| Mon 5 Sep 2005, 10:05 | | Growthpoint Properties Limited - Unaudited Results |
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Growthpoint Properties Limited - Unaudited Results for the year ended 30 June
2005
Growthpoint Properties Limited
(Registration number 1987/004988/06)
Share code: GRT ISIN: ZAE000037669
(`Growthpoint` or `the company`)
UNAUDITED RESULTS for the year ended 30 June 2005
* TOTAL DISTRIBUTIONS INCREASED BY 6,1% TO 73,2 CENTS PER LINKED UNIT
* 63% TOTAL RETURN TO UNITHOLDERS
* PROPERTY ASSETS EXCEED R9 BILLION
* MARKET CAPITALISATION OF OVER R7 BILLION
* 27,7% INCREASE IN NET ASSET VALUE TO 737 CENTS PER LINKED UNIT
* BEE CONSORTIUM ACQUIRES 100 MILLION GROWTHPOINT LINKED UNITS (14,2%)
Condensed Consolidated Income Statement
Unaudited Audited
2005 2004
R`000 R`000
Revenue 1 013 939 836 739
Property expenses (255 434) (230 423)
Net property income 758 505 606 316
Other operating expenses (45 649) (34 887)
Net property income after
other operating expenses 712 856 571 429
Investment income 58 714 85 621
Fair value adjustments (Note 1) 60 690 43 600
Operating profit 832 260 700 650
Interest paid (298 096) (271 664)
Non-cash financing charges (36 169) (26 157)
Finance income 9 240 58 301
Net income before debenture interest 507 235 461 130
Debenture interest (481 792) (442 797)
Net income before taxation 25 443 18 333
Taxation (24 961) (17 890)
- normal and secondary
tax on companies (350) (335)
- capital gains taxation (24 611) (17 555)
Net income after taxation 482 443
Calculation of distributable earnings:
Net property income
after operating expenses 712 856 571 429
Investment income 58 714 85 621
Interest on long term loans (298 096) (271 664)
Finance income 9 240 58 301
Taxation (excluding capital
gains taxation) (350) (335)
Distributable earnings 482 364 443 352
Distribution for the year (482 274) (443 240)
Distribution per linked unit (cents) 73,20 69,00
Six months to December 35,50 33,50
Six months to June 37,70 35,50
Note 1
Fair value adjustments 60 690 43 600
Investment property 1 325 018 383 522
Listed property investments 207 227 59 325
Interest-bearing borrowings (243 969) 132 278
Derivatives (159 245) (199 055)
Zero-coupon borrowings (17 530) (14 846)
Debentures (1 050 811) (317 624)
The disclosure of earnings per share and headline 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 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 fair value adjustments for listed property investments and fair value
adjustments for financial liabilities as well as notional interest on non-
interest bearing long term loans, which do not affect distributable earnings.
The calculation of distributable earnings and the distribution per linked unit
as shown above is more meaningful.
Unaudited Audited
2005 2004
Earnings per share
Shares in issue 660 350 676 612 563 789
Weighted number of shares in issue 655 916 674 592 528 105
Earnings per share (cents) 0,07 0,07
Headline (loss) per share (cents) (144,08) (45,60)
Headline (loss)/earnings
per linked unit (cents) (70,63) 29,13
Headline earnings is calculated as follows: R`000 R`000
Net earnings for the period 482 443
Add back - fair value adjustment -
investment property (1 325 018) (383 522)
Less - Taxation applicable thereto 379 484 112 892
Headline loss attributable to shareholders (945 052) (270 187)
Add back - debenture interest paid 481 792 442 797
Headline (loss)/profit attributable to
linked unitholders (463 260) 172 610
Condensed Consolidated Balance Sheet
Unaudited Audited
2005 2004
R`000 R`000
ASSETS
Investment property 9 119 162 6 131 500
Listed Property investment portfolio 390 857 568 233
Receivables and other current assets 86 287 56 027
Cash and cash equivalents 45 887 86 302
9 642 193 6 842 062
EQUITY AND LIABILITIES
Ordinary share capital 33 018 30 629
Non current liabilities - debentures 4 834 477 3 504 555
Linked unitholders` interest 4 867 495 3 535 184
Other non current financial liabilities 3 816 989 2 658 832
Current liabilities 957 709 648 046
Trade and other payables 169 766 131 497
Amount owing in respect
of property acquisition 368 528 -
Current portion of
non-current liabilities 167 955 298 051
Linked unitholders for
interest and dividends 251 460 218 498
9 642 193 6 842 062
Number of linked units in issue 660 350 676 612 563 789
Net asset value per linked unit (cents) 737 577
Condensed Consolidated Statement of
Changes in Equity
Ordinary Total share
share capital and
capital Reserves reserves
R`000 R`000 R`000
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)
Balance at 30 June 2004 30 629 - 30 629
Shares issued 2 389 - 2 389
Net income for the year - 482 482
Dividends - (482) (482)
Balance at 30 June 2005 33 018 - 33 018
Condensed Consolidated Cash Flow Statement
Unaudited Audited
2005 2004
R`000 R`000
Cash generated by operations 716 588 541 306
Investment income 58 714 85 621
Net finance costs (288 856) (213 363)
Taxation paid (20 684) (1 080)
Distribution to unitholders (449 312) (265 422)
Cash flow from operating activities 16 450 147 062
Cash flow from investing activities (909 513) (896 182)
Cash flow from financing activities 852 648 813 267
Net (decrease)/increase in
cash and cash equivalents (40 415) 64 147
Cash and cash equivalents
at beginning of the year 86 302 22 155
Cash and cash equivalents
at end of the year 45 887 86 302
Commentary
Basis of accounting
In August 2005, the South African Institute of Chartered Accountants (SAICA)
issued a circular setting out the method of accounting for rental income in
terms of the South African accounting statement AC105 and the International
Accounting Standard IAS17. In terms of that circular, rental income from leases
with escalation clauses should be brought to account on a smoothed, straight
line basis over the period of the relevant leases. This has not been the
practice in South Africa to date, where rental escalations may be high relative
to certain other countries, due to the higher local inflation levels.
Prior to this circular, every South African listed property company has brought
rental income to account in the period in which it is contractually due.
Compliance with the circular will result in showing future rental escalations
in the current year`s revenue. The company`s directors believe that the new
method will not add any value to users of the financial statements, but on the
contrary will not fairly represent the results of operations and may be
misleading to users of the financial statements, as income relating to rental
escalations will be reflected in accounting periods different to the periods in
which the rental is legally due. In making the required accounting adjustment
to income, no account is taken of the time value of money, which makes
comparison of net income and cost ratios over time meaningless. These
provisional results have been released as unaudited results as the impact of
compliance with the circular is in the process of being assessed. As soon as
the impact has been determined, an announcement will be made to show the effect
on these provisional results. It must be emphasised that there will be no
cash-flow effect and there will be no impact on distributions. Except for the
above non-compliance with IAS17, these preliminary results have been prepared
in accordance with International Financial Reporting Standards (IFRS).
This is the first set of results prepared in accordance with IFRS and the
provisions of IFRS1 - First Time Adoption of International Accounting
Standards, have been applied. The main impact of applying IFRS is in respect of
share-based payments. Where shares are issued as part payment for assets
acquired, the assets are required to be valued at the date of obtaining
effective control, rather than the price stipulated in the purchase agreement.
This has had the impact of reducing the investment property fair value
adjustment recognised in the income statement by R102,5 million in the current
year.
Taxation
Investment properties are held as long-term income generating assets. 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. The effect of complying with the accounting
standards on deferred taxation, as interpreted by the company`s auditors, is
that deferred taxation is raised at the rate applicable to income earned from
the use of the assets. The company`s directors believe that this is incorrect
in principle.
Restatement of prior year figures
The 2004 comparative figures for revenue and for property expenses have both
been reduced by R83 718 000 as the recoveries of electricity, water and other
municipal consumption costs as well as promotion fund recoveries have been
off-set against the costs to which they relate. This has been done as the
company merely acts as agent in paying for these costs on behalf of tenants.
Audit report
The auditors have completed their audit work for the year ended 30 June 2005
with the exception of the adjustments required to comply with IAS17. The
directors are not aware of any issues which would preclude them from issuing
an unqualified audit opinion, once these calculations have been completed and
the necessary adjustments passed.
Financial results of the company
The year under review has seen exceptional returns to Growthpoint linked
unitholders. Distributions increased by 6,1 % from 69,0 cents to 73,2 cents per
linked unit and in addition the market value of Growthpoint linked units
increased by 51%, from R6,00 to R9,06 per linked unit. Based on the linked unit
price of R6,00 as at 30 June 2004, the total income return plus capital
appreciation for the year was 63%.
Over the last three years, total cumulative returns to linked unitholders
averaged 39% p.a.
Apart from normal rental escalations, the 21% increase in revenue was due to
additional income from properties acquired during the year (see below) and also
due to the timing of acquisitions such as the Investec property acquisition
effective only for four months in the previous year and Waterfall Mall
effective only for three months in the previous year.
The operating margin once again improved, from 72,5% of revenue in 2004 to
74,8% in 2005, as the property expense ratio decreased from 27,5% to 25,2% of
revenue.
The increase in other operating expenses was largely due to the increase in
asset management fees, which is a function of the increased market
capitalisation and debt following the acquisitions made over the last two
years and the improved trading prices of Growthpoint linked units. Expenditure
on marketing and advertising was also increased.
The decrease in investment income was due to the sale of the bulk of the
listed property investment portfolio in the period from December 2004 to June
2005. Subsequent to 30 June 2005, the company sold the balance of its Hyprop
linked units and now only retains a 13,8% shareholding in Metboard Properties
Limited, a specialised industrial fund, giving Growthpoint additional exposure
to the industrial sector.
Investment property increased in value by R1,3 billion following the
discounted cash flow valuation carried out for the entire portfolio as at 30
June 2005. The increase in overall values was in line with expectations, given
the decrease in market capitalisation rates over the last year and the
increase in projected income.
As the majority of the company`s borrowings are at fixed rates, the mark-to-
market of these loans and interest rate swaps gave rise to a fair value charge
to the income statement of R403,2 million. Likewise, the revaluation of zero-
coupon loans resulted in a charge of R17,5 million.
The decrease in finance income was mainly due to a large recovery in the prior
year of a portion of the distribution paid on new linked units issued during
the year to the vendors of properties acquired. The recipients of these new
units agreed to divest themselves of the portion of the distribution on the
units that accrued prior to their paying for the units.
The 6,1% increase in distribution per linked unit, from 69,0 cents to 73,2
cents is in line with market expectations and slightly ahead of the company`s
own budget.
Acquisitions
The major transaction during the year was the purchase of a portfolio of 48
properties from Tresso Trading 119 (Pty) Limited, an unlisted property fund
for R1,1 billion. 46 of the properties were transferred to Growthpoint on 30
June 2005 and the remaining 2 properties are expected to be transferred in the
near future. The flagship of the acquired portfolio is the 20 396 m2
Constantia Village shopping centre in the upmarket suburb of Constantia, Cape
Town. The balance of the portfolio is a good mix of well-located office and
industrial/warehousing properties as well as a private hospital in Cape Town.
The total portfolio was acquired at an initial forward yield of 11% and has
already shown capital growth due to the reduction in market yields and
interest rates.
With effect from July 2004 Growthpoint acquired 10 quality office properties
and a modern warehouse, mostly tenanted by blue-chip tenants on long leases,
from the Lyons Corporate Lease Fund for a total consideration of R288 million.
In July 2004 Growthpoint also acquired the Menlyn Piazza building, opposite
the popular Menlyn Centre in Pretoria for R60 million. At the end of January
2005 a new 9 500 m2 shopping centre `The Paddocks` in Milnerton, Cape Town was
purchased for R88 million from Investec Property Group. It is pleasing to note
that Woolworths have recently signed a 10 year lease to take space in the
centre.
In March 2005 Growthpoint purchased a 7 900 m2 warehouse in Milnerton, Cape
Town for R20 million. R138 million was spent during the year on extensions and
developments at existing properties to meet tenants` requirements.
Disposals
Strong demand from purchasers enabled the company to dispose of the following
older properties which no longer met the criteria for core long-term
investments, for a total consideration of R101,9 million: Flora Centre in
Florida North, Roodepoort; Gresswold Centre in Gresswold, Johannesburg; Hi-Tech
Park in Centurion, Pretoria and The Atrium in Braamfontein, Johannesburg. A
surplus of R6,9 million over the June 2004 book value and R34,4 million over
original cost was realised on all these disposals.
Vacancy levels
GRAPH
Despite the acquisition of the Tresso portfolio on 30 June 2005, which had an
8% vacancy, good letting in June of existing vacant space enabled the
vacancies at year-end to remain at a very acceptable level of 4,8%. Without
the Tresso portfolio, vacancies would have shown a reduction at 30 June 2005
to 4,1%.
Liquidity and tradeability
Growthpoint`s linked units continue to enjoy high levels of liquidity and
tradeability. During the calendar year to 31 December 2004, R2,4 billion of
Growthpoint linked units traded on the JSE Securities Exchange, representing
61% of units in issue. For the six months to June 2005 the value of trade was
R1,0 billion equal to 18% of units in issue.
Value of Growthpoint linked units traded
GRAPH
Borrowings and cash balances
At 30 June 2005, the fair value of interest bearing debt amounted to R3 737,4
million, of which R36,2 million is shown under current liabilities. The fair
value of zero-coupon loans amounted to R247,5 million of which R131,8 million
is reflected under current liabilities.
At 30 June 2005, the loan to value ratio, determined by dividing the total
fair value of all debt (excluding debentures) by the sum of investment
property and listed property investments amounted to 41,9%.
R2 294,5 million or 70% of interest-bearing debt was fixed at a weighted
average rate of 12,6% for a weighted average of 8,1 years at 30 June 2005.
However, the company entered into swap contracts which started on 1 August
2005, whereby R255 million of the debt that was required to finance the Tresso
acquisition has been fixed (excluding whatever margin will be payable) for 5
years at 8,32%, R255 million has been fixed for 7 years at 8,53% and R255
million has been fixed for 10 years at 8,65%. The imminent securitisation
issue is expected to raise R800 million at an all-in margin, including costs,
of around 80 basis points.
Subsequent to year-end the company settled two fixed interest rate contracts
in place relating to the loans secured by listed property investments as the
bulk of these investments have been sold and a large portion of the loan
repaid. After these settlements and the new fixes in respect of the Tresso
funding, over 90% of debt is at fixed rates.
At year-end the company had unutilised debt facilities in place of R408,2
million.
Cash balances at 30 June 2005 amounted to R45,9 million. R20,3 million of this
is cash deposited to cover guarantees issued for municipal services.
Securitisation
Growthpoint has made considerable progress towards issuing its first
commercial mortgage-backed securitised debt. It is anticipated that an
announcement will be made in this regard within the next three months.
Black economic empowerment
On Tuesday 30 August 2005, the company announced that a consortium of BEE
partners have acquired 100 million Growthpoint linked units, or 14,2% of the
total linked units currently in issue, with a current market value of over R1
billion. The Growthpoint linked units will be acquired from existing
unitholders and will not involve the issue by Growthpoint of any additional
linked units.
At the same time, the BEE Consortium will also acquire a 14,2% interest in the
Growthpoint asset management contract from Investec Property Group.
Growthpoint will advance mezzanine funding of R204 million with the balance of
the acquisition cost being provided by ABSA Commercial Property Finance, Old
Mutual Specialised Finance (Proprietary) Limited and Investec Private Bank.
The BEE Consortium consists of the following partners:
* Amabubesi Consortium, 80% owned by Amabubesi a new generation black
controlled and managed investment holding company led by chairman Bulelani
Ngcuka, 15% by Desert Wind Properties (Pty) Limited, a company controlled
and managed by black women with the balance being owned by a broad based
community trust.
* Miganu, a wholly black owned and managed investment company formed in 2002
by Mzolisi Diliza, a non-executive director of Growthpoint. Dr. Penuell
Maduna, former Minister of Justice and Constitutional Affairs is a key
member and significant investor. The company also has a broad based rural
community trust as one of the main beneficiaries.
* Unipalm is a black owned and managed company established in 2001 and chaired
by Thandi Ramathesele. The largest shareholder is Afripalm, an investment
vehicle owned by Ragavan Moonsamy and Lazarus Zim. The Unipalm shareholder
base also includes a national broad base of 35 000 people including women,
with strong rural and urban participation.
Messrs. Bulelani Ngcuka and Ragavan Moonsamy were appointed to the board of
Growthpoint on 31 August 2005.
Apart from ownership and control the other aspects of black economic
empowerment are receiving attention and more details will be provided in the
company`s annual report.
Share and debenture capital
The authorised share capital is R50 000 000 divided into one 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 1000 times greater than the dividend payable per
ordinary share.
During the year to 30 June 2005, the company issued 43 018 102 new linked
units to partly finance the Menlyn Piazza and Lyons portfolio acquisitions.
In December 2004 the company issued 1 661 093 linked units to SASOL Pension
Fund as part consideration for the company`s share of capital extensions
carried out at Kolonnade Shopping Centre.
In March 2005, the company acquired a warehouse in Milnerton, Cape Town for
R20,2 million, paid for by the issue of 3 107 692 linked units to the vendor.
Events subsequent to balance sheet date
During July 2005 the company disposed of the balance of its Hyprop units,
which were valued at R243,2 million at 30 June 2005 for a net selling price of
R247,5. In respect of the sales in the year to 30 June 2005 and the July 2005
sales, a surplus of R260,5 million over original cost was realised.
Growthpoint issued 42 587 942 new linked units in July to settle the liability
of R368,5 million included in current liabilities at 30 June 2005 that relates
to the purchase of the Tresso portfolio.
Prospects
The Growthpoint board anticipates that, subject to market conditions remaining
stable, Growthpoint`s distributions for the year ending 30 June 2006, should
show similar growth to that experienced in the current year.
Dividend and interest payment
Notice was given on Friday, 2 September 2005 of final dividend declaration
number 37 of 0,03763 cents and debenture interest payment number 37 of 37,66237
cents per linked unit totalling 37,70 cents per linked unit for the income
distribution period 1 January 2005 to 30 June 2005.
Timetable for final distribution:
2005
Last day to trade `cum` the final distribution Friday, 16 September
Linked units commence trading
`ex` the final distribution Monday, 19 September
Record date to participate
in the final distribution Friday, 23 September
Payment date of the final distribution Monday, 26 September
No dematerialisation or rematerialisation of Growthpoint linked unit
certificates may take place between Monday, 19 September 2005 and Friday,
23 September 2005, both days inclusive.
This final distribution brings the total distribution for the year ended
30 June 2005 to 73,2 cents per linked unit.
By order of the Board
Growthpoint Properties Limited 2 September 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,
R Moonsamy, B Ngcuka, CG Steyn, JHN Strydom, FJ Visser
*Executive
Registered office: Transfer secretary: Sponsor:
100 Grayston Drive, Computershare Investor Investec Bank Ltd
Sandown, Sandton Services 2004(Pty) Limited
2196 (Registration number
PO Box 78949 1958/003546/06) 100 Grayston Drive,
Sandton, 2146 Ground Floor, 70 Marshall street, Sandown, Sandton, 2196
Johannesburg, 2001 PO Box 78949,
PO Box 61051, Marshalltown, 2107 Sandton, 2146
Growthpoint Properties Limited
(Registration number 1987/004988/06)
Share code: GRT ISIN: ZAE000037669
Managed by
Investec Property Group
Date: 05/09/2005 10:00:23 AM
Produced by the JSE SENS Department
