Growthpoint: Strong Dividends & Resilient Strategy

  • Growthpoint Properties reports 1.3% increase in dividend per share and higher distributable income, showcasing financial resilience.
  • Strategic moves include property sales and successful international subsidiaries, boosting offshore dividend income.
  • Despite challenges, Growthpoint anticipates a decline in distributable income for FY24 but maintains confidence in its diversified portfolio.

Growthpoint Properties Limited has announced its audited annual results for the year ending June 30, 2023. The company reported an increase in dividend per share and distributable income per share, reflecting its strategic efforts to streamline its South African portfolio and strengthen its international investments.

Financial Performance

Growthpoint Properties reported a 1.3% increase in dividend per share to 130.1 cents per share (cps) compared to 128.4 cps for the previous year. Distributable income per share (DIPS) also saw a 1.3% rise to 157.6 cps from 155.6 cps in the comparative period.

However, the net asset value per share, based on the SA REIT net asset value definition, experienced a marginal decrease of 0.3% to 2,151 cps from 2,158 cps in the comparative period.

Strategic Moves

Growthpoint’s strategic vision “to be a leading international property company providing space to thrive” was evident in its strategic moves during the year. The company continued its streamlining efforts by selling 29 South African properties for R1.5 billion, contributing to a total of R11.2 billion in property sales since July 2016. Furthermore, one property worth R18.0 million was held for sale as of FY23.

Growthpoint Investment Partners (GIP) also played a significant role, with assets under management growing by 14.7% to R17.9 billion from R15.6 billion in the comparative period. This growth translated into higher management fees, with R98.0 million received compared to R67.2 million in the comparative period. Notably, R750.0 million was raised from new investors, supporting Growthpoint Healthcare Property Holdings (RF) Limited (GHPH) and Growthpoint Student Accommodation Holdings (RF) Limited (GSAH).

Internationally, offshore dividend income grew by 7.6% in Rand terms to R1.6 billion, contributing 29.1% to DIPS and comprising 45.8% of group property assets. Key international subsidiaries such as Growthpoint Properties Australia Limited (GOZ), Capital & Regional Plc (C&R), and Globalworth Real Estate Investments Limited (GWI) demonstrated strong performances.

Liquidity and Capital Management

Growthpoint remains focused on liquidity and balance sheet strength, with R1.7 billion in cash on the South African balance sheet and R6.6 billion in unutilized committed facilities. The Loan to Value (LTV) ratio increased to 40.1%, primarily due to negative property valuations in GOZ, but the South African SA REIT LTV remained conservative at 32.9%.

The interest cover ratio remained robust at 2.9 times. Furthermore, the weighted average debt maturity for SA borrowings increased to 3.5 years from 2.9 years in the comparative period, reflecting prudent financial management.

Performance Highlights

Total revenue increased by 5.3% to R13.7 billion, and operating profit grew by 2.1% to R8.9 billion. The V&A (Victoria & Alfred Waterfront) exhibited a remarkable performance with a 21.5% increase in the 50% share of distributable income.

Over 1,190,000 square meters of space was leased in South Africa during the year, leading to an improvement in vacancies to 9.2% from 10.1% in the comparative period. However, renewal success declined to 64.9%, and renewal growth remained under pressure at negative 12.9%.

Dividend Declaration: The company declared a final dividend number 75 of 65.80000 cps for the year ending June 30, 2023, which will be paid from income reserves.

Leadership and Prospects: Norbert Sasse, the Group CEO, has committed to continue in his capacity until December 31, 2026, providing stability and continuity for the company’s strategic initiatives.

Outlook

Despite the positive financial results, Growthpoint anticipates a decline in distributable income for the fiscal year 2024 due to high interest rates and economic uncertainties. The company aims to maintain a payout ratio of 82.5% and remains confident in its diversified portfolio, strong balance sheet, and stable foreign currency dividend income streams.

The annual financial statements have been audited by Ernst & Young Inc., and additional tax implications for South African and non-resident shareholders have been highlighted.

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