Asset Plus lifts 1H profit 33% but rental income down

Asset Plus, formerly known as NPT, reported a 33 percent lift in first-half profit, despite a fall in rental income as the property investor overhauls its portfolio.

Net profit for the six months to Sept. 30 was $3.2 million, bolstered by lower operating costs, a smaller interest bill, and a small tax benefit, the company said. However, adjusted funds from operations or AFFO, which excludes capital spending on tenant incentives and lease costs, maintenance and associated tax recoveries, were $2.78 million, down 10 percent from a year earlier.

The half year’s AFFO performance was weighed down by lower rental income due to the sale of Print Place and the AA Centre, offset by lower administration and funding costs, Asset Plus said. Net rental income was $1.28 million, down 21 percent on the year.

"Although divestment of Print Place and AA Centre has reduced rental income, it has now provided balance sheet capacity for future investment," the company said in its interim report.

Asset Plus opted to overhaul its portfolio as part of a value-add strategy and to provide headroom to fund new acquisitions.

"The three remaining properties have performed as expected. The divestments were necessary to reset the Asset Plus portfolio to one that will offer shareholders yield plus growth over time," chair Bruce Cotterill said.

Net tangible asset backing is currently 71 cents a share, unchanged from March 31. That compares to a share price of 57.5 cents, down 4.2 percent so far this year.

The board declared a second-quarter dividend of 0.9 cents per share, with the record date set for Dec. 12 and payment on Dec. 19.

Asset Plus also said the transition of the management contract to Augusta Funds Management is completed and has generated savings. Last year NPT's operations were disrupted by a fight between Augusta and Kiwi Property Group for the management contract.

Augusta won over its fellow shareholders having shelved an earlier proposal that was rejected by the then-board.

Corporate costs reduced by $220,000 due to the benefits of externalisation and the impact of divestments within the portfolio. Net funding costs decreased as debt was repaid on the sale of the AA Centre in July 2018. Interest rate swaps were also cancelled in August in order to better align interest rate risk management with future investment strategies, the company said.

Drawn debt was $10 million at balance date, representing a group gearing level of 8 percent. There was $60 million of undrawn debt capacity on Sept. 30 but post-balance date the facility limit was reduced to $20 million from $70 million.

The holding costs of the interest rate swaps and the debt facility at the $70 million level outweighed their short-term benefit, it said. Further funding will be sought as required in conjunction with new acquisition initiatives.

“We are prepared to be patient in pursuit of the right opportunity to take Asset Plus in a new direction. We have assessed a number of options and will continue to look until we find the right option(s) to bring to shareholders,” said Augusta managing director Mark Francis.

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