Augusta Capital Ltd has gone from a $7 million profit in 2019 to a $27 million loss in the March 2020 year.
The company released its result to the NZX this evening.
Augusta’s reported adjusted funds from operations fell from $7.74 million to $230,000.
NZX-listed property investor Asset Plus Ltd, 18.85% owned by Augusta and managed by Augusta Funds Management Ltd, reported a week ago that it made a $14.7 million net loss after tax for the March year after the value of its property portfolio was cut by $19.1 million.
Augusta’s primary earner, raising capital to manage funds, was decimated. After working towards the establishment of its tourism & general funds, the company ended the year establishing no new funds, compared to 4 the previous year. Those new funds earned Augusta $7.98 million of deal fees last year, whereas the failure to complete the Property & Tourism fund launches lost the company $7.5 million in deal fees.
The loss was attributed predominantly to material writedowns to Augusta’s development property & assets, plus the loss of the Albany Lifestyle Centre deposit and sunk costs from the withdrawn Augusta Property Fund offer.
Augusta chair Paul Duffy & chief executive Mark Francis focused on the result, not mentioning the takeover prospect by Sydney fund manager the Centuria Capital Group.
Mr Duffy said it was a challenging 12 months:
“The onset of Covid-19 has had a significant impact on Augusta’s business, resulting in additional strain on our balance sheet as well as the lost offeror & underwriting fees of about $7.5 million that were planned in respect to the Augusta Property Fund offer, which was withdrawn, and the inability to launch the Augusta Tourism Fund. Augusta has subsequently taken decisive action to strengthen the balance sheet by raising $45 million of equity post-balance date.
“Augusta’s investment thesis & long-term fundamentals remain strong, notwithstanding the short-term impacts of the Covid-19 pandemic. Augusta’s core business is to create wealth through property investment by actively managing properties for its fund & scheme investors. While there is a rebuilding period ahead, we remain committed to serving our loyal investors and managing the portfolio through the current environment.”
Managing director Mark Francis said: “The Augusta team has a history of accessing deals across a range of property sectors, providing management services via the NZX-listed Asset Plus as well as other unlisted funds & single asset vehicles. Augusta has a strong retail investor following across New Zealand.
“With the financial flexibility provided by the recent equity raise, Augusta will be able to maximise outcomes from the assets on its balance sheet and is ready to access new opportunities as they arise. Investment property is still a fundamentally strong investment class.”
Total assets under management stand at $1.8 billion, as of today.
Key points from the year:
• Augusta completed $107.6 million of acquisitions within its managed portfolio
• Asset Plus completed 2 acquisitions as part of its growth strategy; the Albany development remains conditional on satisfying the funding condition & shareholder approval
• Augusta progressed its 2 Tourism developments, but has deferred works post-balance date as a result of Covid-19
• Augusta entered into a joint venture with Australian developer Ninety Four Feet for the Lakeview development in Queenstown
• The company entered into a hotel management agreement with Radisson on the Man St property in Queenstown
Impact of & response to Covid-19:
- Augusta completed a $45 million equity-raise post-balance date to restore the balance sheet & create financial flexibility
• The company has adopted several cost reduction initiatives, expected to cut overheads by up to 20% below original targets for the 2021 financial year
• The company has deferred all non-essential expenditure & cash outflow, including the delay in the Tourism asset development works.
Key aspects of the financial result (2019 result in brackets):
Net return after tax, a 489% decline to a $27.05 million loss ($6.95 million profit)
Adjusted funds from operations (AFFO), down 97% to $230,000 ($7.74 million profit)
Net revenue, down 46.3% to $11.84 million ($22 million)
Total operating costs, up 21.9% to $14.7 million ($12.1 million)
Operating result, down 129% to a $2.9 million loss ($9.95 million profit)
Revaluation of investments in associates, $6.83 million loss ($421,000 gain)
Revaluation of development property, $15.9 million loss (no movement)
Pretax result, a 449% decline to a $31.37 million loss ($9 million profit)
Basic & diluted earnings/share, a 487% decline to 30.72c loss (7.93c gain)
Total assets, down 6.7% to $95.2 million ($102 million)
Net assets, down 35.7% to $55.4 million ($86.1 million)
Net assets/share, down 36.7% to 62c/share at balance date (98c), and fell further to 58c/share at 31 May, after the capital-raise.
Augusta lost its $4.53 million deposit on the Albany Lifestyle Centre and the contract was cancelled post-balance date.
Capital was deployed into tourism assets which aren’t income-producing, whereas the 2019 result included rental income from the Finance Centre. Net rental income fell by $3 million.
Total costs increased by $3.76 million as material due diligence costs ($850,000) & sunk costs from the withdrawn Augusta Property Fund ($2.31 million) were incurred on deals that didn’t proceed.
Funding costs were $1.12 million lower due to the sale of the Finance Centre and all costs associated with funding the developments have been capitalised.
Debt was fully drawn at $31 million as at 31 March and Augusta used an overdraft facility due to the impact of the Augusta Property Fund not being launched. The company drew down debt during the year to fund the development of the 2 Tourism assets – post-balance date, $25 million of debt & the overdraft facility have been repaid.
The portfolio value now stands at $1.8 billion. The company said the New Zealand portfolio revaluations were largely in line with 2019 and now reflected the immediate impact of Covid-19.
17 June 2020: Revaluations take Asset Plus to loss, company still working on developments
17 June 2020: Centuria returns to complete Augusta takeover
22 May 2020: Retail investors take up 68.4% of Augusta capital-raising
13 May 2020: Centuria nears 23% stake in Augusta
1 May 2020: Augusta forfeits one deposit, second one for property fund still at risk
17 April 2020: Asset Plus gets its valuations at last, but…
31 March 2020: Asset Plus gets more time to satisfy Albany council development preconditions
28 March 2020: Augusta pulls Albany purchase, but property fund may be revived
27 March 2020: Augusta pulls property fund IPO
27 March 2020: Centuria ends Augusta bid
18 March 2020: Asset Plus pulls rights issue
11 March 2020: Asset Plus announces rights offer, Augusta to cut its stake
14 February 2020: Asset Plus signs council for Albany development, prepares for capital-raising
3 February 2020: Strong NZ connections already for Augusta bidder Centuria
Attribution: Company release, annual report.