Wrap Text
Provisional summarised audited consolidated results
for the year ended 30 September 2018 and change to the board
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"
Provisional summarised audited consolidated results
for the year ended 30 September 2018 and change to the board
Highlights for the year
106,91 cents dividend per A share for the year.
78,70 cents dividend per B share for the year.
26,81% loan to value strong balance sheet.
R549 million of concluded acquisitions transferred in the
current year.
Two property acquisitions totalling R728,5 million concluded
during the current year, both will have transferred in the
next financial period.
Nature of business
Gemgrow is a specialist Real Estate Investment Trust ("REIT")
holding a diverse portfolio of office, retail and industrial
properties. As at 30 September 2018 the portfolio comprised
135 properties, located in all nine provinces of South Africa
and valued in excess of R4,8 billion.
The company's medium-term financial focus is on paying 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.
Operating environment
The company is operating in an environment of weak property
fundamentals - tenants are under pressure and there is an
over-supply of office space in most regions. This has resulted
in a more competitive rental environment where rental reversions
and higher vacancies have prevailed. We have addressed these
challenges by taking action across a broad front, such as:
* Strengthening our asset management resources and leasing
execution capability;
* Disposing of non-core assets with non-sustainable income
streams;
* Bolstering the company's balance sheet to be in a strong
position to take advantage of opportunities in a tough,
cash-strapped environment.
We are well under way with our strategy of defensively
repositioning our portfolio to produce improved sustainable
income with stronger lease covenants, an improved weighted average
lease expiry profile and tenant demand. This has resulted in the
satisfactory performance achieved in the current year, and will
hopefully help us to deal as effectively as possible with the
market-related challenges ahead of us.
Summarised consolidated financial results
For the year ended 30 September 2018
R'000 2018 2017
Revenue (excluding straight line rental income) 768 916 666 066
Property expenses (286 703) (263 056)
Administration and corporate costs (13 361) (8 531)
Finance charges (122 827) (91 577)
Finance income 23 369 20 468
Distributable income 369 394 323 370
Pre-effective date distribution# - 19 432
Total dividend 369 394 342 802
Property expenses as a percentage of revenue -
gross (%) 37 39
Property expenses as a percentage of revenue -
net (%) 14 17
A share - dividend for the quarter ended 31
December 12 353 11 764
B share - dividend for the quarter ended 31
December 77 687 71 495
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
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 six months/quarter
ended 30 September^ 25 942 12 353
B share - Dividend for the six months/quarter
ended 30 September^ 162 730 76 137
Total dividend 369 394 342 802
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
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 six
months/quarter ended 30 September^ 54,73 26,09
Dividend per B share (cents) for the six
months/quarter ended 30 September^ 40,18 19,00
185,61 175,39
^ The dividend was declared on 21 November 2018
# 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 company changed its dividend payment cycle from quarterly to
bi-annually.
Commentary
Revenue
Revenue includes rental income and expenditure that is recoverable from
tenants.
* For the year ended 30 September 2018, the portfolio comprised 22% retail,
33% office and 45% industrial based on gross lettable area ("GLA"). In
revenue terms, it comprised retail at 23%, office 50% and industrial 27%.
The average gross monthly rental per m2 per sector was R92 for retail,
R118 for office and R44 for industrial.
* Vacancies decreased from 7,7% to 7,6%. At a sector level, retail vacancies
were 8,7%, office vacancies 11,3% and industrial vacancies 4,4%.
* The total GLA of the portfolio increased from 690 263m2 to 751 981m2 as a
result of acquisitions concluded last year and transferred in the current
year. During the period, contracted leases in respect of 156 833m2 expired
and 112 412m2 (72%) of this GLA was renewed. Of the remaining 44 421m2, a
further 14 857m2 (33%) was re-let to new tenants. In total 81% of the GLA
of leases that expired during the period, were renewed to existing tenants
or re-let to new tenants during the period.
* The weighted average of the lease rental escalation was 8,09%, 8,14% and
8,15% for retail, office and industrial properties respectively.
* The step-up escalations on renewed leases over the entire portfolio was
2,9%, of which retail comprised 2,2%, office 3,5% and industrial 2,3%.
* The step-up escalations/reversions on new leases over the entire portfolio
was -14%, of which retail comprised 10%, office -17% and industrial -21%.
12-month letting report
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 (9 795) (8 093) (1 702) 82,62 17,38
Net adjustments (590) 597 (1 187)
Adjusted totals 751 981 693 266 58 715 92,19 7,81
Net gain/(loss) - 1 703 (1 703)
As at 30 September 2018 751 981 694 969 57 012 92,42 7,58
Income Statement
Operating costs
% of % of
R'000 2018 total 2017 total
Municipal expenses 207 111 72 173 770 67
Property management 21 227 8 18 843 8
Security 19 099 7 19 700 7
Repairs and maintenance 9 350 3 13 743 5
Cleaning 9 519 3 8 818 3
Insurance 3 806 1 3 212 1
Other 16 591 6 24 970 9
Total 286 703 100 263 056 100
Municipal expenses have increased primarily due to the acquisitions
concluded in the previous year that transferred in the current year.
Municipal rates revaluations also contributed to the increase in municipal
costs. The higher property management fees were in line with increases in
rental income and the new properties that transferred during the year.
Management implemented cost containment measures across the portfolio
which also resulted in a reduction of repairs and maintenance costs
for the year.
Administrative expenses and corporate costs
% of % of
R'000 2018 total 2017 total
Salaries 7 478 55 5 491 64
Professional service fees 1 671 13 1 690 20
Other 4 212 32 1 350 16
Total 13 361 100 8 531 100
The higher expense in respect of salaries is due to the growth in the staff
complement during the 2018 financial year. The other expenses relate to
audit fees, management fees payable to Gemgrow's holding company, Arrowhead
Properties Limited ("Arrowhead") for services rendered, bank charges and
miscellaneous expenses.
Finance income
% of % of
R'000 2018 total 2017 total
Interest received on bank balances
and debtors 5 775 25 5 078 25
Interest received on loans to
executives 17 594 75 15 390 75
Total 23 369 100 20 468 100
Interest on the loans to executives has increased due to additional shares
issued to the company's executive directors during the year.
Finance charges
% of % of
R'000 2018 total 2017 total
Interest paid on loans 115 381 95 86 860 94
Interest paid on interest rate swaps
6 678 5 3 262 4
Amortisation of loan raising costs 446 0 777 1
Other interest paid 322 0 678 1
Total 122 827 100 91 577 100
The increased interest expense is in relation to additional debt funding
used to finance the acquisitions that transferred during the period. The
higher interest expense on swaps is further due to the company fully
hedging its debt in the current year in comparison to the 58% of debt
hedged in the prior year.
Statement of financial position
Investment properties
The 135 retail, industrial and office properties valued in excess of R4,8
billion had an average property value of R35,9 million.
Gemgrow Cumulative
portfolio portfolio* Total
No. of No. of No. of
build- build- build-
ings R'000 ings R'000 ings R'000
Balance at the beginning
of the period 29 2 510 319 100 1 937 289 129 4 447 608
Acquisitions,
additions and fair 6 404 456 6 80 751 12 485 207
value adjustments
Disposals - - (6) (88 074) (6) (88 074)
Balance at the end
of the period^ 35 2 914 775 100 1 929 966 135 4 844 741
* Gemgrow's shareholding in Cumulative Properties Limited ("Cumulative") was
100% at 30 September 2018.
^ The above includes non-current assets held for sale.
The value of investment property has increased from R4,5 billion at
30 September 2017 to R4,8 billion at 30 September 2018. The increase was
attributable to the acquisition of 12 investment properties valued at
R549 million, 6 property disposals valued at R88 million, capital additions
of R45 million and a downward fair value adjustment of R130 million.
Loans to executives pursuant to the Gemgrow Share Purchase and Option
Scheme ("the Scheme")
During the period under review, in accordance with the Gemgrow Share
Purchase and Option Scheme, loans of R26,4 million were made to the company's
executives to fund the purchase of shares in the company. These loans bear
interest at a rate equal to the dividend of the company for the period ended
30 September 2018. The shares have been pledged as security to the company for
the outstanding loans and the company has recourse against individual executives
under the Scheme.
Further loans will be made for the financial period ended 30 September 2018
in respect of the Scheme. Post these loans, the Scheme will be discontinued,
and no further loans will be issued to executives to fund the purchase of
shares in the company.
Goodwill
Goodwill of R160 million originally arose when Gemgrow Asset Management
("GAM") (formerly Vukile Asset Management), which previously performed the
asset management for Gemgrow (formerly Synergy Income Fund), was acquired
by Gemgrow on 1 October 2016 (when the company was reconstituted and
repositioned as a specialist REIT). The asset management function was
there upon internalised within the Group with a saving on the annual asset
management fees previously incurred. The goodwill was tested for impairment
by reviewing the present value of the future discounted cash flows of the
portfolio ("net present value") against the carrying value of the assets of
the company. Taking into account the effect of the deterioration in market
conditions resulting in reversions and expiries on lease renewals towards
the latter part of the current financial period, a premium of the net
present value over the carrying value no longer exists and therefore the
goodwill has been impaired in full.
Trade and other receivables
The material items comprise of trade debtors of R17 million; R48 million
relates to municipal recovery accruals; R16 million in relation to amounts
due in respect of adjustment accounts in respect of acquisitions and disposals;
R11 million relating to municipal deposits; R4,2 million in respect of interest
due on directors' loans; and R2,5 million for prepaid expenses.
Share Capital
The company issued 5 102 021 Gemgrow A shares at the end of the current
financial period to fund a purchase of investment property transferred in
the next financial period. As these shares were not beneficially allocated
to the new shareholder at year end, this resulted in a difference between
the stated capital and shares in issue.
Secured financial liabilities
The loan to value of the group was 26,81%. The interest rate swaps resulted
in the interest payable being over hedged by 10% because of excess cash being
retained in loan access facilities. The effective interest rate for the year
ended 30 September 2018 was approximately 10%.
Three-month Prime rate Capital 2018
Maturity Jibar margin % margin % R'000
December 2018# - minus 1,5 126 707
September 2019 2,35 - 139 000
September 2022 - minus 1,6 50 000
October 2022 2,15 - 525 000
November 2022 2,20 - 460 842
Total exposure 1 301 549
(Excluding loan initiation fees and fair value adjustments on swaps.)
# The loan facility of R201 million has been reduced with excess cash
deposited into an access facility.
Gemgrow has further entered into interest rate swaps to hedge its exposure
to fluctuations in the 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 R600 million until 31 October 2022; and
* an interest rate swap over R525 million until 15 November 2022.
During the 12-month period, the company refinanced loans of R50 million and
R525 million for 5-year terms expiring in September 2022 and October 2022
respectively. In addition, the company finalised a further 5-year loan to
fund acquisitions that transferred during the year to the value of R549
million. The company also implemented swap arrangements to hedge the R525
million loan refinance and the additional funding for the acquisitions.
The company has a loan facility of R201 million that expires on 3 December
2018. Post year-end, the company concluded a 5-year renewal, in respect of
such facility.
Trade and other payables
The material items comprising trade creditors are tenant deposits of
R48 million; trade creditors of R5,9 million; VAT payable of R5 million;
R64 million of municipal and other accruals and R5,8 million relating to
income received in advance.
Status of Chief Executive Officer ("CEO")
Mark Kaplan has been fulfilling the CEO role of both Gemgrow and its
holding company Arrowhead. Mark intends to step down as the CEO of Gemgrow
in the coming year, by no later than 30 June 2019. It was always intended
that Mark would only steer Gemgrow during its initial years and we are now
confident that the business is well placed to move ahead with the solid
management capability that has been established.
A board sub-committee under the guidance of the remuneration and nomination
committee, consisting of all the non-executive directors of Gemgrow, has
been formed to conduct a process to appoint a successor to Mark, with both
internal and external candidates to be considered, and a further
announcement on the appointment of the new CEO will be released in due course.
Gemgrow is confident that it will be able to achieve this transition without
any disruption or risk to the business model and operations, and that Mark
will be available to ensure a smooth handover of responsibilities.
Prospects
In the paragraph above addressing the current operating environment, we
referred to the steps being taken to respond to the current and anticipated
market conditions. The company has noted a weakening in lease renewals in
the latter part of the 2018 financial year, which appears set to continue
in the next financial year. In instances where tenants have elected to renew
their lease agreements, this has often come at a cost with rental reversions
and higher tenant installation costs. Given the uncertain economic outlook,
it is difficult to accurately forecast income, which is further impacted by
the fact that 36% of the company's rental income is linked to leases that
will be up for renewal in 2019.
In assessing the lease renewals for the year ended 30 September 2019, where
tenants have communicated that they will be renewing leases, the company has
forecast these renewals at market rental rates, which in many cases will be
less than those that currently apply. This forecast could be negatively
impacted if any tenants for which the company has forecast renewals, do not
renew their leases upon expiry. In contrast, however, management has not
forecast any income for the letting of current and upcoming vacancies, which
management believes to be conservative. Any material potential change (positive
or negative) in the political landscape and its impact on the economy has not
been considered in our forecast.
In light of the above, the company forecasts an increase of 5% in the A share
dividend to 112,25 cents per share for the year ended 30 September 2019 (though
the actual dividend will be the lower of 5% or CPI, as set out in the company's
Memorandum of Incorporation). The dividend on the B shares is consequentially
forecast to decline by 10% to 70,83 cents per share. This forecast has not been
reviewed or reported on by the group's auditors.
Summary of financial performance
30 Sep 2018 30 Sep 2017
Dividend per Gemgrow A share (cents) 106,91 101,87
Dividend per Gemgrow B share (cents) 78,70 73,51
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 30 September
2018 (cents)* 962 972
Net asset value per B share at 30 September
2018 (cents) 805 845
# A Shares (5 102 021) were issued during the year not yet taken up by new
shareholder resulting in the difference between the stated capital and
shares in issue.
* The net asset value per Gemgrow A share has been calculated on the 60-day
volume weighted average trading price as at 30 September 2018 limited to
the combined net asset value in accordance with the provisions of Gemgrow`s
Memorandum of Incorporation.
Payment of dividend for the six months ended 30 September 2018
The board of directors ("Board") has approved a gross dividend (dividend
number 7) of 54,73244 cents per A share and 40,18191 cents per B share for
the six months ended 30 September 2018 in accordance with the timetable
set out below:
2018
Last day to trade Tuesday, 11 December
Shares trade ex-distribution Wednesday, 12 December
Record date Friday, 14 December
Payment date Tuesday, 18 December
Share certificates may not be dematerialised or rematerialised between
Wednesday, 12 December 2018 and Friday, 14 December 2018, both days
inclusive.
The dividend will be transferred to dematerialised shareholders' Central
Securities Depository Participant ("CSDP") broker accounts on Tuesday,
18 December 2018. Certificated shareholders' dividend payments will be
paid to certificated shareholders' bank accounts on or about Tuesday,
18 December 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
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 are exempt
from income tax in terms of the general dividend exemption in section
10(1)(k)(i) of the Income Tax Act. 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 43,78595 cents per A share and 32,14553 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:
52 454 224;*
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
* The company issued 5 102 021 Gemgrow A shares at the end of the current
financial period to fund a purchase of investment property transferred in
the next financial period. As these shares were not beneficially allocated
to the new shareholder at year end, this resulted in a difference between
the stated capital of 47 352 203 and issued share capital of 52 454 224.
Events after reporting period
The group concluded property acquisitions to the value of R728,5 million in
the year, of which R100 million transferred in October 2018. The remaining
R628,5 million is in respect of a joint venture with the Moolman Group,
which is subject to the fulfilment of certain conditions precedent. The
yield on the combined value of the acquisitions is 11,60%. The two
transactions will be funded with R578,5 million of debt and the issue of
additional Gemgrow A shares to the value of R150 million. The combined cost
of funding the debt and the additional Gemgrow A shares is approximately
10,3%. The company therefore expects to record a margin of 1,3% on the
combined value of the transactions for the 11-month period ending
30 September 2019.
The company had a loan facility of R201 million expiring on 3 December
2018, which it has renewed for a term of 5 years.
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 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 Committee,
IAS 34: Interim Financial Reporting except for paragraph 16(A)(j) of IAS 34,
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 annual financial statements for the year ended
30 September 2017.
This summarised consolidated report is extracted from audited information
but is not in 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
audited financial statements, including the auditor's unqualified audit
opinion is available for inspection at the company's registered offices at
3rd Floor Upper Building, 1 Sturdee Avenue, Rosebank, Johannesburg. The
auditor's report does not necessarily report on all of the information
contained in this announcement of the financial results. 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 audit report together with the accompanying financial information
from the company's registered office.
By order of the Board
21 November 2018
Condensed consolidated statement of comprehensive income
Audited for Audited for
the year end the year ended
R'000/Audited 30 Sep 2018 30 Sep 2017
Rental income 768 916 666 066
Straight line rental income accrual (1 154) 35 569
Total revenue 767 762 701 635
Property expenses (286 703) (263 056)
Administration and corporate costs (13 361) (8 531)
Net operating profit 467 698 430 048
Changes in fair values (93 643) 63 407
Profit from operations 374 055 493 455
Finance charges (122 827) (91 577)
Finance income 23 396 20 468
Profit before capital items 274 597 422 346
Impairment of Goodwill (160 619) -
Profit before taxation 113 978 422 346
Taxation (2 011) -
Total comprehensive income for the year 111 967 422 346
Condensed consolidated statement of financial position
Audited for Audited for
the year ended the year ended
R'000/Audited 30 Sep 2018 30 Sep 2017
Assets
Non-current assets 4 938 077 4 723 204
Investment property 4 772 341 4 438 238
Fair value of property portfolio for
accounting purposes 4 737 927 4 402 669
Straight line rental income accrual 34 414 35 569
Property, plant and equipment 181 164
Loans to executives 148 596 122 173
Goodwill - 160 618
Derivative financial assets 16 959 -
Deferred tax asset - 2 011
Current assets 135 639 211 096
Trade and other receivables 102 224 74 598
Loan to holding company - 80 002
Cash and cash equivalents 33 415 56 496
Non-current assets held for sale 72 400 9 370
Total assets 5 146 116 4 943 670
Equity and liabilities
Shareholders' interest 3 714 528 3 846 010
Stated capital 3 209 802 3 184 041
Reserves 504 726 661 969
Other-non current liabilities 1 034 565 350 831
Secured financial liabilities 1 033 343 343 390
Derivative instruments 1 222 7 441
Current liabilities 397 023 746 829
Trade and other payables 129 159 126 788
Secured financial liabilities 265 707 575 041
Derivative instruments 2 157 -
Loan from holding company - 45 000
Total equity and liabilities 5 146 116 4 943 670
Condensed consolidated statement of changes in equity
Other
Stated Retained components
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 25 761 - - 25 761
Dividends paid - (269 210) - (269 210)
Total comprehensive income
for the period - 111 967 - 111 967
Balance at 30 September
2018 3 209 802 504 726 - 3 714 528
Condensed consolidated statement of cash flows
Audited for Audited for
the year ended the year ended
R'000/Audited 30 Sep 2018 30 Sep 2017
Net cash utilised from operating
activities 79 121 25 928
Cash generated from operations 447 789 406 434
Finance charges paid (122 827) (91 578)
Interest received 23 369 20 469
Dividends paid (269 210) (309 397)
Net cash utilised in investing activities (514 659) 56 158
Acquisition of investment property (602 672) (30 472)
Proceeds from disposal of investment
property 88 074 26 652
Acquisition of property, plant and
equipment (61) (179)
Pre-acquisition income - 19 433
Repayment of loans to executives - 40 724
Net cash generated from financing
activities 412 459 (49 328)
(Outflow)/proceeds from issue of share
capital (662) 4 425
Repayment/(proceeds) to/from loans to
holding company 35 002 (35 002)
Proceeds/(repayment) of financial
liabilities 378 117 (18 751)
Net movement in cash and cash equivalents (23 080) 32 758
Cash and cash equivalents at the
beginning of the period 56 496 23 738
Cash and cash equivalents at the end of
the period 33 415 56 496
Reconciliation of earnings to headline earnings
Audited for Audited for
the year ended the year ended
R'000/Audited 30 Sep 2018 30 Sep 2017
Profit for the period attributable to
Gemgrow shareholders 111 967 422 346
Earnings 111 967 422 346
Changes in fair value of investment 130 111 (58 265)
property
Profit on sale of investment property (15 448) (7 017)
Impairment of goodwill 160 618 -
Headline earnings attributable to
shareholders 387 248 357 064
Number of A shares in issue* 47 352 203 47 352 203
Number of B shares in issue 405 042 105 400 710 459
Weighted average number of Arrowhead
shares in issue 970 994,00
Weighted average number of A shares in
issue 47 352 203 47 352 203
Weighted average number of B shares in
issue 404 199 511 400 710 459
Basic and diluted earnings per share
(A share) (cents) 24,80 94,26
Basic and diluted earnings per share
(B share) (cents) 24,80 94,26
Headline and diluted headline earnings
per share (A share) (cents) 85,76 79,69
Headline and diluted headline earnings
per share (B share) (cents) 85,76 79,69
* The company issued 5 102 021 Gemgrow A shares at the end of the current
financial period to fund a purchase of investment property transferred in
the next financial period. As these shares were not beneficially allocated
to the new shareholder at year end, this resulted in a difference between
the stated capital and shares in issue.
The company's authorised but unissued shares were placed under the director's
control by shareholders at the company's annual general meeting held on
23 March 2017.
Consolidated condensed segmental analysis
For the year ended 30 September 2018
Geographical
The entity has four reportable segments based on the geographic locations of
the properties, which are the entity's strategic business segments. The
company'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.
Western KwaZulu-
R'000/Audited Gauteng Cape Natal
30 September 2018
Contractual rental income 451 893 98 980 77 040
Straight line rental income 4 716 (11 867) 1 213
Operating and administration costs (184 012) (35 566) (28 749)
Net operating profit 272 597 51 547 49 504
Finance income 1 114 113 136
Finance charges (373) (9) (3)
Net operating income/(loss) 273 338 51 651 49 636
Changes in fair values (135 281) (8 061) (40 688)
Impairment of goodwill - - -
Reportable segment profit before tax 138 057 43 590 8 948
Current taxation - - -
Deferred taxation - - -
Reportable segment profit after tax 138 057 43 590 8 948
Reportable segment assets 3 110 677 671 001 533 329
Reportable segment liabilities (56 246) (13 109) (25 309)
3 054 431 657 892 508 020
R'000/Audited Limpopo Other Total
30 September 2018
Contractual rental income 31 925 109 077 768 916
Straight line rental income 2 941 1 844 (1 154)
Operating and administration costs (7 956) (43 781) (300 064)
Net operating profit 26 910 67 140 467 698
Finance income 16 21 990 23 369
Finance charges (1) (122 441) (122 827)
Net operating income/(loss) 26 925 (33 311) 368 240
Changes in fair values 42 919 47 468 (93 643)
Impairment of goodwill - (160 619) (160 619)
Reportable segment profit before tax 69 844 (146 462) 113 978
Current taxation - - -
Deferred taxation - (2 011) (2 011)
Reportable segment profit after tax 69 846 2 011 111 967
Reportable segment assets 636 805 194 304 5 146 115
Reportable segment liabilities (2 161) (1 334 763) (1 431 588)
634 644 (1 140 459) 3 714 528
Sectoral
R'000/Audited Commercial Industrial Retail
30 September 2018
Contractual rental income 373 906 213 822 181 188
Straight line rental income (8 006) (1 090) 7 942
Operating and administration costs (139 212) (82 972) (66 420)
Net operating profit 226 688 129 760 122 710
Finance income 661 478 365
Finance charges (197) (171) (17)
Net operating income/(loss) 227 152 130 067 123 058
Changes in fair values (157 411) (43 037) 70 337
Impairment of goodwill - - -
Reportable segment profit before tax 69 741 87 030 193 395
Current taxation - - -
Deferred taxation - - -
Reportable segment profit after tax 69 741 87 030 193 395
Reportable segment assets 2 375 588 1 379 563 1 276 390
Reportable segment liabilities (46 049) (26 840) (41 638)
2 329 539 1 352 723 1 234 752
R'000/Audited Overheads Total
30 September 2018
Contractual rental income - 768 916
Straight line rental income - (1 154)
Operating and administration costs (11 460) (300 064)
Net operating profit (11 460) 467 698
Finance income 21 865 23 369
Finance charges (122 442) (122 827)
Net operating income/(loss) (112 037) 368 240
Changes in fair values 36 468 (93 643)
Impairment of goodwill (160 619) (160 619)
Reportable segment profit before tax (236 188) 113 978
Current taxation - -
Deferred taxation (2 011) (2 011)
Reportable segment profit after tax (238 198) 111 967
Reportable segment assets 114 575 5 146 115
Reportable segment liabilities (1 317 061) (1 431 588)
(1 202 486) 3 714 528
Consolidated condensed segmental analysis
For the year ended 30 September 2018
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 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/Audited 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
Western KwaZulu-
R'000/Audited - Restated (*) Gauteng Cape Natal
30 September 2017
Contractual rental income 421 238 94 997 70 967
Straight line rental income 18 738 3 505 2 932
Operating and administration costs (160 143) (35 386) (24 385)
Net operating profit 279 833 63 116 49 514
Finance income 605 47 100
Finance charges (405) (251) (17)
Net operating income/(loss) 280 033 62 912 49 597
Changes in fair values 1 060 28 097 (4 744)
Reportable segment profit before
tax 281 093 91 009 44 853
Current taxation - - -
Deferred taxation - - -
Reportable segment profit after
tax 281 093 91 009 44 853
Reportable segment assets 2 856 785 655 642 536 329
Reportable segment liabilities (41 672) (13 530) (26 215)
2 815 113 642 112 510 114
R'000/Audited - Restated (*) Limpopo Other Total
30 September 2017
Contractual rental income 26 459 52 405 666 066
Straight line rental income 1 403 8 991 35 569
Operating and administration costs (7 176) (44 497) (271 587)
Net operating profit 20 686 16 899 430 048
Finance income 11 19 705 20 468
Finance charges (1) (90 903) (91 577)
Net operating income/(loss) 20 696 (54 299) 358 939
Changes in fair values 15 159 23 835 63 407
Reportable segment profit before
tax 35 855 (30 464) 422 346
Current taxation - - -
Deferred taxation - - -
Reportable segment profit after
tax 35 855 (30 464) 422 346
Reportable segment assets 202 128 692 786 4 943 670
Reportable segment liabilities (2 014) (1 014 229) (1 097 660)
200 114 (321 443) 3 846 010
* The segmental report was restated to reflect the Limpopo region in the
prior year, when it was not considered to be a strategic node.
Consolidated condensed segmental analysis
For the year ended 30 September 2018
Sectoral
R'000/Audited Commercial Industrial Retail Overheads Total
30 September 2017
Contractual
rental income 359 066 194 343 112 657 - 666 066
Straight line
rental income 24 008 7 024 4 537 - 35 569
Operating and
administration
costs (134 088) (74 533) (41 497) (21 468) (271 587)
Net operating
profit 248 986 126 833 75 697 (21 468) 430 048
Finance income 331 339 166 19 632 20 468
Finance charges (486) (183) (10) (90 898) (91 577)
Net operating
income/(loss) 248 831 126 989 75 852 (92 734) 358 939
Changes in fair
values 39 748 14 158 4 359 5 142 63 407
Reportable segment
profit/(loss)
before tax 288 579 141 147 80 211 (87 592) 422 346
Taxation - - - - -
Reportable
segment profit
after tax 288 579 141 147 80 211 (87 592) 422 346
Reportable
segment assets 2 511 992 1 374 418 676 343 380 917 4 943 670
Reportable segment
liabilities (29 326) (26 248) (55 950) (986 136) (1 097 660)
2 482 666 1 348 170 620 393 (605 219) 3 846 010
Reconciliation of headline earnings to distributable earnings
Audited for Audited for
the year ended the year ended
R'000/Audited 30 Sep 2018 30 Sep 2017
Headline profit attributable to shareholders 387 248 357 064
Changes in fair values of financial
instruments (21 020) 1 875
Straight line rental income accrual 1 154 (35 569)
Amortisation of loan raising costs - -
Deferred tax 2 011 -
Pre-effective date distribution - 19 432
Distributable earnings attributable to
shareholders 369 394 342 802
Number of A shares in issue 47 352 203 47 352 203
Number of B shares in issue 405 042 105 400 710 459
Weighted average number of A shares in issue 47 352 203 47 352 203
Weighted average number of B shares in issue 404 199 511 400 710 459
Basic and diluted earnings per share (A and B
combined) (cents) 24,80 94,26
Headline and diluted headline earnings per
share (A and B combined) (cents) 85,76 79,69
Directors
Gemgrow Properties Limited
Gregory Kinross* (Chairperson)
M Kaplan (CEO)
A Kirkel (COO)
J Limalia (CFO)
C Abrams*
A Basserabie*
A Rehman*
* Independent non-executive.
All directors are South African.
Registered office
Gemgrow Properties Limited
1 Sturdee Avenue
3rd Floor
Upper Building
Rosebank, 2196
(PO Box 685, Melrose Arch, 2076)
Transfer secretaries
Link Market Services South Africa Proprietary Limited
(Registration number 2000/007239/07)
13th Floor, 19 Ameshoff Street
Braamfontein, 2001
(PO Box 4844, Johannesburg, 2000)
Sponsor
Java Capital Trustees and Sponsors Proprietary Limited
(Registration number 2006/005780/07)
6A Sandown Valley Crescent
Sandton, 2196
(PO Box 2087, Parklands, 2121)
Company secretary
Gillian Prestwich
CIS Company Secretaries Proprietary Limited
(Registration number 2006/024994/07) Rosebank Towers, 15 Biermann Avenue Rosebank, 2001
(PO Box 61051, Marshalltown, 2107)
Website www.gemgrow.co.za
Date: 21/11/2018 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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