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GRT
GRT
GRT - Growthpoint - Unaudited Results For The 6 Months Ended 31 December 2008
and dividend and interest payment declaration
Growthpoint Properties Limited
(Incorporated in the Republic of South Africa)
(Registration number 1987/004988/06)
Share code: GRT
ISIN: ZAE000037669
("Growthpoint" or "the company")
UNAUDITED RESULTS FOR THE 6 MONTHS ENDED 31 DECEMBER 2008
* 10.2% distribution growth to 56,3 cents per linked unit
* Inclusion in JSE Top 40 index and MSCI emerging markets index
* Market capitalisation of R19 billion and property assets of R29,1 billion
* R1,7 billion capital raised through successful rights offer
CONSOLIDATED INCOME STATEMENT
Unaudited Unaudited Audited
6 months 6 months 12 months
31 Dec 31 Dec 30 June
2008 2007* 2008
Note Rm Rm Rm
Revenue excluding 1 558 1 314 2 712
straight-line lease
income adjustment
Straight-line lease 103 104 208
income adjustment
Revenue 1 661 1 418 2 920
Property expenses (390) (327) (675)
Net property income 1 271 1 091 2 245
Other operating (30) (29) (62)
expenses
Net property income 1 241 1 062 2 183
after other operating
expenses
Investment income - - 1
Operating profit 1 241 1 062 2 184
Fair value adjustments 1 (50) (83) (139)
Finance costs (451) (363) (697)
Non-cash charges 2.1 (61) (79) (193)
(Capital (41) 7 22
costs)/trading profits
Finance income 35 61 87
Profit before 673 605 1 264
debenture interest
Debenture interest (720) (654) (1 363)
Loss before taxation (47) (49) (99)
Taxation charge 13 1 1
- taxation on - (2) (2)
trading profit
- normal taxation (1) (1) (2)
- deferred taxation 14 - -
- capital gains - 4 5
taxation
Loss for the period 2.2 (34) (48) (98)
* Restated refer
note 5
Note 1:
Fair value adjustments (50) (83) (139)
Gross investment 495 657 1 823
property fair value
adjustment
Less: straight-line (103) (104) (208)
lease income
adjustment
Net investment 392 553 1 615
property fair value
adjustment
Fair value adjustment 17 - -
on investment property
held for sale
Listed property 1 (1) (1)
investments
Borrowings and (2 144) (50) 1 197
derivatives
Long-term loans 97 (3) (48)
granted to BEE
consortia
Debentures 1 587 (582) (2 902)
Debentures are
adjusted to fair value
which represents the
net asset value
attributable to
debenture holders,
excluding intangible
assets.
The debentures fair
value adjustment
consists of:
Fair value adjustments 1 637 (499) (2 763)
for other assets and
liabilities excluding
fair value adjustment
on debentures
Straight-line lease (103) (104) (208)
income adjustment
Capital gains taxation - (4) (5)
Non-cash financing 10 9 19
charge
Increase in staff 2 21 75
incentive scheme
liability
Capital costs/(trading 41 (5) (20)
profits net of
taxation)
Debenture fair value 1 587 (582) (2 902)
adjustment
Note 2:
2.1 Non-cash (61) (79) (193)
charges
Non-cash (10) (9) (19)
financing
charge
Amortisation of (49) (49) (99)
intangible
asset
Increase in (2) (21) (75)
staff incentive
scheme
liability
2.2 Loss for
the period
The loss for
the period is
attributable to
the
amortisation of
the intangible
asset net of
deferred tax.
This is a non-
cash accounting
entry and does
not affect
distributable
earnings.
Calculation of
distributable
earnings
Net property 1 241 1 062 2 183
income after
operating
expenses
Less: straight- (103) (104) (208)
line lease
income
adjustment
Investment - - 1
income
Finance costs (451) (363) (697)
Finance income 35 61 87
Normal taxation (1) (1) (2)
Distributable 721 655 1 364
earnings
Total (721) (655) (1
distribution 364)
- Debenture (720) (654) (1
interest 363)
- Ordinary (1) (1) (1)
dividend
Linked units Linked units Linked units
Linked units in 1 280 926 195 1 280 926 195 1 280 926 195
issue at the end
of the period
Weighted number 6 1 280 926 195 1 196 773 190 1 238 460 442
of linked units
in issue
cents cents cents
Distributable 3 56,29 51,12 106,46
earnings per
linked unit
- Interim 56,29 51,12 51,12
- Final - - 55,34
Distribution per 56,30 51,10 106,50
linked unit
- Six months 56,30 51,10 51,10
ended 31
December
- Six months - - 55,40
ended 30 June
Basic loss per 3 (2,65) (4,01) (7,91)
share
Headline 4 (62,98) 46,37 159,31
(loss)/earnings
per linked unit
Rm Rm Rm
Basic loss is
reconciled to headline
(loss)/earnings as
follows:
Loss after taxation (34) (48) (98)
Add back: net fair
value adjustment
- Investment (350) (470) (1 381)
property
- Fair value (409) (553) (1 615)
adjustment
- Applicable 59 83 234
taxation
Headline loss (384) (518) (1 479)
attributable to
shareholders
Less: net fair value
adjustment
- Debentures (1 143) 419 2 089
- Fair value (1 587) 582 2 902
adjustment
- Applicable 444 (163) (813)
taxation
Add back: debenture 720 654 1 363
interest paid
Headline (807) 555 1 973
(loss)/earnings
attributable to linked
unitholders
Note 3:
The disclosure of earnings per share, while obligatory in terms of accounting
standards, is not meaningful to investors as the shares are traded as part of a
linked unit and practically all of the revenue earnings are distributed in the
form of debenture interest plus dividend in the ratio of 1 000 to 1. In
addition, headline earnings include profit on the sale of listed property
investments, fair value adjustments for listed property investments, fair value
adjustments for interest-bearing and zero-coupon borrowings and debentures as
well as non-cash charges, which do not affect distributable earnings. The
calculation of distributable earnings as set out above is more meaningful to
investors and is in accordance with Growthpoint`s reporting policy.
Note 4:
In terms of SAICA Circular 8/2007, both the fair value adjustment on investment
property and debentures are added back in the calculation of headline earnings
per linked unit. The Circular does not make provision for the fair value
adjustment on other non-current financial liabilities to be added back. The fair
value adjustment for borrowings and derivatives resulted in a negative headline
earnings for the interim period.
CONSOLIDATED BALANCE SHEET
Unaudited Unaudited Audited
31 Dec 31 Dec 30 June
2008 2007* 2008
Rm Rm Rm
ASSETS
Non-current assets 31 451 26 621 30 231
Fair value of investment 28 177 23 448 26 409
property for accounting
purposes
Straight-line lease income 939 732 836
adjustment
Fair value of property assets 29 116 24 180 27 245
Intangible assets 1 783 1 880 1 832
Other long-term employee 57 113 59
benefits
Equipment 2 3 2
Listed property investments 10 10 9
Long-term loans granted to 449 353 325
BEE consortia
Derivative asset 34 82 759
Current assets 1 111 365 426
Investment property held for 76 - 42
sale
Trade and other receivables 387 345 357
Cash and cash equivalents 648 20 27
Total assets 32 562 26 986 30 657
EQUITY AND LIABILITIES
Shareholders` interest 1 466 1 551 1 501
Ordinary share capital 64 64 64
Non-distributable reserve 1 402 1 487 1 437
Non-current liabilities - 16 696 15 965 18 283
debentures
Linked unitholders` interest 18 162 17 516 19 784
Other non-current liabilities 10 541 8 363 9 519
Other non-current financial 10 168 7 976 9 132
liabilities
Deferred tax liability 373 387 387
Current liabilities 3 859 1 107 1 354
Trade and other payables 568 391 638
Rights issue underwriting 1 000 - -
amount received in advance
Current portion of non- 1 566 53 -
current liabilities
Taxation payable 1 4 5
Linked unitholders for 724 659 711
interest and dividends
Total equity and liabilities 32 562 26 986 30 657
* Refer to note 5
Net asset value per linked 1 418 1 367 1 545
unit (cents)
Tangible net asset value per 1 308 1 251 1 432
linked unit (cents)
The decrease in net asset value per linked unit is mainly due to the fair value
adjustment to borrowings and derivatives, as a result of the significant
reduction in long-term interest rates from 30 June 2008 to 31 December 2008.
SUMMARISED CONSOLIDATED CASH FLOW STATEMENT
Unaudited Unaudited Audited
6 months 6 months 12 months
31 Dec 31 Dec 30 June
2008 2007 2008
Rm Rm Rm
Cash flow from operating 1 005 925 2 057
activities
Investment income - - 1
Net finance costs (410) (318) (523)
Taxation (paid)/received (5) - 1
(Capital costs)/trading (41) 7 22
profit
Distribution to unitholders (708) (517) (1 174)
Net cash (outflow)/inflow (159) 97 384
from operating activities
Net cash outflow from (1 393) (1 355) (3 296)
investing activities
Net cash inflow from 2 173 1 259 2 920
financing activities
Net increase in cash and cash 621 1 8
equivalents
Cash and cash equivalents at 27 19 19
beginning of the period
Cash and cash equivalents at 648 20 27
end of the period
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Ordinary Non-
share distributable
capital reserve
Rm Rm
Audited balance at 30 June 2007 54 -
Shares issued 10 1 536
Loss for the year - -
Transfer to non-distributable - (99)
reserve
Dividends - -
Audited balance at 30 June 2008 64 1 437
Loss for the period - -
Transfer to non-distributable - (35)
reserve
Dividends - -
Balance at 31 December 2008 64 1 402
Shareholders`
Reserves interest
Rm Rm
Audited balance at 30 June 2007 - 54
Shares issued - 1 546
Loss for the year (98) (98)
Transfer to non-distributable 99 -
reserve
Dividends (1) (1)
Audited balance at 30 June 2008 - 1 501
Loss for the period (34) (34)
Transfer to non-distributable 35 -
reserve
Dividends (1) (1)
Balance at 31 December 2008 - 1 466
Note 5:
In the year ended 30 June 2008, the company acquired the fund management
business and property management business and all related activities (Property
Services Businesses) from Investec Property Group Limited and the BEE partners.
The purchase consideration was settled by the issue of 98,3 million new linked
units. Most of the value was recognised as an intangible asset with a value of
R1,5 billion for the right to manage investment properties. In order to be
consistent with the manner of presentation in the financial statements at 30
June 2008, an adjustment was made to the 2007 interim results as reported. The
major changes consisted of the transfer of R1,5 billion from debenture liability
to a non-distributable reserve and the raising of a deferred tax liability of
R387 million relating to the intangible asset. The effect of raising the
deferred tax liability was to increase the value of goodwill as previously
reported. The adjustment had an immaterial effect on basic loss per share as
well as headline earnings per linked unit. The adjustment had no effect on
distributable earnings.
Note 6:
An adjustment was made to the weighted average number of linked units for the
period ended 31 December 2007. The adjustment had an immaterial effect on basic
earnings per share and headline earnings per linked unit. The adjustment had no
effect on distributable earnings.
SEGMENTAL ANALYSIS
INCOME STATEMENT EXTRACTS
Retail Office Industrial Total
Rm Rm Rm Rm
Six months ended
31 December 2008
Revenue excluding 567 624 367 1 558
straight-line lease
income adjustment
Straight-line lease 9 83 11 103
income adjustment
Revenue 576 707 378 1 661
Property expenses (156) (153) (81) (390)
Net property income 420 554 297 1 271
Fair value adjustment:
- investment property 201 155 139 495
Year ended 30 June 2008
Revenue excluding 1 003 1 050 659 2 712
straight-line lease
income adjustment
Straight-line lease 57 99 52 208
income adjustment
Revenue 1 060 1 149 711 2 920
Property expenses (260) (263) (152) (675)
Net property income 800 886 559 2 245
Fair value adjustment:
- investment property 376 735 712 1 823
BALANCE SHEET EXTRACTS
At 31 December 2008
Non-current assets
- Investment property
- Opening balance - 9 692 11 381 6 172 27 245
30 June 2008
- Acquisitions - 159 102 261
- Developments and 175 795 191 1 161
capital expenditure
- Disposals - (21) (25) (46)
- Fair value adjustment 201 155 139 495
- Fair value of property
assets -
31 December 2008 10 068 12 469 6 579 29 116
At 30 June 2008
Non-current assets
- Investment property
- Opening balance - 8 573 8 499 5 101 22 173
30 June 2007
- Reclassification (73) 73 - -
- Acquisitions 654 1 555 57 2 266
- Developments and 261 582 302 1 145
capital expenditure
- Disposals (99) (21) - (120)
- Transfer to investment - (42) - (42)
property held for sale
- Fair value adjustment 376 735 712 1 823
- Fair value of property 9 692 11 381 6 172 27 245
assets - 30 June 2008
COMMENTARY
INTRODUCTION
Growthpoint Properties Limited is the largest and most diversified South African
listed property holding and investment company with 437 properties valued in
excess of R29 billion and a market capitalisation in excess of R19 billion at 31
December 2008.
On 25 November 2008, Growthpoint was added to the Morgan Stanley Capital
International (MSCI) emerging markets index. Furthermore, Growthpoint made its
landmark debut on the JSE/Actuaries All Share 40 Top Companies Index (ALSI 40
Index) on 22 December 2008, ranked 31 of the top 40 companies.
Growthpoint`s property portfolio is well diversified geographically, by sector
and client.
BASIS OF ACCOUNTING
The interim financial statements have been prepared in accordance with the
recognition and measurement requirements of International Financial Reporting
Standards (IFRS), and the presentation and disclosure requirements of IAS 34,
Interim Financial Reporting. The company`s accounting policies as set out in the
audited financial statements for the year ended 30 June 2008 have been
consistently applied.
Investment property comprises land and buildings held to generate rental income
over the long term. Should any properties no longer meet the company`s
investment criteria and be sold, any profits or losses will be capital in nature
and will be taxed at rates applicable to capital gains. Deferred taxation on
revaluation of investment property is off-set against the deferred taxation
asset that arises on the revaluation of the company`s issued debentures
(excluding deferred taxation on intangible assets).
FINANCIAL RESULTS
The company has delivered growth in distributions for the period ended 31
December 2008 of 10.2% compared to the comparable prior year period.
The growth in distributions is based on sustainable earnings derived from
property net rental income.
The increase in Growthpoint`s linked unit price from R11,10 at June 2008 to
R15,00 at 31 December 2008, together with the 56,3 cents distribution announced
for the six months ended 31 December 2008, amounted to a 40.2% return for the
six month period.
RIGHTS OFFER
On 5 December 2008, Growthpoint announced that it intended to raise R1,7 billion
through a renounceable rights offer. In terms of the rights offer, existing
linked unitholders were offered 128 092 620 new Growthpoint linked units at an
issue price of R13,60 per linked unit, a 2.3% discount to the 30-day volume-
weighted average at the time of announcing the deal. The rights offer was
underwritten by Investec Bank Limited to the value of R1 billion, which was paid
on 31 December 2008. This is reflected as a current liability at 31 December
2008. The offer closed on 30 January 2009, with the full amount of R1,742
billion being raised.
NET PROPERTY INCOME
Apart from normal rental escalations, the increase in gross revenue (18.6%) and
property expenses (19.3%) was mainly due to acquisitions and new developments
that contributed, net of disposals, an additional R111,1 million to property net
income in the six months ended 31 December 2008.
FINANCING COSTS
The nominal value of interest-bearing debt increased from R7,7 billion at 31
December 2007 to R10,6 billion at 31 December 2008, resulting in an increase of
R88 million in finance costs from R363 million to R451 million. The additional
borrowings were utilised on acquisitions, developments and capital expenditure.
FAIR VALUE ADJUSTMENTS
The interim revaluation of properties resulted in an upward revaluation of R495
million (1,7%) increasing Growthpoint`s value of property assets to R29,1
billion.
From 30 June 2008 to 31 December 2008, there has been a significant reduction in
long-term interest rates as reflected in the swap curve below, resulting in a
R2,1 billion increase in the fair value of borrowings and interest rate swaps
for the current period.
NON-CASH CHARGES
The acquisition of the Property Services Businesses in the prior year gave rise
to a R1,5 billion intangible asset as well as R448 million goodwill on initial
recognition. In terms of accounting standards, the intangible asset is amortised
over a 15 year period.
The staff incentive scheme put in place as part of the management "buy-in"
transaction concluded in the prior year has given rise to a plan asset, shown on
the balance sheet net of the plan liability.
The amortisation of the intangible asset and increase in staff incentive scheme
liability are book entries that do not affect cash flow or distributable income.
CAPITAL COSTS
A fee of R35 million was paid to Investec for underwriting the R1,7 billion
rights offer. This fee, together with other costs related to the rights offer,
are disclosed as capital costs.
VACANCY LEVELS
At 31 December 2008 Growthpoint`s vacancy levels, as a percentage of gross
lettable area (GLA) were:
Retail 3.0% (2008: 2.8%)
Office 5.3% (2008: 4.9%)
Industrial 2.7% (2008: 1.9%)
Total 3.5% (2008: 2.9%)
The increase in vacancies from 2.9% to 3.5% of GLA represents 26 422 m2, 90% of
which is due to developments that were completed in the six months ended 31
December 2008. The marked slow-down in economic activity since the last quarter
of 2008 is affecting the letting of vacant space.
MAJOR ACQUISITIONS AND DEVELOPMENTS
During the period ended 31 December 2008, three properties in the office sector
were acquired for a total amount of R158,6 million at a weighted average initial
yield of 8.9%. A further three properties in the industrial sector were also
acquired for a total amount of R91,5 million at an average initial yield of 9.8%
as well as industrial land to the value of R10,8 million.
Expenditure on developments in the six months to 31 December 2008:
Spent in
Spent to six months
to
30 June 31 December Expected
Approved 2008 2008 yield
Property Rm Rm Rm Sector %
100 Grayston 475,0 - 475,0 Office 8.1
(Investec)
extension
Lincoln on 104,3 7,9 22,3 Office 9.0 -
the Lake, 10.0
Umhlanga
Montclare 361,9 259,4 85,7 Office 9.2
Place,
Claremont
Constantia 154,1 148,5 5,6 Office 11.6
Office Park
11 Adderley 150,7 76,1 52,9 Office 9.5
Growthpoint 142,0 - 37,2 Industrial 10.9
Industrial
Estate (mini
units)
Barloworld 86,0 32,4 39,2 Industrial 9.8
(Growthpoint
Industrial
Estate)
City Mall, 75,7 22,7 36,0 Retail 8.5
Klerksdorp
N1 City 70,0 16,6 27,5 Office 10.0
Hospital
Grand Parade 68,4 32,0 21,4 Retail 9.5
Alberton 66,0 14,3 51,7 Retail 9.3
City (35.7%
share)
Ebony Place 52,4 42,7 9,7 Industrial 11.4
Northgate 38,3 15,7 15,5 Retail 10.0
(50% share)
Knightsgate 37,6 19,9 13,7 Industrial 10.8
mini units
Various 351,2 33,3 267,6
other
Total 2 233,6 721,5 1 161,0
ACQUISITIONS AND DEVELOPMENTS IN PROGRESS
As at 31 December 2008 Growthpoint had entered into agreements to acquire three
industrial properties in Somerset West for a total cost of R77,1 million.
Transfer of these properties is expected by April 2009. Once fully let, these
properties are expected to return an initial yield of approximately 11.3% on
cost. Another industrial property in Stormill was purchased for R50,0 million
at an initial yield of approximately 11.3%. Transfer is expected by October
2009.
The outstanding balance on developments in progress, highlighted above, amounts
to R351,1 million.
DISPOSALS AND DISPOSALS IN PROGRESS
Three properties were disposed of in the current period, for R46 million.
Agreements have been entered into for the sale of various properties to the
value of R180,5 million which will realise a profit of R41,7 million over book
value.
LIQUIDITY AND TRADABILITY
Growthpoint`s linked units continue to enjoy high levels of liquidity and
tradability. During the six months ended 31 December 2008, approximately 360
million of Growthpoint linked units traded on the JSE Limited (JSE),
representing 28.1% of units in issue. This represents a monthly average of
R831,7 million.
BORROWINGS
At 31 December 2008, the loan to value ratio (LTV) measured by dividing the
nominal value of interest-bearing borrowings by the fair value of property
assets, was 36.3% (30 June 2008: 34.5%). Subsequent to 31 December 2008,
Growthpoint utilised R658 million of the cash raised from the rights offer to
repay long-term borrowings, reducing the LTV ratio to 34.1%.
96.7% of interest-bearing debt was fixed at a weighted average rate of 9.5% for
a weighted average of 9.8 years at 31 December 2008.
SHARE AND DEBENTURE CAPITAL
The authorised share capital is R75 000 000 divided into one and a half billion
ordinary shares of five cents each. Each ordinary share is linked to ten
variable rate debentures of 250 cents each.
The ordinary shares and debentures trade as linked units on the JSE.
In terms of the debenture trust deed, the interest payable on the debenture
component of the linked unit is always 1 000 times greater than the dividend
payable per ordinary share.
PROSPECTS
Since the last quarter of 2008, there has been a deterioration in trading
conditions.
It is taking longer than anticipated to let vacant space and more difficult to
renew leases at higher rentals. Vacancies have increased from 2.9% of gross
lettable area to 3.5%, largely as a result of new developments that were
completed in the last six months.
Growthpoint is, however, confident of achieving growth in distributions for the
full year to 30 June 2009 of between 7% and 10%, assuming no further material
change in market conditions or unforeseen major tenant failures. This profit
forecast has not been reviewed or reported on by Growthpoint`s auditors.
DIVIDEND AND INTEREST PAYMENT
Notice is hereby given of interim dividend declaration number 45 of 0.056 cents
and debenture interest payment number 45 of 56.244 cents per linked unit
totalling 56.3 cents per linked unit for the six months ended 31 December 2008.
Timetable for interim distribution:
2009
Last day to trade "cum" the interim Friday, 6 March
distribution
Linked units commence trading "ex" the interim Monday, 9 March
distribution
Record date to participate in the interim Friday, 13 March
distribution
Payment date of the interim distribution Monday, 16 March
No dematerialisation or rematerialisation of Growthpoint linked unit
certificates may take place between Monday, 9 March 2009 and Friday, 13 March
2009, both days inclusive.
By order of the Board
Growthpoint Properties Limited
18 February 2009
Directors
JF Marais (Chairman), HSP Mashaba (Deputy Chairman), LN Sasse* (Chief Executive
Officer), EK de Klerk*, MG Diliza, PH Fechter, JC Hayward, HS Herman, R
Moonsamy,
SM Snowball*, CG Steyn, JHN Strydom, FJ Visser
*Executive
Transfer secretary
Computershare Investor Services (Pty) Limited
(Registration number 2004/003647/07)
Ground Floor, 70 Marshall Street, Johannesburg, 2001
PO Box 61051, Marshalltown, 2107
Registered office
The Place, 1 Sandton Drive, Sandton, 2196
PO Box 78949, Sandton, 2146
Sponsor
Investec Bank Limited
100 Grayston Drive, Sandown
Sandton, 2196
PO Box 78949, Sandton, 2146
www.growthpoint.co.za
Date: 18/02/2009 11:00:02 Produced by the JSE SENS Department.
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