Grit today reported strong financial results for the year ended 30 June 2017.
“We are very pleased with the strong performance of the underlying portfolio during some challenging times over the period. Despite economic headwinds in especially Mozambique, our consistent focus on asset management opportunities resulted in the conclusion of negotiations on several lease renewals, including two 10-year renewals with Vodacom and KPMG on favourable terms. This was further supported by the performance of assets transferred during the period”.
“Our entrance into the Euro-denominated Mauritian hospitality market through sale and lease-back transactions further de-risked the portfolio through diversification whilst continuing our ability to secure true hard currency income streams,” commented Bronwyn Corbett, Chief Executive.
Grit declared its seventh consecutive dividend in line with Company guidance since formation of the Company in 2014. Total dividends for the year amounted to US$12.07 cents per share, comprising of an interim dividend of US$6.12 cps, a clean-out dividend for the four months to April 2017 of US$ 4.57 cps and a final dividend for the two months to June 2017 of US$1.38 cps.
“Our business model is based on structured investments underpinned by property assets. Debt is a major lever in this equation and the team successfully reduced our average weighted cost of capital from 6.22% in 2016 to 5.78% for 2017, despite the 0.48% increase in the US$ three-month LIBOR,” continued Corbett.
Corbett attributes the reduction in cost of capital mainly to the inclusion of Euro based loans over the period as the Company continued to match debt to the underlying cash flow of the asset. The increase in Euro based assets has resulted in an increase in the proportion of debt transactions concluded in Euros.
Loan-to-value at year-end reduced to 41.6% from 48.9% in the comparative prior year period. Following the transfer of the interest in the Beachcomber Hospitality Investments (BHI) assets in Mauritius as well as the Imperial Warehouse (Kenya) and Vale accommodation compound (Mozambique), loan-to-value will normalise at approximately 48.8%.
It should be noted that although Grit is an income group, it is not a REIT and therefore targets a more optimal debt-to-equity ratio of approximately 50%.
During the reporting period, Grit increased its rental income including associates by 14% on the back of rental escalations, the full year impact of properties acquired in 2016 as well as income from Mall de Tete and the Lux Tamassa resort that transferred in March 2017. Vacancies across the portfolio remained stable at 3%, predominantly because of strategic vacancies at Anfa Place Shopping Centre in Mauritius, in line with the upgrade of the centre expected to be completed in Q4 2018. The consequent reduced rentals at Anfa Place adversely impacted rental income by US$ 1 million against the 2016 financial year.
The weighted average lease expiry (WALE) on Grit’s existing portfolio increased from 5.8 years in the prior reporting year to 6.4 years for the year under review, as a result of successful lease renewals. Following the transfer of the Imperial Warehouse and interest in the BHI in August 2017, WALE will increase to a healthy 7.8 years.
Grit successfully raised US$156 million in additional capital during the year, including US$121.22 million through a well-supported rights offer concluded at the end of the reporting period.
Proceeds from the rights offer was utilised to finalise the following, including payments made after the year end:
|BHI Transaction (44.4% of three Beachcomber resorts) (EUR5m paid after year-end)||28,7|
|Vale Accommodation Compound (final payment) (US$4.1m paid after year-end)||18,2|
|Settlement of the equity revolver facilities||17,7|
|Cosmopolitan Mall (final payment)||15,7|
|Imperial Warehouse (final payment) (US$12.0m paid after year-end)||13,1|
|Anadarko Phase II Construction||6,6|
|Share Issue Expenses (US$3m paid after year-end)||4,6|
|Investment in 6.25% of Letlole La Rona Limited (US$3.8m paid after year-end)||3,8|
|Investment in Gateway Delta Development (initial investment)||2,0|
|TOTAL CAPITAL DEPLOYED||110,4|
Subsequently, total investment properties have increased to US$492 million from US$295 million in the prior year period. Post transfers concluded in August 2017, property investments now total US$546 million.
“Going forward, our focus will remain on asset management opportunities within the existing portfolio as well as other initiatives to support net asset value growth”.
“Based on the current portfolio’s performance, the solid base established over the past three years and a stable economic environment across operations, we guide a distribution growth forecast for the next 12 months of between 3% and 5%,” concluded Corbett.