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Growthpoint - Unaudited Interim Results: Six Months Ended 31 December 2005
GROWTHPOINT PROPERTIES LIMITED
(Registration number 1987/004988/06)
Share code: GRT & ISIN: ZAE000037669
("Growthpoint" or "the copmany")
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2005
* DISTRIBUTION GROWTH OF 10,1% TO 39,1 CENTS
* PROPERTY ASSETS EXCEED R10 BILLION
* POST-BALANCE SHEET ACQUISITION OF R1,6 BILLION
* MARKET CAPITALISATION ABOVE R8 BILLION
Condensed Consolidated Income Statement
Unaudited Unaudited Audited
6 months 6 months 12 months
31 Dec 2005 31 Dec 2004 30 June 2005
R"000 R"000 R"000
Revenue excluding
straight-line
lease income accrual 628 627 495 695 1 013 939
Straight-line lease
income accrual 58 600 72 230 167 775
Revenue 687 227 567 925 1 181 714
Property expenses (170 784) (127 390) (255 434)
Net property income 516 443 440 535 926 280
Other operating
expenses (30 202) (20 687) (45 649)
Net property income
after
other operating
expenses 486 241 419 848 880 631
Investment income 16 259 33 588 58 714
Fair value
adjustments (Note 1) (35 483) (53 933) (107 085)
Operating profit 467 017 399 503 832 260
Interest paid (177 939) (156 082) (298 096)
Notional interest on
zero coupon loans (6 844) (19 746) (39 492)
Stepped rate loan
adjustment
from cash to accrual
basis 1 883 1 440 3 323
Finance income 9 102 7 158 9 240
Net income before
debenture interest 293 219 232 273 507 235
Debenture interest (247 574) (231 897) (481 792)
Net income before
taxation 18 645 376 25 443
Taxation (18 370) (144) (24 961)
- Normal and
Secondary Tax
on Companies (184) (144) (350)
- Capital gains
taxation (18 186) - (24 611)
Net income after
taxation 275 232 482
Note 1:
Fair value adjustments (35 483) (53 933) (107 085)
Gross investment
property revaluation 466 741 956 138 1 325 018
Less: Straight-line
lease income
accrual adjustment (58 600) (72 230) (167 775)
Net investment
property revaluation 408 141 883 908 1 157 243
Listed property
investments 39 433 179 936 207 227
Interest-bearing
borrowings 744 (38 822) (243 969)
Derivatives (96 036) (352 978) (159 245)
Zero coupon loans 441 (14 141) (17 530)
(388 206) (711 836) (1 050 811)
Debentures
Debentures are
adjusted to fair
value which
represents the net
asset value
attributable to
debenture holders.
The adjustment
consists of:
Fair value
adjustments for
other assets and
liabilities
excluding fair value
adjustment
on debentures (352 723) (657 903) (943 726)
Straight-line lease
income accrual (58 600) (72 230) (167 775)
Capital gains taxation 18 186 - 24 611
Notional interest on
zero coupon
loan 6 844 19 746 39 492
Interest adjustment on
stepped-rate loans (1 883) (1 440) (3 323)
Distributable
earnings retained (30) (9) (90)
Debenture fair value
adjustment (388 206) (711 836) (1 050 811)
Calculation of
distributable
earnings:
Net property income
after
operating expenses 486 241 419 848 880 631
Less: Straight-line
lease
income accrual (58 600) (72 230) (167 775)
Investment income 16 259 33 588 58 714
Interest on long-term
loans (177 939) (156 082) (298 096)
Finance income 9 102 7 158 9 240
Taxation - excluding
Capital
gains taxation (184) (144) (350)
Distributable earnings 274 879 232 138 482 364
Debenture interest and
dividend distribution (274 849) (232 129) (482 274)
- Interim 274 849 232 129 232 138
- Second half - - 250 226
Retained
distributable
earnings 30 9 90
Linked units Linked units Linked units
Shares in issue at
the end
of the period 702 938 618 653 884 453 660 350 676
Weighted number of
shares
in issue - Interim 702 938 618 652 767 981 652 767 981
- Second half - - 655 916 674
Distributable
earnings per
linked unit Cents Cents Cents
- Interim 39,10 35,56 35,56
- Second half - - 38,15
Distribution per
linked unit 39,10 35,50 73,20
- Six months to 31
December 39,10 35,50 35,50
- Six months to 30
June - - 37,70
Earnings per share 0,04 0,04 0,07
The disclosure of earnings per share, set out above, 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, earnings include profit on the sale of listed property
investments, 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 calculation of distributable earnings per
linked unit as shown above is meaningful to investors.
Condensed Consolidated Cash Flow Statement
Unaudited Unaudited Audited
6 months 6 months 12 months
31 Dec 2005 31 Dec 2004 30 June 2005
R"000 R"000 R"000
Cash generated by operations 459 666 337 011 716 588
Investment income 16 259 33 588 58 714
Net finance costs (168 837) (148 924) (288 856)
Taxation paid (23 021) (3 583) (20 684)
Distribution to unitholders (248 987) (217 590) (449 312)
Cash flow from operating
activities 35 080 502 16 450
Cash flow from investing
activities (618 768) (378 631) (909 513)
Cash flow from financing
activities 554 331 378 850 852 648
Net (decrease)/increase
in cash and cash equivalents (29 357) 721 (40 415)
Cash and cash equivalents
at beginning of the period 45 887 86 302 86 302
Cash and cash equivalents
at end of the period 16 530 87 023 45 887
Condensed Consolidated Balance Sheet
Unaudited Unaudited Audited
31 Dec 2005 31 Dec 2004 30 June 2005
R"000 R"000 R"000
ASSETS
Fair value of investment
property
for accounting purposes 9 478 388 7 481 988 8 783 264
Straight-line lease income
accrual 394 498 122 504 335 898
Fair value of physical
property assets 9 872 886 7 604 492 9 119 162
Listed property investment
portfolio 182 889 732 450 390 857
Loan-BEE consortium 210 657 - -
Receivables and other current
assets 117 843 101 775 86 287
Cash and cash equivalents 16 530 87 023 45 887
10 400 805 8 525 740 9 642 193
EQUITY AND LIABILITIES
Ordinary share capital 35 148 32 695 33 018
Non-current liabilities
- Debentures 5 587 083 4 577 541 4 834 477
Linked unitholders" interest 5 622 231 4 610 236 4 867 495
Non-current financial
liabilities 4 111 333 3 233 081 3 816 989
Current liabilities 667 241 682 423 957 709
10 400 805 8 525 740 9 642 193
Number of linked units in
issue 702 938 618 653 884 453 660 350 676
Net asset value per linked
unit (cents) 800 705 737
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 2004 30 629 - 30 629
Shares issued 2 389 - 2 389
Net income for the period - 482 482
Dividend - interim - (232) (232)
- final - (250) (250)
Audited balance at 30 June 2005 33 018 - 33 018
Shares issued 2 130 - 2 130
Net income for the period - 275 275
Dividend - (275) (275)
Unaudited balance at
31 December 2005 35 148 - 35 148
Sectoral Spread by Value - see press for detailed graph.
Sectoral Analysis of Property Assets
INCOME STATEMENT EXTRACTS
Six months ended
31 December 2005 Retail Commercial Industrial Total
R"000 R"000 R"000 R"000
Revenue excluding
straight-
line lease income
accrual 293 929 284 547 50 151 628 627
Straight-line lease
income
accrual 17 044 40 416 1 140 58 600
Revenue 310 973 324 963 51 291 687 227
Property expenses (77 395) (80 508) (12 881) (170 784)
Net property income 233 578 244 455 38 410 516 443
Investment income 9 621 - 6 638 16 259
Fair value
adjustments:
- physical property
assets 232 808 205 993 27 940 466 741
- listed property
investments 4 231 - 35 202 39 433
Twelve months ended
30 June 2005
Revenue excluding
straight-
line lease income
accrual 515 259 443 552 55 128 1 013 939
Straight-line lease
income
accrual 45 901 116 035 5 839 167 775
Revenue 561 160 559 587 60 967 1 181 714
Property expenses (148 758) (94 288) (12 388) (255 434)
Net property income 412 402 465 299 48 579 926 280
Investment income 25 610 23 272 9 832 58 714
Fair value
adjustments:
- physical property
assets 609 186 501 732 46 325 1 157 243
- listed property
investments 110 391 66 998 29 838 207 227
BALANCE SHEET EXTRACTS
at 31 December 2005
Retail Commercial Industrial Total
R"000 R"000 R"000 R"000
Non-current assets
- Physical property
assets:
Opening balance
at 30 June 2005 4 383 016 4 180 471 555 675 9 119 162
Acquisitions 128 525 24 753 23 839 177 117
Capital expenditure 95 804 31 992 1 270 129 066
Disposals (13 200) (6 000) - (19 200)
Fair value
adjustments 232 808 205 993 27 940 466 741
Closing balance at
31 December 2005 4 826 953 4 437 209 608 724 9 872 886
- Listed property
investments:
Opening balance
at 30 June 2005 243 170 - 147 687 390 857
Fair value adjustment 4 231 - 35 202 39 433
Disposals (247 401) - - (247 401)
Closing balance at
31 December 2005 - - 182 889 182 889
Total property assets
at 31 December 2005 4 826 953 4 437 209 791 613 10 055 775
COMMENTARY
Basis of accounting
These interim results have been prepared in accordance with International
Financial Reporting Standards ("IFRS"). The company"s accounting policies as
set out in the audited financial statements for the year ended 30 June 2005
have been consistently applied. The comparative figures for the six months
ended 31 December 2004 have been increased by R72,2 million to disclose the
accrual of future rental escalations on a straight-line basis as required in
terms of Circular 7 issued by The South African Institute of Chartered
Accountants in August 2005. In addition, the comparative figures for revenue
and property expenses have been reduced by R46,6 million in line with the
changes made at 30 June 2005 to set-off recoveries of electricity and water
consumption charges and promotion fund recoveries against the relevant
expenditure.
Financial results of the company
Following the acquisition of 48 properties valued at R1,08 billion from Tresso
Trading 119 (Pty) Limited ("Tresso") on 30 June 2005, the Growthpoint portfolio
has continued its strong performance and has delivered growth in distributions
for the six-month period ended 31 December 2005 of 10,1% compared to the
comparable prior period. This growth was ahead of expectations and market
conditions indicate that the group can expect similar growth for the full year.
The increase in the Growthpoint linked unit price from 906 cents at 30 June
2005 to 1 100 cents at 31 December 2005 together with the 39,1 cents per linked
unit distribution announced for the six months ended 31 December 2005, amounted
to a 51,5% annualised return.
The increase in revenue and property expenses was mainly due to the inclusion
from 1 July 2005 of the 48 properties acquired from Tresso. The strong
performance of Growthpoint"s linked unit price together with the additional
43 million linked units issued pursuant to the Tresso acquisition saw the
company"s market capitalisation increase to just below R8 billion at the end of
December 2005. This together with increased borrowings to finance the Tresso
purchase resulted in an increase in asset management fees of R8 million,
accounting for the bulk of the increase in other operating expenses.
Although property expenses as a percentage of revenue have increased, this was
mainly due to an increase in expenses such as assessment rates and insurance
that were recovered from tenants and the recoveries are included in revenue.
Investment income declined as the company had sold a major portion of its
listed property investments by 30 June 2005, in line with its decision to
disinvest from listed property investments, other than its strategic stake in
Metboard Properties Limited, a specialised industrial fund.
Vacancy levels
Excluding premises that are in the course of major redevelopment, vacancies
have declined from 4,8% at 30 June 2005 to 4,2% at 31 December 2005.
Vacancies at 31 December 2005 based on gross lettable area - see press for
detailed graph.
There are a number of sold properties where the transfers have taken place
subsequent to 31 December 2005. After these sales, total vacancies will reduce
to 3,7% with commercial vacancies declining to 6,1%.
Acquisitions and developments
On 29 December 2005, Growthpoint acquired an 18 200 m2 shopping centre in
Klerksdorp for R105 million at a forward yield of 10,35%. In the six months to
31 December 2005 the company also increased its holding in Alberton City
shopping centre by 4,5% at a forward yield of 10,8% on the purchase price of
R13,3 million. The retail portfolio grew by a further R10 million being the cost
of vacant land purchased opposite Waterfall Mall in Rustenburg to be used for
the development of a value centre. In the office sector, the company acquired a
2 177 m2 office block in Chislehurston, Sandton for R16,3 million at a forward
yield of 11%. Development of a 2 800 m2 office block was completed in November
2005 for Trans Africa Projects in Central Park, Midrand.
December 2005 saw the opening of the 5 276 m2 extensions to Waterfall Mall in
Rustenburg, completed at a cost of R68 million. The R60 million, 7 303 m2
extensions to Walmer Park shopping centre in Port Elizabeth were officially
opened in October 2005. The construction of structured parking for
approximately 650 vehicles at Kolonnade shopping centre in Pretoria was also
completed in the period, as were redevelopments of 2 100 m2 at Beacon Bay
shopping centre in East London and upgrades for Woolworths in La Lucia Mall.
Transfer of two industrial properties acquired from Tresso in June 2005 was
delayed and these properties were accounted for in the period to 31 December
2005.
Disposals
During the period under review the company sold The Willows, a small retail
centre in Pretoria, for R13,2 million as well as a small office block known as
20 Skeen Boulevard for R6,0 million.
A capital gain of R1,4 million was realised on these sales.
Post-balance sheet acquisition
On 26 January 2006 the company announced that it has agreed to acquire a
portfolio of 24 properties from Tresso for approximately R1,6 billion. The
acquisition is subject to a number of suspensive conditions, including both
parties" shareholder approval and the approval of the Competition Tribunal and
other regulatory authorities. The Tresso portfolio comprises 35,5% retail,
43,0% commercial, 11,7% industrial and one hospital making up 9,8% by value.
The properties are well located and of a high quality, in line with
Growthpoint"s investment criteria. Assuming all conditions are fulfilled this
transaction will increase Growthpoint"s property assets to over R11,6 billion.
The purchase consideration will be settled in cash to the extent of R729
million and by the issue of 84,8 million new Growthpoint linked units at an
ex-dividend price of 1 065 cents per linked unit. This should increase
Growthpoint"s market capitalisation to in excess of R10 billion at current
market prices.
The properties were acquired at a forward yield of 9% and, taking advantage of
the lower cost of funding that Growthpoint"s R5 billion commercial mortgage
backed securitisation programme offers, it is expected that the transaction
will be slightly earnings enhancing from the first year.
Liquidity and tradeability
Growthpoint"s linked units continue to enjoy high levels of liquidity and
tradeability. During the six months to 31 December 2005 R2,5 billion of
Growthpoint linked units traded on the JSE Limited ("JSE"), representing an
annualised 74,5% of units in issue.
Borrowings and cash balances
On 28 November 2005 Growthpoint issued R805 million five-year notes on the Bond
exchange of South Africa. This was the first issue in a R5 billion programme
established by Growthpoint to enable it to tap into the cheaper source of debt
offered by commercial mortgage backed securitisation.
There was strong demand for Growthpoint"s rated paper and of the notes issued,
67% achieved AAA rating, 16% AA rating, 11% A rating and the balance BBB. The
weighted average margin at which the notes were issued amounted to 47 points
above JIBAR.
At 31 December 2005, the loan to value ratio, determined by dividing the total
fair value of all debt (excluding debentures) by the sum of investment property
and listed property investments amounted to 42,5%.
89% of interest bearing debt was fixed at a weighted average rate of 10,8% for
a weighted average of 7,3 years at 31 December 2005.
Share and debenture capital
The authorised share capital is R50 000 000 divided into one billion ordinary
shares of five 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.
During the six months to 31 December 2005, the company issued 42 587 942 new
linked units to partly finance the acquisition of 46 properties acquired from
Tresso in June 2005.
Prospects
The Growthpoint board anticipates that, subject to market conditions remaining
stable, Growthpoint"s distributions for the full year ending 30 June 2006
should show similar growth to that experienced in the first half.
Dividend and interest payment
Notice is hereby given of interim dividend declaration number 38 of 0.0391 cent
and debenture interest payment number 38 of 39,0609 cents per linked unit
totalling 39,10 cents per linked unit for the income distribution period 1 July
2005 to 31 December 2005.
Timetable for final distribution:
2006
Last day to trade "cum" the interim distribution Friday, 10 March
Linked units commence trading "ex" the interim distribution Monday, 13 March
Record date to participate in the interim distribution Friday, 17 March
Payment date of the interim distribution Monday, 20 March
No dematerialisation or rematerialisation of Growthpoint linked unit
certificates may take place between Monday, 13 March 2006 and Friday, 17 March
2006, both days inclusive.
22 February 2006
Directors
S Hackner (Chairman), JF Marais (Deputy chairman),
LN Sasse (Chief executive officer)*, MG Diliza, PH Fechter, JC Hayward,
HS Herman, SR Leon, R Moonsamy, B Ngcuka, CG Steyn, JHN Strydom, FJ Visser
*Executive
Registered office:
100 Grayston Drive,
Sandown, Sandton
2196
PO Box 78949
Sandton, 2146
Transfer secretaries:
Computershare Investor
Services 2004 (Pty) Limited
Ground Floor, 70 Marshall Street,
Johannesburg, 2001
PO Box 61051, Marshalltown, 2107
Sponsor:
Investec Bank Limited
100 Grayston Drive, Sandown,
Sandton, 2196
PO Box 78949,
Sandton, 2146
Managed by
Investec Property Group
Date: 22/02/2006 04:57:11 PM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
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