Wrap Text
Condensed unaudited results for six months ended 31 December 2018
Growthpoint Properties Limited
(Incorporated in the Republic of South Africa)
(Registration number 1987/004988/06)
A Real Estate Investment Trust, listed on the JSE
Share code: GRT ISIN: ZAE000179420
Condensed unaudited results for the six months ended 31 December 2018
Group salient features
Investment proposition:
- Sustainable quality of earnings
- 15-year track record of uninterrupted dividend growth
- Underpinned by high-quality physical property assets
- Diversified across international geographies and sectors
- Dynamic and proven management track record
- Best practice corporate governance
- Transparent reporting
- Level 3 B-BBEE contributor
- 5.9% growth in distributable income from FY18
- 105.8 (cents per share)
Dividend per share growth of 4.5% from FY18
- R138.7bn in group property assets (4.3% growth from FY18)
- 35.9% LTV
Gearing levels remain conservative, increased from 35.2% at FY19
- 2 570 NAV (cents per share)
An increase of 0.5% from FY18
- Baa3 global scale and AAA .za national scale rating from Moody's
- Included in major sustainability indices: FTSE/JSE Responsible Investment Index,
Dow Jones Sustainability Index (DJSI), FTSE4Good Emerging Index
Commentary
Growthpoint is an international property company that provides space to thrive with innovative and
sustainable property solutions.
Introduction
Growthpoint is the largest South African primary listed REIT with a quality portfolio of 447 directly owned
properties in South Africa (RSA) valued at R77.2 billion.
We have a 66.0% interest in ASX-listed Growthpoint Properties Australia (GOZ), which owns 59 properties in
Australia valued at R38.3 billion.
Growthpoint has six equity-accounted investments, valued at R15.3 billion. Our 50% share of the V&A
Waterfront (V&A) (R7.5 billion) is the largest of these investments, followed by a 28.96% stake in London
Stock Exchange (AIM)-listed Globalworth Real Estate Investments (GWI) (R5.2 billion) and a 21.6% stake in
Warsaw Stock Exchange-listed Globalworth Poland Real Estate (GPRE) (R2.5 billion).
Growthpoint also has a listed investment which is an 18.2% investment in ASX-listed Industria REIT, owned by
GOZ, valued at R819.0 million.
In line with Growthpoint's vision "to be a leading international property company providing space to
thrive", the company's strategy incorporates the optimisation and streamlining of our South African portfolio,
the introduction of new revenue streams via the Funds Management business, trading and development, and further
international diversification.
The company's objective is to grow and nurture a diversified portfolio of quality investment properties,
providing accommodation to a wide spectrum of clients and delivering sustainable income distributions and
capital appreciation, optimised by effective financial structures. Effectively, net property income received
by the property portfolios of South Africa (RSA) and GOZ, including interest received, the distributable income
received from the equity-accounted and listed investments, less administration and operating overheads, interest
on debt and normal taxation, is distributed to Growthpoint shareholders bi-annually. Growthpoint's distributions
are based on sustainable income generated from rentals, trading profits, development fees and distributions
and management fees from its Funds Management business.
Growthpoint is included in the FTSE/JSE Top40 Index (J200) with a market capitalisation of R69.2 billion at
31 December 2018 (HY19). Over the reporting period, on average, more than 226.6 million shares traded per
month (HY18: 180.0 million). The monthly average value traded was R5.5 billion (HY18: R4.5 billion). This
makes Growthpoint the most liquid and tradable way to own commercial property in South Africa.
The value of Growthpoint's property portfolio is split between South African (inclusive of the V&A) (62.3%)
and international (37.7%) assets. The RSA portfolio represents 84.3% by gross lettable area (GLA). It is well
diversified in the three major sectors of commercial property, being retail, office and industrial. Most of
the value of the RSA portfolio is in economic nodes within major metropolitan areas.
For the period under review the net asset value (NAV) of the group increased by 0.5% to 2 570 (FY18: 2 556)
cents per share.
Growth in distributions
Growthpoint delivered growth in distributions per share for HY19 of 4.5% and has declared an interim
dividend of 105.8 cents per share for the six months ended 31 December 2018. This growth is in line with
the guidance given to the market for FY19.
Distributable income increased by R173 million or 5.9% to R3.1 billion.
Basis of preparation
The summarised consolidated financial statements are prepared in accordance with International Financial
Reporting Standards, IAS 34 Interim Financial Reporting, the SAICA Financial Reporting Guides as issued by the
Accounting Practices Committee and Financial Pronouncements as issued by Financial Reporting Standards Council,
and the requirements of the Companies Act of South Africa. The accounting policies applied in preparing these
financial statements are in terms of International Financial Reporting Standards and are consistent with those
applied in the previous annual financial statements.
These summarised consolidated financial statements are not audited. Mr G Volkel (CA(SA)), Growthpoint's
Financial Director, was responsible for supervising the preparation of these summarised consolidated financial
statements.
Growthpoint Properties Australia (GOZ)
The investment in GOZ was accounted for in terms of IAS 21 The Effects of Changes in Foreign Exchange Rates.
The statement of financial position includes 100% of the assets and liabilities of GOZ, converted at the
closing exchange rate at HY19 of R10.12:AUD1 (HY18 of R9.66:AUD1).
On 29 November 2018, Growthpoint Properties Limited took up its full entitlement of a rights issue in GOZ.
The additional investment in GOZ totalled R907.6 million (AUD89.1 million).
A deferred tax liability of R2.8 billion (HY18: R2.4 billion) is included in the statement of financial
position. This relates to capital gains tax payable in Australia if Growthpoint were to sell its investment
in GOZ.
The statement of profit or loss and other comprehensive income also includes 100% of the revenue and
expenses of GOZ, which were translated at an average exchange rate of R10.27:AUD1 (HY18: R10.45:AUD1)
for HY19. The resulting foreign currency translation difference is recognised in other comprehensive income.
A non-controlling interest was raised for the 34.0% (HY18: 34.9%) not owned by Growthpoint.
Included in the HY19 distributable income is R536.1 million income from GOZ, compared to R417.5 million
for HY18. Included in normal tax in the statement of profit or loss and other comprehensive income is
R51.5 million (HY18: R74.9 million) that relates to withholding tax paid on the distributions received
from GOZ. The decreased withholding tax together with the additional investment made, had a positive
impact on the distribution received from GOZ.
V&A Waterfront and other equity-accounted investments
The investments in the V&A (joint venture), GWI, GPRE and the other associates were accounted for in terms
of IFRS 11 Joint Arrangements and IAS 28 Investments in Associates). The equity-accounting method was used,
where the Group's share of the profit or loss and other comprehensive income of these investments were
accounted for.
Included in the HY19 distributable income is R323.9 million from the V&A, compared to R287.0 million for
HY18, R172.0 million from GWI, compared to R128.0 million for HY18, and R60 million from GPRE, compared
to R nil for HY18.
Net property income
Gross revenue increased by 4.3% for HY19 compared to HY18. RSA increased revenues by 3.1%, and the GOZ
operations increased revenues by 8.4% compared to HY18.
The ratio of property expenses to revenue for the Group increased slightly to 22.7% at HY19 from 21.7%
at HY18. For RSA the ratio increased to 25.2% from 24.0% at HY18 and for GOZ, increased to 14.8% from
14.3% at HY18.
Fair value adjustments
The revaluation of properties in RSA and GOZ resulted in an overall increase of R1.0 billion (0.9%) to
R115.5 billion for investment property (including investment properties classified as held for sale and
trading and development). This was driven mainly by positive property fundamentals in Australia with a
slight decrease in RSA due to low growth reflecting economic weakness.
Interest-bearing borrowings and derivatives were fair valued using the South African or foreign exchange
denominated swap curves at HY19, increasing the overall liability by R165.0 million.
These fair value adjustments and other non-distributable items, such as capital items, non-cash charges,
deferred taxation and the net effect of the non-controlling interests portion of the non-distributable
items, were transferred to the non-distributable reserve.
Finance costs
Finance costs increased by 5.6% to R1.4 billion (HY18: R1.3 billion). The weighted average interest rate
for RSA borrowings was 9.1% (HY18: 9.1%) (6.8% including Euro loans and cross currency interest rate swaps
(CCIRS) (HY18: 7.5%)). The weighted average maturity of debt increased to 3.4 years (HY18: 2.8 years).
Finance costs for GOZ decreased by 3.8% from R293.0 million in HY18 to R282.0 million in HY19. The interest
cover ratio, where income from the equity-accounted investments and listed investments is included in the
operating profit, increased to 3.7 times at HY19 (HY18: 3.5 times).
Finance and other investment income
Finance income increased by 93.1% to R695.0 million (HY18: R360 million) due to the inclusion of dividends
from GWI and GPRE for the first time as at 30 June 2018.
Acquisitions and commitments
There were no acquisitions during the period for Growthpoint's RSA portfolio. The development and capital
outlay for RSA of R1.2 billion (HY18: R1.1 billion) was for various developments and capital expenditure in the
period.
Growthpoint has commitments outstanding for RSA developments totalling R1.7 billion at HY19 (HY18:
R2.2 billion) of which 144 Oxford, Rosebank is the largest at R708.0 million (which now includes commitments
for phase 2).
GOZ acquired two office properties for R3.7 billion (AUD341.3 million) and it incurred development costs of
R155.9 million (AUD15.6 million).
GOZ has commitments outstanding totalling R800.5 million (AUD79.1 million) (HY18: R146.5 million
(AUD14.8 million)). The majority of this commitment is for a new office development of Building 3 at
the Botanica Corporate Park in Richmond, Victoria.
Our 50% development and capital expenditure at the V&A amounted to R86.0 million (HY18: R187.0 million) for
the period. Growthpoint's share of the V&A's commitments outstanding at HY19 amounted to R330.5 million
(HY18: R99.7 million). The largest of these commitments includes Site B: "The Ridge" at R150.4 million,
Woolworths extension at R69.8 million and the Cruise Liner Terminal at R67.3 million.
Additional investments in Globalworth (GWI) and GPRE
There were no additional investments made by Growthpoint in GWI and GPRE for the six months ended
31 December 2018.
Funds Management
Part of Growthpoint's strategy is to grow a R15 billion Fund Management business over the next three to five
years. To this end we have already established two separately identifiable funds:
(1) Growthpoint Investec Africa Properties Fund (GIAP)
(2) Growthpoint Healthcare Properties Holdings Fund (The Healthcare Fund)
GIAP, a joint venture with Investec Asset Management, has raised USD212 million from third-party investors
which we expect will be fully invested in assets on the continent by FY19.
The Healthcare Fund already owns five healthcare assets valued at R2.6 billion consisting of four hospitals
and one medical chambers. The Fund has attracted approximately R700 million in investments from third-party
investors so far. The focus is currently on developments and extensions to Hillcrest and Gateway hospitals for
approximately R100 million. Growthpoint has also undertaken the development of the new Neck and Head hospital in
Pretoria due for completion in August 2020. There is a significant pipeline of both acquisitions and
greenfield developments.
Trading and Development
Adhering to the limits previously communicated, the value of projects pre-identified as opportunities for
trading and development for third-parties will not exceed 5.0% of the value of the South African portfolio and
assets developed for our own balance sheet will not exceed 10.0%. Trading profits of R49 million have been
realised on the sale of the units at Pine Industrial Park, 50% of Runway Park and Storage.
We continue to build a sustainable pipeline of opportunities that we believe should contribute a maximum of
2.0% of distributable income going forward.
Disposals and held-for-sale assets
Growthpoint disposed of twelve properties in the period (HY18: ten) for R2.8 billion (HY18: R478.6 million),
achieving a collective R1.2 billion (HY18: R230.8 million) profit on cost.
At HY19, two RSA properties (HY18: five) valued at R10.0 million (HY18: R159.9 million) and two (HY18: nil)
GOZ properties valued at R457 million (AUD45.2 million) (HY18: nil) were held for sale.
There were no disposals in GOZ for the six months ended 31 December 2018.
Arrears
Total RSA arrears at HY19 were R79.0 million (HY18: R76.6 million) with a provision for bad debts of
R28.2 million (HY18: R28.9 million). Total RSA bad debt expenses were R4.0 million (HY18: R7.1 million).
Vacancy levels
At HY19, Growthpoint's vacancy levels as a percentage of its total portfolio GLA were:
GLA Vacancy
m2 m2 % %
HY19 HY18 HY19 HY18
Retail 1 382 624 1 423 816 3.3 3.0
Office 1 728 986 1 757 898 10.2 8.4
Industrial 2 240 791 2 244 535 5.7 4.1
RSA total 5 352 401 5 426 249 6.5 5.2
GOZ 1 038 683 1 003 529 1.5 2.4
V&A Waterfront (50%) 233 596 229 315 1.8 1.2
Total/Average % 6 624 680 6 659 093 5.6 4.6
Vacancies increased across all the RSA sectors. Tenant retention remains a priority and we are driving
it through various initiatives including the UNdeposit and Smartmove campaigns, as well as the launch
of Growthpoint's resource efficient, sustainable Thrive Portfolio.
Equity raised
There were no share issues or DRIP Programmes for the six months ended 31 December 2018.
Borrowings and net working capital
At HY19, the consolidated loan-to-value ratio (LTV), measured by dividing the nominal value of
interest-bearing borrowings (net of cash) by the fair value of property assets including investment property
held for sale and the equity-accounted investments and the listed investments, was 35.9% (HY18: 34.5%).
Growthpoint has consistently applied its policy for measuring the fair value of long-term interest-bearing
loans and derivatives. There were no changes in valuation techniques, nor were there any transfers between
level 1, level 2 and level 3 during the period.
The Group has an unsecured interest-bearing borrowings balance of R19.5 billion (HY18: R14.3 billion).
All other interest-bearing borrowings across the Group are secured.
Growthpoint had unused committed bank facilities of R5.1 billion in RSA and R2.5 billion (AUD244.0 million)
in Australia at HY19, which assures that it can meet its short-term commitments.
Events after the reporting period
In line with IAS 10 Events after the Reporting Period, the declaration of the dividend occurred after the
end of the reporting period, resulting in a non-adjusting event that is not recognised in the financial
statements.
Edcon
Growthpoint participated in the restructuring of Edcon Ltd by providing it with an equity injection of
R110 million, in return for an equity stake. Growthpoint was among the landlords approached in December 2018
to consider a rental reduction for retail space leased to Edcon's brands. Given that our business model is
based on contractual leases that provide a steady stream of annuity income, we did not want to compromise this
by agreeing to the request for a rental reduction. Growthpoint has already decreased its exposure to the retail
group by approximately 9 000m2 since 31 December 2017. This is expected to decrease further by at least
18 000m2 over the next two years. This is a non-adjusting event.
Prospects
With 62.3% of properties by book value exposed to South Africa's macro-economic environment where property
fundamentals remain weak and are worsening, little to no growth is expected from the SA portfolio. The V&A
Waterfront, which benefits from local and international tourism, is positioned to deliver growth but is not
immune to the erosion in the domestic economy and turnover rentals declined in HY19. The Cape Town water crisis
is now under control and the V&A Waterfront is building its own desalination plant to take it entirely off the
water grid.
Most of FY19's growth will come from our international investments. Property fundamentals in Australia remain
strong and GOZ is expected to deliver on its guidance. Dividend withholding tax will be lower this financial
year and we have taken advantage of exchange rate weakness with favourable hedge rates. Additional offshore
growth will come from our Central and Eastern Europe investments in GWI and GPRE, which enhance the diversity
and defensiveness of the Growthpoint portfolio. Romania and Poland continue to attract large multinational
tenants seeking a young, educated, affordable and ambitious labour force and relatively lower rentals. Property
fundamentals are solid in these strong growth markets with low vacancies, long leases and blue-chip covenants.
There is a solid development pipeline in Romania and accretive acquisition opportunities in Poland.
Assuming no further deterioration in the South African business environment, the Growthpoint Board expects
growth in dividends per share for the financial year ending 30 June 2019 of approximately 4.5%. This forecast
has not been subject to audit or review by the company's independent external auditor.
Interim dividend with the election to reinvest the cash dividend in return for Growthpoint shares
Notice is hereby given of the declaration of the interim dividend number 66 of 105.8 cents per share for the
period ended 31 December 2018. Shareholders will be entitled to elect to reinvest the net Cash Dividend, in
return for Growthpoint shares (Share Alternative), failing which they will receive the net cash dividend in
respect of all or part of their shareholdings. The entitlement of shareholders to elect to participate in the
share re-investment alternative is subject to the Board, either itself or through a Board sub-committee
appointed to set the pricing and terms of the share re-investment alternative, having the discretion to
withdraw the entitlement to elect the share re-investment alternative should market conditions warrant
such action. A withdrawal of the entitlement to elect the share re-investment alternative would be
communicated to shareholders before the publication of the finalisation announcement on Friday, 22 March 2019.
Other information:
- issued shares at 31 December 2018: 2 970 981 288 ordinary shares of no par value.
- Income Tax Reference Number of Growthpoint: 9375/077/71/7.
Shareholders are advised that the dividend meets 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 taxable dividends for South African tax purposes in terms of section 25BB of the
Income Tax Act.
Tax implications for South African resident shareholders
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 the income tax in terms of the exclusion to the general dividend
exemption contained in section 10(1)(k)(i)(aa) of the Income Tax Act, because they are dividends distributed
by a REIT. These dividends are however exempt from dividend withholding tax (Dividend Tax) in the hands of South
African resident shareholders provided that the South African resident shareholders have provided to the
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 DTD(EX) (Dividend Tax: Declaration and undertaking
to be made by the beneficial owner of a share) form to prove their status as South African residents.
If resident shareholders have not submitted the abovementioned documentation to confirm their status as
South African residents, they are advised to contact their CSDP or broker, as the case may be, to arrange for
the documents to be submitted prior to the payment of the dividend.
Tax implications for non-resident shareholders
Dividends received by non-resident shareholders from a REIT 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
section 10(1)(k) of the Income Tax Act. Any dividend received by a non-resident from a REIT is subject to
Dividend 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 non-resident shareholder. Assuming
Dividend Tax will be withheld at a rate of 20%, the net amount due to non-resident shareholders is 84.64 cents
per share. A reduced dividend withholding tax 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 declaration that the dividend is subject to a reduced rate as a result of the application of the DTA; and
- a written undertaking to inform the 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 of the South African Revenue Service.
If applicable, non-resident shareholders are advised to contact the CSDP, broker or the company to arrange
for the abovementioned documents to be submitted prior to payment of the dividend if such documents have not
already been submitted.
Cash dividend payment 2019
Publication of declaration data and finalisation
info (SENS) Wednesday, 13 March (together with HY19 results announcement)
Announcement of share re-investment alternative
issue price and finalisation information published
on SENS Monday, 25 March
Last day to trade cum dividend Tuesday, 2 April
Shares trade ex dividend Wednesday, 3 April
Record date (last date to register
to receive payment) Friday, 5 April
Payment date (EFTs and posting of cheques) Monday, 8 April
Appointment of Company Secretary
In compliance with paragraph 3.59 of the JSE Limited Listings Requirements, shareholders are advised that
FluidRock Co Sec Proprietary Limited (FluidRock) has been appointed as Company Secretary to Growthpoint with
effect from 13 March 2019.
The Board is confident that FluidRock has the knowledge and ability to fulfil the role of assisting the
Board in fulfilling its mandate and ensuring the Company maintains good corporate governance.
By order of the Board
Growthpoint Properties limited
13 March 2019
Directors
JF Marais (Chairman), O Chauke* (Human Resources Director), EK de Klerk* (Chief Executive Officer
South Africa), MG Diliza, PH Fechter, LA Finlay, JC Hayward (Lead Independent Director), SP Mngconkola,
R Moonsamy, NBP Nkabinde, LN Sasse* (Group Chief Executive Officer), N Siyotula, FJ Visser,
G Volkel* (Group Financial Director)
* Executive
Registered office
The Place, 1 Sandton Drive, Sandton, 2196
PO Box 78949, Sandton, 2146
Company Secretary
FluidRock Co Sec Proprietary Limited (represented by Claire Middlemiss)
Transfer Secretary
Computershare Investor Services (Pty) Ltd
(Registration number 2004/003647/07)
Rosebank Towers, 15 Biermann Avenue, Rosebank, Johannesburg, 2196
PO Box 61051, Marshalltown, 2107
Sponsor
Investec Bank Limited
(Registration number 1969/004763/06)
100 Grayston Drive, Sandown, Sandton, 2196
PO Box 785700, Sandton, 2146
Statement of profit or loss and other comprehensive income
For the six months ended 31 December 2018
Unaudited Reviewed Audited
six months six months 12 months
31 December 31 December 30 June
2018 2017 2018
Notes Rm Rm Rm
Revenue, excluding straight-line lease
income adjustment 5 724 5 487 10 976
Straight-line lease income adjustment (93) 7 (50)
Total revenue 5 631 5 494 10 926
Property-related expenses (1 297) (1 192) (2 366)
Net property income 4 334 4 302 8 560
Other administrative and operating overheads (232) (213) (437)
Operating profit 4 102 4 089 8 123
Equity-accounted investment (loss)/profit - net of tax (3) 555 711
Fair value adjustments, capital items and other charges 909 2 926 1 407
Finance and other investment income 1 695 360 904
Finance expense (1 381) (1 308) (2 574)
Profit before taxation 4 322 6 622 8 571
Taxation (158) (179) (666)
Profit for the year 4 164 6 443 7 905
Other comprehensive income
Items that may subsequently be reclassified
to profit or loss
Translation of foreign operations (10) (917) 241
Total comprehensive income for the year 4 154 5 526 8 146
Profit attributable to: 4 164 6 443 7 905
Owners of the company 3 520 5 748 6 663
Non-controlling interests 644 695 1 242
Total comprehensive income attributable to: 4 154 5 526 8 146
Owners of the company 3 548 5 092 6 803
Non-controlling interests 606 434 1 343
Cents Cents Cents
Basic earnings per share 119.48 200.07 229.14
Diluted earnings per share 118.91 198.80 228.00
Headline earnings per share 2 81.77 101.04 159.84
Diluted headline earnings per share 2 81.38 100.40 159.05
Statement of financial position
As at 31 December 2018
Unaudited Reviewed Audited
31 December 31 December 30 June
2018 2017 2018
Rm Rm Rm
Assets
Cash and cash equivalents 2 507 631 2 320
Trade and other receivables 4 377 3 697 3 645
Investment property classified as held for sale 467 160 3 180
Investment property held for trading and development 368 - 131
Derivative assets 720 697 476
Listed investments 819 722 801
Investment in subsidiaries - - -
Fair value of property assets 114 696 111 145 109 046
Fair value of investment property for accounting purposes 112 307 108 557 106 543
Straight-line lease income adjustment 2 389 2 588 2 503
Long-term loans granted 82 353 370
Equity-accounted investments 15 306 12 142 15 096
Equipment 10 14 12
Intangible assets 2 244 2 314 2 279
Total assets 141 596 131 875 137 356
Liabilities and Equity
Liabilities
Trade and other payables 2 230 2 739 2 305
Derivative liabilities 687 566 741
Taxation payable 46 71 72
Interest-bearing borrowings 50 867 43 810 48 234
Deferred tax liability 2 945 2 441 2 844
Total liabilities 56 775 49 627 54 196
Shareholders' interest 75 740 75 371 75 273
Share capital 47 138 45 993 47 092
Retained income 3 116 2 943 3 191
Other reserves 25 486 26 435 24 990
Non-controlling interest 9 081 6 877 7 887
Total liabilities and equity 141 596 131 875 137 356
Statement of changes in equity
For the six months ended 31 December 2018
Attributable to owners of the company
Non-distributable
reserves (NDR)
Share Foreign
capital currency Non- Non-
net of translation distributable Retained Share controlling
treasury reserve reserve earnings holders' interest Total
shares (FCTR) (NDR) (RE) interest (NCI) equity
Rm Rm Rm Rm Rm Rm Rm
Balance at 30 June 2017 44 876 1 572 22 711 2 886 72 045 6 709 78 754
Total comprehensive income:
- Profit after taxation - - - 5 748 5 748 695 6 443
- Other comprehensive income - (656) - - (656) (261) (917)
Transactions with owners recognised
directly in equity:
Contributions by and
distributions to owners:
Shares issued 1 107 - - - 1 107 - 1 107
Transfer non-distributable
items to NDR - - 2 805 (2 805) - - -
Share-based payment transactions 10 - 3 - 13 - 13
Dividends declared - - - (2 886) (2 886) (266) (3 152)
Balance at 31 December 2017 45 993 916 25 519 2 943 75 371 6 877 82 248
Total comprehensive income:
- Profit after taxation - - - 915 915 547 1 462
- Other comprehensive income - 796 - - 796 362 1 158
Transactions with owners recognised
directly in equity:
Contributions by and
distributions to owners:
Shares issued 1 048 - - - 1 048 - 1 048
Transfer non-distributable
items from NDR - - (2 275) 2 275 - - -
Share-based payment transactions 51 - 31 - 82 - 82
Dividends declared - - - (2 942) (2 942) (247) (3 189)
Changes in ownership interest:
Change of ownership in Healthcare Fund - - - - - 285 285
Rights issue and acquisitions - GOZ - 3 - - 3 63 66
Balance at 30 June 2018 47 092 1 715 23 275 3 191 75 273 7 887 83 160
Attributable to owners of the company
Non-distributable
reserves (NDR)
Share Foreign
capital currency Non- Non-
net of translation distributable Retained Share controlling
treasury reserve reserve earnings holders' interest Total
shares (FCTR) (NDR) (RE) interest (NCI) equity
Rm Rm Rm Rm Rm Rm Rm
Balance at 30 June 2018 47 092 1 715 23 275 3 191 75 273 7 887 83 160
Total comprehensive income:
- Profit after taxation - - - 3 520 3 520 644 4 164
- Other comprehensive income - 28 - - 28 (38) (10)
Transactions with owners
recognised directly in equity:
Contributions by and
distributions to owners:
Shares issued - - - - - - -
Transfer non-distributable
items to NDR - - 429 (429) - - -
Share-based payment transactions 46 - 11 - 57 - 57
Dividends declared - - - (3 166) (3 166) (296) (3 462)
Changes in ownership interest:
Change of ownership in Healthcare Fund - - - - - 395 395
Rights issue and acquisitions - GOZ - 28 - - 28 489 517
Balance at 31 December 2018 47 138 1 771 23 715 3 116 75 740 9 081 84 821
2018 2017
Cents Cents
Dividend per share 105.8 101.2
Statement of cash flows
For the six months ended 31 December 2018
Unaudited Reviewed Audited
31 December 31 December 30 June
2018 2017 2018
Rm Rm Rm
Cash flows from operating activities
Cash generated from operations 4 603 3 796 8 060
Finance expense paid (1 381) (1 008) (2 574)
Finance and other investment income received 984 29 312
Taxation paid (75) (43) (126)
Distribution paid to shareholders (3 462) (3 153) (6 341)
Net cash inflow/(outflow) from operating activities 669 (379) (669)
Net cash outflow from investing activities (2 629) (1 917) (5 241)
Net cash inflow from financing activities 2 196 2 331 7 386
Movement in cash and cash equivalents 236 35 1 476
Translation effects on cash and cash equivalents
of foreign operations (49) (17) 231
Cash and cash equivalents at beginning of period 2 320 613 613
Cash and cash equivalents at end of period 2 507 631 2 320
Segmental analysis
For the six months ended 31 December 2018
The Group determines and presents operating segments based on the information that is provided internally to
the Executive Management Committee (EXCO), the group's operating decision-making forum. The Group comprises
six segments, namely Retail, Office, Industrial, Growthpoint Australia, V&A Waterfront and Eastern Europe.
An operating segment's operating results are reviewed regularly by EXCO to make decisions about resources
to be allocated to the segment and assess its performance, and for which discrete financial information
is available.
Segment Brief description of segment
Retail The Growthpoint retail portfolio consists of 49 properties, comprising shopping
centres with the balance being vacant land or standalone single-tenanted
properties. It includes regional, community, neighbourhood, speciality and small
regional shopping centres as well as retail warehouses.
Office The Growthpoint office portfolio consists of 178 properties which includes high
rise and low rise offices, office parks, office warehouses, hospitals as well as mixed
use properties comprising both office and retail.
Industrial The Growthpoint industrial portfolio consists of 220 properties which includes
warehousing, industrial parks, retail warehousing, motor-related outlets, low and
high grade industrial, high-tech industrial as well as mini, midi and maxi units.
Growthpoint The GOZ portfolio consists of 59 properties which includes both industrial and
Australia office properties, all situated in Australia.
V&A Waterfront The V&A Waterfront is a 23 hectare mixed-use property development situated in
and around the historic Victoria and Alfred Basins, which formed Cape Town's
original harbour, with Table Mountain as its backdrop. Its properties include retail,
office, fishing and industrial, hotel and residential as well as undeveloped bulk.
Eastern Europe The Eastern Europe portfolio (GWI and GPRE) consists of 52 properties which
includes mostly modern A-grade office properties, industrial properties as well as a
residential property complex.
Geographic segments
In addition to the main reportable segments, the Group also includes a geographical analysis of net property
income, excluding straight-line lease income adjustment and investment property.
The following geographic segments have been identified:
- South Africa
- Australia
- V&A Waterfront
- Eastern Europe
Segmental analysis continued
For the six months ended 31 December 2018
Material profit or loss disclosures
Unaudited 31 December 2018
Total V&A
South Total as Water- Eastern
Retail Office Industrial Africa Australia reported front Europe Total
Rm Rm Rm Rm Rm Rm Rm Rm Rm
Material profit or loss disclosures
Revenue excluding
straight-line lease adjustment 1 675 1 873 768 4 316 1 408 5 724 455 685 6 864
Property-related expenses (441) (480) (168) (1 089) (208) (1 297) (140) (186) (1 623)
Net property income 1 234 1 393 600 3 227 1 200 4 427 315 499 5 241
Other administrative and
operating overheads (170) (62) (232) (13) (67) (312)
Equity-accounted investment
profit net of tax (3) - (3) - - (3)
Fair value adjustment on
investment property 26 (16) (30) (20) 1 038 1 018 - 4 1 022
Fair value adjustments
(other than investment property) (54) (87) (141) - - (141)
Capital items and non-cash charges (61) - (61) (13) (2) (76)
Finance and investment income 692 3 695 13 20 728
Finance expense (1 099) (282) (1 381) (9) (117) (1 507)
Consolidated profit before taxation 2 512 1 810 4 322 293 337 4 952
Assets
Cash and cash equivalents 2 093 414 2 507 304 1 248 4 059
Trade and other receivables 3 490 887 4 377 100 282 4 759
Investment property
classified as held for sale - - 10 10 457 467 - - 467
Investment property held for
trading and development - 213 155 368 - 368 - - 368
Derivative assets 720 - 720 - - 720
Listed investments - 819 819 - - 819
Fair value of property assets 30 019 33 633 13 149 76 801 37 895 114 696 9 227 13 964 137 887
Long-term loans granted 82 - 82 - - 82
Equity-accounted investments 15 306 - 15 306 - 42 15 348
Equipment 2 8 10 - 293 303
Intangible assets 2 244 - 2 244 - - 2 244
Total assets 101 116 40 480 141 596 9 631 15 829 167 056
Liabilities
Trade and other payables 1 615 615 2 230 138 387 2 755
Derivative liabilities 671 16 687 - 124 811
Taxation payable (6) 52 46 - - 46
Interest-bearing borrowings 35 934 14 933 50 867 188 7 099 58 154
Deferred tax liability 2 945 - 2 945 - 547 3 492
Total liabilities 41 159 15 616 56 775 326 8 157 65 258
Material profit or loss disclosures (continued)
Reviewed 31 December 2017
Total V&A Central
South Total as Water- Eastern
Retail Office Industrial Africa Australia reported front Europe Total
Rm Rm Rm Rm Rm Rm Rm Rm Rm
Material profit or loss disclosures
Revenue excluding
straight-line lease adjustment 1 612 1 871 705 4 188 1 299 5 487 420 356 6 263
Property-related expenses (420) (426) (160) (1 006) (186) (1 192) (121) (123) (1 436)
Net property income 1 192 1 445 545 3 182 1 113 4 295 299 233 4 827
Other administrative and
operating overheads (150) (63) (213) (12) (66) (291)
Equity-accounted investment
profit net of tax 555 - 555 - 10 565
Fair value adjustment on
investment property 763 544 202 1 509 1 253 2 762 - 32 2 794
Fair value adjustments
(other than investment property) 176 65 241 - 131 372
Capital items and non-cash charges (70) - (70) 86 (52) (36)
Finance and investment income 359 1 360 11 7 378
Finance expense (1 015) (293) (1 308) (10) (176) (1 494)
Consolidated profit before taxation 4 546 2 076 6 622 374 119 7 115
Assets
Cash and cash equivalents 326 305 631 395 1 191 2 217
Trade and other receivables 3 011 686 3 697 101 112 3 910
Investment property
classified as held for sale - 126 34 160 - 160 - - 160
Investment property held for
trading and development - - - - - - - - -
Derivative assets 695 2 697 - - 697
Listed investments - 722 722 - 123 845
Fair value of property assets 31 245 35 698 12 954 79 897 31 248 111 145 8 660 7 739 127 544
Long-term loans granted 353 - 353 - - 353
Equity-accounted investments 12 142 - 12 142 - 95 12 237
Equipment 3 11 14 - - 14
Intangible assets 2 314 - 2 314 - 53 2 367
Total assets 98 901 32 974 131 875 9 156 9 313 150 344
Liabilities
Trade and other payables 1 962 777 2 739 153 231 3 123
Derivative liabilities 455 111 566 - - 566
Taxation payable - 71 71 - 4 75
Interest-bearing borrowings 31 836 11 974 43 810 192 3 751 47 753
Deferred tax liability 2 438 3 2 441 - 429 2 870
Total liabilities 36 691 12 936 49 627 345 4 415 54 387
Material profit or loss disclosures (continued)
Audited 30 June 2018
Total V&A Central
South Total as Water- Eastern
Retail Office Industrial Africa Australia reported front Europe Total
Rm Rm Rm Rm Rm Rm Rm Rm Rm
Material profit or loss disclosures
Revenue excluding
straight-line lease adjustment 3 244 3 779 1 420 8 443 2 533 10 976 813 207 11 996
Property-related expenses (834) (848) (325) (2 007) (359) (2 366) (242) (76) (2 684)
Net property income 2 410 2 931 1 095 6 436 2 174 8 610 571 131 9 312
Other administrative and
operating overheads (309) (128) (437) (30) (28) (495)
Equity-accounted investment
profit net of tax 711 - 711 - - 711
Fair value adjustment on
investment property (439) 53 250 (136) 1 671 1 535 375 100 2 010
Fair value adjustments
(other than investment property) (120) (113) (233) - - (233)
Capital items and non-cash charges (190) 245 55 87 (4) 138
Finance and investment income 901 3 904 62 5 971
Finance expense (2 027) (547) (2 574) (24) (16) (2 614)
Consolidated profit before taxation 5 266 3 305 8 571 1 041 188 9 800
Assets
Cash and cash equivalents 2 000 320 2 320 248 2 708 5 276
Trade and other receivables 2 966 679 3 645 75 484 4 204
Investment property
classified as held for sale - 2 187 340 2 527 653 3 180 - - 3 180
Investment property held for
trading and development - 131 - 131 - 131 - - 131
Derivative assets 476 - 476 - - 476
Listed investments 801 - 801 - - 801
Fair value of property assets 29 878 33 134 13 094 76 106 32 940 109 046 9 141 11 564 129 751
Long-term loans granted 370 - 370 - - 370
Equity-accounted investments 15 096 - 15 096 - 40 15 136
Equipment 3 9 12 - - 12
Intangible assets 2 279 - 2 279 - 57 2 336
Total assets 102 755 34 601 137 356 9 464 14 853 161 673
Liabilities
Trade and other payables 1 665 640 2 305 188 249 2 742
Derivative liabilities 671 70 741 - - 741
Taxation payable - 72 72 - - 72
Interest-bearing borrowings 35 699 12 535 48 234 170 6 594 54 998
Deferred tax liability 2 838 6 2 844 - 538 3 382
Total liabilities 40 873 13 323 54 196 358 7 381 61 935
Segmental analysis continued
For the six months ended 31 December 2018
Distributable earnings reconciliation
Unaudited Reviewed Audited
31 December 31 December 30 June
2018 2017 2018
Rm Rm Rm
Revenue excluding straight-line lease income adjustment 5 724 5 487 10 976
Property related expenses (1 297) (1 192) (2 366)
Other administrative and operating overheads (232) (213) (437)
Net interest (686) (948) (1 670)
Finance and other investment income 695 360 904
Interest paid (1 381) (1 308) (2 574)
Less: GWI dividend declared for FY18 (157) - -
GWI dividend declared after period end based
on the reporting period earnings 164 128 157
GPRE dividend declared for FY18 (64) - 64
Antecedent dividends 5 22 33
Non-controlling portion of distribution
(excluding fair value adjustments) - GOZ (296) (266) (513)
Non-controlling portion of distribution (excluding
fair value adjustments) - Healthcare (26) - -
Distributable income from GOZ retained (including NCI's portion) - - (22)
Profit on disposal of Roeland Street Investment 2 (Pty) Ltd 7 - -
Realised foreign exchange loss 26 (1) 46
Current normal taxation (52) (74) (160)
Distributable earnings 3 116 2 943 6 108
Distributions
Total dividend
Distributable earnings 3 116 2 943 6 108
Actual number of shares in issue 2 947 368 431 2 906 954 088 2 945 510 719
Distribution per share 105.8 101.2 208.6
- Interim taxable dividend 105.8 101.2 101.2
- Final taxable dividend - - 107.4
Number of shares
Unaudited Reviewed Audited
31 December 31 December 30 June
2018 2017 2018
Shares issued during the yea:
Issued ordinary shares at the beginning of year 2 970 981 288 2 888 462 582 2 888 462 582
Effect of shares issued - 45 739 890 82 518 706
Shares in issue at period end 2 970 981 288 2 934 202 472 2 970 981 288
Effect of treasury shares held (23 612 857) (27 248 384) (25 470 569)
Net shares in issue at half year 2 947 368 431 2 906 954 088 2 945 510 719
Net asset value*
Net asset value per share (cents) 2 570 2 593 2 556
Tangible net asset value per share (cents) 2 594 2 597 2 575
Net asset value per share is reconciled to tangible
net asset value per share as follows:
Rm Rm Rm
Net asset value attributable to shareholders 75 740 75 371 75 273
Less: Net effect of business acquisitions and
other intangibles 701 127 565
Intangible assets (2 244) (2 314) (2 279)
Deferred tax liability 2 945 2 441 2 844
Tangible net asset value 76 441 75 498 75 838
* This information has not been reviewed or audited by Growthpoint's independent external auditors.
Key reporting ratios*
Best practice recommendations were issued by the SA REIT Association during the financial year, outlining the
need to provide consistent presentation and disclosure of relevant ratios in the SA REIT sector. This will
ensure information and definitions are clearly presented, enhancing comparability and consistency across
the sector.
Group
31 December 31 December 30 June
2018 2017 2018
% % %
Property cost-to-income ratio
Gross 32.39 31.29 31.11
Net 17.11 16.82 16.64
Based on IFRS reported figures 22.66 21.72 21.56
Property cost-to-income ratio is based on the total
property, related expenses divided by the revenue,
excluding straight-line lease income adjustments.
The figures are adjusted for gross, net and IFRS
reported expenses.
Operating cost-to-income ratio
Gross 3.54 3.41 4.17
Net 4.34 4.13 3.98
Based on IFRS reported figures 4.05 3.88 3.98
Operating cost-to-income ratio is based on the total
operating expenses divided by the revenue, excluding
straight-line lease income adjustments. The figures
are adjusted for gross, net and IFRS reported expenses.
Total cost-to-income ratio
Gross 35.93 34.70 34.72
Net 21.46 20.95 20.87
Based on IFRS reported figures 26.71 25.61 25.54
Total cost-to-income ratio is based on the total
expenses divided by the revenue, excluding straight-line
lease income adjustments. The figures are adjusted for
gross, net and IFRS reported expenses.
Interest cover ratio 3.66 3.46 3.65
Interest cover ratio (excluding GOZ) 3.55 3.42 3.62
Interest cover ratio for Growthpoint is based on the
operating profit excluding straight-line lease income
adjustment plus the investment income from equity-accounted
investments divided by the finance costs, after deducting
finance income from banks and long-term loans.
Loan to value ratio 35.87 34.53 35.17
Loan to value ratio (excluding GOZ) 35.87 33.84 35.37
Loan to value ratio for Growthpoint is based on the nominal value of debt (net of cash), divided by the fair value
of property assets. Including investment property held for sale, equity-accounted investments and listed investments.
* This information has not been reviewed or audited by Growthpoint's independent external auditors.
Notes
For the six months ended 31 December 2018
Note 1: Finance and other investment income
Unaudited Unaudited Audited
six months six months 12 months
31 December 31 December 30 June
2018 2017 2018
Rm Rm Rm
Finance income
Banks 60 28 45
Long-term loans granted 4 17 46
Other 11 - 54
75 45 145
Investment income
Dividends received from the V&A 324 287 591
Dividends received from GWI 168 - 131
Dividends received from GPRE 121 - 37
Other 7 28 -
620 315 759
Total finance and investment income 695 360 904
Note 2: Headline earnings per share
Reconciliation between basic earnings, diluted earnings and headline earnings
Gross Total
Unaudited Reviewed Audited Unaudited Reviewed Audited
six months six months 12 months six months six months 12 months
31 December 31 December 30 June 31 December 31 December 30 June
2018 2017 2018 2018 2017 2018
Rm Rm Rm Rm Rm Rm
Profit for the year 3 520 5 748 6 663
Bargain purchase 909* 2 926* 1 407* - (1) (9)
Fair value adjustments
on investment property 909* 2 926* 1 407* (1 111) (2 845) (2 006)
Fair value adjustment:
Net of straight-lining lease
adjustment (1 149) (2 486) (1 290)
NCI portion of fair
value adjustments 38 (359) (716)
Headline earnings 2 409 2 902 4 648
* Both the bargain purchase and fair value adjustment on investment property are included on the "Fair
value adjustments, capital items and other charges" line item on the face of the statement of profit or
loss and other comprehensive income.
Note 3: Fair value disclosure
Classification of financial assets and liabilities
Assets Outside
Held at fair Designated Loans and other scope of
value at fair value receivables IAS 39 Total
Rm Rm Rm Rm Rm
Unaudited six months 31 December 2018
Cash and cash equivalents - - 2 507 - 2 507
Trade and other receivables - - 3 331 1 046 4 377
Derivative assets 720 - - - 720
Listed investments - 819 - - 819
Long-term loans granted - 82 - - 82
Reviewed six months 31 December 2017
Cash and cash equivalents - - 631 - 631
Trade and other receivables - - 2 929 768 3 697
Derivative assets 697 - - - 697
Listed investments - 722 - - 722
Long-term loans granted - 353 - - 353
Audited 30 June 2018
Cash and cash equivalents - - 2 320 - 2 320
Trade and other receivables - - 2 836 809 3 645
Derivative assets 476 - - - 476
Listed investments - 801 - - 801
Long-term loans granted - 370 - - 370
Liabilities
Outside
Held at fair Designated Financial scope of
value at fair value liabilities IAS 39 Total
Rm Rm Rm Rm Rm
Unaudited six months 31 December 2018
Trade payables - - 1 974 256 2 230
Derivative liabilities 687 - - - 687
Tax payable - - - 46 46
Interest-bearing borrowings - 50 867 - - 50 867
Deferred tax liabilities - - - 2 945 2 945
Reviewed six months 31 December 2017
Trade payables - - 2 395 344 2 739
Derivative liabilities 566 - - - 566
Tax payable - - - 71 71
Interest-bearing borrowings - 43 810 - - 43 810
Deferred tax liabilities - - - 2 441 2 441
Audited 30 June 2018
Trade payables - - 2 074 231 2 305
Derivative liabilities 741 - - - 741
Tax payable - - - 72 72
Interest-bearing borrowings - 48 234 - - 48 234
Deferred tax liabilities - - - 2 844 2 844
Fair value estimation
Fair value measurement of assets and liabilities
The below table includes only those assets and liabilities that are measured at fair value including non-recurring items
measured at fair value:
Unaudited 31 December 2018
Fair value Level 1 Level 2 Level 3
Rm Rm Rm Rm
Assets
Recurring fair value measurement
Fair value of property assets 114 696 - - 114 696
Listed investments 819 819 - -
Long-term loans granted 82 - - 82
Derivative assets 720 - 423 297
Non-recurring fair value measurement
Non-current assets held for sale 467 - - 467
Non-current assets held for trading
and development 368 - - 368
Total assets measured at fair value 117 152 819 423 115 910
Liabilities
Recurring fair value measurement
Interest-bearing borrowings 50 867 - 50 867 -
Derivative liabilities 687 - 375 312
Total liabilities measured at fair value 51 554 - 51 242 312
Reviewed 31 December 2017
Fair value Level 1 Level 2 Level 3
Rm Rm Rm Rm
Assets
Recurring fair value measurement
Fair value of property assets 111 305 - - 111 305
Listed investments 722 722 - -
Long-term loans granted 353 - - 353
Derivative assets 697 - 590 107
Non-recurring fair value measurement
Non-current assets held for sale 160 - - 160
Total assets measured at fair value 113 237 722 590 111 925
Liabilities
Recurring fair value measurement
Interest-bearing borrowings 43 810 - 43 810 -
Derivative liabilities 566 - 535 31
Total liabilities measured at fair value 44 376 - 44 345 31
Audited 30 June 2018
Fair value Level 1 Level 2 Level 3
Rm Rm Rm Rm
Assets
Recurring fair value measurement
Fair value of property assets 109 046 - - 109 046
Listed investments 801 797 - 4
Long-term loans granted 370 - - 370
Derivative assets 476 - 252 224
Non-recurring fair value measurement
Non-current assets held for sale 3 180 - - 3 180
Total assets measured at fair value 113 873 797 252 112 824
Liabilities
Recurring fair value measurement
Interest-bearing borrowings 48 234 5 772 42 462 -
Derivative liabilities 741 - 511 230
Total liabilities measured at fair value 48 975 5 772 42 973 230
The carrying amount of assets and liabilities that are not measured at fair value reasonably approximate
their fair value due to their short-term nature. These include trade and other receivables, cash and cash
equivalents and trade and other payables.
Movement in level 3 instruments
Unaudited six months 31 December 2018 Reviewed six months 31 December 2017
Long-term Long-term
Property Listed loans Derivative Derivative Property Listed loans
assets investments granted assets liabilities assets investments granted
Rm Rm Rm Rm Rm Rm Rm Rm
Opening balance 112 226 4 370 224 (230) 109 442 226 709
Gain/(loss) from fair value
adjustments and translation
of foreign operations 843 - - 73 (82) 1 298 10 37
Accrued interest - - - - - - - -
Acquisitions 5 231 - - - - 2 744 - -
Disposals (2 769) (4) - - - (2 179) (236) -
Advancements - - - - - - - 50
Settlements - - (288) - - - - (443)
Closing balance 115 531 - 82 297 (312) 111 305 - 353
Movement in level 3 instruments (continued)
Audited 12 months 30 June 2018
Long-term
Property Listed loans Derivative Derivative
assets investments granted assets liabilities
Rm Rm Rm Rm Rm
Opening balance 109 442 226 709 107 (31)
Gain/(loss) from fair value
adjustments and translation
of foreign operations 2 005 - 12 117 (199)
Accrued interest - - 71 - -
Acquisitions 3 978 - - - -
Disposals (3 199) (222) - - -
Advancements - - 77 - -
Settlements - - (499) - -
Closing balance 112 226 4 370 224 (230)
Valuation process
A number of the Group's accounting policies and disclosures require the measurement of fair values, for both
financial and non-financial assets and liabilities. The Group has an established control framework with respect
to the measurement of fair values. This includes a valuation team that has overall responsibility for
overseeing all significant fair value measurements, including level 3 fair values, and reports directly
to the Financial Director.
The valuation team regularly reviews significant unobservable inputs and valuation adjustments. If third-party
information, such as broker quotes or pricing services is used to measure fair values, then the valuation team
assesses the evidence obtained from the third parties to support the conclusion that such valuations meet the
requirements of IFRS, including the level in the fair value hierarchy in which such valuations should be
classified.
Significant valuation issues are reported to the Group's Audit Committee.
When measuring the fair value of an asset or a liability, the Group uses observable market data as far as
possible. Fair values are categorised into different levels in a fair value hierarchy based on the inputs
used in the valuation techniques as follows:
- Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
- Level 2: inputs other than quoted prices included in level 1 that are observable for the asset or
liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
- Level 3: inputs for the asset or liability that are not based on observable market data
(unobservable inputs).
Valuation techniques using observable inputs - Level 1 and 2
Fair values classified as level 1 and 2 have been determined using models for which inputs are observable
in an active market. A valuation input is considered observable if it is obtained directly, such as quoted
prices, or indirectly, such as those derived from quoted prices.
Valuation techniques using significant unobservable inputs - Level 3
Fair values are classified at level 3 if their determination incorporates significant inputs that are not
based on observable market data.
Valuation techniques and significant unobservable inputs
Level 1 instruments
Listed investment
Description Valuation technique Significant observable inputs
Industria REIT The fair value is based on the last traded Market price of AUD2.73 per
market price from the Australian Securities listed share
Exchange (ASX) as at 31 December 2018.
The estimated fair value would increase/(decrease) if the listed share price was higher/(lower).
Level 2 instruments
Interest-bearing borrowings
Description Valuation technique Significant observable inputs
Interest-bearing borrowings Valued by discounting future cash flows Credit margins: 0.46% to 3.60%
using the South African swap curve plus an (FY18: 0.46% to 3.60%)
appropriate credit margin at the dates when
the cash flows will take place.
The estimated fair value would increase/(decrease) if the credit margin were lower/(higher).
Derivative instruments
Description Valuation technique Significant observable inputs
Forward exchange contracts Valued by discounting the forward rates Not applicable
applied at period end to the open hedged
positions.
Interest rate swaps Valued by discounting the future cash flows Not applicable
using the South African swap curve at the
dates when the cash flows will take place.
Cross-currency interest rate swaps Valued by discounting the future cash flows Not applicable
using the basis swap curve of the respective
currencies at the dates when the cash flows
will take place.
Level 3 instruments
In terms of the Group's policy, at least 75% of the fair value of investment properties should be determined
by an external, independent valuator, having appropriate recognised professional qualifications and recent
experience in the location and category of the property being valued.
The balance of the South African portfolio was valued by Growthpoint's qualified internal valuers.
The South African properties which were valued at HY19, using the discounted cash flow of future income
streams method, were done so by the following valuers who are all registered valuers in terms of section 19
of the Property Valuers Professional Act, No 47 of 2000:
Mills Fitchet PWV PG Mitchell Ndip (Prop Val), MIV (SA), CIEA, professional valuer
Eris Property Group (Pty) Ltd C Everatt BSc (Hons) Estate Management, MRICS, MIV (SA), professional valuer
Jones Lang LaSalle J Karg BSc , MRICS, MIV (SA), professional valuer
Spectrum PL O'Connell Ndip (Prop Val), MRICS, professional valuer
Sterling AS Greybe-Smith BSc (Hons), MIV (SA), professional associate valuer
The Australian properties were valued at HY19 using the discounted cash flow of future income streams method
by Savills, Urbis, m3property, JLL, CBRE and Colliers. The fair value of properties not externally valued as
at 31 December 2018 were based solely on director valuations.
At the reporting date, the key assumptions and unobservable inputs used by the Group in determining fair value
were in the following ranges for the Group's portfolio of properties:
Investment property
Significant unobservable inputs and range of estimates used
Exit
Discount capitalisation Capitalisation
Description Valuation technique rate rate rate
Retail sector 12.5 - 16.5 6.8 - 11.0 6.8 - 11.0
Office sector Discounted cash 13.0 - 16.0 8.0 - 10.5 8.0 - 10.0
Industrial sector flow model 13.5 - 17.0 8.0 - 11.5 8.0 - 11.5
GOZ office 6.5 - 7.8 5.5 - 7.5 5.3 - 14.9
GOZ industrial 6.5 - 8.5 5.8 - 9.8 5.5 - 8.9
Further assumptions are used in the valuation of investment property. The estimated fair value would
increase/(decrease) if the expected market rental growth was higher/(lower), expected expense growth was
lower/(higher), the vacant periods were shorter/(longer), the occupancy rate was higher/(lower), the
rent-free periods were shorter/(longer), the discount rate was lower/(higher) and/or the reversionary
capitalisation rate was lower/(higher).
Long-term loans granted
Description Valuation technique Significant unobservable inputs
Acucap Unit Purchase Scheme Valued by discounting future cash flows using the Counterparty credit risk
South African swap curve at the dates when the cash
flows will take place.
Workshop 17 (previously OPEN) Valued by discounting future cash flows using the Counterparty credit risk
South African swap curve at the dates when the cash
flows will take place.
Sakhumnotho Group Holdings Valued by discounting future cash flows using the Counterparty credit risk
South African swap curve at the dates when the cash
flows will take place.
Derivative instruments
Description Valuation technique Significant unobservable inputs
Cross-currency interest Valued by discounting the future cash flows using Credit Curve
rate swaps the basis swap curve of the respective currencies at
the dates when the cash flows will take place.
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