Precinct Properties lifts annual profit
Listed commercial property investor Precinct Properties increased annual profit 13% and lifted its guidance as it shifted its weighting to Auckland, where it sees long-term growth.
Net profit rose to $138.2 million in the 12 months ended June, from $122.4 million a year earlier. Gross rental revenue fell 14% to $146 million.
Net operating income, an alternate performance measure Precinct uses which excludes non-cash items such as unrealised movements in the value of investment properties, rose 6.6% to $72.8 million.
Precinct uses its net operating income to determine its dividend payout. It lifted its dividend guidance to 5.6c per share for 2017, from 5.4c per share in 2016, and gave full-year earnings guidance of 6.2c per share from 6.01c.
Chief executive Scott Pritchard says the company had ended the year strongly, and developments begun in 2016, which it's invested $968 million in with a forecast completion of $1.14 billion, will increase Precinct's weighting to Auckland and improve its long-term earnings outlook.
"The Auckland city centre office market remains extremely strong with a continuation of historically low vacancy levels," Mr Pritchard says.
"The Auckland city centre retail environment continues to strengthen driven by strong demand from a blend of international and local retailers, improvement in dining and entertainment precincts and strong growth in tourist numbers.
“In Wellington, the conclusion of the government's Wellington Accommodation Project will remove uncertainty in the market providing stability."
Commercial Bay, the company's most significant project, is developing well, Mr Pritchard says. The $681 million development in downtown Auckland will include a 39-storey waterfront glass office tower and retail centre. The development will encompass Precinct's four buildings in the surrounding area, which it anticipates will be worth about $1.5 billion on completion and represent 63% of the company’s portfolio.
Some 60% of the office tower leasing is now complete, with law firm MinterEllisonRuddWatts announcing its intention to move, while H&M is the latest retailer to commit.
"We are delighted with our leasing progress given we are three years from the completion date," Mr Pritchard says.
The shares were unchanged at $1.275, and have gained 2% this year. The stock is rated a 'hold' by an average of six analyst recommendations compiled by Reuters, with a median target price of $1.24.