Wrap Text
Provisional summarised audited consolidated results
for the year ended 30 September 2017
Gemgrow Properties Ltd
(previously Synergy Income Fund Limited)
(Incorporated in the Republic of South Africa)
(Registration number 2007/032604/06)
JSE share code: GPA ISIN: ZAE0000223269
JSE share code: GPB ISIN: ZAE0000223277
(Granted REIT status with the JSE)
(“Gemgrow” or “the company” or “the group”)
Provisional summarised audited consolidated results
for the year ended 30 September 2017
Financial highlights
73,51 cents total dividend per B share for the year*
20,65% loan to value ratio, with strong balance sheet
7 times cash cover on A share dividend
R580m post year-end acquisitions at a yield of 11,85%
7% to 9% forecast dividend growth on B share for FY18
* exceeding forecast dividend of 73,36 cents disclosed in the circular
dated 26 September 2016.
Nature of business
Gemgrow is a specialist high yield, high growth Real Estate Investment
Trust (“REIT”) holding a diverse portfolio of office, retail and
industrial properties. In addition to the 29 properties that it holds
directly, as at 30 September 2017, Gemgrow held a further 100 properties
through its wholly-owned subsidiary, Cumulative Properties Limited
(“Cumulative”). The combined portfolio comprised 129 properties,
located in all nine provinces of South Africa, valued at R4,5 billion.
The company’s financial focus is on paying above market-related income
returns to its investors on a sustainable basis. This is achieved through
escalating rentals, satisfactory renewal of leases with existing tenants,
renting of vacant space within the property portfolio, managing and reducing,
where possible, costs associated with the property portfolio and by acquiring
revenue-enhancing properties.
Background
Synergy Income Fund Limited (“Synergy”) was incorporated as a public
company on 13 November 2007, and listed as a property loan stock company
on the Main Board of the JSE under the “Real Estate — Real Estate Holdings
and Development” sector on 14 December 2011. With effect from 1 July 2013,
Synergy converted from a property loan stock company to a REIT and accordingly
changed its sector classification to the “Retail REITs” sector on the JSE.
Synergy listed on the JSE with a portfolio valued at R280 million,
subsequently growing to comprise 14 shopping centres valued at more than
R2,4 billion as at 30 September 2016.
With effect from 1 October 2016, Synergy repositioned itself as a
specialist high yielding, high growth diversified REIT with a portfolio
comprising retail, office and industrial assets, by way of the following
inter-conditional steps:
* Synergy acquired the entire issued share capital of Vukile Asset
Management Proprietary Limited (“VAM”) from Vukile Property Fund Limited
(“Vukile”), resulting in the effective internalisation of Synergy’s asset
management function;
* the exchange of Synergy’s entire portfolio of 14 retail properties for a
Vukile portfolio of properties comprising 29 high yielding retail, office
and industrial assets (“the Vukile asset exchange”);
* the acquisition by Synergy of the entire issued share capital of Cumulative,
a subsidiary of Arrowhead Properties Limited (“Arrowhead”) that owned 100
high yielding retail, office and industrial assets (“the Cumulative share
acquisition”);
* an amendment of Synergy’s memorandum of incorporation to reflect a revised
year-end of 30 September and the payment of quarterly as opposed to
six-monthly dividends;
* the reconstitution of Synergy’s board of directors; and
* Synergy was renamed Gemgrow;
(collectively “the transaction”).
Following the implementation of the transaction, which saw Gemgrow issue
22 945 522 B shares to Vukile and 271 412 267 B shares to Arrowhead,
Arrowhead holds 61,7% of the issued Gemgrow B shares (55,2% of Gemgrow’s
total issued share capital) and Vukile holds 29,5% of the issued Gemgrow B
shares (27,4% of Gemgrow’s total issued share capital).
In accordance with International Financial Reporting Standards (“IFRS”),
income in respect of the respective parts of the transaction has been
accounted for from the following effective dates:
* 1 October 2016 for the exchange of Synergy’s entire portfolio of
14 retail properties for the Vukile portfolio of properties comprising
29 high yielding retail, office and industrial assets;
* 25 October 2016 for the effective internalisation of Synergy’s asset
management function; and
* 25 October 2016 for the acquisition by Synergy of the entire issued
share capital of Cumulative.
The Vukile asset exchange and Cumulative share acquisition were accounted
for as asset acquisitions, whilst the acquisition of VAM was accounted for
as a business combination.
In respect of the acquisition of VAM:
* The purchase consideration for the acquisition of VAM was R160 618 654,
settled by the issue of 29 945 522 Gemgrow B shares at the ruling price
of R7 per share on the date of the transaction.
* The net value of the assets and liabilities acquired on 30 September
2016 amounts to zero, a breakdown of which is reflected as follows:
Amounts
Description (R’000)
Trade and other receivables 3 099
Current tax asset 126
Cash and cash equivalents 146
Total assets 3 371
Trade and other payables 3 125
Loans from shareholders 102
Dividends payable 144
Total liabilities 3 371
Net assets NIL
* The resultant goodwill was R161 million, representing the cost of acquiring
the asset management contracts which have since been internalised.
The transaction has resulted in the company owning a reconstituted property
portfolio consisting of 129 properties diversified by sector and valued at
R4,5 billion, vastly different from the 14 retail assets valued at
R2,4 billion held prior to the transaction. Consequently, a comparison
of the financial results of the company for the first year following the
transaction, with the financial results of the company for the same period
last year on a like-for-like basis will not be meaningful. Furthermore,
the prior year comparative reflects a six-month period.
The circular issued on 26 September 2016 regarding the transaction contained
a forecast for the year-ended 30 September 2017 (the “forecast”). The
forecast provides the relevant financial information for current shareholders
of Gemgrow and has been reported on by the independent reporting accountants,
Grant Thornton Chartered Accountants. Shareholders are advised that the
distributable income contained in the forecast has been achieved.
Condensed consolidated financial results
for the year ended 30 September 2017
Full year 6 months
R’000/Audited 2017 2016
Revenue (excluding straight-line rental income) 666 066 181 404
Property expenses (263 056) (80 010)
Administration and corporate costs (8 531) (1 708)
Amortisation of loan raising cost — 391
Finance charges (91 577) (46 221)
Finance income 20 468 1 229
Distributable income 323 370 55 085
Pre-effective date distribution 19 432 —
Total dividend 342 802 55 085
Property expenses as a percentage of revenue —
gross (%) 39 44
Property expenses as a percentage of revenue — net
(%) 17 22
A share — dividend for the quarter ended
31 December 11 764 —
B share — dividend for the quarter ended
31 December 71 495 —
A share — dividend for the quarter ended 31 March 11 764 —
B share — dividend for the quarter ended 31 March 72 724 —
A share — dividend for the quarter ended 30 June 12 353 —
B share — dividend for the quarter ended 30 June 74 212 —
A share — dividend for the quarter ended
30 September* 12 353 23 529
B share — dividend for the quarter ended
30 September* 76 137 31 556
Total dividend 342 802 55 085
Dividend per A share (cents) for the quarter ended
31 December 24,85 —
Dividend per B share (cents) for the quarter ended
31 December 17,84 —
Dividend per A share (cents) for the quarter ended
31 March 24,85 —
Dividend per B share (cents) for the quarter ended
31 March 18,15 —
Dividend per A share (cents) for the quarter ended
30 June 26,09 —
Dividend per B share (cents) for the quarter ended
30 June 18,52 —
Dividend per A share (cents) for the quarter ended
30 September* 26,09 49,69
Dividend per B share (cents) for the quarter ended
30 September* 19,00 29,67
175,39 79,36
* The dividend was declared on 15 November 2017.
Commentary
Revenue
Revenue includes rental income and expenditure that is recoverable from
tenants.
At 30 September 2017, Gemgrow owned 129 properties valued at R4,5 billion,
of which retail comprised 14%, office 37% and industrial 49% based on
gross lettable area (“GLA”). In revenue terms the portfolio comprised
retail at 16%, office 55% and industrial 29%.
The average gross monthly rental per m2 per sector was R83 for retail,
R107 for office and R42 for industrial.
Vacancies reduced slightly from 7,73% to 7,71% during the 12 months ended
30 September 2017. At a sector level, retail vacancies were 5,77%,
industrial 6,18% and office 10,51%.
The total GLA of the portfolio was 690 263m2. During the period, contracted
leases in respect of 183 496m2 expired and 129 555m2 (71%) of this GLA was
renewed. Of the remaining 53 941m2, a further 28 835m2 (53%) was re-let
to new tenants. In total 86% of the GLA of leases that expired during
the period were renewed to existing tenants or re-let to new tenants.
The current average lease rental escalations were 8,13%, 8,13% and 8,43%
for retail, office and industrial properties respectively.
The step-up escalations on renewed leases were 5% for retail, 3% for office
and 1% for industrial. Step-up escalations were in line with expectations.
12-month letting report
Total Let Vacant Let Vacant
(m2) (m2) (m2) (%) (%)
As at 1 October 2016 692 713 639 160 53 553 92,27 7,73
Acquisitions — — —
Disposals — — —
Net adjustments (2 450) 54 (2 504)
Adjusted totals 690 263 639 214 51 049 92,60 7,40
Net gain/(loss) — (2 189) 2 189
As at 30 September 2017 690 263 637 025 53 238 92,29 7,71
Income statement
The reason for the period-on-period variances was due to the reconstituted
portfolio being vastly different from the portfolio previously owned in
the prior financial period. Furthermore, the prior period was only for
six months.
Operating costs
R’000 2017 % of total 2016 % of total
Municipal expenses 173 770 67 50 924 64
Property management 18 843 8 6 247 8
Security 19 700 7 6 687 8
Repairs and maintenance 13 743 5 2 096 3
Cleaning 8 818 3 2 737 3
Insurance 3 212 1 570 1
Other 24 970 9 10 749 13
Total 263 056 100 80 010 100
The gross expense to income ratio decreased from 44% to 39%. The net
expense to income ratio decreased from 22% to 17%.
Administrative expenses and corporate costs
R’000 2017 % of total 2016 % of total
Salaries 5 491 64 806 47
Professional service fees 1 690 20 356 21
Other 1 350 16 546 32
Total 8 531 100 1 708 100
Salaries in the comparative period related only to non-executive directors’
remuneration whilst the current year’s figure included both executive and
non-executive remuneration. Furthermore, a portion of non-executive salaries
not provided for in the prior period was accounted for in the current period.
Professional fees increased primarily due to the re-positioning of the company
and the number of reporting periods in the current year compared to the prior
period. Furthermore, audit fees and certain professional fees not provided
for in the prior period were accounted for in the current period.
Finance income
R’000 2017 % of total 2016 % of total
Interest received on bank
balances 3 726 18 680 55
Interest received on loans
to executives 15 390 75 — —
Interest on debtors 836 4 549 45
Interest received other 516 3 — —
Total 20 468 100 1 229 100
Interest on the loans to executives was in respect of interest charged on
outstanding balances of the loans granted to executives persuant to the
transaction.
Finance charges
R’000 2017 % of total 2016 % of total
Interest paid on loans 86 860 94 45 829 99
Interest paid on interest
rate swaps 3 262 4 — —
Amortisation of loan
raising costs 777 1 391 1
Other interest paid 678 1 1 —
Total 91 577 100 46 221 100
Statement of financial position
Investment properties
The company owned a portfolio of 129 retail, industrial and office properties
valued at R4,5 billion at 30 September 2017, located in all nine provinces
of South Africa. The average value per property as at 30 September 2017 was
R34,6 million.
Analysis of movement in investment property
Gemgrow portfolio
No. of
buildings R'000
Balance at the beginning of the period 14 2 451 435
Acquisitions, additions and fair value
adjustments 29 2 534 351
Disposals (14) (2 451 435)
Balance at the end of the period# 29 2 534 351
Cumulative portfolio*
No. of
buildings R'000
Balance at the beginning of the period — —
Acquisitions, additions and fair value
adjustments 100 1 913 257
Disposals — —
Balance at the end of the period# 100 1 913 257
Total
No. of
buildings R'000
Balance at the beginning of the period 14 2 451 435
Acquisitions, additions and fair value
adjustments 129 4 447 608
Disposals (14) (2 451 435)
Balance at the end of the period# 129 4 447 608
* Gemgrow’s shareholding in Cumulative was 100% at 30 September 2017.
# The above includes non-current assets available for sale.
The value of investment property increased from R2,4 billion at
30 September 2016 to R4,5 billion at 30 September 2017. The increase
was attributable to an asset exchange of 14 retail assets at R2,4 billion
for 29 retail, office and industrial assets valued at R2,6 billion, and
the acquisition of the 100% holding in Cumulative, which held 100
properties valued at R1,9 billion, in exchange for the issue of B shares
in the company.
The company has a notarial lease on a property, Royal Palm situated in
Durban with the Passenger Rail Association of South Africa (PRASA), which
has a lease expiry of 30 November 2017. Despite numerous engagements
between the parties to negotiate the lease renewal, PRASA notified the
company that it would not be renewing the lease and requested that the
property be handed back on expiry of the lease. The directors have decided
to write down the value of this property from R16 million to R0 in the
current period. No income was forecasted on the renewal of the lease on
this property after expiry.
Acquisitions and disposals
Post the implementation of the transaction on 1 October 2016, the company
made no further acquisitions or disposals during the 12-month period to
30 September 2017.
Loans to executives pursuant to the transaction
During the period under review, pursuant to the transaction and for
purposes of incentivising certain executives, loans of R163 million
were made to executives for the purposes of funding the purchase of B
shares in the company. The loans bore interest at a rate equal to the
dividend of the company for the period ending 30 September 2017. The
shares have been pledged as security to the company for the outstanding
loans. During the year, shortly after the sad passing of the CEO,
Mr G Leissner, his shares were sold and loans to the value of R41 million
were repaid.
Trade and other receivables
Trade receivables, deposits, other receivables and payments in advance
increased from R41 million to R75 million. The items making up this balance
are R17 million for trade receivables, R7 million for municipal recovery
income accruals, R8 million for municipal deposits and R43 million in
respect of the adjustment accounts relating to the Vukile asset exchange,
which is in the process of being finalised. During the period under review,
bad debts amounting to R3 million were written off, and an allowance for
bad debts of R4 million was raised.
Secured financial liabilities
The loans of R919 million measured against investment properties of
R4,5 billion represents a loan to value of 20,6%. The interest rate swaps
of R300 million and the fixed rate loans of R237 million resulted in
interest on R537 million of the total R919 million being fixed. This
equates to 58,4% of the total borrowings.
The effective interest rate for the period ended 30 September 2017 was
9,33%.
Fixed One-month Three-month
Maturity rate % Jibar margin % Jibar margin %
September 2017 — — —
December 2017 9,14 — —
December 2017 8,36 — —
December 2017 — 2,30 —
December 2017 — 1,65 —
January 2018 — — —
November 2018 — — —
September 2019 — — 2,3
September 2019 — — —
Total exposure
Capital Capital
Prime rate 2017 2016
Maturity margin % R’000 R’000
September 2017 minus 1,6 50 000 50 000
December 2017 — 90 000 90 000
December 2017 — 146 705 146 705
December 2017 — 28 295 28 295
December 2017 — 25 042 25 042
January 2018 minus 1,5 234 998 235 004
November 2018 minus 1,5 200 674 200 678
September 2019 — 139 000 162 000
September 2019 minus 1,1 4 000 —
Total exposure 918 714 937 724
(Excluding loan initiation fees and fair value adjustments on swaps.)
Gemgrow has entered into interest rate swaps to hedge its exposure to
fluctuations in interest rates of its debt as follows:
* an interest rate swap over R50 million until 19 February 2019;
* an interest rate swap over R40 million until 19 February 2019;
* an interest rate swap over R40 million until 1 July 2019;
* an interest rate swap over R40 million until 1 July 2019;
* an interest rate swap over R80 million until 30 September 2019; and
* an interest rate swap over R50 million until 1 September 2020.
Loans to the value of R290 million and R235 million expire on 31 December
2017 and 31 January 2018, respectively. The company has refinanced both
these loans at a forward hedged five-year rate of 9,39%. Drawdown of this
new debt facility and repayment of the old debt facilities are both expected
to be finalised early in the new financial year. Post year-end, the company
also concluded a five-year renewal of the R50 million loan that was due to
expire on 30 September 2017. The company has also secured debt funding for
the total value of its of acquisitions during the year at a forward hedged
five-year rate of 9,74%.
After hedging the existing refinanced debt of R525 million and the debt on
the acquisitions above, the ratio of hedged secured loans as a percentage of
total secured loans will increase from 58% to 94%. The 94% hedge will take
effect from 15 November 2017.
Trade and other payables
The material items making up trade creditors are VAT payable of R7 million,
tenant deposits of R41 million, rentals received in advance of R10 million,
trade creditors of R5 million, capital and operational expenditure accruals
of R64 million. The increase in accruals is acceptable given the increased
size of the fund.
Prospects
The company has secured acquisitions to the value of R580 million, at a
weighted average yield of 11,85%, funded with the hedged debt facilities
mentioned above. Transfer of these properties will take place in the new
financial year.
The company is operating in an environment of subdued growth impacted by
economic and political uncertainty. Gemgrow’s diversified portfolio is
positioned to withstand measured market movements and produce sustainable
value to its stakeholders. The Gemgrow forecast is modelled on the
assumption that current trading conditions will prevail. Forecast income is
based on contractual terms as at the date hereof and anticipated market-
related renewals. The company projects growth in dividends of between 7%
and 9% on its B share for the year ending 30 September 2018. The A share
will grow at the lower of 5% or the Consumer Price Index. The projection
includes income from acquisitions anticipated to transfer between
1 December 2017 and 31 January 2018. This forecast, prepared by the company,
has not been reported on by the independent reporting accountants,
Grant Thornton Chartered Accountants.
Summary of financial performance
Year ended 6 months ended
30 September 2017 30 September 2016
Dividend per Gemgrow A share
(cents) 101,87 49,69
Dividend per Gemgrow B share
(cents) 73,51 29,67
Gemgrow A shares in issue 47 352 203 47 352 203
Gemgrow B shares in issue 400 710 459 106 352 670
Net asset value per A share at
reporting date (cents)* 972 997
Net asset value per B share at
reporting date (cents) 845 959
* The net asset value per Gemgrow A share has been calculated on the 60-day
volume weighted average trading price as at 30 September 2017 limited to
the combined net asset value in accordance with the provisions of
Gemgrow’s MOI.
The company’s shares were trading at a 18% discount to net asset value on a
combined basis. The B share was trading at an 21% discount to net asset value
at year-end.
Annual general meeting
Gemgrow’s integrated report for the year ended 30 September 2017, containing a
notice of the annual general meeting and incorporating the audited annual
financial statements for the year ended 30 September 2017 will be made
available in electronic form on the company’s website, www.gemgrow.co.za and
will be posted in due course to shareholders who have requested that these
items be posted to them, and will also be available in hard copy from
Gemgrow’s offices at 3rd Floor, Upper Building, 1 Sturdee Avenue, Rosebank,
Johannesburg. A further announcement porviding details of the annual general
meeting will be released in due course.
Payment of dividend for the quarter ended 30 September 2017
The board of directors (“Board”) has approved a gross dividend (dividend
number 4) of 26,08791 cents per A share and 19,00001 cents per B share for
the quarter ended 30 September 2017 in accordance with the timetable set
out below:
2017
Last date to trade cum distribution Tuesday, 5 December
Shares trade ex distribution Wednesday, 6 December
Record date Friday, 8 December
Payment date Monday, 11 December
Share certificates may not be dematerialised or rematerialised between
Wednesday, 6 December 2017 and Friday, 8 December 2017, both days inclusive.
The dividend will be transferred to dematerialised shareholders CSDP/ broker
accounts on Monday, 11 December 2017. Certificated shareholders’ dividend
payments will be paid to certificated shareholders’ bank accounts on
Monday, 11 December 2017.
In accordance with Gemgrow’s status as a REIT, shareholders are advised that
the dividends meet the requirements of a “qualifying distribution” for the
purposes of section 25BB of the Income Tax Act, No. 58 of 1962 (“Income Tax
Act”). The dividends on the shares will be deemed to be dividends, for South
African tax purposes, in terms of section 25BB of the Income Tax Act.
The dividends received by or accrued to South African tax residents must be
included in the gross income of such shareholders and will not be exempt from
income tax (in terms of the exclusion to the general dividend exemption,
contained in paragraph (aa) of section 10(1)(k)(i) of the Income Tax Act)
because they are dividends distributed by a REIT. These dividends are, however,
exempt from dividend withholding tax in the hands of South African tax resident
shareholders, provided that the South African resident shareholders provided the
following forms to their Central Securities Depository Participant (“CSDP”)
or broker, as the case may be, in respect of uncertificated shares, or the
company, in respect of certificated shares:
a) a declaration that the dividends are exempt from dividends tax; and
b) a written undertaking to inform the CSDP, broker or the company, as the case
may be, should the circumstances affecting the exemption change or the
beneficial owner cease to be the beneficial owner,
both in the form prescribed by the Commissioner for the South African Revenue
Service. Shareholders are advised to contact their CSDP, broker or the company,
as the case may be, to arrange for the abovementioned documents to be submitted
prior to payment of the dividends, if such documents have not already been
submitted.
Dividends received by non-resident shareholders will not be taxable as income
and instead will be treated as ordinary dividends which is exempt from income
tax in terms of the general dividend exemption in section 10(1)(k)(i) of the
Income Tax Act. On 22 February 2017 the dividends withholding tax was increased
from 15% to 20% and accordingly, any dividends received by a non-resident from
a REIT will be subject to dividend withholding tax at 20%, unless the rate is
reduced in terms of any applicable agreement for the avoidance of double
taxation (“DTA”) between South Africa and the country of residence of the
shareholders. Assuming dividend withholding tax will be withheld at a rate of 20%,
the net dividend amount due to non-resident shareholders is 20,87033 cents per
A share and 15,20001 cents per B share. A reduced dividend withholding rate in
terms of the applicable DTA, may only be relied on if the non-resident
shareholder has provided the following forms to their CSDP or broker, as the
case may be, in respect of uncertificated shares, or the company, in
respect of certificated shares:
a) a declaration that the dividends are subject to a reduced rate as a result
of the application of a DTA; and
b) a written undertaking to inform their CSDP, broker or the company, as the case
may be, should the circumstances affecting the reduced rate change or the
beneficial owner cease to be the beneficial owner,
both in the form prescribed by the Commissioner for the South African Revenue
Service. Non-resident shareholders are advised to contact their CSDP, broker or
the company, as the case may be, to arrange for the abovementioned documents
to be submitted prior to payment of the dividend if such documents have not
already been submitted, if applicable.
Shareholders are encouraged to consult their professional advisors should they
be in any doubt as to the appropriate action to take.
A ordinary shares in issue at the date of declaration of this dividend: 47 352 203.
B ordinary shares in issue at the date of declaration of this dividend: 400 710 459.
Gemgrow’s income tax reference number: 9068/723/17/1
Events after reporting period
The company will take transfer of the properties relating to its acquisitions post
year-end.
Dividend declaration after reporting date
In line with IAS 10 Events after the Reporting Period, the declaration of the
dividends occurred after the end of the reporting period, resulting in a non-
adjusting event which is not recognised in the financial statements.
Litigation statement
There are no legal or arbitration proceedings, including any proceedings that are
pending or threatened, of which Gemgrow is aware, that may have or have had in the
recent past, being the previous year, a material effect on the group’s financial
position.
Basis of preparation
The consolidated results for the year ended 30 September 2017 have been audited by
the company`s independent auditors, Grant Thornton. The auditor’s report does not
necessarily report on all of the information contained in this announcement.
Shareholders are therefore advised that in order to obtain a full understanding
of the nature of the auditor’s engagement they should obtain a copy of the
auditor’s report together with the accompanying financial information from the
issuer’s registered office.
Their unqualified audited opinion is available for inspection at the company’s
registered offices at 3rd Floor Upper Building, 1 Sturdee Avenue, Rosebank,
Johannesburg.
The financial information has been prepared in accordance with the requirements of
International Financial Reporting Standards, the SAICA Financial Reporting
pronouncements as issued by the Financial Accounting Practices Committee as issued
by the Financial Reporting Standard Council, IAS 34: Interim Financial Reporting,
the JSE Listings Requirements and the requirements of the South African Companies
Act, 2008. These results have been prepared under the supervision of J Limalia,
CA (SA), Gemgrow’s Chief Financial Officer.
The accounting policies adopted are consistent with those applied in the preparation
of the financial statements for the year ended 30 September 2016.
This summarised consolidated report is extracted from audited information, but is not
itself audited. The directors take full responsibility for the preparation of the
summarised report and for ensuring that the financial information has been correctly
extracted from the underlying audited annual financial statements. This announcement
does not include the information required pursuant to paragraph 16A(j) of IAS 34. The
full consolidated financial statements are available for inspection at the company’s
registered office.
By order of the Board
15 November 2017
Directors:
Gregory Kinross* (Chairperson), Mark Kaplan (CEO), Alon Kirkel (COO),
Junaid Limalia (CFO), Clifford Abrams*, Arnold Basserabie* and Ayesha Rehman*.
* Independent non-executive.
All directors are South African. All the directors, with the exception of
Arnold Basserabie and Mark Kaplan, were appointed on 22 December 2016. Mr Kaplan was
appointed on 13 January 2017 and Mr Basserabie was appointed on 14 February 2017.
Registered office:
3rd Floor, Upper Building, 1 Sturdee Avenue, Rosebank, Johannesburg, 2196; PO Box 685,
Melrose Arch, 2076
Transfer secretaries:
Computershare Investor Services Proprietary Limited
Sponsor:
Java Capital
Company secretary:
CIS Company Secretaries Proprietary Limited
Website:
www.gemgrow.co.za
Condensed consolidated statement of comprehensive income
Audited for the Audited for the
year ended six months ended
R’000/Audited 30 September 2017 30 September 2016
Rental income 666 066 181 404
Straight-line rental income
accrual 35 569 (16 404)
Total revenue 701 635 165 000
Property expenses (263 056) (80 010)
Administration and corporate costs (8 531) (1 708)
Net operating profit 430 048 83 282
Changes in fair values 63 407 64 483
Loss on sale of investment
properties — (2 397)
Cost of strategic repositioning — (971)
Profit from operations 493 455 144 397
Finance charges (91 577) (46 221)
Finance income 20 468 1 229
Profit before taxation 422 346 99 405
Taxation — 110
Profit for the period 422 346 99 515
Other comprehensive income — (3 833)
422 346 95 682
Condensed consolidated statement of financial position
Audited at Audited at
R’000/Audited 30 September 2017 30 September 2016
Assets
Non-current assets 4 723 204 2 613
Investment property 4 438 238 —
Fair value of property portfolio
for accounting purposes 4 402 669 —
Straight-line rental income accrual 35 569 —
Property, plant and equipment 164 —
Loans to executives 122 173 —
Goodwill 160 618 —
Deferred capital expenditure — 601
Deferred tax asset 2 011 2 012
Current assets 211 096 64 357
Trade and other receivables 74 598 40 512
Derivative financial instrument — 107
Loan to holding company 80 002 —
Cash and cash equivalents 56 496 23 738
Non-current assets held for sale 9 370 2 451 436
Total assets 4 943 670 2 518 406
Equity and liabilities
Shareholders interest 3 846 010 1 491 493
Stated capital 3 184 041 942 472
Reserves 661 969 55 085
Other components of equity — 493 936
Other non-current liabilities 350 831 367 406
Secured financial liabilities 343 390 361 853
Derivative instruments 7 441 5 553
Current liabilities 746 829 659 507
Trade and other payables 126 788 84 340
Secured financial liabilities 575 041 575 047
Derivative instruments — 120
Loan from holding company 45 000 —
Total equity and liabilities 4 943 670 2 518 406
Condensed consolidated statement of changes in equity
Stated Retained
R’000/Audited capital income
Balance at 31 March 2016 953 410 42 021
Dividends paid — (56 608)
Change in fair value of investment properties — (48 079)
Transfer from other components of equity — 18 236
Costs of strategic repositioning (10 937) —
Other comprehensive income — —
Revaluation of cash flow hedges — —
Total comprehensive income for the period — 99 515
Balance at 30 September 2016 942 473 55 085
Issue of shares 2 241 568 —
Transfer from other components of equity — 493 936
Dividends paid — (309 397)
Total comprehensive income for the period — 422 346
Balance at 30 September 2017 3 184 041 661 969
Other components
R’000/Audited of equity Total
Balance at 31 March 2016 467 926 1 463 357
Dividends paid — (56 608)
Change in fair value of investment properties 48 079 —
Transfer from other components of equity (18 236) —
Costs of strategic repositioning — (10 937)
Other comprehensive income — —
Revaluation of cash flow hedges (3 833) (3 833)
Total comprehensive income for the period — 99 515
Balance at 30 September 2016 493 936 1 491 493
Issue of shares — 2 241 568
Transfer from other components of equity (493 936) —
Dividends paid — (309 397)
Total comprehensive income for the period — 422 346
Balance at 30 September 2017 — 3 846 010
Condensed consolidated statement of cash flows
Audited for the Audited for the
year ended six months ended
R’000/Audited 30 September 2017 30 September 2016
Net cash utilised from operating
activities 25 928 2 270
Cash generated from operations 406 434 103 479
Finance charges paid (91 578) (45 830)
Interest received 20 469 1 229
Dividends paid (309 397) (56 608)
Net cash utilised in investing
activities 36 725 35 219
Acquisition of investment property (30 472) (17 627)
Proceeds from disposal of
investment property 26 652 53 447
Deferred capital expenditure — (601)
Acquisition of property, plant and
equipment (179) —
Pre-effective date distribution 19 433 —
Repayment of loans by executives 40 724 —
Net cash generated from financing
activities (29 895) (39 367)
Proceeds from issue of share
capital 4 425 —
Loan advances to holding company (35 002) —
Proceeds from financial
liabilities (18 751) (39 367)
Net movement in cash and cash
equivalents 32 758 (1 878)
Cash and cash equivalents at the
beginning of the period 23 738 25 616
Cash and cash equivalents at the
end of the period 56 496 23 738
Consolidated condensed segmental analysis
for the year ended 30 September 2017
Geographical
The entity has four reportable segments based on the geographic locations
of the properties, which are the entity’s strategic business segments. The
entity’s executive directors review internal management reports monthly
and all segments greater than 10% are considered strategic. All segments
are in South Africa. There are no single major tenants. The following
summary describes the operations in each of the company’s reportable
segments.
R’000
30 September 2017
Western KwaZulu-
Gauteng Cape Natal
Contractual rental income 421 238 94 998 70 967
Straight-line rental income 18 738 3 506 2 933
Operating and administration costs (160 144) (35 386) (24 385)
Net operating profit 279 833 63 117 49 515
Finance income 605 48 100
Finance charges (405) (251) (17)
Net operating income/(loss) 280 033 62 914 49 598
Changes in fair values 1 060 28 098 (4 744)
Reportable segment profit before tax 281 093 91 012 44 854
Taxation — — —
Reportable segment profit after tax 281 093 91 012 44 854
Reportable segment assets 2 856 785 655 643 536 329
Reportable segment liabilities (41 672) (13 531) (26 216)
2 815 113 642 112 510 114
R’000 Other Total
30 September 2017
Contractual rental income 78 863 666 066
Straight-line rental income 10 392 35 569
Operating and administration costs (51 671) (271 587)
Net operating profit 37 583 430 048
Finance income 19 714 20 468
Finance charges (90 904) (91 577)
Net operating income/(loss) (33 607) 358 939
Changes in fair values 38 993 63 407
Reportable segment profit before tax 5 387 422 346
Taxation — —
Reportable segment profit after tax 5 387 422 346
Reportable segment assets 894 913 4 943 670
Reportable segment liabilities (1 016 242) (1 097 660)
(121 329) 3 846 010
Sectoral
R’000 Commercial Industrial Retail
Contractual rental income 359 066 194 343 112 657
Straight-line rental income accrual 24 008 7 024 4 537
Operating and administration costs (134 088) (74 533) (41 497)
Net operating profit 248 986 126 833 75 697
Finance income 331 339 166
Finance charges (486) (183) (10)
Net operating income/(loss) 248 831 126 989 75 852
Changes in fair values 39 748 14 158 4 359
Reportable segment profit/(loss)
before tax 288 579 141 147 80 211
Taxation — — —
Reportable segment profit after tax 288 579 141 147 80 211
Reportable segment assets 2 511 992 1 374 418 676 343
Reportable segment liabilities (29 326) (26 248) (55 950)
2 482 666 1 348 170 620 393
R’000 Overheads Total
Contractual rental income — 666 066
Straight-line rental income accrual — 35 569
Operating and administration costs (21 468) (271 587)
Net operating profit (21 468) 430 048
Finance income 19 632 20 468
Finance charges (90 898) (91 577)
Net operating income/(loss) (92 734) 358 939
Changes in fair values 5 142 63 407
Reportable segment profit/(loss) before tax (87 592) 422 346
Taxation — —
Reportable segment profit after tax (87 592) 422 346
Reportable segment assets 380 917 4 943 670
Reportable segment liabilities (986 136) (1 097 660)
(605 219) 3 846 010
Reconciliation of earnings to headline earnings
Audited for the Audited for the
year ended six months ended
R’000/Audited 30 September 2017 30 September 2016
Profit for the period attributable
to Gemgrow shareholders 422 346 99 515
Earnings 422 346 99 515
Changes in fair value of
investment property (58 265) (64 483)
(Profit)/loss on sale of investment
property (7 017) 2 397
Headline earnings attributable to
shareholders 357 064 37 429
Reconciliation of headline earnings to distributable earnings
Audited for the Audited for the
year ended six months ended
R’000/Audited 30 September 2017 30 September 2016
Headline earnings attributable to
shareholders 357 064 37 429
Cost of strategic repositioning — 971
Changes in fair values of
financial instruments 1 875 —
Straight-line rental income
accrual (35 569) 16 404
Amortisation of loan raising costs — 391
Deferred tax — (110)
Pre-effective date distribution 19 432 —
Distributable earnings
attributable to shareholders 342 802 55 085
Number of A shares in issue 47 352 203 47 352 203
Number of B shares in issue 400 710 459 106 352 670
Weighted average number of A
shares in issue 47 352 203 47 352 203
Weighted average number of B
shares in issue 400 710 459 106 352 670
Basic and diluted earnings per A
share (cents) 94,26 64,74
Basic and diluted earnings per B
share (cents) 94,26 64,74
Headline and diluted headline
earnings per A share (cents) 79,69 24,35
Headline and diluted headline
earnings per B share (cents) 79,69 24,35
Note: A statutory headlines earnings per share (“HEPS”) reconciliation has
not been performed due to the earnings being equal to headline earnings
for the period.
Date: 15/11/2017 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
Sharenet Sites 
