New Zealand Rural Land Company Announces FY23 Results

New Zealand Rural Land Company (NZL:NZX) has today announced a net profit after tax of $10.9m and Adjusted Funds From Operations (AFFO) of $6.0m for the year ended 31 December 2023.[1]

Co-founder and NZRLM director Richard Milsom said, “This is a strong result which is underpinned by an increase in NZL portfolio value including further diversification and demonstrates effective risk management and sustainable growth for shareholders.”

NZL currently owns 16,063 hectares 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.

Post Balance Date Highlights - FY24

• Roc Partners purchase 25% of NZL portfolio, validating strategy and partnering for growth

• FY24 AFFO forecast to be 5.0 cps - 5.4 cps (+19.7% midpoint)

• Forestry and horticulture acquisitions in FY24 materially increased diversification

• Weighted Average Lease Term (WALT) increased from 11.7 years to 12.7 years

• 16,063 hectares of rural land, an 8.4% increase on FY23

• Gearing lowered to 32.9% with 64% of debt hedged following Roc transaction

• Dividend reinstated with an amended policy targeting a pay-out of 60-90% of AFFO

• On-market share buyback programme continued.

FY23 Highlights

• Net Asset Value (NAV) per share grew from $1.250 at listing in December 2020 to $1.602 at FY23 year end

• AFFO grew from 4.13 cps in FY22 to 4.35 cps (+5.3%) in FY23

• Forestry acquisitions materially increased diversification, funded via an inaugural “Green Loan”

• Total assets ended FY23 at $369.8m

• NAV ended FY23 at $223.1m

• Gearing closed FY23 at 36.2%

• NZL repurchased 611,327 shares at an average price of $0.87 per share.

NZL reinstates interim dividend and continues share buyback programme

The NZL Board has resolved to amend its dividend policy and reinstate NZL’s dividend.

The interim dividend will be based on results for the period 1 January 2024 to 30 June 2024 and paid in October 2024.

NZL Chair Rob Campbell said, “NZL’s amended dividend policy targets a pay out of 60-90% of AFFO. This target aims to provide flexibility to deploy cash operating earnings in ways that increase shareholder value.”

NZL maintains a selective on-market share buyback programme. The total number of shares that may be bought back shall not exceed 5,350,000 shares. Shares will only be acquired if the acquisition price represents 90% or less of NZL’s prevailing NAV per share.

Roc partnership supports long-term strategy

On 9 February 2024, post-balance date, NZL sold a 25% equity interest in its land portfolio to Roc Partners (Roc) for $44.2m.

“NZL used the proceeds to repay $11.8m owing on a convertible note it drew down in April 2023 to partially fund its forestry acquisition. A further $20.7m of the proceeds were used to fund orchard and forestry land acquisitions. The balance of the funds have been retained as working capital,” said Mr Milsom.

Acquisitions increase portfolio diversification

In April 2023, NZL purchased two forestry estates totalling 3,137 hectares for $70.2m and leased to New Zealand Forest Leasing (NZFL) for an average weighted lease term of 19.5 years (by value), which includes annual CPI adjustments.

The purchase was funded with NZL’s inaugural Green Loan via Rabobank of $25.2m, the proceeds of NZL’s pro- rata rights issue and a $12m convertible note issued to an entity associated with NZFL.

In February 2024, post-balance date, NZL acquired the land supporting three apple orchards in Twyford, Hawke’s Bay and a forestry block in Awakino, Waikato, for $27.6m.

“These two acquisitions were made through NZL’s partnership with Roc Partners and add meaningful sector, income and tenant diversification to NZL with forestry and horticulture now holding a 31% and 5% proportion of NZL’s portfolio, respectively,” said Mr Milsom.

NZL well positioned for future growth opportunities

“NZL’s increase in its asset value of +2.2%, as at 31 December 2023, in an uncertain macroeconomic environment for real estate assets re-affirms the attractiveness of the company’s rural land asset base and long-term investment strategy.

“NZL remains excited by its future opportunities, which are augmented by the strategic partnership with Roc Partners, and the company is positioned well to continue to grow shareholder value,” said Mr Milsom.

NZL forecasts FY24 AFFO of between $7.0m and $7.5m, excluding earnings from properties with put/call arrangements in place (~$1.2m).

From April 2024, NZL will start to see the positive impact of rental growth with approximately half of its portfolio (by lease income) due for CPI review. This includes 100% of its forestry acquired in FY23 and 53% of its pastoral leases, which between lease commencement and year end have accumulated +3.4% and +17.9% in CPI, respectively.

Currently, NZL has hedging arrangements in place for 64% of its total borrowings. Gearing amounts to 32.9% of total assets.

Full details of the results: https://www.nzrlc.co.nz/reports-presentations.

[1] In late 2022, NZL shifted its balance date from 30 June to 31 December. The FY23 results are for the first full financial year from 1 January – 31 December 2023.

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