- Implemented sustainable dividend strategy.
- On track to meet full year guidance.
- Solid operational performance reducing vacancies in tough environment, setting base for property growth in 2019.
- Well positioned for South African bounce.
Arrowhead Properties has announced strong operating performance for the period ending on the 31st of March 2018.
The group declared a dividend of 40.43 cents per share, indicating that it remains on target to deliver on the guidance provided for the full year.
Arrowhead’s portfolio consists of forty-nine commercial properties valued at R5.6 billion. Through its core subsidiaries, Indluplace Properties Limited and Gemgrow Properties, Arrowhead’s property portfolio consists of three hundred and sixty buildings of which one hundred and eighty nine are commercial and one hundred and seventy one are residential. The total value of the group’s investment properties has increased by 15.5% to R15 billion at the end of the interim reporting period. This is a result of the acquisitions by Indluplace and Gemgrow. Arrowhead has investment in listed REITs, Rebosis Property Fund and Dipula Property Fund too.
COO of Arrowhead, Riaz Kader commented:
“We are pleased with our results reported for the past six months, against a backdrop of subdued macroeconomic conditions and a fiercely competitive rental market. We adopted a cautious stance and positioned ourselves to ensure that we will be able to benefit from improving political and economic conditions as well as continue to create long-term sustainable value for shareholders.”
The solid results were achieved by focusing on reducing vacancies; securing favourable lease renewals and escalations in a difficult rental market and disposing of tail assets, actively managing costs.
Vacancies decreased from 12.10% at the end of September 2017 to 10.635 at the end of March 2018 and it is anticipated that vacancies have yet to improve further, subsequently to the period-end. Revenue and operating costs increased, which was expected, on the back of the Gemgrow and Indluplace acquisitions during the period whilst gross expense to income ratio remained stable at 38.0%.
According to Arrowhead CFO, Imraan Suleman, Arrowhead’s company loans were R3,5 billion at the end of March 2018:
“This represents a comfortable group LTV of 31,3%, marginally up from 28,1% previously. We have fixed 73,0% of total loans and continue to maintain a well-positioned balance sheet …We are confident that we have made the correct strategic decisions, in tough macro-economic circumstances, to position the company for sustainable growth going forward.”
Arrowhead’s holdings of non-core assets Rebosis (18,6%) and Dipula (10,6%) moderated marginally through the additional share issuance by these listed entities. Arrowhead maintains positive engagements with the management of both property funds and reviews its acquisition strategy on an on-going basis to ensure that its portfolio remains positioned for future growth and value.
“We have worked hard over the past six months to deliver these positive results; we maintained a disciplined and conservative approach which we believe will be rewarding in the long-term. We continue to sweat our portfolio and believe that improving consumer and business sentiment, which has started to become evident, will provide an upside to growth. Investors can expect to see the full benefits of our strategy come through in the 2019 financial year” concluded CEO, Mark Kaplan.