Announcement
HALFYR: PFI: Resilient Interim Result, Dividend Guidance Reinstated
08:31am
PFI
04/09/2020 08:31
HALFYR
PRICE SENSITIVE
REL: 0831 HRS Property for Industry Limited
HALFYR: PFI: Resilient Interim Result, Dividend Guidance Reinstated
RESILIENT INTERIM RESULT, DIVIDEND GUIDANCE REINSTATED
The PFI management team will present the results via live webcast from 10am
NZT on 4 September 2020. To view and listen to the webcast, please visit
https://edge.media-server.com/mmc/p/pjszu67e.
There has been a large increase in teleconference bookings because of the
COVID-19 pandemic. Therefore, anyone wishing to participate in the webcast
(for example, to ask a question) must pre-register for the conference call at
http://apac.directeventreg.com/registration/event/2466573. Upon registering,
participants will be provided with participant dial-in numbers, a passcode,
and a unique registrant ID. In the 10 minutes prior to the call start time,
you will need to use the conference access information provided in the email
received at the point of registering, in addition to opening the webcast
(using the details above).
Highlights
- Resilient interim result: interim profit after tax of $15.6 million, Funds
From Operations (FFO)(1) earnings up 6.5% from the prior interim period to
4.78 cents per share, Adjusted Funds From Operations (AFFO) earnings down
7.8% from the prior interim period to 3.79 cents per share, H1 2020 cash
dividends of 3.60 cents per share
- Strong balance sheet: net tangible assets largely unchanged at 204.8 cents
per share, additional bank facility secured, almost $130 million of available
liquidity, gearing of 28.7%
- Portfolio metrics maintained: weighted average lease term of 5.28 years,
occupancy of 99.0%, just 1.9% of contract rent is due to expire in the second
half of 2020
- Dividend guidance reinstated: resilient results, a strong balance sheet,
continued high levels of collection in July and August, resulting in the
reinstatement of dividend guidance of 7.65 to 7.70 cents per share
Property for Industry Limited (PFI, the Company) today announced resilient
results for the six months ended 30 June 2020.
"The first half of 2020 will be remembered for the global onset of the
COVID-19 pandemic. Whilst the course of the pandemic continues to unfold, and
its full impact will take many years to materialise, PFI has delivered a
resilient interim result, maintaining a strong balance sheet and portfolio
metrics, and continuing to pay dividends in line with the prior year." says
PFI Chief Executive Officer Simon Woodhams.
Resilient interim result
Profit after tax for the interim period totalled $15.6 million (3.14 cents
per share), down from $46.4 million (9.30 cents per share) in the prior
interim period. A $7.8 million fair value loss on investment properties, as
compared to a $23.4 million fair value gain in the prior interim period, was
the main contributor to this reduction in profit.
FFO earnings of 4.78 cents per share were 0.29 cents per share or 6.5% ahead
of the prior interim period and 0.20 cents per share or 4.4% ahead of H2
2019. AFFO earnings of 3.79 cents per share were down 0.32 cents per share or
7.8% when compared to the prior interim period but were up 0.11 cents per
share or 3.0% when compared to H2 2019.
Simon Woodhams continues: "As previously announced, it is our current
intention to continue to pay dividends on a quarterly basis to the extent
that the Company is in a financial position to do so. The second quarter
dividend is based on the Company's interim performance, and during this
period, FFO and AFFO earnings were materially in line with the prior interim
period and the second half of 2019.
That being the case, the PFI Board resolved to pay a second quarter cash
dividend of 1.8000 cents per share, in line with the dividend paid for the
same period in the prior year."
The dividend will have imputation credits of 0.4906 cents per share attached
and a supplementary dividend of 0.2226 cents per share will be paid to
non-resident shareholders. The record date for the dividend is 11 September
2020, and the payment date is 22 September 2020.
As was the case with the first quarter dividend, the dividend reinvestment
scheme (DRS) will operate with a discount of 2%. The last date for receipt of
an application for participation in the DRS is one business day after the
record date, being 14 September 2020. If you have previously completed an
application to participate in the DRS, you do not need to do anything
further. You will receive shares instead of cash, in accordance with your
application. If you wish to change your previous participation, you will need
to complete a new application.
Further details can be found in the DRS Offer Document, which is available on
PFI's website:
https://www.propertyforindustry.co.nz/investor-centre/dividend-information/di
vidend-reinvestment/.
The second quarter dividend will take cash dividends for the first six months
of 2020 to 3.60 cents per share, in line with the prior period, resulting in
an FFO dividend pay-out ratio of 80% (H1 2019: 85%) and an AFFO dividend
pay-out ratio of 101% (H1 2019: 93%, refer Appendix 3).
Given the level of volatility in AFFO adjustments, PFI remains mindful of the
AFFO dividend pay-out ratio over a longer time horizon than any one period
when setting dividends, with the average AFFO dividend pay-out ratio being
101.1% since PFI began disclosing AFFO(2) in 2016 (refer Appendix 4).
Strong balance sheet
Net tangible assets (NTA) per share at the end of the interim period of 204.8
cents per share was largely unchanged since the beginning of the year.
In response to the risks associated with the COVID-19 pandemic, in March 2020
PFI secured a new $50 million liquidity facility from the Commonwealth Bank
of Australia, New Zealand Branch (CBA). The new 18-month facility is in
addition to the bonds and syndicated bank facility PFI already had in place.
PFI Chief Finance and Operating Officer, Craig Peirce, notes: "Securing this
additional liquidity gives the Company almost $130 million of undrawn
facilities, which allows us to meet our capital commitments regardless of the
progress of our divestment programme."
The weighted average term to expiry of PFI's bonds and bank facilities stands
at 3.4 years as at the end of the interim period, and the Company ended the
half year with gearing(3) of 28.7% and an interest cover ratio(4) of 4.1
times.
Craig Peirce concludes: "High levels of liquidity from a diverse range of
sources, ultra-low interest rates and headroom to covenant levels provide PFI
with a strong funding position. And whilst the bank loan market remains
supportive of PFI, subject to market conditions, we are considering options
such as another bond issue, to further extend and diversify the Company's
borrowings."
Portfolio metrics maintained
(See table in attached PDF)
Full valuations of 14 properties were completed during the interim period,
and an independent desktop review was completed on the remainder of the
portfolio. As a result of portfolio and valuation activity, a total write
down of $7.8 million or 0.5% was recorded, and PFI's passing yield is now
5.74% (5.84% at the end of 2019). An independent market rental assessment of
the entire portfolio was completed as part of the valuation process, this
assessment estimates that PFI's portfolio is ~3.5% under-rented.
Nearly 31,000 square metres, representing around 5% of PFI's existing
portfolio by rent, was leased during the interim period to 11 new and
existing tenants for an average increase in term of 6.4 years. Lease renewals
accounted for more than 81% of the contract rent secured. Across these
leasing transactions, low levels of incentives and capital expenditure were
required to attract and retain tenants, with average leasing costs of less
than half a month per year of term.
Leasing demand for PFI's properties remains robust, with transactions
totalling more than $5.1 million either secured, or in advanced stages of
negotiation, since the end of the interim period. Vacancy is still at
historically low levels: CBRE report in their August 2020 Market Flash that
Auckland Prime industrial vacancy is just 1.2%, with Secondary industrial
vacancy at 1.5%. Notwithstanding these low levels of vacancy, market levels
of incentive have begun to trend up, as landlords - including PFI - focus on
securing strong tenant covenants, guarantees and long lease terms to ensure
the security of cash flows.
Rent reviews were completed on 53 leases during the interim period, resulting
in an average annual uplift of ~4.1% on ~$22.5 million of contract rent. 5
market rent reviews on $1.2 million of contract rent delivered an annualised
increase of 7.1% over an average review period of 2.4 years, and these
reviews were settled at an average of approximately 2.6% above December 2019
market rental assessments.
At the end of the interim period, the Company's portfolio was 99.0% occupied
and just 1.9% of contract rent is due to expire in the second half of 2020.
When combined with rent reviews, around 44% of PFI's portfolio is subject to
some form of lease event during the second half of 2020.
Dividend guidance reinstated
Simon Woodhams, notes: "When we released the 2019 annual result, we advised
that we expected to pay a total cash dividend for the 2020 year of 7.65 to
7.70 cents per share. This guidance was withdrawn on 15 April, due to the
considerable uncertainty in relation to the operating environment at that
time, and the potential impact of that environment on the Company's earnings
and dividends.
However, during the first half of 2020, FFO and AFFO earnings were materially
in line with the prior interim period and the second half of 2019, despite a
change in the mix of factors contributing to this result, namely, a decrease
in rental income, offset by savings in interest and tax. In addition, high
levels of collection have continued, with more than 95% of July and August's
rent and opex collected."
PFI Chief Finance and Operating Officer, Craig Peirce, continues: "Given that
mix of factors, and based on the current outlook, we are pleased to advise
that we once again expect to pay a total cash dividend for the 2020 year of
7.65 to 7.70 cents per share, and that we expect that this level of full year
cash dividends will approximate 80% to 90% of FFO earnings and 95% to 100% of
AFFO earnings, in line with the Company's dividend policy. This guidance is
subject to there being no material adverse changes in conditions or
unforeseen events, including no material tenant failures or further material
COVID-19 restrictions."
Closing
Simon Woodhams concludes: "PFI has delivered a resilient interim result
despite a period of significant volatility and uncertainty. These results not
only reflect our ownership of the right industrial properties, in the right
locations, filled with quality tenants, managed by an experienced and
dedicated team, they also reflect our conservative gearing and dividend
pay-out ratios.
Looking forward, strong demand for industrial space due to increased
e-commerce volumes and businesses looking to create more localised and
resilient supply chains are trends that are anticipated to benefit PFI's
long-held strategy of owning, developing and acquiring quality industrial
properties in sought-after areas.
Despite the current challenging times, we believe PFI is well placed to
respond to these latest challenges, and indeed any opportunities that may
arise from them."
ENDS
ABOUT PFI & CONTACT
PFI is an NZX listed property vehicle specialising in industrial property.
PFI's nationwide portfolio of 93 properties is leased to 140 tenants.
For further information please contact:
SIMON WOODHAMS
Chief Executive Officer
---
Phone: +64 21 749 770
Email: woodhams@propertyforindustry.co.nz
---
CRAIG PEIRCE
Chief Finance and Operating Officer
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Phone: +64 21 248 6301
Email: peirce@propertyforindustry.co.nz
---
Property for Industry Limited
Shed 24, Prince's Wharf, 147 Quay Street, Auckland 1010
PO Box 1147, Shortland Street, Auckland 1140
---
www.propertyforindustry.co.nz
Attachments
NZX Form - Results Announcement
NZX Form - Distribution Notice
Interim Results Presentation
Interim Financial Statements
Interim Shareholder Newsletter
Appendices
Appendix 1 - FFO and AFFO Calculations
(See table in attached PDF)
Appendix 2 - FFO and AFFO Compared to H1 2020 and H2 2019
(See table in attached PDF)
Appendix 3 - FFO and AFFO Dividend Pay-out Ratios
(See table in attached PDF)
Appendix 4 - AFFO Pay-out Ratios (2016 - 2020 H1)
(See table in attached PDF)
Notes
(1) Funds From Operations (FFO) and Adjusted Funds From Operations (AFFO) are
non-GAAP financial information and are common property investor metrics,
which have been calculated in accordance with the guidelines issued by the
Property Council of Australia. Please refer to Appendix 1 for more detail as
to how these measures were calculated.
(2) AFFO has been disclosed since the financial year ended 31 December 2016.
(3) That is, total borrowings as a percentage of the most recent independent
valuation of the property portfolio. Covenant: 50%.
(4) That is, the ratio of interest expense and bank fees to operating
earnings excluding interest expense and bank fees. Covenant: 2 times.
End CA:00359225 For:PFI Type:HALFYR Time:2020-09-04 08:31:05
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