Good morning, everyone, and welcome to the NZL FY 2024 Investor Webinar. Thanks very much for joining us this morning. You will have likely seen on the NZX we have released this presentation that I am sharing with you and our unaudited financial results for the year ended December 31, 2024, which is also our financial year 2024. This morning, I would like to walk you through this presentation. I will not label every slide, but it is available on our website and on the NZX, and I will be taking questions at the end. The key messages for our FY 2024 year, and this has been well canvassed, Roc Partners purchased 25% of the NZL portfolio, which validated the strategy and partnered with NZL for growth, portfolio diversification, and rental yield materially increased with further forestry and horticultural acquisitions.
We partnered with New Zealand Forest Leasing to execute on native regeneration throughout NZL's forestry properties. AFO grew to NZD 0.0494 per share in FY 2024, which was a 13.6% growth on the previous year. Gearing's been lowered to just under 30%, and a total dividend declared of NZD 0.04 per share net equivalent to 80% of our full year AFO. In terms of financial highlights and metrics, we've seen an 18.6% CPI hike on just under 40% of our portfolio, which took effect in mid-2024, so we'll see the full effect of that next year. AFO's increased to NZD 7.1 million or NZD 0.0494 per share.
You will see that Net Asset Value per share has grown from $1.25 at IPO to $1.603 per share as of December 31, 2024, and the dividend's been resumed for a total dividend of $0.04 net per share, which is 80% of AFO for this year. We've seen very consistent AFO growth year on year since listing, and we expect the same again next year. In terms of our operating overview for the FY 2024 year, what we saw was four acquisitions, which were both AFO and Weighted Average Lease Term accretive. We acquired horticultural land in Twyford, Hawke's Bay. We acquired two forestry estates and some further horticultural land in Otago. We saw our gearing lowered from 36.2% to 29.6%. We saw our Weighted Average Lease Term increase from 11.6 years to 12.5 years, and we saw further diversity increased across the whole portfolio.
In terms of the highlights from our unaudited financial results, we saw an increase in FFO and increase in AFO, a 14% increase in AFO. We've seen Net Profit After Tax reach NZD 23.08 million, which is a record profit for NZL, and we've seen Earnings Per Share reach a record number as well. The balance sheet has had a just under 20% growth in assets and growth in total equity. In terms of our debt summary, as mentioned, we're just under 30% geared at 29.6%. Our Weighted Average Interest Cost is 5.9%. We're 65% hedged, and what we've seen this year is the entrance of Bank of China into our banking syndicate.
In terms of total returns, to summarize where we've landed this year, how that compares to since inception and where we're looking for next year, our net asset value per share has grown from $1.25 to $1.603 per share. We've delivered AFO this in the 2024 year of $7.1 million in aggregate or $0.0494 per share. We're forecasting AFO next financial year, FY 2025, the year we're in at the moment, which ends 31 December 2025, of between $7.5 million-$8 million in aggregate, the midpoint of which is $7.75 million. In dividends per share, we've issued a record dividend this year of $0.04 per share as a net dividend, and we're forecasting a full year dividend for FY 2025 of between $0.042 per share and $0.045 per share, which represents 80% of our forecast AFO.
In terms of our sustainability program, we continue to implement our enduring Land for Life program, which investors will be familiar with, and more details are available on our website. It focuses on the five pillars: environment, economic, social, animal welfare, [Foreign language] , and the oversight and management of which is the governance pillar. What we've seen this year is two further forestry land acquisitions. Our partnership with New Zealand Forest Leasing continues to grow, which has a large nationwide carbon sequestration and native regeneration project underway. This involves using the pine trees as a nurse crop and a variety of quite intensive methods to ensure long-term native regeneration underneath, and we look forward to keeping you updated on these projects. In terms of dividend and outlook, the financial landscape for New Zealand dairy farmers and pastoral farms makes up a large part of our portfolio. The outlook is positive.
Farmers are making record cash profitability. We're seeing declining debt levels in the sector, and we think that this looks positive from both a tenant serviceability point of view and for pastoral land prices. The Roc Partners transaction, which investors will be familiar with, was the 25% sale of the portfolio to Roc Partners. It allowed us to recycle some capital at a premium to market value. It improved the company's financial position and allowed us to rotate some assets into higher yielding and further diverse assets, and it's a strategic partner for growth in the future. The dividend is obviously $0.04 final net dividend for the FY 2024 year. We continue to target a payout ratio of 60%-90% of AFO.
Our share buyback program is maintained, and during the period, we repurchased a total of 88,804 shares, bringing our total bought back to 710,131 shares at an average price of NZD 0.89 per share. In terms of the outlook for FY 2025, our leases all incorporate regular uncapped CPI reviews, and accordingly, inflation will result in further rental growth. We're reasonably insulated from inflation impacted on-farm costs because we own the land, w e don't participate in any of the on-farm operations. 31% of our pastoral leases are subject to review in 2025. We expect this to be around the 13% rental growth mark. 100% of our forestry assets will be subject to rent review in the first half of 2025, and the CPI accumulated since the last rent review is expected to be just over 2%.
What that does for the AFO predictions in aggregate for FY 2025 puts it between NZD 7.5 million and NZD 8 million in aggregate and an AFO per share of between NZD 0.0525 and NZD 0.056 per share. Obviously, our dividend policy remains in that 60%-90% of AFO range. We've seen further positive outlook for the dairy market and the carbon market in New Zealand, which bodes well for tenants and asset prices, and we think that as a company and a reasonably unique offering on the NZX and particularly in the listed property vehicle space, we continue to offer an attractive yield and forecast growth across the sector. What I'd like to do now is open up for questions if anybody has any. Nick.
Hi there. Good morning. Can you hear me?
Yes, I can hear you. Good morning, Nick.
Good morning. Would it be possible to talk what was behind the fair value movements of your investment properties? It wasn't just the forestry assets, wasn't it? Was it pastoral as well as the other, say, orchards?
The orchards, when the fair value increases for orchards are a product of two things: buying the land well that was part of a portfolio that was being broken up and an asset that we've been working on for quite some time to acquire attractively. The outlook for productive horticultural land, especially in Twyford and in certain pockets of Otago, is positive, and we have seen the market for that type of land increase in the last 24 months. Additionally, we were able to command reasonably healthy leases, and so there is a value associated with a slightly above-market rental yield on those properties.
In terms of forestry, since this time last year, the carbon market has firmed, and the outlook is increasingly positive, and we have seen an increase in value in forestry properties, and the dairy market continues to look strong, and we've started to see market transactions that are above last year, and also the CPI nature of our rent hikes occasionally will exceed a market movement, and so our rental, the net present value of our rentals can sometimes be slightly more favorable than market.
To be clear, the revaluation for the pastoral dairy assets was based on transactions in the market and having a better than otherwise rental growth outlook or rental income outlook from the CPI-based leases.
That has been the case. That's the case across the asset group.
It is not much to do with the Farm gate Milk Price being revised upwards.
That's the sentiment and the profitability that drives the increase in the land prices.
Okay, so it's more of a sentiment thing than near-term Farm gate Milk Price?
A sentiment and profitability thing. There's a chart in the presentation that talks to farmers are experiencing record cash profitability levels.
Yeah, thanks. I was just wondering, we can talk about that, so I was just wondering about sort of the short-term volatility on Farm gate Milk Prices versus long-term outlook. I just noticed in the notes of your annual report, there's been a series of asset and lease transactions, quite a bit going on. You're acquiring an asset for NZD 15.5 million, and in terms of paying it, you're funding it with a sale of an NZD 11.4 million asset and cash.
Yeah, I can summarise that. Two of our slightly hillier dairy farms are located next to some of one of our tenants' owned dairy farms. This particular tenant has got a very blue chip property that is isolated from his other farms, but it is very attractive to us in Ashburton. What we have done is we have said, "We will sell you two of our less attractive dairy farms as far as our total portfolio goes, plus some cash your way, and acquire your blue chip large productive dairy farm in Ashburton." I would note that these farms, that the dairy farms that we are selling are being sold for just slightly above their vacant position value.
Okay, and then in terms of the acquisition, what's the cap rate for that or the yield on cost?
5.9%. We're swapping like for like.
With regards to the transferring several leases with the tenants, why are you granting them a call option to buy $60 million worth of properties, and which properties are these, and I guess what are their strike prices? I'm just trying to understand.
The strike prices are at a slight premium to valuation plus a CPI growth year- on year. The tenant wanted the call options because it's their desire to invest a bunch of CapEx in those properties. From our point of view, we wanted to give them the confidence to continue to improve both from a profitability and value and environmental standpoint. If they did not come up with the money to purchase the properties, we have had someone else invest a whole bunch of money in development that we get the benefit of. If they do come up with the money to purchase the properties, it is at an above-market valuation price, which we are happy with. To facilitate the transaction and also either way the option went provide a positive outcome for NZL, we agreed.
Thanks. The $2 million in capital project commitments, what are they for, and how are you treating the spends? Would this be included in or reflected in your FY 2025 FFO guidance as part of, say, maintenance CapEx and incentives?
Yeah, so this is all part of our normal R&M/maintenance CapEx budget. They're all rentalised projects, and they're all value accredited to the land. So a little bit of it is irrigation, a little bit of it is water storage, a little bit of it is tree planting.
Thanks. I guess last one for me before I hand to someone else. You previously commented that FY 2024 was going to be a year of consolidation and relatively quiet compared to earlier years. What would you say FY 2025 looks like to you? Would it be fair to expect a greater level of transaction activity?
I think FY 2025, it's difficult. It's always difficult to speak to what the year holds, but we've got this asset swap that's taking place at the moment, which is really swapping some dairy farms for others. We don't have anything in the immediate future that we're any transactions that we're looking to do or anything like that. We'd like to continue to execute on what we've got in front of us. I mean, if we call that consolidation or just business, I would more describe it as business as usual.
Good. Thanks. That's all from me.
I've got some questions here which I will read out and then answer. One question from AJ Mack is, in the last six months, FFO was $0.03 a share, excluding the put call options, going from $0.0194 per share. The midpoint of the forecast FY 2025 is approximately $0.0546 per share. Why are you forecasting? What is a drop in FFO growth? When you've mentioned FY 2025 forecast includes upsides with CPI, higher yields, horticultural acquisitions, and increased rent from the post-period acquisitions. We are still experiencing FFO growth in the first half of last year. The last half of this year, we've seen the impact of the high-yielding assets, in that six-month period.
What we'd expect to see is that same high yield in the first six months of next year, plus the CPI growth from the properties that are experiencing CPI growth. We are not going to see the same growth as the first half of 2024 to the second half of 2024 because we are not going to see the growth of CPI hikes and the rotation of the portfolio, but we will continue to see growth from an already high-yielding portfolio plus CPI growth. There is another question from Rowan. Are you looking at any opportunities at present? What sectors are you focusing on? Does the large discount in the NAV inhibit the purchases of further assets? Any other comments on share price would be useful. We are continually looking at opportunities. We do not have anything in the imminent future that we are looking at.
The slightly higher-yielding sectors where we think there is opportunity at the moment tend to be in the horticultural, forestry, potentially some solar space. None of those are on the immediate horizon. There's a question from Tina. FY 2024 FFO is slightly below previous provided guidance. Can you talk through how much of it is because of the dilution of shares from the Southern Orchards transaction? The FFO that we guided to in aggregate is exactly on guidance. Per share, just marginally lower for the issue of shares for the Southern Orchards transaction. I would note that Southern Orchards were purchased with shares issued at net asset value, not at the current share price, so quite an accretive way to use shares as currency for shareholders to acquire land. There's a question about the interest rate hedge and when it expires from Tina.
Details on the hedging expiry are on the NZX and on our website. We have a tailing-off expiry, so 65% of our interest rate hedging is through to next year. Slightly lower is the year beyond it at approximately 50% and slightly lower again at 30%. We run an active hedging policy, which means that as hedges roll off, we'll continue to look at them and roll hedges on. There's a question about good interest rates you're getting on the debt, but for the past two years, you've made over a $2 million loss on derivative instruments, which is considerable. What are the derivative instruments? Who are they with, and what situations would enable these losses to become profitable? Those are simply a mark-to-market on our interest rate swaps, which are with Rabobank.
Whenever we take out a hedge on our interest rates, those are carried as a derivative in our books. If the prevailing interest rate in the market becomes higher than what you've hedged at, those derivatives are in the money. If the prevailing interest rate becomes lower than what you've hedged at, those are out of the money. You would expect to see a mark-to-market on our interest rate swaps on our balance sheet. They do not impact from a cash perspective because you have locked in your interest rates, and those are the current or the present value of your future unders and overs versus a market rate. I believe that has answered all the questions I've got in Q&A. Does anyone else have their hand up or any further questions?
I'm very happy to take emails and calls later today or the rest of the week if anyone would like to get in touch. Otherwise, thank you all very much for coming this morning. Okay, thanks.