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GRT - Growthpoint - Unaudited interim results for the six months ended 31
December 2007
Growthpoint Properties Limited
(Incorporated in the Republic of South Africa)
(Registration number 1987/004988/06)
Share code: GRT & ISIN: ZAE000037669
("Growthpoint")
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2007
* 13.5% distribution growth to 51,1 cents per linked unit
* Property portfolio exceeds R24 billion
* Market capitalisation of R20 billion
* R1,6 billion Management "Buy-in"
CONSOLIDATED INCOME STATEMENT
Unaudited Unaudited Audited
6 months 6 months 12 months
31 Dec 31 Dec 30 June
2007 2006 2007
Note Rm Rm Rm
Revenue excluding straight-line 1 314 952 2 152
lease income adjustment
Straight-line lease income 104 79 210
adjustment
Revenue 1 418 1 031 2 362
Property expenses (327) (255) (539)
Net property income 1 091 776 1 823
Other operating expenses (29) (48) (120)
Net property income after other 1 062 728 1 703
operating expenses
Investment income - 30 45
Fair value adjustments 1 (34) (64) (186)
Operating profit 1 028 694 1 562
Finance costs (363) (265) (615)
Non-cash charges 2 (79) (8) (16)
Trading profit and other 7 - (6)
capital items
Finance income 61 21 44
Profit before debenture 654 442 969
interest
Debenture interest (654) (435) (966)
Profit before taxation - 7 3
Taxation charge 1 (7) (2)
- normal and secondary
tax
on companies (3) - -
- capital gains taxation 4 (7) (2)
Profit for the period 1 - 1
Note 1:
Fair value adjustments (34) (64) (186)
Gross investment property fair 657 545 2 802
value adjustment
Paramount initial recognition - - (579)
adjustment
Less: straight-line lease (104) (79) (210)
income adjustment
Net investment property fair 553 466 2 013
value adjustment
Listed property investments (1) 6 7
Borrowings and derivatives (50) (283) 125
Long-term loan receivable (3) - 34
Debentures (533) (253) (2 365)
Debentures are adjusted to fair
value which represents the net
asset value attributable to
debenture holders.
The adjustment consists of:
Fair value adjustments for (499) (189) (2 179)
other assets and liabilities
excluding fair value adjustment
on debentures
Straight-line lease income (104) (79) (210)
adjustment
Capital gains taxation (4) 7 2
Non-cash charges 2 79 8 16
Trading profit net of taxation (5) - 6
Debenture fair value adjustment (533) (253) (2 365)
Note 2:
Non-cash charges (79) (8) (16)
Non-cash financing (9) (8) (16)
charge
Amortisation of (49) - -
intangible asset
Increase in staff (21) - -
incentive scheme
liability
Calculation of
distributable
earnings
Net property income 1 062 728 1 703
after operating
expenses
Less: Straight-line (104) (79) (210)
lease income
adjustment
Investment income - 30 45
Finance costs (363) (265) (615)
Finance income 61 21 44
Taxation (excluding (1) - -
capital gains tax
and tax on trading
profit)
Distributable 655 435 967
earnings
Total distribution (655) (435) (967)
- Debenture (654) (435) (966)
interest
- Ordinary (1) - (1)
dividend
Retained - - -
distributable
earnings
Linked Linked Linked
units units units
Linked units in 1 280 926 195 968 304 090 1 074 126 195
issue at the end of
the period
Weighted number of 1 280 926 195 964 114 740 964 114 740
linked units in
issue - interim
- 2nd half - - 1 030 639 648
cents cents cents
Distributable 3 51,12 45,19 93,82
earnings per linked
unit
- Interim 51,12 45,19 45,19
- 2nd half - - 48,63
Distribution per 51,10 45,00 93,10
linked unit
Six months ended 31 51,10 45,00 45,00
December
- Period to 31 - 30,00 30,00
October
- Period to 31 51,10 15,00 15,00
December
Six months ended 30 - - 48,10
June
Basic earnings per 3 0,08 0,05 0,09
share
Headline earnings 4 43,98 22,82 90,72
per linked unit
Rm Rm Rm
Basic earnings are
reconciled to
headline earnings as
follows:
Profit after 1 1 1
taxation
Add back: net fair (470) (396) (1 711)
value adjustment -
investment property
- Fair value (553) (466) (2 013)
adjustment
- Applicable 83 70 302
taxation
Headline loss (469) (395) (1 710)
attributable to
shareholders
Less: net fair value 378 180 1 679
adjustment -
debentures
- Fair value 533 253 2 365
adjustment
- Applicable (155) (73) (686)
taxation
Add back: debenture 654 435 966
interest paid
Headline earnings 563 220 935
attributable to
linked unitholders
Note 3:
The disclosure of earnings per share, 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 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 non-cash charges, which do not affect distributable earnings. The
calculation of distributable earnings as set out above is more meaningful to
investors.
Note 4:
The comparative headline earnings per linked unit ratios have been restated in
terms of Circular 8/2007, issued November 2007. Per the circular, the debenture
fair value adjustment is added back in the calculation of headline earnings.
CONSOLIDATED BALANCE SHEET
Unaudited Unaudited Audited
31 Dec 31 Dec 30 June
2007 2006 2007
Rm Rm Rm
ASSETS
Fair value of 23 448 18 934 21 545
investment property
for accounting
purposes
Straight-line lease 732 498 628
income adjustment
Fair value of property 24 180 19 432 22 173
assets
Intangible asset 1 434 - -
Goodwill 59 - -
Listed property 10 9 11
investments
Other long-term 113 - -
employee benefits
Fixed assets 3 - -
Long-term loan 353 291 340
Derivative asset 82 38 108
Current assets 365 395 325
Trade and other 345 277 306
receivables
Cash and cash 20 118 19
equivalents
Total assets 26 599 20 165 22 957
EQUITY AND LIABILITIES
Ordinary share capital 64 48 54
Non-current 17 452 10 171 13 646
liabilities -
debentures
Linked unitholders` 17 516 10 219 13 700
interest
Other non-current 7 976 8 295 8 293
financial liabilities
Current liabilities 1 107 1 651 964
Trade and other 391 1 075 385
payables
Linked unitholders for 659 211 521
interest and dividends
Other liabilities 57 365 58
Total equity and 26 599 20 165 22 957
liabilities
Linked units in issue 1 280 926 195 968 304 090 1 074 126 195
Net asset value per 1 367 1 055 1 275
linked unit (cents)
Tangible net asset 1 251 1 055 1 275
value per linked unit
(cents)
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
Unaudited Unaudited Audited
6 months 6 months 12 months
31 Dec 31 Dec 30 June
2007 2006 2007
Rm Rm Rm
Cash flow from operating activities 925 713 1 484
Investment income - 30 45
Net finance costs (318) (243) (598)
Taxation paid - (21) (22)
Trading profit 7 - (6)
Distribution to unitholders (517) (644) (804)
Net cash inflow from operating 97 (165) 99
activities
Net cash outflow from investing (1 355) (364) (1 339)
activities
Net cash inflow from financing 1 259 631 1 243
activities
Net increase in cash and cash 1 102 3
equivalents
Cash and cash equivalents at 19 16 16
beginning of the period
Cash and cash equivalents at end of 20 118 19
the period
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Ordinary Total share
share capital and
capital Reserves reserves
Rm Rm Rm
Audited balance at 30 June 2006 39 - 39
Shares issued 15 - 15
Profit for the year - 1 1
Dividends - (1) (1)
Audited balance at 30 June 2007 54 - 54
Shares issued 10 - 10
Profit for the period - 1 1
Dividend - (1) (1)
Balance at 31 December 2007 64 - 64
SEGMENTAL ANALYSIS
INCOME STATEMENT EXTRACTS
Retail Office Industrial Total
Rm Rm Rm Rm
Six months ended 31 December
2007
Revenue excluding straight-line 491 503 320 1 314
lease income adjustment
Straight-line lease income 34 21 49 104
adjustment
Revenue 525 524 369 1 418
Property expenses (131) (123) (73) (327)
Net property income 394 401 296 1 091
Fair value adjustment:
- investment property 212 242 99 553
Year ended 30 June 2007
Revenue excluding straight-line 813 810 529 2 152
lease income adjustment
Straight-line lease income 61 97 52 210
adjustment
Revenue 874 907 581 2 362
Property expenses (222) (200) (117) (539)
Net property income 652 707 464 1 823
Fair value adjustment:
- investment property 826 728 459 2 013
BALANCE SHEET EXTRACTS
At 31 December 2007
Non-current assets
- Investment property
- Opening balance -
30 June 2007 8 573 8 500 5 100 22 173
- Acquisitions - other 121 680 25 826
- Capital expenditure 139 321 73 533
- Disposals (9) - - (9)
- Net fair value adjustment 246 263 148 657
- Fair value of property assets
-
31 December 2007 9 070 9 764 5 346 24 180
At 30 June 2007
Non-current assets
- Investment property
- Opening balance - 30 June 6 062 5 564 3 391 15 017
2006
- Acquisition - Paramount 1 126 1 493 876 3 495
- Acquisitions - other 433 464 174 1 071
- Capital expenditure 122 309 102 533
- Disposals (57) (8) (101) (166)
- Reclassification - (147) 147 -
- Net fair value adjustment 887 825 511 2 223
- Fair value of property assets 8 573 8 500 5 100 22 173
- 30 June 2007
COMMENTARY
INTRODUCTION
Growthpoint Properties Limited is the largest South African Listed property
company with 430 properties valued at over R24 billion and a market
capitalisation of R20 billion at 31 December 2007.
MANAGEMENT "BUY-IN"
With effect from 1 July 2007, Growthpoint acquired the property fund management
business from Investec Property Group ("IPG"), the Amu Trust and Phatsima
Properties (Pty) Limited; and the property administration business from IPG, for
a purchase consideration of R1,6 billion.
During the period Growthpoint also implemented a Staff Incentive Scheme as an
incentive to retain key executives, management and staff and to align their
interest with those of Growthpoint`s linked unitholders.
The acquisition was funded by the issue of 98 300 000 new linked units. A
further 8 500 000 new linked units were issued in terms of the executive and
staff incentive scheme.
FINANCIAL RESULTS OF THE COMPANY
The Growthpoint portfolio has continued its strong performance and has delivered
growth in distributions for the period ended 31 December 2007 of 13.5% compared
to the comparable prior year period.
The growth in distributions is based on sustainable earnings derived from
property net rental income and investment income. The Company does not
distribute capital and trading profits.
The increase in net property income, when compared to the same period last year,
is explained as follows:
31 Dec 31 Dec
2007 2006 Increase
Property Rm Rm %
Net property income (excluding straight- 987 697 41.6
line lease income adjustment)
Paramount acquisition (77 properties from (149) -
31 December 2006)
Other acquisitions (79) (23)
Developments (59) (48)
Disposals - (3)
Core net property income 700 623 12.4
Retail 260 236 10.2
Office 244 218 11.9
Industrial 196 169 16.0
Due to the Management "Buy-in" transaction, the asset management fee was no
longer payable. This fee was calculated as 0.5% of the aggregate of the market
capitalisation plus debt of the company and would have amounted to R63 million
for the six months ended 31 December 2007.
The balance sheet at 31 December 2007 reflects the acquisition of the Property
Services Businesses with most of the value shown in the intangible asset of R1,5
billion. This intangible asset will be amortised over 15 years, being the
valuation period for the Property Services Businesses.
BASIS OF ACCOUNTING
The financial results have been prepared in accordance with International
Financial Reporting Standards (IFRS) and IAS 34. The company`s accounting
policies as set out in the audited financial statements for the year ended 30
June 2007 have been consistently applied.
Investment property comprises land and buildings held to generate rental income
over the long term. Should any properties no longer meet the company`s
investment criteria and be sold, any profits or losses will be capital in nature
and will be taxed at rates applicable to capital gains. Deferred taxation on
revaluation of Investment property is off-set against the deferred taxation
asset that arises on the revaluation of the company`s issued debentures.
VACANCY LEVELS
Property fundamentals remain strong, with vacancy levels for the whole country,
as reported by Investment Property Databank South Africa (Pty) Limited (IPD)
declining across all sectors with Industrial showing the largest decline in
vacancies.
At 31 December 2007 Growthpoint`s vacancy levels, as a % of Gross Lettable Area
(GLA) were:
Retail 1.9% (June 2007: 2.1%)
Office 3.4% (June 2007: 4.2%)
Industrial 1.0% (June 2007: 2.0%)
Total 1.8% (June 2007: 2.5%)
ACQUISITIONS AND DEVELOPMENTS
The following acquisitions were made:
Purchase Sector Initial yield
price
Property Rm %
Lakeside Mall (additional 120,5 Retail 7.5
20.67%, bringing the
ownership to 87.4%)
Ogilvy, Bryanston 93,9 Office 8.5
160 Jan Smuts, Rosebank 75,0 Office 11.0
68 Oak Street, Centurion 43,8 Office 9.4
Die Hoewes, Centurion 55,0 Office 9.5
Deloitte, Midrand 70,6 Office 9.1
Fiat, Midrand 17,1 Office 9.1
IDCS, Midrand 35,0 Office 8.3
IBM, Sandton 197,2 Office 7.8
Aventis, Midrand 64,6 Office 10.4
The Place, Sandton (land) 28,0 Office
Growthpoint Industrial 25,0 Industrial
Estate, Meadowdale (land)
Total 825,7
Major developments approved:
Spent To be Expected
Approved to date spent Sector yield
Property Rm Rm Rm %
1 Sandton Drive 494,0 81,2 412,8 Office 10.3
Woodmead Retail 511,0 - 511,0 Retail 8.0
Park
Sandhurst B&C 360,5 - 360,5 Office 9.3
Pick n Pay, 412,3 162,8 249,5 Retail & 9.2
Claremont Office
Key Projects, 399,5 - 399,5 Office 9.5
Umhlanga
11 Adderley Street 158,6 43,3 115,3 Office 9.5
Constantia Office 152,2 125,9 26,3 Office 11.6
Park
City Mall, 134,0 32,9 101,1 Retail 8.0
Klerksdorp
Nike 90,0 - 90,0 Industrial 9.8
Middestad Mall, 79,5 54,6 24,9 Retail 10.0
Belville
Alberton City 66,0 7,6 58,4 Retail 10.0
Justine Avon 55,0 26,2 28,8 Industrial 9.7
Ebony 50,5 12,1 38,4 Industrial 10.0
Hatfield Gardens 40,0 39,2 0,8 Retail 9.5
Northgate 38,3 1,2 37,1 Retail 10.0
Knightsgate 38,0 2,7 35,3 Industrial 10.0
N1 City Hospital 37,1 - 37,1 Office 9.0
Altech Autopage 35,4 28,2 7,2 Office 10.0
Grosvenor Corner 35,0 - 35,0 Office 10.0
Newmarket 28,6 3,3 25,3 Industrial 10.3
Industrial Estate
La Lucia Mall 32,3 20,0 12,3 Retail 10.3
Grayston Office 25,1 0,3 24,8 Office 11.7
Park
Various other 237,9 70,4 167,5
Total 3 510,8 711,9 2 798,9
Acquisitions and developments in progress
At 31 December 2007 Growthpoint had entered into agreements to acquire a number
of properties in various transactions totalling over R1,0 billion.
Major acquisitions in progress are:
Initial
Cost yield
Property Rm %
100 Grayston (Investec extensions) 475,0 8.1
The District, Woodstock 260,0 8.1
The Estuaries, Century City 90,0 9.8
The Estuaries, Phase 2 62,3 9.3
7 Sturdee Ave, Rosebank 49,5 8.8
BCX - Faerie Glen 53,5 8.5
DISPOSALS
One of the properties, Lighthouse Mall consists of retail, office and
residential space. The residential units were disposed of in the current period
for a total consideration of R16 million.
LIQUIDITY AND TRADEABILITY
Growthpoint`s linked units continue to enjoy high levels of liquidity and
tradeability. During the six months ended 31 December 2007, R7,8 billion of
Growthpoint linked units traded on the JSE Securities Exchange, representing
43.3% of the weighted number of units in issue.
BORROWINGS
The ratio of borrowings to property valuation decreased as follows:
31 Dec 31 Dec 30 June
2007 2006 2007
Property Rm Rm Rm
Borrowings 7 947 8 257 8 238
Investment property at valuation 24 180 19 432 22 173
Ratio of borrowings to property (%) 32.9 42.5 37.2
94% of interest-bearing debt was fixed at a weighted average rate of 9.2% for a
weighted average of 9,5 years at 31 December 2007.
Share and debenture capital
The authorised share capital is R75 000 000 divided into one and a half 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.
In November 2007 the company issued 98 300 000 new linked units to acquire the
Property Services Businesses. A further 8 500 000 new linked units were also
issued in respect of the executive and staff incentive scheme.
On 1 October 2007 the company raised R1,65 billion through the placing of 100
000 000 new linked units with the Public Investment Corporation ("PIC") on
behalf of the Government Employees Pension Fund in terms of a renounceable claw-
back offer.
The PIC retained 97 million of those linked units pursuant to the take-up of 3
million linked units by Growthpoint`s other linked unitholders in terms of the
offer. Accordingly the PIC`s linked unitholding increased to 29.1% of
Growthpoint`s total linked units in issue as at 31 December 2007.
PROSPECTS
The fundamentals in respect of demand for space and availability of space across
all sectors remain strong, as witnessed by the declining vacancy levels.
A slow-down in consumer spending has been noted as higher interest rates and
higher inflation levels are impacting on disposable incomes. The recent power
outages have exacerbated the situation for smaller tenants in particular.
Although bad debts and tenancy failures are expected to increase, this is not
likely to be material to Growthpoint`s results for the year ended June 2008, due
to the large tenant base diversification throughout its industrial, retail and
office sectors
The Growthpoint board anticipates that, subject to market conditions remaining
stable, Growthpoint`s distribution growth for the full year ending 30 June 2008,
should be similar to the growth reported for the interim period ended 31
December 2007.
This profit forecast has not been reviewed or reported on by Growthpoint`s
auditors.
DIVIDEND AND INTEREST PAYMENT
Notice is hereby given of interim dividend declaration number 43 of 0,051 cents
and debenture interest payment number 43 of 51,049 cents per linked unit
totalling 51,1 cents per linked unit for the six months ended 31 December 2007.
Timetable for interim distribution:
2008
Last day to trade "cum" the interim distribution Thursday, 13 March
Linked units commence trading "ex" the interim Friday, 14 March
distribution
Record date to participate in the interim Thursday, 20 March
distribution
Payment date of the interim distribution Tuesday, 25 March
No dematerialisation or rematerialisation of Growthpoint linked unit
certificates may take place between Friday, 14 March 2008 and Thursday, 20 March
2008, both days inclusive.
By order of the board
Growthpoint Properties Limited
27 February 2008
Directors
S Hackner (Chairman), JF Marais (Deputy chairman), LN Sasse*
(Chief Executive Officer), MG Diliza, PH Fechter, JC Hayward,
HS Herman, HSP Mashaba, R Moonsamy, BT Ngcuka, CG Steyn,
JHN Strydom, FJ Visser
* Executive
Registered office
100 Grayston Drive, Sandown
Sandton, 2196
P O Box 78949, Sandton, 2146
Transfer secretaries
Computershare Investor Services 2004(Pty) Limited
(Registration number 1958/003546/06)
Ground Floor, 70 Marshall Street, Johannesburg, 2001
PO Box 61051, Marshalltown, 2107
Sponsor
Investec Bank Limited
100 Grayston Drive, Sandown
Sandton, 2196
P O Box 78949, Sandton, 2146
Date: 27/02/2008 11:00:09 Supplied by www.sharenet.co.za
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