office portfolio fell 7.9% to $38.2 million, mainly reflecting a drop in the Aurora Centre, which has been vacant since November 2014 for refurbishment, and the loss of income from 205 Queen St, which was sold in June 2014. Property management fees rose 3.6% to $8.6 million.

Total expenses dropped 21% to $119.3 million, including a 1.1% decline in direct property expenses to $51.6 million and a 19% decline in interest and finance charges to $33.5 million, the company said. Its net fair value loss on interest rate derivatives widened to $17.6 million from $13.1 million.

The reduction in its interest expense reflected a 26% drop in bank interest to $31.1 million after it used proceeds of a one-for-nine entitlement to repay debt, while the conversion of its mandatory convertible notes in December 2014 meant it didn't incur interest on the notes, compared to $8.4 million a year earlier. Interest on bonds rose 48% to $8 million representing a full year of interest on bonds issued in August 2014.

Kiwi's weighted average lease term or WALT, rose to 5.1 years from 4.5 years while the occupancy rate across both retail and office properties increased to 98.7% from 98.4%.


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