Pyne Gould Corp Ltd (PGC) made $20.1 million (9.5c/share) net profit after tax for the June year, down 55%, as it continued its journey from the New Zealand sharemarket towards a London listing.
The formerly Christchurch-based company, now based in Guernsey, “is now reviewing its timetable for listing in London and expects to make an announcement at the time of its annual report, which is to be distributed by the end of September,” managing director George Kerr said on Friday.
The company is becoming trimmer, but with great expectations. It made a $2.4 million loss from ordinary activities, a 110% worse result, on revenue down 81% at $8.2 million.
The bottomline return reflected a 16% gain in net tangible assets, from 64c/share ($137 million) to 74c/share ($153 million).
But, as usual since Mr Kerr took control of an ailing long-established company and began to turn it upside down, the transformation and the hopes for a company growing through offshore business ventures are the interesting aspects of Pyne Gould at the moment.
In his preliminary result report on Friday he talked of simplifying the group, selling non-core assets and reinvesting in the core business in Australia & the UK. The $20.8 million bottom line was derived from “a profitable core fund management business and a substantial gain on the exit from financial services, after significant one-off costs.
“Torchlight contributed $5.8 million before non-cash foreign exchange accounting adjustments, which reduced this to $3.1 million. The full net profit after tax results were largely attributable to the positive one-off impact from the sale of Perpetual, and reduced by the legal & other costs associated with transactions, regulatory compliance & migration.”
At 30 June, Pyne Gould held total assets of $159.8 million and total liabilities of $5.9 million, with a net position of $153.9 million. It has no bank debt.
Current assets are $49.3 million ($42.1 million last year), with current liabilities $5.9 million ($14.1 million), giving net current assets of $43.4 million ($29.3 million). Long-term assets total $110.4 million, with no long-term liabilities.
Pyne Gould holds $59 million in Torchlight Fund LP interests & $33 million of co-investments. Over the course of the financial year, Torchlight Fund LP acquired ownership of almost 100% of the assets of Melbourne-based residential land investor & developer Residential Communities Ltd, which has a landbank of about 6000 sites in 17 projects. It develops & sells about 10%/year.
Torchlight Fund LP is also the cornerstone shareholder of ASX-listed Lantern Hotel Group, a Sydney-based freehold hotel group with net assets of more than $A100 million. Torchlight supports Lantern’s strategy of creating long-term value by acquiring & operating freehold pubs and buying back shares below net asset value.
Torchlight Fund LP’s other assets include an 11% stake in UK newspaper group Local World, acquired in 2012 for £7.5 million). Mr Kerr said the UK economy, the newspaper sector & the pound sterling had recovered strongly since then, leading to a positive outlook for the investment. “Local World is creating value through both cost-cutting & growth in digital advertising.”
Pyne Gould’s other long-term assets include an $18 million stake in Equity Partners Infrastructure Co No.1 Ltd (Epic – 42 million shares, or 26.9%), which owns about 17% of Moto, the largest motorway service area owner & operator in the UK. “We have a positive long-term view of this investment,” Mr Kerr said.
Pyne Gould spent $3.85 million buying back about 4% of its shares last year and has a target of buying back 30 million shares, or 15% of the stock on issue, this year.
Summing up the business after 5 years of transformation, Mr Kerr said: “With the exception of Local World, the principal direct & indirect investments are all, at their core, large & valuable real estate businesses. Each has a strong real estate-based business model and a high quality management team.
“In Australia, Torchlight’s RCL has a significant landbank that is being continuously developed, sold & restocked. The investment — made via distressed debt, consolidated & converted into equity ownership — has become a material engine for free cashflow.
“Similarly, the cornerstone shareholding in Lantern Hotel Group was built up in distressed market conditions and now has strong earnings prospects from a large freehold pub portfolio nearing the end of a major refurbishment cycle.
“In the UK, Epic initially invested in Moto at a distressed market valuation during the depths of the global financial crisis in 2009. This investment requires particular patience & discipline to unlock the quality cash earnings from owning & operating a substantial real estate portfolio of motorway service areas. Like RCL & Lantern, Moto is expected to create significant long-term shareholder value.
“PGC is well ahead of its restructuring objectives and is highly confident in both the financial strength & strategic direction of the company. As a consequence, PGC is considering the restoration of a policy of regular dividend payments within the next year. This topic will be addressed in the annual report.”
Attribution: Company release.