NPT Limited Announces Annual Results For Trust
30 May 2011
NPT Limited (NPT, the 'Company'), as Manager of The National Property Trust (the 'Trust'), today announced the Trust's year end results to 31 March 2011. These will be the final results released by the Trust following its corporatisation. On 1 April 2011 NPT Limited became the Manager of the Trust and is releasing these results in that capacity.
The gross operating profit, before non-recurring expenses, other gains or losses and tax, decreased by 4.3 per cent from the 31 March 2010 result of $9.19 million, to $8.80 million and is due to property sales in the 2010 year. This result was higher than forecast, predominantly due to occupancy rates being better than expected and indirect operating expenses being lower than expected.
The net loss after tax for the year was $14.67 million, compared to a net loss of $7.37 million for the year to March 2010 (restated as a result of adopting IAS 12 Income Tax (Amended) last year). This loss was largely the result of the substantial change in valuations applied to Natcoll House and Eastgate Shopping Centre in Christchurch after the February earthquake. As previously reported, a section of the Eastgate Shopping Centre was materially damaged on 22 February 2011 and this section has since been demolished. The Eastgate Centre is fully insured and the future insurance proceeds will be included in 31 March 2012 and future financial statements.
Also impacting on valuations, independent valuers have applied increased capitalisation rates to Christchurch properties. Consequently the Unrealised Change in Fair Value of Investment Properties was a reduction of $22.37 million for the year ended 31 March 2011.
DIVIDEND DISTRIBUTIONS
The dividend distribution for the last quarter of the financial year will be 1.1575 cents per Unit and is due to be paid on 1 July 2011 to investors on the register at the close of trading on 17 June 2011. This will be a cash distribution with no imputation credits attached and is based on the Trust's policy of distributing 90 per cent of distributable earnings. This distribution will bring the total paid to investors in the financial year to 31 March 2011 to 4.55 cents per Unit, 0.55 cents above the guidance figure announced to the NZX in September 2010.
AMENDMENT TO NZ IAS 12 INCOME TAX
As previously announced, the Trust recognised a $14.63 million deferred tax expense in the interim financial statements for the six month ended 30 September 2010. This was a result of tax changes announced by the New Zealand Government in May 2010 which limited the claim of future depreciation on building structures with a useful life of more than 50 years. An amendment to IAS 12 Income Tax was gazetted in January 2011, which reverses the unintended consequence of the removal of depreciation on building structures. This amendment also reverses the deferred tax expense provided previously in respect of revaluation gains. Consequently, the Balance Sheets for the last two years have been restated as if the amended NZ IAS 12 had been in place at that time.
CAPITAL MANAGEMENT
The proceeds from the sale of the Liardet Street property in New Plymouth were used to retire debt. The property settled on 21 June 2010 at a sale price of $1.35 million, $100,000 above the March 2010 valuation.
As part of the corporatisation process, during the year the Trust redeemed and cancelled 31.95 million units from the owner of the Trust's previous Manager and 0.54 million units from overseas investors (other than Australian investors). The Trust also paid the Manager $2.5 million for the relinquishment of the management rights. The total cost of corporatisation and the relinquishment of the management rights was $3.65 million.
The increase in debt, coupled with the negative impact on the valuation of investment properties in Christchurch, has resulted in the gearing ratio increasing from 22.02 per cent last March to 36.8 per cent as at 31 March 2011.
BANK FACILITY
NPT Limited has accepted an offer from the Bank of New Zealand to renew its current loan facility, which was due to expire on 30 November 2011, for a further three years on favourable terms. On renewal the facility limit will increase from $70 million to $80 million.
THE PORTFOLIO
As previously reported, the Trust's property valuations as at 31 March 2011 reduced by 11.21 per cent during the year, largely due to the demolition of a section of the Eastgate Shopping Centre, combined with a level of uncertainty surrounding the Christchurch property market. At year end the portfolio was valued at $168.64 million.
Acting Chief Executive Officer, Kerry Hitchcock says, "A major focus for our management team is understandably, our Christchurch properties, particularly the Eastgate Centre. Our property management team fortuitously secured both an early engineering assessment of the Centre and contractors who could immediately start repairs on the affected sections. This swift action resulted in many businesses being back in operation by the end of April with another substantial section due to open in June."
Of NPT's other Christchurch properties, Print Place suffered only superficial damage in the February earthquake and was operational within days, and Natcoll House is unable to be fully assessed while it remains within the CBD's cordoned off area.
Avonhead Mall and Hornby Mall, over which NPT holds the head leases, had only superficial damage and both were back in operation shortly after the February earthquake.
With the exception of the Christchurch properties, the portfolio is performing in line with trading forecasts. The vacancy rate is unchanged from the previous year, at 5.7 per cent as at 31 March 2011.
CONCLUSION
NPT Limited Chairman, Sir John Anderson says, "We expect the situation in Christchurch to occupy much of the Company's attention during the coming year."
"The other key focus for the NPT Board will be to develop a clear strategic direction for the new Company. We believe that the new structure will have a number of advantages including the removal of performance fees and a significant reduction in asset acquisition and divestment costs. This will provide a platform which will enable the Company to improve its performance and returns and the new Board is looking forward to delivering these to our shareholders."