Sectors Shares

Gemgrow Properties Limited - Unaudited Condensed Consolidated Interim Results For The Six Months Ended 31 March 2018

Release Date: 16/05/2018 07:15
Code(s): GPA GPB
 
Wrap Text
Unaudited condensed consolidated interim results for the six months ended 31 March 2018

Gemgrow Properties 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")

Unaudited condensed consolidated interim results for the six months 
ended 31 March 2018

Financial highlights
Strong balance sheet low LTV 29% 97% debt hedged
Debt expiry profile 3,8 years (2017: 1 year)
R549m of acquisitions transferred and integrated within portfolio
Dividend on A share of 52,18 cents and dividend on B share of
38,52 cents in line with guidance for interim period
7 times cash cover on A shares

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. As at 31 March 2018 the portfolio comprised 139 properties, 
located in all nine provinces of South Africa and valued in excess of 
R5 billion.

The company's focus is on paying competitive dividend 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 yield-enhancing properties.

Condensed consolidated financial results for the six months ended
31 March 2018

R'000/Unaudited                                            2018       2017
Revenue (excluding straight line rental income)         360 652    314 907
Property expenses                                      (133 026)  (125 209) 
Administration and corporate costs                       (5 115)    (5 939) 
Finance charges                                         (53 457)   (46 407) 
Finance income                                           11 668     10 964
Distributable income                                    180 722    148 316
Pre-effective date distribution#                              —     19 433
Total dividend                                          180 722    167 749
Property expenses as a percentage of revenue —
gross (%)                                                  36,9       39,8
Property expenses as a percentage of revenue —
net (%)                                                    14,3       16,6
A share — dividend for the quarter ended                 12 353     11 765
31 December
B share — dividend for the quarter ended 
31 December                                              77 687     71 496
A share — dividend for the quarter ended 
31 March*                                                12 353     11 764
B share — dividend for the quarter ended 
31 March*                                                78 329     72 724
Total dividend                                          180 722    167 749
Dividend per A share (cents) for the quarter
ended 31 December                                         26,09      24,85
Dividend per B share (cents) for the quarter
ended 31 December                                         19,18      17,84
Dividend per A share (cents) for the quarter
ended 31 March*                                           26,09      24,85
Dividend per B share (cents) for the quarter
ended 31 March*                                           19,34      18,15
                                                          90,70      85,69

# Pre-effective dividend income was the income earned for the period 
  between the legal date of the acquisition by Gemgrow of the entire 
  issued share capital of Cumulative Properties Limited and the IFRS 
  effective date.
* The dividend was declared on 16 May 2018.

Commentary
Revenue
Revenue includes rental income and expenditure that is recoverable from 
tenants for the six months ended 31 March 2018 ("the six-month period").

* Gemgrow owned 139 properties valued in excess of R5,0 billion, of which 
  retail comprised 22%, office 33% and industrial 45% based on gross 
  lettable area ("GLA"). In revenue terms the portfolio comprised retail 
  of 27%, office 46% and industrial 27%.
* The average gross monthly rental per m² per sector was R104 for retail, 
  R118 for office and R48 for industrial.
* Vacancies increased from 8% to 9%. At a sectoral level, retail vacancies 
  were 9%; industrial vacancies 6% and office vacancies 13% for this period.
* The total GLA of the portfolio increased from 690 263m2 to 759 964m2 as a 
  result of acquisitions concluded last year, and transferred in the current 
  year. During the six-month period, contracted leases in respect of 72 730m2 
  expired and 52 335m2 (72%) of this GLA was renewed. Of the remaining 
  20 395m2, a further 4 736m2 (23%) was re-let to new tenants. In total 79% 
  of the GLA of leases that expired during the six-month period were renewed 
  with existing tenants or re-let to new tenants.
* The weighted average lease rental escalations were 7,95%, 8,26% and
  8,07% for retail, office and industrial properties respectively.
* The step-up escalations on renewed leases over the entire portfolio was
  4%, of which retail constituted 2%, office 3% and industrial 7%.
  
Letting report for the six months ended 31 March 2018

                         Total       Let     Vacant       Let  Vacant
                           (m²)      (m²)       (m²)       (%)     (%) 
As at 1 October 2017   690 263   637 025     53 238     92,29    7,71
Acquisitions            72 103    63 737      8 366     88,40   11,60
Disposals               (1 975)     (893)    (1 082)    45,22   54,78
Net adjustments           (427)      407       (834)
Adjusted totals        759 964   700 276     59 688     92,15    7,85
Net (loss)/gain              —    (8 850)     8 850
As at 31 March 2018    759 964   691 426     68 538     90,98    9,02

The vast majority of the increase in vacancies was in line with 
expectations. A quarter of the increase in vacancies was due to acquisitions, 
which were secured at no cost, and which represents upside for Gemgrow. The 
remaining increase in vacancies was in line with our strategy to improve 
the leasing profile of our portfolio by requiring tenants occupying premises 
on a month-to-month basis to either sign lease renewals or to vacate the 
premises.

Income statement
Operating costs
R'000                          2018 % of total      2017  % of total
Municipal expenses           93 026         70    83 497          67
Property management          11 438         10     8 711           7
Security                      9 349          7     9 790           8
Repairs and maintenance       5 121          4     5 749           5
Letting commission            3 101          2     4 097           3
Cleaning                      4 602          3     4 245           3
Insurance                     1 783          1     1 696           1
Other                         4 606          3     7 424           6
Total                       133 026        100   125 209         100

Municipal expenses and property management fees increased in line with 
revenue. The company has rationalised the portfolio management under one 
property manager and implemented cost containment measures which have 
successfully reduced security, cleaning and repairs and maintenance costs. 
The impact has been a reduction in the gross and net expense to income 
ratios over the portfolio from 39,8% to 36,9% and 16,6% to 14,3%, 
respectively. The lower letting commission expense was a function of 
lease renewals and new leases concluded in the current year compared to 
that in the prior year. Other expenses in the prior year contained a 
provision for bad debts, higher than the current year, by R2,5 million.

Administrative and corporate costs
The higher expenses last year related to certain professional fees 
relating to 2016 that were only invoiced to the company in the first 
six months of 2017.

Finance income
R'000                               2018  % of total   2017  % of total
Interest received on bank
balances and debtors               3 383          29  2 330          21
Interest received on loans to
executives                         8 285          71  8 684          79
Total                             11 668         100 10 964         100

Interest received on the loans to executives is lower, due to interest 
received in the prior year from loan shares issued to the late Gerald 
Leissner. This loan was settled in the prior financial year.

Finance charges
The increased interest expense related to additional debt funding used 
to finance the acquisitions that transferred during the six-month period 
being reported on.

Statement of financial position
Investment properties
The company owned a portfolio of 139 retail, industrial and office properties 
valued in excess of R5,0 billion at 31 March 2018, located in all nine 
provinces of South Africa. The average value per property as at 31 March 2018 
was R36,1 million. The value of investment property has increased from R4,5 
billion at 30 September 2017 to approximately R5 billion as at 31 March 2018. 
The increase was primarily attributable to the acquisition of 12 investment 
properties valued at R549 million and one property disposal valued at 
R6 million and one leasehold property in respect of which the lease was not 
renewed. There is one remaining leasehold property in the portfolio with a 
value of R36 million with a lease that expires in 18 years.

Trade and other receivables
Trade receivables, deposits and other receivables reduced from R74,6 million 
in September 2017 to R70,1 million at 31 March 2018. The material items 
making up this balance were R15,6 million for trade receivables reduced by 
a R4,8 million provision for bad debts, R3,5 million for municipal recovery 
income accruals, R9,2 million for municipal deposits and R44 million in 
respect of the adjustment accounts relating to the asset exchange with Vukile 
Property Fund Limited ("Vukile"), which is in the process of being finalised.

Secured financial liabilities
The loans of R1,46 billion measured against investment properties of 
R5 billion represents a loan to value of 29%. The interest rate swaps of R1,43 
billion resulted in 97% of the interest payable being hedged. The effective 
interest rate for the period ended 31 March 2018 was 9,39%.

                                Three-month    Prime rate         Debt
Maturity                     Jibar margin %      margin %        R'000
November 2018                             —     minus 1,5      200 674
September 2019                          2,3             —      139 000
September 2022                            —     minus 1,6       50 000
October 2022                           2,15             —      525 000
November 2022                          2,20             —      548 842
Total exposure                                               1 463 516 
(Excluding the carrying value of loan initiation fees.)

Gemgrow has furthermore 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;
* an interest rate swap over R50 million until 1 September 2020;
* an interest rate swap over R525 million until 31 October 2022; and
* an interest rate swap over R600 million until 15 November 2022 
  (excluding fair value adjustments on swaps.)

During the six-month period, the company refinanced loans of R50 million and 
R525 million for five-year terms expiring in September 2022 and October 2022 
respectively. The company also finalised a further five-year loan to fund 
acquisitions that transferred during the six-month period to the value of 
R549 million. In the same period the company implemented swap arrangements 
to hedge the R525 million loan refinance and R600 million in respect of the 
loans on acquisitions. As at 31 March 2018, 97% of the loans were hedged. 
The weighted average debt expiry profile has improved from a 12-month debt 
expiry profile in the prior year to 3,8 years as at 31 March 2018.

The company has debt expiring on 1 November 2018 to the value of R201 million 
and is negotiating the renewal thereof.

Trade and other payables
Trade creditors reduced from R126,8 million to R124,5 million. The material 
items making up trade creditors were VAT payable of R13,3 million, tenant 
deposits of R46,4 million, trade creditors of R2 million, R34,3 million in 
respect of the adjustment accounts asset exchange process for Vukile yet 
to be finalised; and capital and operational expenditure accruals of 
R25,8 million.

Prospects
Gemgrow is positioned to deliver on its guidance of 7% to 9% growth on its
B shares for the year ended 30 September 2018, as previously advised, while 
the A shares will grow at the lower of 5% and the consumer price index. 
Gemgrow's focus is to reshape and improve the quality of its core portfolio, 
by unlocking further potential from existing properties, strategic disposals 
and refurbishments and concluding yield-enhancing acquisitions.

Bolstering the company's team of talented property professionals and improving 
operating efficiencies through improved capital allocations, solar initiatives 
and cost containment measures is a key strategy in ensuring delivery in an 
environment that has seen subdued growth.

The company is pleased to welcome Government's planned growth strategy for 
the South African economy, which should provide Gemgrow with a platform of 
accelerated growth in the future as a purely South African focused property 
fund. Gemgrow's strong balance sheet and a low LTV of 29% will provide the 
company with an opportunity to respond effectively to renewed growth and 
positive sentiment in the economy. Gemgrow is negotiating on an ongoing 
basis to acquire property portfolios that will provide further growth 
opportunities.

Summary of financial performance

                                        Six months ended Six months ended
                                           31 March 2018    31 March 2017
Dividend per Gemgrow A share (cents)               52,18            49,70
Dividend per Gemgrow B share (cents)               38,52            35,99
Gemgrow A shares in issue                     47 352 203       47 352 203
Gemgrow B shares in issue                    405 042 105      400 710 459
Net asset value per A share at
reporting date (cents)*                              985              994
Net asset value per B share at
reporting date (cents)                               841              814

* The net asset value per Gemgrow A share has been calculated on the 60-day 
  volume weighted average trading price as at 31 March 2018.

Payment of dividend for the quarter ended 31 March 2018
The board of directors ("Board") has approved a gross dividend (dividend number 
6) of 26,08791 cents per A share and 19,33845 cents per B share for the quarter 
ended 31 March 2018 in accordance with the timetable set out below:

2018
Last day to trade                                       Tuesday, 5 June 
Shares trade ex distribution                          Wednesday, 6 June 
Record date                                              Friday, 8 June 
Payment date                                            Monday, 11 June

Share certificates may not be dematerialised or re-materialised between
Wednesday, 6 June 2018 and Friday 8 June 2018, both days inclusive.

The dividend will be transferred to dematerialised shareholders CSDP/ broker 
accounts on Monday, 11 June 2018. Certificated shareholder's dividend payments 
will be paid to certificated shareholder's bank accounts on Monday, 11 June 2018.

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.

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. From 22 February 2017, any dividends received by a non-resident from a REIT 
are 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 15,47076 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 distribution 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:
405 042 105.
Gemgrow's income tax reference number: 9068/723/17/1

Events after reporting period
At the general meeting held on 23 April 2018, shareholders approved an amendment 
to the company's Memorandum of Incorporation, amending the timing of dividend 
payments from quarterly to bi-annual. Accordingly, the next dividend is expected 
to be declared on 20 November 2018.

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 six months, a material effect on the 
group's financial position.

Basis of preparation
The unaudited condensed consolidated interim results for the six months ended 
31 March 2018 have not been reviewed or reported on by the group's auditors, 
Grant Thornton Johannesburg Partnership.

The financial information has been prepared in accordance with the requirements 
of International Financial Reporting Standards, the SAICA Financial Reporting 
guides as issued by the Accounting Practices Board, 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 2017.

By order of the Board
16 May 2018

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.

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: Link Market Services Proprietary Limited
Website: www.gemgrow.co.za

Condensed consolidated statement of comprehensive income

                                       Unaudited  Unaudited      Audited 
                                         for the    for the      for the
                                      six months six months         year 
                                           ended      ended        ended
                                        31 March   31 March 30 September
R'000                                       2018       2017         2017
Rental income                            360 652    314 907      666 066
Straight-line rental income accrual       10 262          —       35 569
Total revenue                            370 914    314 907      701 635
Property expenses                       (133 026)  (125 209)    (263 056) 
Administration and corporate costs        (5 115)    (5 939)      (8 531) 
Net operating profit                     232 773    183 759      430 048
Changes in fair values                   (12 379)        89       63 407
Profit from operations                   220 394    183 848      493 455
Finance charges                          (53 457)   (46 407)     (91 577) 
Finance income                            11 668     10 964       20 468
Profit before taxation                   178 605    148 405      422 346
Taxation                                       —          —            — 
Profit for the period                    178 605    148 405      422 346
Other comprehensive income                     —          —            —
                                         178 605    148 405      422 346

Condensed consolidated statement of financial position

                                  Unaudited at  Unaudited at   Audited at
                                      31 March      31 March 30 September
R'000                                     2018          2017         2017
Assets
Non-current assets                   5 334 028     4 665 294    4 723 204
Investment property                  5 022 635     4 339 685    4 438 238
Fair value of property portfolio
for accounting purposes              4 976 804     4 333 104    4 402 669
Straight-line rental income
accrual                                 45 831         6 581       35 569
Property, plant and equipment              168            80          164
Loans to executives                    148 595       162 898      122 173
Goodwill                               160 618       160 619      160 618
Deferred tax asset                       2 012         2 012        2 011
Current assets                         143 353       159 602      211 096
Trade and other receivables             70 117        51 781       74 598
Loan to holding company                      —             —       80 002
Cash and cash equivalents               73 236       107 821       56 496
Non-current assets held for sale             —             —        9 370
Total assets                         5 477 381     4 824 896    4 943 670
Equity and liabilities
Shareholders interest                3 872 359     3 743 124    3 846 010
Stated capital                       3 210 314     3 184 042    3 184 041
Reserves                               662 045       559 082      661 969
Other non-current liabilities        1 278 660       403 732      350 831
Secured financial liabilities        1 259 978       398 254      343 390
Derivative instruments                  18 682         5 478        7 441
Current liabilities                    326 362       678 040      746 829
Trade and other payables               124 550       103 007      126 788
Derivative financial instruments         1 138             —            — 
Secured financial liabilities          200 674       575 033      575 041
Loan from holding company                    —             —       45 000
Total equity and liabilities         5 477 381     4 824 896    4 943 670
The secured financial liabilities include the effects of loan initiation 
fees.

Condensed consolidated statement of changes in equity

                                                       Other
                                Stated   Retained components 
R'000/Unaudited                capital     income  of equity      Total 
Balance at 30 September
2016                           942 473     55 085    493 936  1 491 493
Issue of shares              2 241 568          —          —  2 241 568
Transfer from other
components of equity                 —    493 936   (493 936)         — 
Dividends paid                       —   (309 397)         —   (309 397) 
Total comprehensive income
for the period                       —    422 346          —    422 346
Balance at 30 September
2017                         3 184 041    661 969          —  3 846 010
Issue of shares                 26 273          —          —     26 273
Dividends paid                       —   (178 529)         —   (178 529) 
Total comprehensive income
for the period                       —    178 605          —    178 605
Balance at 31 March 2018     3 210 314    662 045          —  3 872 359

Condensed consolidated statement of cash flows

                                       Unaudited   Unaudited      Audited 
                                         for the     for the      for the
                                      six months  six months         year 
                                           ended       ended        ended
                                        31 March    31 March 30 September
R'000                                       2018        2017         2017
Net cash utilised from operating
activities                                 9 205      37 195       25 928
Cash generated from operations           229 524     210 982      406 434
Finance charges paid                     (53 457)    (46 407)     (91 578) 
Interest received                         11 667      10 964       20 469
Dividends paid                          (178 529)   (138 344)    (309 397) 
Net cash utilised in investing
activities                              (566 634)     (3 048)      56 158
Acquisition of investment property      (572 611)     (2 966)     (30 472) 
Proceeds from disposal of investment
property                                   6 000           —       26 652
Acquisition of property, plant and
equipment                                    (23)        (82)        (179) 
Pre-acquisition income                         —           —       19 433
Repayment of loans by executives               —           —       40 724
Net cash generated from financing
activities                               574 169      49 936      (49 328) 
Proceeds from issue of share capital        (149)     13 936        4 425
Proceeds from loans to holding
company                                   35 002           —      (35 002) 
Proceeds from/(repayment of)
financial liabilities                    539 316      36 000      (18 751) 
Net movement in cash and cash
equivalents                               16 740      84 083       32 758
Cash and cash equivalents at the
beginning of the period                   56 496      23 738       23 738
Cash and cash equivalents at the end
of the period                             73 236     107 821       56 496

Reconciliation of earnings to headline earnings

                                       Unaudited  Unaudited       Audited 
                                         for the    for the       for the
                                      six months six months          year 
                                           ended      ended         ended
                                        31 March   31 March  30 September
R'000                                       2018       2017          2017
Profit for the period attributable
to Gemgrow shareholders                  178 605    148 405       422 346
Earnings                                 178 605    148 405       422 346
Changes in fair value of investment            —          —       (58 265)
property
Loss on sale of investment property            —          —        (7 017) 
Headline profit attributable to
shareholders                             178 605    148 405       357 064

Consolidated condensed segmental analysis for the six months ended 
31 March 2018

The entity has 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.

Geographical
                        
R'000/Unaudited                                       Western  KwaZulu-
31 March 2018                               Gauteng      Cape     Natal  
Contractual rental income                   216 874    49 020    38 142
Straight line rental income                   6 687     1 000       783
Listed securities income                          —         —         — 
Operating and administration costs          (83 228)  (17 292)  (12 931) 
Net operating profit/(loss)                 140 333    32 728    25 994
Interest received                               465        60        73
Finance charges                                (131)       (1)       (3) 
Net operating profit/(loss)                 140 667    32 787    26 064
Changes in fair values                            —         —         — 
Reportable segment profit/(loss) 
before tax                                  140 667    32 787    26 064
Taxation                                          —         —         — 
Reportable segment profit after tax         140 667    32 787    26 064
Reportable segment assets                 3 146 555   679 041   553 426
Reportable segment liabilities              (52 849)  (13 456)  (26 254)
                                          3 093 706   665 585   527 172

R'000/Unaudited                          Limpopo       Other       Total
31 March 2018
Contractual rental income                 15 200      41 416     360 652
Straight line rental income                  382       1 410      10 262
Listed securities income                       —           —           — 
Operating and administration costs        (3 782)    (20 908)   (138 141) 
Net operating profit/(loss)               11 800      21 918     232 773
Interest received                              6      11 064      11 668
Finance charges                               (1)    (53 321)    (53 457) 
Net operating profit/(loss)               11 805     (20 339)    190 984
Changes in fair values                         —     (12 379)*   (12 379)
Reportable segment profit/(loss)before
tax                                       11 805     (32 718)    178 605
Taxation                                       —           —           — 
Reportable segment profit after tax       11 805     (32 718)    178 605
Reportable segment assets                556 265     542 094   5 477 381
Reportable segment liabilities           (13 045) (1 499 417) (1 605 022)
                                         543 219    (957 323)  3 872 359

Sectoral
R'000/
Unaudited                              Commercial  Industrial      Retail
31 March 2018
Contractual rental income                 183 941     103 485      73 226
Straight line rental income                 6 137       1 571       2 554
Operating and administration costs        (64 859)    (38 302)    (27 339) 
Net operating profit                      125 219      66 754      48 441
Finance income                                328         232         104
Finance charges                               (43)        (90)         (2) 
Net operating income/(loss)               125 504      66 896      48 543
Changes in fair values                          —           —           — 
Reportable segment profit before tax      125 504      66 896      48 543
Taxation                                        —           —           — 
Reportable segment profit after tax       125 504      66 896      48 543
Reportable segment assets               2 534 390   1 388 954   1 231 379
Reportable segment liabilities            (44 884)    (23 812)    (43 422)
                                        2 489 506   1 365 142   1 187 957

R'000/
Unaudited                                         Overheads         Total
31 March 2018
Contractual rental income                                 —       360 652
Straight line rental income                               —        10 262
Operating and administration costs                   (7 641)     (138 141) 
Net operating profit                                 (7 641)      232 773
Finance income                                       11 003        11 667
Finance charges                                     (53 321)      (53 456) 
Net operating income/(loss)                         (49 959)      190 984
Changes in fair values                              (12 379)*     (12 379) 
Reportable segment profit before tax                (62 338)      178 605
Taxation                                                  —             — 
Reportable segment profit after tax                 (62 338)      178 605
Reportable segment assets                           322 658     5 477 381
Reportable segment liabilities                   (1 492 904)   (1 605 022) 
                                                 (1 170 246)    3 872 359
* Changes in fair values relate to the swaps implemented by the company.

Geographical
                                                        Western  KwaZulu-
R'000/Unaudited                              Gauteng       Cape     Natal
31 March 2017
Contractual rental income                    207 107     46 339    34 463
Straight line rental income                        —          —         — 
Operating and administration costs           (78 479)   (18 457)  (11 852) 
Net operating profit                         128 628     27 882    22 611
Finance income                                   237          —        33
Finance charges                                 (163)       (84)        — 
Net operating income/(loss)                  128 702     27 798    22 644
Changes in fair values                             —          —         — 
Reportable segment profit before tax         128 702     27 798    22 644
Taxation                                           —          —         — 
Reportable segment profit after tax          128 702     27 798    22 644
Reportable segment assets                  2 761 242    595 478   507 760
Reportable segment liabilities               (39 962)   (10 597)  (14 751)
                                           2 721 280    584 881   493 009

R'000/Unaudited                                         Other       Total
31 March 2017
Contractual rental income                              26 998     314 907
Straight line rental income                                 —           — 
Operating and administration costs                    (22 360)   (131 148) 
Net operating profit                                    4 638     183 759
Finance income                                         10 694      10 964
Finance charges                                       (46 160)    (46 407) 
Net operating income/(loss)                           (30 828)    148 316
Changes in fair values                                     89          89
Reportable segment profit before tax                  (30 739)    148 405
Taxation                                                    —           — 
Reportable segment profit after tax                   (30 739)    148 405
Reportable segment assets                             960 416   4 824 896
Reportable segment liabilities                     (1 016 462) (1 081 772) 
                                                      (56 046)  3 743 124

Sectoral
R'000/
Unaudited                                Commercial Industrial    Retail
31 March 2017
Contractual rental income                   172 677     89 468    52 762
Straight-line rental income accrual               —          —         — 
Operating and administration costs          (65 301)   (35 632)  (22 981) 
Net operating profit                        107 376     53 836    29 781
Finance income                                  182         53        69
Finance charges                                (236)        (6)        — 
Net operating income/(loss)                 107 322     53 883    29 850
Changes in fair values                            —          —         — 
Reportable segment profit before tax        107 322     53 883    29 850
Taxation                                          —          —         — 
Reportable segment profit after tax         107 322     53 883    29 850
Reportable segment assets                 2 427 301  1 342 556   643 211
Reportable segment liabilities              (24 693)   (16 826)  (50 054)
                                          2 402 608  1 325 730   593 157

R'000/
Unaudited                                           Overheads       Total
31 March 2017
Contractual rental income                                   —     314 907
Straight-line rental income accrual                         —           — 
Operating and administration costs                     (7 234)   (131 148) 
Net operating profit                                   (7 234)    183 759
Finance income                                         10 660      10 964
Finance charges                                       (46 165)    (46 407) 
Net operating income/(loss)                           (42 739)    148 316
Changes in fair values                                     89          89
Reportable segment profit before tax                  (42 650)    148 405
Taxation                                                    —           — 
Reportable segment profit after tax                   (42 650)    148 405
Reportable segment assets                             411 828   4 824 896
Reportable segment liabilities                       (990 199) (1 081 772) 
                                                     (578 371)  3 743 124

Geographical

                                                      Western   KwaZulu-
R'000/Audited                               Gauteng      Cape      Natal
30 September 2017
Contractual rental income                   421 238    94 998     70 967
Straight line rental income accrual          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/(loss) 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/Audited                                           Other       Total
30 September 2017
Contractual rental income                              78 863     666 066
Straight line rental income accrual                    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/(loss) before tax             5 387     422 347
Taxation                                                    —           — 
Reportable segment profit after tax                     5 387     422 347
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/Audited                            Commercial  Industrial     Retail
30 September 2017
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/Audited                                        Overheads       Total
30 September 2017
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 headline earnings to distributable earnings

                                       Unaudited   Unaudited      Audited 
                                         for the     for the      for the
                                      six months  six months         year 
                                           ended       ended        ended
                                        31 March    31 March 30 September
R'000                                       2018        2017         2017
Headline profit attributable to
shareholders                             178 605     148 405      357 064
Cost of strategic repositioning                            —            — 
Changes in fair values of financial
instruments                               12 379         (89)       1 875
Straight line rental income accrual      (10 262)          —      (35 569) 
Amortisation of loan raising costs                         —            — 
Deferred tax                                               —            — 
Pre-effective date distribution                       19 433       19 432
Distributable earnings attributable
to shareholders                          180 722     167 749      342 802
Number of A shares in issue           47 352 203  47 352 203   47 352 203
Number of B shares in issue          405 042 105 400 710 459  400 710 459
Weighted average number of A shares
in issue                              47 352 203  47 352 203   47 352 203
Weighted average number of B shares
in issue                             403 994 895 400 710 459  400 710 459
Basic and diluted earnings per A
share (cents)                              39,57       33,12        94,26
Basic and diluted earnings per B
share (cents)                              39,57       33,12        94,26
Headline and diluted headline
earnings per A share (cents)               39,57       33,12        79,69
Headline and diluted headline
earnings per B share (cents)               39,57       33,12        79,69

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.

Directors
Mark Kaplan (CEO) 
Junaid Limalia (CFO) 
Alon Kirkel (COO)
Gregory Kinross (Chairman)* 
Clifford Abrams*
Arnold Basserabie*
Ayesha Rehman*
* Independent non-executive

Registered Office
Gemgrow Properties Limited
3rd Floor Upper Building
1 Sturdee Avenue Rosebank Johannesburg 2196
Transfer Secretaries
Link Market Services South Africa Proprietary Limited

Sponsor
Java Capital Trustees and Sponsors Proprietary Limited

Company Secretary
Gillian Prestwich
CIS Company Secretaries Proprietary Limited 

gemgrow.co.za
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