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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 |
From Apr 2019 to Apr 2024
TIDMGR1T
RNS Number : 8405C
Grit Real Estate Income Group
13 February 2020
GRIT REAL ESTATE INCOME GROUP LIMITED
(Registered by continuation in the Republic of Mauritius)
(Registration number: C128881 C1/GBL)
LSE share code: GR1T
SEM share code: DEL.N0000
JSE share code: GTR
ISIN: MU0473N00036
("Grit" or the "Company" or the "Group")
HALF YEAR ABRIDGED UNAUDITED CONSOLIDATED RESULTS
FOR THE SIX MONTHSED 31 DECEMBER 2019
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 Dollar and Euro denominated long-term leases with high quality multi-national tenants, today announces its results for the six months ended 31 December 2019.
Financial highlights
Hot Features
Premium
6 Months ended 6 Months ended Increase/
31 Dec 2019 31 Dec 2018 Decrease
Dividend per share USD5.25 cps USD5.25 cps +0.0%
--------------- --------------- ----------
EPRA Net asset value ("NAV") per share(2) USD144.7 cps USD143.1 cps +1.1%
--------------- --------------- ----------
IFRS NAV per share(1) USD128.3 cps USD134.5 cps -4.6%
--------------- --------------- ----------
Total Income Producing Assets(5) USD860.1m USD796.4m +8.0%
--------------- --------------- ----------
Gross Rental income USD24.3m USD18.7m +29.9%
--------------- --------------- ----------
Profit from operations USD10.7m USD7.3m +46.6%
--------------- --------------- ----------
Earnings per share USD4.26 cps USD7.07 cps -39.8%
--------------- --------------- ----------
Headline earnings per share(3) USD2.80 cps USD2.77 cps +1.1%
--------------- --------------- ----------
Adjusted EPRA earnings per share(4) USD5.67 cps USD5.36 cps +5.8%
--------------- --------------- ----------
EPRA cost ratio (incl associates and joint ventures) 18.6% 15.6% +3.0 pts
--------------- --------------- ----------
Weighted average lease expiry ("WALE") 4.7 yrs 6.5 yrs -1.8 yrs
--------------- --------------- ----------
EPRA portfolio occupancy rate 97.4% 96.0% +1.4 pts
--------------- --------------- ----------
Group LTV 43.9% 43.4% +0.5 pts
--------------- --------------- ----------
Property LTV 41.9% 40.5% +1.4 pts
--------------- --------------- ----------
-- Dividends per share declared for the six months ended 31 December 2019 of USD5.25cps (December 2018: USD5.25cps), putting the Company on course to meet its progressive dividend policy and minimum full year dividend per share target of USD12.25cps
-- EPRA NAV per share grew to USD1.447 (December 2018: USD1.431). EPRA NAV growth was positively impacted by prefunding profits on VDE but was largely offset by negative valuation impacts on retail assets. The Group remains on track to meet its full year target of 12%+ total return in US Dollars (inclusive of NAV growth) which is expected to be supported by the impact of recent acquisitions, contracted escalations and continued leasing activity in the second half of the financial year
-- Profit from operations increased 46.6% to USD10.7 million as a result of strong portfolio performance and acquisitive growth over the period
-- Weighted average cost of debt declined to 6.07% (June 2019: 6.44%) as a result of active treasury management activities and downward movements in LIBOR over the reporting period. The average forward rate as at 31 December 2019 is currently 5.98% and 68.8% of debt is now at fixed interest rates
-- LTV has been impacted by the acquisition of the additional VDE units which were debt funded. LTV is expected to reduce towards the targeted 40% by the end of the financial year
-- Earnings per share, Headline Earnings per share and Adjusted EPRA Earnings per share were negatively impacted by one-off non-recurring tax charges of USD1.1 million and USD1.3 million additional provision for bad debts relating to retail property portfolio assets
-- Completion of the first development pre-funding transaction resulting in a total valuation increase of USD6.1 million
-- Acquisition of an additional 23.75% in Letlole La Rona in Botswana ("LLR"), increasing the Company's overall shareholding in LLR from 6.25% to 30.0%, represents a significant expansion of Grit's strategy in Botswana, a strong and politically sound economy and an investment grade country and a key market for Grit's future growth
-- The portfolio was independently valued at 31 December 2019 (with the exception of LLR which was valued by Knight Frank as at 30 June 2019), with total income producing asset value increasing to USD860.1 million (June 2019: USD825.2 million) and like for like property valuations increasing 2.9%
Operational highlights
-- Property portfolio now comprises a total of 46 properties (including 20 properties held in LLR), across seven countries and five property sectors
-- 92.8% of revenue is earned from multinational tenants(6) (December 2018: 92.6%) -- 94.1% of income is produced in hard currency(7) (December 2018: 93.2%)
-- EPRA portfolio occupancy rate improved to 97.4% as at 31 December 2019 (June 2019: 97.1%) as a result of continued leasing activity at AnfaPlace Mall
-- Total gross lettable area ("GLA"), attributable to Grit, increased 20.9% from June 2019 to 315,098 sqm as a result of acquisitions in the period
-- Weighted average annual contracted rent escalations at 2.7% (June 2019: 2.8%) -- Weighted average property capitalisation rate 7.8% (June 2019: 7.9%)
Post balance sheet activity
-- On 27 January 2020, Grit completed the acquisition of the Club Med Cap Skirring Senegal resort upon a sale and leaseback (with a new 12 year lease) from the Club Med group. The re-development and expansion of the existing hotel (capped at EUR28 million) is expected to commence by the end of Q1 2020
-- On 12 February 2020, the Group announced a conditional Memorandum of Agreement to purchase a Morrocan REIT / OPCI vehicle consisting of a flagship mixed use development asset in Casablanca and exclusivity over a further industrial asset located in the Meknes industrial zone. The Group further intends to consolidate its existing Morrocan assets and in-country pipeline within this OPCI vehicle and will introduce equity co-investors upon completion. The introduction of co-investors is expected to provide a measured reduction in relation to Grit's sole exposure to the vehicle going forward
-- Declared an interim dividend in respect of the six months 31 December 2019 of USD5.25cps in line with the prior year
Notes
(1) The Net Asset Value attributable to the Ordinary Shares divided by the number of Ordinary Shares in issue (other than Ordinary Shares held in treasury if any) at the date of calculation.
(2) Explanations of how European Public Real Estate Association ("EPRA") figures are derived from IFRS are shown in note 14.
(3) Refer to Note 15.
(4) Adjustments to make earnings representative of Company performance and includes adjustments for unrealised foreign exchange movements and straight line leasing adjustments - refer to note 14 for further details on adjustments made.
(5) Includes properties, investments and property loan receivables - Refer to Financial Review.
(6) Forbes 2000, Other Global and Pan-African tenants.
(7) Hard (USD and EUR) or pegged currency rental income.
Bronwyn Corbett, Chief Executive Officer of GRIT Real Estate Income Group Limited, commented:
"We continue to see strong demand for quality real estate solutions from high quality multi-national tenants. This continues to support Grit growing our property portfolio in an accretive manner and enabling our expansion into an eighth African country after we recently took transfer of the Club Med Cap Skirring resort in Senegal.
We also took delivery of the first turnkey development which Grit prefunded, providing the Company a meaningful share of development profits, and which acts as a template for a number of exciting risk mitigated development opportunities in our current pipeline that we expect will deliver attractive capital growth potential for our shareholders over the short and longer term.
Our team has continued to extract value from our asset portfolio and we believe the Group is well placed to take advantage of the deepening and increasing sophistication of the real estate sectors across the countries in which we operate and where the fundamentals remain positive.
Recent reductions in LIBOR rates, in conjunction with active treasury management and refinancing activities, are assisting in driving down the Group borrowing costs. The Group is continuing to focus on delivering its investment strategy and remains on track to meet its full year target of 12%+ total return in US Dollars. The Company is in the process of engaging with financiers on the upcoming LIBOR replacement.
FOR FURTHER INFORMATION PLEASE CONTACT:
Grit Real Estate Income Group Limited
Bronwyn Corbett, Chief Executive Officer +230 269 7090
Darren Veenhuis, Head of Investor Relations +44 779 512 3402
Morne Reinders, Investor Relations +27 82 480 4541
Maitland/AMO - Communications Adviser
James Benjamin +44 20 7379 5151
Grit-maitland@maitland.co.uk
finnCap Ltd - UK Financial Adviser
William Marle / Scott Mathieson / Matthew Radley (Corporate Finance) +44 20 7220 5000
Mark Whitfeld (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
PSG Capital - JSE Sponsor and Corporate Adviser
David Tosi +27 21 887 9602
The Company's LEI is: 21380084LCGHJRS8CN05
NOTES:
Grit Real Estate Income Group Limited is a 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 Dollar 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 a net total shareholder return inclusive of net asset value growth of 12.0%+ per annum.*
The Company currently holds primary listings on both the Main Market of the London Stock Exchange (LSE: GR1T) and on the Main Board of the Johannesburg Stock Exchange (JSE: GTR), while its listing on the Official Market of the Stock Exchange of Mauritius Ltd is termed as a secondary listing (SEM: DEL.N0000).
Further information on the Company is available at http://grit.group/
* This is a target only and not a profit forecast and there can be no assurance that it 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 Corbett (Chief Executive Officer)*, Leon van de Moortele (Chief Financial Officer)*, Ian Macleod+, Nomzamo Radebe, Catherine McIlraith+, David Love+, Sir Samuel Esson Jonah+, and Bright Laaka (Permanent Alternate Director to Nomzamo Radebe).
(* Executive Director) (+ Independent Non-Executive Director)
Company secretary: Intercontinental Fund Services Limited
Registered address: c/o Intercontinental Fund Services Limited, Level 5, Alexander House, 35 Cybercity, Ebene, 72201, Mauritius
Transfer secretary (South Africa): Computershare Investor Services Proprietary Limited
Registrar and transfer agent (Mauritius): Intercontinental Secretarial Services Limited
Corporate advisor and JSE sponsor: PSG Capital Proprietary Limited
SEM authorised representative and sponsor: Perigeum Capital Ltd
This notice is issued pursuant to the LSE Listing Rules, JSE Listings Requirements, SEM Listing Rule 11.3 and the Mauritian Securities Act 2005. The Board of the Company accepts full responsibility for the accuracy of the information contained in this communiqué.
CHIEF EXECUTIVE OFFICER'S STATEMENT
The Group is continuing to focus on delivering its investment strategy and remains on track to meet its full year target of 12%+ total shareholder return in US Dollars. The dividend declaration of USD5.25 cps (December 2018: USD5.25 cps) is in line with the strategy to maintain our current distribution in cents per share while over the medium term (3 to 5 years) reducing the payout ratio and redeploying resources into attractive and accretive opportunities that we expect to deliver capital growth potential over the short and longer term for our shareholders. We expect our annual distributions to once again be weighted to the second half of the financial year. The Group's earnings and dividends are underpinned by the secure and growing income of our high-quality portfolio.
In the first half of this financial year, the Company continued to deliver on our business and growth strategy with the completion of an acquisition, an addition to an existing asset and concluded one post period acquisition which were all underpinned by predominantly global blue-chip tenants and hard currency leases.
-- The recent expansion of VDE Housing Estate marks the first delivery of a risk-mitigated development via the pre-funding of projects and has achieved our goal of participating in development profits to increase our net asset value growth potential. A number of our current pipeline opportunities include developments, and in a similar fashion, we would expect to prefund into largely turnkey contracts that Grit has risk-mitigated through upfront, contracted, long duration leases.
-- The acquisition of the additional 23.75% in LLR provides us with a solid foundation to continue our growth strategy within the investment grade country of Botswana alongside our strategic new partner, the Botswana Development Corporation.
-- The Group's acquisition of the Club Med resort (post period-end) in Senegal has unlocked additional potential pipeline within the hospitality sector and is the first asset to be acquired in the Paradise Hospitality vehicle. The venture signals a strategic partnership between Grit and Club Med for collaboration on their entire real estate portfolio across the African continent and Indian Ocean.
The latter two acquisitions also form the basis of activating additional revenue streams by providing asset management solutions to outside shareholders, associates and joint ventures of the Group in the months to follow.
The Group delivered modest growth in asset values over the six-month period. Reported net asset value growth has been limited to 1.1% year on year, and while most sectors in our portfolio have shown positive valuation growth, specifically the Corporate Accommodation sector (which includes the component of development profit from the VDE Housing Estate expansion), the retail sector has been impacted by negative sentiment towards retail assets in general as well as trading difficulties of some retailers on the continent. The impacts were predominantly felt in our Mukuba Mall and Mall de Tete exit capitalisation rates and cashflows. Mukuba Mall, which currently has a relatively short WALE of 0.5 years due to the timing of the initial lease terms subsequent to development, is expected to increase in excess of 4.5 years by year end due to current letting activity, and which should result in improved capitalisation rates to underpin valuation growth.
The Group has concluded a number of the debt refinancing programs, which together with the decrease in USD LIBOR has seen an overall reduction in financing costs, with the current weighted average forward rate being 5.98% down from 6.43% at December 2018. We have taken the opportunity to fix a greater percentage of base LIBOR exposures, and in the period we have moved our hedged position from 42.1% in December 2018 to 68.8%.
The Company has access to a significant and growing pipeline of potential investments that meet its strict investment criteria. The pipeline of investments is strategically placed to continue strengthening the geographic and sectoral spread of the group's investment portfolio. We recently updated the market on the progress we have made on the currently announced portion of this pipeline and will be providing an update on the funding of these in due course. The investments consist of a balanced mix of asset acquisitions, and a risk mitigated development pipeline which we expect will ultimately deliver higher capital growth prospects for the Group in the medium term.
The Company's operations, management and reporting departments have all been strengthened in order to cater for the additional pipeline assets expected to come online in the near future. The highly skilled management team and infrastructure that is now in place have the capacity to manage not only the current income producing asset base of USD860.1 million, but also for the identified investment pipeline of c.USD470 million anticipated to be delivered in the medium term, and the asset management contracts with outside shareholders, associates and joint ventures.
The weighted average lease expiry of 4.73 years at December 2019 was impacted in the period by the lease lengths of the LLR acquisition as Botswana's market generally has shorter lease terms than the balance of our markets. Mukuba Mall in Zambia is nearing the end of its initial five years of operations (with a current WALE of 0.5 years) while the Vodacom Building approaches its first renewal period after 10 years (with a current WALE of 1.0 year). Lease renewal negotiations are continuing on these buildings, with a number of others progressing well and we look forward to seeing the positive impact these renewals are expected to have on the WALE and exit capitalization rate once concluded in the next 6 months.
The Group's current vacancy rate has reduced to 2.6% (from 4.0% at December 2018 and 2.9% at June 2019) in line with the completion of the AnfaPlace Mall refurbishment project in September 2019. The redevelopment and successful launch of the new anchor tenant Alpha 55 has been well received in the market, however a small number of retailers experienced trading pressures over the refurbishment period and this resulted in non-performing tenants that we have had to exit. While this is expected to negatively impact operating profit over the next few months (through reduced revenue in the short term and additional provisions for bad debts recorded to December), the Mall has now successfully been repositioned and we have accelerated early renewals of existing successful retailers which we are confident will ensure the long term profitability of the Mall. Further initiatives on utilisation of common areas for marketing and generation of specialty leasing income in the mall as well as improvement on the parking management system will facilitate the generation of additional revenue.
Recent changes to Moroccan legislation, introducing the equivalent of a real estate investment trust ("REIT") framework under the local equivalent called Organisme de Placement Collectif Immobilier ("OPCI"), is providing further sophisticating of local capital markets and is resulting in strong demand for real estate investment. We recently announced our intention to acquire a OPCI vehicle inclusive of a mixed-use asset, Massira Corner consisting of gross lettable area ("GLA") of approximately 16,500 sqm and anchored by Hotel Onomo with 201 keys (occupying c.67% of the GLA) alongside a retail mall with notable high-street retail brands such as H&M, Charles and Keith, Starbucks, Terranova and Cosmos, who occupy the balance of ground floor retail space (c.33%).
Grit intends to further grow the OPCI's asset base with a number of contemplated acquisitions to further diversify the vehicle's sector and tenant exposures. We currently have exclusivity over an A-grade light industrial asset secured by a 10-year triple net lease to US-listed Aptiv plc (formerly named Delphi Automotive plc), and have signed a non-binding memorandum of understanding with Club Med in relation to the development of a 350-key hospitality resort in Essaouira, leased back to Club Med on a 15-year fixed Euro lease. We additionally expect that AnfaPlace Mall will be a suitable asset for inclusion within this OPCI structure, and expect to make further announcements in this regard in due course.
We have engaged with key cornerstone investors and will look to inject their equity to take up shares alongside the Company in the OPCI structure. The introduction of co-investors is expected to provide a measured reduction in relation to Grit's sole exposure to the vehicle, however with our positive views on the potential for capitalization rate compression and further asset management opportunities, we believe we are well placed to deliver meaningful returns to our shareholders and co-investors through both income and capital appreciation.
Finally, it is pleasing to see the steady growth in our London Stock Exchange share register, which now represents c.28% of the total shares in issue (15% as at December 2018 and 12% at our initial IPO), which we believe is a testament to the growing interest in attractive risk mitigated investments into Africa by institutional shareholders in the UK and we thank them for their support thus far.
Outlook
The Company continues to deliver on its targets of annual attractive income distribution and total annual return growth and is well positioned to capitalise on significant potential growth from its unique high-quality portfolio of properties as well as further attractive investment opportunities across the African continent. Given the strength of the Group's existing portfolio, we expect to continue to deliver annual rental growth as well as capital value increases through yield compression, risk mitigated developments and yield and NAV enhancing acquisitions.
Earnings in the second half of the year are expected to be underpinned by both recent acquisitive activity as well as the supportive dynamics of falling debt costs. Further improved benchmarking exercises and facilities management initiatives will bring about reduced and more efficient cost ratios to the portfolio. As a result, we remain confident of meeting our progressive dividend and total shareholder return targets for the full year.
The Group is on track to move trading in its shares to the premium listing segment of the Main Market of the London Stock Exchange as well as redomiciling its corporate seat to Guernsey in 2020, which is expected to facilitate the Group's eligibility for inclusion in the FTSE UK Index Series. This is anticipated to significantly improve the liquidity in the Company's shares and further diversify the Company's shareholder base. The Group is also actively reviewing its current listing locations and assessing the viability of three concurrent listings and the impacts that might be having on share trading liquidity.
We expect that the retail sector will remain challenging in both the occupier and investment markets against the backdrop of a fast-changing retail sector but we expect to deliver value by continuing to focus on maximising the yield of the current portfolio and unlocking value through the Company's operational expertise and proactive asset management, financial strength and selective asset divestment strategies.
We are continuing to assess a number of financing options to fund our investment pipeline of high-quality accretive assets leased to multinational corporates and attracting hard currency rental streams and will update shareholders in due course. The Company is well placed to continue to benefit from its strong position in the market and deliver attractive risk adjusted returns to our shareholders over the short and longer term.
Bronwyn Corbett
Chief Executive Officer
BUSINESS REVIEW
Property diversification
The recently concluded additions and acquisitions have continued to diversify the geographical and sectoral splits, and with the purchase of the Club Med resort in Senegal post period-end, the Group has added additional geographic diversification.
Acquisitions and additions
Letlole La Rona Limited (LLR) in Botswana
On 20 November 2019 Grit announced the acquisition of an additional 23.75% interest in Botswana Stock Exchange listed Letlole La Rona Limited (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 EPRA NAV per share, less dividend declared, of USD140.0 cps.
The transaction for the 9,839,511 shares was recorded at the ruling share price of the day of USD1.19, resulting in the acquisition being recorded at USD11.7 million. 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 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.
Construction of additional 60 units for Vale in Mozambique
In December 2019, the Group took delivery of 60 units constructed under a turnkey construction contract that concluded the first transaction whereby the Group provided pre-development funding to the developers and shared in the development profits. Total construction costs amounted to USD9.3 million (exclusive of VAT) and the profit share amounted to USD4.6 million of which USD2.5 million was attributable to Grit. The specific units were valued at USD17.4 million, resulting in value uplift of USD3.4 million attributable to Grit. The overall increase in the value of the accommodation complex was positively impacted by the lease renewals of Vale which combined with the USD3.4 million uplift from the 60 units resulted in a total value increase of the property of USD6.1 million.
The developer, being a related party of the Group via their shareholding in Grit, has repaid USD9.4 million of the total pre-development funding of USD12 million, with the balance due on settlement of the amounts for the profit-sharing arrangement (USD4.6 million).
Completion of the AnfaPlace Mall refurbishment project in Morocco
The completion of the refurbishment project for a total cost of USD25.1 million was concluded in September 2019. Additional costs amounting to USD0.4 million have been spent on additional features, out of the original scope, and additional interest costs of USD0.4 million have been incurred. At the end of the reporting period, an amount of USD25.9 million remains outstanding to the developers, with the final account due shortly.
The project was conducted by Gateway Delta Development Holdings Limited, a 19.98% owned associate of the Group and a related party to the Group (by virtue of a common material shareholder of both companies, the Public Investment Corporation of South Africa).
The Geographical and Sector analysis of the assets (including our proportionate holding in associates and joint ventures) are as follows:
Geographical split WALE WALE Property Value Property Value
(years) (years) 31-Dec-19 31-Dec-18
31-Dec-19 31-Dec-18
-------------------- ----------- ----------- --------------- ---------------
Mozambique 3.4 3.1 38.6% 38.1%
Mauritius 10.8 11.8 20.6% 22.7%
Morocco 3.7 3.5 13.5% 13.2%
Kenya 7.7 8.6 3.5% 4.9%
Zambia 1.5 2.6 14.0% 12.8%
Ghana 3.6 3.5 6.4% 7.9%
Botswana 2.1 - 2.6% 0.4%
Other investments* - - 0.8% 0.0%
-------------------- ----------- ----------- --------------- ---------------
Total 4.7 6.5 100.0% 100.0%
-------------------- ----------- ----------- --------------- ---------------
*Other investments include land owned by Grit (Imperial phase 2) and associate properties owned by Grit's development associate, Gateway Delta Development Holdings Limited.
Sector split WALE WALE Property Value Property Value
(years) (years) 31-Dec-19 31-Dec-18
31-Dec-19 31-Dec-18
------------------------- ----------- ----------- --------------- ---------------
Office 4.3 4.6 25.1% 28.7%
Retail 2.6 3.2 32.1% 31.6%
Light industrial 5.7 6.4 3.4% 4.6%
Hospitality 11.0 12.1 18.8% 20.5%
Held for sale - - 0% 0.5%
LLR* 2.1 - 2.6% 0%
Corporate accommodation 3.7 2.6 17.2% 13.7%
Other investments** - - 0.8% 0.4%
------------------------- ----------- ----------- --------------- ---------------
Total 4.7 6.5 100.0% 100.0%
------------------------- ----------- ----------- --------------- ---------------
* LLR reflected separately to enable comparable analysis of portfolio against prior reporting period.
**Other investments include land owned by Grit (Imperial phase 2) and associate properties owned by Grit's development associate, Gateway Delta Development Holdings Limited.
The movement in the WALE has been predominantly driven by the growth in the portfolio, including the development and acquisition of the additional 60 units at the VDE Estate. The Botswanan LLR portfolio, in a jurisdiction where shorter term leases are concluded, has diluted the weighting of several of the long-term leases. Furthermore impacts on retail centres in Zambia, with the early exit of Truworths and TFG Group, have impacted portfolio statistics.
The existing portfolio WALE is being strategically managed by pre-empting renewals of strategic leases such as Vodacom and retail tenants in Anfa and Mukuba Mall, as well as the driving of longer term leases for new tenancies.
Asset Management
Notable new leases entered into by the Group during the period includes:
Ghana: GC Net Lease renewal for a period of 5 years Rotan Power Lease renewal for a period of 3 years Main One Cable Lease extended by additional 1 year to July 2022 Mozambique: Vale Lease renewal for 5 years (including the additional 60 units developed in the current period) Exxon New 5-year lease Morocco: Alpha 55 New 6.5-year lease Kandy Oyster New 9-year lease Orchestra Expanded and signed a new 9-year lease Oliveri Renewal for a period of 9-year lease La Cantinetti New lease for 9-year period Optical In New lease for 9-year period Le Coin Marocain New lease for 9-year period
Tenant analysis
Tenant Classification (by % Grit Ownership) % GLA % Rentals
---------------------------------------------- ------- -----------
Forbes 2000 23.1% 40.3%
Other Global 62.2% 41.1%
Pan African 10.8% 11.4%
National 2.3% 4.5%
Local 1.6% 2.7%
---------------------------------------------- ------- -----------
100% 100%
---------------------------------------------- ------- -----------
Tenant Lease Currency (by % Grit Ownership) 6 months to 31-Dec-19 6 months to 31-Dec-18
---------------------------------------------- ----------------------- -----------------------
US Dollars 61.7% 62.0%
Pegged to US Dollars 15.1% 15.5%
Euro 17.3% 15.7%
Local Currencies (Excluding Botswana Pula) 5.2% 6.8%
Local Currencies (Botswana Pula) 0.7% 0%
---------------------------------------------- ----------------------- -----------------------
100% 100%
---------------------------------------------- ----------------------- -----------------------
FINANCIAL REVIEW
Gross rental income (excluding straight line leasing and amortisation of lease premiums), including associates and joint ventures, increased by USD3.9 million to USD33.2 million (six months ending December 2018: USD29.3 million). This increase is attributable to acquisitions and additions (USD3.3 million) with the balance of the movement from normal operations (including the impact of the Euro vs the US Dollar). Property operating expenses, including associates and joint ventures, increased by USD2.4 million, attributable to acquisitions (USD0.6 million), increased provision for bad debts (USD1.3 million) and normal operations (USD0.4 million). Net cash property income including associates and joint ventures increased 7.5% to USD26.6 million from USD24.7 million in the comparative period.
Operating costs on the entire portfolio (included assets held in associated companies) as a percentage of revenue increased in the period to 20.8% from 15.5% for the period ended December 2018, with 4% of the increased cost being attributable to the provision for bad debt focused on the Retail sector (which predominately relates to a single tenant group that is facing liquidation in Morocco).
Six months Six months Six months Six months Six months Six months
ended ended ended ended ended ended
31 Dec 2019 31 Dec 2019 31 Dec 2019 31 Dec 2018 31 Dec 2018 31 Dec 2018
Associates and Associates and
Subsidiaries joint ventures Total Subsidiaries joint ventures Total
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
---------------- --------------- --------------- --------------- --------------- --------------- ---------------
Revenue * 25,972 7,258 33,230 18,733 10,560 29,293
Operating
expenses (6,284) (635) (6,919) (3,977) (577) (4,554)
---------------- --------------- --------------- --------------- --------------- --------------- ---------------
Net operating
income 19,688 6,623 26,311 14,756 9,983 24,739
---------------- --------------- --------------- --------------- --------------- --------------- ---------------
Operating costs
ratio 24.2% 8.7% 20.8% 21.2% 5.5% 15.5%
* Revenue excludes straight line leasing and amortization of lease premiums
The Group incurred a 22.0% comparable increase in administration expenses during the period from USD8.2 million to USD10.0 million. Transaction costs of USD1.1 million (predominantly related to the LLR acquisition) included in administration expenses is offset by the day one gains on LLR recorded during the period.
The Group's staffing complement has been bolstered to absorb the recent and future expected growth of the portfolio as well as third party asset management services. Over the next 6 months, the Group will place less reliance on external consultants as a result of the recent appointments of in-house corporate advisory, legal, company secretarial and human resource staff.
The comparative head count of staff is as follows:
As at As at
DEPARTMENT 31 Dec 2019 31 Dec 2018 Movement
-------------------- ------------- ------------- ---------
Legal & Compliance 5 4 1
Operations 22 18 4
Communications 4 2 2
Finance 18 17 1
Investment 9 8 1
Admin 13 9 4
Corporate Advisory 3 0 3
Treasury 5 0 5
Investor Relations 2 1 1
Human Resources 1 1 -
Management 3 5 (2)
-------------------- ------------- ------------- ---------
85 65 20
-------------------- ------------- ------------- ---------
With the Group's active on-site approach to asset and property management in the various jurisdictions, it has attracted a number of highly skilled and experienced staff to manage the portfolio.
Fair value movements in subsidiaries and associates and joint ventures
Retail Office Hospitality Light Industrial Corporate Accommodation TOTAL
--------------
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
-------------- ---------- ---------- -------------- -------------------- -------------------------- ----------
Mauritius - 596 1,169 - - 1,765
Mozambique (2,793) 3,568 - (101) 7,526 8,200
Morocco (3,939) - - - - (3,939)
Zambia (4,677) - - - - (4,677)
Kenya 1,377 - - 782 - 2,159
Ghana - (487) - - - (487)
-------------- ---------- ---------- -------------- -------------------- -------------------------- ----------
TOTAL* (10,032) 3,677 1,169 681 7,526 3,021
-------------- ---------- ---------- -------------- -------------------- -------------------------- ----------
* Total of fair value gains of properties including associates and joint ventures, excluding fair value adjustment from contractual receipts from vendors
Retail
The retail sector in general experienced pressure, with Mukuba Mall in Zambia specifically demonstrating a negative valuation adjustment of USD5.1 million a result of the relatively short lease expiry profile and uncertainty around lease renewal rates.
Office
The Mozambique assets have benefited from securing long term global tenancies and the increased demand for office space consequent to the commencement of the LNG construction phase in the Rovuma Basin. The offices in the other regions, Ghana and Mauritius, had marginal movements impacted by recent lease renewals.
Hospitality
The hospitality assets remained robust with the sector outlook reflecting a stable tourism demand.
Light Industrial
Increased valuation on the Imperial Distribution Centre in Kenya was expected and in line with contractual rental escalation. This absorbed the slight downward adjustment on the Bollore Warehouse in Mozambique which is driven by the decision to redevelop this Pemba Industrial site in the strategic location at the Port.
Corporate accommodation
During the period Grit acquired an additional 60 units for Vale in Mozambique. This was part of the first pre-development funding initiative allowing Grit to profit share in the development as well as to take advantage of the valuation uplift from the development costs. The total fair value increase for this property was USD6.1 million for the period.
Distributable earnings and dividends
The financial results for the six months ended 31 December 2019 produced distributable earnings per share of USD5.48 cps (December 2018: USD6.06 cps). A number of once off costs incurred during the six months including a provision for bad debts within the retail assets amounting to USD1.3million, additional withholding taxes amounting to USD1.2million to flow funds from Mozambique as part of the Mozambique refinance transaction impacted results. The additional withholding taxes has resulted in an increase in the effective tax rate in the current reporting period. The impact of these items amount to USD 0.85 cps. In line with the Group strategy to maintain a progressive distribution in USD cps while reducing the payout ratio over the medium term, a dividend of USD 5.25 cps is declared for the six months to December 2019 (December 2018: USD 5.25 cps). New acquisitions, lease escalations, decrease in WACD and the relative higher weighting of administration expenses in the first six months will allow the company to maintain its full year forecast.
Net asset value
EPRA NAV per share increased by 1.1%, or USD1.6 cps, year-on-year from USD143.1 cps (December 2018) to USD144.7 cps. NAV decreased by 4.6% or USD6.2 cps from USD134.5 cps (December 2018) to USD128.3 cps.
The movement in net asset value per share for the period is shown in the table below:
IFRS EPRA
Net Asset Value Movement USD cps USD cps
------------------------------------ -------- --------
Opening Balance 1 July 2019 131.9 147.1
Dividend paid (7.0) (7.0)
Portfolio performance
- Distributable earnings 5.5 5.5
- Fair value adjustments
- Retail (3.4) (3.4)
- Office 1.2 1.2
- Corporate accommodation 2.5 2.5
- Hospitality 0.4 0.4
- Light industrial 0.2 0.2
- Other non-cash items (3.2) (1.8)
------------------------------------ -------- --------
Closing Balance 31 December 2019 128.3 144.7
------------------------------------ -------- --------
Total investment in income generating assets has increased from USD825.2 million in June 2019 to USD860.1 million in December 2019. The increase is attributable to the LLR acquisition (USD20.8 million), additional 60 units for Vale (USD13.9 million cost) less repayment of the development pre-funding loan of USD9.4 million for the Vale construction contract.
COMPOSITION OF INCOME PRODUCING ASSETS 31-Dec-19 30-Jun-19
--------------------------------------------------------------------------------------
USD'm USD'm
-------------------------------------------------------------------------------------- ---------- ----------
Investment properties 599.5 576.8
Deposits paid on investment properties 8.5 8.5
Investment property included within 'Investment of associates and joint ventures' 208.2 183.8
816.2 769.1
Other investments, PPE, and loans to related parties and loans to property partners* 43.9 56.1
-------------------------------------------------------------------------------------- ---------- ----------
TOTAL INCOME PRODUCING ASSETS 860.1 825.2
-------------------------------------------------------------------------------------- ---------- ----------
* Includes receivable balances from partners in Zambia relating to the back-to-back loan from Bank of China of USD77 million used to fund the acquisition and loans advanced to Gateway Delta.
Net debt, cash flow and financing
As financing is integral to our business model, the Group has continued to develop strong relationships with financiers. The multi-bank approach adopted by Grit has continued, with the main banking partners being Bank of China, Standard Bank, ABSA Bank and SBM (Mauritius) Ltd. The breakdown of the interest-bearing borrowings is listed in note 7.
The Group raised USD154.5 million of debt in the period to fund acquisitions and refinance debt facilities (USD112.0 million was repaid in the period and USD13.3 million repaid in early January 2020), of which USD140 million pertained to the Mozambique refinancing program that was used to settle acquisition costs for the Vale units in Tete, facility fees and retiring existing Mozambican facilities of USD97.8 million at balance sheet date and a further USD13.3 million after the reporting period. The terms of the new facility will result in reduced cost of funding over the four-year Mozambican portfolio facility to 3-month LIBOR plus a margin of 5%.
The average 3-month USD LIBOR rates decreased from 2.46% for the 6 months to June 2019 to 1.90% for the 6 months to 31 December 2019. The 0.56% decrease in USD LIBOR rates in the period resulted in the Group's WACD decreasing to an average of 6.07% (December 2018: 6.31%) for the six month period, and with the finalisation of the Mozambique refinancing program, the weighted average forward rate is 5.98%.
The Group's loan-to-value ("LTV") has increased to 43.9% in six months ended December 2019 (30 June 2019: 43.1%).
Two new corporate term loans were secured being USD20 million from SBM and USD8.5 million from Bank ABC which were utilised to settle the Revolving Credit Facility held with SBM and the overdraft facility held with Bank ABC respectively.
This has contributed to the increase in the debt expiry profile and the decrease of the current portion of the interest-bearing borrowings.
The Group has entered into a number of interest rate fixing mechanism to minimise the risk of USD LIBOR rate volatility.
Details of the fixed rate contracts are as follows:
Financial Notional Amount Type Rate Effective date Termination date
institution
-------------------- ----------------- -------------------- ------------------- --------------- -----------------
Standard Bank of USD 20.0 million Interest rate swap 1.58% fixed rate 11-Oct-19 16-Oct-23
South Africa versus 3m USD
LIBOR floating
rate
Standard Bank of USD 40.0 million Interest rate Cap of 1.75%, 24-Oct-19 16-Oct-23
South Africa collar floor of 1.50%
versus 3m USD
LIBOR floating
rate
Standard Bank of USD 40.0 million Interest rate Cap of 1.85%, 25-Nov-19 16-Oct-23
South Africa collar floor of 1.30%
versus 3m USD
LIBOR floating
rate
Currently 68.8% of debt is fixed in nature.
Presentation of financial results
The financial statements have been prepared in accordance with IFRS, in accordance with best practice in the sector, alternative performance measures have also been provided to supplement IFRS, based on the recommendations of European Public Real Estate Association ("EPRA"). EPRA's Best Practice Recommendations have been adopted widely throughout this report and are used within the business when considering our operational performance of the properties. Full reconciliations between IFRS and EPRA figures are provided in note 14.
Leon van de Moortele
Chief Financial Officer
PRINCIPAL RISKS AND UNCERTAINTIES
Grit maintain a Key Risk Register which is shared with the Risk Committee on a quarterly basis. The key risks are well managed and monitored regularly as the risks could change with changes in the industry, economy and stakeholders, amongst others.
The principal risks of the business are set out on pages 34-36 of the 2019 Annual Report alongside their potential impact and related mitigations. These risks fall into four categories: compliance; strategic; financial and operational.
The Board has reviewed the principal risks in the context of the second half of the current financial year. The Board believes there has been no material change to the risk categories outlined in the 2019 Annual Report of the Group and that the existing mitigation actions remain appropriate to manage them.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The directors confirm that the abridged consolidated half year financial statements have been prepared in accordance with IAS 34 'Interim Financial Reporting' as issued by the International Accounting Standards Board ("IASB") and that the half year management report includes a fair review of the information required by the Disclosure Guidance and Transparency Rules ("DTR") 4.2.7R and DTR 4.2.8R, namely:
-- Important events that have occurred during the first six months and their impact on the abridged set of half year financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year;
-- Material related party transactions in the first six months and a fair review of any material changes in the related party transactions described in the last Annual Report.
The maintenance and integrity of the Grit website is the responsibility of the directors.
Legislation in Mauritius governing the preparation and dissemination of financial statements may differ from legislations in other jurisdictions. The directors of the Group are listed in its Annual Report for the year ended 30 June 2019. A list of current directors is maintained on the Grit website: www.grit.group.
On behalf of the Board
Bronwyn Corbett Leon van de Moortele
Chief Executive Officer Chief Financial Officer
Unaudited Unaudited
six months six months
ended ended
31-Dec-19 31-Dec-18
Abridged consolidated statement of comprehensive income Notes USD'000 USD'000
----------------------------------------------------------------- ------ ----------- -----------
Gross rental income 8 24,276 18,733
Straight-line rental income accrual (171) 642
----------------------------------------------------------------- ------ ----------- -----------
Revenue 24,105 19,375
Property operating expenses (6,284) (3,977)
----------------------------------------------------------------- ------ ----------- -----------
Net property income 17,821 15,398
Other income 2,958 101
Administrative expenses (including corporate structuring costs) (10,030) (8,223)
----------------------------------------------------------------- ------ ----------- -----------
Profit from operations 10,749 7,276
----------------------------------------------------------------- ------ ----------- -----------
Fair value adjustment on investment properties 486 12,373
Contractual receipts from vendors of investment properties 3 2,525 2,652
----------------------------------------------------------------- ------ ----------- -----------
Total fair value adjustment on investment properties 3,011 15,025
Fair value adjustment on other investments 591 26
Fair value adjustment on other financial liability (552) -
Impairment of loans (904) -
Net impairment chargeon financial assets (218) -
Fair value adjustment on derivative financial instruments 136 -
Share-based payment expense (90) (78)
Share of profits from associates and joint ventures 4 12,590 7,720
Foreign currency gains / (losses) 8 (1,084)
----------------------------------------------------------------- ------ ----------- -----------
Profit before interest and taxation 25,321 28,885
Interest income 9 2,366 6,669
Finance costs 10 (12,605) (10,999)
----------------------------------------------------------------- ------ ----------- -----------
Profit for the period before taxation 15,082 24,555
Taxation (3,381) (3,605)
----------------------------------------------------------------- ------ ----------- -----------
Profit for the period after taxation 11,701 20,950
----------------------------------------------------------------- ------ ----------- -----------
Loss on translation of functional currency (1,406) (1,290)
Total comprehensive income 10,295 19,660
----------------------------------------------------------------- ------ ----------- -----------
Profit/(loss) attributable to:
Owners of the parent 13,130 20,643
Non-controlling interests (1,429) 307
11,701 20,950
Total comprehensive income/(loss) attributable to:
Owners of the parent 11,724 19,353
Non-controlling interests (1,429) 307
10,295 19,660
Basic and diluted earnings per share (cents) 4.26 7.07
Unaudited as at Audited as at Unaudited as at
31-Dec-19 30-Jun-19 31-Dec-18
Abridged consolidated statement of financial position Notes USD'000 USD'000 USD'000
------------------------------------------------------- ------ ---------------- -------------- ----------------
Assets
Non-current assets
Investment properties 3 595,965 573,664 552,763
Deposits paid on investment properties 3 8,500 8,500 15,382
Property, plant and equipment 2,122 2,158 1,847
Intangible assets 1,625 581 492
Investments in associates and joint ventures 4 171,407 150,605 135,695
Other investments 5 1 3,024 4,180
Related party loans receivable 12,477 25,320 802
Other loans receivable 6 29,290 29,226 42,863
Deferred tax 22,901 20,484 10,059
------------------------------------------------------- ------ ---------------- -------------- ----------------
Total non-current assets 844,288 813,562 764,083
--------------------------------------------------------------- ---------------- -------------- ----------------
Current assets
Non-current assets held for sale - - 4,282
Trade and other receivables 39,258 34,293 57,771
Related party loans receivable 2,693 166 2,000
Current tax receivable 769 693 402
Derivative financial instruments 127 - -
Cash and cash equivalents 25,545 15,164 5,698
------------------------------------------------------- ------ ---------------- -------------- ----------------
Total current assets 68,392 50,316 70,153
--------------------------------------------------------------- ---------------- -------------- ----------------
Total assets 912,680 863,878 834,236
--------------------------------------------------------------- ---------------- -------------- ----------------
Equity and liabilities
Total equity attributable to equity holders
Ordinary share capital 454,147 443,259 443,242
Treasury shares reserve (18,406) (18,406) (14,811)
Foreign currency translation reserve (1,442) (36) 490
Antecedent dividend reserve 418 - 927
Retained loss (42,301) (34,868) (28,776)
------------------------------------------------------- ------ ---------------- -------------- ----------------
Equity attributable to owners of the Company 392,416 389,949 401,072
--------------------------------------------------------------- ---------------- -------------- ----------------
Non-Controlling interests 2,571 4,581 16,655
--------------------------------------------------------------- ---------------- -------------- ----------------
Total equity 394,987 394,530 417,727
--------------------------------------------------------------- ---------------- -------------- ----------------
Liabilities
Non-current liabilities
Redeemable preference shares 12,840 12,840 12,840
Proportional shareholder loans 9,615 9,615 19,230
Interest-bearing borrowings 7 369,069 163,738 201,462
Obligations under leases 969 126 89
Deferred tax 48,951 44,410 25,463
------------------------------------------------------- ------ ---------------- -------------- ----------------
Total non-current liabilities 441,444 230,729 259,084
--------------------------------------------------------------- ---------------- -------------- ----------------
Current liabilities
Interest-bearing borrowings 7 15,043 182,359 123,415
Obligations under leases 226 46 50
Trade and other payables 33,106 31,606 25,334
Current tax payable 556 924 -
Derivative financial instruments 34 43 (3)
Related party loans payable 26,088 14,507 -
Other financial liability 1,196 644 128
Bank overdrafts - 8,490 8,501
------------------------------------------------------- ------ ---------------- -------------- ----------------
Total current liabilities 76,249 238,619 157,425
--------------------------------------------------------------- ---------------- -------------- ----------------
Total liabilities 517,693 469,348 416,509
--------------------------------------------------------------- ---------------- -------------- ----------------
Total equity and liabilities 912,680 863,878 834,236
--------------------------------------------------------------- ---------------- -------------- ----------------
Unaudited Unaudited
six months six months
ended ended
31-Dec-19 31-Dec-18
Abridged consolidated statement of cashflows Notes USD'000 USD'000
-------------------------------------------------------------- ------ ----------- -----------
Cash generated from operations
Profit before taxation for the period 15,082 24,555
Adjusted for:
Depreciation and amortisation 261 167
Interest income 9 (2,366) (6,669)
Share of profits from associates and joint ventures 3 (12,590) (7,720)
Finance costs 10 12,605 10,999
Allowance for credit losses 218 -
Bad debt provision 1,340 -
Impairment of loans 904 -
Foreign currency (gains)/losses (8) 1,084
Straight-line rental income accrual 171 (642)
Amortisation of lease premium 1,696 -
Share based payment expense 90 78
Fair value adjustment on investment properties 3 (3,011) (12,373)
Fair value adjustment on other investments (591) (26)
Fair value adjustment on other financial liability 552 -
Fair value adjustment on derivative financial instruments (136) -
---------------------------------------------------------------------- ----------- -----------
14,217 9,453
---------------------------------------------------------------------- ----------- -----------
Changes to working capital
Movement in trade and other receivables (7,313) (23,768)
Movement on deposits paid on investment properties 3 - (6,266)
Movement in trade and other payables 1,422 (4,953)
---------------------------------------------------------------------- ----------- -----------
Cash generated from/(utilised in) operations 8,326 (25,534)
---------------------------------------------------------------------- ----------- -----------
Taxation paid (1,701) (569)
---------------------------------------------------------------------- ----------- -----------
Net cash generated from/(utilised in) operating activities 6,625 (26,103)
---------------------------------------------------------------------- ----------- -----------
Cash utilised on investing activities
Acquisition of investment properties 3 (20,978) (80,958)
Acquisition of property, plant and equipment (91) (105)
Acquisition of intangible assets (computer software) (84)
Acquisition of other investments 5 (1) -
Acquisition of associates and joint ventures 4 - (10,500)
Dividends and interest received from associates and joint ventures 4,091 3,681
Interest received 1,911 4,864
Related party loans payable 11,582 -
Related party loans repayment received 9,387 -
Proportional shareholder loans received 1,110 -
Other loans (advanced)/repaid - (1,923)
---------------------------------------------------------------------- ----------- -----------
Net cash generated from/(utilised in) investing activities 6,927 (84,941)
---------------------------------------------------------------------- ----------- -----------
Proceeds from the issue of ordinary shares - 132,094
Share issue expenses (404) (10,666)
Dividends paid to non-controlling shareholders (581) -
Ordinary dividends paid (20,547) (18,749)
Proceeds from interest bearing borrowings 154,500 98,269
Settlement of interest-bearing borrowings (112,039) (81,135)
Finance costs and debt initiation fees paid (15,003) (5,738)
Settlement of obligations under leases (123) (37)
---------------------------------------------------------------------- ----------- -----------
Net cash generated from financing activities 5,803 114,038
---------------------------------------------------------------------- ----------- -----------
Net movement in cash and cash equivalents 19,355 2,994
Cash at the beginning of the year 6,674 (5,812)
Effect of foreign exchange rates (484) 15
---------------------------------------------------------------------- ----------- -----------
Total cash and cash equivalents at the end of the period 25,545 (2,803)
---------------------------------------------------------------------- ----------- -----------
Foreign
currency Antecedent Non- Total
Share Treasury translation dividend Retained controlling Equity
Capital Shares reserve reserve earnings interest Holders
Consolidated statement of USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
changes in equity
--------------------------------- --------- --------- ------------ ----------- --------- ------------ ---------
Balance as at 1 July 2018 328,394 (14,811) 1,780 - (36,245) (3,940) 275,178
--------------------------------- --------- --------- ------------ ----------- --------- ------------ ---------
Profit for the period - - - - 20,643 307 20,950
Other comprehensive expense for
the period - - (1,290) - - - (1,290)
--------------------------------- --------- --------- ------------ ----------- --------- ------------ ---------
Total comprehensive income - - (1,290) - 20,643 307 19,660
--------------------------------- --------- --------- ------------ ----------- --------- ------------ ---------
Ordinary shares issued 132,094 - - - - - 132,094
Ordinary shares issue expenses (10,666) - - - - - (10,666)
Transfer to antecedent dividend
reserve (6,580) - - 6,580 - - -
Ordinary dividends paid - - - (5,653) (13,096) - (18,749)
Share based payments - - - - (78) - (78)
Minority interest acquired
through effective control - - - - - 20,288 20,288
--------------------------------- --------- --------- ------------ ----------- --------- ------------ ---------
Balance as at 31 December 2018 443,242 (14,811) 490 927 (28,776) 16,655 417,727
--------------------------------- --------- --------- ------------ ----------- --------- ------------ ---------
Balance as at 1 July 2019
- As previously reported 443,259 (18,406) (36) - (34,869) 4,581 394,529
- Adoption of IFRS 16 - - - - (52) - (52)
--------------------------------- --------- --------- ------------ ----------- --------- ------------ ---------
Restated total equity at the
beginning of the financial year 443,259 (18,406) (36) - (34,921) 4,581 394,477
--------------------------------- --------- --------- ------------ ----------- --------- ------------ ---------
Profit for the period - - - - 13,130 (1,429) 11,701
Other comprehensive expense for
the period - - (1,406) - - - (1,406)
--------------------------------- --------- --------- ------------ ----------- --------- ------------ ---------
Total comprehensive income - - (1,406) - 13,130 (1,429) 10,295
--------------------------------- --------- --------- ------------ ----------- --------- ------------ ---------
Share based payments - - - - 90 - 90
Ordinary dividends paid - - - - (20,600) - (20,600)
Dividends paid to
non-controlling shareholders - - - - - (581) (581)
Ordinary shares issued 11,710 - - - - - 11,710
Antecedent dividend reserve (418) - - 418 - - -
Share issue expenses (404) - - - - - (404)
Balance as at 31 December 2019 454,147 (18,406) (1,442) 418 (42,301) 2,571 394,987
--------------------------------- --------- --------- ------------ ----------- --------- ------------ ---------
NOTES TO THE FINANCIAL STATEMENTS
1. Basis of preparation
This abridged consolidated interim financial information (financial statements) for the six months ended 31 December 2019 has been prepared on a going concern basis and in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority and IAS 34 'Interim Financial Reporting' as issued by the IASB, the JSE , LSE and SEM Listings Requirements; the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee, the Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council and the Securities Act of Mauritius 2005.
In order to satisfy themselves that the Group has adequate resources to continue in operational existence for the foreseeable future, the Directors have reviewed an 18-month cash flow target includes assumptions about future trading performance and debt requirements, and an assessment of the potential impact of significant changes to those cash flows. This, together with available market information, headroom under the financial covenants, and experience of the Group's property portfolio and markets, has given the Directors sufficient confidence to adopt the going concern basis in preparing the financial statements.
The abridged consolidated interim financial information does not comprise statutory accounts. Statutory accounts for the year ended 30 June 2019, presented in accordance with International Financial Reporting Standards ("IFRS"), were approved by the Board of Directors on 30 September 2019 and delivered to the Registrar of Companies in Mauritius. The report of the auditor on those accounts was unqualified, did not contain an emphasis of matter paragraph. The abridged consolidated interim financial information should be read in conjunction with the Group's annual financial statements for the year ended 30 June 2019. This abridged consolidated interim financial information was approved Board of Directors on 13 February 2020. The abridged consolidated interim financial information has not been reviewed or reported on by the Group's auditors.
Significant Judgements
The preparation of these financial statements requires the Board to make judgements, assumptions and estimates that affect amounts reported in the Statement of Comprehensive Income and Balance Sheet. The directors consider the valuation of investment property to be a critical estimate because of the level of complexity, judgement or estimation involved and its impact on the financial statements. This is consistent with the financial statements for the previous year end. Full disclosure of the critical judgements, assumptions and estimates is included in the 2019 financial statements and there has been no change in the judgements, assumptions and estimates as per the 2019 financial statements with the exception of the accounting treatment of LLR below and IFRS16.
The principle area where such judgement has been made was:
Acquisition of LLR
Grit increased its stake in LLR from 6.25% to 30.0%.
On 20 November 2019 Grit announced the acquisition of an additional 23.75% interest in Botswana Stock Exchange listed Letlole La Rona Limited (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 EPRA NAV per share, less dividend declared, of USD 140 cps.
The transaction for the 9,839,511 shares was recorded at the ruling share price of the day of USD1.19, resulting in the acquisition being recorded at USD11.7 million. 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.
Judgements in respect of new accounting standards have been considered further below:
2. Changes in accounting policies
The abridged consolidated interim financial information has been prepared on the basis of the accounting policies, significant judgements, key assumptions and estimates as set out in the notes to the Group's annual financial statements for the year ended 30 June 2019, as amended where relevant to reflect the new standards, amendments and interpretations which became effective in the period which are detailed below.
New accounting standards and interpretations
The following amendment to an existing Standard was relevant to the Group and mandatory for the first time for the financial year beginning 1 July 2019:
Standard or Interpretation Effective from
IFRS 16 Leases 01-Jan-19
----------------
IFRIC 23 Uncertainty Over Income Tax Treatments 01-Jan-19
----------------
Prepayment Features with Negative Compensation (Amendments to IFRS 9) 01-Jan-19
----------------
Long-term Interests in Associates and Joint Ventures (Amendment to IAS 28) 01-Jan-19
----------------
Plan Amendment, Curtailment or Settlement (Amendment to IAS 19) 01-Jan-19
----------------
Annual Improvements to IFRS Standards 2015/2017 Cycle various standards 01-Jan-19
----------------
This note explains the impact of the adoption of IFRS 16 Leases on the group's financial statements and discloses the new accounting policies that have been applied from 1 January 2019.
The group has adopted IFRS 16 retrospectively from 1 July 2019 but has not restated comparatives for the 2018 reporting period, as permitted under the specific transitional provisions in the standard. The reclassifications and the adjustments arising from the new leasing rules are therefore recognised in the opening balance sheet on 1 July 2019.
Adjustments recognised on adoption of IFRS 16
On adoption of IFRS 16, the group recognised lease liabilities in relation to leases which had previously been classified as 'operating leases' under the principles of IAS 17 Leases. These liabilities were measured at the present value of the remaining lease payments, discounted using the lessee's incremental borrowing rate as of 1 July 2019. The weighted average lessee's incremental borrowing rate applied to the lease liabilities on 1 July 2019 was 6.00%.
For leases previously classified as finance leases the entity recognised the carrying amount of the lease asset and lease liability immediately before transition as the carrying amount of the right of use asset and the lease liability at the date of initial application. The measurement principles of IFRS 16 are only applied after that date.
USD'000
-------------------------------------------------------------------------------------------- --------
Operating lease payments at 30 June 2019 (226)
Discounted using the lessee's incremental borrowing rate of at date of initial application 76
Add: finance lease liabilities recognised as at 30 June 2019 1,296
Lease liability recognised as at 1 July 2019 1,146
Of which are:
Current lease liabilities 158
Non-current lease liabilities 988
-------------------------------------------------------------------------------------------- --------
Lease liability recognised as at 1 July 2019 1,146
-------------------------------------------------------------------------------------------- --------
The associated right-of-use assets for property and motor vehicle leases were measured on a retrospective basis as if the new rules had always been applied. There were no onerous lease contracts that would have required an adjustment to the right-of-use assets at the date of initial application. The recognised right-of-use assets relate to the following types of assets:
31-Dec-19 01-Jul-19
USD'000 USD'000
-------------------- ---------- ----------
Office 928 1,011
Motor vehicles 72 83
-------------------- ---------- ----------
Total right of Use 1,000 1,094
-------------------- ---------- ----------
The change in accounting policy affected the following items in the balance sheet on 1 July 2019:
01-Jul-19
USD'000
-------------------------------------------------------------------- ----------
Right of use of assets (Included inintangible assets) - increase 1,094
Lease liabilities (Included inObligations under leases) - increase 1,146
Impact on retained earnings - decrease 52
Impact on segment disclosures
Adjusted Profit after taxation, segment assets and segment liabilities for June 2019 as a result of the change in accounting policy is displayed below. Lease liabilities are now included in segment liabilities, whereas finance lease liabilities were previously excluded from segment liabilities. The following segments were affected by the change in policy:
Segment Adjusted Profit after taxation Segment assets Segment liabilities
USD'000 USD'000 USD'000
---------- ------------------------------- ----------------- --------------------
Corporate Decrease - 49 Increase - 1,044 Increase - 1,146
Geographical Adjusted Profit after taxation Segment assets Segment liabilities
USD'000 USD'000 USD'000
------------- ------------------------------- ----------------- --------------------
Mauritius Decrease - 49 Increase - 1,044 Increase - 1,146
(ii) Practical expedients applied
In applying IFRS 16 for the first time, the group has used the following practical expedients permitted by the standard:
-- the use of a single discount rate to a portfolio of leases with reasonably similar characteristics
-- reliance on previous assessments on whether leases are onerous
-- the use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease.
The group has also elected not to reassess whether a contract is or contains a lease at the date of initial application. Instead, for contracts entered into before the transition date the group relied on its assessment made applying IAS 17 and IFRIC 4 Determining whether an Arrangement contains a Lease.
The group's leasing activities and how these are accounted for
The group leases an office and motor vehicles. Rental contracts are typically made for fixed periods of 5 to 7 years but may have extension options as described below. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants, but leased assets may not be used as security for borrowing purposes.
Until the 2018 financial year, leases of property, plant and equipment were classified as either finance or operating leases. Payments made under operating leases (net of any incentives received from the lessor) were charged to profit or loss on a straight-line basis over the period of the lease.
From 1 July 2019, leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the group. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-use asset is depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments:
-- fixed payments (including in-substance fixed payments), less any lease incentives receivable -- variable lease payment that are based on an index or a rate -- amounts expected to be payable by the lessee under residual value guarantees
-- the exercise price of a purchase option if the lessee is reasonably certain to exercise that option, and
-- payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined, the lessee's incremental borrowing rate is used, being the rate that the lessee would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic environment with similar terms and conditions.
Right-of-use assets are measured at cost comprising the following:
-- the amount of the initial measurement of lease liability -- any lease payments made at or before the commencement date less any lease incentives received -- any initial direct costs, and -- restoration costs.
Critical judgements in determining the lease term
In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise an extension option, or not exercise a termination option. Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated). Management is of the opinion that the lease term will not be extended at the expiry date of the current lease. For the current reporting period there is no indication that the lease term will be terminated earlier. The accounting treatment determining the lease liability and the right of use of asset is therefore calculated using the current lease term per the contract.
Lessor accounting
There was no change to lessor accounting applied by the group as a result of IFRS 16.
Segmental information
IFRS 8 requires operating segments to be reported in a manner consistent with the internal financial reporting reviewed by the chief operating decision maker. The chief operating decision maker of the Group is the Board. The Board is responsible for reviewing the Group's internal reporting in order to assess performance. The information reviewed by the Board is prepared on a basis consistent with these financial statements. That is, the information is provided at a Group level and includes both the IFRS reported results and EPRA measures. Refer to note 11 for segmental reporting.
As at As at
31-Dec-19 30-Jun-19
3. Investment properties USD'000 USD'000
------------------------------------------------------------------------------------------ ---------- ----------
Net carrying value of properties excluding straight-line rental income accrual 595,965 573,664
------------------------------------------------------------------------------------------ ---------- ----------
Movement for the period excluding straight-line rental income accrual
Investment property at the beginning of the year 567,731 376,723
Acquisitions of investment properties - 94,254
Transfer from joint venture - 75,400
Other capital expenditure and construction 23,503 8,484
Foreign currency translation differences (1,517) (2,767)
Revaluation of properties at end of period 3,011 21,363
Contractual receipts from vendors of investment properties (reduction in purchase price) (2,525) (5,726)
------------------------------------------------------------------------------------------ ---------- ----------
As at period end 590,203 567,731
------------------------------------------------------------------------------------------ ---------- ----------
Reconciliation to consolidated statement of financial position and valuations
Investment properties carrying amount per above 590,203 567,731
Straight-line rental income accrual 5,762 5,933
------------------------------------------------------------------------------------------ ---------- ----------
Total valuation of properties 595,965 573,664
------------------------------------------------------------------------------------------ ---------- ----------
Reconciliation to Property Valuation
Investment Property (disclosed on balance sheet) 595,965 573,664
Lease incentives (disclosed under Current Assets) 3,071 2,505
Right of use of land (disclosed under intangible assets) 464 478
Furniture and Fittings (disclosed under Property, plant and equipment) - 209
------------------------------------------------------------------------------------------ ---------- ----------
Total valuation of investment properties directly held by the Group 599,500 576,856
------------------------------------------------------------------------------------------ ---------- ----------
Investment property pledged as security
Mozambican investment properties with a market value of USD312.0 million are mortgaged to Standard Bank of South Africa to secure debt facilities amounting to USD126.0 million and Bank of China to secure debt facilities amounting to USD13.3 million. (June 2019: Mozambican investment properties with a market value of USD287.9 million were mortgaged to Standard Bank of Mozambique to secure debt facilities amounting to USD10.5 million, Standard Bank of South Africa to secure debt facilities amounting to USD77.2 million, Standard Bank Mauritius USD10.1 million and Banco Unico of Mozambique to secure debt facilities amounting to USD2.7 million and Bank of China to secure debt facilities amounting to USD13.3 million)
Moroccan investment properties with a market value of USD109.2 million (June 2019: USD106.7 million) are mortgaged to Investec South Africa to secure debt facilities amounting to USD44.5 million (June 2019: USD45.1 million).
Mauritian investment properties with a market value of USD67.8 million (June 2019: USD68.4 million) are mortgaged to Barclays Bank of Mauritius to secure debt facilities amounting to USD7.1 million (June 2019: USD7.2 million) and State Bank of Mauritius to secure debt facilities amounting to USD24.9 million (June 2019: USD25.4 million).
Kenyan investment properties with a market value of USD24.4 million (June 2019: USD23.4 million) are mortgaged to Bank of China to secure debt facilities amounting to USD8.6 million (June 2019: USD8.5 million).
Zambian investment properties with a gross market value of USD163.9 million (June 2019: USD168.4 million) are mortgaged to Bank of China to secure debt facilities amounting to USD76.4 million (June 2019: USD76.4 million). This includes the properties of Cosmopolitan Shopping Centre and Kafubu Mall that is disclosed within Investments in associates and joint ventures. The Group's share of these properties are disclosed within note 4 as well as in the table below.
Most recent Valuer As at As at
independent (for the most 31-Dec-19 30-Jun-19
Summary of valuation date recent valuation) Sector Country USD'000 USD'000
valuations by
reporting date
------------------- ---------------- -------------------- ------------------- ------------ ---------- ----------
Commodity House
Phase I building 31-Dec-19 REC Office Mozambique 46,953 46,236
Commodity House
Phase II building 31-Dec-19 REC Office Mozambique 19,266 17,200
Hollard Building 31-Dec-19 REC Office Mozambique 21,279 20,800
Vodacom Building 31-Dec-19 REC Office Mozambique 48,279 48,101
Zimpeto Square 31-Dec-19 REC Retail Mozambique 6,625 7,616
Bollore Warehouse 31-Dec-19 REC Light industrial Mozambique 6,699 6,800
Barclays House 31-Dec-19 Knight Frank Office Mauritius 14,699 14,312
AnfaPlace Mall 31-Dec-19 Knight Frank Retail Morocco 109,201 106,145
Tamassa Resort 31-Dec-19 Knight Frank Hospitality Mauritius 53,080 54,100
VDE Housing Estate 31-Dec-19 REC Accommodation Mozambique 72,074 49,900
Imperial
Distribution
Centre 31-Dec-19 Knight Frank Light industrial Kenya 21,140 20,200
Mara Viwandani 31-Dec-19 Knight Frank Light industrial Kenya 3,250 3,250
Mall de Tete 31-Dec-19 REC Retail Mozambique 23,696 25,416
Acacia Estate 31-Dec-19 REC Accommodation Mozambique 67,159 65,800
5th Avenue
Building 31-Dec-19 Knight Frank Office Ghana 22,080 21,880
Mukuba Mall 31-Dec-19 Knight Frank Retail Zambia 64,020 69,100
------------------- ---------------- -------------------- ------------------- ------------ ---------- ----------
Total valuation of investment properties directly held by
the Group 599,500 576,856
Deposits paid on Imperial Distribution Centre Phase 2 5,500 5,500
Deposits paid on Capital Place Limited 3,000 3,000
----------------------------------------------------------- --------------------------------- ---------- ----------
Total deposits paid on investment properties 8,500 8,500
----------------------------------------------------------- --------------------------------- ---------- ----------
Total carrying value of investment properties including
deposits paid 608,000 585,356
----------------------------------------------------------- --------------------------------- ---------- ----------
Investment properties held within associates and joint
ventures - Group share
Buffalo Mall -
Buffalo Mall
Naivasha Limited
(50%) 31-Dec-19 Knight Frank Retail Kenya 6,825 5,449
Kafubu Mall -
Kafubu Mall
Limited (50%) 31-Dec-19 Knight Frank Retail Zambia 11,320 12,300
CADS II Building -
CADS Developers
Limited (50%) 31-Dec-19 Knight Frank Office Ghana 18,275 18,230
Cosmopolitan
Shopping Centre -
Cosmopolitan
Shopping Centre
Limited (50%) 31-Dec-19 Knight Frank Retail Zambia 37,935 37,350
Canonniers,
Mauricia and
Victoria Resorts
and Spas -
Beachcomber
Hospitality
(44.42%) 31-Dec-19 Knight Frank Hospitality Mauritius 98,464 98,736
Capital Place -
Capital Place
Limited (47.5%) 31-Dec-19 Knight Frank Office Ghana 11,148 11,714
Letlole La Rona 30-Jun-19 Knight Frank Light industrial Botswana 12,987 -
Limited (30%) - 15
Investment
properties
Letlole La Rona 30-Jun-19 Knight Frank Hospitality Botswana 206 -
Limited (30%) - 1
Investment
property
Letlole La Rona 30-Jun-19 Knight Frank Retail Botswana 5,292 -
Limited (30%) - 2
Investment
properties
Letlole La Rona 30-Jun-19 Knight Frank Office Botswana 1,326 -
Limited (30%) - 1
Investment
property
Letlole La Rona 30-Jun-19 Knight Frank Accommodation Botswana 1,301 -
Limited (30%) - 1
Investment
property
Gateway Delta 31-Dec-19 Directors' Other investments Mauritius 3,143 -
Development valuation
Holdings Limited
(19.98%) - 2
Investments
------------------- ---------------- -------------------- ------------------- ------------ ---------- ----------
Total of investment properties acquired through associates and joint ventures 208,222 183,779
---------------------------------------------------------------------------------------------- ---------- ----------
Total portfolio 816,222 769,135
---------------------------------------------------------------------------------------------- ---------- ----------
Valuation policy and methodology for investment properties held by the Group and by associates and joint ventures
For this interim reporting period, all investment properties have been valued by reputable RICS accredited valuation experts who have sufficient expertise in the jurisdictions where the properties are located with the exception of Gateway Delta Development Holdings Limited for which a directors'valuation was used.
The Group used the 30 June 2019 Knight Frank valuations for the Letlole La Rona Limited portfolio for the interim reporting period.
All valuations that are performed in the functional currency of the relevant property company are converted to United States Dollars at the effective closing rate of exchange. All independent valuations have been undertaken in accordance with 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 Mozambican investment properties, independent valuations were performed at 31 December 2019 by REC, Chartered Surveyors, using the discounted cash flow method and the best use method.
The remainder of the portfolio were independently valued at 31 December 2019 by Knight Frank, Chartered Surveyors, using the discounted cash flow method.
As at As at
31-Dec-19 30-Jun-19
4. Investments in associates and joint ventures USD'000 USD'000
------------------------------------------------------------------------------- ----------- -----------
The following entities have been accounted for as associates and joint ventures in the current
and comparative consolidated financial statements using the equity method:
Name of joint venture Country % held
Kafubu Mall Limited(1) Zambia 50.00% 11,141 12,089
Cosmopolitan Shopping Centre Limited(1) Zambia 50.00% 38,038 37,301
CADS Developers Limited(1) Ghana 50.00% 11,108 11,366
----------------------------------------------------- ------------- --------- ----------- -----------
Carrying value of joint ventures 60,287 60,756
------------------------------------------------------------------------------- ----------- -----------
Name of associate Country % held
Letlole La Rona Limited Botswana 30.00% 20,311 -
Buffalo Mall Naivasha Limited Kenya 50.00% 5,028 3,610
Gateway Delta Development Holdings Limited Mauritius 19.98% 7,103 6,925
Capital Place Limited Ghana 47.50% 8,415 8,687
Beachcomber Hospitality Investments Limited Mauritius 44.42% 70,263 70,627
----------------------------------------------------- ------------- --------- ----------- -----------
Carrying value of associates 111,120 89,849
------------------------------------------------------------------------------- ----------- -----------
Joint Ventures 60,287 60,756
Associates 111,120 89,849
-------------------------------------------------------------------- --------- ----------- -----------
Total carrying value of associates and joint ventures 171,407 150,605
------------------------------------------------------------------------------- ----------- -----------
(1) The joint ventures were incorrectly classified as associates in the prior period and has been restated in the current year. This was correctly reclassified on the June 2019 financial statements. This change has no impact on numbers presented.
Gateway
Beachcomber Delta Cosmopolitan Buffalo
Letlole Kafubu Hospitality Capital Development CADS Shopping Mall
La Rona Mall Investments Place Holdings Developers Centre Naivasha
Limited Limited Limited Limited Limited Limited Limited Limited Total
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
----------------- -------- -------- ------------ -------- ------------ ----------- ------------- --------- --------
Reconciliation
to carrying
value in
associates and
joint ventures
Opening Balance
1 July 2019 - 12,089 70,627 8,687 6,925 11,366 37,301 3,610 150,605
Acquired during
the period 15,324 - - - - - - - 15,324
Profit /
(losses) from
associates and
joint ventures
- Gross rental
income 210 527 3,247 566 106 763 1,572 267 7,258
- Straight-line
rental income
accrual - - 119 - - - - - 119
- Property
operating
expenses (41) (113) (12) (86) - (18) (265) (100) (635)
- Admin
expenses and
recoveries (3) (3) 2 (30) (160) (3) 27 (5) (175)
- Fair value
adjustment on
other
investments - - - - 129 - - - 129
- Unrealised
foreign
exchange
gains/(losses) - (417) 3 6 - - 2 (5) (411)
- Realisation
of profits on
acquisition 2,066 - - - - - - - 2,066
- Investment at
fair value 3,290 - - - - - - - 3,290
- Finance
Charges (20) (3) (540) (163) (102) (296) 1 (115) (1,238)
- Fair value
movement on
Investment
Property - (182) 1,276 (565) - 45 585 1,376 2,535
- Current tax (6) (25) (13) - (9) - - - (53)
- Deferred tax 53 - (348) - - - - - (295)
----------------- -------- -------- ------------ -------- ------------ ----------- ------------- --------- --------
Total profits
from associates
and joint
ventures 5,549 (216) 3,734 (272) (36) 491 1,922 1,418 12,590
Dividends
received and
interest
received (562) - (2,906) - - - (1,185) - (4,653)
Anfa profit in
Gateway Delta - - - - 214 - - - 214
Repayment of
proportionate
shareholders
loan - (361) - - - (749) - - (1,110)
Foreign currency
translation
differences - (371) (1,192) - - - - - (1,563)
----------------- -------- -------- ------------ -------- ------------ ----------- ------------- --------- --------
Carrying value
of associates
and joint
ventures 20,311 11,141 70,263 8,415 7,103 11,108 38,038 5,028 171,407
----------------- -------- -------- ------------ -------- ------------ ----------- ------------- --------- --------
Investment in the period ended 31 December 2019
On 20 November 2019 Grit announced the acquisition of an additional 23.75% interest in Botswana Stock Exchange listed Letlole La Rona Limited (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 EPRA NAV per share, less dividend declared, of USD 140 cps.
The transaction for the 9,839,511 shares was recorded at the ruling share price of the day of USD1.19, resulting in the acquisition being recorded at USD11.7 million. 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 within the group.
In the prior period in Letlole La Rona Limited was classified as Other Investments as our stake was only 6.25% in the entity. With the increase of our shareholding to 30% this was subsequently reclassified to Investment in Associates and Joint Ventures.
As at As at
31-Dec-19 30-Jun-19
5. Other investments USD'000 USD'000
------------------------------------------------------------------ ---------- ----------
Balance at the beginning of the period 3,024 4,154
Additions 1 -
Reclassification to Investments in associates and joint ventures (3,615) (335)
Fair value adjustments recognised in profit or loss 591 (795)
------------------------------------------------------------------ ---------- ----------
Total 1 3,024
------------------------------------------------------------------ ---------- ----------
Level 1 investment comprise listed equity investment valued at market prices. If all significant inputs required to fair value an investment are observable, the investment is included in level 2. If one or more of the significant inputs are not based on observable market data, the investment is included in level 3.
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.
As at As at
31-Dec-19 30-Jun-19
6. Other loans receivable USD'000 USD'000
----------------------------------------------- ---------- ----------
Ndola Investments Limited 5,073 5,073
Paxton Investments Limited - 25
Kitwe Copperbelt Limited 5,577 5,577
Syngenta Limited 18,690 18,690
IFRS 9 - Impairment on financial assets (ECL) (50) (139)
----------------------------------------------- ---------- ----------
As at 31 December 29,290 29,226
----------------------------------------------- ---------- ----------
As at As at
31-Dec-19 30-Jun-19
7. Interest-bearing borrowings USD'000 USD'000
------------------------------------------------------------------------ ------------- ------------
Non-current liabilities
At amortised cost 369,069 163,738
Current liabilities
At amortised cost 15,043 182,359
------------------------------------------------------------------------ ------------- ------------
384,112 346,097
------------------------------------------------------------------------ ------------- ------------
Currency of the interest-bearing borrowings (stated gross of unamortised loan issue costs)
United States Dollars 271,022 214,345
Euros 117,766 131,561
Mozambican Meticais - 2,658
388,788 348,564
Unamortised loan issue costs (4,676) (2,467)
------------------------------------------------------------------------ ------------- ------------
As at period end 384,112 346,097
------------------------------------------------------------------------ ------------- ------------
Movement for the period
Balance at the beginning of the year 346,097 306,144
Proceeds of interest bearing-borrowings 154,500 147,275
Loan issue costs incurred (3,044) (2,670)
Amortisation of loan issue costs 835 1,785
Foreign currency translation differences (2,237) (1,529)
Debt settled during the year (112,039) (104,908)
------------------------------------------------------------------------ ------------- ------------
As at period end 384,112 346,097
------------------------------------------------------------------------ ------------- ------------
Analysis of facilities and loans in issue
As at As at
Initial 31-Dec-19 30-Jun-19
Lender Borrower facility USD'000 USD'000
---------------------------------- --------------------------------- ----------------------- ---------- ----------
Financial institutions
Standard Bank Mozambique S&C Immobiliaria Limitada USD10.4m - 10,451
Standard Bank South Africa Sal Investments Holdings Limited USD12.0m - 12,000
Standard Bank South Africa Commotor Limitada USD38.0m - 38,000
Standard Bank South Africa Commotor Limitada USD140.0m 126,000 -
Standard Bank South Africa Cognis 1 Limitada USD28.0m - 27,239
Standard Bank South Africa Grit Services Limited RCF - EUR26.5m 29,619 30,128
Standard Bank (Mauritius) Limited Transformers Holdings Limited USD11.7m - 10,110
---------------------------------- --------------------------------- ----------------------- ---------- ----------
Total Standard Bank Group 155,619 127,928
Bank of China Warehously Limited USD8.5m 8,555 8,555
Bank of China Gerania Limited USD13.3m 13,300 13,300
Zambian Property Holdings
Bank of China Limited USD77.0m 76,405 76,405
---------------------------------- --------------------------------- ----------------------- ---------- ----------
Total Bank of China 98,260 98,260
Leisure Property Northern
State Bank of Mauritius (Mauritius) Limited EUR9.0m 10,059 10,395
Leisure Property Northern
State Bank of Mauritius (Mauritius) Limited EUR3.2m 3,577 3,474
Mara Delta Properties Mauritius
State Bank of Mauritius Limited EUR22.3m 24,925 25,353
State Bank of Mauritius Grit Real Estate Income Group Equity Bridge USD20.0m 20,000 -
Limited
Grit Real Estate Income Group
State Bank of Mauritius Limited RCF USD20.0m - 11,115
---------------------------------- --------------------------------- ----------------------- ---------- ----------
Total State Bank of Mauritius 58,561 50,337
Investec South Africa Freedom Property Fund SARL EUR36.0m 35,683 36,198
Investec South Africa Freedom Property Fund SARL USD15.7m 8,860 8,860
Grit Real Estate Income Group
Investec Mauritius Limited USD0.5m 402 425
---------------------------------- --------------------------------- ----------------------- ---------- ----------
Total Investec Group 44,945 45,483
Barclays Bank Mauritius BH Property Investment Limited EUR7.4m 7,054 7,174
Barclays Bank Ghana Limited Grit Accra Limited USD9.0m 9,000 9,000
---------------------------------- --------------------------------- ----------------------- ---------- ----------
Total Barclays Group 16,054 16,174
Grit Real Estate Income Group
Maubank Mauritius Limited USD3.7m 3,628 3,691 Maubank Mauritius Freedom Asset Management USD4.0m 3,221 4,033 ---------------------------------- --------------------------------- ----------------------- ---------- ---------- Total Maubank 6,849 7,724 ABC Banking Corporation Grit Services Limited Equity bridge USD 8.5m 8,500 - ---------------------------------- --------------------------------- ----------------------- ---------- ---------- Total ABC Banking Corporation 8,500 - Bank Unico of Mozambique Zimpeto Immobiliaria Limitada MZN182.7m - 2,658 ---------------------------------- --------------------------------- ----------------------- ---------- ---------- Total loans in issue 388,788 348,564 less: unamortised loan issue costs (4,676) (2,467) ---------------------------------------------------------------------------------------------- ---------- ---------- As at period end 384,112 346,097 ---------------------------------------------------------------------------------------------- ---------- ----------
The Group raised USD154.5 million of debt in the period to fund acquisitions and refinance debt facilities (USD112.0 million repaid in the period and USD13.3 million repaid in early January 2020). As financing is integral to our business model, the Group has continued to develop strong relationships with financiers. The multi-bank approach adopted by Grit has continued, with the main banking partners being Bank of China, Standard Bank, ABSA Bank and SBM (Mauritius) Ltd. The breakdown of the interest-bearing borrowings is listed in note 7.
The Group's loan-to-value ("LTV") has increased to 43.9% in six months ended December 2019 (30 June 2019: 43.1%).
The average 3-month USD LIBOR rates decreased from 2.46% for the 6 months to June 2019 to 1.90% for the 6 months to 31 December 2019. The 0.56% decrease in USD LIBOR rates in the period resulted in the Group's WACD decreasing to an average of 6.07% (December 2018: 6.31%). With the finalisation of the Mozambique refinancing programme, the weighted average forward rate is 5.98%.
Included in the total USD 154.5 raise is the Mozambique refinancing program that comprises USD140 million, of which USD126 million was paid out at reporting date in order to settle the existing Mozambican facilities of USD97.8 million and a further USD13.3 million after the reporting period as well as acquisition costs for the Vale units in Tete and facility fees. The terms of new facility will result in reduced cost of funding over the Mozambican portfolio over its four-year tenor carrying interest of 3-month LIBOR plus a margin of 5%.
Two new corporate term loans were secured being USD20 million from SBM and USD8.5 million from Bank ABC which were utilised to settle the Revolving Credit Facility held with SBM and the overdraft facility held with Bank ABC respectively.
This has contributed to the increase in the debt expiry profile and the decrease of the current portion of the interest-bearing borrowings.
Six months Six months
ended ended
31-Dec-19 31-Dec-18
8. Revenue USD'000 USD'000
------------------------------- ----------- -----------
Contractual rental income 19,802 15,450
Retail parking income 809 791
Recoverable property expenses 3,665 2,492
------------------------------- ----------- -----------
Total revenue 24,276 18,733
------------------------------- ----------- -----------
None of the revenue recognised in the current year reporting period relates to carried forward contract liabilities and to performance obligations that were satisfied in a prior period.
Contractual rental income included within deferred revenue in the prior period has been fully recognised as revenue in the current period. The recoverable property expenses were recognised in the group income statement in accordance with the delivery of services.
There was no change to lessor accounting applied by the group as a result of IFRS 16.
Six months Six months
ended ended
31-Dec-19 31-Dec-18
9. Interest income USD'000 USD'000
-------------------------------------------------------- ----------- -----------
Bank interest receivable 12 121
Interest on loans to partners 969 5,009
Interest on loans to related parties 1,001 30
Interest on property deposits paid 278 1,399
Interest on convertible shareholder loans - 110
Interest on tenant rental arrears and penalty interest 106 -
-------------------------------------------------------- ----------- -----------
2,366 6,669
-------------------------------------------------------- ----------- -----------
Six months Six months
ended ended
31-Dec-19 31-Dec-18
10. Finance costs USD'000 USD'000
------------------------------------------------------ ----------- -----------
Interest-bearing borrowings - financial institutions 11,268 9,445
Amortisation of loan issue costs 835 614
Preference share dividends 402 401
Interest on finance leases 37 -
Finance costs expensed related to capital projects 53 -
Interest on bank overdraft 10 149
Other interest payable - 390
------------------------------------------------------ ----------- -----------
12,605 10,999
------------------------------------------------------ ----------- -----------
11. Segmental reporting
Consolidated segmental
analysis Botswana Morocco Mozambique Zambia Kenya Ghana Mauritius Total
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
------------------------------- --------- -------- ----------- -------- -------- -------- ---------- ---------
Geographical location 31
December 2019 - USD'000
Gross rental income - 3,959 13,266 2,798 811 1,038 2,404 24,276
Straight-line rental income
accrual - (165) (290) - 158 15 111 (171)
------------------------------- --------- -------- ----------- -------- -------- -------- ---------- ---------
Revenue - 3,794 12,976 2,798 969 1,053 2,515 24,105
Property operating expenses - (3,389) (2,155) (398) (24) (244) (74) (6,284)
------------------------------- --------- -------- ----------- -------- -------- -------- ---------- ---------
Net property income - 405 10,821 2,400 945 809 2,441 17,821
Other income - 118 - 18 - 2 2,820 2,958
Administrative expenses
(including corporate
structuring costs) - (849) (759) (17) (24) (255) (8,126) (10,030)
------------------------------- --------- -------- ----------- -------- -------- -------- ---------- ---------
Profit/(loss) from operations - (326) 10,062 2,401 921 556 (2,865) 10,749
Fair value adjustment on
investment properties - (6,512) 12,082 (5,080) 782 34 1,705 3,011
Fair value adjustment on other
investments 591 - - - - - - 591
Fair value adjustment on other
financial liability - - - - - - (552) (552)
Fair value adjustment on
derivatives financial
instruments - - - - - - 136 136
Share based payment expense - - - - - - (90) (90)
Share of profits from
associates and joint ventures 5,549 - - 1,707 1,418 219 3,697 12,590
Impairment of loans - - - - - - (904) (904)
ECL Provision - 326 (11) (1) - 1 (533) (218)
Foreign currency (losses) /
gains - 336 (230) 6 2 (48) (58) 8
------------------------------- --------- -------- ----------- -------- -------- -------- ---------- ---------
Profit/(loss) before interest
and taxation 6,140 (6,176) 21,903 (967) 3,123 762 536 25,321
Interest income - (664) 88 3 (107) (469) 3,515 2,366
Finance costs - (982) (3,571) - (328) (389) (7,335) (12,605)
------------------------------- --------- -------- ----------- -------- -------- -------- ---------- ---------
Profit/(loss) for the period
before tax 6,140 (7,822) 18,420 (964) 2,688 (96) (3,284) 15,082
Taxation - 1,776 (3,580) - (276) 96 (1,397) (3,381)
------------------------------- --------- -------- ----------- -------- -------- -------- ---------- ---------
Profit/(loss) for the period 6,140 (6,046) 14,840 (964) 2,412 - (4,681) 11,701
------------------------------- --------- -------- ----------- -------- -------- -------- ---------- ---------
Reportable segment assets and
liabilities
Non-current assets
Investment properties - 107,225 311,180 64,020 24,390 21,843 67,307 595,965
Deposits paid on investment
properties - - - - - - 8,500 8,500
Property, plant and equipment - 43 374 - - 30 1,675 2,122
Intangible assets - 59 - - - - 1,566 1,625
Other investments - - 1 - - - - 1
Investment in associates and
joint ventures 20,311 - - 49,179 5,028 19,523 77,366 171,407
Related party loans receivable - - - - - - 12,477 12,477
Other loans receivable - - - - - - 29,290 29,290
Deferred tax - 6,393 12,819 - 537 370 2,782 22,901
------------------------------- --------- -------- ----------- -------- -------- -------- ---------- ---------
Total non-current assets 20,311 113,720 324,374 113,199 29,955 41,766 200,963 844,288
Current assets
Trade and other receivables - 11,658 7,114 (8) 2,343 340 17,811 39,258
Current tax refundable - - 740 - - - 29 769
Related party loans receivable - - - - - - 2,693 2,693
Derivative financial
instruments - - - - - - 127 127
Cash and cash equivalents - 147 8,981 257 68 711 15,381 25,545
------------------------------- --------- -------- ----------- -------- -------- -------- ---------- ---------
Total assets 20,311 125,525 341,209 113,448 32,366 42,817 237,004 912,680
------------------------------- --------- -------- ----------- -------- -------- -------- ---------- ---------
Liabilities
Total liabilities - 70,873 192,320 6,387 11,005 10,481 226,627 517,693
------------------------------- --------- -------- ----------- -------- -------- -------- ---------- ---------
Net assets 20,311 54,652 148,889 107,061 21,361 32,336 10,377 394,987
------------------------------- --------- -------- ----------- -------- -------- -------- ---------- ---------
Consolidated Other Light Accommo-
segmental analysis investments Hospitality Retail Office industrial dation Corporate Total
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
---------------------- ------------ ------------ --------- -------- ----------- --------- ---------- ---------
Type of property 31
December 2019 -
USD'000
Gross rental income - 1,834 8,021 7,340 1,036 6,045 - 24,276
Straight-line rental
income accrual - - (171) (394) 158 236 - (171)
---------------------- ------------ ------------ --------- -------- ----------- --------- ---------- ---------
Revenue - 1,834 7,850 6,946 1,194 6,281 - 24,105
Property operating
expenses - - (4,650) (862) (35) (1,000) 263 (6,284)
---------------------- ------------ ------------ --------- -------- ----------- --------- ---------- ---------
Net property income - 1,834 3,200 6,084 1,159 5,281 263 17,821
Other income - - 77 2 - - 2,879 2,958
Administrative
expenses (including
corporate
structuring costs) - (155) (882) (391) (40) (128) (8,434) (10,030)
---------------------- ------------ ------------ --------- -------- ----------- --------- ---------- ---------
Profit/(loss) from
operations - 1,679 2,395 5,695 1,119 5,153 (5,292) 10,749
Fair value adjustment
on investment
properties - (107) (11,861) 4,198 681 10,099 1 3,011
Fair value adjustment
on other investments 591 - - - - - - 591
Fair value adjustment
on other financial
liability - 194 - - - - (746) (552)
Fair value adjustment
on derivatives
financial
instruments - - - 8 - - 128 136
Share based payment
expense - - - - - - (90) (90)
Share of profits from
associates and joint
ventures (36) 3,741 3,162 232 105 8 5,378 12,590
Impairment of loans - - - - - - (904) (904)
ECL Provision - 1 326 (3) (6) (3) (533) (218)
Foreign currency
(losses) / gains - (234) 292 (345) 39 62 194 8
---------------------- ------------ ------------ --------- -------- ----------- --------- ---------- ---------
Profit/(loss) before
interest and
taxation 555 5,274 (5,686) 9,785 1,938 15,319 (1,864) 25,321
Interest income - 3 17 87 7 4 2,248 2,366
Finance costs - (1,252) (1,151) (3,282) (328) (669) (5,923) (12,605)
---------------------- ------------ ------------ --------- -------- ----------- --------- ---------- ---------
Profit/(loss) for the
periodbefore tax 555 4,025 (6,820) 6,590 1,617 14,654 (5,539) 15,082
Taxation - (174) 4,467 (2,661) (175) (3,656) (1,182) (3,381)
---------------------- ------------ ------------ --------- -------- ----------- --------- ---------- ---------
Profit/(loss) for the
period 555 3,851 (2,353) 3,929 1,442 10,998 (6,721) 11,701
---------------------- ------------ ------------ --------- -------- ----------- --------- ---------- ---------
Reportable segment
assets and
liabilities
Non-current assets
Investment properties - 53,080 201,543 171,382 31,088 138,872 - 595,965
Deposits paid on
investment
properties - - - - - - 8,500 8,500
Property, plant and
equipment - - 44 59 - 240 1,779 2,122
Intangible assets - - 57 464 - - 1,104 1,625
Other investments - - - - - - 1 1
Investment in
associates and joint
ventures 7,103 70,461 59,298 20,799 12,494 1,252 - 171,407
Related party loans
receivable - - - - - - 12,477 12,477
Other loans
receivable - - - - - - 29,290 29,290 Deferred tax - 2,390 12,238 4,262 695 3,303 13 22,901 ---------------------- ------------ ------------ --------- -------- ----------- --------- ---------- --------- Total non-current assets 7,103 125,931 273,180 196,966 44,277 143,667 53,164 844,288 Current assets Trade and other receivables - 477 11,582 1,804 2,455 5,675 17,265 39,258 Current tax refundable - - 35 453 139 41 101 769 Related party loans receivable - - - - - - 2,693 2,693 Derivative financial instruments - - - - - - 127 127 Cash and cash equivalents - 78 1,445 8,274 216 179 15,353 25,545 ---------------------- ------------ ------------ --------- -------- ----------- --------- ---------- --------- Total assets 7,103 126,486 286,242 207,497 47,087 149,562 88,703 912,680 ---------------------- ------------ ------------ --------- -------- ----------- --------- ---------- --------- Liabilities Total liabilities - 55,127 74,070 175,199 11,078 32,179 170,040 517,693 ---------------------- ------------ ------------ --------- -------- ----------- --------- ---------- --------- Net assets 7,103 71,359 212,172 32,298 36,009 117,383 (81,337) 394,987 ---------------------- ------------ ------------ --------- -------- ----------- --------- ---------- ---------
12. Subsequent events
The acquisition of Club Med Cap Skirring closed on the 27th of 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 ("Provisional Purchase Price"), subject to an adjustment based on the final balance sheet and the related profit and loss accounts of SIGHC. On 27 January, Casamance Limited ("Casamance"), a wholly owned subsidiary of Grit paid EUR15.5 million being 96% of the Provisional Purchase Consideration, the balance of the purchase price will be settled post the audit of the completion accounts of SIGHC dated 27 January 2020. EUR6.4 million of The Provisional Purchase Price was funded through a debt facility from Bank ABC, the loan was availed to Paradise Hospitality Group (100% shareholder of Casamance), and injected into Casamance through a EUR6.4 million shareholder loan. The loan is for a 5 year term and attracts interest at Euribor (floored at zero) plus 4.6%.
Société de Gestion Touristique du Cap ("SOGETOC"), a wholly owned subsidiary of Club Med SAS signed a 12 year triple net lease with SIGHC commencing on 27 January 2020, the initial annual rent is EUR1.3 million ("Initial Rent") equating to 8% of the property value (EUR 15m) plus the pre development costs incurred up to closing (EUR1.5 million). The lease is payable quarterly in advance with an annual escalation of 66.6% of European CPI, with a collar of 1% to 2%.
Casamance also entered into an Owner Agency Agreement appointing Club Med SAS as its representative to carry out the redevelopment program at the resort which will involve the renovation and upgrade of the existing hotel, plus the addition of 122 rooms taking the resort to 326 keys. The development budget is EUR 26.5m, and guaranteed by Club Med at EUR28.0 million. Club Med will pay rent monthly during the development period of 8% of funds deployed per annum ("Development Rent"), and a final rent will be determined on completion of the redevelopment which will equate to the escalated Initial Rent plus 8% of the final project cost.
Six months
ended
31-Dec-19
13. Company distribution calculation (1) USD'000
----------------------------------------------------------------------------------- --------------
Adjusted EPRA Earnings 16,874
Company specific distribution adjustments
- VAT Credits utilised on rentals 304
- Interest related to AnfaPlace Mall areas under construction 53
- Depreciation and amortisation 259
- Share based payments 90
- Antecedent dividend 418
- LLR Initial day one gain (2,066)
- Operating costs related to AnfaPlace Mall refurbishment costs 271
DISTRIBUTABLE EARNINGS TO GRIT SHAREHOLDERS 16,203
----------------------------------------------------------------------------------- --------------
DISTRIBUTABLE INCOME PER SHARE (USD cps) 5.48
----------------------------------------------------------------------------------- --------------
- Profits (withheld)/released (678)
----------------------------------------------------------------------------------- --------------
TOTAL DISTRIBUTABLE EARNINGS TO GRIT SHAREHOLDERS 15,525
----------------------------------------------------------------------------------- --------------
TOTAL DISTRIBUTABLE INCOME PER SHARE (USD cps) 5.25
----------------------------------------------------------------------------------- --------------
Shares '000
--------------
Weighted average shares in issue 308,268
Less: Weighted average treasury shares for the year (12,546)
Add: Weighted average shares vested in Long term incentive scheme 1,859
----------------------------------------------------------------------------------- --------------
EPRA SHARES 297,581
----------------------------------------------------------------------------------- --------------
Less: Vested shares in consolidated entities (1,859)
----------------------------------------------------------------------------------- --------------
DISTRIBUTION SHARES 295,722
----------------------------------------------------------------------------------- --------------
Distribution declared:
Interim USD5.25 cps
(1 The distribution calculation is disclosed to provide clarity regarding the interim dividend
distribution of USD5.25 per share and to reconcile 'Distributable earnings' to 'Basic Earnings
attributable to the owner of the parent'.)
14. EPRA financial metrics
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 and joint ventures, 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 Anfa Shopping Centre's areas under construction, Listing and set-up costs, depreciation and amortisation , share based payments, antecedent dividends, operating costs relating to Anfa Shopping Centre'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 and considered pro forma financial information for the purposes of JSE Listings Requirements.
The pro forma financial information has been compiled for illustrative purposes only and is the responsibility of the Directors. Due to the nature of this information, it may not fairly present the Grit's financial position, changes in equity and results of operations or cash flows going forward. The pro forma information has been compiled in terms of the JSE Listings Requirements and the Revised Guide on Pro Forma Information by SAICA.
Six months Six months
ended Ended
31-Dec-19 31-Dec-18
14. Adjusted administration expenses USD'000 USD'000
------------------------------------------------------------------------------------------ ------------ ------------
Administrative expenses (including corporate structuring costs) 10,030 8,223
Less Admin expenses (non-controlling interest) (75) (706)
Less Acquisition and setup costs (1,130) (2,113)
------------------------------------------------------------------------------------------ ------------ ------------
Adjusted administration expenses 8,825 5,404
------------------------------------------------------------------------------------------ ------------ ------------
14a. EPRA earnings
Six months Six months
ended Ended
31-Dec-19 31-Dec-18
EPRA earnings USD'000 USD'000
------------------------------------------------------------------------------------------ ------------ ------------
Basic Earnings per above 11,701 20,950
Add Back:
- Total fair value adjustment on investment properties (486) (12,373)
- Fair value adjustments included under income from associates and joint ventures (2,535) (1,925)
- ECL Provision 218 -
- Fair value adjustment on other investments (591) (26)
- Fair value adjustment on other financial asset 552 -
- Fair value adjustment on derivative financial instruments (136) -
- Deferred tax in relation to the above 1,041 4,331
- Acquisition costs not capitalised 1,131 2,007
- Non-controlling interest included in basic earnings 1,427 (307)
------------------------------------------------------------------------------------------ ------------ ------------
EPRA EARNINGS 12,322 12,657
------------------------------------------------------------------------------------------ ------------ ------------
EPRA EARNINGS PER SHARE (DILUTED) 4.14 4.04
Company specific adjustments
- Unrealised foreign exchange gains or losses 403 4,213
- Straight-line leasing and amortisation of lease premiums (non-cash rental) 1,867 (642)
- Amortisation of Right of use of land (non-cash) - 167
- Impairment of loan 904 -
- Deferred tax in relation to the above 1,378 -
------------------------------------------------------------------------------------------ ------------ ------------
Total Company Specific adjustments 4,552 3,737
------------------------------------------------------------------------------------------ ------------ ------------
ADJUSTED EPRA EARNINGS 16,874 16,394
------------------------------------------------------------------------------------------ ------------ ------------
ADJUSTED EPRA EARNINGS PER SHARE (DILUTED)USD cps 5.67 5.36
Shares '000 Shares '000
------------------------------------------------------------------------------------------ ------------ ------------
Weighted average shares in issue 308,224 291,971
Less: Non-entitled shares - (4,301)
Less: Weighted average treasury shares for the period (12,546) (9,940)
Add: Weighted average share awards and shares vested shares in Long term incentive scheme 1,859 1,943
------------------------------------------------------------------------------------------ ------------ ------------
EPRA SHARES 297,537 279,673
------------------------------------------------------------------------------------------ ------------ ------------
As at As at
31-Dec-19 30-Jun-19
14b. EPRA NAV USD'000 USD'000
-------------------------------------------------------------------------- ------------ ------------
NET ASSET VALUE OF THE GROUP 392,416 389,949
ADD BACK:
Fair value of financial instruments (93) 43
Net impairment on financial assets (ECL) 766 548
Deferred tax from revaluation of properties 48,951 44,410
-------------------------------------------------------------------------- ------------ ------------
EPRA NAV 442,040 434,950
-------------------------------------------------------------------------- ------------ ------------
EPRA NAV PER SHARE (cents per share) 144.7 147.1
Shares'000 Shares'000
Total shares in issue 316,236 306,396
Less: Treasury shares for the period (12,546) (12,546)
Add: Share awards and shares vested shares in Long term incentive scheme 1,859 1,859
-------------------------------------------------------------------------- ------------ ------------
EPRA SHARES 305,549 295,709
-------------------------------------------------------------------------- ------------ ------------
Six months Six months
ended Ended
31-Dec-19 31-Dec-18
15. Headline Earnings Notes USD'000 USD'000
------------------------------------------------------------------------------------ ------ ----------- -----------
Basic earnings 13,130 20,643
Fair value adjustments on investment property 3 (3,011) (15,025)
Deferred taxation on investment property revaluation 1,041 4,331
Other - 51
Share of fair value adjustment on investment property accounted by associates and
joint ventures 4 (2,535) (1,924)
------------------------------------------------------------------------------------ ------ ----------- -----------
Headline earnings attributable to shareholders 8,625 8,076
-------------------------------------------------------------------------------------------- ----------- -----------
Weighted average number of shares * 308,268 291,971
-------------------------------------------------------------------------------------------- ----------- -----------
Earnings per share 4.26 7.07
Basic and diluted earnings per share (cents) 4.26 7.07
-------------------------------------------------------------------------------------------- ----------- -----------
Headline diluted earnings per share (cents) 2.80 2.77
-------------------------------------------------------------------------------------------- ----------- -----------
OTHER NOTES
The abridged unaudited consolidated financial statements for the six months period ended 31 December 2019 ("abridged unaudited consolidated financial statements")have been prepared in accordance with the measurement and recognition requirements of International Financial Reporting Standards ("IFRS"), the JSE Listings Requirements, the LSE Listing Rules, the SEM Listing Rules and the requirements of the Mauritian Companies Act 2001. 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 judgement disclosed in note 2 and 1 respectively.
The Group is required to publish financial results for the six months ended on 31 December 2019 in terms of Listing Rule 12.19 of the SEM, the JSE Listings Requirements and the LSE Listing Rules. The Directors are not aware of any matters or circumstances arising subsequent to the period ended 31 December 2019 that require any additional disclosure or adjustment to the financial statements. These abridged unaudited consolidated financial statements were approved by the Board on 13 February 2020.
Copies of the abridged unaudited consolidated financial statements, 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: Mrs. Smitha Algoo-Bissonauth.
Top five shareholders for Grit as at 31 December 2019 are as follows:
Anchor shareholders (>5%) % ------------------------------------------ -------- Government Employees Pension Fund (PIC) 26.75% Drive In Trading Proprietary Limited 7.35% M&G Investment Management Ltd UK 5.99% Delta Property Fund 5.49% Management & Staff 5.23%
The Grit shareholders base is made up of LSE investors holding 28%, SEM investors holding 55% with the balance of 17% held on the JSE.
Interim dividend declaration
Shareholders are advised that dividend number 12 of USD 5.25 cents per share for the six months ended 31 December 2019 has been approved and declared by the Board of the Company. The source of the cash dividend is from rental income and cum-dividend reserve.
Salient dates and times
For shareholders on the Mauritian Register 2020
Announcement of cash dividend on JSE, SEM and LSE Thursday, 13 February
----------------------
Announcement of USD to Rand conversion rate released on SEM website by no later than 1:00pm Tuesday, 25 February
----------------------
Last date to trade cum dividend Tuesday, 3 March
----------------------
Shares trade ex-dividend Wednesday, 4 March
----------------------
Record date of dividend on the SEM Friday, 6 March
----------------------
Payment date of dividend Friday, 3 April
----------------------
Notes
1. All dates and times quoted above are local dates and times in Mauritius. The above dates and times are subject to change. Any changes will be released on the SEM website.
2. No dematerialisation or rematerialisation of share certificates may take place between Wednesday, 4 March 2020 and Friday, 6 March 2020, both days inclusive.
3. No transfer of shares between sub-registers in Mauritius, South Africa and the UK may take place between Tuesday, 25 February 2020 and Friday, 6 March 2020, both days inclusive.
4. Shareholders on the Mauritian sub-register who have opted to receive their dividends through bank transfer, will be paid in USD. Shareholders on the Mauritian sub-register who have opted to receive their dividends by cheque, will be provided with a MUR bank cheque, based on the USD:MUR exchange rate prevailing on the payment date, being Friday, 3 April 2020. Should the latter shareholders wish to receive their dividends through bank transfer, they are required to contact Grit's Mauritian Registrar and Transfer Agent, Intercontinental Secretarial Services Limited (email: Grit@intercontinentaltrust.com | Tel: +230 403 0800) by no later than Friday, 27 March 2020.
For shareholders on the South African Register 2020
Announcement of cash dividend on JSE, SEM and LSE Thursday, 13 February
----------------------
Announcement of USD to Rand conversion rate released on SENS by no later than 11:00am Tuesday, 25 February
----------------------
Last date to trade cum dividend Tuesday, 3 March
----------------------
Shares trade ex-dividend Wednesday, 4 March
----------------------
Record date of dividend on the JSE Friday, 6 March
----------------------
Payment date of dividend Friday, 3 April
----------------------
Notes
1. All dates and times quoted above are local dates and times in South Africa. The above dates and times are subject to change. Any changes will be released on SENS.
2. No dematerialisation or rematerialisation of share certificates may take place between Wednesday, 4 March 2020 and Friday, 6 March 2020, both days inclusive.
3. No transfer of shares between sub-registers in Mauritius, South Africa and the UK may take place between Tuesday, 25 February 2020 and Friday, 6 March 2020, both days inclusive.
4. Shareholders on the South African sub-register will receive dividends in South African Rand, based on the exchange rate to be obtained by the Company on or before Tuesday, 25 February 2020. A further announcement in this regard will be made on Tuesday, 25 February 2020.
For shareholders on the UK Register 2020
Announcement of cash dividend on JSE, SEM and LSE Thursday, 13 February
----------------------
Announcement of USD to Rand conversion rate released on the Regulatory Information Service Tuesday, 25 February
of the LSE by no later than 10:00am
----------------------
Last date to trade cum dividend Wednesday, 4 March
----------------------
Shares trade ex-dividend Thursday, 5 March
----------------------
Record date of dividend on the LSE Friday, 6 March
----------------------
Last date for receipt of currency election forms Friday, 6 March
----------------------
Payment date of dividend Friday, 3 April
----------------------
Notes
1. All dates and times quoted above are local dates and times in the UK. The above dates and times are subject to change. Any changes will be released on a Regulatory Information Service of the LSE.
2. No dematerialisation or rematerialisation of share certificates may take place between Wednesday, 4 March 2020 and Friday, 6 March 2020, both days inclusive.
3. No transfer of shares between sub-registers in Mauritius, South Africa and the UK may take place between Tuesday, 25 February 2020 and Friday, 6 March 2020, both days inclusive.
4. Shareholders on the UK sub-register will receive dividends in USD. However, shareholders can elect to have dividends paid in sterling (GBP) and the option to elect a sterling dividend payment for this dividend will be available to shareholders until Friday, 6 March 2020 (the "Election Date").
5. Further details together with a copy of the Dividend Currency Election Form, which should be sent to Link Asset Services, The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU when completed, will be available on the Company's website shortly at http://grit.group/. CREST shareholders must elect via CREST.
In terms of the JSE Listings Requirements regarding Dividends Tax, the following information is only of direct application to shareholders on the South African share register, as the dividend is regarded as a foreign dividend for shareholders on the South African share register:
-- the final dividend is subject to South African Dividends Tax; -- the local dividend tax rate is 20%; -- there is no withholding tax payable in Mauritius; -- the number of ordinary shares in issue is 316 235 546; and -- the Mauritian income tax reference number of the Company is 27331528.
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.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
IR GZGMZGFFGGZG
(END) Dow Jones Newswires
February 13, 2020 02:01 ET (07:01 GMT)
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