Grit Real Estate financial results for the year-ended 30 June 2019

Posted On Monday, 30 September 2019 18:09 Published by
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London Stock Exchange listed Grit, the only listed Africa-focused income distribution group to offer international property investors access to high growth opportunities in thriving African economies outside of South Africa, today announced robust interim results for the financial year ending 30 June 2019,  despite challenging macro-economic conditions.

 -BRONWNY-CORBETT-

A final dividend of US$ 6.95 cps was declared, bringing the full-year dividend to US$12.20 cps, an increase of 0.1%. This equates to an annual dividend yield of 9.55% on the JSE, 8.81% on the LSE and 8.84% on the SEM (based on 30 June 2019 exchange rates and respective stock exchange share prices).

Bronwyn Corbett, founder member and CEO commented:

“I am delighted to present another year of strong performance in which we continued to successfully implement our investment strategy.

“Grit delivered a total return of 12.4% from Portfolio Performance, in line with expectations despite currency headwinds and significant corporate activity, including a successful listing and capital raise on the London Stock Exchange on 31 July 2018.

“Country and sector diversification and our proactive asset management initiatives have helped us to effectively manage the challenges faced in the retail sector across the continent.”

As a result of the various acquisitions and ongoing performance of the existing portfolio, Grit achieved a 57.3% increase in profits from operations (increasing to US$17.3 million in 2019 versus US$11.0 million in 2018).

Profit before tax increased from US$30.5 million to US$39.5million, representing an increase of 29.5% for the year, despite a 20.7% increase in financing costs (attributable to increased Libor rates over the period and the impact of the new debt from acquisitions). Adjusted EPRA earnings of US$28.7 million were declared for the year, a 42.8% increase from US$20.1 million in 2018.

Income producing asset value increased by 28.5% to US$825.2 million during the period, following the successful deployment of the US$132.2 million raised during the LSE listing. The total gross lettable area concomitantly increased by 9.96% to 338 854 sqm and the property portfolio now comprises a total of 25 investments across seven countries and five asset classes.

“The quality of the Grit’s diversified portfolio and our strong multinational tenant base have once again helped us to deliver a strong set of results and our solid foundation leaves us confident of continuing to deliver attractive returns over the short and longer term.

“We are excited about the identified opportunities we have to add attractive, accretive assets to the portfolio at prices that create value for our shareholders and that will underpin our EPRA NAV growth and our progressive dividend policy over the medium term,” continued Corbett.

93.6% of Grit’s revenue is earned from multinational tenants (FY18: 89.1%) and 95.4% of income is in US dollar, Euro or linked currencies (FY18: 93.2%). Significant leasing activity took place at Anfa Place Mall, Grit’s largest asset by value. Successful pre-letting and re-tenanting activities have reduced vacancies at Anfa Place Mall to 12.9%. Strategic vacancies of 20% were maintained during the redevelopment stage. Significant new tenants to the centre include new anchor tenant Alpha 55 (1908 sqm), a well-known Moroccan brand, while food and entertainment offerings have also been increased as a percentage of overall GLA.

The redevelopment and relaunch of the centre took place post the balance sheet date on 12 September 2019 and is not fully reflected in the reporting year valuations. The Company expects further positive reversions in asset valuation and income generation in future reporting periods.

The Company further successfully renewed a number of long-term leases during the year under review. 91.4% of expiring GLA was either renewed or replaced (as part of active asset management activities) with significant activity including a new five-year office lease to Exxon Mobil in Commodity House Phase 2 in Maputo. Exxon Mobil has also been granted first option on any further Grit controlled office space in Maputo that becomes available.

Grit further successfully concluded a new 10-year office lease, including an increase in GLA, with Anadarko (1 910 sqm) after the exit of an existing local tenant at Commodity House Phase 1.

The Company introduced the Macau Casino (947 sqm) to Mall de Tete on a new five-year lease and concluded a new five-year lease with VIP Spar (1 780 sqm) as anchor tenant in Zimpeto Square shopping mall in Maputo. It further acquired an additional 20 completed units leased to Barloworld at VDE corporate accommodation compound in Tete, Mozambique, including the remaining 15.5 hectares of land earmarked for further development at a total acquisition price of US $3.6 million.

The additional units are adjacent to Grit’s existing 123 unit corporate accommodation asset. Post year end, the Group concluded a new lease contract with Vale for a period of five years, with a material requirement of this lease being the supply of an additional 60 accommodation units. By December 2019, 203 units are expected to be completed, representing an increase of 65% in units available for Vale and their subcontractors.

EPRA NAV per share increased to US$147.1 (2018: US$145.7). Excluding once-off costs of 3.1% relating to the London Stock Exchange listing, portfolio performance increased 4%. The portfolio was independently valued at 30 June 2019, with total income producing assets valued at US$825.2m (2018 US$642.3m) and like-for-like property valuations increasing by 3.8%.

Post year-end, Grit implemented phase 1 of its debt refinance programme, consolidating a number of debt facilities into a single US$ 1040 million facility from Standard Bank South Africa which cross-collateralises the Mozambique asset portfolio for a four year term at an interest rate of 3month Libor + 5%. This resulted in an interest cost saving on phase 1 of the programme of 1.14%.

The Company has identified c.US$600m of pipeline targets and has concluded transactions or secured exclusivity agreements on 13 of these assets, focused on tenant driven opportunities, which are collectively valued at  c. US$470 million across both completed assets and development opportunities. Targeted acquisitions are still subject to, inter alia, successful funding and other conditions precedent which will be communicated to the market.

Commenting on the strategic evolution of the Group, Corbett commented:

“The board recently broadened our mandate to include the pre-funding of risk mitigated development projects as we look to deploy surplus cash into business units demonstrating higher returns, strong fee generation and strategies that further accelerate NAV growth.”

In this regard, Grit aims to deliver ongoing superior returns through three primary areas, including:

Property Investment

A targeted 12% US$ total return including secure and growing distributions underpinned by high-quality hard currency leases and contracted rental escalations.

Property Development

Pre-funding of risk-mitigated development projects which, together with the investment in the Group’s development associate Gateway Delta, is limited to 20 per cent. of Group gross asset value (“GAV”). The turnkey nature of developments is not expected to impact dividends. Profits are applied as a reduction in acquisition cost of future assets, which will make it a key component of delivering sustainably higher targeted future NAV growth from Grit’s strong multinational tenant relationships.

Asset Management fee income

Fees charged on full property asset values where Grit owns less than 100% of the portfolio has the ability to further leverage on Grit’s operational cost base. The provision of Asset Management Services, both internally and to external property owners is a strategic focus area for the Group and is expected to drive strong fee generation and should assist in lowering a number of the Group’s operating cost ratios into the future.

“During the past financial year, we have positioned the business to optimise our growth ambitions in a sustainable, predictable way.

The quality of the Group’s diversified portfolio and our strong multinational tenant base have once again helped us to deliver a strong set of results despite several headwinds. This solid foundation leaves us confident of continuing to deliver attractive returns over the short and longer term.

We are excited about the opportunities we have identified to continue adding attractive, accretive assets to the portfolio at prices that create value for our shareholders and that will underpin our EPRA NAV growth and our progressive dividend policy over the medium term,” Corbett concluded.

The Group maintains its targeted net total shareholder return including of NAV growth of 12.0% per annum.

  • Full year dividend of US$12.20 cps declared (FY18 12.19 cps)
    • equating to an annual dividend yield of 9.55% on the JSE 
  • European Public Real Estate Association ("EPRA*") NAV per share increased by 1% to US$147.1 cps
  • EPRA NAV growth from Portfolio Performance grew 4.0% during the period (excluding once-off costs of 3.1% relating to the LSE listing)
  • Adjusted EPRA earnings per share down 0.4% to US$9.92 cps
  • Net property income increased by 25.97% to US$32.32 million
  • Total income producing assets increased by 28.5% to US$825.2 million
  • Profit from operations increased 57.3% to US$17.3 million (FY18: US$11.0 million)
  • Portfolio Weighted Average Lease Expiry (WALE) of 6.3 years
  • EPRA portfolio occupancy rate at 97.1% (FY18: 96.7%)
  • Group loan to value reduced by 8.28 points from 51.4% to 43.12%
  • Property loan to value reduced by 3.1 points from 43.7% to 40.6%
Last modified on Monday, 30 September 2019 18:56

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