Asset Plus profit gains on cheaper operating costs, interest

By Paul McBeth

May 29 (BusinessDesk) - Asset Plus lifted its annual profit as its external management contract with Augusta Capital and a smaller debt load helped cut costs.

The property investor is repositioning its portfolio under the new oversight of Augusta, with a view to buying new buildings where it can unlock value. The external management was seen as a way to improve shareholder return by cutting the company's operating costs, and was a key factor in a 40 percent drop in administration costs to $1.8 million in the 12 months ended March 31.

Smaller bank debt of $10.5 million helped reduce its interest costs to $1.1 million, down from the $2.8 million finance bill it faced on $44.5 million of bank debt a year earlier.

A tax benefit of $280,000 compared to a tax expense of $790,000 also helped lift the company's annual profit to $3.8 million from $3.1 million.

Asset Plus had three properties in its portfolio valued at $123.1 million as at March 31. It sold two buildings in the period, which contributed to a 22 percent decline in net rental income of $9.2 million and a 23 percent drop in adjusted funds from operations to $4.7 million.

The company has designs on a new property and has agreed to buy an Auckland CBD building for $58 million from Auckland Council, pending shareholder approval at a special meeting on June 17.

"The potential acquisition of 35 Graham Street fits with the value-add strategy and restores near term earnings as the balance sheet is more effectively utilised," the company said in a statement. "Management will remain focused on securing further acquisition opportunities and continue to identify opportunities to optimise the existing assets."

Asset Plus intends to extend its existing banking facility with Bank of New Zealand by $55 million to a maximum of $75 million. The acquisition, if approved, is expected to add $1 million of profit to Asset Plus, with net rental income of $3.9 million. The property is seen increasing admin costs by $25,000 and the interest bill by $2.3 million. It is expected to generate an extra $294,000 of management fees for Augusta.

The company has also granted an exclusive period of due diligence for a potential buyer of Asset Plus' Watties distribution centre, which was valued at $29.1 million. If sold, it would reduce the firm's rental income by $2.1 million and trim profit by $657,000. If a deal's reached, Asset Plus could sell the property in October.

The board declared a fourth-quarter dividend of 0.9 cents per share, payable on June 20 with a June 13 record date. That takes the annual return to 3.6 cents.

The shares were unchanged at 65 cents, and have gained 13 percent so far this year.

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