GRIT REAL ESTATE INCOME GROUP LIMITED (Registered in Guernsey) (Registration number: 68739) LSE share code: GR1T SEM share codes (dual currency trading): DEL.N0000 (USD) / DEL.C0000 (MUR) ISIN: GG00BMDHST63 LEI: 21380084LCGHJRS8CN05 ("Grit" or the "Company" or the "Group") | |
FULL YEAR AUDITED CONSOLIDATED RESULTS FOR THE YEAR ENDED 30 JUNE 2023
The board of Directors (the “Board”) of Grit Real Estate Income Group Limited, a leading pan-African real estate company focused on investing in, developing and actively managing a diversified portfolio of assets underpinned by predominantly US$ and Euro denominated long-term leases with high quality multinational tenants, today announces its audited consolidated results for the financial year ended 30 June 2023.
Bronwyn Knight, Chief Executive Officer of Grit Real Estate Income Group Limited, commented:
“The financial year to 30 June 2023 was a transitory year for the Group characterised by disposals of non-core assets, reducing debt and debt refinancing risks and substantial progress on the acquisition of a majority interest in GREA, the Group’s development associate. GREA successfully delivered the award-winning Precinct office park and Artemis Curepipe Hospital developments in the year and is on time and on budget on the ENEO Tatu City call centre facility, expected to be completed mid 2024.
Global interest rate volatility provided headwinds to our strong property portfolio operating performance, where a 5.7% increase in net operating income (excluding properties sold) was impacted by significantly rising finance costs. Our focus will remain on sustainably growing distributable income and enhancing capital growth while continuing to target key portfolio metrics such as lowering the LTV, vacancy and cost factors and further strengthening the balance sheet and liquidity position through focused asset recycling initiatives.”
Financial & Portfolio highlights as at 30 June 20231
| 30 June 2023 | 30 June 2022 | Increase/ (Decrease) |
IFRS diluted earnings / (loss) per share | (US$4.90) cps | US$2.62 cps | (US$7.52) cps |
Adjusted EPRA earnings per share2 | US$0.72 cps | US$3.13 cps | (US$2.41) cps |
Distributable earnings per share3 | US$4.29 cps | US$5.08 cps | (US$0.79) cps |
Dividend per share | US$2.0 cps | US$4.50 cps | (US$2.5) cps |
Contractual rental collected | 101.3% | 92.8% | +8.5% |
EPRA NRV per share2 | US$72.8 cps | US$79.4 cps | (US$6.6cps) |
Total Income Producing Assets4 | US$862.0m | US$856.7m | US$5.3m |
Group LTV | 44.3% | 46.7% | (2.4%) |
Weighted average cost of debt | 8.4% | 7.1% | 1.3% |
Portfolio highlights | | | |
Property net operating income from ongoing operations5 | US$52.0m | US$49.2m | +5.7% |
EPRA cost ratio (including associates)6 | 13.3% | 13.0% | +0.3ppt |
EPRA portfolio occupancy rate7 | 93.6% | 95.3% | (1.7ppt) |
WALE8 | 4.4 yrs. | 4.8 yrs. | (0.4 yrs.) |
Revenue earned from multinational tenants9 | 85.3% | 85.6% | (0.3ppt) |
Income in hard currency10 | 94.5% | 91.5% | +3.0ppt |
Grit proportionately owned lettable area ("GLA") | 298,962m2 | 366,926m2 | (67,964m2) |
Weighted average annual contracted rent escalations | 3.0% | 5.4% | (2.4ppt) |
Notes
1 | Various alternative performance measures (APMs) are used by management and investors, including a number of European Public Real Estate Association ("EPRA") metrics, Distributable Earnings, Total Income Producing Assets and Property portfolio net operating income. APMs are not a substitute, and not necessarily better for measuring performance than statutory IFRS results and where used, full reconciliations are provided. |
2 | Explanations of how EPRA figures are derived from IFRS are shown in notes 11 to 13 (unaudited). |
3 | Distributable earnings per share is an APM derived from IFRS and shown in note 12 (unaudited). |
4 | Includes controlled Investment properties with Subsidiaries, Investment Property owned by Associates and Joint Ventures, Deposits paid on Investment properties and other investments, property plant and equipment, intangibles, and related party loans – Refer to Chief Financial Officer's Statement for reconciliation. |
5 | Property net operating income (“NOI”) from continuing operations is an APM and is derived from IFRS NOI adjusted for the results of associates and joint ventures, excluding the impact of disposals of BHI and LLR. A full reconciliation is provided in the Chief Financial Officers Statement |
6 | Based on EPRA cost to income ratio calculation methodology shown in note 13. |
7 | Property occupancy rate based on EPRA calculation methodology (Includes associates and excludes direct vacancy cost). Please see calculation methodology shown in note 13. |
8 | Weighted average lease expiry (“WALE”). |
9 | Forbes 2000, Other Global and pan African tenants. |
10 | Hard (US$ and EUR) or pegged currency rental income. |
Summarised results commentary:
• | Despite economic headwinds facing the global property industry, Grit’s property portfolio performed well with revenue increasing 1.9% (Revenue from ongoing operations, which excludes the impact of BHI and LLR, grew 7.3%). NOI (excluding properties sold) grew 5.7% and the Group collected 101.3% of contractual revenue over the period. |
• | The value of the property portfolio declined by 4.5%, predominantly as a result of asset disposals which offset the increased interest in Gateway Real Estate Africa (“GREA”). Excluding the impacts of this corporate activity, the ongoing property portfolio experienced a 0.8% (US$5.9 million) decline in fair value against a backdrop of global economic uncertainty, once again demonstrating relative stability in the portfolio. |
• | High interest rates impacted the group with cash WACD increasing from 7.1% to 7.97% for the year. Our hedging policy protected us from a large part of the c3.6% increase in base rates over the year. Notwithstanding the hedges, group finance costs increased by US$11.3 million, representing a 46.5% increase as compared to the prior year (which includes the full year impact of the Orbit acquisitions and the developments completed during the year). The US$100.0 million notional interest rate hedge that expired in October 2023 has been replaced – please refer to post balance sheet events below. |
• | In line with the Grit 2.0 strategy, asset management fee income within the subsidiaries grew to US$1.4 million (an increase of 219% from the prior year comparative of US$0.48 million). Additionally, the insourcing of property management services in Ghana and Kenya resulted in net savings of US$0.16 million (with the current years fees of US$0.11 million ending during the year). Grit’s proportionate share of on-going asset management and development management fee income from APDM (treated as a joint venture for the financial year) amounted to US$3.1 million for the year. |
• | Administrative expenses increased by 40.3% due to a combination of high inflationary pressures, onboarding costs surrounding the increased investment in APDM and GREA, the full year impact of the income generating Kenyan office and the Group’s investment towards future growth (in the setup costs of Bora Africa). The administrative expenses as a percentage of total income producing assets amounted to 2.4%. This is higher than the medium-term objective of 1.8%, which the Group aims to achieve through cost reduction initiatives and an expected increase in the asset base as a result of the acquisition of GREA. |
• | Taking the above into account, Adjusted EPRA earnings dropped by 77.0% to US$0.72cps. Distributable income dropped 15.6% to US$4.29cps as the company continues to obtain significant VAT credits. The 8.3% reduction in EPRA NRV to US$72.8cps was driven by a combination of property valuations (US$1.05cps), provisions and write offs against property projects (US$1.56cps) and transaction costs related to the GREA acquisition and US$306m syndicated loan (US$0.71cps). |
• | During the financial year over US$90.0 million of cash was utilised in support of the Group’s strategic objectives of debt reduction and increased ownership in GREA and APDM. While the Board understands the importance of dividends to our shareholders, it has elected against declaring a second half dividend. Total dividend for the year amounts to US$2.00 cps following the interim dividend of US$2.00cps declared for the six months ended 31 December 2022 (46.6% pay-out of distributable earnings). Should sufficient progress be made on implementing the new GREA dividend policy and dividend normalisation from recently completed GREA developments, the Board will consider either a special dividend or an increased H1 dividend. |
• | The Group continued to reduce debt levels with a net reduction of US$28.3 million in the financial year. Group LTV dropped by 2.4% to 44.3%. |
Corporate highlights – execution on strategy
• | The Board targeted US$160 million of asset disposals by 31 December 2023 and has made significant progress towards this target with the disposal of interests in BHI and LLR, at near book value. Capital was redeployed to debt reduction and to the acquisition of GREA and APDM – please refer to post balance sheet events below. |
• | The Group unveiled its Grit 2.0 strategy and focus areas post the acquisition of GREA and APDM, which includes higher targeted fee income strategies and the pursuit of a capital light strategy through industry focused substructures. |
• | The Group won several high-profile industry awards for a number of GREA delivered developments and for the innovative Sustainability linked debt refinance concluded in October 2022. |
Notable Post balance sheet events
• | On the 26th of July 2023 the Group announced the conclusion of the final phase in the acquisition of a majority interest in GREA and APDM from Gateway Africa Real Estate Limited and Prudential Impact Investments Private Equity LLC, which resulted in the Group owning a direct interest of 51.48% in GREA and 78.95% in APDM. The transaction became unconditional, and the share transfer was lodged following receipt of the Mauritius Prime Minister’s Office consent, which was the final condition precedent. Although the share transfer took place after the end of the financial year, beneficial ownership of the 51.48% was attained on 30 June 2023 and as such the Group treated GREA as a joint venture in preparing its financial statements for the year ended 30 June 2023. The required final amendments to the Shareholders Agreement (which upon signature will result in control over GREA and therefore allow for the full consolidation of GREA and APDM - please refer to The Basis of Presentation 1.2 Critical Judgements and Estimates), are expected imminently. On the 3rd of October 2023 GREA issued shares to APDM in terms of the Managers Incentive Program and from this date the Group, through its shareholding in APDM, holds a combined direct and indirect interest of 54.22%. |
• | Bora Africa, a specialist industrial real estate vehicle, was established on 24 October 2023 when 5 Grit owned industrial assets namely Imperial, Bollore, Orbit and two industrial land assets were transferred to the newly established entity. Bora is a wholly owned subsidiary of Grit and has therefore resulted in no change to existing beneficial interests. The International Finance Corporation, a division of the World Bank, has approved a US$30 million subordinated notes issue by Bora Africa to fund future pipeline and impact focused real estate acquisitions. |
• | On 16 October 2023, interest rate hedges over US$100.0 million notional against LIBOR rates above 1.58% to 1.85%, matured. The Group concluded a new US$100.0 million notional interest rate hedge from this date, with a new two-year collar and cap instrument providing protection against rates above 4.75% on SOFR rates while allowing savings up to 3.00% SOFR rate. The Group has therefore maintained its overall hedged position at US$200 million. |
FOR FURTHER INFORMATION, PLEASE CONTACT:
Grit Real Estate Income Group Limited | |
Bronwyn Knight, Chief Executive Officer | +230 269 7090 |
Darren Veenhuis, Investor Relations | +44 779 512 3402 |
| |
Cavendish Capital Markets Limited – UK Financial Adviser | |
William Marle/Teddy Whiley (Corporate Finance) | +44 20 7220 5000 |
Pauline Tribe (Sales) | +44 20 3772 4697 |
| |
Perigeum Capital Ltd – SEM Authorised Representative and Sponsor | |
Shamin A. Sookia | +230 402 0894 |
Kesaven Moothoosamy | +230 402 0898 |
| |
Capital Markets Brokers Ltd – Mauritian Sponsoring Broker | |
Elodie Lan Hun Kuen | +230 402 0280 |
NOTES:
Grit Real Estate Income Group Limited is the leading pan-African real estate company focused on investing in, developing and actively managing a diversified portfolio of assets in carefully selected African countries (excluding South Africa). These high-quality assets are underpinned by predominantly US$ and Euro denominated long-term leases with a wide range of blue-chip multinational 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 both income and capital growth.
The Company holds its primary listing on the main market of the London Stock Exchange (LSE: GR1T) and a dual currency trading secondary listing on the Stock Exchange of Mauritius (SEM: DEL.N0000 (USD) / DEL.C0000 (MUR)).
Further information on the Company is available at http://grit.group/.
Directors:
Peter Todd (Chairman), Bronwyn Knight (Chief Executive Officer) *, Leon van de Moortele (Chief Financial Officer) *, David Love+, Sir Samuel Esson Jonah+, Catherine McIlraith+, Jonathan Crichton+, Cross Kgosidiile and Lynette Finlay+.
(* Executive Director) (+ independent Non-Executive Director)
Company secretary: Intercontinental Fund Services Limited
Registered office address: PO Box 186, Royal Chambers, St Julian's Avenue, St Peter Port, Guernsey GY1 4HP
Registrar and transfer agent (Mauritius): Intercontinental Secretarial Services Limited
SEM authorised representative and sponsor: Perigeum Capital Ltd
UK Transfer secretary: Link Market Services Limited
