New Zealand Rural Land Co (NZX: NZL) has recorded a net profit after tax of $5.3M for the financial year ended 31
December 2022 along with a further increase in the value of its property portfolio.
The results cover the period 1 July 2022 – 31 December 2022, following a recent change in NZL’s balance date to 31
December (from 30 June).
NZL currently owns 11,710 hectares (28,963 acres) of high quality productive rural land in New Zealand which is fully
tenanted on long-term leases with regular CPI adjustment provisions. It generates shareholder value through a
combination of asset value appreciation and cash flows from its long-term leases.
Co-founder and New Zealand Rural Land Management director Richard Milsom said that in the current environment the
increase in value of NZL’s rural land holdings demonstrated the resilience and quality of NZL’s portfolio.
“Since listing on the NZX, 21 December 2020, NZL’s audited NAV per share has increased at a compound annual growth rate
(CAGR) of approximately +15% per annum.
“An inflationary environment, uncertain macro-economic conditions, and volatile geo-political situation are putting
downward pressure on the value of many other assets.
“However NZL’s total assets of $298.8M, composed primarily of 11,710ha of premium rural land, continue to deliver value
growth. Independent valuations of NZL’s portfolio shows an increase of +0.94% in the six months from 1 July 2022 to 31
December 2022. This is in addition to the increase of
+16.7% reported in the 12 months to 30 June 2022.
“The external drivers of this consistent trajectory include a rapidly growing global population and food demand, and a
decrease in available productive land, which make rural land – particularly in New Zealand - an increasingly attractive
investment.
“NZL provides a route for local and international investors to acquire an interest in New Zealand’s respected
agri-sector, knowing that it is managed by a company that is delivering safe, secure and predictable long-term
earnings,” said Mr Milsom.Results Summary: Year Ending 31 December 202231 December 2022*30 June 2022**ChangeTotal Assets$298.8M$289.0M+$9.8MTotal Liabilities$107.9M$102.4M+$5.5MNet Profit After Tax$5.3M$36.5M-$31.2MAFFO1$2.5M$2.2M+$0.2MDividend (cents per share)2.03 cps1.60 cps+0.43 cpsNet Assets$190.9M$186.6M+$4.3MNet Asset Value per Share$1.652$1.656-$0.004Number of Shares on Issue115.6M112.6M+3.0M
*6 month period from 1 July 2022 to 31 December 2022.
**6 month period from 1 January 2022 to 30 June 2022.
1 AFFO is a proxy for free cash flow commonly used by real estate investment trusts. AFFO is intended to provide
investors with a clearer picture of the company’s dividend paying ability
A detailed results presentation is available https://www.nzrlc.co.nz/reports-presentationsForestry Estate Acquisition: Capital Raise
On 21 October 2022, NZL announced it had entered into an agreement to acquire up to 100% of a forestry estate located in
Manawatu-Whanganui in the North Island. The estate is comprised of five individual properties with a total area of
approximately 2,383ha.
NZL’s cost to acquire 100% of the estate is approximately $63.7m (subject to final costs), with a settlement date of 15
April 2023. The entire estate will be leased to New Zealand Forest Leasing (NZFL) for a period of 20 years.
Post forest acquisition, NZL will own 14,093 hectares of rural land with a 12.1 year weighted average lease term (by
value), with 100% occupancy across eight tenants. From completion of this transaction NZL forecasts an increase to its
FY23 and FY24 dividend per share of +3.7% and +17.4% respectively, an increase in NZL’s weighted average lease term by
+34.4% and material growth in the scale and diversity of NZL’s asset and tenant base.
At the time of announcing the acquisition, NZL said the purchase would be funded through a combination of debt and
equity.
NZL Director, Christopher Swasbrook, said the company had spent considerable time assessing funding options for the
acquisition that would be in the best interests of shareholders.
“The most earnings and dividend accretive option in the time available is to purchase 100% of the forest funded by a 1:3
pro-rata rights issue at a cost of $1.00 per share, to raise approximately $38.5M. The Offer will open today to
institutional investors and then the retail component of the Offer opens next Monday, 6 March 2023.
“For every three new shares allotted to investors under the Offer, NZL will also allot one warrant for no additional
consideration. Each warrant gives its holder the right, but not the obligation, to subscribe for one additional ordinary
share in NZL on or before the expiry date (30 November 2025) for an exercise price of NZD$1.20. Application has been
made to quote the warrants on the NZX Main Board and this is expected to occur on Thursday, 23 March 2023, under the
ticker code “NZLWA”.
“In addition, $25.2M further debt will be raised via Rabobank, with total facility limits expected to increase to
approximately $131.0m.
“NZL has received indications of interest from a recent European Roadshow in Germany, Luxembourg and Switzerland which
provides the Board of NZL with confidence that should shareholders not wish to take up their rights in NZL that the
Company can access capital, expand its asset base as planned and further broaden its share register;” said Mr Swasbrook.
A detailed forestry acquisition and equity raising presentation is available https://www.nzrlc.co.nz/reports-presentationsDividend
NZL will pay a half year dividend of $2.03 cps for the period 1 July – 31 December 2022. An increase of +27% on the
previous six month period (1 January 2022 - 30 June 2022).
The cash dividend will be paid on Friday, 10 March 2023, with a record date of Tuesday, 7 March 2023. There will be no
Dividend Reinvestment Plan (DRP) offered for this dividend.Outlook
NZL’s strategy is to own quality rural land in New Zealand, grow and diversify its portfolio while delivering attractive
risk-adjusted returns.
NZL’s leases incorporate regular, uncapped, CPI reviews. That means higher inflation results in higher than anticipated
rental growth. And NZL is insulated from inflation-impacted and all other operational on-farm costs by owning only the
land.
Post the forestry acquisition NZL forecasts FY23 AFFO of between $6.0m and $6.5m. NZL has hedging arrangements in place
for 39% of its total borrowings at an average all in cost of 4.5%. NZL’s remaining debt is borrowed on a floating rate
at an average all in cost of 6.3%. NZL’s weighted average interest cost (fixed and floating) is 5.6%.
From 1 July 2024, NZL will start to see the positive impact of rental growth with approximately 55% of the portfolio (by
lease income) due for CPI review. These reviews are CPI-indexed. CPI accumulated since the leases began (1 June 2021)
totals +12.6% to 31 December 2022 and is forecast by the market to be more than +18% for the three years to 30 June
2024.