Announcement
HALFYR: KPG: Kiwi Property announces half-year results and dividend
08:31am
KPG
23/11/2020 08:30
HALFYR
PRICE SENSITIVE
REL: 0830 HRS Kiwi Property Group Limited
HALFYR: KPG: Kiwi Property announces half-year results and dividend
Kiwi Property today announced its financial results for the six months ended
30 September 2020, reporting operating profit before tax [Note 1] of $55.2
million, down 8.4% on the same period last year. Net profit after tax [Note
2] rose 47.5% to $54.2 million, assisted by a fair value gain on investment
properties.
Kiwi Property Chief Executive Officer, Clive Mackenzie, said the proactive
steps taken early in the financial year had enabled the Company to navigate
the financial impacts of COVID-19.
"While operating profit fell for the period, it's important to consider the
result within the context of the lockdowns that took place in the first half.
Looking ahead, we're focused on delivering a solid performance through the
remainder of the 2021 financial year, capitalising on our diversified
property portfolio and the successful opening of Sylvia Park Level 1," said
Mackenzie.
Property valuations
As at 30 September 2020, the Company's mixed use, office, retail and other
investment properties were worth $3.2 billion [Note 3], following an $11.8
million fair value uplift. Net tangible assets per share also increased
marginally to $1.29. Kiwi Property's office assets proved most resistant to
the economic impact of the pandemic, increasing in value by 4.3% to $950
million. In contrast, the Company's mixed-use and retail portfolios declined
in value by 0.9% (to $1.55 billion) and 3.3% (to $469 million) respectively.
"While the uncertainty caused by COVID-19 continues to impact property
values, it's encouraging to see a firming of capitalisation rates and a
general stabilisation of asset pricing across our portfolio," said Mackenzie.
Rent relief
The cost of the rent relief measures introduced to support tenants
post-lockdowns contributed to a 5.3% reduction in net rental income to $84.9
million. Adjusted Funds from Operations [Note 1] (AFFO) were similarly
affected, declining 21.1% to $36.5 million.
The cash cost of the tenant support package remains within the $20 million
provision previously outlined by the Company (equivalent to $14 million after
tax for the full-year) and will have a first half pre-tax accounting impact
of approximately $8.1 million. These rent relief costs will be partially
offset by the reintroduction of depreciation allowances for commercial
buildings, expected to increase Kiwi Property's full year after-tax earnings
by approximately $4.5 million.
"COVID-19 and the ensuing lockdowns placed a number of our tenants under
significant pressure. While the costs associated with abating and deferring
rent for our tenants has impacted Kiwi Property's financial performance, by
supporting our retailers and SMEs we have maintained productive shopping
centres, and helped safeguard the long-term performance of our assets," said
Mackenzie.
Resilient tenant portfolio
At the half year, Kiwi Property's assets were 99.1% occupied, with a robust
weighted average lease expiry of 4.7 years. In parallel, income from new
leases and rent reviews rose 1.5% overall, led by office (+3.6%).
Kiwi Property's tenant portfolio is increasingly resilient to the impact of
future COVID-19 related lockdowns. Around 50% of the Company's tenants are
designated as either essential services or everyday essentials, many of which
are able to operate at more restrictive alert levels. With only two of Kiwi
Property's tenants contributing over five percent of gross income, the
Company also benefits from a diversified rental stream.
Sylvia Park Level 1
Kiwi Property opened the 20,000 square metre Sylvia Park Level 1 expansion on
15 October 2020. The $277 million development features an extensive lineup of
local and international brands, including a two-level Farmers flagship store
and 'The Terrace at Sylvia Park' dining precinct. Following the launch of the
new addition, Sylvia Park is now home to 10 of New Zealand's 11 favourite
retailers [Note 4], as well as more than 250 stores and over 5,000 free
carparks, the most of any shopping centre in the country.
Moving forward on strategy
Kiwi Property continued to progress its mixed-use strategy through the first
half of the 2021 financial year, with a focus on diversifying its asset base.
Design of Sylvia Park Tower 2 is ongoing, with resource consent granted for
the 15-floor development. Planning is also underway for Sylvia Park Tower 3,
a smaller six-floor office and medical building, as well as a build-to-rent
residential development at Sylvia Park.
In October 2020, the Company began marketing for sale The Plaza shopping
centre in Palmerston North. The potential disposal of this asset forms part
of Kiwi Property's portfolio rebalancing strategy and will unlock capital to
help fund its mixed-use development pipeline.
Dividend and guidance update
An interim dividend will be paid for the six month period ended 30 September
2020. In line with Kiwi Property's new dividend policy, the payout of 2.20
cents per share is set at 95% of the Company's AFFO. Payment will be made on
18 December 2020. Acknowledging that trading conditions remain uncertain for
the remainder of the year, the board expects full-year AFFO to be in the
range of 4.90 to 5.15 cents per share [Note 5].
Kiwi Property Chair, Mark Ford, said the reinstatement of the dividend
reflected a relative stabilisation of trading conditions over recent months.
"COVID-19 has had a significant impact on Kiwi Property, however despite the
challenges the business has faced, we have remained resilient. We're pleased
to be in a position to pay an interim dividend and encouragingly, provide
guidance for the full year.
"While the pandemic may create more uncertainty in the months ahead, as
always, we are committed to delivering for our shareholders and other
stakeholders," Ford concluded.
ENDS
Notes:
1. Operating profit before tax and AFFO are alternative non-GAAP performance
measures. Refer to the 2021 half-year result presentation accompanying this
announcement for definitions.
2. The reported profit has been prepared in accordance with New Zealand
Generally Accepted Accounting Practice (GAAP).
3. Kiwi Property's independent valuers have included either 'material
valuation uncertainty' or 'market volatility and uncertainty' clauses,
consistent with market practice following COVID-19.
4. NZ's top retailers survey, September 2020, Colmar Brunton.
5. The final dividend payment is contingent on the financial performance of
the Company through the remainder of the 2021 financial year, barring
material adverse effects or unforeseen circumstances.
Contact us for further information:
Clive Mackenzie
Chief Executive Officer
Clive.mackenzie@kp.co.nz
Campbell Hodgetts
Communications and Investor Relations Lead
campbell.hodgetts@kp.co.nz;
+64 27 5634985
About us:
Kiwi Property (NZX: KPG) is one of the largest listed property companies on
the New Zealand Stock Exchange and is a member of the S&P/NZX 20 Index. We've
been around for over 25 years and proudly own, and manage a significant real
estate portfolio, comprising some of New Zealand's best mixed-use, retail and
office buildings. Our objective is to provide investors with a reliable
investment in New Zealand property through the ownership and active
management of a diversified, high-quality portfolio. S&P Global Ratings has
assigned Kiwi Property an issuer credit rating of BBB (stable) and an issue
credit rating of BBB+ for each of its fixed rate senior secured bonds. Kiwi
Property is the highest rated New Zealand company within CDP (Carbon
Disclosure Project) and is a member of FTSE4 Good, a series of benchmark and
tradable indices for ESG (Environmental, Social and Governance) investors.
Kiwi Property is licensed under the Real Estate Agents Act 2008. To find out
more, visit our website kp.co.nz
End CA:00363655 For:KPG Type:HALFYR Time:2020-11-23 08:31:02
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