Augusta Capital's first-half profit more than halved as the company wrote down the value of its stake in listed property investor NPT and didn't repeat year-earlier valuation gains as the firm continues its shift into funds management rather than direct property ownership.
Net profit fell to $2.3 million, or 2.58 cents per share, in the six months ended September 30, from $5.2m, or 5.97 cents, a year earlier, the Auckland-based company said in a statement. That included a $1.8m writedown in the value of its 19 per cent NPT stake, which it built up to secure control of the firm's board earlier this year, while the year-earlier period was bolstered by a $3.2m gain in the value of its property portfolio.
Excluding fair value changes, Augusta's adjusted funds from operations slipped 2 per cent to $3.9m as gains in funds management fees weren't enough to offset increased corporate and funding costs and lower rental income.
"Revaluation gains going forward will not be a primary driver of growth. This is being actively replaced by earnings derived from funds under management," chair Paul Duffy said in a statement. "This transformational period will generate some expected earnings volatility, but the current market environment is creating opportunities to further progress the transition."
Augusta diversified into funds management and property syndication, where it saw greater benefits from generating recurring fees rather relying on rental income. The firm has almost completed its shift away from direct property ownership with the three remaining Finance Centre properties due to settle over the next 18 months.
Chief executive Mark Francis told BusinessDesk that staggered settlement was intentional, avoiding the problem of having $100m hit Augusta's balance sheet and come under pressure on how to reallocate those funds. Instead, Augusta will use that capital to seed new investment opportunities as they arise.
"We view our balance sheet as an assembly line - it's a warehousing facility to secure the assets, wrap the bow around it in whatever shape or form, and then out the other end they go into the end investor's hand into whatever vehicle is appropriate for that assets," Francis said. "The strategy is a broadening of or diversifying the types of offers we put out."
Augusta has traditionally focused on single-asset syndicates, but after the success with a multi-asset value-add fund launched last year has encouraged the firm to look at different types of offers, which are expected to launch in the next six-to-12 months.
The board declared a second-quarter dividend of 1.375 cents per share, payable on Dec. 1 with a November 27 record date.
The shares last traded at $1.045 and have gained 6.9 per cent so far this year.