- Group LTV: Increased from 40% to 42%.
- Unutilized Committed Bank Debt Facilities: ZAR6.2 billion as of December 31, 2023.
- Cash on Balance Sheet: ZAR1 billion, down from ZAR1.7 billion in FY23.
- Total Distribution Income: Around ZAR2.4 billion.
- Dividend Payout Ratio: 82.5%, with total dividends just below ZAR2 billion.
- Property Sales: 9 properties sold for ZAR635 million.
- CapEx and Development Spending: ZAR1 billion.
- Assets Under Management (Funds Management): ZAR7.9 billion.
- Dividend Income from Co-Investment: Down from ZAR79 million to ZAR48.6 million.
- Management Fees: Increased from ZAR48 million to ZAR52 million.
- International Assets: 43.5% of total assets, contributing 32.5% of distributable income.
- Rand Equivalent of Foreign Currency Income: ZAR796 million, up from ZAR763 million.
- Distributable Income: ZAR2.414 billion, down 9.3% from ZAR2.662 billion.
- Gross Property Income: Just short of ZAR7 billion, down 0.6%.
- Property Expenses: Just over ZAR2 billion, up 7.1%.
- Net Property Income: Down 3.5% to ZAR4.882 billion.
- Other Operating Expenses: Up 19.2% to ZAR539 million.
- Finance Costs: Up 16.9% to just over ZAR2.1 billion.
- Finance and Other Income: ZAR657 million, up 4.6%.
- Property Portfolio Value: ZAR140 billion, relatively stable.
- Total Nominal Borrowings: ZAR70 billion, up from ZAR69.3 billion.
- Net Asset Value (NAV) per Share: Down 3.9% to ZAR20.67.
- Interest Cover Ratio: 2.5 times, down from 2.9 times.
- Dividend per Share: Down 8.6%.
- Guidance for FY24: Expected dips down 10% to 12%.
Release Date: March 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Growthpoint Properties Ltd (JSE:GRT, Financial) reported a strong performance from its V&A Waterfront property, with net property income increasing by 17.2% driven by a 109% increase in turnover rental.
- The company successfully disposed of nine properties for ZAR635 million and a residential development for ZAR141 million, generating a profit of ZAR21 million.
- Growthpoint Properties Ltd (JSE:GRT) signed a purchase power agreement securing 195 gigawatt hours of green energy, estimated to cover 32% of current usage, starting in mid-2025.
- The company maintained a strong liquidity position with ZAR6.2 billion worth of unutilized committed bank debt facilities and ZAR1 billion of cash on the balance sheet.
- Growthpoint Properties Ltd (JSE:GRT) saw a positive contribution from its V&A Waterfront and Growthpoint Australia investments, with the latter delivering an extra ZAR18 million due to favorable currency movements and tax adjustments.
Negative Points
- Group LTV increased from 40% to 42%, driven by property value write-downs in Australia and South Africa, and additional debt levels.
- Distributable income per share and dividend per share decreased by 8.6%, with overall distributable income down 9.3% compared to the prior period.
- The company's property expenses increased by 7.1%, and other operating expenses rose by 19.2%, impacting net property income which fell by 3.5%.
- Finance costs surged by 16.9% to over ZAR2.1 billion, driven by rising interest rates and higher debt levels.
- The healthcare fund's contribution was down ZAR21 million due to selling down shareholding and elevated arrears, impacting overall liquidity and dividend payouts.
Q & A Highlights
Q: What is Growthpoint Properties' view on Pick n Pay's recent performance and its impact on your portfolio?
A: Estienne de Klerk, Chief Executive Officer of South Africa, Executive Director: Pick n Pay occupies about 109,000 square meters in our portfolio, contributing roughly 6.3% of our retail revenue and about 2.3%-2.5% of our total South African portfolio revenue. We are in ongoing discussions with them regarding their occupancy. We anticipate some space cancellations and reductions, but we are confident in managing the situation and finding alternatives if necessary.
Q: What was the yield on the Gyle acquisition?
A: Norbert Sasse, Chief Executive Officer (Group): The Gyle acquisition was done at a running yield of about 13.4%. After accounting for necessary CapEx, we estimate a stabilized yield of just over 10%, which we consider decent for the UK market.
Q: Have GOZ's valuations reached their lowest point, or is there more downward adjustment expected?
A: Norbert Sasse, Chief Executive Officer (Group): We believe there might still be some downward adjustments in valuations for both GOZ and Globalworth until the interest rate cycle turns, which is expected in the second half of calendar 2024. Therefore, we anticipate some more write-downs in the near term.
Q: What drove the increase in operating costs for the Student Accommodation Fund (GSAH)?
A: Estienne de Klerk, Chief Executive Officer of South Africa, Executive Director: The increase was primarily due to the addition of the Peak and Apex studios and Brooklyn studios, which added close to ZAR33 million. Additional load-shedding costs contributed just under ZAR3 million, and CapEx on beds and mattresses added another ZAR2 million.
Q: What is the outlook for Growthpoint Properties' financial performance in FY25?
A: Norbert Sasse, Chief Executive Officer (Group): While we do not typically provide projections beyond the current financial year, we believe that things should be bottoming out. However, the real question mark remains around interest rates and their duration. We expect some upward pressure on our weighted average cost of debt, particularly from our international debt, which will impact our financial performance in FY25.
Q: What is the end game for Globalworth, considering its diminishing return profile?
A: Estienne de Klerk, Chief Executive Officer of South Africa, Executive Director: We do not foresee a need for additional equity at this stage. The company is actively managing its refinancing cycle and has taken steps to secure liquidity. While we are open to evaluating offers, we still see value in the CEE region and are not driven to sell out of it. Our focus is on optimizing the structure and addressing the minority position.
Q: Can you provide more details on the rights dispute in the office sector?
A: Estienne de Klerk, Chief Executive Officer of South Africa, Executive Director: We have provisioned ZAR35 million for the rights dispute, which we expect to reverse. This provision has impacted our office costs, and once resolved, it will bring down our like-for-like growth figures significantly.
Q: What is the current environment for office vacancies and leasing activity?
A: Norbert Sasse, Chief Executive Officer (Group): The leasing activity has been driven significantly by BPO call center demand, particularly in Durban and Cape Town. Traditional tenants like corporates and banks are still optimizing space, but we have seen substantial demand from BPOs, which has helped reduce vacancies. We expect this trend to continue, improving our office occupancy rates.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
