Argosy first-half profit drops 58pc

Argosy Property posted a 58 per cent decline in first-half profit as the firm became the latest listed property investor to report a little-changed portfolio valuation after several years of gains, and was faced with smaller rental income.

Net profit fell to $23.4 million in the six months ended September 30 from $56.2m a year earlier, the Auckland-based company said. The year-earlier period was boosted by a $35.8m unrealised gain in the value of its property portfolio, which was not repeated in the latest period as the wider property market slows after several years of rapid growth.

Distributable income, which strips out movements in the property portfolio, fell 14 per cent to $31.2m with the year-earlier period bolstered by a surrender payment from New Zealand Post after it exited three floors on the lease of NZ Post House in Wellington, offset by an insurance payment from the Kaikoura earthquake last November.

“There is now more visibility and certainty around New Zealand’s medium-term position and we are confident there will be no material impact on our business,” said chairman Mike Smith said. “The outlook for the New Zealand property market remains positive, with rental growth being achieved and good levels of inquiry for vacant space.”

Argosy has been diversify- ing its property portfolio outside Auckland, buying industrial sites which now make up 40 per cent of its portfolio. The firm’s 63 properties were valued at $1.46 billion as at September 30, with 185 tenants at a 98.1 per cent occupancy rate. The weighted average lease term of 5.6 years was up from 5.26 years as at September 30, 2016.

The board declared a second-quarter dividend of 1.55c per share, payable on December 20 with a December 6 record date. The board affirmed its view that it will pay an annual return of 6.2c per share.

Argosy’s directors also signalled plans to change the dividend policy, linking payments to an adjusted funds from operations earnings measure, which has become popular among listed property companies.

The gauge “was considered by some investors to represent a measure of dividend sustainability”.

Distributable earnings has been the previous measure favoured by those firms. Argosy’s adjusted funds from operations dropped 11 per cent to $23.5m.