Funds manager Augusta lifts earnings 122%

Augusta Capital Ltd lifted its half-year earnings by 122%, driven primarily by higher operating earnings & revaluations. On another measure, the non-GAAP adjusted funds from operations assessment of underlying financial performance, the return was 16% higher than a year ago.

Augusta chair Paul Duffy said in the results release on Thursday: “The material improvement in the interim result reflects the early benefits of Augusta’s transition to a funds management earnings model, which is being actively supported by improved balance sheet capability.

“Improved earnings came from Asset Plus and the launch of the Augusta Industrial Fund. The launch & expansion of investor funds, including fees from assets under management, are now core to the company’s growth story.”

Mr Duffy said the new funds had attracted new investors, and a number of existing investors had reinvested.

Broad picture

The company generated $5.03 million of net offeror & underwriting fees and created $950,000 of ongoing gross annual management fees from the 2 new offers.

Net management fee income rose 32% to $4.17 million ($3.15 million), driven by strong transactional income & new assets under management.

Net rental income fell by $840,000 following divestment of Augusta House (19 Victoria St West in Auckland) in July 2017 and the retail title in March 2018, offset against income from the Hub in Wellington until 15 June 2018.

Corporate costs increased by $620,000 to $5.02 million, driven by the level of investment required to support the launch of new fund initiatives.

Net funding costs fell $570,000 to $890,000 after the sale of directly held investments. The company had $32 million of undrawn lending facility at 30 September, to support new initiatives.

Total assets were reduced by $36 million to $105.3 million, primarily as a result of the sale of the Hub in Wellington to the Industrial Fund for $44.9 million. The bulk of these proceeds ($35.9 million) was applied as a debt repayment and the balance held as working capital.

Group gearing based on drawn debt was 6.3% of gross asset value. Intangible assets & goodwill are held at cost net of impairment, driven by asset sales in the managed portfolio. However, Augusta will continue to revalue investment assets to fair value.

2 new investment offerings were completed oversubscribed, raising $143.5 million of new equity, and Augusta completed transition of the Asset Plus Ltd management contract.

Key finance & portfolio points:

  • Net profit & total comprehensive income, up 122% to $5.1 million ($2.3 million)
  • Net revenue, up 7.1% to $11.84 million ($11.05 million)
  • Profit before fair value movements, disposals & tax, up 14.3% to $5.9 million ($5.2 million)
  • Adjusted funds from operations, up 16% to $4.56 million ($3.94 million)
  • Total assets, down 25.2% to $105.3 million ($140.85 million)
  • Net assets, up 3% to $86.7 million ($84.2 million)
  • Net asset value/share increased to 99c (98c) due to retained earnings
  • Net tangible assets/share, fell 3c to 75c (78c, but up from 71c in March)
  • Basic & diluted earnings/share 5.83c (2.62c)
  • Second quarter cash dividend 1.5c/share, fully imputed with imputation credits of 0.583c/share attached, and supplementary dividend of 0.2647c/share for non-resident shareholders; the board expects to maintain the full-year dividend at 6c/share, subject to quarterly review
  • All assets within the Augusta Value Add Fund unconditionally sold, generating an 11.7% internal rate of return 
  • Increase in corporate costs as Augusta continues to invest in people to support the growth strategy.

Outlook
Managing director Mark Francis said Augusta would maintain its focus on growing assets under management & diversifying the portfolio: “The tourism sector remains a key focus for Augusta’s next new multi-asset fund offering, and we have previously signalled our intentions as to the future growth of the Industrial Fund. The acquisition of the Queenstown Views property is a further asset secured for the tourism fund initiative and we are also pursuing further opportunities in both Queenstown & Auckland.”

Immediate aims: 
• Exit the final 2 Finance Centre assets
• Launch sector-specific funds
• Grow existing assets under management, specifically Asset Plus & the Augusta Industrial Fund 
• Leverage balance sheet to support underwriting & broader business objectives 
• Invest in further IT to support growth 
• Active asset management in New Zealand & Australia in terms of acquisition, divestment & development opportunities.

Immediate aims:

  • Exit the final 2 Finance Centre assets
  • Launch sector-specific funds
  • Grow existing assets under management, specifically Asset Plus & the Augusta Industrial Fund 
  • Leverage balance sheet to support underwriting & broader business objectives 
  • Invest in further IT to support growth 
  • Active asset management in New Zealand & Australia in terms of acquisition, divestment & development opportunities.

Attribution: Company release.

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