Robust Collections, Diversification, Tenant Strength And Cost Savings Lead To Grit’s Dividend Resumption
- Dividend of USD1.50 cps declared
- Gross rental income of USD31.6 million
- Profit from operations up 19.7% to USD12.9 million
- NAV per share up 6.3% to USD124.4 cps
- Group LTV down 0.9% from 50.2% to 49.3%
- Weighted average lease expiry 5.2 years
- Total income producing assets up 3.1% to USD849.2 million
- Property portfolio now comprises 54 investments across eight countries and five property sectors
- Strong rent collection, averaging 91.4%
- 88.7% of revenue earned from multinational tenants
- 93.0% of revenue produced in hard currency
- Weighted average rental contracted rent escalations at 2.9%, up 0.1%
- Weighted average property capitalisation rate of 8.1%
Grand Baie, Mauritius. Grit Real Estate Income Group Limited, a leading pan-African real estate company focused on investing in and actively managing a diversified portfolio of assets underpinned by predominantly US$ and Euro denominated long-term leases with high quality multi-national tenants, today announced robust results for the six months ended 31 December 2020.
Ms. Bronwyn Knight, co-founder and CEO of Grit commented:
“Notwithstanding a very tough operating environment as a result of Covid-19 uncertainty and the inability to travel, our team has continued to manage, protect and enhance the portfolio superbly. Although like-for-like revenue decreased by 6.2% due to rental concessions, our disciplined approach to cutting costs supported an 8.1% increase in net operating income, together with the impact of acquisitions during the period.
“Our focus over the past 10 months has been on increasing liquidity and restoring balance sheet strength. It is therefore pleasing to announce that our collections rate continues to improve and has moved to 91.4% over the course of the reporting period, vis-à-vis an 86% collection rate reported during the first four months of the pandemic.
“The Group’s loan to value remains a key metric to measuring our overall performance, and I am happy to report that this has started to show a recovery trajectory, down from 50.2% in the prior reporting period to 49.3%, mainly because of the Acacia Estate disposal and reductions in revolving credit facility balances.
“The Board has set a near-term LTV target of 45% with several initiatives currently underway that will support the achievement of this target.”
Total income producing assets grew by 3.1% during the reporting period, mainly driven by the stabilisation in property valuations following the material reversions reported in FY20 because of Covid-19. On a like-for-like basis, property valuations increased by 2.2% during the reporting period, supported by Euro foreign exchange movements and operational earnings, offsetting negative valuation impacts on retail assets.
The Group’s LTV was impacted positively by asset recycling initiatives and valuation movements, although this was offset by movements in the Euro foreign exchange rates, due to Grit’s higher proportion of Euro debt to Euro asset value (which hedges the balance sheet exposure to Euro fluctuations against the US dollar).
Grit’s total income producing asset value increased to USD849.2 million (June 2020: USD823.5 million). EPRA NRV* per share (NAV per share) consequently increased by 6.3% to USD1.244 (June 2020: USD 1.171).
Notwithstanding challenging market conditions, Grit was able to successfully recycle some non-core assets, raising USD11 million during the reporting period, with further recycling initiatives currently under consideration. Structural and cyclical challenges within the retail sector continues to place pressure on rental reversions and vacancies, which the Group expects to lead to some revenue pressure for the rest of the current and the early part of the next financial years. The Group, however, remains positive of successful re-letting activities once Covid-19 restrictions have been lifted. At a portfolio level, the Group reported occupancy levels of 92% down 2.1% on the comparable six months ended
31 December 2019. 88.7% of revenue is earned in hard currency (USD and Euro or pegged currency rental income).
Considering strong cash collections and operating performance as well as progress made in the reduction of gearing, Grit resumed distributions, declaring a conservative dividend of USD1.50 cents per share (December 2019: USD 5.25 cents per share). The Group is not a REIT and has therefore no minimum distribution requirement.
Grit’s Board indicated that should current cash collection trends, especially in the hospitality sector be maintained and LTV be reduced further, an extraordinary quarterly dividend may be considered. This distribution would further be subject to no significant third or fourth wave Covid-19 impacts and the successful restructuring of the Group’s empowerment transaction.
The Group also announced a refocused set of pipeline opportunities, with all projects being subject to even stricter scrutiny in light of the pandemic as well as the Group’s focus on balance sheet protection and optimisation.
Post the reporting date, Grit announced that it had successfully migrated its corporate domicile to Guernsey from Mauritius. This migration, coupled with the Group’s recent transfer to a Premium listing on the London Stock Exchange, is expected to facilitate Grit’s inclusion in the FTSE indices. This, in turn, is anticipated to help raise Grit’s profile with investors, improve liquidity in Grit’s shares and place Grit in an enhanced position to fund its accretive pipeline of investments. With this in place, the Group believes it has the appropriate listing and capital structure to realise its longer -term growth ambitions going forward.
Ms. Knight concluded:
“Our focus for the next six months remains firmly on current operations, especially further improvements in rent collection, the reduction of operating expenses and ensuring the long-term viability of our assets.
“We will further place strong emphasis on addressing the current vacancy rate across the portfolio and believe that new rental contracts will be concluded once Covid-19 restrictions have been lifted.
“Lastly, we will continue to focus on restoring balance sheet strength through a combination of asset recycling initiatives, a reduction in debt levels as well as the acquisition of accretive assets and pre-funding of developments.”