Grit Real Estate Income Group (GR1T)
28-Feb-2024 / 07:00 GMT/BST
| 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") | |
ABRIDGED UNAUDITED CONSOLIDATED RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2023 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 Dollar and Euro denominated long-term leases with high quality multi-national tenants, today announces its results for the six months ended 31 December 2023. Bronwyn Knight, Chief Executive Officer of Grit Real Estate Income Group Limited, commented: “Grit’s strategy continues to focus on quality real estate assets with strong ESG credentials and long leases in hard currency to a resilient and diverse multinational customer base across the African continent. Evidence of the Grit 2.0 strategy and asset recycling, away from non-core sectors and into resilient and impact focused real estate, is increasingly becoming visible in our results and is expected to accelerate in the coming years. We are delivering on our cost control targets and are demonstrating disciplined capital allocation through our debt reduction targets and selected risk mitigated development opportunities and are today pleased to announce the resumption of dividends paid from cash operating earnings.” Financial and Portfolio highlights | | 6 Months ended 31 Dec 2023 | 6 Months ended 31 Dec 2022 | Increase/ Decrease | | Adjusted EPRA earnings per share2 | US$1.03 cps | US$1.02 cps | +1.0% | | Distributable earnings per share1 | US$2.07 cps | US$2.56 cps | -19.1% | | Dividend per share | US$1.50 cps | US$2.00 cps | -25.0% | | Property portfolio net operating income from continuing operations (proportionate9) | US$29.7m | US$25.7m | +15.6% | | EPRA cost ratio (including associates) 3 | 14.5% | 12.7% | +1.8 ppts | | Net finance costs | US$18.2m | US$16.5m | +10.3% | | Revenue earned from multinational tenants7 | 79.0% | 85.9% | -6.9 ppts | | Income produced in hard currency8 | 95.0% | 92.4% | +2.6 ppts | | | As at 31 Dec 2023 | As at 30 Jun 2023 | Increase/ Decrease | | EPRA NRV per share2 | US$68.1 cps | US$72.8 cps | -6.4% | | Group LTV | 47.6% | 44.8% | +2.8 ppts | | Total Income Producing Assets4 | US$847.9m | US$862.0m | -1.6% | | Contractual rental collected | 93.9% | 108.4% | -14.5 ppts | | WALE5 | 4.7 years | 4.4 years | +0.3 years | | EPRA portfolio occupancy rate6 | 95.5% | 93.6% | +1.9 ppts | | Grit proportionately owned lettable area (“GLA”) | 301,306m2 | 298,962m2 | +2,344m2 | | Weighted average annual contracted rent escalations | 3.1% | 3.0% | +0.1 ppts |
Summarised results commentary: | • | The Board is pleased to announce the resumption of the payment of dividends and has today declared US$1.50 cents per share ordinary dividend from cash operating earnings (Distributable earnings). | | • | We benefit from having built a business focused on quality real estate assets with strong ESG credentials and long leases to a resilient and diverse customer base that comprises more than 79% of strong multinational and investment grade tenants. Contractual lease escalations, which are predominantly inflation-linked, and new assets producing income, have contributed to growth in NOI in this reporting period and into the future. We now have 33 assets across 7 sectors with 95.0% of our leases in hard currency providing a strong foundation to our income generation and a resilient platform from which to pursue growth opportunities through active management, sector focused development substructures and external revenue generation from our professional services. | | • | For the purposes of these interim financials, Gateway Real Estate Africa Limited (“GREA”) and Africa Property Development Managers Limited (“APDM”) have been accounted for as joint ventures. Post recent amendments to the shareholders’ agreements, which now result in Grit exercising control over both GREA and APDM, the Board considers 1 January 2024 the most appropriate date to commence consolidation. | | • | EPRA net reinstatement value (“NRV”) per share of US$68.1 cents per share (30 June 2023: US$72.8 cents per share), is predominantly driven by a -2.7% fair value adjustment made on investment properties during the period, which was partially offset by increased capex and asset investment. This culminated in an overall decrease of 1.0% in the group’s proportionate share of property values (including GREA associates). | | • | Property portfolio net operating income (Grit proportionate ownership) increased 0.6%. Excluding the impact of disposals (Beachcomber and LLR from the prior year), NOI from continuing operations increased 15.6% and the Grit 2.0 recycling strategy is becoming increasingly evident within the composition of Group NOI. Diplomatic housing, healthcare and data centre segments have replaced earnings disposed of in the hospitality segment. | | • | Group Administrative costs reduced 15.4% in the six months to 31 December 2023 and remains on track to achieve the US$4.0 million cost reduction target (-19%) for the full year to 30 June 2024. | | • | Group WACD increased to 9.62%, resulting in a US$1.5 million increase (+8.2%) in finance costs for the six-month period. The Group has interest rate hedges amounting to US$200 million worth of notional debt. In addition, the Company is targeting to reduce the most expensive debt balances, and post consolidation, amalgamate individual GREA facilities within the current syndication. | | • | Final regulatory approvals for the unwinding of the Drive in Trading Black empowerment structure (“DiT”) have been received (see prior announcements). The Company will take direct ownership of its proportionate number of DiT Security Shares in exchange for making the US$17.5 million Guarantee Agreement payment to the GEPF by 30 March 2024, the implementation of which is currently under review. |
Post period end | • | On 16 February 2024, shareholders approved the disposal of interests in Bora Africa and Acacia Estates to GREA, which will form part of Grit’s equity contribution to the GREA $100 million recapitalisation that is expected to conclude in March 2024. The disposal of properties at or close to book value achieves the Board’s strategy of additional asset recycling and further reinforces the Group’s audited net asset value. By concluding the GREA capital raise with these proceeds, the Group (including GREA) receives a cash injection of US$48.5 million from the PIC’s subscription at NAV. This equity will initially be utilised to reduce the Group’s higher cost debt. Over the medium term these funds are expected to be redrawn and invested by GREA, upon careful capital allocation assessment, into risk mitigated and accretive development projects that are expected to meaningfully contribute to ESG impact, accelerated NAV growth and fee income generation to the Group as is contemplated under the Grit 2.0 strategy. |
Notes | 1 | Various alternative performance measures (APMs) are used by management and investors, including a number of European Public Real Estate Association ("EPRA") metrics, Distributable Earnings, Total Income Producing Assets and Property portfolio net operating income. APMs are not a substitute, and not necessarily better for measuring performance than statutory IFRS results and where used, full reconciliations are provided. | | 2 | Explanations of how EPRA figures and Distributable earnings per share are derived from IFRS are shown in note 16. | | 3 | Based on EPRA cost to income ratio calculation methodology which includes the proportionately consolidated effects of associates and joint ventures. | | 4 | Includes controlled Investment properties with Subsidiaries, Investment Property owned by Associates and Joint Ventures, other assets owned by associates and joint ventures, deposits paid on Investment properties and other investments, property plant and equipment, intangibles, and related party loans. | | 5 | Weighted average lease expiry (“WALE”). | | 6 | Property occupancy rate based on EPRA calculation methodology - Includes associates and joint ventures. | | 7 | Forbes 2000, Other Global and pan African tenants. | | 8 | Hard (US$ and EUR) or pegged currency rental income. | | 9 | Property net operating income (“NOI”) is an APM’s and is derived from IFRS revenue and NOI adjusted for the results of associates and joint ventures and further includes the results of the GREA associates. A full reconciliation is provided in the financial review section below. In deriving the property net operating income from ongoing operations, the net operating income related to Beachcomber hotels and the LLR (which were disposed of in FY2023) were excluded from the comparative number in order to provide a comparative for only the ongoing operations. |
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 | | | | | CavendishCapital Markets Limited – UK Financial Adviser | | | James King/Teddy Whiley (Corporate Finance) | +44 20 7220 5000 | | Justin Zawoda-Martin / Daniel Balabanoff / Pauline Tribe (Sales) | +44 20 3772 4697 | | Perigeum Capital Ltd – SEM Authorised Representative and Sponsor | | | Shamin A. Sookia | +230 402 0894 | | | | | 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 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 holds its primary listing on the Main Market of the London Stock Exchange (LSE: GR1T and a secondary listing on the Stock Exchange of Mauritius (SEM: DEL.N0000). Further information on the Company is available at www.grit.group. Directors: Peter Todd (Chairman), Bronwyn Knight (Chief Executive Officer) *, Gareth Schnehage (Chief Financial Officer) *, David Love+, Catherine McIlraith+, Jonathan Crichton+, Cross Kgosidiile, Lynette Finlay + and Nigel Nunoo+. (* 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 Limited UK Transfer secretary: Link Assets Services Limited Mauritian Sponsoring Broker: Capital Markets Brokers Limited This notice is issued pursuant to the FCA Listing Rules, SEM Listing Rule 15.24 and the Mauritian Securities Act 2005. The Board of the Company accepts full responsibility for the accuracy of the information contained in this communiqué. A Company presentation for all investors and analysts via live webcast and conference call The Company will host a live webcast and conference call on Wednesday, 28 February 2024 at 13:00 Mauritius time / 09:00 UK time / 11:00 SA time via the Investor Meet Company platform, with the presentation being open to all existing and potential shareholders. Pre-registration is advised via: https://www.investormeetcompany.com/grit-real-estate-income-group-limited/register-investor Investors who already follow Grit Real Estate Income Group Limited on the Investor Meet Company platform will automatically be invited. A playback will be accessible on-demand within 48 hours via the Company website: https://grit.group/financial-results/ CHIEF EXECUTIVE OFFICER’S STATEMENT Introduction Grit is a prominent, woman-led real estate platform providing property investment and associated real estate services across the African continent. The Group recognises its role in transforming the design of buildings and developments for long-term sustainability and focuses on impact, energy efficiency and carbon reduction across the portfolio. Additionally, the Group prides itself on achieving more than 40% of women in leadership positions and the significant support it provides to local communities in Africa through extensive CSR and upliftment programs. The Board continues to target a simplification of the Group’s structure, operations and financial reporting and has made significant progress over the last 18 months. For associate accounted properties, where we’ve had limited opportunity for obtaining controlling interests, we’ve disposed of these and redirected the capital to assets that we can control. The sale of our interests in LLR and the Beachcomber hotel portfolios, at or close to book value, allowed us to redeploy capital to the acquisition of controlling interests in GREA and APDM, whose results will be consolidated from 1 January 2024. The Grit 2.0 recycling strategy is becoming increasingly evident within the composition of Group net operating income with Diplomatic housing, Healthcare and Data center segments replacing earnings that were disposed of from LLR and Hospitality. The impact of both the consolidated acquisitions and the newly completed developments contributing for the full financial year are expected to result in meaningful growth in IFRS revenue over the coming reporting cycles. Although the Group achieved the Board’s 20% asset recycling target, we expect to continue rotating the portfolio away from non-core asset segments and will target further asset disposals in the coming years. The final stage of the Group simplification involves grouping property assets into logical industry subsidiaries and positioning these within the Group for optimal funding, growth, and value creation. The move of Bora Africa (the Group’s industrial asset portfolio) and Acacia estates (diplomatic housing) to GREA, furthers this strategy and has facilitated a US$48 million cash equity injection to GREA from our co-investor, PIC. These recapitalisation proceeds will be directed towards debt reduction and pipeline developments in the diplomatic housing, industrial and healthcare sectors which will, amongst others, generate additional income consistent with the Grit 2.0 strategy. Sustainability of the Group’s business model We benefit from having built a business focused on quality real estate assets with strong ESG credentials and long leases to a resilient and diverse customer base that comprises more than 79% of strong multinational and investment grade tenants. NOI from ongoing operations grew by 15.6% in the six months to 31 December 2023, with contractual lease escalations, which are predominantly inflation-linked, and new assets producing NOI contributing to the growth. We now have 33 assets across 7 sectors with 95.0% of our leases in hard currency providing a strong foundation to our income generation and a resilient platform from which to pursue growth opportunities through active management, sector focused development substructures and external revenue generation from our professional services. We recognised US$6.8 million of other income in the period predominantly related to development revenues earned in APDM. Significant adjustments in global interest rates have however caused sharp increases in our overall cost of capital in the near term, which continue to impact our financial results. We actively manage our interest rate risk, but with several hedges maturing over the period, our weighted average cost of debt further increased in the period to 9.62% (discussed in greater detail in the treasury section below). We note that central banks are expected to start lowering interest rates later this calendar year, which should go some way to alleviating the current funding cost pressures, however the Group will additionally target settling more expensive facilities to lower overall funding costs. The Board is keenly focused on improving total returns to shareholders and is currently targeting the following key actions: Continued focus on NOI growth and strong cash collections from the high-quality property portfolio including refocusing the portfolio towards resilient and impact sectors. A rationalisation of shared functions post the acquisition of GREA and APDM and assessment of the optimal structure of corporate head office functions going forward. We are pleased to report substantial progress on the US$4 million cost reduction target for the financial year 2024 and remain on track to deliver the c19% cost-saving target for the full year. A US$4.1million annualised cost savings in net finance costs from reduction in debt, refinancing existing facilities and inclusion of GREA assets into the existing syndicated facility The execution of development pipeline by GREA consistent with the Grit 2.0 strategy and generating additional income from property related services. GREA & APDM update The Group concluded the acquisition of a majority interest in GREA and APDM in 2023, resulting in a combined direct and indirect interest of 54.22% in GREA and 78.95% in APDM. GREA and APDM were treated as joint ventures in the financial statements for the full year results to 30 June 2023 and again for the six months ended 31 December 2023. Following final amendments to the Shareholders Agreement, both will now be fully consolidated with effect from 1 January 2024. In addition to GREA’s existing income producing portfolio, the PIC will inject $48 million of cash equity as part of the recently announced GREA $100 million recapitalisation which will facilitate GREA’s pipeline of development opportunities in its focus sectors: 1. 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 three industrial land assets were transferred to the newly established entity. Post the recent shareholder approval Bora will shortly become a wholly owned subsidiary of GREA, who will oversee the realisation of the development pipeline. 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. Diplomatic Holdings Africa Ltd ("DH Africa"), a wholly owned subsidiary of GREA, has been established as a specialist property platform investing in diplomatic housing and other sovereign-backed property assets in Africa. DH Africa currently holds four diplomatic housing assets, which were internally developed or purchased, and has several future developments which are either under consideration or in the process of being negotiated. Update on the 2023 Annual General Meeting vote At the Annual General Meeting of the Company held on 18 December 2023, ordinary resolution 10 received the support of 71.4% of shareholder votes. The Company has subsequently undertaken an engagement exercise with shareholders to discuss this voting outcome, including a consultation with some of the Company’s major shareholders on 17 January 2024 to understand their position and perspectives. The perspectives of our major shareholders are highly valued and have been reported to the Board. Changes to the Board of Directors Sir Sam Jonah reached retirement age recently and accordingly withdrew himself from re-election at the annual general meeting, that was held on the 18 December 2023. The Board would like to express its gratitude to Sir Sam for his meaningful contribution to Grit over the years and wishes him well for the future, and for his retirement. The Board welcomes Mr Nigel Nunoo, who was appointed as an independent Non-Executive Director, with effect from 19 December 2023. He has also been appointed as a member of the Remuneration Committee. Leon van de Moortele, the Group CFO and member of the Board, who has been on medical leave since 19 December 2023, resigned from the Board today. The Board would like to express their gratitude to Leon for the integral role he has played in the company since its inception and his immense dedication to navigating the complex landscape in the Pan Africa business environment. The Board today appoints Gareth Schnehage as replacement Chief Financial Officer and welcomes him to the Board of directors. Gareth is a Chartered Accountant with over 15 years of leading roles at multinational corporations, including extensive experience operating in African jurisdictions and executing asset backed debt financing solutions. Outlook The Group continues to focus on growing income from its portfolio of high-quality, income producing properties and from the implementation of its Grit 2.0 revenue strategy. The Board will continue to target the reduction of administrative costs and implementing strategies to reduce LTV and weighted average cost of debt to defend and grow its distributable earnings and NAV growth. Presentation of financial results The consolidated financial statements have been prepared in accordance with IFRS as issued by the IASB. Alternative performance measures (APMs) have also been provided to supplement the IFRS financial statements as the Directors believe that this adds meaningful insight into the operations of the Group and how the Group is managed. European Public Real Estate Association (“EPRA”) Best Practice Recommendations have been adopted widely throughout this report and are used within the business when considering the operational performance of our properties. Full reconciliations between IFRS and EPRA figures are provided in notes 16a to 16b. Other APMs used are also reconciled below. “Grit Proportionate Interest" income statement, presented below, is a management measure to assess business performance and is considered meaningful in the interpretation of the financial results. Grit Proportionate Interest Income Statement (including “Distributable Earnings”) are alternative performance measures. Distributable Earnings is utilised to determine the maximum amount of operational earnings that would be available for distribution as dividend to equity holders in any financial period. This factors the various company specific impacts of operating across several diverse jurisdictions across Africa and the investments’ legal structures of externalising cash from these regions. The IFRS statement of comprehensive income is adjusted for the component income statement line items of properties held in joint ventures and associates. This measure, in conjunction with adjustments for non-controlling interests (for properties consolidated by Grit, but part owned by minority partners), form the basis of the Group’s distributable earnings build up, which is alternatively shown in Note 16b “Distributable earnings”. Distributable earnings for the six months are underpinned by NOI, fee income performance and improved administrative cost control. The higher weighted average cost of debt has however impacted the results and resulted in a decline of distributable earnings of 19.1% (Distributable EPS HY24 $2.07cps vs HY23 $2.56cps). | | IFRS YTD | Extracted from Associates | GRIT Proportionate Income statement | Split NCI | GRIT Economic Interest | YTD Distributable earnings | | | US$'000 | US$'000 | US$’000 | US$'000 | US$'000 | US$'000 | | Gross rental income | 28,429 | 4,931 | 33,360 | (4,622) | 28,738 | 28,272 | | Property operating expenses | (4,953) | (644) | (5,597) | 1,211 | (4,386) | (3,255) | | Net operating profit | 23,476 | 4,287 | 27,763 | (3,411) | 24,352 | 25,017 | | Other income | 108 | 6,745 | 6,853 | (12) | 6,841 | 6,637 | | Administration expenses | (7,929) | (3,945) | (11,874) | 165 | (11,709) | (10,541) | | Net impairment charge on financial assets | 979 | 445 | 1,424 | (382) | 1,042 | - | | Profit / (loss) from operations | 16,634 | 7,532 | 24,166 | (3,640) | 20,526 | 21,113 | | Fair value adjustment on investment properties | (19,954) | (403) | (20,357) | 3,534 | (16,823) | - | | Fair value adjustment on other financial asset | (235) | - | (235) | - | (235) | - | | Fair value adjustment on derivative financial instruments | (4,041) | - | (4,041) | - | (4,041) | - | | Share-based payment | (100) | - | (100) | - | (100) | - | | Share of profits from associates | 5,378 | (5,378) | - | - | - | - | | Gain on derecognition of loans and other receivables | 1 | - | 1 | - | 1 | - | | Foreign currency (losses) / gains | (2,499) | (53) | (2,552) | 297 | (2,255) | - | | Other transaction costs | (567) | - | (567) | - | (567) | - | | Profit / (loss) before interest and taxation | (5,383) | 1,698 | (3,685) | 191 | (3,494) | 21,113 | | Interest income | 1,514 | 1,618 | 3,132 | (1) | 3,131 | 3,131 | | Finance costs - Intercompany | - | - | - | 1,786 | 1,786 | 1,089 | | Finance charges | (19,691) | (2,470) | (22,161) | 1,337 | (20,824) | (18,361) | | Profit / (loss) before taxation | (23,560) | 846 | (22,714) | 3,313 | (19,401) | 6,972 | | Current tax | (218) | (56) | (274) | 80 | (194) | (194) | | Deferred tax | 2,751 | (949) | 1,802 | (129) | 1,673 | - | | Profit / (loss)
en | GG00BMDHST63 | GRIT REAL ESTATE INCOME GROUP | boerse | 65203374 |
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