| Tue 22 Feb 2005, 17:14 | | Growthpoint - Unaudited Interim Results And Distri |
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Growthpoint - Unaudited Interim Results And Distribution Announcement
GROWTHPOINT PROPERTIES LIMITED
(Registration number 1987/004988/06)
Share code: GRT ISIN: ZAE000037669
(`Growthpoint` or `the company`)
UNAUDITED INTERIM RESULTS AND DISTRIBUTION ANNOUNCEMENT for the six months
ended 31 December 2004
* most liquid and traded property counter
- 61% of linked units in issue traded in the year
- average monthly trades exceeded R197 million
* 6% increase in interim distribution per linked unit
* largest South African listed property company
- property assets exceed R8 billion
- market capitalisation exceeds R5,5 billion
* vacancies down to 4,7%
CONDENSED CONSOLIDATED INCOME STATEMENT
Unaudited Unaudited Audited
6 months 6 months 12 months
ended ended ended
31 December 31 December 30 June
2004 2003 2004
R`000 R`000 R`000
Revenue 531 251 434 221 920 457
Property expenses (162 946) (141 523) (314 141)
Net property income 368 305 292 698 606 316
Other operating expenses (20 687) (15 561) (34 887)
Net property income after other
operating expenses 347 618 277 137 571 429
Investment income 33 588 47 072 85 621
Capital items and fair value
adjustments (Note 1) 18 297 11 404 43 600
Operating profit 399 503 335 613 700 650
Interest paid (156 082) (133 939) (271 664)
Non cash financing charges (18 306) (11 456) (26 157)
Interest earned 7 158 19 726 58 301
Net income before debenture
interest 232 273 209 944 461 130
Debenture interest (231 897) (208 552) (442 797)
Net income before taxation 376 1 392 18 333
Taxation (144) (1 184) (17 890)
- Normal and secondary tax on
companies (144) (148) (335)
- Capital gains taxation - (1 036) (17 555)
Net income after taxation 232 208 443
Note 1: Fair value adjustments 18 297 11 404 43 600
Investment properties 956 138 479 383 522
Listed investment portfolio 179 936 82 937 59 325
Interest bearing borrowings (38 822) (52 145) 132 278
Derivatives (352 978) - (199 055)
Zero coupon loans (14 141) - (14 846)
Debentures (711 836) (19 867) (317 624)
Calculation of distributable
earnings:
Net property income after other
operating expenses 347 618 277 137 571 429
Investment income 33 588 47 072 85 621
Interest paid (156 082) (133 939) (271 664)
Interest earned 7 158 19 726 58 301
Taxation (144) (148) (335)
Distributable earnings 232 138 209 848 443 352
Distribution per linked unit 35,50 33,50 69,00
Earnings per share
The disclosure of earnings per share set out below, while obligatory in terms
of accounting standards, is not meaningful to investors as the shares are
traded as part of a linked unit and virtually 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 fair value adjustments for
debentures as well as interest adjustments on nil coupon loans, which do not
affect distributable earnings. It is submitted that distributable earnings and
the distribution per linked unit as shown above is more meaningful.
Unaudited Unaudited Audited
6 months 6 months 12 months
ended ended ended
31 December 31 December 30 June
2004 2003 2004
Shares in issue 653 884 453 623 100 092 612 563 789
Weighted number of shares in
issue 652 767 981 623 100 092 592 528 105
Basic earnings per share (cents) 0,04 0,03 0,07
Headline earnings/(loss) per
share (cents) (102,50) (0,04) (45,60)
Basic earnings/headline
earnings are
calculated as follows: R`000 R`000 R`000
Net income after taxation 232 208 443
Fair value adjustment -
investment properties (956 138) (479) (383 522)
Deferred taxation 286 841 - 112 892
Headline earnings/(loss) (669 065) (271) (270 187)
CONDENSED CONSOLIDATED BALANCE SHEET
Unaudited Unaudited Audited
31 December 31 December 30 June
2004 2003 2004
R`000 R`000 R`000
ASSETS
Investment property 7 481 988 4 569 244 6 131 500
Listed investment portfolio 732 450 942 549 568 233
Receivables and other current
assets 101 775 42 183 56 027
Bank and call accounts 87 023 203 714 86 302
Total assets 8 403 236 5 757 690 6 842 062
EQUITY AND LIABILITIES
Ordinary share capital 32 695 31 156 30 629
Non-current liabilities -
debentures 4 455 037 3 271 730 3 504 555
Linked unitholders` interest 4 487 732 3 302 886 3 535 184
Non-current financial
liabilities 3 233 081 2 088 254 2 658 832
Current liabilities 682 423 366 550 648 046
Total equity and liabilities 8 403 236 5 757 690 6 842 062
Number of linked units in issue 653 884 453 623 100 092 612 563 789
Net asset value per linked unit
(cents) 686 530 577
Loan to value ratio (%) 39,4 37,9 39,7
CONDENSED CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY
Total share
Ordinary capital and
share capital Reserves reserves
R`000 R`000 R`000
Audited balance at 30 June 2003 17 164 - 17 164
Shares issued 13 465 - 13 465
Net income for the year - 443 443
Dividends - (443) (443)
Audited balance at 30 June 2004 30 629 - 30 629
Shares issued 2 066 - 2 066
Net income for the period - 232 232
Dividends - (232) (232)
Unaudited balance at 31 December 2004 32 695 - 32 695
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
Unaudited Unaudited Audited
31 December 31 December 30 June
2004 2003 2004
R`000 R`000 R`000
Cash generated by operations 337 011 274 084 541 306
Net finance costs (115 336) (67 141) (127 742)
Taxation paid (3 583) (1 059) (1 080)
Distribution to unitholders (217 590) (40 294) (265 422)
Cash flow from operating
activities 502 165 590 147 062
Cash flow from investing
activities (378 631) (1 024 239) (896 182)
Cash flow from financing
activities 378 850 1 040 208 813 267
Net increase in cash and cash
equivalents 721 181 559 64 147
Cash and cash equivalents at
beginning of the period 86 302 22 155 22 155
Cash and cash equivalents at end
of the period 87 023 203 714 86 302
SECTORAL ANALYSIS
6 months ended 31 Dec 2004
Com-
Retail mercial Industrial
R`000 R`000 R`000
INCOME STATEMENT
Revenue 275 945 223 158 15 137
Expenses (93 882) (60 546) (5 482)
Net property income 182 063 162 612 9 655
% of total 49,4 44,2 2,6
Operating margin (%) 66,0 72,9 63,8
BALANCE SHEET R`000 R`000 R`000
Investment property
Opening balance
1 July 2004 3 298 145 2 509 603 133 442
Acquisitions - 333 018 -
Capital expenditure 47 164 13 823 345
Fair value adjustments 525 285 385 988 19 410
Closing balance
31 December 2004 3 870 594 3 242 431 153 197
% of total 51,7 43,4 2,0
6 months ended 31 Dec 2004
Ware- Hotels
housing and other Total
R`000 R`000 R`000
INCOME STATEMENT
Revenue 10 898 6 113 531 251
Expenses (1 448) (1 588) (162 946)
Net property income 9 450 4 525 368 305
% of total 2,6 1,2 100,0
Operating margin (%) 86,7 74,0 69,3
BALANCE SHEET R`000 R`000 R`000
Investment property
Opening balance
1 July 2004 111 211 79 100 6 131 501
Acquisitions - - 333 018
Capital expenditure - - 61 331
Fair value adjustments 15 642 9 813 956 138
Closing balance
31 December 2004 126 853 88 913 7 481 988
% of total 1,7 1,2 100,0
BASIS OF ACCOUNTING
The unaudited interim financial statements have been prepared in accordance
with the South African Statements of Generally Accepted Accounting Practice -
Interim Financial Reporting AC 127 and the accounting policies used are
consistent with those applied in the annual financial statements for the year
ended 30 June 2004.
RELATED PARTY TRANSACTIONS
Two executive directors and two non-executive directors, including the chairman
are directors or employees of Investec Bank Limited (`Investec`) or it`s group
companies. Investec Property Group also owns 70% of Growthpoint Managers (Pty)
Limited, the management company of Growthpoint.
The following market-related fees were paid during the six months ended
31 December 2004:
2004 2003
R`000 R`000
Letting commissions paid to Investec Property Group
(`IPG`) 4 510 3 769
Property management fees paid to IPG 19 334 17 303
Asset management fees paid to Growthpoint Managers (Pty)
Limited 17 986 13 657
COMMENTARY
Financial results of Growthpoint
During the period to December 2004, the office portfolio was enhanced by the
acquisition of 11 properties from subsidiaries of the Lyons Corporate Lease
Fund and the Menlyn Piazza in Pretoria. These are all good quality,
well-located properties with long leases in place and a good mix of tenants. In
total these acquisitions added R20,0 million to net income for the six months
ended 31 December 2004.
The operating margin at 69,3% of net property income to revenue shows a further
improvement over the prior year figures. This is partly due to the inclusion
for the full six months of the net rental income in respect of the two Investec
properties acquired in March 2004. As these are triple net leases, there are no
expenses related to these properties. Continuing tight control over expenses
and the maintenance of the low vacancy level also contributed to this
improvement.
The retail sector has been experiencing strong growth and as a result of
tenant-driven demand, Growthpoint is busy with a R55 million extension to
Walmer Park in Port Elizabeth and a R104 million extension to Waterfall Mall
in Rustenburg.
In the office sector it is encouraging to see the over-supply of space is being
rapidly reduced, partly due to conversions to residential apartments and partly
due to increased demand. It is expected that office rentals in the major
business districts, that are relatively cheap at present, will increase to more
realistic levels over the next year or two.
Borrowings and cash balances
The nominal value of interest bearing borrowings at 31 December 2004 amounted
to R2,8 billion. Interest rates in respect of 81% of interest-bearing
borrowings have been fixed for varying periods with the earliest expiry being
August 2006 and the latest expiry being October 2024. The weighted average
interest rate paid by Growthpoint on these borrowings in terms of which
interest rates have been fixed amounts to 12,4%. Growthpoint`s debt, including
the present value of non-interest bearing debt and the mark-to-market
adjustments in respect of derivatives and fixed interest loans as a per-
centage of total long-term assets is 39,4%.
Trading of linked units on the JSE
During the 12 month period ended 31 December 2004, Growthpoint linked units to
the value of R2,4 billion traded on the JSE Securities Exchange South Africa,
equal to 61% of the average number of units in issue over the period.
Commercial mortgage backed securitisation
Growthpoint has made substantial progress towards achieving its first issue of
a secured corporate bond to the value of approximately R700 million. The timing
of the issue is likely to be towards the end of the current financial year and
therefore will not have a significant impact on distributions for this
financial year.
Valuation of property portfolio
The policy of the company is to revalue the property portfolio annually at the
financial year end with external valuations obtained for at least one third of
the portfolio each year.
The directors are of the opinion that market-derived discount and
capitalisation rates are lower than those applied in the June 2004 valuation.
As a result, the directors have revalued the portfolio to take into account the
reduction in discount and capitalisation rates and this has resulted in an
increase in value of R956,1 million or 15,6%.
As mentioned in the previous year`s annual report, deferred taxation has been
provided at 30% on the fair value adjustments to investment property. Although
this is off-set by an opposite deferred tax credit on the fair value adjustment
to debentures, the company believes that providing for deferred tax on the
revaluation of investment property at 30% is wrong in principle and this
provision is not commensurate with the company`s intention of holding
investment properties as long-term investments to generate revenue. The
company`s view is that if required at all, defered taxation should be pro-
vided capital gains rate that is currently 15%. The provision at 30% was made
bacause the view of the company`s auditors is that this is the correct
interpretations of current accounting standards.
Post-balance sheet events
As was announced in the press in December 2004, Growthpoint has entered into an
agreement to acquire a portfolio of 48 properties from Tresso Trading (Pty)
Limited for R1 080 million.
The transaction is subject to the approval of Growthpoint linked unitholders
and approval of the Competition Tribunal. It is anticipated that a circular
containing full details of the transaction will be posted to Growthpoint
linked unitholders around about the end of February 2005.
The acquisition will be financed by borrowings of R810 million and the issue of
new Growthpoint linked units to the value of R270 million. The effective date
of the transaction will be on the first day of the month following fulfilment
of all conditions precedent.
Subsequent to December 2004, Growthpoint has disposed of a large portion of its
listed property investment portfolio. To the date of this announcement R240
million has been realised from the proceeds of these sales. The rationale for
these disposals is to convert from listed property investments into physical
property assets at higher yields.
Prospects
The Growthpoint board is confident that, subject to market conditions remaining
favourable, Growthpoint`s distribution for the second 6 month period and the
year ending 30 June 2005, should show an increase which is in line with the
distribution growth for the first six months of the year. This forecast has not
been reviewed or reported on by the company`s auditors.
Declaration of interim dividend and interest payment
Notice is hereby given of interim dividend declaration number 36 of 0,0355
cents and debenture interest payment number 36 of 35,4645 cents per linked unit
for the income distribution period 1 July 2004 to 31 December 2004. The total
amount payable to linked unit holders amounts to 35,5 cents (`the interim
distribution`) per Growthpoint linked unit and will be paid to linked
unitholders in accordance with the timetable set out in the table below:
Last day to trade `CUM` the interim distribution Friday, 11 March 2005
Linked units commence trading `EX` the interim
distribution Monday, 14 March 2005
Record date to participate in the interim
distribution Friday, 18 March 2005
Payment date of the interim distribution Tuesday, 22 March 2005
No dematerialisation or rematerialisation of Growthpoint linked unit
certificates may take place between Monday, 14 March 2005 and Friday, 18 March
2005, both days inclusive.
By order of the board
Growthpoint Properties Limited 23 February 2005
Directors
S Hackner (Chairman)*, JF Marais (Deputy chairman)*,
LN Sasse (Chief executive officer), MG Diliza*, PH Fechter*,
JC Hayward*, HS Herman*, SR Leon, J Molobela*, CG Steyn*, JHN Strydom*,
FJ Visser*
*Non-executive
Registered office
Ground floor
100 Grayston Drive
Sandown
Sandton 2196
PO Box 78949
Sandton 2146
Transfer secretaries
Computershare Investor Services 2004
(Pty) Limited
Ground Floor, 70 Marshall Street
Johannesburg 2001
PO Box 61051
Marshalltown 2107
Sponsor
Investec Securities Limited
100 Grayston Drive
Sandown
Sandton 2196
PO Box 785700
Sandton 2146
