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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Grit Real Estate Income Group Limited | LSE:GR1T | London | Ordinary Share | GG00BMDHST63 | ORD NPV |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 20.00 | 19.00 | 21.00 | 20.00 | 20.00 | 20.00 | 6,000 | 01:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
Real Estate Investment Trust | 56.54M | -23.63M | -0.0478 | -4.18 | 98.97M |
TIDMGR1T
RNS Number : 7011Q
Grit Real Estate Income Group
29 October 2021
GRIT REAL ESTATE INCOME GROUP LIMITED (Registered in Guernsey) (Registration number: 68739) LSE share code: GR1T SEM share code: DEL.N0000 ISIN: GG00BMDHST63 LEI: 21380084LCGHJRS8CN05 ("Grit" or the "Company" or the "Group")
FULL YEAR AUDITED CONSOLIDATED RESULTS FOR THE YEARED 30 JUNE 2021
The board of Directors (the "Board") of Grit Real Estate Income Group Limited , a leading pan-African real estate company focused on investing in and actively managing a diversified portfolio of assets underpinned by predominantly US$ and Euro denominated long-term leases with high quality multi-national tenants, today announces its audited results for the financial year ended 30 June 2021.
Financial highlights
30 June 2021 30 June 2020 Increase/ (Decrease) Distributable earnings per share(1) US$5.97 cps US$9.58 cps (37.7%) ------------- ------------- --------------------- Dividend per share US$1.50 cps US$5.25 cps (71.4%) ------------- ------------- --------------------- EPRA NRV per share(2) US$102.4 cps US$117.1 cps (12.6%) ------------- ------------- --------------------- EPRA earnings per share US$2.57 cps US$3.82 cps (32.7%) ------------- ------------- --------------------- Adjusted EPRA earnings per share(3) US$4.91 cps US$9.02 cps (45.6%) ------------- ------------- --------------------- Property portfolio net operating income US$55.3m US$53.5m +3.5% ------------- ------------- --------------------- Gross property income US$49.2m US$48.5m +1.4% ------------- ------------- --------------------- Contractual rental collected 92.5% 88.6% +3.9ppt ------------- ------------- --------------------- Loss for the year before taxation (US$60.9m) (US$53.9m) (13.0%) ------------- ------------- --------------------- EPRA cost ratio (including associates) 13.2% 14.6% -1.4ppt ------------- ------------- --------------------- Total Income Producing Assets(5) US$801.9m US$823.5m (2.6%) ------------- ------------- --------------------- WALE(6) 4.8 yrs. 5.0 yrs. -0.2 yrs. ------------- ------------- --------------------- EPRA portfolio occupancy rate(7) 94.7% 94.1% +0.6ppt ------------- ------------- --------------------- Group LTV 53.1% 50.2% +2.9ppt ------------- ------------- --------------------- Property LTV 46.6% 46.5% +0.1ppt ------------- ------------- ---------------------
-- EPRA net reinstatement value ("NRV") per share contracted to US$1.024 (2020: US$1.171). The 12.6% reduction was principally as a result of the decrease in the value of the Group's retail and VDE Housing Estate ("VDE") assets and increased impairment charges.
-- Contractual rental collections, which represents the cash collections as percentage of contractual revenue (before adjustments of rental deferrals and concessions), has improved by 3.9 percentage points from 88.6% to 92.5%.
-- Group LTV increased to 53.1% (2020: 50.2%) predominantly as a result of the decrease in the value of the Group's property portfolio. The Group has successfully extended its lowest applied LTV debt covenants to 55% to April 2023 and secured additional liquidity facilities. The Board remains committed to reducing LTV levels to its near-term target of 45% and then to its medium term target of between 35% to 40% through capital recycling initiatives, issuance of quasi equity instruments and select NAV accretive acquisitions to be completed only upon the securing of appropriate funding by the Group.
-- Dividends per share declared for the year ended 30 June 2021 of US$1.50cps (2020: US$5.25cps), comprising the interim dividend declared in February 2021. The Board has decided against declaring a final dividend for the year ended 30 June 2021, but plans to resume payments in the current financial year ending 30 June 2022 with a view to the Group's LTV meaningfully declining towards the Board's near term target of 45%.
-- The portfolio was independently valued at 30 June 2021, with total income producing assets valued at US$801.9m (2020: US$823.5m), including acquisitions and capex additions amounting to US$18.8m and like-for-like property valuations decreasing 7.8% for the year to 30 June 2021.
-- The Group's property portfolio net operating income (including associates and joint ventures) increased 3.5% as a result of the full year impact of prior year acquisitions in the period and strong portfolio performance in sectors relatively unaffected by COVID-19.
Operational highlights
-- Property portfolio now comprises a total of 54 investments, across eight countries and five asset classes.
-- 90.9% (2020: 90.2%) of revenue is earned from multinational tenants8. -- 92.7% (2020: 89.1%) of income is produced in hard currency9. -- EPRA portfolio occupancy rate of 94.7% as at 30 June 2021 (2020: 94.1%).
-- Total Grit proportionately-owned lettable area ("GLA") increased 2.3% year-on-year by 7,807m2 (30 June 2020: 34,589m2) mostly as a result of acquisitions.
-- Weighted average annual rent escalations at 3.8% (2020: 2.8%).
-- Weighted average property exit capitalisation rate 8.1% (2020: 8.1%) driven by COVID-19 uncertainty related upward movements that were offset by favourable portfolio mix effects from acquisitions.
-- Weighted average cost of debt moved down to 5.7% (2020: 5.9%) as a result of movements in libor over the reporting period and refinancing activities by the Group.
Corporate highlights
-- On 29 July 2020, Grit delisted from the Main Board of the Johannesburg Stock Exchange and introduced two strong African institutional shareholders.
-- On 3 August 2020, the trading of Grit's shares on the Main Board of the London Stock Exchange (the "LSE") converted from a US$ quotation to a Sterling quotation.
-- On 22 January 2021, the Group stepped up to premium segment of the LSE. -- On 4 February 2021, the Group redomiciled to Guernsey.
Post balance sheet events
-- Obtained an equity classified perpetual note and IFC debt funding for the acquisition of the Orbit Africa manufacturing facility and redevelopment, that is expected to be accretive to both the Company's net asset value and earnings, delivering value to Grit's shareholders.
-- Extended the maturity of US$116 million of debt to between April 2023 and April 2025.
Notes
(1) Refer to note 11 (unaudited).
(2) Explanations of how European Public Real Estate Association ("EPRA") figures are derived from IFRS are shown in note 12 (unaudited).
(3) Adjustments to make earnings better representative of what the Directors believe is the underlying company performance and includes adjustments for unrealised foreign exchange movements, straight-line leasing and amortisation of lease premiums, amortisation of right of use land, impairment of loan and deferred tax adjustments - refer to note 10 (unaudited) for further details on adjustments made.
(4) Based on EPRA cost to income ratio calculation methodology which includes the proportionately consolidated effects of LLR and other associates.
(5) Includes properties, investments and property loan receivables - Refer to Chief Financial Officer's Statement for reconciliation and analysis.
(6) Weighted average lease expiry ("WALE").
(7) Property occupancy rate based on EPRA calculation methodology - Includes associates.
(8) Forbes 2000, Other Global and pan African tenants. (9) Hard (US$ and EUR) or pegged currency rental income.
Bronwyn Knight, Chief Executive Officer of Grit Real Estate Income Group Limited, commented:
We have a high-quality portfolio of attractive property assets leased to very strong tenant covenants that is continuing to deliver a resilient performance with 92.5% of contracted revenue collected this period, versus 88.6% in the prior year, despite the headwinds of the pandemic. We are increasingly confident that the Group's property occupancy rate of 94.7% at the period end will continue to improve during the balance of 2021 and beyond, supported by our hospitality sector assets benefitting from the easing of travel restrictions and further leasing activity in both our Ghanaian office portfolio and retail sector assets. Trading is also showing encouraging signs of normalising, especially in the hospitality and retail sectors.
Although we delivered a robust operational performance, with our Property Portfolio Net Operating Income rising 3.5% for the year to 30 June 2021, our LTV ratio rose to 53.1% over the same period impacted by valuation pressures, predominantly in the retail sector. We expect Grit's LTV to benefit from improvements in our property valuations over the medium term, the acceleration of our asset recycling strategy and target of recycling 20% by property portfolio value by the end of 2023, which we continue to pursue, and our perpetual note issuance, which has now been concluded. Our LTV will additionally benefit from the potential sale of AnfaPlace at no lower than the 30 June 2021 book value, which would also be expected to impact positively on the Group's distributable earnings per share.
Although our short-term focus remains on continuing our strong rental collections, balance sheet optimisation and the reduction of our LTV to below 45%, we are pursuing select accretive growth, co-investment and pre-funded development opportunities across resilient sectors. These high-quality, diversified opportunities, if successfully concluded, hold the potential to significantly improve the Group's net asset value, distributable earnings and yield.
Our strategy remains effective, and I am increasingly confident that we are well positioned and that the steps we are taking will not only safeguard Grit for the near term but ensure that we proactively seize the opportunities that arise to return to growth, acceptable shareholder returns and an attractive cash dividend.
FOR FURTHER INFORMATION, PLEASE CONTACT:
Grit Real Estate Income Group Limited Bronwyn Knight, Chief Executive Officer +230 269 7090 Darren Veenhuis, Chief Strategy Officer and Investor Relations +44 779 512 3402 Maitland/AMO - Communications Adviser James Benjamin +44 7747 113 930 Grit-maitland@maitland.co.uk finnCap Ltd - UK Financial Adviser William Marle/Teddy Whiley (Corporate Finance) +44 20 7220 5000 Mark Whitfeld/Pauline Tribe (Sales) +44 20 3772 4697 Monica Tepes (Research) +44 20 3772 4698 Perigeum Capital Ltd - SEM Authorised Representative and Sponsor Shamin A. Sookia +230 402 0894 Kesaven Moothoosamy +230 402 0898 Capital Markets Brokers Ltd - Mauritian Sponsoring Broker Neetusha Aubeeluck +230 402 0285
NOTES:
Grit Real Estate Income Group Limited is the leading pan-African real estate company focused on investing in and actively managing a diversified portfolio of assets in carefully selected African countries (excluding South Africa). These high-quality assets are underpinned by predominantly US$ and Euro denominated long-term leases with a wide range of blue-chip multi-national tenant covenants across a diverse range of robust property sectors.
The Company is committed to delivering strong and sustainable income for shareholders, with the potential for income and capital growth. The Company is targeting net total shareholder return inclusive of NAV growth of 12.0%+ p.a.*
The Company holds its primary listing on the Main Market of the London Stock Exchange (LSE: GR1T and a secondary listing on the Stock Exchange of Mauritius (SEM: DEL.N0000).
Further information on the Company is available at http://grit.group/
* These are targets only and not a profit forecast and there can be no assurance that they will be met. Any forward-looking statements and the assumptions underlying such statements are the responsibility of the Board of Directors and have not been reviewed or reported on by the Company's external auditors.
Directors:
Peter Todd+ (Chairman), Bronwyn Knight (Chief Executive Officer)*, Leon van de Moortele (Chief Financial Officer)*, David Love+, Sir Samuel Esson Jonah+, Nomzamo Radebe, Catherine McIlraith+, Jonathan Crichton+, Cross
Kgosidiile (+) and Bright Laaka+ (Permanent Alternate Director to Nomzamo Radebe).
(* Executive Director) ((+) independent Non-Executive Director)
Company secretary : Intercontinental Fund Services Limited
Registered office address : PO Box 186, Royal Chambers, St Julian's Avenue, St Peter Port, Guernsey GY1 4HP
Registrar and transfer agent (Mauritius) : Intercontinental Secretarial Services Limited
SEM authorised representative and sponsor : Perigeum Capital Ltd
UK Transfer secretary : Link Assets Services Limited
Mauritian Sponsoring Broker : Capital Markets Brokers Ltd
This notice is issued pursuant to the FCA Listing Rules and SEM Listing Rule 15.24 and the Mauritian Securities Act 2005. The Board of the Company accepts full responsibility for the accuracy of the information contained in this communiqué.
A Company presentation for all investors and analysts via live webcast and conference call
The Company will host a live Zoom webcast and conference call on Friday, 29 October 2021 at 12:00pm Mauritius / 09: 00am UK . The call can be accessed directly on the day using the following link: https://us06web.zoom.us/j/82090379280 . For further queries please contact IR@grit.group.
A playback will be accessible on-demand within 48 hours via the Company website: https://grit.group/financial-results/
CHAIRMAN'S STATEMENT
The operating environment during the review period remained challenging, however Grit's strategy of high-quality assets leased to very strong tenant covenants helped to ensure that Grit was resilient and maintained high rent collection rates. We continue to concentrate on preserving the resilience and financial strength of the Company to deliver secure attractive value to our shareholders over both the short and longer term, with significant progress made during the period.
Grit's strategic focus on counterparty strength and portfolio diversification provided a stable asset base helping to ensure the Group posted a robust operational performance for the year, with its corporate accommodation, industrial, commercial office and other assets materially unaffected by the COVID-19 fall-out. These assets collectively comprise 53.2% (after excluding non-controlling interests, ("Group's Economic Interest")) of the Group's Economic Interest in property assets as at 30 June 2021.
The Group collected 92.5% of the value of its contracted revenue in the financial year to 30 June 2021 (FY20: 88.6%) and over the same period provided rent concessions, resulting in reduced revenues of 5.6%, and rent deferrals of a further 2.3% of contracted rental revenue . Management's continued focus on proactive tenant and asset management resulted in a higher occupancy rate of 94.7% (FY20: 94.1%) predominantly because of new leases concluded in the corporate offices and retail portfolios.
The retail sector across Africa continues to face both cyclical and structural shifts and accounts for over 80% of the Group's reported vacancy, of which AnfaPlace Mall in Morocco, our largest asset by value, is the main contributor. Leasing activity to the retail sector assets has improved and this is expected to continue to improve in the current financial year, and whilst we continue to be confident about the convenience and strip mall retail concepts, our strategy is to continue reducing overall exposure to the retail sector. To this end, Grit has recently granted 2-months exclusivity to a potential buyer of AnfaPlace Mall in Casablanca, Morocco. Grit expects to realise a price no lower than the updated 30 June 2021 book value and if concluded, the transaction is expected to reduce the Group's LTV and positively impact the Group's distributable earnings per share.
We are encouraged to see Mauritian border restrictions lifted from 1 October 2021, with tourist arrivals expected to recover strongly and swiftly. Grit has two principal tenant brands in the Mauritius hospitality sector, both of which received strong Mauritian government support, including liquidity support, from the Mauritian Investment Corporation which is supporting the resumption of lease repayments to Grit. Club Med Cap Skirring is expected to resume trading on 5 December 2021 and this will see the resumption of rental payments at that date. The resort is currently experiencing strong bookings for the upcoming tourist season.
The Company redomiciled its corporate seat to Guernsey and successfully applied to step-up to the Premium segment of the London Stock Exchange in January 2021. A premium listing requires the highest standards in governance and is expected to facilitate the Group's eligibility for inclusion in the FTSE UK Index Series, which is anticipated to significantly improve liquidity and further diversify Grit's shareholder base.
Financial results
These are challenging and uncertain times, as demonstrated by the valuation declines across the property portfolio that has resulted, for the year under review, in the value of total income producing assets dropping to US$801.9m (FY20: US$823.5m) and a total return per share(1) of -11.3% (FY20: -15.8%).
(1) EPRA NRV per share movement plus dividend paid per share during the year
EPRA NRV per share reduced by 12.6% mainly due to further valuation write-downs in the retail sector assets and VDE housing compound. Grit's property portfolio fair value losses, since the onset of the pandemic, amount to US$114.9m, representing a 14.2% (like-for-like) reduction compared to 31 December 2019. Consequently, Grit Group LTV increased to 53.1% as at 30 June 2021, predominantly as a result of this decrease in valuations, additional short-term working capital facilities to fund rental deferrals provided to tenants in the hospitality sector and capital expenditure in the normal course of business, including GREA capital calls. The Board continues to pursue a medium-term LTV target of between 35% and 40% with a near-term focus of reducing LTV to below 45%, and although it does not expect a rebound in retail valuations until the financial year ending 30 June 2023 at the earliest, it does, however, take note of positive trends such as reduced vacancies and increased footfall in its retail assets and the re-opening of the Mauritian borders to overseas tourists.
Protection of the balance sheet and debt reduction remains a strong focus and despite the recent positive rent collection trends and notwithstanding raising gross proceeds of approximately US$9.8 million of fresh equity in late 2020, other initiatives by the Group, such as a reduction of US$6.7 million in administrative and operating expenses, have so far and at 30 June 2021 financial year end, not yet had a positive impact on the Group's LTV.
The Board is now advancing its efforts to achieve an asset recycling target of 20% of the value of the property portfolio by 31 December 2023. The potential sale of AnfaPlace Mall was recently announced and further disposals are expected to be announced in due course, which are expected to contribute to the reduction of reported LTV to 30 June 2022.
Grit also successfully engaged with its debt providers and has both increased its lowest applied LTV and dropped its Interest Service Coverage Ratio (ISCR) covenants on debt facilities and, more recently, secured maturity extensions for the bulk of the Group's US$410.1 million outstanding debt to beyond April 2023.
Post balance sheet date, the Group secured full funding for the accretive US$53.6 million acquisition and redevelopment of Orbit Africa manufacturing facility in Kenya, obtaining a US$25.0 million senior debt facility from the International Finance Corporation (the "IFC"), the investment arm of the World Bank and up to US$31.5 million by way of Grit issued equity classified perpetual notes to two additional external funders. This transaction is expected to be the first in a number of strategic collaborations with the IFC across Africa and positions the Company to execute on its focus of increasing its exposure to industrial sector assets.
The Directors have modelled both a 'base case' and a 'severe but plausible downside' of the Group's expected liquidity and covenant position for a going concern period of at least 12 months from the date of signing the annual report. The models show that, save for the items highlighted in the CFO report, the Group has adequate financing facilities and maintains its covenants throughout the going concern period. The inherent uncertainty in future property valuations is also such that should they decrease more severely or quicker than anticipated as a result of the COVID-19 pandemic, then the Group may breach some individual property and/or Group wide covenants. Further details on the downside scenarios are reflected in the CFO's report. Management has a number of mitigating actions available to it should these situations arise. Further details of matters relating to going concern are referenced in the external auditors' Independent Audit Opinion.
Dividends
In light of recent events, especially the LTV which has increased to over 53%, the Board has deliberated at length regarding the current year dividend and considered the needs of its income and yield investors against the long-term protection of the Group's balance sheet. The Board has decided against recommending a final dividend for the financial year ended 30 June 2021 and expects to re-instate this once Group LTV declines towards the Board's near - term target of 45%.
Changes to the Board
Mr Cross Kgosidiile joined the Board of Grit as an independent Non-Executive Director and as a member of the Audit and Risk Committees with effect from 5 March 2021. Mr Kgosidiile is the Managing Director of the Botswana Development Corporation (" BDC "), the country's main agency for commercial and industrial development, founded in 1970 with the Government of Botswana as its sole shareholder. BDC's shareholding in the Company represents approximately 4.48% of the total issued share capital of the Company.
He has over 20 years' experience in building high performance businesses and teams, having served in a variety of leadership roles, including at the Botswana Power Corporation (BPC), the Motor Vehicle Accident (MVA) Fund and the national airline, Air Botswana. Mr Kgosidiile has also worked as a business consultant where he focused on property transactions. His expertise spans corporate finance and business strategy, information technology, supply chain management and business transformation.
Climate change and sustainability
With Africa rapidly urbanising, we understand the important role that we as landlords must play in limiting carbon emissions and our impact on natural resources for long-term sustainability.
The Group has committed to reducing carbon emissions by a targeted 25% as well as a 25% improvement in our building efficiency over the next four years and the Board has committed to delivering a clear definition of our net zero carbon pathway. The Responsible Business Committee has been tasked to monitor these improvements, including having adequate data to support this target.
We are proud to maintain more than 40% of women in leadership positions at Grit, and a staff complement consisting of more than 80% local employees, exceeding our target of 65%.
Outlook
In a very challenging environment, our Board and management team took decisive, proactive action to defend and grow our position and safeguard the business to deliver shareholder value for both the short and long term.
Trading is showing encouraging signs of normalising especially in the hospitality and retail sectors. Whilst we maintain an appropriately cautious stance in light of the potential longer-term effects from COVID-19 on our tenants and the wider economy, we remain confident in our strategy of unlocking superior total returns for our investors in the medium to longer term through the significant recovery potential across our unique portfolio of properties as well as strategic, value accretive acquisitions and capital recycling initiatives. Key to the long-term success of the Company will be a more conservative capital structure, significant disposals and successfully exploiting opportunities within our portfolio to help ensure we return to growth, acceptable returns and a cash dividend.
We are excited about the potential for further value creation from the assets and development pipeline within Gateway Real Estate Africa Limited ("GREA"), in which we currently hold a 19.98% equity interest. The Group's exposure to embassy corporate accommodation and data centre assets is expected to increase as these projects are delivered in the coming months.
As a management team, we remain under no illusions about the challenges ahead. However, I am confident that we are well positioned and that the steps we are taking will not only safeguard Grit for the near term but ensure that we proactively seize the opportunities that arise from these unprecedented times.
Finally, I would like to thank my colleagues on the Board for their significant time contributions this year; our colleagues in the business for their Herculean efforts in an exceptionally tough environment; and shareholders for their support for the actions taken to date and those that are forthcoming.
Peter Todd Chairman
CHIEF EXECUTIVE'S STATEMENT
COVID-19 has emerged as a multi-faceted risk with a variety of implications for the Group. As we continue to navigate effectively the ever-changing environment, the Company is carefully monitoring the impact of COVID-19 on the business, financial conditions, property valuations, medium-term growth strategies and prospects of the Grit Group. Our strategy remains effective, and we are confident that we have successfully navigated the worst of the current cycle by virtue of the various interventions we have made over the last 18 months.
Ongoing COVID-19 response
Although COVID-19 impacted our business over the full financial year, we took clear action to strengthen the Group's financial position while our colleagues simultaneously ensured that all our stakeholders were safe and supported.
Our operational response included:
-- New safety measures and increased cleaning protocols across all our assets;
-- Support for key tenants and brand partners including reductions in service charge, rent deferrals and concessions; and
-- Support for our communities, including community food programmes and provision of face masks.
Our financial response included:
-- Defining detailed strategies to achieve our near-term targets of reducing LTV to below 45%; -- Suspending our 2020 final dividend and withholding our final 2021 year-end dividend;
-- 10% reduction in pay for the Board and senior management over the period 1 July 2020 to 30 June 2021;
-- Negotiating a temporary extension to the Group LTVs and Group ISCR covenants;
-- Suspending and cancelling a number of announced pipeline acquisitions in order to protect Balance sheet capacity; and
-- Advancing asset recycling within the portfolio with the partial sales of AnfaPlace Mall and Acacia announced in late 2020. These strategies are now being further accelerated with the Board targeting 20% of the portfolio to be recycled by December 2023.
Resilient portfolio performing well
Grit's property portfolio comprises a total of 54 assets (including 25 properties held in Letlole La Rona in Botswana) with rentals predominantly collected monthly, of which 92.7% are collected in US$, Euro or pegged currencies.
The Group's high-quality assets have a weighted average lease expiry of 4.8 years (FY20: 5.0 years) and a weighted average contracted lease escalation of 3.8% per annum (FY20: 2.8% per annum), underpinned by a wide range of blue-chip multinational tenants across a variety of sectors who account for over 90.9% (FY20: 90.2%) of our contracted revenue.
The Group's weighted average EPRA vacancy rate reduced to 5.3% as at 30 June 2021 (FY20: 5.9%) mainly because of two new leases to Total in Commodity House Phase 1 (Mozambique) and several new leases signed in AnfaPlace Mall (Morocco), as well as at the three retail malls in Kitwe, Ndola and Lusaka, Zambia respectively.
The retail segment still accounts for over 80% of the reported Group vacancy, of which AnfaPlace Mall is the largest contributor. Strong leasing activity is expected over the remainder of the 2021 calendar year buoyed by increased footfall numbers as lockdown restrictions are relaxed.
Other investments, Office, corporate accommodation, and light industrial assets
Other investments, corporate accommodation, industrial and commercial office sectors remained largely unaffected by the COVID-19 fall-out. These sectors collectively represent over 53.2% of Grit's Economic Interest in property assets as at 30 June 2021.
Light industrial assets continue to represent a resilient sector and remain a key focus for growth in the portfolio. Several significant opportunities have been presented to the Group and management to consider options in relation to funding and furthering the sector strategy. To this end, the Group recently announced the successful conclusion of an equity classified perpetual note of up to US$31.5 million to fund the acquisition of the Orbit Africa warehouse and manufacturing buildings in Kenya via a sale and lease back arrangement, with a 25-year lease in place (at a 9.5% yield), followed by the development of additional warehousing and manufacturing buildings at a 16% yield. The debt component of the acquisition, amounting to US$25 million, will be funded by the International Finance Corporation ("IFC") at libor + 5.75%, but pleasingly marks the opportunity for Grit to further collaborate with the IFC across similar assets on the African continent.
Retail assets
The pandemic has accelerated structural challenges in the retail sector. Although convenience centres, which typically have a proportionately higher services and basic necessities offering, have continued to trade well, the larger enclosed malls remain under pressure with rising vacancies and tenant strain.
Retail assets constituted 21.1% of Grit's Economic Interest in property assets as at 30 June 2021 and are split between enclosed malls (AnfaPlace Mall) and convenience shopping and service orientated strip malls. During the year under review, Grit provided a combination of concessions and rent deferrals to tenants at AnfaPlace Mall in anticipation of the asset returning to normalised levels of trading post the 2019 redevelopment and the more recent COVID-19 related disruptions.
The asset management team made good progress on lease renewals at Mukuba Mall in Kitwe, Zambia, following 85% of the leases expiring in March 2020. At the reporting date, 98.5% of the mall's available rental space has been let. Cosmo Mall (Lusaka, Zambia) and Mall de Tete (Tete, Mozambique) continue to experience abnormal levels of vacancies although signs of the vacancy rate normalising through the current financial year are encouraging.
Hospitality assets
At the financial year end, hospitality assets comprised 25.7% of Grit's Economic Interest in property assets. Grit does not have direct occupancy and operational cost exposure in the hospitality sector because of its fully servicing triple net lease rental contracts with international leisure operators. Rent deferrals were offered to tenants ahead of the re-opening of borders and the expected resumption of normal tourist arrivals. Grit expects to recover these deferrals over the coming months as described in the cash collections section below.
Strong rental collection rate
For the financial year to June 2021, Grit collected 92.5% of the value of its contracted rental revenue (FY20: 88.6%). Over this same period, the Group has provided rent concessions, resulting in reduced revenues of 5.6% and rent deferrals of a further 2.3% of contracted rental revenue.
Corporate 1 July 2020 to 30 June Office Retail accommodation Hospitality Light Industrial 2021 ----------------------- ------ ------ ---------------------- ----------- ---------------- ---------------------- Contracted rent 100% 100% 100% 100% 100% 100% Rent deferrals 0% (0.3%) 0% (11.2%) 0% (2.3%) Rent concessions (2.3%) (8.9%) (5.5%) (6.5%) 0% (5.6%) ----------------------- ------ ------ ---------------------- ----------- ---------------- ---------------------- Expected collection rate 97.7% 90.8% 94.5% 82.3% 100% 92.1% ----------------------- ------ ------ ---------------------- ----------- ---------------- ---------------------- Actual collection rate 100% 90.2% 99.2% 77.2% 100.3% 92.5% ----------------------- ------ ------ ---------------------- ----------- ---------------- ---------------------- Movement in debtors' balances (excl. agreed deferrals) (2.7%) 0.06% (4.7%) 5.1% (0.3%) (0.4%) ----------------------- ------ ------ ---------------------- ----------- ---------------- ----------------------
While the hospitality sector has not been as severely impacted as our peers due to the fixed nature of our leases and the significant government support granted to our hospitality tenants, it continues to be a focus area of the Group. With the opening of the Mauritian borders from 1 October 2021 and the planned opening of the ClubMed in Senegal in December 2021, lease payments are expected to resume fully by those dates and for the rental deferments granted to be recovered over the coming months.
The Lux Group is up to date on current rentals and have repaid all rent deferrals granted in 2020 in respect of the Tamassa resort in Mauritius. The remaining three Mauritius hotels in Grit's portfolio are tenanted to New Mauritius Hotels Group (NMH), owned by a large Mauritian conglomerate, who have resumed rental payments. Grit provided cashflow deferrals of c.50% of monthly rental value for the period December 2020 until October 2021 that will be collected over the subsequent 48-month period.
Collection rates of 77.2% achieved during the year are expected to return 100% by December 2021 following the opening of the various resorts.
Cost of debt
Total interest-bearing borrowings increased by US$17.6 million for the financial year ended 30 June 2021.
Cost of debt reduced further to 5.7% for the year under review from a weighted average of 5.9% in the comparative prior financial year.
Refinancing negotiations were successfully concluded, and the bulk of the maturities were extended beyond April 2023. Further detailed commentary is in the CFO statement.
Growing value and strengthening our position
While our mandate is clear, that of reducing our Group LTV and strengthening our balance sheet, Grit will continue to grow shareholder value through asset recycling initiatives and redeploying its equity into accretive opportunities across resilient sectors.
In addition to focusing on the generation of revenue by targeting completed, income generating properties, Grit's investment strategy is complemented by our participation in pre-funded development and co-investment opportunities as well as property management services.
To this end Grit co-founded, and currently holds, a 19.98% interest in Gateway Real Estate Africa ("GREA"), a private development company focused on several turnkey build projects across the African continent tenanted to current and targeted multinational clients. Through its minority stake, Grit has access to GREA's accretive pipeline of development projects, assets and returns, including access to its attractive completed assets.
The roll out of the development projects within GREA has accelerated during the financial year with several projects being awarded recently.
Projects currently underway or concluded include:
-- Metroplex Uganda, a retail centre in Uganda anchored by Carrefour, completed in May 2021.
-- Diplomatic Housing compound in Ethiopia, anchored by the US Embassy, completed in October 2021.
-- African Data Centre in Nigeria, due for handover in November 2021.
-- Diplomatic Housing compound in Kenya, fully let to the US Embassy, due for completion in Q2 of 2022.
-- Diplomatic Housing compound in Mali, fully let to the US Embassy, due to start construction before the end of the year.
-- The construction of the St Helene Hospital in Mauritius, to be operated by the Artemis Group, was started prior to year-end and is expected to complete at the end of 2022; and
-- Office building in Apolonia City in Ghana, anchored by Rendeavour, has recently commenced construction.
As a result of the number of projects awarded to GREA in the year, the company has now called for the remaining capital commitments from its shareholders, with Grit due to inject an additional US$17.9 million by the end of the year if it wishes to retain its current equity ownership in GREA (this being in addition to the US$8.4million injected into GREA during the year). The growth trajectory of GREA has accelerated and based on the independent valuers' completion valuations, and the pre-let nature of the projects, net asset value growth is expected to be strongly positive over the forthcoming two years as projects are completed.
Grit is concurrently considering increasing its stake in GREA to further align both Grit and GREA's future profitable growth strategies and approach to servicing tenants, which would be a cornerstone to further unlocking scale, synergy benefits and the creation and delivery of further value to Grit's shareholders. A potential transaction would likely require approvals from Grit's shareholders and equity funding by Grit. Grit expects to engage with its shareholders should this be further pursued.
Governance
Grit continues to invest in a strong governance framework, resources, and ongoing training from both its Human Resources and Compliance Departments to uphold the highest levels of corporate governance across the continent and has increased its focus as a result of the step up to the premium listing on the main market of the London Stock Exchange.
Prospects
Our diversified portfolio and high-quality tenants provided great stability to the Company despite the economic volatility on the back of COVID-19.
Notwithstanding significant economic headwinds, especially in the retail sector, early signs of post-COVID-19 recovery are encouraging but dependent on ongoing vaccine rollouts. We expect the Mauritian leisure market to recover significantly in the short term, with a concomitant recovery of a major part of our leisure segment, assuming no potential further COVID-19 lockdowns.
Although our short-term focus remains on continuing our strong rental collections, balance sheet optimisation and the reduction of our LTV to below 45%, we are pursuing select growth and co-investment opportunities. These high-quality, diversified opportunities, if successfully concluded, hold the potential to significantly improve the Group's net asset value and yield.
Our strategy remains effective and we have successfully navigated through the worst of the current cycle. We are appreciative of the support provided by all our stakeholders, most notably that of our providers of capital, the Grit Board, the executive team, and our staff and I look forward to updating you on our progress and strategy during the 2022 financial year .
Bronwyn Knight Chief Executive Officer
CHIEF FINANCIAL OFFICER'S STATEMENT
Presentation of financial statements
The financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB"). In line with our continuous commitment to best practices in the sector, we continue to present the European Public Real Estate Association ("EPRA") reporting as an alternative performance measures to supplement IFRS. In considering our operational performance, we've adopted the EPRA Best Practice and Policy Recommendations ("BPR") throughout this report. Full reconciliations between IFRS and EPRA figures are provided in note 43 of the Audited Financial statements.
The financial statements include disclosures on material uncertainty related to going concern. Although these uncertainties are highlighted, and described in more detail in the statement of going concern, the financial statements have not included any adjustments that would be required if the Group were unable to continue as a going concern.
Financial and Portfolio summary
The current financial year has proved to be challenging and although some sectors have been severely impacted by the pandemic, other sectors have started benefiting from the new opportunities presented in the changing economic and social environments. The Group has maintained its focus on tightly managing aspects which are within its direct control while monitoring and reacting to those factors that are not. Cost optimisation, debtors collections and re-letting activities continue to be the key elements of daily focus of the operations team, while the treasury team has made great strides in securing extensions to debt tenors and obtaining additional covenant headroom as required.
Gross IFRS rental income increased to US$49.2m from US$48.5m. This increase is as a result of annual contractual lease escalations in the period.
Audited for the year ended Audited for the year ended 30 June 2021 30 June 2020 US$'000 US$'000 --------------------------------------- --------------------------- -------------------------- Contractual rental income 38,884 38,798 Retail parking income 1,698 1,567 Other rental income (lease incentives) 3,042 2,240 Recoverable property expenses 5,366 5,349 Straight-line rental income accrual 227 580 --------------------------------------- --------------------------- -------------------------- Gross rental income 49,217 48,534 --------------------------------------- --------------------------- --------------------------
For meaningful comparison, assets accounted for as associates and joint ventures have been proportionately presented in the relevant sectors to produce a "Grit Property Portfolio" revenue, operating expenses and NOI analysis below. Grit Property Portfolio revenue has risen 2.0% from prior year on annual contractual lease escalations and asset acquisitions annualising in the period, while strong operational cost control (5.5% y.o.y. reduction) resulted in a 3.5% increase in net operating income over the financial year to 30 June 2021.
Rental Revenue Revenue Opex Opex NOI NOI Collection Sector FY2021 FY2020 Movement FY2021 FY2020 Movement FY2021 FY2020 Movement FY2021 USD'000 USD'000 % USD'000 USD'000 % USD'000 USD'000 % % -------------- -------- -------- -------- -------- -------- -------- --------- --------- -------- ---------- Retail 15,770 19,911 (20.8%) (6,341) (6,488) (2.3%) 9,429 13,423 (29.8%) 90.2% Hospitality 12,728 10,654 19.5% - - - 12,728 10,654 19.5% 77.2% Office 18,408 16,939 8.7% (1,835) (2,357) (22.1%) 16,573 14,582 13.7% 100.0% Industrial 2,174 2,512 (13.5%) (74) (69) 7.2% 2,100 2,443 (14.0%) 100.3% Corporate Accommodation 13,117 12,397 5.8% (1,978) (1,949) 1.5% 11,139 10,448 6.6% 99.2% LLR portfolio 2,811 1,315 113.8% (335) (184) 82.1% 2,476 1,131 118.9% n/a GREA portfolio 250 199 25.6% - - - 250 199 25.6% n/a Corporate (26) - - 675 585 15.4% 649 585 10.9% n/a -------------- -------- -------- -------- -------- -------- -------- --------- --------- -------- ---------- TOTAL 65,232 63,927 2.0% (9,888) (10,462) (5.5%) 55,344 53,465 3.5% 92.50% -------------- -------- -------- -------- -------- -------- -------- --------- --------- -------- ---------- Subsidiaries 49,217 48,534 1.4% (8,543) (8,985) (4.9%) 40,674 39,549 2.8% Associates 16,015 15,393 4.0% (1,345) (1,477) (8.9%) 14,670 13,916 5.4% -------------- -------- -------- -------- -------- -------- -------- --------- --------- -------- ----------
Note 1
Rental Collections represents the amount of cash received as a percentage of contractual income. Contractual income is stated before the effects of any rental deferment and concessions provided to tenants.
Retail sector
The retail sector has been primarily impacted by COVID-19 with a significant increase in vacancies, rental concessions and lease renewals at much reduced rates since the start of the pandemic. In the most recent months, there has been an improvement in letting activity, with vacancies in the sector reducing from 16.2% to 14.7% over the year. In addition, promising footfall (with AnfaPlace Mall in Morocco recording figures well above pre-COVID levels) and improving rent to turnover ratios, are being reported by our tenants. The recent positive impacts on the Zambian economy, where exchange rates have improved significantly against the USD and the recovery in copper prices, bode well for the future of our Zambian Malls, specifically those in the copper belt region.
Revenue declined by 20.8% as a result of short-term concessions granted, weaker local currencies and lower lease rates upon renewals. These were partially offset by reductions in operating costs of 2.3% that resulted in a total NOI decline of 29.8%. Rental collections of 92.5% of contractual revenue has been achieved through very difficult trading environments, although these collections are off the newly contracted lease rates which are on average 11.4% lower per square metre than prior year.
Valuations continue to be impacted by the lower NOI and a depressed view on lease renewal rates for the next 18 to 24 months. In total, the retail properties experienced fair value losses of 17.8% over the year.
Hospitality Sector
Hospitality sector revenue increased in USD terms by 19.5%, 6.8% of which was attributable to the full year impact of ClubMed acquired in January 2020, and the balance to the Euro vs the USD move during the year and lease escalations. Rental concessions of $0.8million were provided to ClubMed during the period.
New Mauritius Hotels (operator of the Beachcomber resorts) have been provided with cashflow deferrals of c.50% of monthly rental value for the period 1 January 2021 until Mauritian border restrictions were lifted and are current on the remaining portions of their lease commitments. The agreed cashflow deferrals will be collected over the subsequent 48-month period to December 2025.
The fixed nature of the leases and government support for our hospitality tenants has limited the fair value impact on the assets to -2.5% for the year while the recovery of the EUR against the USD has resulted in reported values in USD terms increasing 7.5% over the prior year.
Corporate Accommodation Sector
Operating performance in the sector remained resilient with revenue increasing by 5.8% as a result of leasing activity and rental escalations, while operating cost increases were limited to 1.5%, having a positive impact on the NOI of 6.6%.
As widely publicised, Vale has made the decision to dispose of their coal mining assets in Tete Mozambique. While the next lease renewal date is in May 2024, the valuation of the property has been impacted by the uncertainty of the identity of a potential buyer and whether the new owners of the mine would require the superior level of accommodation the Group currently supplies to Vale and the potential impact this might have on future lease renewals. This resulted in a net fair value write down of the corporate accommodation sector by 8.3%.
Office Sector
The office portfolio remains relatively unaffected by the pandemic, with the property valuation decline of 4.5% mainly driven by reductions in the value of Grit's office portfolio in Ghana as a result of a softer leasing market. One of Grit's anchor tenants in Ghana, GCNet, early terminated their lease which was due to expire in November 2022, and while the bulk of the space has been re-let post year end, the current oversupply and the slowdown due to COVID-19 have impacted lease rates of the new tenants.
The revenue increase of 8.7% for the year includes the additional revenue from the lease termination fee for GCNet. The material decrease in operating costs of 22.1% (partly due to planned maintenance not being able to be completed due to COVID-19 restrictions) resulted in a 13.7% increase in NOI.
Industrial Sector
The revenue drop in the industrial sector of 13.5% was attributable to the reduction in revenue from the Bollore facility redevelopment. The redevelopment of the Bollore facility has progressing well with phase 1 delivered in March 2021 which resulted in a new four-year lease being signed with Bollore. Phase 2 is due for completion in November 2021.
Letlole La Rona Portfolio (" LLR ")
Both asset values and revenue have been positive during the year. The predominately industrial portfolio has had limited impact from the COVID-19 pandemic and the revenue increase of 113.8% is due to the full year impact of the November 2020 acquisition and the additional five assets acquired by LLR in June/July 2021.
It is the intention to expand the working relationship between LLR and Grit in the future, with the Group currently investigating jointly purchasing new assets in order to provide LLR with additional US Dollar revenue streams.
The value of our property portfolio decreased to US$755.9m as at 30 June 2021 from US$776.1m in 2020.
COMPOSITION OF INCOME PRODUCING ASSETS 2021 2020 US$'m US$'m ---------------------------------------------------------------------------------- ----- ----- Investment properties 549.5 577.2 Investment property included within 'Investment in associates' 193.8 193.9 Properties under development within 'Investment in associates' 12.6 5.0 755.9 776.1 Deposits paid on investment properties 5.7 4.5 Other investments, Property, plant & equipment, Intangibles & related party loans 40.3 42.9 ---------------------------------------------------------------------------------- ----- ----- TOTAL INCOME PRODUCING ASSETS 801.9 823.5 ---------------------------------------------------------------------------------- ----- -----
Cost control
In addition to the cost control measures put in place within the property operating costs, the Group has made significant savings in ongoing administrative costs, achieving a US$2.4 million saving in the year, of which at least US$1 million is expected to be permanent. Transaction costs are variable and are impacted by the level of corporate activity undertaken by the Group.
Administrative costs as at 30 June 2021 as at 30 June 2020 Movement Movement USD'000 USD'000 USD'000 % -------------------------------- ------------------ ------------------ -------- -------- Total Administrative costs 13,867 20,131 (6,264) (31.1%) Less: Transaction costs 79 3,905 (3,826) (98.0%) -------------------------------- ------------------ ------------------ -------- -------- Ongoing administrative expenses 13,788 16,226 (2,438) (15.0%) -------------------------------- ------------------ ------------------ -------- --------
A metric by which the Group measures its operating efficiency is the ongoing administrative cost to assets ratio which has improved to 1.7% in the current year under review. The Group continues to target a medium-term admin cost to assets ratio of under 1.0%. Total income producing assets for the year reduced by 2.6% which negatively affected the cost ratio by 0.1%.
Property valuations
Investment properties are valued at each reporting date with valuations performed every year by independent professional valuation experts accredited by the Royal Institute of Chartered Surveyors' ("RICS") and compliant with International Valuation Standards.
Downward Fair value movements in the group's property portfolio, including the proportionate share of the assets held in joint ventures and associates, were predominantly reflected in the retail and corporate accommodation sectors. The overall fair value decline in the portfolio was US$60.4 million which offsets the additions and forex movement over the reporting period.
Opening Closing Total Property Forex Fair value Property Valuation Fair Value Sector Value movement Additions Other movements Value Movement Movement USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 % % -------------- ------------ ------------ --------- ------- ------------ ------------ ------------ ------------ Retail 217,760 5,643 1,917 (317) (38,710) 186,293 (14.5%) (17.8%) Hospitality 162,279 11,592 3,455 1,159 (4,065) 174,420 7.5% (2.5%) Office 199,378 (601) 1,307 383 (8,995) 191,472 (4.0%) (4.5%) Industrial 30,235 - 3,595 201 2,201 36,232 19.8% 7.3% Corporate Accommodation 138,194 - 124 1,076 (11,494) 127,900 (7.4%) (8.3%) LLR portfolio 23,223 2,159 1,337 67 213 26,999 16.3% 0.9% GREA portfolio 5,009 - 7,051 - 498 12,558 150.7% 9.9% -------------- ------------ ------------ --------- ------- ------------ ------------ ------------ ------------ TOTAL 776,078 18,793 18,786 2,569 (60,352) 755,874 (2.6%) (7.8%) -------------- ------------ ------------ --------- ------- ------------ ------------ ------------ ------------ Subsidiaries 577,222 10,971 10,130 2,465 (51,297) 549,491 (4.8%) (8.9%) Associates 198,856 7,822 8,656 104 (9,055) 206,383 3.8% (4.6%) -------------- ------------ ------------ --------- ------- ------------ ------------ ------------ ------------
Net Asset Value and EPRA earnings per share
EPRA earnings during the year fell 29.9%, predominately due to the sale of a 39.6% stake in AnfaPlace Mall in July 2020, resulting the non-controlling interest impact on the underlying property of US$1.1 million and the sale of 26.55% stake in Acacia Estate amounting to US$0.8 million.
EPRA adjusted earnings were additionally impacted by a number of lease incentives granted during the financial year, particularly in retail and hospitality which have yet to be amortised as well as unrealised foreign exchange gains added back for the year of US$1.1 million versus an unrealised foreign exchange loss of US$4.9 million in the prior year.
UNAUDITED UNAUDITED UNAUDITED UNAUDITED 30 June 2021 30 June 2021 30 June 2020 30 June 2020 Per Share (Diluted) Per Share (Diluted) $'000 (Cents Per Share) $'000 (Cents Per Share) ---------------------------------------------- ------------- ------------------- ------------- ------------------- EPRA Earnings 8,080 2.57 11,530 3.82 Total Company Specific Adjustments 7,351 2.34 15,727 5.20 ---------------------------------------------- ------------- ------------------- ------------- ------------------- Adjusted EPRA Earnings 15,431 4.91 27,257 9.02 Total company specific distribution adjustments 3,162 1.06 1,457 0.56 ---------------------------------------------- ------------- ------------------- ------------- ------------------- TOTAL DISTRIBUTABLE EARNINGS (BEFORE PROFITS WITHELD) 18,593 5.97 28,714 9.58 Profits Withheld (13,920) (4.47) (12,979) (4.33) ---------------------------------------------- ------------- ------------------- ------------- ------------------- TOTAL DISTRIBUTABLE EARNINGS TO GRIT SHAREHOLDERS 4,673 1.50 15,735 5.25 ---------------------------------------------- ------------- ------------------- ------------- ------------------- EPRA NRV 328,863 102.4 358,370 117.1 EPRA NTA 319,907 99.6 348,007 113.7 EPRA NDV 270,858 84.3 296,948 97.0 ---------------------------------------------- ------------- ------------------- ------------- -------------------
As at 30 June 2021, EPRA NRV per share decreased by 12.5% from US$117.1cps to US$102.4cps, while IFRS NAV per share dropped 13.3% to US$84.4cps. In total, property valuations accounted for an US$19.7cps drop in both EPRA NRV and IFRS NAV per share.
NET ASSET VALUE EVOLUTION USD'000 US$ cps --------------------------------- -------- ------- IFRS NAV as reported 297,883 97.3 IFRS 9 3,634 1.2 Derivative financial instruments 4,004 1.3 Deferred Tax on Properties 57,419 18.8 EPRA NAV at 30 Jun 2020 362,940 118.6 --------------------------------- -------- ------- EPRA NAV to EPRA NRV adjustment (4,569) (1.5) EPRA NRV at 30 Jun 2020 358,371 117.1 --------------------------------- -------- ------- Dividend paid FY 2021 (4,780) (1.6) Portfolio valuations (60,352) (18.8) Other non-Cash items (8,804) (2.9) Premium Listing Costs (3,467) (1.1) Cash profits 23,946 7.8 Part disposal of assets 14,253 4.7 Issue of shares 9,696 (2.8) EPRA NRV at 30 Jun 2021 328,863 102.4 --------------------------------- -------- ------- Deferred Tax on Properties (55,377) (17.2) Derivatives (2,627) (0.9) IFRS NRV at 30 Jun 2021 270,858 84.3 --------------------------------- -------- -------
Treasury
Financing continues to be an integral part of our business model and maintaining relationship with key financiers is an ongoing workstream of the Group's Treasury function. Net debt raised in the period amounted to US$2.6 million versus US$45.4 million in the comparative prior year. As at 30 June 2021, the Group's loan-to-value ratio ("LTV") increased to 53.1% (2020: 50.2%) while cost of debt further reduced to 5.7% (from a weighted average rate of 5.9% in the comparative year). The Group's fixed interest rates are equivalent to 45.1% of the total underlying debt (2020: 44.5%) as at 30 June 2021.
Movement in Debt for the year as at 30 June 2021 as at 30 June 2020 USD'000 USD'000 ----------------------------------------- ------------------ ------------------ Balance at the beginning of the year 392,999 346,097 Proceeds of interest bearing-borrowings 43,562 170,278 Overdraft converted to term loan 7,203 - Loan issue costs incurred (1,520) (4,639) Amortisation of loan issue costs 2,974 1,999 Foreign currency translation differences 7,548 (1,165) Interest accrued (1,173) 5,349 Debt settled during the year (41,005) (124,920) ----------------------------------------- ------------------ ------------------ As at 30 June 410,588 392,999 ----------------------------------------- ------------------ ------------------
In line with our policy, the Group has successfully refinanced the majority of the debt becoming due in the next two years. Although the Group's weighted average debt expiry as at 30 June 2021 was 1.48 years, these actions have resulted in an increase to 1.83 years as at 27 October 2021. In addition, the Group's Treasury team has negotiated further extensions to the covenant relaxations provided by the financiers over the COVID-19 period from December 2021 to beyond Q1 2023. Over this period, Group LTV covenant from our main financiers Absa, Nedbank and Standard Bank of South Africa have been extended to 55% (from 53%) and Interest Service Cover Ratio ("ISCR") to 1.8x (from 2.0x cover).
One of the Group's major strategic goals is achieving an LTV of between 35% to 40%. The recently announced equity perpetual note and the resultant yield and NAV accretive acquisitions, in conjunction with the sale of non-core assets and other corporate actions, are expected to assist the Group in meeting the Board's near term target of a 45% LTV.
Our multi-bank approach has once again proven to be an effective approach to funding and banking in general. Post the year ended 30 June 2021, the Group added a new banking partner the International Financial Corporation (the "IFC") to the list of Grit's financiers. The total capital exposure to debt providers (net of interest accrued and unamortised loan issue costs) as at 30 June 2021 is as follows:
Debt in Debt in Debt in Debt in Subsidiaries associates Total Subsidiaries associates Total USD'000 USD'000 USD'000 % USD'000 USD'000 USD'000 % ---------------- --------------- --------------- ------- ------ --------------- --------------- ------- ------ Standard Bank Group 170,676 - 170,676 37.5% 169,730 - 169,730 38.9% Bank of China 84,960 - 84,960 18.6% 84,960 - 84,960 19.5% State Bank of Mauritius 62,840 8,830 71,670 15.7% 60,483 8,307 68,790 15.8% Investec Group 47,023 8,830 55,853 12.3% 46,127 8,307 54,434 12.5% Absa Group 16,179 7,500 23,679 5.2% 16,081 7,500 23,581 5.4% ABC Banking Corporation 14,918 - 14,918 3.3% 8,500 - 8,500 2.0% Nedbank CIB 7,000 3,100 10,100 2.2% - - - 0.0% Mauritius Commercial Bank - 8,830 8,830 1.9% - 8,307 8,307 1.9% Maubank 6,469 - 6,469 1.4% 6,876 - 6,876 1.6% First National Bank - 5,294 5,294 1.2% - 4,885 4,885 1.1% Rand Merchant Bank - - - 0.0% - 2,661 2,661 0.6% Housing finance corporation - 2,209 2,209 0.5% - 2,066 2,066 0.5% Bank of Gaborone - 1,077 1,077 0.2% - 1,048 1,048 0.2%
---------------- --------------- --------------- ------- ------ --------------- --------------- ------- ------ TOTAL BANK DEBT 410,065 45,670 455,735 100.0% 392,757 43,081 435,838 100.0% ---------------- --------------- --------------- ------- ------ --------------- --------------- ------- ------
The following debt transactions were concluded during and subsequent to the period under review as a short-term measure in anticipation of a larger and more strategic balance sheet solution. The Group has engaged advisors and is currently investigating the potential for a corporate bond issuance, which it would expect to pursue in 2022, subject to prevailing market conditions at that time. The benefits would largely be the extension of debt tenor, diversification of the Group's funding base and taking advantage of supportive credit markets in relation to African and frontier markets issuance.
Subsidiaries (within the financial year):
-- The Group's overdraft facility of EUR6.4m with ABC Banking Corporation, has been converted into a term loan under Casamance Holdings with a fixed interest rate of 4.25%, maturing in October 2025.
-- On 17 August 2020, the Group secured a short-term facility of 1 year from Nedbank South Africa to the value of US$7.0m bearing interest at libor plus 7.5%.
-- Further temporary extensions have been made in this period to the following facilities:
- SBM MUR72.0 million facility from 31 October 2020 - 30 June 2021
- SBM US$20.0 million facility from 31 October 2021 - 31 October 2022
- SBSA EUR26.5 million RCF from 14 August 2021 - 30 June 2022
- Nedbank US$7.0 million RCF for a further 12 month period
- Investec SA US$15.0 million capital repayment extended by 16-months
Subsidiaries (subsequent to the financial year):
-- The Group has extended the MUR72.0 million (or US$1.7 million) Covid facility from the State Bank of Mauritius, to an evenly amortised 48-month facility.
-- The Group has extended all its financing with the State Bank of Mauritius ("SBM") to 2025. This applies to the following facilities:
- Leisure Property North Mauritius Limited (EUR12.2 million, with interest of 4.25% fixed) - related to the Beachcomber Assets
- Mara Delta (Mauritius) Property Limited (EUR22.3 million, with interest of 4.00% fixed) - Related to the Lux Tamassa Asset
- Grit Real Estate Income Group Limited (US$20.0 million, with interest of 4.00% fixed) - a corporate facility
-- The US$46m facility (EUR31.8 million and US$8.7 million) with Investec Bank on the AnfaPlace Mall held by Freedom Property Fund SARL in Morocco has been extended to April 2023. As part of the terms of the refinance, an amount of US$6.0 million will become due in the next 12 months.
-- The Group's RCF facility of US$7.0 million held with Nedbank has been extended to April 2023, with optional capital repayment conditions, and bearing an interest of 6-month libor + 8.40%.
-- Negotiations are ongoing with regards the refinance transaction with Bank of China in relation to the US$76.4 million loan which matures in April 2022.
Associates and Joint Ventures (within the financial year):
-- The Group's RCF facility of US$7.0 million held with Nedbank has been extended to April 2023, with optional capital repayment conditions, and bearing an interest of 6-month libor + 8.40%.
Associates and Joint Ventures (subsequent to the financial year)
-- The BHI syndicated loan of EUR50.0 million has been extended to April 2023 whereby MCB and SBM have both extended their loans and additionally SBM has also taken over the Investec portion of the loan.
The below table provides a detailed analysis of the Property Portfolio Debt (which includes the debt held within subsidiaries and associates).
Net Debt Debt Expiry Opening Forex obtained / Closing Debt Expiry at Signature Property Sector Balance Movement (paid) Balance WACD at year end date LTV USD'000 USD'000 USD'000 USD'000 % years years % --------------- ------------ ------------- ------------ ------------- ----- ------------ ------------ -------- Retail 104,615 2,037 (946) 105,706 5.80% 1.02 1.07 56.7% Hospitality 63,627 4,433 7,203 75,263 4.21% 0.98 2.65 43.2% Office 94,634 446 92 95,171 6.62% 2.30 1.99 49.7% Industrial 13,042 - - 13,042 4.56% 1.57 3.32 36.0% Corporate Accommodation 56,905 - - 56,905 6.95% 2.34 2.01 44.5% LLR portfolio 5,933 437 - 6,370 5.08% 1.75 1.42 23.6% GREA portfolio - - - - 0.00% n/a --------------- ------------ ------------- ------------ ------------- ----- ------------ ------------ -------- TOTAL PROPERTY DEBT 338,756 7,352 6,349 352,458 5.13% 1.56 1.83 46.6% --------------- ------------ ------------- ------------ ------------- ----- ------------ ------------ -------- Net Debt Debt Opening Forex obtained / Closing reconciliation Balance Movement (paid) Balance WACD LTV USD'000 USD'000 USD'000 USD'000 %% --------------- ------------ ------------- ------------ ------------- ----- ----------- Corporate debt in subsidiaries 97,082 3,891 2,303 103,276 Property debt in subsidiaries 295,675 3,758 7,355 306,788 --------------- ------------ ------------- ------------ ------------- ----- ------------ TOTAL DEBT IN SUBSIDIARIES 392,757 7,649 9,658 410,064 5.70% 53.10% Property debt in associates 43,081 2,006 583 45,669 5.10% 42.1% --------------- ------------ ------------- ------------ ------------- ----- ------------ TOTAL 435,838 11,243 8,652 455,734 --------------- ------------ ------------- ------------ ------------- ----- ------------
Capital commitments
ClubMed
On 27 January 2020, Grit, through its wholly-owned subsidiary Casamance Holdings Limited (the "Casamance") acquired 100% of the shares in Société Immobiliére et de Gestion Hôteliére du cap Skirring ("SIGHC"), the owner of Club Med Cap Skirring on a sale and lease back basis. The parties agreed that a renovation and development programme to the property, estimated at EUR25.0 million. The works are to be financed and owned by Grit.
With the onset of COVID-19, Grit and Clubmed are reassessing the timing and extend of the renovation and the development programme and have committed to an initial phase amounting to $0.8 million by December 2021, with further phases being deferred to 2022 and 2023 until there is greater clarity on the re-opening of the hotel. Should the agreed renovation be further delayed, the lease rate applicable to the property shall drop from 8% yield to 7% yield (an impact of EUR0.16 million per annum).
Bollore redevelopment
During the year, the Group has redeveloped the Bollore warehouse in Mozambique. The remaining capital commitments still to be spent in the following year amounts to US$1.2 million. The project funding and management was outsourced to Grit's development associate, GREA in which the Group holds a 19.98% interest. The full development costs, expected to be US$7.7 million needs to be settled by April 2023.
Gateway Real Estate Africa Limited ("GREA")
Having recently been awarded a number of high-quality development projects over the last 12 months, GREA has now made a call for the final capital draws from its shareholders. Grit is required to inject a further US$17.9 million of capital into GREA before the end of the year if it is to retain its current equity stake in the company.
Drive in Trading guarantee update
By virtue of the Group's historic listing on the Johannesburg Stock Exchange, the Company's largest shareholder, the Public Investment Corporation ("PIC"), facilitated the Group's black economic empowerment and transformation partner, Drive in Trading ("DIT"), in the acquisition of 23.25 million Grit shares in June 2017 by providing a guarantee against their external debt facility. Separately, Grit indemnified the PIC for up to 50% of any potential losses suffered by PIC as a result of the guarantee, capped at US$17.5 million. In August 2020, following the expiry of the loan facility, PIC has assumed the position of lender to DIT, and continues to reserve its rights under the Grit indemnity to call for cash collateral with four days' notice.
The Board and PIC continue to engage on this aspect and further details will be published once agreement has been reached with the PIC.
Grit's share price continues to trade at unprecedented levels of discount to its Net Asset Value. As a result of the movement in the share price, the Group has increased its provisions against potential future losses in the financial year resulting in a reported provision balance of US$5.4 million as at 30 June 2021 for the Drive in Trading CRO (with the guaranteed loan being underpinned by Grit's shares).
Dividend
Dividends per share declared for the year ended 30 June 2021 amounted to US$1.5cps (2020: US$5.25cps), comprising the interim dividend declared in February 2021. Grit's Board has decided against declaring a final dividend for the year ended 30 June 2021 due to the capital commitments and emphasis on reducing LTV in the near term.
The below reconciliation provides further details of the IFRS statement of comprehensive income and the adjustments made to provide additional insight into the components of properties held in joint ventures and associates, as well as the portion attributable to non-controlling interest (for properties consolidated by Grit, but part owned by minority partners.
IFRS Income statement to distribution reconciliation IFRS YTD Split from Associate Split NCI GRIT Economic Interest Distributable Earnings US$'000 US$'000 US$'000 US$'000 US$'000 --------------------------- -------- -------------------- --------- ---------------------- ---------------------- Gross property income 49,217 16,015 (5,948) 59,284 56,597 Property operating expenses (8,543) (1,176) 2,170 (7,549) (7,520) --------------------------- -------- -------------------- --------- ---------------------- ---------------------- Net property income 40,674 14,839 (3,778) 51,735 49,077 Other income 169 2,355 (795) 1,729 1,729 Administrative expenses (13,867) (1,861) 927 (14,801) (13,464) Net impairment charge on financial assets (7,119) (169) 163 (7,125) (654) --------------------------- -------- -------------------- --------- ---------------------- ---------------------- Profit from operations 19,857 15,164 (3,483) 31,538 36,688 Fair value adjustment on investment properties (51,297) (7,451) 8,293 (50,455) 144 Fair value adjustment on other investments - (9) - (9) - Fair value adjustment on other financial liability (5,230) (1,604) - (6,834) - Fair value adjustment on other financial asset (1,106) - - (1,106) - Fair value adjustment on derivative financial instruments 1,378 - - 1,378 - Impairment of loans and other receivables (1,113) (935) - (2,048) - Corporate restructure costs (3,467) - - (3,467) - Share-based payment (127) - - (127) - Share of profits / (loss) from associates and joint ventures 583 (583) - - - Foreign currency (losses) / gains 2,343 (1,253) (543) 547 - --------------------------- -------- -------------------- --------- ---------------------- ---------------------- Profit before interest and taxation (38,179) 3,329 4,267 (30,583) 36,832 Interest income 2,690 3,517 (1) 6,206 6,206 Finance charges (25,442) (6,199) 1,867 (29,774) (27,331) --------------------------- -------- -------------------- --------- ---------------------- ---------------------- Profit before taxation (60,931) 646 8,672 (51,612) 18,246 Current tax (1,791) (645) 420 (2,016) (2,016) Deferred tax 1,346 (1) 357 1,702 - --------------------------- -------- -------------------- --------- ---------------------- ---------------------- Profit after taxation (61,376) (0) 9,449 (51,927) 16,229 --------------------------- -------- -------------------- --------- ---------------------- ---------------------- RBO OCI 42 - - 42 - --------------------------- -------- -------------------- --------- ---------------------- ---------------------- Total comprehensive income (61,334) (0) 9,449 (51,885) 16,229 --------------------------- -------- -------------------- --------- ---------------------- ---------------------- Antecedent dividend - - - - - VAT - - - - 2,364 --------------------------- -------- -------------------- --------- ---------------------- ---------------------- Distributable earnings - - - - 18,593 --------------------------- -------- -------------------- --------- ---------------------- ---------------------- Profit released/(withheld) - - - - (13,920) --------------------------- -------- -------------------- --------- ---------------------- ---------------------- Total distributable earnings - - - - 4,673 --------------------------- -------- -------------------- --------- ---------------------- ----------------------
Going Concern
The director's assessment of the Group's and Company's ability to continue as a going concern is required when producing the financial statements. As such the Directors have modelled a 'base case' and a 'severe but plausible downside' of the Group's and Company's expected liquidity and covenant position for a going concern assessment period through to June 2023. The process involved a thorough review of the Group's and Company's risk register, an analysis of the trading information both pre and post year end, extensive discussions with the independent property valuers, a review of the operational indicators within the Group and economic data available in the countries of operations. All of this has been done in the context of the ongoing COVID-19 pandemic, previous experience of the African real estate sector and best estimates of expectations in the future.
The base case reflects the director's best expectations of the position going forward. It was modelled on board approved forecasts over the relevant period. Please refer to note 1.1 for further details of the base case and a severe but plausible downside scenarios.
Under the severe but plausible scenario, there are three circumstances (set out below) in which the Group and Company would be required to seek additional financing. There can be no guarantee that such financing would be available to the Group and Company on terms that are acceptable, or at all. Accordingly, the directors have concluded that there is a material uncertainty that may cast significant doubt on the Group's and Company's ability to continue to operate as a going concern in the assessment period to June 2023. The factors giving rise to this conclusion are:
1. One of the debt facilities (for a net amount of US$47.1m, being the total loan amount of US$76.4m, less the back-to-back loan to the property partners of US$29.3m) is required to be refinanced by April 2022. While the Directors have no reason to believe that this will not be refinanced, should that not occur the Group and Company would need to secure additional financing to avoid being in default, with three related properties, valued at US$115m, being pledged as security for the loan as well as a group guarantee on the loan.
2. The Group is currently a guarantor to the Group's Black Economic Empowerment consortium for an amount of up to US$17.5m (being 50% of the total loan amount). The Public Investment Corporation ("PIC"), Grit's 25.4% shareholder, has matched the balance of the guarantee. Since August 2020, when the PIC took over the debt from BoAML, the PIC had the ability to call for cash collateral for the guarantee on four days' notice. Should the PIC enforce their rights to call for the cash collateral, the Group would be required to fund this from operational cashflow or with new, currently uncommitted, debt facilities.
3. The inherent uncertainty in future property valuations as a result of the COVID-19 pandemic are such that in the event that property valuations across the portfolio decrease more severely or quickly than expected, even after taking mitigating actions such as stopping cash dividends, the Group may be in breach of some individual property and Group wide covenants and would need to negotiate a waiver with its lenders and, or, pay down debt through either existing or new currently uncommitted facilities to avoid borrowings becoming payable immediately.
Notwithstanding the material uncertainty detailed above and taking into account the results of the analysis and the various mitigating action available to the Company and the Group, the Board has concluded that it is appropriate to prepare the financial statements on the going concern basis. The financial statements do not contain the adjustments that would be necessary if the Company and the Group were unable to continue as a going concern.
Leon van de Moortele Chief Financial Officer 29 October 2021
PRINCIPAL RISKS AND UNCERTAINTIES
Grit has a detailed risk management framework in place that is reviewed annually and duly approved by the Risk Committee and the Board. Through this risk management framework, the Company has developed and implemented appropriate frameworks and effective processes for the sound management of risk.
The principal risks and uncertainties facing the Group as at 30 June 2021 are set out on pages 24 to 31 of the 2021 Integrated Annual Report together with the respective mitigating actions and potential consequences to the Group's performance in terms of achieving its objectives. These principal risks are not an exhaustive list of all risks facing the Group but are a snapshot of the Company's main risk profile as at year end.
The Board has reviewed the principal risks categories and existing mitigating actions and are satisfied that the existing mitigation actions remain appropriate to manage them.
STATEMENT OF DIRECTORS RESPONSIBILITIES IN RESPECT OF THE FINANCIAL STATEMENTS
The directors are responsible for preparing financial statements for each financial year which give a true and fair view, in accordance with applicable Guernsey law and International Financial Reporting Standards , of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing those financial statements, the directors are required to :
-- select suitable accounting policies and then apply them consistently; -- make judgements and estimates that are reasonable and prudent;
-- state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; and
-- prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.
The directors confirm that they have complied with the above requirements in preparing the financial statements.
directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with The Companies (Guernsey) Law, 2008. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
So far as the directors are aware, there is no relevant audit information of which the Company's auditors are unaware, and each director has taken all the steps that he or she ought to have taken as a director in order to make himself or herself aware of any relevant audit information and to establish that the Company's auditors are aware of that information.
Directors' confirmations
The Directors consider that the Integrated Report and Accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group's position, performance, business model and strategy.
Each of the Directors, whose names and functions are listed in pages 66 to 69 confirm that, to the best of their knowledge:
-- the Group and Company financial statements, which have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies (Guernsey) Law 2008, give a true and fair view of the assets, liabilities, financial position and loss of the Group and profit of the Company; and
-- the Strategic report includes a fair review of the development and performance of the business and the position of the Group and Company, together with a description of the principal risks and uncertainties that it faces.
The financial statements on pages 118 to 211 were approved by the Board of Directors and signed on its behalf by:
On behalf of the Board
Bronwyn Knight Leon van de Moortele Chief Executive Officer Chief Financial Officer
CONSOLIDATED STATEMENT OF INCOME
Audited for the year ended Audited for the year ended 30 June 2021 30 June 2020 Notes US$'000 US$'000 ------------------------------------------------------- ----- -------------------------- -------------------------- Gross property income 49,217 48,534 Property operating expenses (8,543) (8,985) -------------------------- -------------------------- Net property income 40,674 39,549 Other income 169 4,132 Administrative expenses (13,867) (20,131) Net impairment charge on financial assets (7,119) (4,633) -------------------------- -------------------------- Profit from operations 19,857 18,917 Fair value adjustment on investment properties (51,441) (44,523) Contractual receipts from vendors of investment properties 2 144 3,305 ------------------------------------------------------- ----- -------------------------- -------------------------- Total fair value adjustment on investment properties (51,297) (41,218) Fair value adjustment on other investments - 591 Corporate restructure costs (3,467) - Fair value adjustment on other financial liability (5,230) (4,224) Fair value adjustment on other financial asset (1,106) - Fair value adjustment on derivative financial instruments 1,378 (3,961) Share-based payment expense (127) (109) Share of profits from associates and joint ventures 3 583 6,698 Impairment of loans and other receivables (1,113) (6,883) Gain from bargain purchase on associates - 178 Foreign currency losses 2,343 (2,933) Loss before interest and taxation (38,179) (32,944) Interest income 2,690 4,752 Finance costs (25,442) (25,674) Loss for the year before taxation (60,931) (53,866) Taxation 7 (445) (13,382) Loss for the year after taxation (61,376) (67,248) Loss attributable to: Equity shareholders (51,927) (63,115) Non-controlling interests (9,449) (4,133) (61,376) (67,248) ------------------------------------------------------- ----- -------------------------- -------------------------- Basic and diluted (losses) / earnings per ordinary share (cents) 10 (16.54) (20.85) ------------------------------------------------------- ----- -------------------------- --------------------------
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Audited for Audited for the year ended the year ended 30 June 2021 30 June 2020 US$'000 -------------------------------------------------------------- --------------- --------------- Loss for the year (61,376) (67,248) -------------------------------------------------------------- --------------- --------------- Retirement benefit obligation 42 209 -------------------------------------------------------------- --------------- --------------- Profit/(loss) on translation of functional currency 7,005 (4,036) -------------------------------------------------------------- --------------- --------------- Other comprehensive income/(expense) that may be reclassified to profit or loss 7,047 (3,827) Total comprehensive (expense)/income relating to the year (54,329) (71,075) -------------------------------------------------------------- --------------- --------------- Attributable to: Equity shareholders (46,511) (66,942) Non-controlling interests (7,818) (4,133) -------------------------------------------------------------- --------------- --------------- (54,329) (71,075) -------------------------------------------------------------- --------------- ---------------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Audited as at Audited as at 30 June 2021 30 June 2020 Notes US$'000 US$'000 --------------------------------------------------- ----- ------------- ------------- Assets Non-current assets Investment properties 2 549,491 577,222 Deposits paid on investment properties 2 5,698 4,500 Property, plant and equipment 2,448 2,907 Intangible assets 480 568 Investments in associates and joint ventures 3 167,492 161,301 Other investments 1 1 Related party loans receivable - 3 Other loans receivable 4 - 39,575 Trade and other receivables 2,166 2,858 Deferred tax 20,067 24,471 --------------------------------------------------- ----- Total non-current assets 747,843 813,406 --------------------------------------------------- ----- ------------- ------------- Current assets Trade and other receivables 18,946 24,993 Current tax refundable 1,440 697 Related party loans receivable 197 138 Other loans receivable 4 37,303 2,846 Derivative financial instruments 87 39 Cash and cash equivalents 4,890 3,578 --------------------------------------------------- ----- Total current assets 62,863 32,291 --------------------------------------------------- ----- ------------- ------------- Total assets 810,706 845,697 --------------------------------------------------- ----- ------------- ------------- Equity and liabilities Total equity attributable to ordinary shareholders Ordinary share capital 463,842 454,145 Treasury shares reserve (18,406) (18,406) Foreign currency translation reserve 1,495 (4,072) Accumulated losses (176,073) (133,784) --------------------------------------------------- ----- ------------- ------------- Equity attributable to owners of the Company 270,858 297,883 --------------------------------------------------- ----- ------------- ------------- Preference share capital 25,481 - Non-Controlling interests (17,935) (614) --------------------------------------------------- ----- ------------- ------------- Total equity 278,404 297,269 --------------------------------------------------- ----- ------------- ------------- Liabilities Non-current liabilities Redeemable preference shares 12,840 12,840 Proportional shareholder loans 17,582 9,615 Interest-bearing borrowings 5 215,565 337,620 Obligations under leases 750 905 Related party loans payable 648 3,918 Deferred tax liability 51,720 57,419 --------------------------------------------------- ----- ------------- ------------- Total non-current liabilities 299,105 422,317 --------------------------------------------------- ----- ------------- ------------- Current liabilities Interest-bearing borrowings 5 195,023 55,379 Obligations under leases 205 254 Trade and other payables 24,843 23,220 Current tax payable 1,438 2,002 Derivative financial instruments 2,714 4,043 Related party loans payable 91 27,138 Other financial liability 6,307 4,868 Bank overdrafts 2,576 9,207 --------------------------------------------------- ----- ------------- ------------- Total current liabilities 233,197 126,111 --------------------------------------------------- ----- ------------- ------------- Total liabilities 532,302 548,428 --------------------------------------------------- ----- ------------- ------------- Total equity and liabilities 810,706 845,697 --------------------------------------------------- ----- ------------- -------------
CONSOLIDATED STATEMENT OF CASH FLOWS
Audited as at Audited as at 30 June 2021 30 June 2020 Notes US$'000 US$'000 ------------------------------------------------------------------------------ ------ ------------- ------------- Cash generated from operations 19,885 7,661 -------------------------------------------------------------------------------------- ------------- ------------- Acquisition of, and additions to, investment properties (10,068) (42,573) Deposits (paid) / refunded on investment properties (550) 4,000 Additions to property, plant and equipment (92) (213) Additions to intangible assets (88) (518) Additions other investments - (1) Acquisition of associates and joint ventures (8,493) (2,335) Dividends and interest received from associates and joint ventures 6,361 7,756 Interest received 1,488 4,635 Proceeds from partial disposal of property, plant and equipment 5,358 - Proceeds from disposal of property, plant and equipment 122 1 Related party loan receivables (61) - Other loans repayment received - 10,241
Related party loan payables (4,857) 16,221 Proceeds from proportional shareholder loans 7,726 - Proportional shareholder loans received from associates 1,560 1,614 Other loans advanced 64 (278) Net cash utilised in investing activities (1,530) (1,450) -------------------------------------------------------------------------------------- ------------- ------------- Proceeds from the issue of ordinary shares 9,810 - Share issue expenses (113) (406) Dividends paid to non-controlling shareholders (419) (1,062) Ordinary dividends paid (4,778) (36,479) Proceeds from interest bearing borrowings 50,765 170,278 Settlement of interest-bearing borrowings (41,005) (124,920) Finance costs (23,906) (25,019) Payments of leases (274) (338) Net cash (utilised) / generated from financing activities (9,920) (17,946) -------------------------------------------------------------------------------------- ------------- ------------- Net movement in cash and cash equivalents 8,435 (11,735) -------------------------------------------------------------------------------------- ------------- ------------- Cash at the beginning of the year (5,629) 6,674 Effect of foreign exchange rates (492) (568) -------------------------------------------------------------------------------------- ------------- ------------- Total cash and cash equivalents (including overdrafts) at the end of the year 2,314 (5,629) -------------------------------------------------------------------------------------- ------------- -------------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Foreign Treasury currency Ordinary shares translation Accumulated Preference Non-controlling Total Share capital reserve reserve losses share capital interest equity US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 ---------------- ------------- ------------- ------------- ------------- ------------- --------------- -------- Balance as at 1 July 2019 443,259 (18,406) (36) (35,022) 4,581 394,376 Loss for the year - - - (63,115) - (4,133) (67,248) Other comprehensive expense for the year - - (4,036) 209 - - (3,827) ---------------- ------------- ------------- ------------- ------------- ------------- --------------- -------- Total comprehensive expense - - (4,036) (62,906) (4,133) (71,075) ---------------- ------------- ------------- ------------- ------------- ------------- --------------- -------- Share based payments - - - 109 - - 109 Ordinary dividends paid - - - (35,965) - - (35,965) Ordinary shares issued 11,292 - - - - - 11,292 Share issue expenses (406) - - - - - (406) Dividends paid to non-controlling shareholders - - - - - (1,062) (1,062) ---------------- ------------- ------------- ------------- ------------- ------------- --------------- -------- Balance as at 30 June 2020 454,145 (18,406) (4,072) (133,784) - (614) 297,269 ---------------- ------------- ------------- ------------- ------------- ------------- --------------- -------- Balance as at 1 July 2020 454,145 (18,406) (4,072) (133,784) - (614) 297,269 Loss for the year - - - (51,927) - (9,449) (61,376) Other comprehensive expense for the year - - 5,374 42 - 1,631 7,047 ---------------- ------------- ------------- ------------- ------------- ------------- --------------- -------- Total comprehensive expense - - 5,374 (51,885) - (7,818) (54,329) ---------------- ------------- ------------- ------------- ------------- ------------- --------------- -------- Share based payments - - - 127 - - 127 Ordinary dividends paid - - - (4,780) - - (4,780) Ordinary shares issued 9,810 - - - - - 9,810 Share issue expenses (113) - - - - - (113) Transaction with non-controlling interests without change in control - - 193 14,249 - (9,084) 5,358 Preference shares issued - - - - 25,481 - 25,481 Dividends paid to non-controlling shareholders - - - - - (419) (419) ---------------- ------------- ------------- ------------- ------------- ------------- --------------- -------- Balance as at 30 June 2021 463,842 (18,406) 1,495 (176,073) 25,481 (17,935) 278,404 ---------------- ------------- ------------- ------------- ------------- ------------- --------------- --------
NOTES TO THE FINANCIAL STATEMENTS
1. Summary of significant accounting policies
The principal accounting policies applied in the preparation of these separate and consolidated financial statements are set out below.
1.1 Basis of preparation
The abridged financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the IASB; the Financial Pronouncements as issued by Financial Reporting Standards Council and the LSE and SEM Listings Requirements. The financial statements have been prepared on the going-concern basis and were approved for issue by the board on 28 October 2021.
Going Concern
The director's assessment of the Group's and Company's ability to continue as a going concern is required when producing the financial statements. As such the Directors have modelled a 'base case' and a 'severe but plausible downside' of the Group's and Company's expected liquidity and covenant position for a going concern assessment period through to June 2023. The process involved a thorough review of the Group's and Company's risk register, an analysis of the trading information both pre and post year end, extensive discussions with the independent property valuers, a review of the operational indicators within the Group and economic data available in the countries of operations. All of this has been done in the context of the ongoing COVID-19 pandemic, previous experience of the African real estate sector and best estimates of expectations in the future.
The base case reflects the director's best expectations of the position going forward. It was modelled on board approved forecasts over the relevant period The base case scenario includes the Group's and Company's financial projections including:
1. Modelling of the Group's contractual lease income, which at 30 June 2021 had a weighted average lease expiry of 4.8 years, and associated contractual lease escalations which equate to 3.8% per annum on a weighted average basis across the portfolio. The Group's revenue was adjusted for tenant support already provided and expectation for potential further concessions in specific sectors as a result of COVID-19;
2. Expected take up of vacant space through the ordinary letting activities of the Group and current leasing negotiations;
3. Debt facilities falling due during the period being refinanced in the ordinary course of business, specifically the April 2022 facility with Bank of China on the Zambian malls;
4. Contractual maturity of debt facilities, which at signature date had a weighted average maturity profile of 1.8 years and associated weighted average cost of debt of 5.7%;
5. Drive in Trading guarantee assumed to be paid up in August 2022, followed by the security being realised by October 2022; and
6. With the exception of the retail and hospitality sectors, the model assumes trading returns to pre-COVID-19 levels. Retail is modelled to have a structural change to base rentals which only return to pre-COVID-19 levels beyond the going concern assessment period while hospitality assets are modelled to return to pre-COVID-19 levels at the expected dates of the applicable borders being open for travellers.
A summary of the key assumptions made in the severe but plausible scenario are as follows:
1. Reduced revenue as a result of potential rental concessions provided to a range of tenants, particularly in the retail and hospitality sectors, and extended assumptions on vacancy take up:
-- A delay in vacancy take up of 12 months for all vacant space for the retail sector, and 6 months for all other sectors;
-- Average of 5% additional rental concession on all non-essential services tenants in the retail sector; and
-- Average rental concessions and deferments extensions of 6 months on the hospitality tenants who have yet to fully commence normalised rental payments.
2. Cumulative decline in property valuations over the base case scenario of:
-- A decline in total property valuations of 10.5% to June 2022 versus the base case (predominately weighted to the retail sector of 16% and the hospitality sector of 21%, both inclusive of the foreign currency downside impacts); and
-- Total property valuation decline of 10.3% to June 2023 versus the base case (predominately weighted to the retail sector of 9% and the hospitality sector of 12%, both inclusive of the foreign currency downside impacts)
3. Exchange Rates: -- A 11% weakening of the Euro against the US Dollar over the next 18 months; and
-- Negative movements in the local African currencies against the US Dollar ranging from 9% to 48% (in the case of the Zambian Kwacha) over the analysis period.
4. Facilities and Finance costs:
-- All uncommitted debt facilities (i.e. overdraft facilities or other facilities where the financier has the right to unilaterally amend the terms of the agreement) are assumed to be repaid within the relevant facilities' notice period.
-- An increased cost of funding ranging from 0.25% to 0.5% on debt facilities over the next 18 months (excluding facilities recently negotiated).
5. Dividends:
-- No dividends are paid over the going concern period to maintain liquidity as a result of the assumptions above.
6. Drive in Trading Guarantee:
-- The Drive in Trading Guarantee is called in April 2022, followed by the realisation of the security by December 2022.
7. The assumptions applied above are made on the basis that the COVID-19 impact is extended beyond the assumptions in the base case. This extended recovery period over the base case has an impact as follows:
-- Revenue in year to June 2022 and 2023 declines by 5.4% and 9.6% respectively over the base case's assumed recovery period which compares to the modest growth of 2% in revenue over the June 2021 financial year; and
-- Property devaluation of c.10% over both period versus the base case which compares to the full year impact in the year to 30 June 2021 of 7.8%
Under the severe but plausible scenario, there are three circumstances (set out below) in which the Group and Company would be required to seek additional financing. There can be no guarantee that such financing would be available to the Group and Company on terms that are acceptable, or at all. Accordingly, the directors have concluded that there is a material uncertainty that may cast significant doubt on the Group's and Company's ability to continue to operate as a going concern in the assessment period to June 2023. The factors giving rise to this conclusion are:
1. One of the debt facilities (for a net amount of US$47.1 million, being the total loan amount of US$76.4 million, less the back-to-back loan to the property partners of US$29.3 million) is required to be refinanced by April 2022. While the Directors have no reason to believe that this will not be refinanced, should that not occur the Group and Company would need to secure additional financing to avoid being in default, with three related properties, valued at US$115.3 million, being pledged as security for the loan as well as a group guarantee on the loan.
2. The Group is currently a guarantor to the Group's Black Economic Empowerment consortium for an amount of up to US$17.5 million (being 50% of the total loan amount). The Public Investment Corporation ("PIC"), Grit's 25.5% shareholder, has matched the balance of the guarantee. Since August 2020, when the PIC took over the debt from BoAML, the PIC had the ability to call for cash collateral for the guarantee on four days' notice. Should the PIC enforce their rights to call for the cash collateral, the Group would be required to fund this from operational cashflow or with new, currently uncommitted, debt facilities.
3. The inherent uncertainty in future property valuations as a result of the COVID-19 pandemic are such that in the event that property valuations across the portfolio decrease more severely or quickly than expected, even after taking mitigating actions such as stopping cash dividends, the Group may be in breach of some individual property and Group wide covenants and would need to negotiate a waiver with its lenders and, or, pay down debt through either existing or new currently uncommitted facilities to avoid borrowings becoming payable immediately.
Notwithstanding the material uncertainty detailed above and taking into account the results of the analysis and the various mitigating action available to the Company and the Group, the Board has concluded that it is appropriate to prepare the financial statements on the going concern basis. The financial statements do not contain the adjustments that would be necessary if the Company and the Group were unable to continue as a going concern.
Functional and presentation currency
The consolidated financial statements are prepared and are presented in United States Dollars (US$) which is also the functional and presentational currency of the company. Amounts are rounded to the nearest thousand, unless otherwise stated. Some of the underlying subsidiaries and associates have different functional currencies other than the US$ which is predominantly determined in the country in which they operate.
Presentation of alternative performance measures
The group presents certain alternative performance measures on the face of the income statement. Revenue is shown on a disaggregated basis, split between gross rental income and the straight line rental income accrual. Additionally, the total fair value adjustment on investment properties is presented on a disaggregated basis to show the impact of contractual receipts from vendors separately from other fair value movements. These are non IFRS measures and supplement the IFRS information presented. The directors believe that the presentation of this information provides useful insight to users of the financial statements and assists in reconciling the IFRS information to industry-wide EPRA metrics.
1.2 Segmental reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker is a person or group that is responsible for allocating resources and assessing performance of the operating segments. The Group has determined the board as its chief operating decision-maker as it is the board that makes the Group's strategic decisions. Each operating entity has its own Segmental and Geographical allocation, and it is not allocated to more than one sector.
1.3 Critical Judgements and estimates
The preparation of financial statements in conformity with IFRS requires the use of accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. The estimates and assumptions relating to the fair value of investment properties in particular, have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities in the subsequent financial year. Fair value adjustments do not affect the determination of distributable earnings but have an effect on the net asset value per share presented on the statement of financial position to the extent that such adjustments are made to the carrying values of assets and liabilities.
Judgements
The principal areas where such judgements have been applied are:
Unconsolidated structured entity
Drive in Trading (DiT), a B-BBEE consortium, secured a facility of US$33.4 million from the Bank of America N.A (UK Branch) ("BoAML") to finance its investment in Grit. The BoAML facility was granted to DiT after South Africa's Government Employees Pension Fund (GEPF), represented by Public Investment Corporation SOC Limited ("PIC"), provided a guarantee to BoAML in the form of a Contingent Repurchase Obligation ("CRO") for up to US$35 million. The terms of the CRO obligate PIC to acquire the loan granted to DiT should DiT default under the BoAML facility.
In order to facilitate the above, the Group agreed to de-risk 50% of PIC's US$35 million exposure to the CRO, by granting PIC a guarantee whereby should BoAML enforce the CRO, the Group would indemnify PIC for up to 50% of the losses, capped at US$17.5 million, following the sale of the underlying securities, being the shares held by DiT in Grit.
Given the unusual structure of the transaction, the Group has determined that DiT has limited and predetermined activities and can be considered a "structured entity" under IFRS 10 as the "design and purpose" of DiT was to fund Grit rights issue and at the same time enable Grit to obtain B-BBEE credentials.
As the Group does not have both, power to direct the activities of DiT and an exposure to variable returns, the Group has exercised judgement on not to consolidate DiT but disclose it as an unconsolidated structured entity due to DiT being a related party.
Acquisition of Letlole La Rona Limited
On 20 November 2019 Grit announced the acquisition of an additional 23.75% interest in Botswana Stock Exchange listed LLR from the Botswana Development Corporation ("BDC").
Through this transaction, Grit increased its stake in LLR from 6.25% to a strategic 30.0% and is expected to unlock a strategic partnership with BDC as both an institutional investor in Grit and a potential co-investor in direct property opportunities throughout Africa.
The purchase consideration was settled through the issuance of 9,839,511 new Grit shares to BDC on 28 November 2019. The swap ratio was determined using our most recently reported at the time EPRA NAV per share, less dividend declared, of US$140cps.
The transaction for the 9,839,511 shares was recorded at the ruling share price of the day of US$1.19, resulting in the acquisition being recorded at US$11.3m. The difference between the agreed transaction price of USD13.8 million has resulted in a gain of USD2.1 million.
In determining the fair value of the investment at the acquisition date, Grit conducted an analysis of the volume and frequency of the share trades of LLR on the Botswanan Stock Exchange (including an analysis of the free float of the shareholder base of LLR) in order to determine whether the shares were traded in an active market and concluded that the share was not traded with sufficient volume nor frequency to support the conditions of an active market. As the share price was not indicative as a proxy for fair value, the Company has concluded the best mechanism would be Net Asset Value based on the latest available independent valuations (which were conducted by Knight Frank as part of the 30 June 2019 financial year end of LLR). This determination of fair value of LLR is consistent with the Group's accounting policy and fair value determination of other associates and joint ventures within the group.
Freedom Asset Management (FAM) as a subsidiary
The Group has considered Freedom Asset Management (FAM) to be its subsidiary for consolidation purposes due to the Group's implied control of FAM, as the Group has ability to control the variability of returns of FAM and has the ability to affect those returns through its power of FAM. The Group does not own any interest in FAM and does not benefit from any profits of FAM nor is it liable for any losses incurred by FAM.
Grit Executive Share Trust (GEST) as a subsidiary
The Group has considered Grit Executive Share Trust (GEST) to be its subsidiary for consolidation purposes due to the Group's implied control of GEST, as the Group's ability to appoint the majority of the trustees and to control the variability of returns of GEST. The Group does not own any interest in GEST but is exposed to the credit risk and losses of (GEST) as the Group shall bear any losses sustained by GEST and shall be entitled to receive and be paid any profits made in respect of the purchase, acquisition, sale or disposal of unawarded shares in the instance where shares revert back to GEST. No non-controlling interest has been accounted for in the current year.
Gateway Real Estate Africa Ltd (GREA) as an associate
The Group has considered Gateway Real Estate Africa Ltd (GREA) to be its associate for consolidation purposes due to the Group's significant influence of GREA, as the Group has a direct and indirect ability to appoint some members to the board. The Group owns 19.98% of GREA and benefit from profits of GREA. The Group also has the ability to exercise significant influence to participate in the financial and operating policy decisions of the GREA but do not control or jointly control this policy as the CEO of the Group is also on the investment committee of GREA and has a close working relationship and history with Mr Pearson (MD of GREA).
Acquisition of investment properties
Where investment properties are acquired through the acquisition of corporate interests, the directors have regard to the substance of the assets and activities of the acquired entity in determining whether the acquisition represents the acquisition of a business.
Where such acquisitions are not judged to be an acquisition of a business under IFRS 3, the transactions are accounted for as if the Group had acquired the underlying investment property directly, together with any associated assets and liabilities. Accordingly, no goodwill arises, rather the cost of acquiring the corporate entity is allocated between the identifiable assets and liabilities of the entity, based on their relative fair values at the acquisition date.
The acquisition of Club Med Cap Skirring closed on 27 January 2020, through the acquisition of 100% of the equity of Société Immobiliére et de Gestion Hôteliére du Cap Skirring ("SIGHC") for EUR16.2 million. This was accounted as an asset acquisition.
Investments, associates and joint ventures
As an acquiring group, management needs to ensure that all acquisitions are appropriately classified in the financial statements. Depending on the shareholding and other factors there can be some judgement as to whether the acquisition is shown as an investment, associate, joint venture or consolidated as a subsidiary. In particular the Group holds interests of 50% of the total stake in multiple investments. The Group is not a controlling party in any of the arrangements. The Company applies judgement to determine whether the investment is classified as a joint venture or an associate by considering the guidance provided and the prevailing operational arrangements. The Group has exercised judgement that, for all investments classified as joint ventures, the arrangements will meet the definition of a joint arrangement because there is no ultimate controlling party and the control is shared. Therefore, the Group has accounted for these investments as joint ventures.
Estimates
The principal areas where such estimations have been made are:
Fair value of investment properties
The fair value of investment properties is determined using a combination of the discounted cash flows method and the income capitalisation valuation method, using assumptions that are based on market conditions existing at the end of the relevant reporting year. Material valuation uncertainty due to Novel Corona virus ("COVID-19"):
The outbreak of COVID-19, declared by the World Health Organisation as a "Global Pandemic" on the 11th March 2020, has and continues to impact many aspects of daily life and the global economy - with some real estate markets having experienced lower levels of transactional activity and liquidity. Travel, movement and operational restrictions have been implemented by many countries. In some cases, "lockdowns" have been applied to varying degrees and to reflect further "waves" of COVID-19; although these may imply a new stage of the crisis, they are not unprecedented in the same way as the initial impact. The pandemic and the measures taken to tackle COVID-19 continue to affect economies and real estate markets globally. Nevertheless, as at the valuation date property markets are mostly functioning again, with transaction volumes and other relevant evidence at levels where an adequate quantum of market evidence exists upon which to base opinions of value. For the avoidance of doubt this explanatory note has been included to ensure transparency and to provide further insight as to the market context under which the valuation opinion was prepared. In recognition of the potential for market conditions to move rapidly in response to changes in the control or future spread of COVID-19 we highlight the importance of the valuation date. There has been no change in the valuation methodology used for investment property as a result of COVID -19.
Fair value of financial instruments
The Group have estimated the value of its obligation arising from its guarantee to de-risk 50% of PIC's exposure to the BoAML CRO. The Group's obligation is based on the occurrence or non-occurrence of uncertain future events (the probability of DiT defaulting on the BoAML facility). Therefore, the fair value of the obligation was based on the probability of DiT defaulting on the facility (management has assessed the risk of default as low for the years endings 30 June 2021 and 30 June 2020.)
Taxation
Judgements and estimates are required in determining the provision for income taxes due to the complexity of legislation. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for anticipated tax inspection issues in the jurisdictions in which it operates based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the year in which such determination is made.
The Group recognises the net future tax benefit related to deferred income tax assets to the extent that it is probable that the deductible temporary differences will reverse in the foreseeable future. Assessing the recoverability of deferred tax assets requires the Group to make significant estimates related to expectations of future taxable income. Estimates of future taxable income are based on forecast cash flows from operations and the application of existing tax laws in each relevant jurisdiction. To the extent that future cash flows and taxable income differ significantly from estimates, the ability of the Group to realise the net deferred tax assets recorded at the end of the reporting year could be impacted.
COVID-19
Certain estimates have been made taking into the consideration of the COVID-19 epidemic. Refer to the Going Concern under Note 1.1 for the estimates made.
2. INVESTMENT PROPERTIES
Audited as at Audited as at 30 June 2021 30 June 2020 US$'000 US$'000 ---------------------------------------------------------------------------------------- ------------- ------------- Net carrying value of properties 549,491 577,222 Movement for the year excluding straight-line rental income accrual, lease incentive and right of use of land Investment property at the beginning of the year 565,773 567,731 Acquisitions of investment properties(1) - 18,848 Transfer to right of use asset - (88) Other capital expenditure and construction 10,130 27,030 Foreign currency translation differences 10,971 (3,225) Revaluation of properties at end of year (51,297) (41,218) Contractual receipts from vendors of investment properties (reduction in purchase price) (144) (3,305) ---------------------------------------------------------------------------------------- ------------- ------------- As at 30 June 535,433 565,773 ---------------------------------------------------------------------------------------- ------------- ------------- Reconciliation to consolidated statement of financial position and valuations Investment properties carrying amount per above 535,433 565,773 Right of use of land 409 456 Lease incentive 7,027 4,680 Straight-line rental income accrual 6,622 6,313 ---------------------------------------------------------------------------------------- ------------- ------------- Total valuation of investment properties directly held by the Group 549,491 577,222 ---------------------------------------------------------------------------------------- ------------- ------------- 1. Acquisitions of investment properties The acquisition of Club Med Cap Skirring closed on 27 January 2020, through the acquisition of 100% of the equity of Société Immobiliére et de Gestion Hôteliére du Cap Skirring ("SIGHC") for EUR16.2m in total. This was accounted as an asset acquisition.
Investment property pledged as security
Certain of the Group's investment property has been pledged as security for interest-bearing borrowings (note 6) as follows:
-- Mozambican investment properties with a market value of US$294.1 million are mortgaged to Standard Bank of South Africa to secure debt facilities amounting to US$140.0 million (2020: Mozambican investment properties with a market value of US$308.0million were mortgaged to Standard Bank of South Africa to secure debt facilities amounting to US$140.0 million).
-- Moroccan investment properties with a market value of US$79.5 million (2020: US$89.4 million) are mortgaged to Investec Bank South Africa to secure debt facilities amounting to US$46.7 million (2020: US$45.7 million).
-- Mauritian investment properties with a market value of US$65.4 million (2020: US$63.6 million) are mortgaged to ABSA Bank Mauritius to secure debt facilities amounting to US$7.5 million (2020: US$7.1 million) and State Bank of Mauritius to secure debt facilities amounting to US$26.6 million (2020: US$25.0 million).
-- Kenyan investment properties with a market value of US$27.2 million (2020: US$24.4 million) are mortgaged to Bank of China to secure debt facilities amounting to US$8.6 million (2020: US$8.6 million).
-- Zambian investment properties with a market value of US$46.2 million (2020: US$55.1 million) are mortgaged to Bank of China to secure debt facilities amounting to US$28.7 million (2020: US$28.7 million).
-- Ghanaian investment properties with a market value of US$16.4 million (2020: US$19.2 million) are mortgaged to Barclays Bank Ghana Limited to secure debt facilities amounting to US$8.7 million (2020: US$9.0 million).
Valuation policy and methodology for investment properties held by the Group, associates and joint ventures
Investment properties are valued at each reporting date with independent valuations performed every year by independent professional reputable valuation experts who have sufficient expertise in the jurisdictions where the properties are located. All valuations that are performed in the functional currency of a group entity that is not United States Dollars are converted to United States Dollars at the effective closing rate of exchange. All valuations have been undertaken by the Royal Institute of Chartered Surveyors' ("RICS's"), accredited and registered valuers, in accordance with the version of the RICS Valuation Standards that were in effect at the relevant valuation date and are further compliant with International Valuation Standards. Market values presented by valuers have also been confirmed by the respective valuers to be fair value in terms of IFRS.
In respect of the majority of the Mozambican investment properties, independent valuations were performed at 30 June 2021 by REC Chartered Surveyors (2020: REC Chartered Surveyors) using the discounted cash flow method (2020: discounted cash flow method).
The remainder of the portfolio including investment properties held by associates and joint ventures was independently valued at 30 June 2021 by Knight Frank Chartered Surveyors (2020: Knight Frank Chartered Surveyors), using the discounted cash flow method with the exception of freehold land which is valued by comparable method.
Material valuation uncertainty due to Novel Coronavirus ("COVID-19"): The outbreak of COVID-19, declared by the World Health Organisation as a "Global Pandemic" on the 11th March 2020, has and continues to impact many aspects of daily life and the global economy - with some real estate markets having experienced lower levels of transactional activity and liquidity. Travel, movement and operational restrictions have been implemented by many countries. In some cases, "lockdowns" have been applied to varying degrees and to reflect further "waves" of COVID-19; although these may imply a new stage of the crisis, they are not unprecedented in the same way as the initial impact. The pandemic and the measures taken to tackle COVID-19 continue to affect economies and real estate markets globally. Nevertheless, as at the valuation date property markets are mostly functioning again, with transaction volumes and other relevant evidence at levels where an adequate quantum of market evidence exists upon which to base opinions of value. For the avoidance of doubt this explanatory note has been included to ensure transparency and to provide further insight as to the market context under which the valuation opinion was prepared. In recognition of the potential for market conditions to move rapidly in response to changes in the control or future spread of COVID-19 we highlight the importance of the valuation date. There has been no change in the valuation methodology used for investment property as a result of COVID-19.
Audited Audited Summary of Most recent Valuer (for the as at as at valuations by independent most recent 30 June 2021 30 June 2020 reporting date valuation date valuation) Sector Country US$'000 US$'000 ----------------- ----------------- ----------------- ------------------ ----------- ------------- ------------- Commodity House Phase I building 30-Jun-21 REC Office Mozambique 47,214 48,095 Commodity House Phase II building 30-Jun-21 REC Office Mozambique 19,047 19,348 Hollard Building 30-Jun-21 REC Office Mozambique 20,816 21,332 Vodacom Building 30-Jun-21 REC Office Mozambique 49,624 49,438 Zimpeto Square 30-Jun-21 REC Retail Mozambique 4,587 5,848 Bollore Warehouse 30-Jun-21 REC Light industrial Mozambique 9,012 5,795 ABSA House 30-Jun-21 Knight Frank Office Mauritius 13,109 13,825 Anfa Place Mall 30-Jun-21 Knight Frank Retail Morocco 79,535 89,363 Tamassa Resort 30-Jun-21 Knight Frank Hospitality Mauritius 52,232 49,734 Vale Housing Compound 30-Jun-21 REC Accommodation Mozambique 57,546 70,654 Imperial Distribution
Centre 30-Jun-21 Knight Frank Light industrial Kenya 24,170 21,370 Mara Viwandani 30-Jun-21 Knight Frank Light industrial Kenya 3,050 3,070 Mall de Tete 30-Jun-21 REC Retail Mozambique 15,952 19,991 Acacia Estate 30-Jun-21 REC Accommodation Mozambique 70,353 67,540 5th Avenue Building 30-Jun-21 Knight Frank Office Ghana 16,440 19,210 Mukuba Mall(4) 30-Jun-21 Knight Frank Retail Zambia 46,210 55,130 Club Med Cap Skirring Resort 30-Jun-21 Knight Frank Hospitality Senegal 20,594 17,479 Total valuation of investment properties directly held by the Group 549,491 577,222 Deposits paid on Imperial Distribution Centre Phase 2 2,148 1,500 Deposits paid on Capital Place Limited 3,550 3,000 Total deposits paid on investment properties 5,698 4,500 --------------------------------------------------------------------------- ----------- ------------- ------------- Total carrying value of investment properties including deposits paid 555,189 581,722 --------------------------------------------------------------------------- ----------- ------------- ------------- Investment properties held within associates and joint ventures - Group share Buffalo Mall - Buffalo Mall Naivasha Limited (50%) 30-Jun-21 Knight Frank Retail Kenya 5,441 6,395 Kafubu Mall - Kafubu Mall Limited (50%) 30-Jun-21 Knight Frank Retail Zambia 9,623 9,658 CADS II Building - CADS Developers Limited (50%) 30-Jun-21 Knight Frank Office Ghana 15,075 16,920 Cosmopolitan Shopping Centre - Cosmopolitan Shopping Centre Limited (50%) 30-Jun-21 Knight Frank Retail Zambia 24,945 31,375 Canonniers, Mauricia and Victoria Resorts and Spas - Beachcomber Hospitality (44.42%) 30-Jun-21 Knight Frank Hospitality Mauritius 101,594 95,066 Capital Place - Capital Place Limited (50%) 30-Jun-21 Knight Frank Office Ghana 10,150 11,210 Letlole La Rona Limited (30%) - 19 Investment properties 30-Jun-21 Knight Frank Light industrial Botswana 18,647 15,536 Letlole La Rona Limited (30%) - 1 Investment property 30-Jun-21 Knight Frank Hospitality Botswana 209 193 Letlole La Rona Limited (30%) - 2 Investment properties 30-Jun-21 Knight Frank Retail Botswana 5,325 4,957 Letlole La Rona Limited (30%) - 1 Investment property 30-Jun-21 Knight Frank Office Botswana 1,517 1,316 Letlole La Rona Limited (30%) - 1 Investment property 30-Jun-21 Knight Frank Accommodation Botswana 1,300 1,221 Gateway Real Estate Africa Directors Ltd (19.98%) 30-Jun-21 Valuation Other Investments Mauritius 12,557 5,009 Total of investment properties acquired through associates and joint ventures 206,383 198,856 ---------------------------------------------------------------------------------------- ------------- ------------- Total portfolio 761,572 780,578 ---------------------------------------------------------------------------------------- ------------- -------------
As indicated above, all of the valuations were performed using the discounted cash flow method. These methodologies are based on estimated rental values with consideration given to the future earnings potential and applying an appropriate capitalisation rate and/or discount rate to the property and country. The capitalisation rates (equivalent yield) applied to the Group's valuations of investment properties at 30 June 2021 ranged between 6.0% and 12.0%. The discount rates applied to the Group valuations that were performed at 30 June 2021 using the discounted cash flow method ranged between 8.25% and 16.0%.
Included in the valuation is lease incentives which includes rent-free periods, rent abatements and fit-out contributions. The lease incentive is disclosed separately under Trade and other receivables.
In the current year, the valuations include the right of use of land, lease incentives and certain furniture and fittings.
There have been no material changes to the information used and assumptions applied by the registered valuer.
The fair value adjustments on investment property are included in the income statement.
The Directors consider that the deposit payments and capital expenditure which are carried at cost approximate their fair value at the relevant reporting date.
3. INVESTMENTS IN ASSOCIATES AND JOINT VENTURES (2)
Audited as at Audited as at 30 June 2021 30 June 2020 US$'000 US$'000 ------------------------------------ ------------------------------------ ---------- ------------- --------------- The following entities have been accounted for using the equity method: Country of incorporation and Name of joint venture operation % held ------------------------------------ ------------------------------------ ---------- ------------- --------------- Kafubu Mall Limited(3) Zambia 50.00% 9,502 9,552 Cosmopolitan Shopping Centre Limited(3) Zambia 50.00% 25,076 31,495 CADS Developers Limited(3) Ghana 50.00% 7,607 9,504 ------------------------------------ ------------------------------------ ---------- ------------- --------------- Carrying value of joint ventures 42,185 50,551 -------------------------------------------------------------------------- ---------- ------------- --------------- Country of incorporation and Name of associate operation % held ------------------------------------ ------------------------------------ ---------- ------------- --------------- Letlole La Rona Limited(4) Botswana 30.00% 21,672 19,676 Buffalo Mall Naivasha Limited(3) Kenya 50.00% 3,402 4,612 Gateway Real Estate Africa Ltd(3,6) Mauritius 19.98% 20,706 11,404 Capital Place Limited(5) Ghana 50.00% 7,471 8,038 Beachcomber Hospitality Investments(1,3) Limited Mauritius 44.42% 72,056 67,020 ------------------------------------ ------------------------------------ ---------- ------------- --------------- Carrying value of associates 125,307 110,750 -------------------------------------------------------------------------- ---------- ------------- --------------- Joint ventures 42,185 50,551 Associates 125,307 110,750 -------------------------------------------------------------------------- ---------- ------------- --------------- Total carrying value of associates and joint ventures 167,492 161,301 -------------------------------------------------------------------------- ---------- ------------- ---------------
(1) The carrying value of Beachcomber Hospitality Investments at 30 June 2021 includes an unsecured loan of USEUR37.5m (2020: USEUR37.5m), from the Group to the associate, which bears interest at 6.25% (2020: 6.25%).
(2) All investments in associates are private entities and do not have quoted prices available with the exception of Letlole La Rona Limited. In determining the fair value of the investment at the acquisition date, Grit conducted an analysis of the volume and frequency of the share trades of LLR on the Botswanan Stock Exchange (including an analysis of the free float of the shareholder base of LLR) in order to determine whether the shares were traded in an active market and concluded that the share was not traded with sufficient volume nor frequency to support the conditions of an active market. As the share price was not indicative as a proxy for fair value, the Company has concluded the best mechanism would be Net Asset Value based on the latest available independent valuations.
(3) The percentage of ownership interest for 2021 did not change.
(4) In the prior year, Letlole La Rona Limited was reclassified from other investments to investments in associates and joint ventures after increasing the shareholding from 6.25% to 30% in the current period. This company is incorporated in Botswana and listed on the Botswana Stock Exchange.
(5) The percentage of ownership increased from 47.5% to 50.0% in the prior year.
Secured investments:
Zambian investment properties held by associates or joint ventures have a market value of US$69.1 million as at 30 June 2021 (2020: US$82.1 million). The properties in the investee entities are fully mortgaged to Bank of China to secure debt facilities amounting to US$ 47.7 million as at that date (2020: US$47.7 million).
Mauritian investment properties held by an associate have a market value of US$228.8 million as at 30 June 2021 (2020: US$214.0 million). The property in the investee entity is mortgaged in equal proportions to SBM Bank (Mauritius) Limited, Investec Bank (Mauritius) Limited and the Mauritius Commercial Bank Limited to secure debt facilities amounting to US$59.6 million (2020: US$56.1 million).
Kenyan investment property held by an associate has a market value of US$10.9 million as at 30 June 2021 (2020: US$12.8 million). The property in the investee entity is fully mortgaged to HFCK Bank Limited to secure debt facilities amounting to US$4.4 million (2020: US$4.2 million).
Ghanaian investment property held by an associate has a market value of US$30.2 million as at 30 June 2021 (2020: US$33.8 million). The property in the investee entity is fully mortgaged to ABSA Bank Ghana Limited to secure debt facilities amounting to US$14.9 million (2020: US$14.6 million).
Ghanaian investment property held by an associate has a market value of US$20.3 million as at 30 June 2021 (2020: US$22.4 million). The property in the investee entity is fully mortgaged to RMB Holdings Limited to secure debt facilities amounting to US$5.9 million (2020: US$6.2 million).
Botswana investment property held by an associate has a market value of US$89.0 million as at 30 June 2021 (2020: US$77.9 million). The properties in the investee entity is mortgaged to Bank Gaborone Limited and First National Bank of Botswana Limited to secure debt facilities amounting to US$21.2 million (2020: US$19.9 million).
Set out below is the summarised financial information of each of the Group's associates for each reporting period together with a reconciliation of this financial information to the carrying amount of the Group's interests in each associate. Where an interest in an associate has been acquired in a reporting period the results are shown for the period from the date of such an acquisition.
Each of the acquisitions referred to below have given the Group access to high quality African real estate in line with the Group's strategy.
Where associates and joint ventures have non-coterminous financial reporting dates, the Group uses management accounts to incorporate their results into the consolidated financial statements.
Gateway Beachcomber Real Cosmo-politan Buffalo Letlole Kafubu Hospitality Capital Estate CADS Shopping Mall La Rona Mall Investments Place Africa Developers Centre Naivasha Limited Limited Limited Limited Ltd Limited Limited Limited Total US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 -------------- --------- --------- ----------- --------- --------- ---------- ------------- --------- ------- As at 30 June 2021 Statement of financial position Non-current assets 90,872 19,246 228,698 20,301 154,854 30,150 49,897 10,893 604,911 Current assets 11,820 136 5,243 2,587 42,530 113 510 627 63,566 -------------- --------- --------- ----------- --------- --------- ---------- ------------- --------- ------- 102,692 19,382 233,941 22,888 197,384 30,263 50,407 11,520 668,477 -------------- --------- --------- ----------- --------- --------- ---------- ------------- --------- ------- Non-current liabilities 25,835 210 62,612 7,125 4,106 14,877 - 4,521 119,286 Current liabilities 4,618 168 9,123 821 2,306 171 256 196 17,659 -------------- --------- --------- ----------- --------- --------- ---------- ------------- --------- ------- 30,453 378 71,735 7,946 6,412 15,048 256 4,717 136,945 -------------- --------- --------- ----------- --------- --------- ---------- ------------- --------- ------- Net asset value 72,239 19,004 162,206 14,942 190,972 15,215 50,151 6,803 531,532 -------------- --------- --------- ----------- --------- --------- ---------- ------------- --------- ------- Percentage held by Group 30.00% 50.00% 44.42% 50.00% 19.98% 50.00% 50.00% 50.00% -------------- --------- --------- ----------- --------- --------- ---------- ------------- --------- ------- Net Asset Value attributable to the Group 21,672 9,502 72,056 7,471 20,706 7,607 25,076 3,402 167,492 -------------- --------- --------- ----------- --------- --------- ---------- ------------- --------- ------- For the year to 30 June 2021 Total comprehensive income Revenue 2,811 839 7,380 1,093 250 1,434 1,919 289 16,015 -------------- --------- --------- ----------- --------- --------- ---------- ------------- --------- ------- Fair value movement in investment properties 213 1,957 (1,305) (1,066) 498 (1,960) (6,433) (959) (9,055) -------------- --------- --------- ----------- --------- --------- ---------- ------------- --------- ------- Profit/(loss) for the year 1,758 1,394 4,372 (542) 748 (1,040) (4,897) (1,210) 583 -------------- --------- --------- ----------- --------- --------- ---------- ------------- --------- ------- Total comprehensive income / (expense) 3,340 556 8,603 (542) 749 (1,040) (4,897) (1,210) 5,559 -------------- --------- --------- ----------- --------- --------- ---------- ------------- --------- ------- Dividends received from associates and joint ventures 1,344 - 727 - - - 845 - 2,916 -------------- --------- --------- ----------- --------- --------- ---------- ------------- --------- -------
Reconciliation to carrying value in associates and joint ventures
Gateway Beachcomber Real Cosmo-politan Buffalo Letlole Kafubu Hospitality Capital Estate CADS Shopping Mall La Rona Mall Investments Place Africa Developers Centre Naivasha Limited Limited Limited Limited Ltd Limited Limited Limited Total US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 --------------- --------- --------- ----------- --------- -------- ---------- ------------- --------- ------- Opening Balance 1 July 2021 19,676 9,552 67,020 8,038 11,404 9,504 31,495 4,612 161,301 Acquired during the period - - - - 8,493 - - - 8,493 Profit / (losses) from associates and joint ventures 1,758 1,394 4,372 (542) 748 (1,040) (4,897) (1,210) 583 --------------- --------- --------- ----------- --------- -------- ---------- ------------- --------- ------- - Revenue 2,811 839 7,380 1,093 250 1,434 1,919 289 16,015 - Property operating expenses (335) (183) - (227) - (68) (241) (291) (1,345) - Admin expenses and recoveries (607) (12) (26) 132 996 (26) (13) (10) 434 - Fair value adjustment on other investments 6 - - - (15) - - - (9)
- Unrealised foreign exchange gains/(losses) 5 (1,167) (29) 29 - 4 (90) (6) (1,254) - Investment at fair value - - - - (1) - - - (1) - Impairments - - - - (935) - - - (935) - Interest Income / (costs) 64 3 - - - - 6 - 73 - Finance charges (413) (6) (1,198) (335) (85) (424) - (233) (2,694) - Fair value movement on investment property 213 1,957 (1,305) (1,066) 498 (1,960) (6,433) (959) (9,055) - Movement in fair value of share price - Current tax 14 (37) (530) - (47) - (45) - (645) - Deferred tax - - 80 (168) 87 - - - (1) --------------- --------- --------- ----------- --------- -------- ---------- ------------- --------- ------- Dividends and interest paid to Group (1,344) - (3,567) - - (605) (845) - (6,361) Repayment of proportionate shareholders loan - (606) - (25) - (252) (677) - (1,560) Consolidation elimination - - - - 60 - - - 60 Foreign currency translation differences 1,582 (838) 4,231 - 1 - - - 4,976 --------------- --------- --------- ----------- --------- -------- ---------- ------------- --------- ------- Carrying value of associates and joint ventures 21,672 9,502 72,056 7,471 20,706 7,607 25,076 3,402 167,492 --------------- --------- --------- ----------- --------- -------- ---------- ------------- --------- -------
Investment in the year ended 30 June 2021
Through its 19.98% equity interest in GREA, the private African property development company that Grit co-founded, Grit has an interest in the developer's accretive pipeline assets and development returns GREA has made strong progress on securing an attractive risk-mitigated pipeline in the office, embassy corporate accommodation and data centre sectors including:
-- Near completion of a 112 unit diplomatic residential tower in Ethiopia predominantly tenanted to OBO, a division of the US State Department, now being readied for occupation on 1 November 2021. Estimated total project cost c.US$54 million.
-- The construction of a 90 unit diplomatic apartment and town house community in Kenya fully tenanted by OBO, a division of the US State Department, with expected completion date in Q1 2022.
-- Construction of a 994sqm GLA data centre in Lagos, Nigeria tenanted to African Data Centres, part of the Liquid Intelligent Technologies Group.
-- The Precinct, Mauritius: Commencement of a landmark 8,594sqm GLA premium grade office development in Grand Baie in Q2 2021. Targeted completion August 2022.
The Group sees significant further potential value creation from the assets and development pipeline within GREA going forward, which are expected to result in strong NAV growth to Grit shareholders from exposure to risk mitigated developments tenanted to current and target multinational clients.
GREA has now called for final capital calls in relation to its shareholders' initial committed equity funding and Grit is required to make its US$17.9 million payment in the coming months if it wishes to retain its current equity ownership in GREA. Grit is concurrently considering increasing its stake in GREA to further align both Grit and GREA's future profitable growth strategies and approach to servicing tenants, which would be a cornerstone to further unlocking scale, synergy benefits and the creation and delivery of further value to Grit's shareholders. A potential transaction would likely require approvals from Grit's shareholders and equity funding by Grit. Grit expects to engage with its shareholders should this be further pursued.
4. OTHER LOANS RECEIVABLE
Audited as Audited as at at 30 June 2021 30 June 2020 US$'000 US$'000 ---------------------------------------------- ------------- ------------- Ndola Investments Limited 5,115 5,073 Kitwe Copperbelt Limited 5,624 5,577 Syngenta Limited 19,081 18,690 Healthcare Assets 239 303 Drift (Mauritius) Limited 9,731 12,846 IFRS 9 - Impairment on financial assets (ECL) (2,487) (68) ---------------------------------------------- ------------- ------------- Total as at 30 June 37,303 42,421 ---------------------------------------------- ------------- ------------- Classification of other loans: Non-current assets - 39,575 Current assets 37,303 2,846 ------------------------------- ------ ------ 37,303 42,421 ------------------------------- ------ ------
5. INTEREST-BEARING BORROWINGS
Audited as at Audited as at 30 June 2021 30 June 2020 US$'000 US$'000 ---------------------------------------------------------------------------------------- ------------- ------------- Non-current liabilities Capital portion 215,565 337,620 Current liabilities Capital portion 190,846 50,030 Accrued interest 4,177 5,349 ---------------------------------------------------------------------------------------- ------------- ------------- Total as at 30 June 410,588 392,999 ---------------------------------------------------------------------------------------- ------------- ------------- Currency of the interest-bearing borrowings (stated gross of unamortised loan issue costs) United States Dollars 276,947 271,560 Euros 131,420 119,419 Mauritian Rupees 1,698 1,778 Mozambican Meticais - - ---------------------------------------------------------------------------------------- ------------- ------------- 410,065 392,757 Interest accrued 4,176 5,349 Unamortised loan issue costs (3,653) (5,107) ---------------------------------------------------------------------------------------- ------------- ------------- Total as at 30 June 410,588 392,999 ---------------------------------------------------------------------------------------- ------------- ------------- Movement for the year ---------------------------------------------------------------------------------------- ------------- ------------- Balance at the beginning of the year 392,999 346,097 Proceeds of interest bearing-borrowings 50,765 170,278 Loan issue costs incurred (1,520) (4,639) Amortisation of loan issue costs 2,974 1,999 Foreign currency translation differences 7,548 (1,165) Interest accrued (1,173) 5,349 Debt settled during the year (41,005) (124,920) ---------------------------------------------------------------------------------------- ------------- ------------- Total as at 30 June 410,588 392,999 ---------------------------------------------------------------------------------------- ------------- -------------
Analysis of facilities and loans in issue
Audited as at Audited as at 30 June 2021 30 June 2020 Lender Borrower Initial facility US$'000 US$'000 ------------------------------- ------------------------------- ---------------------- ------------- ------------- Standard Bank South Africa Commotor Limitada US$140.0m 140,000 140,000 Standard Bank South Africa Grit Services Limited RCF - EUR26.5m 30,676 29,730 ------------------------------- ------------------------------- ---------------------- ------------- ------------- Total Standard Bank Group 170,676 169,730 Bank of China Warehousely Limited US$8.5m 8,555 8,555 Zambian Property Holdings Bank of China Limited US$77.0m 76,405 76,405 ------------------------------- ------------------------------- ---------------------- ------------- ------------- Total Bank of China 84,960 84,960 Leisure Property Northern State Bank of Mauritius (Mauritius) Limited EUR9.0m 10,733 10,097 Leisure Property Northern State Bank of Mauritius (Mauritius) Limited EUR3.2m 3,816 3,590 Mara Delta (Mauritius) State Bank of Mauritius Properties Limited EUR22.3m 26,593 25,018 Grit Real Estate Income Group State Bank of Mauritius Limited Equity Bridge US$20.0m 20,000 20,000 Grit Real Estate Income Group State Bank of Mauritius Limited RCF MUR72.0m 1,698 1,778 ------------------------------- ------------------------------- ---------------------- ------------- ------------- Total State Bank of Mauritius 62,840 60,483 Investec South Africa Freedom Property Fund SARL EUR36.0m 37,974 37,027 Investec South Africa Freedom Property Fund SARL US$15.7m 8,722 8,722 Grit Real Estate Income Group Investec Mauritius Limited US$0.5m 327 378 ------------------------------- ------------------------------- ---------------------- ------------- ------------- Total Investec Group 47,023 46,127 ABSA Bank Mauritius BH Property Investment Limited EUR7.4m 7,526 7,081 ABSA Bank Ghana Limited Grit Accra Limited US$9.0m 8,652 9,000 ------------------------------- ------------------------------- ---------------------- ------------- ------------- Total ABSA Group 16,178 16,081 Grit Real Estate Income Group Maubank Mauritius Limited EUR3.2m 3,871 3,642 Maubank Mauritius Freedom Asset Management EUR4.0m 2,599 3,234 ------------------------------- ------------------------------- ---------------------- ------------- ------------- Total Maubank 6,470 6,876 ABC Banking Corporation Grit Services Limited Equity bridge US$8.5m 7,286 8,500 ABC Banking Corporation Casamance Holdings Limited EUR6.4m 7,632 - ------------------------------- ------------------------------- ---------------------- ------------- ------------- Total ABC Banking Corporation 14,918 8,500 Grit Real Estate Income Group Nedbank South Africa Limited US$7.0m 7,000 - Total Nedbank South Africa 7,000 - ------------------------------- ------------------------------- ---------------------- ------------- ------------- Total loans in issue 410,065 392,757 ---------------------------------------------------------------- ---------------------- ------------- ------------- plus: interest accrued 4,177 5,349 less: unamortised loan issue costs (3,654) (5,107) ---------------------------------------------------------------- ---------------------- ------------- ------------- As at year end 410,588 392,999 ---------------------------------------------------------------- ---------------------- ------------- -------------
Fair value of borrowings are not materially different to their carrying value amounts since interest payable on those borrowings are either close to their current market rates or the borrowings are of short-term in nature.
6 . TAXATION
Audited as at Audited as at 30 June 2021 30 June 2020 US$'000 US$'000 ------------------------------------------------------------ ------------- ------------- Major components of the taxation expense Current taxation 1,791 4,354 Deferred taxation (1,346) 9,028 ------------------------------------------------------------ ------------- ------------- 445 13,382 ------------------------------------------------------------ ------------- ------------- Reconciliation of the taxation expense (Loss) / profit before tax (60,931) (53,866) ------------------------------------------------------------ ------------- ------------- Statutory taxation (credit) / expense at 15% (all years) (9,140) (8,080) Tax effect of adjustments to taxable income: Non-taxable income (17,174) (3,299) Non-deductible expenditure 20,979 14,066 Under provision in the previous year (5,749) (768) Withholding tax 446 192 Foreign tax credit (1,060) (6,319) Deferred tax asset not provided for 19,330 10,924 Investment tax credit - (119) Minimum tax 7 216 Foreign currency translation differences (52) - Effect of different tax rates and consolidation adjustments (7,142) 6,569 ------------------------------------------------------------ ------------- ------------- Effective taxation expense at -0.73% (2020: -24.84%) 445 13,382 ------------------------------------------------------------ ------------- -------------
7. Segmental information
The Group reports on a segmental basis in terms of geographical location and type of property. Geographical location is split between Morocco, Mozambique, Zambia, Kenya, Ghana and Mauritius, as relevant to each reporting period. In terms of type of property, the Group has investments in the retail, office and various other sectors.
In US$'000 Geographical location Botswana Senegal Morocco Mozambique Zambia Kenya Ghana Mauritius Total 30 June 2021 ----------------------------- -------- ------- -------- ---------- ------- ------- ------- --------- -------- Reportable segment profit and loss Gross property income - 1,802 6,474 27,006 4,234 1,893 3,060 4,748 49,217 Property operating expenses - - (4,218) (3,017) (714) (39) (329) (226) (8,543) ----------------------------- -------- ------- -------- ---------- ------- ------- ------- --------- -------- Net property income - 1,802 2,256 23,989 3,520 1,854 2,731 4,522 40,674 ----------------------------- -------- ------- -------- ---------- ------- ------- ------- --------- -------- Other income - - - 22 - - 147 - 169
Administrative expenses - (161) (702) (2,432) (25) (104) (447) (9,996) (13,867) Net impairment (charge) / credit on financial assets - 6 (415) (1,341) - - (627) (4,742) (7,119) ----------------------------- -------- ------- -------- ---------- ------- ------- ------- --------- -------- Profit / (loss) from operations - 1,647 1,139 20,238 3,495 1,750 1,804 (10,216) 19,857 Fair value adjustment on investment properties - (2,262) (18,497) (20,047) (8,922) 2,572 (3,421) (720) (51,297) Corporate restructure costs - - - - - - - (3,467) (3,467) Fair value adjustment on other financial liability - - - - - - - (5,230) (5,230) Fair value adjustment on other financial asset - - - - - - - (1,106) (1,106) Fair value adjustment on derivatives financial instruments - - - - - - - 1,378 1,378 Share based payment expense - - - - - - - (127) (127) Share of profits / (losses) from associates and joint ventures 1,758 - - - (3,503) (1,210) (1,582) 5,120 583 Impairment of loans and other receivables - - - - - - (23) (1,090) (1,113) Foreign currency gains / (losses) - (96) 2,048 999 (34) (32) (31) (511) 2,343 ----------------------------- -------- ------- -------- ---------- ------- ------- ------- --------- -------- Profit / (loss) before interest and taxation 1,758 (711) (15,310) 1,190 (8,964) 3,080 (3,253) (15,969) (38,179) Interest income - - - 16 6 - 411 2,257 2.690 Finance costs - - (3,397) (8,360) - (469) (595) (12,621) (25,442) ----------------------------- -------- ------- -------- ---------- ------- ------- ------- --------- -------- Profit / (loss) for the year before taxation 1,758 (711) (18,707) (7,154) (8,958) 2,611 (3,437) (26,333) (60,931) Taxation - (7) (970) 1,284 (96) 74 45 (775) (445) ----------------------------- -------- ------- -------- ---------- ------- ------- ------- --------- -------- Profit / (loss) for the year after taxation 1,758 (718) (19,677) (5,870) (9,054) 2,685 (3,392) (27,108) (61,376) ----------------------------- -------- ------- -------- ---------- ------- ------- ------- --------- -------- Reportable segment assets and liabilities Non-current assets Investment properties - 20,594 79,535 294,151 46,210 27,220 16,440 65,341 549,491 Deposits paid on investment properties - - - - - - - 5,698 5,698 Property, plant and equipment - 24 24 308 - 3 23 2,066 2,448 Intangible assets - - 16 - - - - 464 480 Other investments - - - 1 - - - - 1 Investment in associates and joint ventures 21,672 - - - 34,578 3,402 15,078 92,762 167,492 Trade and other receivables - - 2,166 - - - - - 2,166 Deferred tax - - 7,019 10,299 - 490 310 1,949 20,067 ----------------------------- -------- ------- -------- ---------- ------- ------- ------- --------- -------- Total non-current assets 21,672 20,618 88,760 304,759 80,788 31,115 31,851 168,280 747,843 ----------------------------- -------- ------- -------- ---------- ------- ------- ------- --------- -------- Current assets Trade and other receivables - 503 4,840 5,426 63 2,180 1,038 4,896 18,946 Current tax refundable - - - 898 - 61 344 137 1,440 Related party loans receivable - - - - - - - 197 197 Other loans receivable - - - - - - - 37,303 37,303 Derivative financial instruments - - - - - - - 87 87 Cash and cash equivalents - 270 290 2,789 251 97 (246) 1,439 4,890 ----------------------------- -------- ------- -------- ---------- ------- ------- ------- --------- -------- Total assets 21,672 21,391 93,890 313,872 81,102 33,453 32,987 212,339 810,706 ----------------------------- -------- ------- -------- ---------- ------- ------- ------- --------- -------- Liabilities Total liabilities - 1,591 76,592 209,761 80,506 10,579 10,524 142,749 532,302 ----------------------------- -------- ------- -------- ---------- ------- ------- ------- --------- -------- Net assets 21,672 19,800 17,298 104,111 596 22,874 22,463 69,590 278,404 In US$'000 Other Light Corporate Type of property investments Hospitality Retail Office industrial Accommodation Corporate Total 30 June 2021 ---------------- -------------- ----------- -------- ------- --------------- -------------- --------- -------- Reportable segment profit and loss Gross property income - 5,348 12,723 15,881 2,174 13,117 (26) 49,217 Property operating expenses - - (5,626) (1,540) (74) (1,978) 675 (8,543) ---------------- -------------- ----------- -------- ------- --------------- -------------- --------- -------- Net property income - 5,348 7,097 14,341 2,100 11,139 649 40,674 ---------------- -------------- ----------- -------- ------- --------------- -------------- --------- -------- Other income - - - - - - 169 169 Administrative expenses - (458) (859) (1,116) (168) (2,202) (9,064) (13,867) Net impairment (charge)/credit on financial assets - (27) (923) (1,452) (7) - (4,710) (7,119) ---------------- -------------- ----------- -------- ------- --------------- -------------- --------- -------- Profit / (loss) from operations - 4,863 5,315 11,773 1,925 8,937 (12,956) 19,857 ---------------- -------------- ----------- -------- ------- --------------- -------------- --------- -------- Fair value adjustment on investment properties - (2,905) (33,274) (5,969) 2,201 (11,494) 144 (51,297) Fair value adjustment on other investments - - - - - - - - Corporate restructure costs - - - - - - (3,467) (3,467) Fair value adjustment on other financial liability - 9 - - - - (5,239) (5,230) Fair value adjustment on other financial asset - (503) - - - - (603) (1,106) Fair value adjustment on derivatives financial instruments - - - 10 - - 1,368 1,378 Share based payment expense - - - - - - (127) (127) Share of profits / (losses) from associates and joint ventures 747 4,386 (4,366) (1,483) 1,214 85 - 583 Impairment of loans and other receivables - - - - - - (1,113) (1,113) Gain from bargain purchase on associates - - - - - - - - Foreign currency gains / (losses) - 1,191 1,920 (484) (126) 613 (771) 2,343 ---------------- -------------- ----------- -------- ------- --------------- -------------- --------- -------- Profit / (loss) before interest and taxation 747 7,041 (30,405) 3,847 5,214 (1,859) (22,764) (38,179) Interest income - - 8 - 12 - 2,670 2,690 Finance costs - (2,673) (3,496) (8,873) (469) (326) (9,605) (25,442)
---------------- -------------- ----------- -------- ------- --------------- -------------- --------- -------- Profit / (loss) for the year before taxation 747 4,368 (33,893) (5,026) 4,757 (2,185) (29,699) (60,931) Taxation - (81) (1,067) (1,533) 74 2,803 (641) (445) ---------------- -------------- ----------- -------- ------- --------------- -------------- --------- -------- Profit / (loss) for the year after taxation 747 4,287 (34,960) (6,559) 4,831 618 (30,340) (61,376) Reportable segment assets and liabilities Non-current assets ---------------- -------------- ----------- -------- ------- --------------- -------------- --------- -------- Investment properties - 72,826 146,284 166,247 36,232 127,902 - 549,491 Deposits paid on investment properties - - - - - - 5,698 5,698 Property, plant and equipment - 24 24 36 3 198 2,163 2,448 Intangible assets - - - - - - 480 480 Other investments - - - - - - 1 1 Investment in associates and joint ventures 20,705 72,224 42,255 16,296 14,968 1,044 - 167,492 Trade and other receivables - - 2,166 - - - - 2,166 Deferred tax - 1,551 9,866 3,659 648 4,331 12 20,067 ---------------- -------------- ----------- -------- ------- --------------- -------------- --------- -------- Total non-current assets 20,705 146,625 200,595 186,238 51,851 133,475 8,354 747,843 ---------------- -------------- ----------- -------- ------- --------------- -------------- --------- -------- Current assets Trade and other receivables - 381 4,907 1,695 2,908 3,861 5,194 18,946 Current tax refundable - 98 183 916 189 42 12 1,440 Related party loans receivable - - - - - - 197 197 Other loans receivable - - - - - - 37,303 37,303 Derivative financial instruments - - - 87 - - - 87 Cash and cash equivalents - 367 1,077 911 193 896 1,446 4,890 ---------------- -------------- ----------- -------- ------- --------------- -------------- --------- -------- Total assets 20,705 147,471 206,762 189,847 55,141 138,274 52,974 810,706 ---------------- -------------- ----------- -------- ------- --------------- -------------- --------- -------- Liabilities Total liabilities - 89,662 172,545 178,983 11,493 28,645 52,974 532,302 ---------------- -------------- ----------- -------- ------- --------------- -------------- --------- -------- Net assets 20,705 57,809 34,217 10,864 43,648 109,629 1,532 278,404 ---------------- -------------- ----------- -------- ------- --------------- -------------- --------- --------
Major customers
Rental income stemming from Beachcomber represented approximately 11.1% of the Group's total contractual rental income for the year and Total 9.8%, Vale 9.4%, Vodacom Mozambique 6.3% and Tamassa Resort 5.5% of the Group's total contractual rental income for the year.
8.Subsequent events
Subsequent events
Perpetual Preference Note
Grit Services Limited has entered into a Subscription Agreement with Ethos Mezzanine Partners GP Proprietary Limited and Blue Peak Private Capital GP for the issuance by Grit of a perpetual note that will raise up to
US$31,500,000 ("the Note") and will be applied towards:
-- the acquisition and redevelopment of the Orbit Africa warehousing and manufacturing facility in Nairobi, Kenya; and
-- the St Helene Private Hospital development in Mauritius. The Note is subject to fulfilment of conditions precedent prior to disbursement.
Salient features of the Note
-- The Note is treated as equity for IFRS accounting purposes and will reduce the Group's reported LTV.
-- The Note has a cash coupon of 9% per annum and a 4% per annum redemption premium. The Company may elect to capitalise cash coupons.
-- The Note, although perpetual in tenor, carries a material coupon step-up provision after the fifth anniversary that is expected to result in an economic maturity and redemption by the Company on or before that date.
-- The Note may be voluntarily redeemed by the Company at any time, although there would be call-protection costs associated with doing so before the third anniversary.
-- The Note is subordinated to permitted indebtedness in the Company but ranks ahead of shareholder claims.
-- The Note potentially offers noteholders an additional return of not more than 3% per annum, linked to the performance of Grit ordinary shares over the duration of the Note.
Orbit Africa transaction
The Orbit facility is situated on Mombasa Road, the principal route south of Nairobi centre serving the main industrial node, the link to the port of Mombasa and the industrial town of Athi River and is strategically located 11 kilometres south of the international airport and 9.6 kilometres from the Inland Container Depot. The site is well known to Grit, being less than one kilometre from the Imperial Health Sciences logistics facility owned by Grit in the same industrial precinct.
The transaction comprises the acquisition of an existing warehouse and manufacturing facility with a gross lettable area ("GLA") of 29,243 sqm at an accretive net acquisition yield of 9. 60 %. The facility will be leased back to Orbit Products Africa Limited (the "Tenant") in terms of a 25-year US Dollar denominated triple net lease with an option to extend for a further 10 years and includes a contracted average annual escalation of 2%. The transaction also incorporates a redevelopment and expansion of the facility for the Tenant, to be undertaken by the Company at a contractual development yield of 16.0%. The development project provides potential scope for further value accretion through the addition of 14,741 sqm GLA of modern warehouse space that will reposition the property to the standards expected of a modern FMCG light industrial facility and shall target an IFC EDGE green building certification upon completion.
The total investment (incl. VAT) in the combined initial acquisition and the expansion and redevelopment is expected to be US$53. 6 million and will be funded through the US$ 25 million senior debt financing from the International Finance Corporation ("IFC") , and the balance can be provided through the perpetual preference note issuance.
The IFC debt terms are summarised below:
-- The IFC provides a US$25 million senior debt facility (the "Loan").
-- US$16.1 million1m of the Loan will be utilised to fund the purchase consideration and associated transaction costs related to the initial sale and leaseback of the Orbit transaction mentioned above.
-- US$8.9 million of the Loan will be utilised to fund the Redevelopment Project.
-- The Loan provided by the IFC carries a tenure of eight years of which the first three years are provided under a capital repayment moratorium.
-- The applicable facility interest rate is 5.75% per annum above 6-month libor.
Interest bearing borrowings
The following debt transactions were concluded subsequent to the period under review as a short term measure to create a platform for a more strategic and suitable balance sheet solution. The Group has engaged advisors and is currently investigating the potential for a corporate bond issuance, which it would expect to pursue in 2022 subject to prevailing market conditions at that time. The benefits would largely be extension of debt tenor, diversification of the Group's funding base and taking advantage of supportive credit markets in relation to African and frontier markets issuance:
Subsidiaries
-- The Group has extended the MUR 72 million (or US$1.7 million) Covid facility from the State Bank of Mauritius, to an evenly amortized 48 month facility.
-- The Group has extended all its facilities with the State Bank of Mauritius ("SBM") to 2025. This applies to the following facilities:
- Leisure Property North Mauritius Limited (EUR 12.2 million, with interest of 4.25% + 3-month libor) for the Beachcomber properties;
- Mara Delta (Mauritius) Property Limited, owner of the Lux Tamassa resort (EUR 22.3 million, with interest of 4.00% fixed); and
- Grit Real Estate Income Group, a Corporate facility (US$ 20.0 million, with interest of 4.00% fixed).
-- The US$ 46m facility (EUR31.8 million and US$8.7 million) with Investec Bank on the AnfaPlace Mall held by Freedom Property Fund SARL in Morocco has been extended to April 2023, as part of the terms of the refinance, an amount of US$6million will become due in the next 12 months.
-- The Group's RCF facility of US$ 7.0 million held with Nedbank has been extended to April 2023, with optional capital repayment conditions, bearing an interest of 6-month libor + 8.40%.
Associates and Joint Ventures
-- The BHI syndicated loan of EUR 50.0 million has been extended to April 2023.
9. EARNINGS PER SHARE
Audited as at Audited as at 30 June 2021 30 June 2020 US$'000 US$'000 ---------------------------------------------------------------------------------------- ------------- ------------- Basic and diluted (losses) / earnings (51,927) (63,115) Reconciliation of weighted average number of shares in issue (net of unvested treasury shares) 30 June 2021 30 June 2020 Shares Shares '000 '000 ---------------------------------------------------------------------------------------- ------------- ------------- Ordinary shares in issue at start of year 316,236 306,396 Unvested treasury shares at start of year (10,114) (10,114) ---------------------------------------------------------------------------------------- ------------- ------------- Total shares issue at start of year 306,122 296,282 Effect of shares issued in the year 7,849 5,834 Effect of treasury shares acquired in the year - - Effect of treasury shares surrendered in the year - - Effect of treasury shares vested or allocated in the year - 573 ---------------------------------------------------------------------------------------- ------------- ------------- Weighted average number of shares at end of year - basic 313,971 302,689 Dilutive effect of share options - - Weighted average number of shares at end of year - diluted 313,971 302,689 ---------------------------------------------------------------------------------------- ------------- ------------- Basic and diluted earnings per share (cents) (16.5) (20.9) ---------------------------------------------------------------------------------------- ------------- -------------
10. EPRA FINANCIAL METRICS - UNAUDITED
NON-IFRS MEASURES
Basis of Preparation
The directors of GRIT Real Estate Income Group Limited ("GRIT") ("Directors") have chosen to disclose additional non-IFRS measures, these include EPRA earnings, adjusted net asset value, EPRA net asset value, adjusted profit before tax and funds from operations (collectively "Non-IFRS Financial Information").
The Directors have chosen to disclose:
-- EPRA earnings in order to assist in comparisons with similar businesses in the real estate sector. EPRA earnings is a definition of earnings as set out by the European Public Real Estate Association. EPRA earnings represents earnings after adjusting for fair value adjustments on investment properties, gain from bargain purchase on associates, fair value adjustments included under income from associates, ECL provisions, fair value adjustments on other investments, fair value adjustments on other financial assets, fair value adjustments on derivative financial instruments, and non-controlling interest included in basic earnings (collectively the "EPRA earnings adjustments") and deferred tax in respect of these EPRA earnings adjustments. The reconciliation between basic and diluted earnings and EPRA earnings is detailed in the table below;
-- EPRA net asset value in order to assist in comparisons with similar businesses in the real estate sector. EPRA net asset value is a definition of net asset value as set out by the European Public Real Estate Association. EPRA net asset value represents net asset value after adjusting for net impairment on financial assets (ECL), fair value of financial instruments, and deferred tax relating to revaluation of properties (collectively the "EPRA net asset value adjustments"). The reconciliation for EPRA net asset value is detailed in the table below;
-- adjusted EPRA earnings in order to provide an alternative indication of GRIT and its subsidiaries' (the "Group") underlying business performance. Accordingly, it excludes the effect of non-cash items such as unrealised foreign exchange gains or losses, straight-line leasing adjustments, amortisation of right of use land, impairment of loans and deferred tax relating to the aforementioned adjustments. The reconciliation for adjusted EPRA earnings is detailed in the table below; and
-- total distributable earnings in order to assist in comparisons with similar businesses and to facilitate the Group's dividend policy which is derived from total distributable earnings. Accordingly, it excludes VAT credit utilised on rentals, interest related to AnfaPlace Mall's areas under construction, Listing and set-up costs, depreciation and amortisation, share based payments, antecedent dividends, operating costs relating to AnfaPlace Mall's refurbishment costs, rental concessions for capital projects/ amortisation of lease premiums and profits withheld/released. The reconciliation for total distributable earnings is detailed in the table below.
In this note, Grit presents European Real Estate Association (EPRA) earnings and other metrics which is non-IFRS financial information.
UNAUDITED UNAUDITED UNAUDITED UNAUDITED 30 June 2021 30 June 2021 30 June 2020 30 June 2020 Per Share (Diluted) Per Share (Diluted) $'000 (Cents Per Share) $'000 (Cents Per Share) ---------------------------------------------- ------------- ------------------- ------------- ------------------- EPRA Earnings 8,080 2.57 11,530 3.82 Total Company Specific Adjustments 7,351 2.34 15,727 5.20 ---------------------------------------------- ------------- ------------------- ------------- ------------------- Adjusted EPRA Earnings 15,431 4.91 27,257 9.02 Total company specific distribution adjustments 3,162 1.06 1,457 0.56 ---------------------------------------------- ------------- ------------------- ------------- ------------------- TOTAL DISTRIBUTABLE EARNINGS (BEFORE PROFITS WITHELD) 18,593 5.97 28,714 9.58 Profits Withheld (13,920) (4.47) (12,979) (4.33) ---------------------------------------------- ------------- ------------------- ------------- ------------------- TOTAL DISTRIBUTABLE EARNINGS TO GRIT SHAREHOLDERS 4,673 1.50 15,735 5.25 ---------------------------------------------- ------------- ------------------- ------------- ------------------- EPRA NRV 328,863 102.4 358,370 117.1 EPRA NTA 319,907 99.6 348,007 113.7 EPRA NDV 270,858 84.3 296,948 97.0 ---------------------------------------------- ------------- ------------------- ------------- ------------------- Unaudited control 30 June 2021 EPRA EARNINGS Notes US$'000 ----------------------------------------------------------------------------------- ------- ------------- Basic losses attributable to the owners of the parent (51,927) Add Back: Fair value adjustment on investment properties 51,441 Fair value adjustments included under income from associates 9,055 Change in value of other investments 9 Change in value of other financial asset 8,383 Change in value of derivative financial instruments (1,378)
Deferred tax in relation to the above (1,575) Acquisition costs not capitalised 79 Non-controlling interest included in basic earnings (6,007) ----------------------------------------------------------------------------------- ------- ------------- EPRA EARNINGS 8,080 ----------------------------------------------------------------------------------- ------- ------------- EPRA EARNINGS PER SHARE (DILUTED) (cents per share) 2.57 ----------------------------------------------------------------------------------- ------- ------------- Company specific adjustments Unrealised foreign exchange gains or losses (non-cash) 1 (1,089) Straight-line leasing and amortisation of lease premiums (non-cash rental) 2 (2,565) Amortisation of right of use of land (non-cash) 3 28 Impairment of loan and other receivables 4 6,466 Corporate restructure costs 5 3,467 Non-controlling interest included above 6 814 Deferred tax in relation to the above 7 230 ----------------------------------------------------------------------------------- ------- ------------- Total Company specific adjustments 7,351 ----------------------------------------------------------------------------------- ------- ------------- ADJUSTED EPRA EARNINGS 15,431 ----------------------------------------------------------------------------------- ------- ------------- ADJUSTED EPRA EARNINGS PER SHARE (DILUTED) (cents per share) 4.91 ----------------------------------------------------------------------------------- ------- ------------- Shares '000 ----------------------------------------------------------------------------------- ------- ------------- Weighted average shares in issue 324,085 Less: Weighted average treasury shares for the year (12,546) Add: Weighted average share awards and vested shares in long term incentive scheme 2,432 ----------------------------------------------------------------------------------- ------- ------------- EPRA SHARES 313,971 ----------------------------------------------------------------------------------- ------- -------------
COMPANY SPECIFIC ADJUSTMENTS TO EPRA EARNINGS
1. Unrealised foreign exchange gains or losses
The foreign currency revaluation of assets and liabilities in subsidiaries gives rise to non-cash gains and losses that are non-cash in nature. These adjustments (similar to those adjustments that are recorded to the Foreign currency translation reserve) are added back to provide a true reflection of the operating results of the Group.
2. Straight-line leasing (non-cash rental)
Straight-line leasing adjustment and amortised lease incentives under IFRS relate to non-cash rentals over the period of the lease. This inclusion of such rental does not provide a true reflection of the operational performance of the underlying property and are therefore removed from earnings.
3. Amortisation of intangible asset (right of use of land)
Where a value is attached to the right of use of land for leasehold properties, the amount is amortised over the period of the leasehold rights. This represents a non-cash item and is adjusted to earnings.
4. Impairment on loans and other receivables
Provisions for expected credit loss are non-cash items related to potential future credit loss on non- property operational provisions and is therefore added back in order to provide a better reflection of underlying property performance. The add back excludes and specific provisions for against tenant accounts.
5. Corporate restructure costs
Corporate restructure costs are once off in nature related to corporate actions by the company and not underlying performance of the portfolio.
6. Non-Controlling interest
Any Non-Controlling interest related to the company specific adjustments.
7. Other deferred tax (non-cash)
Any deferred tax directly related to the company specific adjustments.
11. COMPANY DISTRIBUTION CALCULATION - UNAUDITED
Unaudited 30 June 2021 Notes US$'000 ---------------------------------------------------------------------------------- ----- ------------- Adjusted EPRA Earnings 15,431 Company specific distribution adjustments VAT credits utilised on rentals 1 2,364 Listing and set up costs under administrative expenses 2 382 Depreciation and amortisation 3 787 Share based payments 4 127 Retirement fund & PRGF 111 Amortisation of capital funded debt structure fees 3,015 Non-controlling interest non distributable (3,624) Total Company Specific distribution adjustments 3,162 ---------------------------------------------------------------------------------- ----- ------------- TOTAL DISTRIBUTABLE EARNINGS (BEFORE PROFITS WITHHELD) 18,593 ---------------------------------------------------------------------------------- ----- ------------- DISTRIBUTABLE INCOME PER SHARE (DILUTED) (cents per share) 5.97 - Profits withheld (13,920) ---------------------------------------------------------------------------------- ----- ------------- TOTAL DISTRIBUTABLE EARNINGS TO GRIT SHAREHOLDERS 4,673 ---------------------------------------------------------------------------------- ----- ------------- DIVID PER SHARE (cents) 1.50 Reconciliation to amount payable Total distributable earnings to Grit shareholders before profits withheld (cents) 5.97 Profits withheld (cents) (4.47) Interim dividends already paid (cents) (1.50) ---------------------------------------------------------------------------------- ----- ------------- FINAL DIVID PROPOSED (cents) 0.00 ---------------------------------------------------------------------------------- ----- ------------- Shares '000 ---------------------------------------------------------------------------------- ----- ------------- Weighted average shares in issue 324,085 Less: Weighted average treasury shares for the year (12,546) Add: Weighted average shares vested in long term incentive scheme 2,432 ---------------------------------------------------------------------------------- ----- ------------- EPRA SHARES 313,971 Less: Non-entitled shares - Less: Vested shares in consolidated entities (2,432) ---------------------------------------------------------------------------------- ----- ------------- DISTRIBUTION SHARES 311,539 ---------------------------------------------------------------------------------- ----- -------------
COMPANY DISTRIBUTION NOTES IN TERMS OF THE DISTRIBUTION POLICY
1. VAT credits utilised on rentals
In certain African countries, there is no mechanism to obtain refunds for VAT paid on the purchase price of the property. VAT is recouped through the collection of rentals on a VAT inclusive basis. The cash generation through the utilisation of the VAT credit obtain on the acquisition of the underlying property is thus included in the operational results of the property.
2. Listing and set-up costs under administrative expenses
Costs associated with the new listing of shares, setup on new companies and structures are capital in nature and is added back for distribution purposes.
3. Depreciation and amortisation
Non-cash items added back to determine the distributable income.
4. Share based payments
Non-cash items added back to determine the distributable income.
12. EPRA FINANCIAL METRICS - UNAUDITED
The EPRA NAV metrics are EPRA Net Reinstatement Value (NRV), EPRA Net Tangible Assets (NTA) and EPRA Net Disposal Value (NDV)
EPRA NRV EPRA NTA EPRA NDV UNAUDITED UNAUDITED UNAUDITED 30 Jun 30 Jun 30 Jun 2021 2021 2021 $'000 $'000 $'000 --------------------------- --------- --------- --------- IFRS Equity attributable to shareholders 270,858 270,858 270,858 i) Hybrid instruments Preference shares - - - --------------------------- --------- --------- --------- Diluted NAV 270,858 270,858 270,858 Add Revaluation of IP (if IAS 40 cost option is used) - - - Revaluation of IPUC (if IAS 40 cost option is used) - - - Revaluation of other non-current investments - - - Revaluation of tenant leases held as leases - - - Revaluation of trading properties - - - --------------------------- --------- --------- --------- Diluted NAV at fair value 270,858 270,858 270,858 Exclude*: Deferred tax in relation to fair value gains of Investment properties 55,377 46,901 - Fair value of financial instruments 2,628 2,628 - Goodwill as a result of deferred tax - - - Goodwill as per the IFRS balance sheet - - - Intangibles as per the IFRS balance sheet - (480) - Include*: - - - Fair value of fixed interest rate debt - - - Revaluation of intangibles to fair value - - Real estate transfer tax - --------------------------- --------- --------- --------- NAV 328,863 319,907 270,858 --------------------------- --------- --------- --------- Fully diluted number of shares 321,122 321,122 321,122 --------------------------- --------- --------- --------- NAV per share (cents per share) 102.4 99.6 84.3 Shares Shares Shares '000 '000 '000 Total shares in issue 331,236 331,236 331,236 Less: Treasury shares for the period (12,546) (12,546) (12,546) Add: Share awards and shares vested shares in Long term incentive scheme 2,432 2,432 2,432 --------------------------- --------- --------- --------- EPRA SHARES 321,122 321,122 321,122 --------------------------- --------- --------- ---------
OTHER NOTES
The audited consolidated financial statements for the year ended 30 June 2021 have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority, International Financial Reporting Standards ("IFRS"), the LSE and SEM Listing Rules, the Financial Pronouncements as issued by Financial Reporting Standards Council . The accounting policies are consistent with those of the previous annual financial statements with the exception of the change in accounting policy and the significant judgment disclosed in note 1.
The Group is required to publish financial results for the year ended 30 June 2021 in terms of Listing Rule 12.14 of the SEM and the LSE Listing Rules. The Directors are not aware of any matters or circumstances arising subsequent to the year ended 30 June 2021 that require any additional disclosure or adjustment to the financial statements. These audited consolidated financial statements were approved by the Board on 28 October 2021.
PricewaterhouseCoopers have issued their unqualified audit opinion on the Group's financial statements for the year ended 30 June 2021. Copies of the audited consolidated financial statements for the year ended 30 June 2021, and the statement of direct and indirect interests of each officer of the Company pursuant to rule 8(2)(m) of the Mauritian Securities (Disclosure Obligations of Reporting Issuers) Rules 2007, are available free of charge, upon request at the Company's registered address. Contact Person: Smitha Algoo-Bissonauth.
Forward-looking statements
This document may contain certain forward-looking statements. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. Actual outcomes and results may differ materially from any outcomes or results expressed or implied by such forward-looking statements.
Any forward-looking statements made by, or on behalf of, Grit speak only as of the date they are made and no representation or warranty is given in relation to them, including as to their completeness or accuracy or the basis on which they were prepared. Grit does not undertake to update forward-looking statements to reflect any changes in its expectations with regard thereto or any changes in events, conditions or circumstances on which any such statement is based.
Information contained in this document relating to Grit or its share price, or the yield on its shares, should not be relied upon as an indicator of future performance.
Any forward-looking statements and the assumptions underlying such statements are the responsibility of the Board of directors and have not been reviewed or reported on by the Company's external auditors.
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October 29, 2021 02:00 ET (06:00 GMT)
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