ASTRO JAPAN PROPERTY GROUP ASX/Media Release
11 November 2015
Please find attached the Address to Securityholders to be delivered by the Chairman and the Senior Advisor at today's Annual General Meeting.
Eric Lucas John Pettigrew
Senior Advisor Chief Financial Officer
Phone: +61 2 8987 3900 (Australia) Phone: +61 2 8987 3902
+81 3 3238 1671 (Japan)
Astro Japan Property Group is a listed property group which invests in the Japan real estate market. It currently holds interests in a portfolio comprising 31 retail, office and residential properties. Asset management services in Japan are generally undertaken by Spring Investment Co., Ltd.
AJA is a stapled entity comprising Astro Japan Property Trust (ARSN 112 799 854) and Astro Japan Property Group Limited (ABN 25 135 381 663). For further information please visit our website: www.astrojapanproperty.com.
Chai rm an' s Address - Mr Allan McDonald
Good morning and welcome to the Astro Japan Property Group's 2015 Annual General Meeting.
I am pleased to report some very significant achievements during the 2015 financial year, positioning the Astro Japan Property Group (Astro) soundly for the future. As we have mentioned in numerous presentations and at this meeting last year, our focus has been on enhancing the capital structure and refining the property portfolio. I will take a few minutes later in my address to summarise the major elements of the achievements in these areas and the Senior Advisor's Address will provide a detailed outline of the year's activities.
Firstly, let me deal with our financial results. Our underlying profit after-tax was $26.8 million for the year ended 30 June 2015, 0.8% lower than the previous year. Underlying profit after-tax is a measure which the Directors believe accurately and consistently reflects the underlying business performance of Astro. The negative impact of reduced net property income resulting from a number of asset sales and an approximately 3% strengthening of the Australian dollar, was substantially offset by materially lower borrowing costs achieved through a series of refinancings. The result was also helped by lower asset management fees.
Importantly, this result reflects stabilisation following previous weakness in net rental income, with like-for-like net rent down only 1.9%, almost entirely from the restructuring and extension of a single retail lease in the Susono asset. For the future, there is some early evidence of potential rental growth, albeit small, linked to the efforts of the Japanese Government to stimulate and reflate the economy.
This improvement has been reflected in a tightening of capitalisation rates used by valuers, resulting in an increase in the book value of the Group's portfolio at June 2015 by nearly $22 million, representing about 36 cents per security. This has been the main driver for an uplift in net tangible assets per security from $5.94 to $6.44 as at June, 2015. Significant weakening of the Australian dollar against the Japanese Yen since the June accounting date, has further increased the Australian dollar NTA.
As I indicated to you last year, capital management is a key focus for the Group. Interests in our 31 properties are held through 5 special purpose companies. To take advantage of improved conditions in both the banking and property markets in Japan, our asset manager, Spring Investment, succeeded in refinancing the debt of all those companies during the year, resulting in a reduction in the weighted average interest rate from 1.87% at June 2014 to 1.29% at June 2015. Importantly, amortisation - the amount of debt that must be repaid to lenders each year - has been substantially reduced as a result of these refinancings, meaning Astro's annual debt repayments are lower by approximately $9.1 million. The new loans also mean an increase in the weighted average maturity of all the Astro debt from 2.3 years to 7.7 years. Gearing remains well within our target range at 58%, as detailed in the chart now on the screen.
1
2
With funds realised from some opportunistic asset sales and through the debt refinancings, we bought back and cancelled a total of 6.56 million AJA securities during the year through both on- market and off-market ASIC approved buy-back programs. This represented 10% of securities previously on issue. Directors considered this to be the best use of available funds, resulting as it did in an improvement in earnings and NTA per security for securityholders.
With available excess funds remaining, we will continue to consider further capital management strategies, as Mr Lucas will outline.
A final distribution of 16 cents per security (cps) was paid on 31 August, 2015, bringing total distributions for the year to 28.5 cps, an increase of 42% compared to 20 cps for the previous year.
The Board reaffirms its ongoing emphasis on continuity of the highest prudent level of distributions to security holders and is proud to have been able to maintain an unbroken record of half yearly distributions since the Group was listed in 2005.
As announced on 26 August, distribution guidance for the six months to 31 December, 2015 is
17.5 cps, with further guidance to be given, if appropriate, when current volatility in currency markets stabilises sufficiently to give some clarity on the impact for the Group. The FY2015 full year distribution of 28.5 cents per security was less than underlying earnings of 40.4 cents per stapled security, with the balance used for capital management purposes. AJA expects to continue an ongoing programme of capital expenditure on the portfolio funded from cash flows, currently amounting to approximately 7 cents per security per year, to maintain the highest possible rental outcomes.
The longer term outlook for the Group is of course influenced by the success of the Japanese Government's strategy to stimulate the Japanese economy, which so far has produced limited improvements. Whilst the 2014 sales tax increase has clearly acted as a brake on economic activity, the restarting of Japan's nuclear power generating capacity will assist in enhancing the productivity of manufacturers and utilities which have borne extremely high energy costs during most of the period since 2011. Global economic volatility makes forecasting difficult, however with the post-GFC portfolio rationalisation and pro-active refinancing of all Astro's liabilities we believe the Group is positioned to withstand some economic downside but at the same time take advantage of opportunities which arise.
As a result of the expected full-year impact of the refinancings, buy-backs and acquisition transactions undertaken in the past 12 months, underlying profit after tax for the current full financial year is expected to increase by approximately 5%-6% based on budgeted portfolio performance and assuming the same foreign exchange rate as FY2015.
However, given recent Yen strengthening against the Australian dollar, and assuming a foreign exchange rate in line with recent levels around A$1=¥88, underlying profit after tax for FY 2016 is expected to increase by approximately 12%-15% to between A$30 million and A$31 million.
3
|
distributed by
|
