Archive | Securities – NZ

Augusta industrial fund closes oversubscribed

Augusta Capital Ltd confirmed yesterday that the Augusta Industrial Fund closed oversubscribed with $75 million raised.

Managing director Mark Francis said the acquisition of the initial properties in the portfolio was to be settled later in the day.

As part of the capital raising, Augusta Capital has subscribed for 7.5 million shares and intends to hold a 10% stake as a long-term investment.

Mr Francis said a limited number of investors were reinvesting their funds from other Augusta-managed properties which have sold and would settle in the next month. As a result, Augusta will hold a limited number of shares for the next 2 weeks and then transfer to those investors.

He also said Augusta had received a large number of applications at the close.

The initial portfolio consists of 12 Brick St, Henderson; 862 Great South Rd, Penrose; 20 Paisley Place, Mt Wellington; and The Hub, Seaview, Wellington.

Together, that initial portfolio will have the following key features:

  • a weighted average lease term to expiry of 8.7 years
  • 100% occupancy
  • a diversified mix of 15 tenants, and
  • a 60% weighting to the Auckland industrial market.

Augusta will receive establishment & underwriting fees in connection with the offer as well as ongoing management fees consistent with the NPT Ltd management agreement, which Augusta entered in March.

Image above: 862 Great South Rd, Penrose, back on to Auckland’s Southern Motorway. The area marked in green will be redeveloped.

Earlier stories:
25 May 2018: Transformation hits Augusta bottom line, but confident company lifts dividend
1 May 2018: Augusta industrial fund set to open next week
27 March 2018: Augusta settles NPT management rights payment
12 March 2018: Augusta gets agreement to add 4th building to industrial fund
2 March 2018: Augusta delays industrial fund launch to get fourth property in

Attribution: Company release.

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Updated: Chow Group to delist

Published 7 June 2018, updated 8 June 2018:
Chow brothers John & Michael lifted their combined holdings above the 90% threshold for compulsory purchase of their NZAX-listed company, Chow Group Ltd, on 31 May and said today (8 June) they intend to complete compulsory acquisition within 3 weeks – by Friday 29 June.

The brothers lifted their holdings from 88.592% to 90.09% on 31 May and said then they would delist the company.

The share price was stuck on 5.8c for the few sales through May, rising to 6c last Wednesday.

Sharemarket operator NZX Ltd still says on its website the NZAX (NZX alternative market) “is the marketplace for small to medium-sized, fast-growing businesses seeking a safe & efficient capital-raising facility”. It says much the same about its NXT market, launched in 2015 to replace the NZAX.

But a year ago the NZX decided to can both its junior markets, forcing participants on to its main board.

Chow Group listed in early 2016 through the reverse takeover of RIS Group Ltd, one of the shell companies listed on the NZAX by broker Brett Wilkinson.

Earlier stories:
17 June 2016: Chow Group records $8 million profit as listed company
11 November 2015: Chows use RIS Group to backdoor list property portfolio

Attribution: Company announcement.

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Oyster goes unconditional on Central Park purchase

The Goodman Property Trust’s $209 million sale of the Central Park Corporate Centre to a joint venture led by property fund manager Oyster Property Group Ltd has gone unconditional.

The trust’s manager, Goodman (NZ) Ltd, announced the sale last November, when one condition remained – Overseas Investment Office approval. Oyster is 50% owned by the ASX-listed Cromwell Property Group.

Settlement is scheduled for 29 June.

Goodman (NZ) chief executive John Dakin said in November the sale represented a significant milestone in the repositioning of the Goodman trust, marking the last of its major identified asset sales.

The property fronts Great South Rd beside the Southern Motorway at the Ellerslie-Panmure roundabout in Auckland.

Earlier stories:
17 November 2017: One condition left on Central Park sale, and Air NZ extends at Fanshawe St
10 November 2017: Big property sale follows first-half profit setback for Goodman

Attribution: Company release.

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NPT scores miserable result, adopts Augusta strategy of repositioning assets

NPT Ltd, which has struggled to gain either critical mass or momentum since its inception as a listed trust in 1994, reported a miserable annual result yesterday, as shareholders’ funds again declined.

The answer is to adopt the more aggressive style of its new manager & 18.85% shareholder, Augusta Capital Ltd: buy properties to reposition, redevelop & lease – and sell rather than remain a passive investor.

Once its $47 million sale of the AA Centre to SkyCity Entertainment Group Ltd settles in July, NPT will be down to a portfolio of just 3 properties worth a combined $124.6 million – the Eastgate shopping centre in Christchurch, 22 Stoddard Rd retail centre in Mt Roskill, Auckland, and Heinz Wattie’s national distribution centre in Hastings. The company sold Print Place in Christchurch in March for $8.25 million – 25% less than its $11 million carrying value.

Augusta also started life as a small portfolio owner and was destined to stay that way unless it changed its strategy. It’s sold down all but the remaining 2 parts of the Finance Centre in Auckland (scheduled to settle on 1 April 2019), and now manages $1.85 billion of assets held by syndicates & NPT.

Without the $4.5 million sale of its management rights to Augusta, right on balance date, NPT would have struggled to make a profit. Including those management rights, its net profit after tax was $3.095 million – $22,000 more than in 2017.

NPT chair Bruce Cotterill said in the company’s annual results announcement yesterday revaluations had reduced net tangible assets by $2.95 million ($1.65 million last year). In both 2017 & 2018, NPT paid out about $5.8 million in dividends. Shareholders’ funds have dropped by $5.5 million in 2 years, and just under $20 million in the last 3 years, to $114.3 million.

Mr Cotterill, appointed independent chair in April 2017 when Augusta staved off Kiwi Property Group Ltd’s bid for control, said operating earnings for the 12 months to March 2018 were consistent with the previous year, but revaluations & the $2.97 million loss on disposal of assets had reduced net tangible assets by 2.3%.

“We are confident that the position of the existing portfolio is now sustainable & positioned for value add-related growth moving forward.

“With Augusta, the board have now identified a defined value-add strategy in which the company will seek to acquire properties with the potential to reposition, redevelop & lease; all with the aim of creating future value. The future strategy differentiates NPT from the sector and provides a framework for relative outperformance,” he said.

Other points from the annual result:

  • Net operating income after tax, down 1.4% to $5.8 million ($5.88 million)
  • Adjusted funds from operations up 4.1% to $6.15 million ($5.9 million)
  • Gearing (loan:value ratio) 26.6% (33.1%)
  • Net tangible assets/share 70.6c (72.3c)
  • Basic & diluted earnings/share up 1c to $1.91
  • Portfolio occupancy 97.4% (96%) due to higher occupancy at Stoddard Rd and the sale of Print Place
  • Weighted average lease term 4.4 years (4.6 years)
  • An unchanged final quarter dividend of 0.9c/share has been declared; total dividends paid for the year are also unchanged at 3.6c/share; payout ratio is 95% based on adjusted funds from operations of $6.15 million

Earlier stories:
27 March 2018: Augusta settles NPT management rights payment
21 March 2018: Francis talks about a livelier future for NPT
20 December 2017: NPT accepts 25% cut to sell Christchurch property
15 October 2017: SkyCity buys AA Centre to consolidate precinct control
28 August 2017: Cotterill sees opportunity for NPT as tenants quit

Attribution: Company release, presentation, annual report.

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Goodman upbeat as it forges ahead with repositioning

The Goodman Property Trust produced a very upbeat annual report on Monday, although every shift on the performance summary – apart from net asset backing – was downward.

Once again, half the profit came from revaluations (as projected in March), which many listed entities have highlighted over the years to bolster otherwise ordinary returns. Goodman, however, tends to work its properties much harder, rather than sitting back waiting for the cyclical valuation windfall.

The trust’s manager, Goodman (NZ) Ltd, has been busily building & filling space at its Highbrook business park in East Tamaki, and (post-balance date) has just sold out of the VXV office precinct between Fanshawe St & the lighter basin on the downtown Auckland waterfront for a $323.9 million share of the $635 million sale.

Goodman has also been repositioning its portfolio. It sold 3 properties for $243.9 million during the year, leased 200,000m² of space and began 7 new development projects, including 24 new warehouse facilities, with a total project cost of $164.8 million.

5 years of disciplined growth, says chair

Management company chair Keith Smith said: “We have pursued a disciplined growth strategy over the last 5 years, selling assets to fund the trust’s development projects. It has rebalanced the portfolio and deleveraged the balance sheet, transforming the trust and positioning it for sustainable long-term growth.”

Once current development projects & contracted sales are completed, the trust’s $2.2 billion portfolio will be 99% invested in Auckland industrial property.

Chief executive John Dakin said: “We’re divesting our remaining office assets and developing high quality estates such as Highbrook. It is a deliberate strategy that reflects the positive investment characteristics of this type of property and the strong growth profile of the country’s largest city.”

On the balance sheet, it’s meant a 12.6% cut in the loan:value ratio to 25.6%, or an 18.3% cut in the ratio to 25% on a look-through basis.

In Goodman Group terms that’s high gearing – the ASX-listed Goodman Group, owner of the NZX-listed company’s manager, has kept its gearing below 20% for 5 years, and had it down at 5.9% in 2017.

The New Zealand trust’s pretax statutory profit was $207.2 million (including look-through[1] valuation gains of $106.3 million), compared to $220.5 million (including look-through valuation gains of $114.7 million) in 2017.

After tax, operating earnings fell 4.2% to $101.6 million ($106 million).

  1. Look-through valuation is a non-GAAP measure that includes the trust’s proportionate share of Wynyard Precinct Holdings Ltd, the joint venture with GIC that owns the VXV portfolio, which has been sold to Blackstone Group LP funds, subject to Overseas Investment Office & freehold landowner approval.

Links:
Goodman Property Trust
Annual report, operational highlights

Earlier story:
29 March 2018: Goodman looking at record portfolio revaluation

Attribution: Company release, annual report, Goodman Group.

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Transformation hits Augusta bottom line, but confident company lifts dividend

Augusta Capital Ltd continued its transformation in the year to March from being a direct property investor towards its aim of becoming New Zealand’s leading & most diversified property funds management specialist.

One impact was the 80% drop in revaluation gains to $799,000 ($4.12 million the previous year). Those gains are unrealised, but are a handy prop for company results as the market rises.

Key points from the financial year to March:

  • Total assets under management grew 10% ($168 million) to $1.85 billion – 99 properties
  • Total comprehensive income for the year, net of tax, fell 60% to $3.2 million ($8 million) due to lower investment property revaluation gains & the deferral of the Augusta Industrial Fund launch date
  • 14% reduction in adjusted funds from operations (non-GAAP measure) to $5.8 million, equating to 6.6c/share (7.7c/share).
  • Exit of 2 Finance Centre assets – 2 remaining properties settle on 1 April 2019
  • 3 new single-asset funds launched, raising $125 million of equity
  • 23% growth in recurring annualised base management fees, which are now $6.96 million
  • New funding structure executed, which is now aligned to the company’s future strategic direction
  • Net assets/share reduced to 96c (98c), primarily driven by the writedown in value of NPT shares
  • Basic & diluted earnings/share fell 60% to 3.67c (9.15c)
  • Increased stake in NPT to 18.85% and then secured the NPT management contract
  • Invested in specialist talent to support business growth & new fund initiatives
  • 4th quarter dividend of 1.5c/share, supported by the increase in recurring earnings.

Reflects transformation stage, says Duffy

Augusta chair Paul Duffy said the result reflected the nature of a business in the late stages of a significant transformation: “The total comprehensive income after-tax result is also symptomatic of the fact Augusta is progressively selling down all directly held properties from which the company’s revenues have historically been derived. The result should reflect the bottom of a transition cycle to establishing a more resilient earnings profile from a greater pool of Australasian-based property funds.

“The board believes this is a tipping point in terms of transitioning Augusta’s earnings. The volatility we’re seeing here has been well signalled previously, but the recurring annualised earnings continue to grow. 2 new funds have also been added to the managed portfolio, as well as 3 new single-asset vehicles.”

Managing director Mark Francis said the total comprehensive income after-tax & AFFO performance was impacted by the deferral of the Augusta Industrial Fund launch as a fourth asset was secured and more time was taken to allow for the capital raising. The income derived from establishing the fund will be recorded on settlement, expected to be 15 June.

“The prior year also reflected valuation gains at the Finance Centre based on the contracted sale terms, and the remaining assets are held at similar values this year net of transaction costs.

“The long-term growth fundamentals are encouraging. The resilience being built into Augusta’s earnings is critical to the future of the business.

“Encouragingly, we realised just over 10% growth in funds under management during the period under review. The pipeline has been created and we are actively pursuing a number of investment opportunities in the Australian market too.”

Rental income reduced due to the sale of Augusta House in July but this was offset by income derived from warehousing the Hub asset for the Augusta Industrial Fund.

Funds management

Mr Francis said: “The income benefits derived from the progress made this year will be realised in future income years. Momentum has continued with 2 new funds added to the managed portfolio, broadening our product offerings.

“Often in the funds management industry costs are incurred before the wealth is created for both the investor & manager. Corporate costs increased as we sought the necessary capability to grow & source new opportunities.”

Investment asset income of $1.77 million was realised from positions taken in the Augusta Value Add Fund No 1 Ltd (Value Add Fund) & NPT Ltd: “This income replaced the loss of rental income from the Finance Centre divestment. Income derived from capital investments & commitments was stronger in the 2018 financial year through active use of the balance sheet, at the same time maintaining capability to facilitate new deals.”

Balance sheet transformation

Augusta now has a new funding structure consisting of 3 facilities aligned to the new balance sheet – property, investment & funds management (working capital). It can also source further funding for warehousing of assets or underwriting of offers.

Following the divestment of the Finance Centre, capital will be released to grow the funds management business, and will include:

  • Acquisition or launch of new fund management initiatives
  • Warehoused assets – prior to the transfer to a managed fund
  • Underwriting capability in respect to new offerings or capital raises, and
  • The ability to invest in new products or investments which Augusta manages to create an alignment of interests.

Group gearing was 31.2% of gross asset value (26.6%).

Dividend

The board resolved today to pay a fourth quarter cash dividend of 1.5c/share, up from 1.375c in the December quarter. It’s fully imputed with credits of 0.583c/share attached. Dividends for the full year total 5.625c/share (5.5c/share in 2017). The dividend pay-out ratio was 85% (71%). The board expects the 2018-19 dividend to be 6c/share, up 9.1%.

Outlook

Mr Francis said earnings would reflect the strong start to the 2019 financial year, based on the current pipeline of opportunities: “The challenge remains in sourcing compelling product for our investors, but Augusta is as well placed as anyone to do this. Current market conditions remain buoyant, with deals continuing to be transacted at historically low yields.

Near-term strategic operating priorities include:

  • Settlement of the Augusta Industrial Fund on 15 June
  • Launch of the 96 St Georges Bay Rd offer, which will be a single asset vehicle
  • Launch of further investment funds, details to come
  • Identifying further capital sources & distribution channels
  • Further expansion into Australia, and
  • The sale of the final 2 assets of the Finance Centre transaction will be complete in April 2019, providing further balance sheet capability.

Attribution: Company release.

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Argosy profit slips as it repositions portfolio

When a company doesn’t tell you in the first line of its results announcement that it’s made a huge profit, it’s all too common to have to hunt for the score. Argosy Property Ltd didn’t mention the profit fall all the way through a long release on its performance on Wednesday, but I’ve tracked down the figures in the annual report and done some percentages (most of which were also not in the release, presentation or report).

In short: Income was steady, pretax profit fell 9.2%, after-tax profit fell 5.2%, earnings/share fell 6.2%.

Argosy has reasons for some complicated figures, especially the effect of the November 2016 Kaikoura earthquake on NZ Post House in Wellington, where reinstatement of 3 floors continues and insurance claims are still being worked through.

The company is also repositioning itself according to its view of the commercial & industrial property cycles, continuing to dispose of what it sees as non-core assets, but seeing less opportunity to acquire well.

Key financial & portfolio stats:

  • Net property income $101.0 million ($100.8 million)
  • Pretax profit down 9.2% to $109.3 million ($120.4 million)
  • Net profit after tax down 5.2% to $98.2 million ($103.6 million)
  • Total assets up 5.9% to $1.545 billion ($1.459 billion)
  • Debt:total-assets ratio 35.9% (36.3%)
  • Total equity up 5.9% to $926.9 million ($875.2 million)
  • Financial year total shareholder return of 9.8%, outperforming the sector by 2.8%
  • Basic & diluted earnings/share down 6.2% to 11.9c (12.69c)
  • Net tangible assets/share up 5.5% to $1.12 ($1.06)
  • Net distributable income/share up 1.1% to 6.62c (6.55c)
  • Cash dividend/share 6.2c (6.1c)
  • A final quarter dividend of 1.55c/share with imputation credits of 0.3744c attached, up 1.6%, has been declared for the March quarter
  • Dividend guidance 6.25c/share for 2019 financial year
  • Annualised rent review increase of 3.0%
  • Occupancy at 98.8% (98.6%) and a 6.1-year weighted average lease term
  • Portfolio revaluation gain 3.2% on book value, $47.3 million ($42.3 million)
  • Completion of $48.8 million of developments, including $33.8 million of green developments

The repositioning

Argosy chief executive Peter Mence said strong leasing & rent review activity underpinned a strong overall performance.

Chair Mike Smith said the management team had resolved key lease expiries & vacancies: “They have also repositioned the portfolio sensibly, with the combination of completed developments, revaluations & selected divestments resulting in a modest reduction in exposure to the retail sector. Over the next 12-18 months we will continue to divest non-core assets in an attractive vendors’ market. Generally, after this period, we expect that Argosy will be positioned towards the lower end of our retail band and at the higher end of our industrial band.”

Argosy’s board has amended the debt:total assets ratio target band to 30-40% from the previous target of 35-40%. Mr Smith said: “As we continue to divest non-core assets to take advantage of strong investor demand, the proceeds will be used to continue our tenant-led development programme and/or reduce gearing.
“As we begin the 2019 financial year there is greater political visibility over the near term and we continue to be optimistic around potential opportunities for Argosy. Our diversified investment approach brings strength & balance to our business.

“The increase reflects our wish for shareholders to share in the continued strong results but also allows us to maintain our momentum towards an adjusted funds from operations (AFFO)-based dividend policy in the medium term.”

Quake recovery

Mr Mence said reinstatement works were progressing well at the quake-damaged NZ Post House in Wellington. Work on levels 10-12 should be completed this financial year, and he expected strong demand for them. The other floors remain leased to NZ Post.

The company has included this interim works programme’s $41 million cost to complete as a capital deduction in the valuation for 7 Waterloo Quay and is working on a large insurance claim. It also has business interruption insurance and has received $11.8 million plus gst in progress payments.

Revaluations

An independent portfolio revaluation resulted in a full-year gain of $47.3 million, a 3.2% gain on the year-end book value – industrial up 6.5% ($39 million), office 1.0% ($5.6 million), retail 0.9% ($2.7 million). Adjusting the annual revaluation result for NZ Post House, the increase above book value would have been 4.5% ($61.6 million).

On current market value, Argosy’s portfolio has a passing yield of 6.88% and a 6.98% yield on market rental. The portfolio is 1.3% under-rented, excluding market rentals on vacant space.

Leasing

The company completed 51 lease transactions on 150,000m² of net lettable area – 23 new leases, 20 renewals & 8 extensions.

The company completed 88 rent reviews on $48.5 million of existing rental income. It achieved 6.1% rental growth, or 3.0% on an annualised basis on all rents reviewed. The office portfolio accounted for 50% of the total rental uplift due to a large market review, industrial 29%, retail 21%.

50% (by income) of all rents reviewed were market reviews, 27% fixed reviews and 23% CPI or CPI+.

Acquisitions & value-add developments
Mr Mence said the market remained tight: “This, coupled with a surplus of capital & scarcity of quality real estate, means few opportunities have emerged during the period to make acquisitions which would add value. Despite this, we have continued to progress our development pipeline with 4 projects totalling $48.8 million now completed.”

The company is aiming for a 4 Green Star industrial built rating for its Highgate (Mighty Ape) development and 5 Green Star office built rating for 82 Wyndham St in the Auckland cbd. Its 143 Lambton Quay & 15 Stout St buildings in Wellington are both 5 Green Star.

Divestment of non-core assets 
Argosy completed the sale of Tunnel Grove, Wellington, for $2.8 million and the unconditional agreement to sell Wagener Place in Auckland for $31 million. This transaction will settle in July. These transactions follow the sale of Pandora Rd in Napier in the first half for $7.7 million.

Mr Mence said: “The Wagener Place sale was an opportunity to reduce Argosy’s retail exposure in an area where there will be increasing competition.”
At year end, Argosy has categorised about 7% ($110 million) of the portfolio as non-core. Argosy will continue its divestment programme over the next 12-18 months to take advantage of current market conditions.

Sustainability
On the value of green building, Mr Mence said: “Last year we established our environmental, social & governance framework to recognise the importance sustainable business practices have on the environment & long-term value creation for shareholders. Our environmental policy reflects our ambition to create vibrant & sustainable workplaces for our tenants and Argosy believes green buildings have potential to provide both environmental & business benefits.”

Strategy
Mr Smith said the board considered the New Zealand property market to be near its cyclical peak, making it hard to acquire property: “We believe ongoing strength in the sector will provide opportunities to divest non-core assets at attractive prices and either reduce gearing or reinvest the proceeds into tenant-led development opportunities. We will continue to focus on our existing portfolio of value-add properties to create long-term value for shareholders and increase the quality & sustainability of our earnings.

Outlook
“Argosy continued to deliver excellent results over the back half of 2018, but there is more work to do through the 2019 financial year & beyond. Argosy achieved excellent leasing success & rent review growth across the portfolio. As a result, the year-end portfolio metrics are in excellent shape. Reinforced by their Green Star ratings, a number of redevelopment projects were completed which increased our portfolio quality and will contribute towards sustainable earnings over time. We will continue to look at sustainability, given the environmental & business benefits that are likely to accrue.”

Attribution: Company release & annual report.

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Australian acquisition boosts revenue, but Metroglass profit slips

A full year’s trading by its new Australian subsidiary lifted Metro Performance Glass Ltd’s revenue by 10% in the year to March, but ebit (earnings before interest & tax) fell 15% and net profit after tax fell 16%.

Chair Peter Griffiths said yesterday: “The group had a busy transitional year as it adapted to the softer growth in New Zealand, implemented an extensive capital investment programme and conducted a strategic review of the business. Pleasingly, Metroglass has maintained its leadership position, with its New Zealand glass category share above 55%.

“Ebit before significant items fell 9% to $30.9 million this year, which was a disappointing result. However the cost issues New Zealand faced in the first half have been addressed, and the capital programme that caused meaningful disruptions in Australia in the final quarter of the financial year is now complete.”

The company plainly had a disrupted year. It restructured management early & late last year, promoting 3 managers to the New Zealand senior leadership team early in the year. When North Island regional general manager Dean Brown resigned in November, the company resolved not to fill that position. Then, in March, chief executive & director Nigel Rigby left after 5 years.

Financial highlights:

  • Group revenue up 10% to $268.3 million ($244.3 million) including a full 12 months of trading from Australian Glass Group (Holdings) Pty Ltd
  • Ebit down 15% to $28 million ($32.9 million)
  • Net profit after tax down 16% to $16.3 million ($19.4 million)
  • Operating cashflow up 92% to $33.6 million
  • Net debt flat at $94.3 million
  • Basic earnings/share down 16% to 8.8c (10.5c)
  • Final dividend of 3.8c/share took payout for the year to 7.4c/share, according to the results announcement; in its presentation to analysts yesterday, Metroglass said its final dividend would be 4c/share, maintaining the dividend total at 7.6c/share.

Ebit before significant items excluded $2.9 million for chief executive departure & recruitment costs and $1 million of one‐off, non‐deductible expenses related to the acquisition of the Australian company the previous year. Net profit after tax & before significant items in 2017 also excluded tax adjustments relating to IPO expenses and the finalisation of prior year tax positions.

Mr Griffiths said the $20.6 million capital investment programme was aimed at delivering improved capability & efficiency at each of the group’s processing plants, as well as better geographic alignment of equipment to market opportunities across the group.

“The New Zealand programme went largely to plan. However the Australian programme proved challenging, with significant shipping disruptions extending the planned shutdown period. As a consequence, Australian Glass Group’s sales, costs & customer experience were impacted in the second half of the financial year.

Chief financial officer John Fraser‐Mackenzie said the company maintained net debt in line with last year after funding capex & dividends, but debt reduction would be a priority given the group’s position in the cycle.

The group’s forward strategy is based on 4 key priorities, each with a set of initiatives for delivery in the next 1224 months:

  1. Deliver market-leading service
  2. Develop organisational capabilities – investing in people, their capabilities & support systems
  3. Maintain scale position via product & channel leadership
  4. Leverage scale & assets to deliver lowest total delivered cost.

Mr Griffiths said Metroglass was aiming for group ebit of $30-33 million in the 2019 financial year, capex of $10 million and repayment of $7-10 million of debt. It intended to maintain its current dividend policy.

Attribution: Company release & presentation.

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Metlifecare plans retirement village for Beachlands

Metlifecare Ltd has bought 3 adjoining properties for a retirement village development at Beachlands, on the Pohutukawa Coast in Auckland’s south-east. Settlement is scheduled for August.

Chief executive Glen Sowry said the new Karaka Rd site was in an area not currently served with retirement living options: “This is one of Auckland’s growth hotspots. Significant residential intensification in the rural & coastal area from Cockle Bay through Whitford & Clevedon, and along the Pohutukawa Coast (Beachlands, Maraetai & Kawakawa Bay) has resulted in substantial & ongoing population growth. This is set to escalate further as housing development takes advantage of the new zoning opportunities opened up by the Auckland unitary plan.

“The area’s demographics are already extremely favourable with an older-than-average population, high levels of home ownership & median house prices of around $1.2 million. Additionally, the retirement-age population in our catchment area is expected to double in the next 15 years. With the closest existing villages nearly 20km away, we are very pleased to be the first retirement village provider here.”

Mr Sowry said Metlifecare planned to invest about $180 million (including care & common costs) developing the site to offer over 210 independent living units & care beds. The site is a short walk from the Pine Harbour marina & ferry terminal and opposite the Formosa golfcourse.

“From an investment perspective, we are confident that this development will be value-accretive for the company. Our analysis indicates the list price for units in this village will range from $600,000 to more than $1 million, which would enable Metlifecare to comfortably meet its development margin threshold of 15%.”

Mr Sowry said Metlifecare would start design & consenting work immediately: “The village is expected to be built over about 4 years, with site works set to commence in early 2019 and the first stage planned for completion by early 2020. Our village design provides for staging flexibility, with construction able to be accelerated according to demand.”

The new site will boost Metlifecare’s development pipeline to just under 2000 units & beds across its 24 operational villages & 5 greenfield sites. As previously signalled, the company is on track to deliver 254 new retirement units & care beds in the June 2018 year.

Hunua MP Andrew Bayly spoke in support of the purchase, while noting the need for investment in infrastructure & services to enable growing communities to thrive: “This is a special area, where Aucklanders can have a fantastic lifestyle away from the city but with many of its benefits on their doorstep.

“With the area being designated for intense future growth, I am pleased to see organisations such as Metlifecare recognising the opportunities it offers. In the past year we have seen a significant increase in the range of services, including a new Countdown supermarket, the Pohutukawa Coast shopping centre, and increased frequency & connectivity of transport options. For example, the ferry service, which is free to SuperGold card off-peak travellers, now has 20 sailings/day to Auckland’s cbd.”

Attribution: Company release.

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Review puts Steel & Tube ebit loss at $38 million

Steel & Tube Holdings Ltd expects to lose $38 million before interest & tax in the financial year ending next month.

As a result of writedowns & impairments, the company expects its 2018 forecast earnings to result in a breach of one or more covenants in its senior debt facilities. The company said management was seeking a waiver from its banking partners for any covenant breach.

The company released this earnings guidance this morning after a 24-hour share trading halt. It will release the actual annual results on 31 August.

In its release today, Steel & Tube said it expected normalised ebit (earnings before interest & tax) of about $16 million, but non-trading costs & impairments of up to $54 million would take it to the $38 million loss.

In its guidance last November for the half-year to December, Steel & Tube said ebit would be $9-10 million lower than in the previous half-year, impacted by working capital review, reorganisation & restructuring activities and increased depreciation & amortisation costs.

After non-trading costs of $8.1 million, the half-year ebit came in at $6.7 million. However, in last November’s review the company said it expected full-year ebit to 30 June would be “materially the same as the 2017 financial year ebit of $31.1 million”.

Today’s release from the company said the revised guidance followed an extensive company-wide review of the business by the refreshed board & management team in conjunction with the previously announced change programme.

“The review has resulted in the planned exit from, and associated impairment of, S&T’s plastics business; a further writedown of inventory values; a likely impairment of intangible assets; rationalisation of distribution & reinforcing operations; and completion of further organisational restructuring.

“In addition, as previously advised, the company has been significantly impacted by issues relating to the implementation of its new ERP system [enterprise resource planning system, which went live on 2 October 2017].”

While the trading environment remained highly competitive, the company said its board was “confident that the change programme & restructuring undertaken will drive sustainable improvements in earnings and deliver benefits from the 2019 financial year [starting 1 July 2018] onwards”.

The resource planning system represented two-thirds of the year’s change in normalised ebit.

Steel & Tube chair Susan Paterson said at the end of the release: “As noted at the half-year, we have initiated a change programme and are restructuring the company to drive sustainable improvements in earnings. As part of the business review, a number of legacy issues have now been identified & resolved.

“The new management team has completed significant restructuring over the last 6 months and, while today’s announcement is disappointing, the board is confident the business is now well placed to move forward. We have put the past behind us and are focused on growing our business as a leading provider of steel products & solutions in New Zealand.”

Earlier stories:
22 May 2018: Steel & Tube reviews earnings guidance
4 May 2018: Steel & Tube puts second property up for sale & leaseback
29 November 2017: Steel & Tube owns up to mesh label & testing guilty pleas
20 November 2017: East Tamaki property sold as Steel & Tube rings in changes
21 August 2017: Steel & Tube performance dissatisfies new chair

Attribution: Company release.

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