Argosy's profit falls 25%

Peter Mence, chief executive of Argosy Property Limited.

Argosy Property reported a 25 per cent drop in annual profit, while its rental income rose, as the listed property investor returned to a tax paying position for the first time in four years and paid more interest.

Profit fell to $64.4 million in the year ended March 31, from $85.6 million a year earlier, the Auckland-based company said.

Distributable income, the preferred measure for property investors as it strips out unrealised shifts in fair value, fell to $48 million, or 6.02c a share, from $50 million, or 6.69c.

Argosy's bottom line was weighed on by a $23.2 million loss on derivative financial instruments, compared with a gain of $20.6 million the year earlier, which it said caused a loss on its interest rate swaps due to the lowering of the interest rate curve.

Distributable income dropped after the company faced an $11.6 million tax expense, the first time since 2011, Argosy said.

Net property income rose 11 per cent to $90.9 million as it benefited from acquisitions in the year and a refurbished Stout St office block came online, starting a 12-year lease with the Ministry of Business, Innovation and Employment.

It declared a final dividend of 1.5c a share, taking the annual payout to 6c, in line with guidance.

Argosy shares closed yesterday at $1.105 The stock is rated an average hold based on five analyst recommendations compiled by Reuters, with a median target of $1.13.

Argosy has been diversifying its portfolio outside Auckland, focusing on industrial sites rather than malls and retail investments.

Last year it identified $70 million worth of property to divest.

Argosy bought five Lower Hutt sites for $59 million in the year, marking its first Wellington-based industrial site renting foray.

Across its 68 properties, with a market value of $1.3 billion, occupancy was 99.2 per cent with a 5.54-year weighted average lease term.

About 39 per cent of the portfolio is industrial, 37 per cent office space, and 11 per cent retail.

The weighting to Auckland was 65 per cent and 28 per cent in Wellington.