Augusta Capital Ltd’s net profit for the September half-year was slashed by 68%, from $5.1 million to $1.63 million, as the company failed to complete a number of initiatives to continue its restructuring from investor in buildings to funds manager.
Managing director Mark Francis said today the most notable factors reducing the return were deal timing & investment into new funds & assets, the divestment of the Finance Centre and corporate costs relating to ongoing investment to expand Augusta’s corporate & development teams, in line with the company’s growth strategy.
“Augusta is the manager of a $2 billion portfolio of diversified assets, but we’re also a transactional company. Launching new fund initiatives involves considerable work in order to ensure they can deliver the target investment fundamentals and this requires ongoing investment in people and the use of the balance sheet.
“Furthermore, as our focus is on delivering the best results for our investors, Augusta has a robust & rigorous due diligence process. It takes a significant amount of time to get the right deals on the table, and our investment criteria mean we decline significantly more deals than we accept.”
Mr Francis said that, over the last 6 months, Augusta had made significant progress on the strategic objectives it outlined in May, creating multiple pipelines for long-term growth, including investment into the development of new fund initiatives & the acquisition of key assets.
“Capital was redeployed from the Finance Centre to the Cook St, Auckland, & Man St, Queenstown, assets which will seed the Augusta Tourism Fund. Income will not be drawn until these properties are divested to funds, resulting in a reduction in net rental of $1.81 million for the period.
“Corporate costs increased by $0.68 million during the period to $5.7 million, driven by the level of investment required to set up & manage the new fund initiatives.”
Material updates during the period included:
- Profit and total comprehensive income after tax, down 68% to $1.63 million ($5.1 million)
- Return before fair value movements, gain/loss on disposals & tax, $119,000 loss ($5.93 million profit)
- Fair value gain on investments in associates, $1.38 million ($578,000)
- Pretax profit, $1.33 million ($6.6 million)
- Basic/diluted earnings/share 1.86c (5.83c)
- Operating cashflow $2 million net loss ($3.6 million gain)
- Adjusted funds from operations, down 92% to $0.37 million as no capital-raisings were completed (2 in the September 2018 half-year)
- Investment income, up 57% to $1.19 million due to an increase in investment assets
- Net management fees, up 16% to $2.98 million due to growth in managed funds, primarily Asset Plus and Augusta Industrial Fund – with $2 billion total assets under management
- Acquisition activity within the Augusta Industrial Fund – $42 million of properties acquired, increasing management fees payable to Augusta
- Acquisition of 35 Graham St by 20%-owned Asset Plus Ltd for $58 million resulted in increased management fees & potential development opportunity
- Transactional income, down 42% ($0.67 million) due to a reduction in divestment activity in the managed portfolio
- Secured Radisson Hotel Group as the operator for Man St hotel under construction in Queenstown
- Strategic partnership with Ninety-Four Feet for future Lakeview development in Queenstown over more than 10 years
- Appointment of 2 new independent directors.
The board resolved today to pay a quarterly cash dividend of 1.625c/share, fully imputed with imputation credits of 0.632c/share attached. The company will also pay a supplementary dividend of 0.2868c/share to non-resident shareholders.
The board expects the full year’s dividends to total 6.5c/share.
Contingent on deal flow, the board expects full-year earnings to be similar to the 2019 result.
Mr Francis said: “The pipeline for long-term growth is in good shape, with a busy period ahead as we gear up to launch the previously signalled Augusta Tourism Fund & Augusta Diversified Fund. We have the right expertise in place and are focused on continuing to progress developments prior to these funds launching – as well as on looking at additional tourism-based opportunities.”
Near-term strategic operating priorities include:
- On track to launch the Tourism & Augusta Diversified Funds by the end of March
- Asset Plus – pursuing ongoing acquisition opportunities
- Active management – several growth opportunities within the managed portfolio, including Asset Plus & the Industrial Fund
- Building further strategic partners as the company broadens its product offerings.
25 October 2019: Augusta warns of lower earnings
Attribution: Company release.