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Growthpoint - REVIEWED RESULTS FOR THE YEAR ENDED 30 JUNE 2003
Growthpoint Properties Limited
(Registration number 1987/004988/06)
Share code: GRT ISIN: ZAE000037669
("Growthpoint" or "the company")
REVIEWED RESULTS FOR THE YEAR ENDED 30 JUNE 2003
An unaudited "pro-forma" balance sheet has been prepared to take into account
the following significant post balance sheet transactions:
* Settlement of the amount due to Primegro Properties Limited ("Primegro") by
the issue of 184 662 735 new Growthpoint linked units to the value of R979
million and by the raising of mortgage loans to the value of R1 360 million.
* The issue of a further 94 330 764 linked units to the value of R500 million.
* Placement by Growthpoint of the linked units issued in respect of
Growthpoint"s shareholding in Primegro realising R51 million.
* Payment of transaction costs, including settlement of Primegro"s fixed
interest rate contracts, amounting to R115 million.
* Payment of the final distribution of 11,85 cents per linked unit to
Growthpoint linked unitholders for May and June, amounting to R41 million.
* Acquisition of Hyprop Investments Limited combined units to the value of R59
million.
UNAUDITED PRO-FORMA BALANCE SHEET AFTER POST BALANCE SHEET TRANSACTIONS
R"000
ASSETS
Investment properties 4 550 893
Listed property investment portfolio 810 918
Receivables and other current assets 40 792
Bank and call accounts 118 995
5 521 598
EQUITY AND LIABILITIES
Ordinary share capital and reserves 31 114
Non-current liabilities - debentures 3 239 502
Non-current liabilities - interest bearing 1 955 914
Non-current liabilities - non-interest bearing 112 726
Current liabilities 182 342
5 521 598
Number of linked units in issue 622 282 433
Net asset value per linked unit (cents) 526
Loan to value ratio 39,7%
* property assets exceed R5,3 billion
* market capitalisation of around R3,5 billion
* largest SA company listed in real estate sector
* diversified quality portfolio with retail focus
* loan to value ratio below 40%
CONDENSED GROUP INCOME STATEMENT
12 months 15 months
ended ended
30 June 2003 30 June 2002
R"000 R"000
Revenue 452 982 313 270
Property expenses (158 775) (109 971)
Net property income 294 207 203 299
Fund operating expenses (13 533) (5 539)
Net property income after fund expenses 280 674 197 760
Investment income 77 223 -
Capital items and fair value adjustments: 220 248 -
Fair value adjustment - investment properties 69 922 -
Fair value adjustment - listed property
investment portfolio 135 329 -
Realised profit on sale of listed property
investment 13 212 -
Realised profit on sale of investment property 1 785 -
Merger costs (8 827) -
Operating profit 569 318 197 760
Interest on long term loans (127 334) (67 718)
Interest on liability to Primegro Properties Ltd (21 883) -
Fair value adjustment - debentures (206 108) -
Notional interest on nil coupon loan (2 910) -
Interest earned 19 904 5 527
Income before debenture interest 230 987 135 569
Debenture interest (227 197) (135 399)
Net income before taxation 3 790 170
Taxation (3 563) (17)
Net income after taxation 227 153
CALCULATION OF DISTRIBUTABLE EARNINGS
Net property income after fund expenses 280 674 197 760
Investment income 77 223 -
Interest on long-term loans (127 334) (67 718)
Interest on liability to Primegro Properties Ltd (21 883) -
Interest earned 19 904 5 527
Taxation (excluding capital gains taxation) (1 151) (17)
DISTRIBUTABLE EARNINGS 227 433 135 552
Distributions for the period (227 424) (135 534)
Distribution per linked unit after 1-for-5
consolidation (cents) 66,55 85,66
Five-months to August 2001 (Restated) - 31,50
Four-months to December 2001 (Restated) - 23,75
Six-months to June 2002 - 30,41
Six-months to December 2002 32,00 -
Four-months to April 2003 22,70 -
Two-months to June 2003 11,85 -
The disclosure of earnings per share and headline earnings per share set out
below, while obligatory in terms of accounting standards, is not meaningful to
investors as the shares are traded as part of a linked unit and practically all
of the revenue earnings are distributed in the form of debenture interest plus
dividend in the ratio of 1000 to 1. In addition, headline earnings include
profit on the sale of listed property investments, fair value adjustments for
listed property investments, fair value adjustments for debentures as well as
notional interest on non-interest bearing long-term loans, which do not affect
distributable earnings. The distribution per linked unit as shown above is more
meaningful.
Earnings per share
Shares in issue 343 288 934 246 303 721
Weighted number of shares in issue 314 910 131 166 462 240
Earnings per share (cents) 0,07 0,09
Headline (loss)/ earnings per share (cents) (15,90) 0,09
Headline earnings is calculated as follows: R"000 R"000
Net earnings for the period 227 153
Realised profit on sale of investment property
- net of tax (1 355) -
Fair value adjustment - investment properties
- net of tax (48 945) -
Headline (loss)/ earnings (50 073) 153
CONDENSED GROUP Balance sheet
30 June 2003 30 June 2002
R"000 R"000
ASSETS
Investment properties 4 550 893 1 782 962
Listed property investment portfolio 809 811 -
Receivables and other current assets 40 792 29 544
Bank and call accounts 22 155 73 576
5 423 651 1 886 082
EQUITY AND LIABILITIES
Ordinary share capital and reserves 17 164 5 275
Non-current liabilities - debentures 1 782 317 1 120 144
Non-current liabilities - interest bearing 895 914 642 399
Non-current liabilities - non-interest bearing 112 726 -
Amount owing to Primegro Properties Limited in
respect of merger 2 278 604 -
Current liabilities 336 926 118 264
5 423 651 1 886 082
Number of linked units in issue 343 288 934 246 303 721
Net asset value per linked unit (cents) 524 457
CONDENSED group Cash flow statement
30 June 2003 30 June 2002
R"000 R"000
Cash generated by operations 452 362 217 884
Sundry income 263 -
Investment income 77 223 -
Net finance costs (107 430) (62 191)
Taxation paid (22) (30)
Distributions to unitholders (261 645) (63 883)
Cash flow from operating activities 160 751 91 780
Cash flow from investing activities (465 687) (585 905)
Cash flow from financing activities 253 515 562 954
Net (decrease)/increase in cash and cash
equivalents (51 421) 68 829
Cash and cash equivalents at beginning of the
period 73 576 4 747
Cash and cash equivalents at end of the period 22 155 73 576
CONDENSED group Statement of changes in equity
Ordinary Total
share share capital
capital Reserves and reserves
R"000 R"000 R"000
Balance at 31 March 2001 339 (7 058) (6 719)
Shares issued 11 976 11 976
Net income for the period 153 153
- previously stated 135 552 135 552
- restatement of debenture interest (135 399) (135 399)
Dividends (135) (135)
Balance at 30 June 2002 12 315 (7 040) 5 275
Opening balance fair value adjustment
- debentures 7 040 7 040
Shares issued 4 849 4 849
Net income for the period 227 227
Dividends (227) (227)
Balance at 30 June 2003 17 164 - 17 164
Commentary
Basis of accounting
These financial statements have been prepared in accordance with South African
Statements of Generally Accepted Accounting Practice and the accounting policies
used are consistent with those applied in the annual financial statements for
the period ended 30 June 2002 except for the reclassification of debentures and
the implementation of AC133. The current financial period is the first period in
which AC 133: Financial Instruments: Recognition and Measurement is applicable
to the company. Investment properties and the listed property investment
portfolio are valued at the end of each period and any changes in value are
shown in the income statement. In addition the debentures, which have been
issued at a discount and are subordinated in favour of all other creditors of
the company, are adjusted to fair value. On the insistence of the company"s
auditors, KPMG Inc., in order to comply with GAAP, as interpreted by them,
deferred taxation has been provided at 30% on the fair value adjustments to
investment properties and the listed property investment portfolio. Although
this is off-set by an opposite deferred tax credit on the fair value adjustment
to debentures, the company believes that providing for deferred tax on the
revaluation of investment properties and listed property investment portfolio at
30% is incorrect in principle as this provision is not commensurate with the
company"s principal investment activities. The investment properties and listed
portfolio are held as long-term investments to generate revenue. If it is
necessary to provide for deferred taxation at all, the rate should be the rate
at which any capital gain would be taxed, which is currently 15%.
Certain comparative figures have been re-stated where necessary. The
debentures have been restated as a liability in accordance with the contractual
obligation contained in the trust deed.
The prior year financial statements cover a fifteen-month period owing to the
change of year-end from 31 March to 30 June.
The company acquired a portfolio of listed investments comprising linked units
in property loan stock companies and units in property unit trusts in October
2002. The intention is to hold these as long-term investments for the purposes
of earning investment income. These investments were initially recorded at cost,
and subsequently stated at market value as determined by reference to the JSE
Securities Exchange South Africa closing prices as at 30 June 2003.
Investment income includes dividends and debenture interest received from the
listed property investment portfolio. These are recognised with reference to the
last day to trade ("LDT") date.
Review report
The condensed financial statements have been reviewed by KPMG Inc. Their
unqualified review report is available for inspection at the company"s
registered office.
Financial results of Growthpoint
During the year ended 30 June 2003 Growthpoint acquired 62 physical
properties and a listed property investment portfolio valued at R3,2 billion in
aggregate. In addition, one building known as the Nestle building was sold for a
cash consideration of R53,0 million. This, together with the fact that the
previous reporting period was for a fifteen-month period, makes comparison of
the results between the two periods meaningless.
Net property income increased by 44,7% to R294,2 million whilst net income
before debenture interest increased to R231,0 million, an increase of 70,4%.
Total distributions paid for the year to 30 June 2003 amount to R227,4
million or 66,55 cents per linked unit. Distributions of 34,55 cents per linked
unit for the second six-month period of the year represent an increase of 8,0%
over the 32,00 cents per linked unit paid for the first six-month period of the
year.
Acquisitions and disposals
The year under review has been a particularly busy one and the results for
the year ended 30 June 2003 incorporate the acquisition of the listed property
investment portfolio in October 2002 for R650,0 million, the acquisition of the
Laser portfolio for R54,8 million with effect from November 2002, the
acquisition of the remainder of the Hatfield Gardens office park with effect
from 1 April 2003 for R36,1 million, and the R2 465,9 million merger of the
businesses of Growthpoint and Primegro with effect from 1 May 2003.
These acquisitions, excluding the merger with Primegro which is discussed in
the paragraph below, were financed by Growthpoint issuing in aggregate 96 985
213 new linked units whilst the balance of R272,8 million was financed using
cash from the disposal of the Nestle property and taking on additional interest
bearing borrowings.
During the year only one property, the Nestle building in Pinetown, was sold
with effect from 30 August 2002 for R53,0 million.
Primegro merger
The merger of Growthpoint and Primegro has created the largest South African
listed property company with an asset base in excess of R5,3 billion, while
maintaining interest bearing borrowings below 40% of asset value. It has
increased the market capitalisation to around R3,5 billion and significantly
improved the shareholder spread. The overall quality of the portfolio underpins
the ability to generate sustainable earnings in the long term.
The net property income of Primegro from the effective date of 1 May 2003,
has been included in the total net property income for the year. The debenture
interest for the two months of R21,9 million paid to Primegro linked unitholders
in respect of the 184 662 735 Growthpoint vendor units issued to them has been
shown as interest paid on the liability to Primegro.
The balance sheet at 30 June 2003 reflects the value of the Primegro
properties acquired in the value of investment properties, whilst the bulk of
the liability for the acquisition is reflected as an amount owing to Primegro
with the balance included in non-current and current liabilities.
Property portfolio
The property portfolio of Growthpoint, pursuant to the acquisitions and
disposal and the Primegro merger referred to above, comprises 122 commercial,
retail, industrial and warehouse properties and three hotels.
The total gross lettable area of 1 378 989 m2 consists of retail (48%),
commercial (34%), industrial (9%), warehousing (6%) and hotel (3%) properties.
The major assets by value and net income include inter alia, Brooklyn Mall
and Kolonnade Shopping Centre (50%) in Pretoria, La Lucia Mall in KwaZulu-Natal,
Northgate Mall (50%), Constantia Office Park, River Square Shopping Centre,
Alberton City Shopping Centre (31,25%) and Gillooly"s View Office Park in
Gauteng, Longbeach Shopping Centre (50,1%) in the Western Cape, Walmer Park
Shopping Centre in Port Elizabeth and Beacon Bay Shopping Centre in East London.
The La Lucia Mall refurbishment has been completed at a cost of approximately
R73 million. The refurbishment will improve the earnings potential of the centre
as well as the sustainability of such earnings.
At 30 June 2003 total vacancies including the Primegro property portfolio
amounted to 99 383m2 or 7,2% of total gross lettable area.
Growing the portfolio, improvement in the quality of the portfolio and a
reduction in vacancies remain a priority of management.
Listed property investment portfolio
Investment income received from the listed property investment portfolio, in
the form of dividends and debenture interest, amounted to R77,2 million for the
period 9 October 2002 to 30 June 2003. At 30 June 2003 the total value of the
listed property investment portfolio amounted to R809,8 million.
The increase in market value of the listed property investment portfolio
during the period since acquisition resulted in a fair value adjustment or mark-
to-market unrealised profit of R135,3 million.
During the year a number of transactions were executed in order to balance the
risk associated with the listed property investment portfolio and to improve the
ability of the portfolio to produce long-term sustainable income growth. These
transactions resulted in a realised capital profit on sale of R13,2 million.
Borrowings and cash balances
At 30 June 2003, total interest bearing debt excluding any amounts owing to
Primegro in terms of the Primegro merger amounted to R895,9 million whilst total
non-interest bearing debt, assumed by Growthpoint in terms of the Primegro
merger, amounted to R170,0 million of which R57,3 million is reflected under
current liabilities.
The amount owing to Primegro of R2 278,6 million was settled through the
issue of new linked units to Primegro of R978,7 million and taking on borrowings
of R1 360,0 million. Cash raised in terms of the issue of linked units for cash
has been used to reduce debt. Total costs relating to the merger of R115,0
million (including the settlement of Primegro"s fixed interest rate contracts
amounting to R69,4 million and capital gains tax of R10,5 million) was settled
by taking on additional borrowings of R60,0 million and the balance of R55,0
million was paid in cash from the cash raised in terms of the issue of linked
units for cash.
Total debt, excluding debentures and interest free debt, after implementation
of the merger and the issue of linked units for cash will therefore amount to
approximately R1 955,9 representing a loan to value ratio of 36,5% and 39,7%
when the present value of the interest free debt is added to total debt.
The company will continue to adopt a conservative approach to its borrowings
and as at the date of this report approximately R1,7 billion, or 86% of the
interest-bearing debt was fixed at an average rate of 12,5% for an average of
5,4 years.
Cash balances at 30 June 2003 amounted to R22,2 million. However cash
remaining from the issue of linked units for cash, after settling the balance of
the expenses relating to the merger and payment of distribution number 33 on 1
September 2003, will amount to approximately R119,0 million.
Share capital and debentures (linked units)
Each linked unit comprises one share of 5 cents linked to 10 debentures of
250 cents each and the interest payable on the 10 debentures is always 1 000
times greater than the dividend payable per share.
Pursuant to the acquisitions referred to above, but before the issue of any
linked units in terms of the Primegro merger or the issue of linked units for
cash, Growthpoint had 343 288 934 linked units in issue.
In terms of the Primegro merger, a further 184 662 735 new Growthpoint shares
were issued to Primegro on 25 August 2003 whilst an additional 94 330 764 linked
units were issued on 1 September 2003 to raise R500 million cash, taking the
total linked units in issue to 622 282 433.
Prospects
The Growthpoint board is optimistic that, subject to market conditions
remaining stable, Growthpoint"s distribution for the year ending 30 June 2004,
will not be less than 67 cents per linked unit which forecast was included in
the circular to Growthpoint linked unitholders dated 17 June 2003.
Dividend and interest payment
Growthpoint linked unitholders are referred to the declaration of final
dividend and interest payment for the year ended 30 June 2003 published in the
press on 7 August 2003. In terms of this announcement notice was given of final
dividend declaration number 33 of 0,01184 cents and debenture interest payment
number 33 of 11,83816 cents per linked unit for the income distribution period 1
May 2003 to 30 June 2003. The total amount payable to linked unitholders
amounted to 11,85 cents ("the final distribution") per Growthpoint linked unit
and was paid to linked unitholders on Monday, 1 September 2003.
The final distribution brings the total distribution for the year ended 30
June 2003 to 66,55 cents per Growthpoint linked unit.
By order of the board
8 September 2003
Registered office:
100 Grayston Drive
Sandown
Sandton, 2196
PO Box 78949
Sandton, 2146
Transfer secretaries:
Computershare Limited
Registration number 2000/006082/06
9th Floor, 70 Marshall Street
Johannesburg, 2001
PO Box 61051
Marshalltown 2107
Sponsor:
Investec Securities Limited
(Registration number 1972/008905/06)
100 Grayston Drive, Sandown
Sandton, 2196
PO Box 785700
Sandton, 2146
Date: 08/09/2003 01:00:17 PM Supplied by www.sharenet.co.za
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