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Growthpoint Properties Limited - Unaudited Interim Results And Distribution

Release Date: 26/02/2004 12:00
Code(s): GRT
Wrap Text

Growthpoint Properties Limited - Unaudited Interim Results And Distribution Announcement Growthpoint Properties Limited ("Growthpoint" or "the company") (Registration number 1987/004988/06) Share code: GRT ISIN: ZAE000037669 * 4,7% increase in interim distribution to 33,5 cents * assets to exceed R6,6 billion * market capitalisation of o ver R3,7 billion * largest listed South African property investment company * much-improved liquidity and tradability UNAUDITED INTERIM RESULTS AND DISTRIBUTION ANNOUNCEMENT for the six months ended 31 December 2003 CONDENSED CONSOLIDATED INCOME STATEMENT Unaudited Unaudited Audited 6 months ended 6 months ended 12 months ended
31 December 31 December 30 June 2003 2002 2003 R"000 R"000 R"000 Revenue 434 221 188 281 452 982 Property expenses (141 523) (67 251) (158 775) Net property income 292 698 121 030 294 207 Other operating expenses (15 561) (3 626) (13 533) Net property income after other operating expenses 277 137 117 404 280 674 Investment income 47 072 19 229 77 223 Capital items and fair value adjustments (Note 1) 11 404 (832) 14 140 Merger costs - - (8 827) Operating profit 335 613 135 801 363 210 Interest paid (133 939) (43 099) (149 217) Interest on nil coupon loan (11 456) - (2 910) Interest earned 19 726 16 129 19 904 Net income before debenture interest 209 944 108 831 230 987 Debenture interest (208 552) (108 708) (227 197) Net income before taxation 1 392 123 3 790 Taxation (1 184) (14) (3 563) Normal and secondary tax on companies (148) (14) (1 151) Capital gains taxation (1 036) - (2 412) Net income after taxation 208 109 227 Note 1: Capital items and fair value adjustments 11 404 (832) 14 140 Fair value adjustment investment properties - - 69 922 Fair value adjustment listed investment portfolio 76 031 60 546 135 329 Fair value adjustment interest bearing borrowings (52 145) - - Fair value adjustment debentures (19 867) (61 378) (206 108) Realised profit on sale of listed investments 6 906 - 13 212 Realised profit on sale of investment property 479 - 1 785 Calculation of distributable earnings: Net property income after other operating expenses 277 137 117 404 280 674 Investment income 47 072 19 229 77 223 Interest paid (133 939) (43 099) (149 217) Interest earned 19 726 16 129 19 904 Taxation (148) (14) (1 151) Distributable earnings 209 848 109 649 227 433 Distribution per linked unit 33,50 32,00 66,55 CONDENSED CONSOLIDATED BALANCE SHEET Unaudited Unaudited Audited 31 December 31 December 30 June
2003 2002 2003 R"000 R"000 R"000 ASSETS Investment property 4 569 244 1 839 981 4 550 893 Listed investment portfolio 942 549 716 741 809 811 Receivables and other current assets 42 183 70 036 40 792 Bank and call accounts 203 714 33 793 22 155 Total assets 5 757 690 2 660 551 5 423 651 EQUITY AND LIABILITIES Ordinary share capital 31 156 17 003 17 164 Non-current liabilities debentures 3 271 730 1 619 798 1 782 317 Linked unitholders" interest 3 302 886 1 636 801 1 799 481 Non-current liabilities 1 964 072 841 834 895 914 Non-current liabilities non-in terest bearing 124 182 - 112 726 Amount owing to Primegro Properties Limited in respect of merger - - 2 278 604 Current liabilities 366 550 181 916 336 926 Total equity and liabilities 5 757 690 2 660 551 5 423 651 Number of linked units in issue 623 100 092 340 054 700 343 288 934 Net asset value per linked unit (cents) 530 481 524 CONDENSED CONSOLIDATED CASH FLOW STATEMENT Unaudited Unaudited Audited 31 December 31 December 30 June
2003 2002 2003 R"000 R"000 R"000 Cash generated by operations 274 084 125 723 343 007 Sundry income - - 263 Net finance costs (67 141) (26 970) (30 207) Taxation paid (1 059) (9) (22) Distribution paid to unitholders (40 294) (74 752) (261 645) Cash flow from operating activities 165 590 23 992 51 396 Cash flow from investing activities (1 024 239) (263 210) (356 332) Cash flow from financing activities 1 040 208 199 435 253 515 Net increase in cash and cash equivalents 181 559 (39 783) (51 421) Cash and cash equivalents at beginning of period 22 155 73 576 73 576 Cash and cash equivalents at end of period 203 714 33 793 22 155 CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Total share Ordinary capital and share capital Reserves reserves
R"000 R"000 R"000 Audited balance at 30 June 2002 12 315 (7 040) 5 275 AC 133 transitional adjustment - 7 040 7 040 Shares issued 4 849 - 4 849 Net income for year - 227 227 Dividends - (227) (227) Audited balance at 30 June 2003 17 164 - 17 164 Shares issued 13 992 - 13 992 Net income for period - 208 208 Dividends - (208) (208) Unaudited balance at 31 December 2003 31 156 - 31 156 COMMENTARY Basis of accounting The unaudited interim financial statements have been prepared in accordance with the South African Statement of Generally Accepted Accounting Practice Interim Financial Reporting AC 127 and the accounting policies used are consistent with those applied in the annual financial statements for the year ended 30 June 2003. It is not the company"s policy to revalue Investment Property at the interim stage. The significant increase in demand for property over the last six months has resulted in a lowering of capitalisation rates which, if sustained, is likely to result in an increase in the valuation of the physical property portfolio at the end of the current financial year. Financial results of Growthpoint The merger with Primegro Properties Limited ("Primegro"), effective from 1 May 2003, more than doubled the value of the property portfolio, interest bearing loans and linked unitholders" interest. Revenue, expenses and interest paid have also more than doubled as a result of the merger. The substantial increase in investment income was due to the fact that the listed investment portfolio was only acquired in October 2002. The successful implementation of the merger has created the largest South African listed property investment company with assets in excess of R5,7 billion and a market capitalisation of over R3,7 billion. The overall high quality of the portfolio, with retail comprising 63% by value at balance sheet date, including exposure to 10 dominant/regional shopping centres, should ensure the long-term sustainability of earnings. The company has achieved the critical mass to take advantage of large acquisition opportunities and has concluded two large purchases in the period as set out in the note on post-balance sheet events. The larger and more diversified shareholder base has contributed to much-improved liquidity and tradability of the linked units traded on the JSE Securities Exchange South Africa ("JSE"), as described in more detail later in this report. The short to medium term goal of Growthpoint is to be included in the FTSE/JSE Alsi 40 index as this should create significant additional investment demand, further increasing liquidity and tradability and could potentially lead to a further positive rerating of the linked units. Earnings per share The disclosure of 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 virtually all of the revenue earnings are distributed in the form of debenture interest plus dividend in the ratio of 1 000 to 1. In addition, headline earnings include profit on the sale of listed property investments, fair value adjustments for debentures as well as interest adjustments on nil coupon loans, which do not affect distributable earnings. It is submitted that the distribution per linked unit as shown above is more meaningful. Unaudited Unaudited Audited 6 months ended 6 months ended 12 months ended 31 December 31 December 30 June
2003 2002 2003 Shares in issue 623 100 092 340 054 700 343 288 934 Weighted number of shares in issue 623 100 092 254 116 303 314 910 131 Basic earnings per share (cents) 0,03 0,04 0,07 Headline earnings/(loss) per share (cents) (0,04) 0,04 (15,90) Basic earnings/Headline earnings are calculated as follows: R"000 R"000 R"000 Net income after taxation 208 109 227 Realised profit on sale of investment property (479) - (1,785) Capital Gains Taxation on realised capital profits - - 430 Fair value adjustment investment properties net of tax - - (48,945) Headline loss/(earnings) (271) 109 (50,073) Segmental information Retail Commercial Industrial
R"000 R"000 R"000 Revenue 251 980 152 484 12 509 Property expenses (79 078) (55 292) (4 216) Net income 172 902 97 192 8 293 Percentage of total 59,1 33,2 2,8 Book value 2 891 210 1 362 744 98 490 Percentage of total 63,3 29,8 2,2 Warehousing Hotels Total
R"000 R"000 R"000 Revenue 8 598 8 650 434 221 Property expenses (1 224) (1 713) (141 523) Net income 7 374 6 937 292 698 Percentage of total 2,5 2,4 100,0 Book value 96 800 120 000 4 569 244 Percentage of total 2,1 2,6 100,0 Refer to pie chart published in the press. Borrowings and cash balances Total interest bearing borrowings at 31 December 2003 amounted to R1,9 billion. Interest rates in respect of 100% of total borrowings have been fixed for varying periods with the earliest expiry being April 2004 and the latest expiry being October 2013. The weighted average interest rate paid by Growthpoint on these borrowings in terms of which interest rates have been fixed amounts to 12,25%. Growthpoint"s debt, including non-interest bearing debt as a percentage of investment property plus listed property investments ("loan to value ratio"), is 38,4%. Refer to graph published in the press. The above graph shows the years in which the fixed interest rate contracts expire in respect of the value of debt shown. Lease expiry profile Refer to graph published in the press. The purchase of the two Investec Bank Limited ("Investec") properties and conclusion of a twenty-year lease with Investec will result in approximately 15% of rentals (at current levels) being secured for the next 20 years and together with the Waterfall Mall acquisition should improve the overall lease expiry profile. Vacancies Average vacancies decreased substantially following the merger with Primegro, effective from 1 May 2003. The properties acquired were predominantly retail, with average vacancies of approximately 3,5%. This is a further indication of the quality of the properties acquired. Since the merger date, vacancies have continued to be well managed and have decreased to a level of 7,2% based on gross letable area. Refer to graph published in the press. The company is in the process of disposing of its remaining Johannesburg C.B.D. properties. This, together with the disposal of other non-core properties and ongoing letting activities, should result in vacancies decreasing further. Liquidity and trading of Growthpoint linked units on the JSE The graphs below show the value of units traded and the percentage of units traded relative to the total units in issue over the past 20 months: Refer to graph published in the press. The average Rand value of units traded has increased from R11 million to R98 million per month since the merger with Primegro. Likewise the volume of units traded as a percentage of units in issue has increased from a monthly average of 0,75% to 2,59%. For the reporting period 1 July 2003 to 31 December 2003 nearly 90 million linked units, valued at R542 million were traded on the JSE. Post-balance sheet events The following significant transactions, which have been announced in the press and circularised to linked unitholders, will be effective after the balance sheet date: 1. The acquisition of the Cape Town and Sandton offices of Investec for a total cost of R995 million and the entering into of a 20-year lease with Investec over the two properties. The acquisition will be financed by a mortgage loan to the extent of R502,5 million, the issue of new Growthpoint linked units to the value of R292,5 million and an interest-free loan of R200 million payable in equal tranches at the end of one and two years. The effective date of the transaction will be on registration of transfer, which is imminent. 2. The acquisition of Waterfall Mall, a premier regional shopping mall in Rustenburg for an amount of R294,6 million. This transaction will be effective from 1 April 2004. 3. The specific repurchase of 62 000 000 Growthpoint linked units from the Mine Pension Funds ("MPF") for a consideration of R375,1 million paid for by transferring to MPF a portfolio of listed property investments. The pro forma balance sheet below has been prepared to show the impact of the above transactions: Pro-forma balance sheet, after post-balance sheet transactions Unaudited 31 December 2003 Pro forma R"000 R"000 ASSETS Investment property 4 569 244 5 827 849 Listed investment portfolio 942 549 567 449 Receivables and other current assets 42 183 42 183 Bank and call accounts 203 714 203 714 Total assets 5 757 690 6 641 195 EQUITY AND LIABILITIES Ordinary share capital 31 156 30 599 Non-current liabilities debentures 3 271 730 3 189 687 Non-current liabilities interest bearing 1 964 072 2 761 172 Non-current liabilities non interest bearing 124 182 293 187 Current liabilities 366 550 366 550 Total equity and liabilities 5 757 690 6 641 195 Number of linked units in issue 623 100 092 611 969 657 Prospects Subject to market conditions remaining stable, the Growthpoint board anticipates that the company"s distribution for the second half of this financial year should exceed that of the first half and therefore the total distribution for the year will be in excess of the 67 cents per linked unit previously forecast. Declaration of interim dividend and interest payment Notice is hereby given of interim dividend declaration number 34 of 0,03347 cent and debenture interest payment number 34 of 33.46653 cents, totalling 33,5 cents per linked unit for the income distribution period 1 July 2003 to 31 December 2003. Timetable for interim distribution 2004 Last day to trade "cum"the interim distribution Friday, 12 March Linked units commence trading "ex"the interim distribution Monday, 15 March Record date to participate in the interim distribution Friday, 19 March Payment date of the interim distribution Tuesday, 23 March No dematerialisation or rematerialisation of Growthpoint linked unit certificates may take place between Monday, 15 March 2004 and Friday, 19 March 2004, both days inclusive. By order of the board Growthpoint Properties Limited 26 February 2004 Registered office Ground floor 100 Grayston Drive Sandown Sandton, 2196 PO Box 78949 Sandton, 2146 Transfer secretaries Computershare Limited Registration number 2000/006082/06 Ground Floor, 70 Marshall Street Johannesburg, 2001 PO Box 61051 Marshalltown 2107 Sponsor Investec Securities Limited 100 Grayston Drive Sandown Sandton, 2196 PO Box 785700 Sandton, 2146 Managed by INVESTEC Property Group Date: 26/02/2004 12:00:17 PM Supplied by www.sharenet.co.za Produced by the JSE SENS Department

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