Abridged Unaudited consolidated results for six months ended 31 December 2024
Grit Real Estate Income Group (GR1T)
14-Feb-2025 / 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 2024
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 2024. Bronwyn Knight, Chief Executive Officer of Grit Real Estate Income Group Limited, commented: “As part of the Group’s journey to recovery, we progressed in our cost reduction programme, strengthened the balance sheet through active interest rate risk management and improved the portfolio across key metrics, underpinned by strong leasing and asset management efforts. Although several initiatives already implemented will only realise full value over the medium term, net operating income benefitted from an increased contribution from the Data Centres and Healthcare segments. Our portfolio remains defensive by geographic and asset class diversification, with a significant percentage of income under long-term hard currency leases. This provides a foundation for income generation and a resilient platform from which to capitalise on growth opportunities through active management and sector-focused development structures.” Financial and Portfolio highlights
6 Months ended 31 Dec 2024
Restated 6 Months ended 31 Dec 2023
Increase/ Decrease
Property portfolio net operating income (proportionate8)
US$35.1m
US$31.1m
+13.0%
EPRA cost ratio (including associates) 2
14.2%
14.7%
-0.5%
Net finance costs
US$29.8m
US$21.5m
+38.6%
Weighted cost of debt
9.39%
9.87%
-0.45%
Revenue earned from multinational tenants6
85.4%
80.0%
+5.4%
Income produced in hard currency7
94.2%
95.4%
-1.2%
As at 31 Dec 2024
As at 30 Jun 2024
Increase/ Decrease
EPRA NRV per share1
US$50.7cps
US$57.9cps
-12.4%
Group LTV
51.36%
52.33%
-0.97%
Total Income Producing Assets3
US$956.5m
US$971.2m
-1.51%
Contractual rental collected
92.1%
91.1%
+1.0%
WALE4
5.21 years
5.23 years
-0.02 years
EPRA portfolio occupancy rate5
90.62%
89.77%
+0.85%
Grit proportionately owned lettable area (“GLA”)
353,340m2
386,538m2
-33,198m2
Weighted average annual contracted rent escalations
2.67%
2.84%
-0.17%
Notes
1
Explanations of how EPRA figures and Distributable earnings per share are derived from IFRS are shown in note 18.
2
Based on EPRA cost to income ratio calculation methodology which includes the proportionately consolidated effects of associates and joint ventures.
3
Includes controlled Investment properties with Subsidiaries, Investment Property owned by Joint Ventures, deposits paid on Investment properties and other investments, property plant and equipment, intangibles, and related party loans.
4
Weighted average lease expiry (“WALE”).
5
Property occupancy rate based on EPRA calculation methodology - Includes joint ventures.
6
Forbes 2000, Other Global and pan African tenants.
7
Hard (US$ and EUR) or pegged currency rental income.
8
Property net operating income (“NOI”) is an Alternative Performance Measure (“APM”) and is derived from IFRS revenue and NOI adjusted for the results of joint ventures. A full reconciliation is provided in the financial review section below.
Summarised results commentary:
•
We benefit from having built a business focused on quality real estate assets with strong ESG credentials and long term leases to a resilient and diverse customer base that comprises more than 85% of strong multinational and investment grade tenants. The impact of the consolidation of GREA, which was fully consolidated with effect from 30 November 2023, along with contractual lease escalations, which are predominantly inflation-linked, and new assets, have contributed to growth in NOI during this reporting period and into the future. We now have 33 assets across 7 sectors with 94.2% 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 and sector focused development substructures.
•
EPRA net reinstatement value (“NRV”) per share of US$50.7 cents per share (30 June 2024: US$57.9 cents per share), is predominantly driven by a 2.3% decrease in the fair value adjustment made on investment properties during the period. This culminated in an overall decrease of 4.5% in the Group’s proportionate share of property values.
•
Property portfolio net operating income (Grit proportionate ownership) increased 13.0%, which is largely driven by the impact of the full period inclusion of the consolidated results of GREA post the acquisition of this business on the 30th of November 2023.
•
Group administrative costs increased by 4.1% in the six months to 31 December 2024, mainly as a result of the impact of the consolidation of APDM. Excluding the impact of APDM and considering that the cost related to APDM will be capitalised to development projects when these resume in 2025, the administrative costs on a like-for-like comparable basis reduced by 19.1% from the comparative period. As a result, administrative expenses as a percentage of total income-producing assets declined to 1.5% as of 31 December 2024, down from 1.85% as at 30 June 2024. This demonstrates strong progress in cost reduction initiatives, notwithstanding the smaller asset base following negative fair value adjustments. The Group continues to advance towards its strategic objective of reducing administrative costs as a percentage of total income-producing assets to 1.25% over the short term and ultimately 1% over the medium term.
•
Although the Group WACD decreased to 9.39% from 9.87% in the comparative period, finance costs increased by US$10.1 million (44.6%) during the period under review as compared to the period ended 31 December 2024. The increase in finance costs is largely driven by the full period impact of increased borrowing levels following the consolidation of GREA, which were partially offset by the settlement of debt from the proceeds of the GREA capital raise that were recovered during the period.The Group has increased the nominal value of interest rate hedges that amounted to US$200 million at the end of June 2024 to US$235 million as at 31 December 2024. The Group’s focus remain on debt reduction over the foreseeable future through asset recycling in non-core sectors.
FOR FURTHER INFORMATION, PLEASE CONTACT:
Grit Real Estate Income Group Limited
Bronwyn Knight, Chief Executive Officer
+230 269 7090
Morne Reinders, Investor Relations
+27 82 480 4541
Cavendish Capital Markets Limited – UK Financial Adviser
Tunga Chigovanyika/ Edward Whiley (Corporate Finance)
+44 20 7220 5000
Justin Zawoda-Martin / Daniel Balabanoff / Pauline Tribe (Sales)
+44 20 3772 4697
Perigeum Capital Ltd – SEM Authorised Representative and Sponsor
Shamin A. Sookia
+230 402 0894
Darren M. Chinasamy
+230 402 0885
Capital Markets Brokers Ltd – Mauritian Sponsoring Broker
Elodie Lan Hun Kuen
+230 402 0280
NOTES: Grit Real Estate Income Group Limited is the leading Pan-African real estate company focused on investing in, developing and actively managing a diversified portfolio of assets in carefully selected African countries (excluding South Africa). These high-quality assets are underpinned by predominantly US$ 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+, Cross Kgosidiile, Lynette Finlay + and Nigel Nunoo+. (* Executive Director) (+ independent Non-Executive Director) Company secretary: Intercontinental Fund Services Limited Corporate service provider: Mourant Governance Services (Guernsey) Limited Registered office address: PO Box 186, Royal Chambers, St Julian's Avenue, St Peter Port, Guernsey GY1 4HP Registrar and transfer agent (Mauritius): Onelink Ltd SEM authorised representative and sponsor: Perigeum Capital Ltd UK Transfer secretary: Link Market Services Limited Mauritian Sponsoring Broker: Capital Markets Brokers Ltd
This notice is issued pursuant to the FCA Listing Rules, SEM Listing Rules 15.24 and 15.44 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 Friday, 14 February 2025 at 11:30 Mauritius time / 09:30 SA time / 07:30 UK 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 leading, woman-led real estate platform, delivering property investment and associated real estate services across Africa. We recognise our responsibility in shaping the built environment for long-term sustainability, with a strong focus on impact, energy efficiency, and carbon reduction across our portfolio. In addition, we remain committed to diversity and empowerment, with women holding over 40% of leadership positions, and we continue to make a meaningful difference through extensive community engagement and social impact initiatives across the continent. Over the past 24 months, the Board introduced and remains focused on the Group’s Grit 2.0 strategy, with its capital allocation strategy, cost reduction drive, active interest rate management and portfolio optimisation increasingly reflected in the composition of Group net operating income, with earnings from diplomatic housing, healthcare, and data centres replacing those from previously disposed assets in hospitality and LLR. Operational review The Group’s journey was challenged by various exogenous factors during the reporting period, including a higher for longer interest rate environment, local currency declines, rental reversions as well as geopolitical headwinds, particularly in Mozambique. These challenges impacted our net asset value, with EPRA NRV per share contracting by 12.4% to US$50.70 cents. Delays in development projects adversely affected revenue generation and portfolio growth. Notwithstanding these challenges, NOI from ongoing operations grew by 13.0% to US$35.1 million (H1FY24: US$31.1 million) in the six months to December 2024, driven predominantly by the positive contribution arising from the consolidation of GREA and supported by inflation-linked contractual lease escalations. Rental collections improved to 92.1% from 91.1% at 30 June 2024, whilst 94% of the Group’s revenue is earned in hard currency or from hard currency-linked long-term leases with mainly multinational, blue-chip tenants. Portfolio occupancy, excluding vacancies at ENEO CCI and VDE, remained stable at 94.5%. The Group’s retail portfolio continued to experience value compression, driven mainly by Anfaplace Mall, whilst the renegotiation of long-term leases on the Group’s Vodacom (5 years) and Imperial (10 years) assets in Mozambique and Kenya impacted valuations in the office and Industrial segments respectively. Considering the prevailing macro-economic environment, the Group believes that the benefits of a more stable weighted average lease expiry (“WALE)” outweigh the impact of rental reversions from these contract negotiations. The valuation movement in the Medical segment is as a result of the reclassification of the Group’s Artemis Curepipe Hospital asset to “non-current asset held for sale” as part of the Group’s asset recycling initiatives. Cost containment On a like-for-like basis, administrative costs decreased by 19.1% compared to the prior period. As a result, administrative expenses as a percentage of total income-producing assets declined to 1.5% as of 31 December 2024, down from 1.85% as at 30 June 2024. This demonstrates strong progress in cost reduction initiatives, notwithstanding the smaller asset base following negative fair value adjustments. The Group continues to advance towards its strategic objective of reducing administrative costs as a percentage of total income-producing assets to 1.25% over the short term and ultimately to 1% over the medium term. Stakeholders are further referred to the AGM Business Update published on RNS on 13 December 2024 for more information on the Group’s strategic outsourcing agreement with Broll Property Group, who will assume responsibility for the property and facilities management of Grit’s assets valued at US$754 million as at 31 December 2024. This partnership is expected to deliver annual cost savings of approximately US$1 million and streamline operational efficiencies, enabling the Group to focus on its core expertise in impact real estate development, strategic asset management and retaining key tenant relationships. The effective date of this partnership will be 1 February 2025, preceded by a seamless transition phase to ensure uninterrupted operations. Finance costs Net finance costs increased substantially by 38.6% to US$29.8 million, mainly due to the full period impact of finance costs associated with the GREA acquisition being included in the period ended 31 December 2024, whilst the comparative period only included 1 month’s impact following the consolidation of GREA on 30 November 2023. Annual contractual lease escalations over the portfolio that are mostly linked to US consumer price inflation partially shielded the increase in ongoing funding costs. Despite the increase in net finance costs, the weighted cost of debt reduced by 0.45% to 9.39%, supporting a reduction in the loan-to-value ratio of 0.97% to 51.36%. During the reporting period, the Group increased its hedging positions to 74.1% of its US$ SOFR exposure. Further hedging and capital allocation, particularly from disposals, is expected to improve the Group’s interest cover ratio (ICR) over the medium term. Asset recycling The Group continues to make measured progress in its asset recycling initiatives with the disposal of two assets valued at approximately US75 million currently underway. The reclassification of the Artemis Curepipe Hospital as “held for sale” temporarily impacted on the Group’s reported asset yield, however it is expected that the yield will continue to increase in line with Grit’s stated target of approximately 9% as assets producing below the required yield threshold are disposed of. Update on political unrest in Mozambique Mozambique experienced several weeks of political unrest following a disputed national election. At the time of writing, the situation remained calm, with limited reports of violence. Grit’s foremost priority remains the safety of its staff, tenants and assets – no injuries or damage to the Group’s assets have been reported. The Board and Management continues to monitor the situation closely, drawing on the Group’s well-established Family of Partnerships in the country, with all contingencies remaining in effect, including police and military presence at Zimpeto Square. Political Risk Insurance against loss of income as a result of the unrest remains in place. Update on the 2024 Annual General Meeting vote At the Annual General Meeting of the Company held on 13 December 2024, ordinary resolutions number 12 and 13, received the support of 69.68% and 70.27% respectively of shareholder votes. During January 2025 the Company invited shareholders, including dissenting shareholders, to discuss this voting outcome to understand their position and perspectives. The perspectives shared by of our shareholders are highly valued and have been reported to the Board. Changes to the Board of Directors The Board welcomes Mr Nigel Nunoo, who was appointed as the Group’s incoming independent Non-Executive Chairman. Mr Nunoo is expected to assume the position of Chairman following the retirement of Mr Peter Todd later this calendar year, having reached the maximum tenure in terms of the Group’s governance policies. As announced in the Integrated Annual Report for the year ended 30 June 2024, Mr Jonathan “Johnny” Crichton sadly passed away in September 2024. Lynette Finlay, Independent Non-Executive Director, has been appointed as a Member of the Audit Committee and Nigel Nunoo, Independent Non-Executive Director, appointed as a Member and Chair of the Risk Committee. Outlook The improvement of total returns to shareholders over the medium term remains a priority through 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. 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. The uncertain political landscape in the USA, particularly impacting foreign trade policy and aid, remains a matter of concern and is closely monitored. Notwithstanding these external challenges, the Group remains on its growth trajectory, however, this remains susceptible to interest rate movements which are outside the Group’s control. In line with its Grit 2.0 strategy, the Board will continue to target the reduction of administrative costs, lower LTV’s and the weighted average cost of debt to defend and grow its distributable earnings and NAV growth Presentation of financial results The abridged consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“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 18a to 18b. 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. In the absence of the requirement for Distributable Reserves in the domicile countries of the group, Distributable Earnings is utilised to determine the maximum amount of operational earnings that would be available for distribution as dividends to shareholders in any financial period. This factors the various company specific nuances of operating across a number of diverse jurisdictions across Africa and the investments’ legal structures of externalising cash from the various 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 interest (for properties consolidated by the group, but part owned by minority partners), form the basis of the Group’s distributable earnings build up, which is alternatively shown in Note 18b – Distributable Earnings. Although the NOI performance of the Group have improved on a year-on-year basis and administrative costs are trending downward as part of the cost savings initiatives that the Group is undertaking, the distributable earnings for the six months ended 31 December 2024 was negatively impacted by finance costs that remain high due to the high interest rate environment that exist globally. This contributed to a distributable loss being incurred for the six months ended 31 December 2024 amounting to US$4.6 million as compared to a distributable earning of US$6.0 million generated during the six months ended 31 December 2023.
IFRS Income statement to distribution reconciliation
IFRS YTD
Extracted from Associates
GRIT Proportionate Income statement
Split NCI
GRIT Economic Interest
YTD Distributable earnings
US$'000
US$'000
US$’000
US$'000
US$'000
US$'000
Gross rental income
38,987
3,605
42,592
(12,796)
29,796
29,546
Property operating expenses
(6,826)
(681)
(7,507)
1,867
(5,640)
(5,626)
Net operating profit
32,161
2,924
35,085
(10,929)
24,156
23,920
Other income
142
-
142
(265)
(123)
(92)
Administration expenses
(9,264)
(284)
(9,548)
1,484
(8, 064)
(7,744)
Net impairment charge on financial assets
(386)
-
(386)
40
(346)
-
Profit / (loss) from operations
22,653
2,640
25,293
(9,670)
15, 623
16,084
Fair value adjustment on investment properties
(19,528)
(135)
(19,663)
4,677
(14,986)
-
Fair value adjustment on other financial asset
20
-
20
(13)
7
-
Fair value adjustment on derivative financial instruments
(1,511)
-
(1,511)
(31)
(1,542)
-
Share-based payment
-
-
-
-
-
-
Share of profits from associates
602
(602)
-
-
-
-
Gain on derecognition of loans and other receivables
