- Net Operating Income from continuing operations up 15.6%
- Distributions to shareholders resumed with US$1.50 cents per share dividend declared paid from Distributable cash earnings (1H24 of $2.07) implying a 72.5% payout ratio.
- Grit 2.0 capital recycling strategy at or close to book value increasingly evident in supporting higher quality, more defensive portfolio underpinned by longer yields
- Diplomatic housing, healthcare and data centres replaced earnings disposed of in the hospitality segment
- Group administrative costs down 15.4%
- On track to achieve a targeted US$4 million (-19%) by FY24
- Group weighted average cost of debt increased to 9.62% resulting in an 8.2% (US$1.5 million) increase in finance costs for the period
- due to expiring hedges being replaced at higher market levels.
- Grit is 78.4% hedged on its USD debt positions
- 95% of income produced in hard currency (H1FY22: 92.4%)
- Weighted average lease expiry up 0.3 years to 4.7 years
- EPRA portfolio occupancy rate up 1.9% to 95.5%
28 February 2024. Grand Baie, Mauritius. London-listedGrit Real Estate Income Group Limited (“Grit” or “the Company”), a leading and award-winning pan-African impact real estate company focused on investing in, developing and actively managing a diversified portfolio of assets in carefully selected African countries announced solid interim results for the six months ended 31 December 2023 today, despite ongoing macro-economic headwinds.
Ms. Bronwyn Knight, CEO of Grit commented:
“Our unwavering execution of the Board’s approved Grit 2.0 strategy continued to gain traction, despite ongoing macro-economic challenges with several encouraging green shoots emerging.
“We’ve made significant progress with the simplification of our structure, operations, and financial reporting over the last 18 months. We also successfully disposed of our interests in associate accounted properties where we had limited opportunity of obtaining controlling interests at or close to book value and redirected the capital to assets that we can control.
“The Grit 2.0 strategy is becoming increasingly evident within the composition of the Group’s net operating income, with Diplomatic Housing, Healthcare and Data Centre segments replacing earnings that were disposed of.”
As a result, Grit’s net operating income from continuing operations increased 15.6% to US$29.7 million from US$15.7 million in the prior year comparative period.
In addition, the Group recommenced distributions to shareholders, having declared an interim dividend of US$1.5 cents per share.
Knight shared that the final stage of Grit’s simplification involves grouping property assets into logical industry subsidiaries and positioning these within the Group for optimal growth and value creation.
“Grit 2.0 effectively allows us to capture the property value chain across all verticals,” Knight explains.
“Considering the lack of depth within the African real estate market, it enables us to secure NAV uplift by developing assets, holding these over an extended period under long leases earning lease income, as well as earning additional revenue through development management, asset and property management services – not only for Grit but for third parties as well,” she added.
Knight said that Grit’s ability to own the entire value chain is evidenced in the optimisation of its administration costs through its in-sourced solutions.
“By optimising our intellectual property, we generated close to US$6.5 million in additional income during the reporting period, with expectations of growing this further as further critical mass is generated,” she added.
Group administrative costs consequently reduced by 15.4% during the reporting period, and it remains on track to achieve a targeted US$4 million or 19% reduction in administrative costs by the end of the current financial year.
The Group’s move of its industrial assets under the banner of Bora Africa, as well as its Acacia Estates and diplomatic housing assets to its development subsidiary, GREA, post the period under review supported its “capital light” strategy, facilitating a US$48 million cash injection to GREA from its co-investor, the Public Investment Corporation.
These recapitalisation proceeds will be directed towards both debt reduction and pipeline developments within diplomatic housing, industrial, and healthcare sectors that will also generate fee income, in line with the Group’s 2.0 strategy.
Knight contextualised Grit’s performance against strong macro-economic headwinds, mainly due to significant adjustments in global interest rates during the period under review, which caused sharp increases in the Group’s overall cost of capital.
Grit’s weighted average cost of debt subsequently increased to 9.62%, with several hedges maturing over the period. At period-end, Group LTV stood at 47.6%, with a target LTV of between 35% and 40% in the short- to medium-term.
The Group’s portfolio comprises a total of 33 investments in 11 African countries with exposure to seven property asset classes and a total portfolio GLA of 301 306m2. Property fair valuations contracted marginally by 1.6% as a result of rising interest rates during the period.
90% of revenue is earned from multinational tenants, excluding retail assets (79% including retail) and the EPRA occupancy rate stood at 99% (95.5% including retail assets).
“Going forward, prudent capital allocation will remain fundamental to the business. We have shown the ability to recycle over US$160 million of assets at or close to book value in very difficult markets.
“Debt reduction will have a direct impact on our LTV and earnings, and therefore remain a prime consideration. A second part of this will be capitalizing on the NAV uplift as a result of GREA’s development portfolio coming on stream, as well as further leveraging our fee-income earning capabilities.
“We are also very sensitive to returning capital to investors and will consider share buy-backs in addition to continued distributions,” Knight concluded.
ENQUIRIES:
Articulate Capital Partners
Morné Reinders +27 82 480 4541
Grit Real Estate Income Group Limited
Bronwyn Knight, Chief Executive Officer +230 269 7090 Darren Veenhuis, Investor Relations +44 779 512 3402
