Despite challenging retail market conditions, London Stock Exchange listed Grit today announced robust interim results for the period ending 31 December 2018 with robust operational, strategic and financial performance following its listing on the main board of the London Stock Exchange on 31 July 2018.
“This has been another busy and successful period in which the Group continued to implement its investment strategy. “We successfully deployed the $132.2 million of capital raised from the London Stock Exchange Listing to complete strategic acquisitions in Ghana and Mozambique. The acquisition in Mozambique of the corporate accommodation residence to both Anadarko and the American Embassy had a positive impact on the Company’s net asset value in the period, but the capital raise and income distributions offset some of this value uplift.
“The Group has delivered good growth in the valuations of our investment assets and continues to focus on delivering on a target loan to value ratio of between 35% and 40% by the end of the financial year,” said Grit founder member and CEO Bronwyn Corbett.
“We are currently in the process of refinancing a number of the debt facilities which will see an overall reduction in finance costs and the delivery of a longer tenure debt profile. With the deployment of the capital raise there has been a significant reduction in the gearing of the Group at the period end to 43.4% (30 June 2018: 51.7%).”
Income producing asset value increased by 19.8% to US$796.3 million during the period, following the successful deployment of the US$132.2 million raised during the LSE listing. Distributable income of US$16.962 million was generated, equating to distributable earnings of US$6.06 cps (Interim 2018: US$6.07cps).
Considering the importance of the completion of the Anfa Shopping Centre’s redevelopment, the Board has elected to take a prudent approach and hold over a portion of the distribution to the end of year to ensure there is sufficient cash reserves should any unforeseen overruns occur on the redevelopment. The Board has thus declared an interim distribution of US$5.25 cps (i.e. 87% of distributable earnings).
In a challenging retail market, shareholder value has been protected through active management of the day to day operational activities including the tenant mix, extension of leases and exiting of non-performing brands, whilst at the same time progressing the Group’s strategy of focusing on convenience retail that services the basic needs of the supporting communities.
Lease negotiations (renewals, new leases and lease extensions) have successfully introduced new global counterparties into the portfolio tenancy mix, or lengthened some of the Group’s lease periods, which is reflected in the positive asset valuation uplift of 2.5% achieved.
Notable new leases concluded are:
– Global Petroleum Company – Leased premises expansion on remaining 10-year lease
– Swiss Embassy – New 5 year lease
– Spar – New supermarket anchor at Zimpeto for 5 year lease
– ENI – 3 units at Acacia Estate
– Marks & Spencer – 5-year extension to existing leasing at Anfa Place shopping Mall
– Terranova – New 9 year lease
EPRA NAV return from operations showed an increase of US$7.5 cps although this was diluted by the impact of the $132.2m capital raised in July 2018, which resulted in a net decrease of US$3.8 cps (being the reduction due to the capital raise of US$4.6 cps less the resultant value uptick, net of costs, from the acquired properties of US$0.6 cps). A further reduction in the NAV was due to the US$6.3 cps dividend paid in the period.
The Group utilized the proceeds of capital raised to complete asset purchases of:
– 80.1% of Acacia Estate (a housing compound in Maputo, Mozambique leased to the US State Department and Global Petroleum on long term corporate leases – US$38.8 million),
– 5th Avenue (an office complex in Accra, Ghana anchored by the American Tower Corporation and GCNet – US$11.5m), and
– 50% of CADS II Office Building (in Accra, Ghana fully let to Tullow Oil – US$8.5m).
In line with Grit’s soft hurdle rate of not being more than 25% exposed to one geography or asset class, the expansion into Ghana and acquisition of corporate accommodation further diversified the Company’s regional and sectoral footprint.
“Our portfolio is now situated between North, West, East and SADIC Africa. These regions are all driven by different economic drivers and do not track the same cycles. We are not heavily reliant on the commodity cycle and is exposed to other industries/sectors including retail, hospitality and financial services.
“We target to have 50% of our portfolio located in investment grade countries in Africa, being Botswana, Morocco and Mauritius, characterized by the ease of doing business and more sophisticated capital markets.
“Our investment pipeline remains focused on assets with multinational tenants and on securing revenues in hard currencies,” said Bronwyn Corbett.
The Company currently has 92.3% of its rental income from multinational tenants and collects 93.2% of the revenue stream in hard currency (including pegged currencies). The Group also settled debt amounting to US$46.4m which resulted in a material reduction in the Group’s LTV position to 43.4% at 31 December compared to 51.7% at 30 June 2018. The balance of the proceeds was utilized to commence construction on a warehouse in Nairobi, Kenya and for capital calls for Gateway Delta (a development company of which the Group owns 19.98%).
Operating costs on the entire portfolio (included assets held in associated companies) as a percentage of revenue decreased in the period from 18.6% for the period ending December 2017 to 15.2% in the period ending December 2018. This has been achieved through the acquisition of triple net lease assets and cost savings initiatives and synergies across the geographical locations.
The Group is continuing to focus on cost optimization both at a property and corporate level to reduce the overall cost base and deliver further value to our shareholders. Management will continue to focus on identifying potential investments where the Company has the current infrastructure cost base in place as well as the potential for the full internalization of the Company’s property management function across all markets.
“We expect retail to remain challenging in both the occupier and investment markets against the backdrop of an uncertain economic outlook, but we expect to deliver value by continuing to focus on maximizing the yield of the current portfolio and unlocking value through the Company’s operational expertise, financial strength and proactive asset management.
“Through opportunities presented by the Group’s recent LSE listing, we are well positioned to continue to selectively add high quality assets to its portfolio, focused on assets leased to multinational corporates and attracting hard currency rental streams, ensuring that potential investments are value accretive.
“We remain well placed to continue to benefit from our strong position in the market and deliver attractive returns to our shareholders over the short and longer term,” Bronwyn Corbett concluded.