Asset Plus Ltd’s profit for the September half-year was down 37% as the company lifted debt to buy 35 Graham St overlooking the Viaduct area from Auckland Council while it continued to conduct due diligence for further investments.
Net profit fell from $3.2 million in the September 2018 half to $2 million.
Chair Bruce Cotterill said on Friday adjusted funds from operations were down $760,000 to $2 million as a result of due diligence costs incurred.
“Operating performance over the period was steady on a like-for-like basis for the 3 existing assets. The partial impact of the Graham St acquisition offset the AA Centre divestment in the September 2018 half, which resulted in an increase in total operating income to $3.56 million from $3.15 million.
“The last 6 months has been a period of active due diligence, with a focus to secure acquisitions with future value-add potential. The 35 Graham St acquisition was the first step, but other opportunities continue to be sought.”
Key financial points:
- Pretax net profit, down 4.2% to $2.76 million ($2.88 million)
- Profit & total comprehensive income after tax, down 37.3% to $2.01 million ($3.2 million)
- Basic & diluted earnings/share, down 37.4% to 1.24c (1.98c)
- Adjusted funds from operations, down 27.3% to $2.02 million ($2.78 million). The current period was impacted by $0.83 million of due diligence & transaction related costs
- Net rental revenue, up 4.3% to $5.03 million ($4.83 million), due primarily to the acquisition of 35 Graham St in June 2019, offset by the sale of the AA Centre in June 2018
- Reported tax expense, up $1.08 million – the $1 million deferred tax liability relating to the AA Centre was released in the September 2018 half
- Net tangible assets, 69c/share (69c)
Portfolio occupancy, 98.0% (96.7 at 31 March), up due to the Graham St acquisition
- Weighted average lease term to expiry, 4.2 years (5.5 years at 31 March) due to the acquisition of 35 Graham St
- $69.7 million of debt currently drawn, $59.2 million of that to fund the 35 Graham St acquisition, representing a loan:value ratio of 38% (March 2019 8.5%)
- Interim net dividend, unchanged at 0.9c/share
Mr Cotterill said the board was committed to growing the portfolio in a disciplined manner, with a primary focus to close the gap between the share price (down half a cent on Thursday to 63.5c after a week at 64c) & net tangible asset backing (69c).
“The 35 Graham St acquisition fits within the Asset Plus ‘value-add’ investment strategy as, not only does the purchase price represent a strong initial yield of 6.85% in the near term, the property has considerable potential for a repositioning at the end of the 2-year lease term. The future development feasibility & scope of works is well underway, and a leasing agent has been appointed to pursue preleasing opportunities.”
Mr Cotterill said the divestment of the Heinz warehouse in Hastings would settle on 17 December, providing debt headroom to facilitate further acquisitions. The company identified this asset as non-core as it no longer fitted the company strategy.
He said Asset Plus management undertook significant due diligence on material opportunities during the half-year: “Value-add opportunities require significant due diligence. The size & complexity of these transactions require a thorough & robust programme of diligence. To date no transaction has been secured, but the management team remain focused on potential opportunities.”
Mr Cotterill said: “Steady progress has been made at Eastgate in Christchurch & Stoddard Rd in Mt Roskill, Auckland. Both assets provide a running yield in the near to medium term. Occupancy has been maintained at 100% at Stoddard Rd.
“The search for a further anchor tenant at Eastgate remains a focus and in recent times there have been some promising leads in attracting prospective tenants.”
No independent revaluations were completed as the directors determined there was no material movement over the 6 months.
Asset Plus is managed by Augusta Capital Ltd, which holds 18.85% of its shares.
Attribution: Company release.