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Growthpoint - Audited Results For The Year Ended 30 June 2004
GROWTHPOINT PROPERTIES LIMITED
(Registration number 1987/004988/06)
Share code GRT ISIN: ZAE000037669
("Growthpoint" or "the company")
* 3,7% increase in distribution * market capitalisation
to 69,0 cents in excess of R3,7 billion
* property assets exceed * largest SA company listed in
R6,6 billion Real Estate sector of the JSE
* improved liquidity and tradeability * vacancies down to 4,7%
AUDITED RESULTS FOR THE YEAR ENDED 30 JUNE 2004
CONDENSED CONSOLIDATED INCOME STATEMENT
2004 2003
R"000 R"000
Revenue 920 457 452 982
Property expenses (314 141) (158 775)
Net property income 606 316 294 207
Other operating expenses (34 887) (13 533)
Net property income after other operating expenses 571 429 280 674
Investment income 85 621 77 223
Capital items and fair value adjustments (Note 1) 43 600 14 140
Merger costs - (8 827)
Operating profit 700 650 363 210
Interest paid (271 664) (149 217)
Non-cash financing charges (26 157) (2 910)
Finance income 58 301 19 904
Net income before debenture interest 461 130 230 987
Debenture interest (442 797) (227 197)
Net income before taxation 18 333 3 790
Taxation (17 890) (3 563)
- normal and Secondary Tax on Companies (335) (1 151)
- Capital Gains Taxation (17 555) (2 412)
Net income after taxation 443 227
Calculation of distributable earnings
Net property income after other operating expenses 571 429 280 674
Investment income 85 621 77 223
Interest paid (271 664) (149 217)
Finance income 58 301 19 904
Taxation - excluding Capital Gains Taxation (335) (1 151)
Distributable earnings 443 352 227 433
Distribution for year 443 240 227 424
Distribution per linked unit (cents) 69,00 66,55
- six months to December 33,50 32,00
- six months to June 35,50 34,55
Note 1: Capital items and fair value adjustments 43 600 14 140
Fair value adjustment - investment property 383 522 71 707
Fair value adjustment - listed property
investments 59 325 148 541
Fair value adjustment - interest bearing
borrowings (66 777) -
Fair value adjustment - zero-coupon
borrowings (14 846) -
Fair value adjustment - debentures (317 624) (206 108)
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 1 000 to 1.
In addition headline earnings include fair value adjustments for listed
property investments, fair value adjustments for interest bearing and
zero-coupon borrowings and 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 612 563 789 343 288 934
Weighted number of shares in issue 592 598 105 314 910 131
Earnings per share (cents) 0,07 0,07
Headline loss per share (cents) (45,59) (15,90)
Headline earnings is calculated as follows:
Net income after taxation 443 227
Fair value adjustment - investment property,
net of capital gains tax (270 557) (50 300)
Headline loss (270 114) (50 073)
CONDENSED CONSOLIDATED BALANCE SHEET
2004 2003
R"000 R"000
ASSETS
Investment property 6 131 500 4 550 893
Listed investment portfolio 568 233 809 811
Receivables and other current assets 56 027 40 792
Bank and call accounts 86 302 22 155
6 842 062 5 423 651
EQUITY AND LIABILITIES
Ordinary share capital 30 629 17 164
Non-current liabilities - debentures 3 504 555 1 782 317
Linked unitholders" interest 3 535 184 1 799 481
Non-current financial liabilities 2 658 832 1 008 640
Amount owing to Primegro Properties Limited in
respect of merger - 2 278 604
Current liabilities 648 046 336 926
6 842 062 5 423 651
Number of linked units in issue 612 563 789 343 288 934
Net asset value per linked unit (cents) 577 524
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
2004 2003
R"000 R"000
Cash generated from operations 541 306 343 270
Investment income 85 621 77 223
Net finance costs (213 363) (107 430)
Taxation paid (1 080) (22)
Distribution to linked unitholders (265 422) (261 645)
Cash flow from operating activities 147 062 51 396
Cash flow from investing activities (896 182) (3 357 494)
Cash flow from financing activities 813 267 3 254 677
Net increase/(decrease) in cash and cash
equivalents 64 147 (51 421)
Cash and cash equivalents at beginning of year 22 155 73 576
Cash and cash equivalents at end of year 86 302 22 155
CONDENSED CONSOLIDATED STATEMENT OF CHANGES
IN EQUITY
Total share
Ordinary capital and
share capital Reserves reserves
R"000 R"000 R"000
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 year - 227 227
Dividends - (227) (227)
Balance at 30 June 2003 17 164 - 17 164
Shares issued 13 465 - 13 465
Net income for year - 443 443
Dividends - (443) (443)
Balance at 30 June 2004 30 629 - 30 629
COMMENTARY
The auditors, KPMG Inc. have issued their opinion on the group financial
statements for the year ended 30 June 2004. A copy of their unqualified report
is available for inspection at the company"s registered office.
Basis of accounting
These financial statements have been prepared in accordance with the 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 year ended 30 June 2003.
Financial results of the company
The results for the year ended 30 June 2004 include a full year"s income from
the R2,5 billion portfolio acquired in terms of the merger with Primegro
Properties Limited ("Primegro"). The effective date of the merger was 1 May
2003 and therefore only two months" income was included in the 2003 financial
year, resulting in large increases in most income statement items from 2003 to
2004.
The merger with Primegro, together with the R975,0 million acquisition of the
two Investec buildings, effective from 1 March 2004 and the acquisition of the
R284,6 million Waterfall Mall in Rustenburg, effective from 1April 2004,
accounts for the 103% increase in revenue to R920,5 million. Revenue is
expected to exceed R1 billion in the year to 30 June 2005.
Investment property increased in value by R383,5 million to R6 132 million,
following the discounted cash flow valuation carried out for the entire
portfolio at 30 June 2004.
The listed investment portfolio was revalued according to the closing prices of
the listed units on the JSE Securities Exchange South Africa ("JSE") on 30 June
2004, resulting in an increase in value of R59,3 million.
As the majority of the company"s borrowings are at fixed rates, the
mark-to-market of these loans and swaps gave rise to a fair value charge to the
income statement of R66,8 million. Likewise, the revaluation of zero- coupon
loans resulted in a charge of R14,8 million.
Capital profits and fair value adjustments are not taken into account when
determining the income available for distribution, neither are notional
interest charges raised to amortise zero-coupon and stepped rate loans to
maturity. Distributions are effectively calculated on normal, operating income
and expenses after "cash" financing costs and finance income.
The large increase in finance income is mainly due to the recovery of a portion
of the distribution paid on new linked units issued during the year to property
vendors or in terms of issues for cash. The recipients of these new units
agreed to divest themselves of the portion of the distribution on the units
that accrued prior to paying for the units. As all new linked units issued have
to rank pari-passu with existing units, full distributions are paid on those
units but by recovering the portion that accrued prior to payment for the
units, earnings and distributions for existing unitholders are not diluted.
The 3,7% increase in distribution per linked unit, from 66,55 cents to 69,0
cents exceeds the forecast of 67,0 cents made at the time of the merger with
Primegro.
It is important to emphasize that the increase in distribution has been
achieved notwithstanding the fact that Growthpoint"s property portfolio has
nearly trebled in value since before the merger with Primegro and the fact that
the overall quality of the portfolio has been significantly enhanced to include
10 dominant regional retail shopping centres with a very high percentage of
national and "blue-chip" tenants, where such an enhancement in quality would
normally be expected to lead to a dilution in earnings. This overall
improvement in quality should ensure the long-term sustainability of income as
well as capital appreciation.
Acquisitions
The balance sheet at 30 June 2003 reflected the cost of the Primegro portfolio
acquired in investment property, whilst the bulk of the liability for the
acquisition was shown as an amount owing to Primegro with the balance included
in non-current and current liabilities. Following approval of the Competition
Tribunal on 30 July 2003, the merger was implemented and 184 662 735 linked
units were issued to Primegro and a further 94 330 764 linked units were
issued, raising R500 million in cash. Mortgage loans to a value of R1,1 billion
were raised and the amount owing to Primegro was settled.
Shortly after finalising the Primegro merger, negotiations commenced which led
to the acquisition of the Sandton and Cape Town offices of Investec Bank
Limited ("Investec"). The 20-year lease with Investec further enhances the
long-term quality and sustainability of future income streams, while the
quality and location of the properties make them excellent property
investments.
Growthpoint added another top-quality regional shopping centre to its retail
portfolio, which is now valued at R3,4 billion, when it acquired the
newly-developed 39 885 m2 Waterfall Mall in Rustenburg for R284,6 million with
effect from 1 April 2004.
Disposals
Strong demand from purchasers enabled Growthpoint to dispose of four office
properties in the Johannesburg CBD and a mixed-use property and a hotel on the
outskirts of the Pretoria CBD for a total cash consideration of R97,5 million.
In addition two retail properties in Acornhoek and Thohoyandou were sold to
ApexHi for R15,2 million, paid for with ApexHi A and B linked units. A vacant
property in Brakpan was also donated to the Ekhurhuleni Business Initiative as
part of Growthpoint"s social responsibly initiative. A surplus of R11,4 million
over original cost was realised on all these disposals.
Sectoral split of property portfolio at 30 June 2004
Book % of Gross lettable
Number of value fund by area ("GLA")
properties Category R"000 valuation (m2)
41 Retail 3 409 392 55,7 696 392
49 Commercial 2 419 663 39,4 510 436
2 Hotels 79 100 1,3 26 465
9 Industrial 118 278 1,9 119 787
13 Warehousing 105 067 1,7 84 054
114 TOTALS 6 131 500 100,0 1 437 134
Number of % of Vacancy vacancy
properties Category GLA (m2) %
41 Retail 48,5 26 444 3,8
49 Commercial 35,5 39 002 7,6
2 Hotels 1,8 -
9 Industrial 8,3 2 438 2,0
13 Warehousing 5,9 -
114 TOTALS 100,0 67 884 4,7
Vacancies at 30 June 2004 were 4,7% based on gross lettable area compared to
7,2% at 30 June 2003.
Vacancies based on GLA are available in a graph form and can be viewed in the
press to be released on 26 August 2004.
Liquidity and tradeability
Growthpoint"s liquidity and tradeability have shown a dramatic improvement
since the merger with Primegro as illustrated in the graph which can be viewed
in the press to be released on 26 August 2004.
The average monthly Rand value of trade in Growthpoint"s linked units has
improved from R11 million per month to R125 million per month since the merger
with Primegro in May 2003.
Borrowings and cash balances
At 30 June 2004, the fair value of interest bearing debt amounted to R2 625,2
million, of which R154,0 million is shown under current liabilities. The fair
value of zero-coupon loans amounted to R331,7 million of which R144,1 million
is reflected under current liabilities.
At 30 June 2004, the loan to value ratio, determined by dividing the total fair
value of all debt by the sum of investment property and listed property
investments amounted to 44,1%. (2003: 39,7%)
R2 410,5 million or 92% of interest bearing debt was fixed at a weighted
average period rate of 12,4% for a weighted average of 8,1 years at
30 June 2004.
Cash balances at 30 June 2004 amounted to R86,3 million. R60,0 million of this
was set aside to pay for the acquisition of Menlyn Piazza, which was
transferred into the company"s name on 11 July 2004.
Share and debenture capital
The authorised share capital is R50 000 000, divided into one billion ordinary
shares of 5 cents each. Each ordinary share is linked to ten variable rate
debentures of 250 cents each. The ordinary shares and debentures trade as
linked units on the JSE. In terms of the debenture trust deed, the interest
payable on the debenture component of the linked unit is always 1 000 times
greater than the dividend payable per ordinary share.
On 25 August 2003, the company issued 184 662 735 linked units to Primegro and
on 1 September 2003 a further 94 330 764 linked units were issued to raise R500
million cash pursuant to the merger with Primegro.
In November 2003 the company issued 817 659 linked units to SASOL Pension Fund
("SASOL") and in April 2004 a further 594 132 linked units were issued to SASOL
as consideration for the company"s share of capital extensions carried out at
the jointly-owned Northgate Shopping Centre.
With effect from 1 March 2004, the company acquired the Sandton and Cape Town
offices of Investec. As part of the purchase consideration the company issued
50 869 565 linked units at 575 cents per unit to the vendors of these
properties.
In March 2004 the company repurchased 62 000 000 linked units at 605 cents per
unit from the Mine Employees Pension Fund and Sentinel Mining Industry
Retirement Fund for a total of R375 million and cancelled these units.
Net asset value
The net asset value per linked unit at 30 June 2004 was 577 cents (2003: 524
cents). The increase is mainly due to the revaluation of the investment
property and listed property investment portfolio to market value.
Post-balance sheet events
The portfolio continues to grow with the R60 million acquisition of the 6 826
m2 Menlyn Piazza building, opposite Menlyn Centre, in Pretoria on 11 July 2004.
Competition Tribunal approval has also been received for the acquisition of 11
A-grade commercial properties from various subsidiaries of Lyons Corporate
Lease Fund for R287,9 million.
Additional debt facilities totalling R396 million have been arranged to finance
these acquisitions and future capital expenditure.
Both acquisitions will enhance the overall quality of the portfolio and further
add to the sustainability of long- term income streams.
Resignation of directors and appointment of Chief Executive Oficer
Messrs. M Ettin, D Greenberg and R Harman have resigned from the Growthpoint
board with effect from 25 August 2004 in order to pursue their own business
interests.
The board thanks these directors for the contribution made by them to the
success of the company and wishes them well in their future endeavours.
In particular the board wishes to acknowledge the role played by Martin Ettin
and Derek Greenberg in the merger with Primegro Properties Limited, which has
resulted in Growthpoint becoming the largest listed South African property
company on the JSE.
Mr. Norbert Sasse has been appointed Chief Executive Officer with immediate
effect.
Prospects
The Growthpoint board of directors anticipates that, subject to market
conditions remaining stable, the total distribution for the year ending 30 June
2005 should exceed the distribution of 69,0 cents for the current year.
Dividend and interest payment
Notice is hereby given of final dividend declaration number 35 of 0,0355 cent
and debenture interest payment number 35 of 35,4645 cents per linked unit,
totalling 35,5 cents per linked unit, ("the final distribution"), for the
income distribution period 1 January 2004 to 30 June 2004.
Timetable for the final distribution
2004
Last day to trade "cum" the final distribution Friday, 10 September
Linked units commence trading "ex" the final
distribution Monday, 13 September
Record date to participate in the final distribution Friday, 17 September
Payment date of the final distribution Monday, 20 September
No dematerialisation or rematerialisation of Growthpoint linked unit
certificates may take place between Monday, 13 September 2004 and Friday, 17
September 2004, both days inclusive.
This final distribution brings the total distribution for the year ended 30
June 2004 to 69,0 cents per linked unit.
By order of the board
GROWTHPOINT PROPERTIES LIMITED
24 August 2004
Directors
S Hackner (Chairman)*, J F Marais (Deputy chairman)*, M Diliza*, M Ettin,
P Fechter*, D Greenberg, R Harman*, J C Hayward*, H S Herman*, S R Leon,
J Molobela*, L N Sasse, C G Steyn*, J H N Strydom*, F J Visser*
*Non-executive
Registered office
Ground Floor
100 Grayston Drive
Sandown
Sandton, 2196
PO Box 78949
Sandton, 2146
Transfer secretaries
Computershare Investor Services 2004 (Pty) Limited
(Registration number 2004/003647/07)
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: 25/08/2004 11:00:25 AM Supplied by www.sharenet.co.za
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