Wrap Text
Unaudited condensed consolidated interim results for the six months ended 31 March 2019
Gemgrow Properties Limited
Incorporated in the Republic of South Africa
Registration number 2007/032604/06
JSE share code: GPA ISIN: ZAE0000223269
JSE share code: GPB ISIN: ZAE0000223277
(Granted REIT status with the JSE)
(Gemgrow or the company or the group)
Unaudited condensed consolidated interim results
for the six months ended 31 March 2019
Highlights
* 54,54 cents dividend per A share.
* 35,31 cents dividend per B share.
* R425m in successful disposals of non-core assets in the current
year, of which R98m transferred during the six-month period
ending 31 March 2019.
* R761m of acquisitions transferred and integrated within the
portfolio.
* 32% loan to value to reduce debt further with cash from
disposals - strong balance sheet.
* >5 times cash cover on A share dividend.
* Proposed merger between Gemgrow and Arrowhead Properties
Limited.
Nature of business
Gemgrow is a Real Estate Investment Trust (REIT) holding a
diverse portfolio of office, retail and industrial properties.
As at 31 March 2019 the portfolio comprised 163 properties,
located in all nine provinces of South Africa and valued at
approximately R5,6 billion.
The company's financial focus is on providing increasing income
returns to its investors on a sustainable basis in the medium to
long term. This is achieved through escalating rentals,
satisfactory renewal of leases with existing tenants, renting
of vacant space within the property portfolio, managing and
reducing, where possible, costs associated with the property
portfolio and by acquiring revenue-enhancing properties.
Operating environment
The company continues to operate in a very challenging economic
environment. Tenants are under pressure and the supply of letting
space outweighs demand. This has resulted in an increasingly
competitive rental environment where rental reductions and higher
vacancies have prevailed. In response to these market challenges,
our key focus is on tenant retention, competitive letting of vacant
space and strengthening our balance sheet.
We are well under way with our strategy of defensively repositioning
our portfolio to produce improved sustainable income with stronger
lease covenants, an improved weighted average lease expiry profile
and tenant demand. This has resulted in a satisfactory performance
achieved during the period and will hopefully enable us to deal as
effectively as possible with the market-related challenges ahead.
Changes to the business and property portfolio
During the current period the company successfully transferred
36 properties that it acquired last year, 26 of which were acquired
through the acquisition of a controlling interest in Moolgem Proprietary
Limited. The remaining 10 properties were acquired directly for
R99,9 million funded with the issue of R50 million Gemgrow A shares at
an ex dividend price of R9,80 and debt of R49,9 million. The company
also disposed of eight properties valued at R98 million, as part of
its asset recycling programme. Further disposals of approximately
R330 millionhave been concluded and are expected to transfer before
the end of the financial year. The proceeds of these disposals will be
used to reduce debt and decrease the company's loan to value to
approximately 28%.
Moolgem Proprietary Limited (Moolgem)
Cumulative Properties Limited (Cumulative) a wholly owned subsidiary
of the company, acquired a majority shareholding in Moolgem, which owned
a portfolio of 26 properties valued at R704 million, on 1 December 2018
for the purchase consideration of R634,5 million. Post the transaction,
Cumulative is entitled to 75,62% of the voting rights and 95% of the net
assets and income of Moolgem. The transaction had a legal effective date
of 1 November 2018 but was subject to the fulfilment of certain conditions
precedent, all of which were fulfilled on 1 December 2018 at which time
the shares were transferred to Cumulative. The purchase consideration was
funded by the issue of 10 264 434 Gemgrow A shares at an ex-dividend issue
price of R9,74 per A share, with the balance funded with debt.
From an International Financial Reporting Standard (IFRS) perspective,
as the controlling interest does not meet the requirements of a business
acquisition, it has been accounted for as an asset acquisition on
1 December 2018.
Condensed consolidated financial results
for the six months ended 31 March 2019
R'000 2019 2018
Revenue (excluding straight line rental income) 424 831 360 652
Property expenses (162 977) (133 026)
Administration and corporate costs (11 312) (5 115)
Finance charges (91 746) (53 457)
Finance income 13 890 11 668
Non-controlling interest profits elimination (1 836) -
Antecedent income 1 403 -
Distributable income 172 253 180 722
Pre-effective date distribution 6 090 -
Total dividend 178 343 180 722
Property expenses as a percentage of revenue -
gross (%) 38,4 36,9
Property expenses as a percentage of revenue -
net (%) 15,2 14,3
A share - dividend for the quarter ended
31 December* - 12 353
B share - dividend for the quarter ended
31 December* - 77 687
A share - dividend for the six months/quarter
ended 31 March^# 34 206 12 353
B share - dividend for the six months/quarter
ended 31 March^ 144 137 78 329
Total dividend 178 343 180 722
Dividend per A share (cents) for the quarter
ended 31 December* - 26,09
Dividend per B share (cents) for the quarter
ended 31 December* - 19,18
Dividend per A share (cents) for the six
months/quarter ended 31 March^# 54,54 26,09
Dividend per B share (cents) for the six
months/quarter ended 31 March^ 35,31 19,34
89,85 90,70
^ The dividend was declared on 15 May 2019.
* The company changed its dividend payment cycle from quarterly to bi-
annually.
# The A share dividend has increased by 4,528%, being the latest
Consumer Price Index (CPI) change at the end of March 2019.
Commentary
Revenue
Revenue includes rental income and expenditure that is recoverable from
tenants for the six months ended 31 March 2019 (the six-month period).
For the six-month period, the portfolio comprised 28% retail, 29%
office and 43% industrial based on gross lettable area (GLA). In
revenue terms, it comprised retail at 36%, office 39% and industrial
25%.
The average gross monthly rental per m2 per sector is R101 for retail,
R123 for office and R46 for industrial. This gross monthly rental rate
per m2 includes parking, rates recoveries and operating cost recoveries
but excludes utilities (water, sewerage and waste) consumed by tenants.
Vacancies increased from 7,6% to 9,0% during the six-month period as
expected given the number of non-renewals that were forecast at the
end of the prior year. Vacancies are expected to reduce by year-end
post the transfer of disposals in process. At a sector level, retail
vacancies were 6,6%; industrial vacancies 7,2% and office vacancies
14,0%.
The total GLA of the portfolio increased from 751 981m2 to 815 412m2.
During the six-month period, contracted leases in respect of 81 082m2
expired and 54 299m2 (67%) of this GLA was retained. Of the remaining
26 433m2, a further 8 048m2 (30%) was re-let to new tenants. In total,
77% of the GLA of leases that expired during the period were renewed
to existing tenants or re-let to new tenants.
The current average contractual lease rental escalations are 7,4%,
7,8% and 7,9% for retail, office and industrial properties respectively.
The net rental reversion on leases renewed during the 6 months over the
entire portfolio was (2%). The net rental reversions on renewed leases
were (4%) for retail, (3%) for office, while we achieved a 1% step up
escalation for industrial.
Six-month letting report
Total Let Vacant Let Vacant
(m2) (m2) (m2) (%) (%)
As at 1 October 2018 751 981 694 969 57 012 92,42 7,58
Acquisitions 89 456 85 681 3 775 95,78 4,22
Disposals (26 734) (16 765) (9 969) 62,71 37,29
Net adjustments 709 774 (65)
Adjusted totals 815 412 764 659 50 753 93,78 6,22
Net (loss)/gain - (22 511) 22 511
As at 31 March 2019 815 412 742 148 73 264 91,02 8,98
Income Statement
Operating costs
% of % of
R'000 2019 total 2018 total
Municipal expenses 112 414 69 93 026 70
Property management 14 696 9 11 438 10
Security 10 305 6 9 349 7
Repairs and maintenance 6 917 4 5 121 4
Letting commission 4 242 3 3 101 2
Cleaning 9 519 6 4 602 3
Insurance 2 131 1 1 783 1
Other 2 753 2 4 606 3
Total 162 977 100 133 026 100
The higher operating costs includes the 36 properties acquired during
the period. Most costs were in line with the previous year, apart from
letting commission and cleaning costs. The increased letting commission
is as a result of higher letting incentives incurred to renew leases
and fill vacant space, whilst we have intensified efforts to maintain
the appearance of our properties to improve their letting potential.
There was also a fair amount of cleaning that was carried out on an ad
hoc basis in the previous year and reported as Other costs, whereas in
the current year, they were contracted for and reported under Cleaning
costs. Security costs have decreased due to the fact that we have
implemented offsite monitoring on many of our properties, which enabled
us to reduce security headcount in some of our properties.
Administrative expenses and corporate costs
% of % of
R'000 2019 total 2018 total
Salaries 6 734 60 3 054 60
Professional service fees 2 919 25 258 5
Other 1 659 15 1 803 35
Total 11 312 100 5 115 100
The higher expense in respect of salaries is due to the growth in the
staff complement employed to achieve greater oversight of certain key
functions during the 2019 financial year. Since last year, we have
employed two additional asset managers, an accountant and two leasing
consultants. Furthermore, whereas the costs of the staff incentives was
only provided for at the end of the last year, we have forecast for this
cost proportionately throughout the current year. The staff costs are
therefore in line with expectation.
Professional fees were considerably higher due to the fact that we also
forecasted for these costs proportionately throughout the period versus
the previous period when we only accounted for them as they were incurred.
The material costs incurred was R335 000 for consulting fees for the
drafting and implementing of the new long-term incentive as well as the
short-term incentive plan for the company; costs of R185 000 incurred in
respect of accounting and tax advisory services; R350 000 for commitment
fees in respect of access facilities created to house excess cash enabling
us to earn higher investment returns on cash and R486 000 in respect of the
integrated annual reports. To enhance the letting potential on certain retail
properties, we employed a retail specialist to perform assessments on these
properties. Other expenses relate to audit fees, management fees of
R1,4 million paid to Gemgrow's parent company, Arrowhead Properties Limited
(Arrowhead) for services rendered, bank charges and miscellaneous expenses.
These costs were in line with the prior year.
Finance income
% of % of
R'000 2019 total 2018 total
Interest received on bank balances
and debtors 1 854 13 3 383 29
Interest received on loans to
executives 12 036 87 8 285 71
Total 13 890 100 11 668 100
Finance income has reduced because the company has transferred funds that
are in excess of its requirements to its loan access facilities. The
reduction in interest income has been offset by the savings derived in
finance costs. Interest on the loans to executives has increased due
to additional shares issued to the company's executive directors during
the year.
Finance charges
% of % of
R'000 2019 total 2018 total
Interest paid on loans 87 197 95 50 567 94
Interest paid on interest rate swaps 3 863 4 2 753 5
Amortisation of loan raising costs 454 1 - -
Other interest paid 232 - 137 1
Total 91 746 100 53 457 100
The increased interest on loans is as a result of additional debt funding
used to finance the acquisitions that transferred during the period. The
higher interest on swaps is due to the company increasing the value of debt
hedged since March 2018.
Statement of financial position
Investment properties
The company owned a portfolio of 163 retail, industrial and office properties
valued at R5,6 billion at 31 March 2019, located in all nine provinces of
South Africa. The average value per property as at 31 March 2019 was
R34,3 million.
Gemgrow Cumulative
portfolio portfolio*
No. of No. of
buildings R'000 buildings R'000
Balance at the beginning of
the period 35 2 914 775 100 1 929 966
Acquisitions, additions and
fair value adjustments - 14 577 10 121 768
Disposals (1) (33 069) (7) (69 503)
Balance at the end of the
period# 34 2 896 283 103 1 982 231
Moolgem^ Total
No. of No. of
buildings R'000 buildings R'000
Balance at the beginning of
the period - - 135 4 844 741
Acquisitions, additions and
fair value adjustments 26 705 413 36 841 758
Disposals - - (8) (102 572)
Balance at the end of the
period# 26 705 413 163 5 583 927
* Gemgrow's shareholding in Cumulative was 100% at 31 March 2019.
^ Cumulative's economic interest in Moolgem was 95% at 31 March 2019.
# The above includes non-current assets held for sale.
The value of investment property has increased from R4,8 billion at
30 September 2018 to R5,6 billion at 31 March 2019. The increase was
attributable to the acquisition of 10 investment properties by Cumulative
valued at R99,9 million, 26 properties in Moolgem valued at R661 million,
capital additions of R37 million and an upward fair value adjustment of
R38 million in Moolgem. The company normally fair values its properties
only at year end, but because Moolgem had a 28 February 2019 year-end,
its assets were fair valued during the current reporting period. The
remaining assets of the Group will only be fair valued at the end of
the year.
Loans to executives
During the period under review loans of R19,8 million were made to the
company's executives to fund the purchase of shares in the company. The
executives or their related entities (as the case may be) remain liable for
the full value of the loans outstanding. These loans bear interest, which
the company deems to be market related, at a rate equal to the dividend of
the company for the period ended 31 March 2019. The shares have been pledged
as security to the company for the outstanding loans and the company has
recourse against individual executives.
Trade and other receivables
The material items comprise trade debtors of R22,0 million (against which
a provision of R10,0 million has been raised); R24,0 million relating to
income accruals; R28,5 million relating to amounts due in respect of
adjustment accounts in respect of acquisitions and disposals and
R29,5 million relating to municipal clearances.
Share Capital
The company issued 15 366 455 Gemgrow A shares to fund the acquisitions
reported earlier and 3 142 856 Gemgrow B shares were awarded to the
company's executives in accordance with the Scheme during the period.
Secured financial liabilities
The loan to value of the group was 32%. The interest rate swaps resulted
in 77% of the interest payable being hedged. The effective interest rate
for the six months ended 31 March 2019 was approximately 10%.
One-month Three-month
Fixed Jibar Jibar Prime rate
rate % margin % margin % (*) margin % R'000
Maturity
September 2019 - - 2,35 - 139 000
September 2022 - - - minus 1,6 50 000
October 2022 - - 2,15 - 525 000
November 2022 - - 2,20 - 480 000
November 2022 - - 2,20 - 75 519
December 2023 - - 2,25 - 200 000
December 2023 - - 2,35 - 500 000
December 2023 - - - minus 0,85 31 508
Total exposure 2 001 027
(Excluding loan initiation fees and fair value adjustments on swaps.)
* Three month Jibar at 31 March 2019 was 7,16%
Gemgrow has further entered interest rate swaps to hedge its exposure to
fluctuations in interest rates of its debt as follows:
an interest rate swap over R40 million until 1 July 2019;
an interest rate swap over R40 million until 1 July 2019;
an interest rate swap over R80 million until 30 September 2019; an
interest rate swap over R50 million until 1 September 2020; an interest
rate swap over R525 million until 31 October 2022;
an interest rate swap over R600 million until 15 November 2022; and an
interest rate swap over R200 million until 4 December 2022.
Trade and other payables
The material items comprising trade creditors are tenant deposits of
R55,5 million; trade creditors of R8,2 million and R87,6 million of
municipal and other accruals.
Prospects
At the end of the 2018 financial period, the company communicated an
earning's guidance on its B share of (10%). As mentioned earlier, the
company is operating in a challenging economic environment and there
are a material number of leases that are yet to be finalised in the
second six months of the year. Notwithstanding this, based on the
assumptions made by management in respect of the lease renewals to be
concluded, management is confident of being able to marginally improve
on its previously communicated guidance for the current year ending
30 September 2019.
Potential merger with Arrowhead
In April 2019, the company announced a potential merger with Arrowhead
Properties Limited, its parent company. It is expected that Gemgrow
shareholders will benefit through improved liquidity, a significantly
enhanced cash cover as well as better future access to equity capital
markets to support growth. Shareholders will be kept apprised of
developments in respect of the proposed merger via SENS as they arise.
Status of Chief Executive Officer (CEO)
We previously reported that Mark Kaplan, CEO of Arrowhead would be
stepping down as CEO of Gemgrow by 30 June 2019. In view of the
announcement of the proposed merger of Arrowhead and Gemgrow, the
board of directors has decided that it would be in the best interests
of the company that Mark retain his current position unless the potential
merger does not proceed, in which event a further decision will be made
in this regard.
Summary of financial performance
Six months Six months
ended ended
31 March 2019 31 March 2018
Dividend per Gemgrow A share (cents)^ 54,54 52,18
Dividend per Gemgrow B share (cents) 35,31 38,52
Gemgrow A shares in issue 62 718 658 47 352 203
Gemgrow B shares in issue 408 184 961 405 042 105
Net asset value per A share at reporting
date (cents)* 959 985
Net asset value per B share at reporting
date (cents)# 804 841
* The net asset value per Gemgrow A share has been calculated on the 60-
day volume weighted average trading price as at 31 March 2019 limited to
the combined net asset value in accordance with the provisions of
Gemgrow's Memorandum of Incorporation.
^ The A share grew by 4,528% being the latest CPI growth number at the
end of March 2019.
# The decrease in the net asset value of the Gemgrow B share compared to
the same reporting period in the prior year was informed primarily by the
impairment of goodwill of R160 million made at the end of the last
financial year.
Payment of dividend for the quarter ended 31 March 2019
The board of directors (Board) has approved a gross dividend (dividend
number 8) of 54,53834 cents per A share and 35,31170 cents per B share
for the six months ended 31 March 2019 in accordance with the timetable
set out below:
2019
Last day to trade Tuesday, 4 June
Shares trade ex distribution Wednesday, 5 June
Record date Friday, 7 June
Payment date Monday, 10 June
Share certificates may not be dematerialised or re-materialised between
Wednesday, 5 June 2019 and Friday 7 June 2019, both days inclusive.
The dividend will be transferred to dematerialised shareholders Central
Securities Depository Participant (CSDP)/broker accounts on Monday,
10 June 2019. Certificated shareholder's dividend payments will be paid
to certificated shareholder's bank accounts on Monday, 10 June 2019.
In accordance with Gemgrow's status as a REIT, shareholders are advised that
the dividends meet the requirements of a qualifying distribution for the
purposes of section 25BB of the Income Tax Act, No. 58 of 1962 (Income Tax
Act). The dividends on the shares will be deemed to be dividends, for South
African tax purposes, in terms of section 25BB of the Income Tax Act.
The dividends received by or accrued to South African tax residents must be
included in the gross income of such shareholders and will not be exempt from
income tax (in terms of the exclusion to the general dividend exemption,
contained in paragraph (aa) of section 10(1)(k)(i) of the Income Tax Act)
because they are dividends distributed by a REIT. These dividends are,
however, exempt from dividend withholding tax in the hands of South African
tax resident shareholders, provided that the South African resident
shareholders provided the following forms to their CSDP or broker, as the
case may be, in respect of uncertificated shares, or the company, in respect
of certificated shares:
a) a declaration that the dividends are exempt from dividends tax; and
b) a written undertaking to inform the CSDP, broker or the company, as the
case may be, should the circumstances affecting the exemption change
or the beneficial owner cease to be the beneficial owner, both in the form
prescribed by the Commissioner for the South African Revenue Service.
Shareholders are advised to contact their CSDP, broker or the company, as
the case may be, to arrange for the abovementioned documents to be submitted
prior to payment of the dividends, if such documents have not already been
submitted.
Dividends received by non-resident shareholders will not be taxable as income
and instead will be treated as ordinary dividends which is exempt from income
tax in terms of the general dividend exemption in section 10(1)(k)(i) of the
Income Tax Act. Any dividends received by a non-resident from a REIT will be
subject to dividend withholding tax at 20%, unless the rate is reduced in terms
of any applicable agreement for the avoidance of double taxation (DTA)
between South Africa and the country of residence of the shareholders. Assuming
dividend withholding tax will be withheld at a rate of 20%, the net dividend
amount due to non-resident shareholders is 43,63067 cents per A share and
28,24936 per B share. A reduced dividend withholding rate in terms of the
applicable DTA, may only be relied on if the non-resident shareholder has
provided the following forms to their CSDP or broker, as the case may be, in
respect of uncertificated shares, or the company, in respect of certificated
shares:
a) a declaration that the dividends are subject to a reduced rate as a result
of the application of a DTA; and
b) a written undertaking to inform their CSDP, broker or the company, as the
case may be, should the circumstances affecting the reduced rate change or the
beneficial owner cease to be the beneficial owner, both in the form prescribed
by the Commissioner for the South African Revenue Service. Non-resident
shareholders are advised to contact their CSDP, broker or the company, as the
case may be, to arrange for the abovementioned documents to be submitted prior
to payment of the distribution if such documents have not already been submitted,
if applicable.
Shareholders are encouraged to consult their professional advisors should they be
in any doubt as to the appropriate action to take.
A ordinary shares in issue at the date of declaration of this dividend:
62 718 658.
B ordinary shares in issue at the date of declaration of this dividend:
408 184 961.
Gemgrow's income tax reference number: 9068/723/17/1
Events after reporting period
The company announced a potential merger with its parent company, Arrowhead on
10 April 2019.
Dividend declaration after reporting date
In line with IAS 10 Events after the Reporting Period, the declaration of the
dividends occurred after the end of the reporting period, resulting in a non-
adjusting event which is not recognised in the financial statements.
Litigation statement
There are no legal or arbitration proceedings, including any proceedings that
are pending or threatened, of which Gemgrow is aware, that may have or have
had in the recent past, being the previous six months, a material effect on
the group's financial position.
Basis of preparation
The unaudited condensed consolidated interim results for the six months ended
31 March 2019 have not been reviewed or reported on by the group's auditors,
BDO South Africa Incorporated.
The financial information has been prepared in accordance with the requirements
of International Financial Reporting Standards, the SAICA Financial Reporting
guides as issued by the Accounting Practices Committee, IAS 34: Interim Financial
Reporting, the JSE Listings Requirements and the requirements of the South
African Companies Act, 2008. These results have been prepared under the
supervision of J Limalia, CA(SA), Gemgrow's Chief Financial Officer.
The accounting policies adopted are consistent with those applied in the
preparation of the financial statements for the year-ended 30 September 2018.
By order of the Board
15 May 2019
Directors
Gregory Kinross* (Chairperson), M Kaplan (CEO), J Limalia (CFO), A Kirkel (COO),
C Abrams*, A Basserabie* and A Rehman*.
* Independent non-executive. All directors are South African.
Registered office
3rd Floor, Upper Building, 1 Sturdee Avenue, Rosebank, Johannesburg,
2196; PO Box 685, Melrose Arch, 2076
Transfer secretaries
Link Market Services South Africa Proprietary Limited
Sponsor
Java Capital
Company secretary
CIS Company Secretaries Proprietary Limited
Website www.gemgrow.co.za
Condensed consolidated statement of comprehensive income
Unaudited Unaudited
for the for the Audited for
six months six months the year-
ended ended ended
R'000 31 Mar 2019 31 Mar 2018 30 Sep 2018
Rental income 424 831 360 652 768 916
Straight line rental income
accrual 2 602 10 262 (1 154)
Total revenue 427 433 370 914 767 762
Property expenses (162 977) (133 026) (286 703)
Administration and corporate
costs (11 312) (5 115) (13 361)
Net operating profit 253 144 232 773 467 698
Changes in fair values 14 660 (12 379) (93 643)
Profit from operations 267 804 220 394 374 055
Finance charges (91 746) (53 457) (122 827)
Finance income 13 890 11 668 23 369
Profit before capital items 189 948 178 605 274 597
Impairment of Goodwill - - (160 619)
Profit before taxation 189 948 178 605 113 978
Taxation - - (2 011)
Other comprehensive income 189 948 178 605 111 967
Profit for the period
attributable to:
Equity shareholders of Gemgrow 185 883 178 605 111 967
Non-controlling interests 4 065 - -
189 948 178 605 111 967
Condensed consolidated statement of financial position
Unaudited at Unaudited at Audited at
31 Mar 31 Mar 30 Sep
R'000 2019 2018 2018
Assets
Non-current assets 5 424 576 5 334 028 4 938 077
Investment property 5 254 617 5 022 635 4 772 341
Fair value of property portfolio
for accounting purposes 5 217 628 4 976 804 4 737 927
Straight line rental income
accrual 36 989 45 831 34 414
Property, plant and equipment 153 168 181
Loans to executives 168 934 148 595 148 596
Goodwill - 160 618 -
Derivative financial assets 872 - 16 959
Deferred tax asset - 2 012 -
Current assets 330 030 143 353 135 639
Trade and other receivables 103 759 70 117 102 224
Cash and cash equivalents 226 271 73 236 33 415
Non-current assets held for
sale 329 310 - 72 400
Total assets 6 083 916 5 477 381 5 146 116
Equity and liabilities
Shareholders' interest 3 882 105 3 872 359 3 714 528
Stated capital 3 379 232 3 210 314 3 209 802
Reserves 502 873 662 045 504 726
Non-controlling interest 36 773 - -
Other non-current liabilities 1 864 794 1 278 660 1 034 565
Secured financial liabilities 1 858 787 1 259 978 1 033 343
Derivative instruments 6 007 18 682 1 222
Current liabilities 300 244 326 362 397 023
Trade and other payables 160 439 124 550 129 159
Derivative financial
instruments 805 1 138 2 157
Secured financial liabilities 139 000 200 674 265 707
Total equity and liabilities 6 083 916 5 477 381 5 146 116
Condensed consolidated statement of changes in equity
Non-
Stated Retained controlling
R'000 capital income interest Total
Balance at 30 September
2017 3 184 041 661 969 - 3 846 010
Issue of shares 25 761 - - 25 761
Dividends paid - (269 210) - (269 210)
Total comprehensive income
for the period - 111 967 - 111 967
Balance at 30 September
2018 3 209 802 504 726 - 3 714 528
Issue of shares 169 430 - 33 642 203 072
Dividends paid - (188 670) - (188 670)
Transfer from other
components of equity - 934 (934) -
Total comprehensive income
for the period - 185 883 4 065 189 948
Balance at 31 March 2019 3 379 232 502 873 36 773 3 918 878
Condensed consolidated statement of cash flows
Unaudited Unaudited Audited
for the for the for
six months six months the year-
ended ended ended
R'000 31 Mar 2019 31 Mar 2018 30 Sep 2018
Net cash utilised from operating
activities 21 700 9 205 79 121
Cash generated from operations 288 226 229 524 447 789
Finance charges paid (91 746) (53 457) (122 827)
Interest received 13 890 11 667 23 369
Dividends paid (188 670) (178 529) (269 210)
Net cash utilised in investing
activities (557 402) (566 634) (514 659)
Acquisition of investment
property (661 517) (572 611) (602 672)
Proceeds from disposal of
investment property 98 029 6 000 88 074
Acquisition of property, plant
and equipment - (23) (61)
Repayment of loans to executives 6 086 - -
Net cash generated from
financing activities 728 558 574 169 412 459
Net (outflow)/proceeds from
issue of share capital (581) (149) (662)
Proceeds from issue of share
capital - non-controlling
interest 33 642 - -
Proceeds from loans to
subsidiary - 35 002 35 002
Advances of financial
liabilities 695 497 539 316 378 117
Net movement in cash and cash
equivalents 192 856 16 740 (23 080)
Cash and cash equivalents at the
beginning of the period 33 415 56 496 56 496
Cash and cash equivalents at the
end of the period 226 271 73 236 33 415
Reconciliation of earnings to headline earnings
Unaudited Unaudited Audited
for the for the for
six months six months the year-
ended ended ended
R'000 31 Mar 2019 31 Mar 2018 30 Sep 2018
Profit for the period
attributable to Gemgrow
shareholders 185 883 178 605 111 967
Earnings 185 883 178 605 111 967
Changes in fair value of
investment property (38 430) - 130 111
Changes in fair value of
investment property - non-
controlling interest 1 936 - -
Loss/(profit) on sale of
investment property 4 544 - (15 448)
Impairment of goodwill - - 160 618
Headline profit attributable to
shareholders 153 933 178 605 387 248
Number of A shares in issue* 62 718 658 47 352 203 47 352 203
Number of B shares in issue 408 184 961 405 042 105 405 042 105
Weighted average number of
Gemgrow shares in issue
Weighted average number of A
shares in issue 59 109 187 47 352 203 47 352 203
Weighted average number of B
shares in issue 407 079 781 403 994 895 404 199 511
Basic and diluted earnings per
Gemgrow ordinary share (cents)
Basic and diluted earnings per
A share (cents) 39,87 39,57 24,80
Basic and diluted earnings per
B share (cents) 39,87 39,57 24,80
Headline and diluted headline
earnings per Gemgrow ordinary
shares (cents)
Headline and diluted headline
earnings per A share (cents) 33,02 39,57 85,76
Headline and diluted headline
earnings per B share (cents) 33,02 39,57 85,76
Consolidated condensed segmental analysis
for the six months ended 31 March 2019
Geographical
The entity has four reportable segments based on the geographic locations
of the properties, which are the entity's strategic business segments.
The company's executive directors review internal management reports
monthly and all segments greater than 10% are considered strategic.
All segments are in South Africa. There are no single major tenants.
The following summary describes the operations in each of the company's
reportable segments.
KwaZulu- Western
R'000 Gauteng Natal Cape
31 March 2019
Contractual rental income 220 455 38 592 49 331
Straight line rental income 4 716 1 212 (11 867)
Administration costs 302 60 60
Operating and administration costs (92 718) (16 456) (19 891)
Net operating profit 132 755 23 408 17 633
Finance income 597 69 55
Finance charges (225) (5) (1)
Net operating income/(loss) 133 127 23 472 17 687
Changes in fair values (135 281) (40 688) (8 061)
Reportable segment profit before tax (2 154) (17 216) 9 626
Taxation - - -
Reportable segment profit after tax (2 154) (17 216) 9 626
Reportable segment assets 3 154 540 532 722 683 890
Reportable segment liabilities (89 157) (29 971) (20 925)
3 065 383 502 751 662 965
R'000 Limpopo Other Total
31 March 2019
Contractual rental income 63 665 52 788 424 831
Straight line rental income 2 941 5 600 2 602
Administration costs 117 (11 851) (11 312)
Operating and administration
costs (17 030) (16 882) (162 977)
Net operating profit 49 693 29 655 253 144
Finance income 57 13 112 13 890
Finance charges (4) (91 511) (91 746)
Net operating income/(loss) 49 746 (48 744) 175 288
Changes in fair values 42 919 155 771 14 660
Reportable segment profit before
tax 92 665 107 027 189 948
Taxation - - -
Reportable segment profit after
tax 92 665 107 027 189 948
Reportable segment assets 1 405 354 307 410 6 083 916
Reportable segment liabilities (12 377) (2 012 607) (2 165 038)
1 392 977 (1 705 197) 3 918 878
Sectoral
R'000 Commercial Industrial
31 March 2019
Contractual rental income 183 613 107 661
Straight line rental income (8 007) (1 091)
Operating and administration costs (72 634) (40 798)
Administration costs - -
Net operating profit 102 972 65 772
Finance income 356 234
Finance charges (6) (204)
Net operating income/(loss) 103 322 65 802
Changes in fair values (157 411) (43 038)
Reportable segment profit before tax (54 089) 22 764
Taxation - -
Reportable segment profit after tax (54 089) 22 764
Reportable segment assets 2 322 771 1 476 353
Reportable segment liabilities (68 361) (42 527)
2 254 410 1 433 826
R'000 Retail Overheads Total
31 March 2019
Contractual rental income 152 344 (18 787) 424 831
Straight line rental income 7 943 3 757 2 602
Operating and administration
costs (52 009) 2 464 (162 977)
Administration costs - (11 312) (11 312)
Net operating profit 108 278 (23 878) 253 144
Finance income 264 13 036 13 890
Finance charges (24) (91 512) (91 746)
Net operating income/(loss) 108 518 (102 354) 175 288
Changes in fair values 70 337 144 772 14 660
Reportable segment profit
before tax 178 855 42 418 189 948
Taxation - - -
Reportable segment profit after
tax 178 855 42 418 189 948
Reportable segment assets 1 946 104 338 688 6 083 916
Reportable segment liabilities (64 861) (1 989 289) (2 165 038)
1 881 243 (1 650 601) 3 918 878
Geographical
Western KwaZulu-
R'000 Gauteng Cape Natal
31 March 2018
Contractual rental income 216 874 49 020 38 142
Straight line rental income 6 687 1 000 783
Operating and administration costs (83 228) (17 292) (12 931)
Net operating profit 140 333 32 728 25 994
Finance income 465 60 73
Finance charges (131) (1) (3)
Net operating income/(loss) 140 667 32 787 26 064
Changes in fair values - - -
Reportable segment profit before tax 140 667 32 787 26 064
Taxation - - -
Reportable segment profit after tax 140 667 32 787 26 064
Reportable segment assets 3 146 555 679 041 553 426
Reportable segment liabilities (52 849) (13 456) (26 254)
3 093 706 665 585 527 172
R'000 Limpopo Other Total
31 March 2018
Contractual rental income 15 200 41 416 360 652
Straight line rental income 382 1 410 10 262
Operating and administration
costs (3 782) (20 908) (138 141)
Net operating profit 11 800 21 918 232 773
Finance income 6 11 064 11 668
Finance charges (1) (53 321) (53 457)
Net operating income/(loss) 11 805 (20 339) 190 984
Changes in fair values - (12 379) (12 379)
Reportable segment profit before
tax 11 805 (32 718) 178 605
Taxation - - -
Reportable segment profit after
tax 11 805 (32 718) 178 605
Reportable segment assets 556 265 542 094 5 477 381
Reportable segment liabilities (13 046) (1 499 417) (1 605 022)
543 219 (957 323) 3 872 359
Sectoral
R'000 Commercial Industrial
31 March 2018
Contractual rental income 183 941 103 485
Straight line rental income 6 137 1 571
Operating and administration costs (64 859) (38 302)
Net operating profit 125 219 66 754
Finance income 328 232
Finance charges (43) (90)
Net operating income/(loss) 125 504 66 896
Changes in fair values - -
Reportable segment profit before tax 125 504 66 896
Taxation - -
Reportable segment profit after tax 125 504 66 896
Reportable segment assets 2 534 390 1 388 954
Reportable segment liabilities (44 884) (23 812)
2 489 506 1 365 142
R'000 Retail Overheads Total
31 March 2018
Contractual rental income 73 226 - 360 652
Straight line rental income 2 554 - 10 262
Operating and administration
costs (27 339) (7 641) (138 141)
Net operating profit 48 441 (7 641) 232 773
Finance income 104 11 003 11 668
Finance charges (2) (53 321) (53 457)
Net operating income/(loss) 48 543 (49 959) 190 984
Changes in fair values - (12 379) (12 379)
Reportable segment profit before
tax 48 543 (62 338) 178 605
Taxation - - -
Reportable segment profit after
tax 48 543 (62 338) 178 605
Reportable segment assets 1 231 379 322 658 5 477 381
Reportable segment liabilities (43 422) (1 492 904) (1 605 022)
1 187 957 (1 170 246) 3 872 359
Geographical
Western KwaZulu-
R'000 Gauteng Cape Natal
30 September 2018
Contractual rental income 451 893 98 980 77 040
Straight line rental income accrual 4 716 (11 867) 1 213
Operating and administration costs (184 012) (35 566) (28 749)
Net operating profit 272 597 51 547 49 504
Finance income 1 114 113 136
Finance charges (373) (9) (3)
Net operating income/(loss) 273 338 51 651 49 637
Changes in fair values (135 281) (8 061) (40 688)
Impairment of Goodwill - - -
Reportable segment profit/(loss)
before tax 138 057 43 590 8 949
Deferred taxation - - -
Reportable segment profit after tax 138 057 43 590 8 949
Reportable segment assets 3 110 677 671 001 533 329
Reportable segment liabilities (56 246) (13 109) (25 309)
3 054 431 657 892 508 020
R'000 Limpopo Other Total
30 September 2018
Contractual rental income 31 925 109 077 768 915
Straight line rental income
accrual 2 941 1 844 (1 153)
Operating and administration
costs (7 956) (43 781) (300 064)
Net operating profit 26 910 67 140 467 698
Finance income 16 21 990 23 369
Finance charges (1) (122 441) (122 827)
Net operating income/(loss) 26 925 (33 311) 368 240
Changes in fair values 42 919 47 468 (93 643)
Impairment of Goodwill - (160 619) (160 619)
Reportable segment profit/(loss)
before tax 69 844 (146 462) 113 978
Deferred taxation - (2 011) (2 011)
Reportable segment profit after
tax 69 844 (148 473) 111 967
Reportable segment assets 636 805 194 304 5 146 116
Reportable segment liabilities (2 161) (1 334 763) (1 431 588)
634 644 (1 140 459) 3 714 528
Sectoral
R'000 Commercial Industrial
30 September 2018
Contractual rental income 373 906 213 822
Straight line rental income accrual (8 006) (1 090)
Operating and administration costs (139 212) (82 972)
Net operating profit 226 688 129 760
Finance income 661 478
Finance charges (197) (171)
Net operating income/(loss) 227 152 130 067
Changes in fair values (157 411) (43 037)
Impairment of Goodwill - -
Reportable segment profit before tax 69 741 87 030
Deferred taxation - -
Reportable segment profit after tax 69 741 87 030
Reportable segment assets 2 375 588 1 379 563
Reportable segment liabilities (46 049) (26 840)
2 329 539 1 352 723
R'000 Retail Overheads Total
30 September 2018
Contractual rental income 181 187 - 768 915
Straight line rental income
accrual 7 943 - (1 153)
Operating and administration costs (66 420) (11 460) (300 064)
Net operating profit 122 710 (11 460) 467 698
Finance income 365 21 865 23 369
Finance charges (17) (122 442) (122 827)
Net operating income/(loss) 123 058 (112 037) 368 240
Changes in fair values 70 337 36 468 (93 643)
Impairment of Goodwill - (160 619) (160 619)
Reportable segment profit before
tax 193 395 (236 188) 113 978
Deferred taxation - (2 011) (2 011)
Reportable segment profit after
tax 193 395 (238 199) 111 967
Reportable segment assets 1 276 390 114 575 5 146 116
Reportable segment liabilities (41 638) (1 317 061) (1 431 587)
1 234 752 (1 202 486) 3 714 528
Reconciliation of profit before tax to distributable earnings
Unaudited Unaudited Audited
for the for the for
six months six months the year-
ended ended ended
R'000 31 Mar 2019 31 Mar 2018 30 Sep 2018
Profit before tax 189 948 178 605 113 978
Changes in fair values of
investment property (36 494) - 130 111
Changes in fair values of
financial instruments 19 519 12 379 (21 019)
Loss/(profit) on sale of
investment properties 4 544 - (15 448)
Impairment of goodwill - - 160 618
Straight line rental income
accrual (2 602) (10 262) 1 154
Pre-effective date distribution 6 090 - -
NCI earnings net of fair value
adjustments and goodwill
impairments (4 065) - -
Antecedent interest 1 403 - -
Distributable earnings
attributable to shareholders 178 343 180 722 369 394
Number of A shares in issue 62 718 658 47 352 203 47 352 203
Number of B shares in issue 408 184 961 405 042 105 405 042 105
Weighted average number of A
shares in issue 59 109 187 47 352 203 47 352 203
Weighted average number of B
shares in issue 407 079 781 403 994 895 404 199 511
Basic and diluted earnings per
share (A and B combined) (cents) 39,87 39,57 24,80
Headline and diluted headline
earnings per share (A and B
combined) (cents) 33,02 39,57 85,76
Administration
Directors
Gemgrow Properties Limited
G Kinross* (Chairperson)
M Kaplan (CEO)
A Kirkel (COO)
J Limalia (CFO)
C Abrams*
A Basserabie*
A Rehman*
* Independent non-executive.
All directors are South African.
Registered office
Gemgrow Properties Limited
1 Sturdee Avenue
3rd Floor
Upper Building
Rosebank, 2196
(PO Box 685, Melrose Arch, 2076)
Transfer secretaries
Link Market Services South Africa Proprietary Limited
(Registration number 2000/007239/07)
13th Floor, 19 Ameshoff Street
Braamfontein, 2001
(PO Box 4844, Johannesburg, 2000)
Sponsor
Java Capital Trustees and Sponsors Proprietary Limited
(Registration number 2006/005780/07)
6A Sandown Valley Crescent
Sandton, 2196
(PO Box 522606, Saxonwold, 2132)
Company secretary
Gillian Prestwich
CIS Company Secretaries Proprietary Limited
(Registration number 2006/024994/07) Rosebank Towers,
15 Biermann Avenue Rosebank, 2001
(PO Box 61051, Marshalltown, 2107)
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