Growthpoint has forecast muted growth for the rest of the year as result of higher inflation and interest rates, and local and international economic uncertainty, despite reporting an increase in property income and declaring a bigger dividend.
SA biggest real estate investment trust (Reit) on Wednesday said net property income for the six months to end-December rose 5.6% year on year to R4.9bn, operating profit was up 4.8% to R4.45bn and distributable income per share was 1.3% higher at 77.9c, SA biggest real estate investment trust (Reit).
The company, whose portfolio includes properties in Africa, Australia, the UK and Eastern Europe, and 371 retail, office and industrial properties in SA said the main driving factors were the V&A Waterfront, ASX-listed Growthpoint Properties Australia, and lower vacancies in its SA portfolio.
“Our performance in SA for the rest of the 2023 financial year will be linked to the country’s economic health where load-shedding is having a severe impact,” it added.
Trading in the local retail sector improved to pre-pandemic levels, with the V&A Waterfront in Cape Town delivering 23% growth in net property income as tourism rebounded the venue hosted more events, the group said.
The V&A Waterfront, which is 50% owned by Growthpoint, reported record December retail sales that surpassed R1bn, a as it jumped 28% jump from December 2019 before the Covid pandemic struck.
“Trading densities are also improving. However, consumers are experiencing increased financial pressure due to higher inflation and interest rates,” Growthpoint said.
“The V&A ensured that all retail, restaurants and hotels could trade through the 208 days of load-shedding in 2022, which carried a R21m diesel cost.”
To help deal with the power cuts, Growthpoint initially focused on generators, but has now shifted to solar power and will invest R210m to more than double its 13.5MW of installed renewable energy generation before the end of the financial year.
That expenditure will take its total investment in solar power to about R400m, it said. It also has 332MW available from 334 backup generators which used R47m worth of diesel in the review period.
Growthpoint Properties SA CEO Estienne de Klerk called on the government to provide simple regulation to help companies become involved with solving the country’s energy crisis.
“The government has prevented the private sector from playing in the [energy] space or providing a solution,” he said. “The only answer is to have access to the transmission networks and the distribution networks of our municipalities and of Eskom,” he said.
Despite the strong performance of the V&A Waterfront, Growthpoint said property expenses outweighed the increase in revenue from its portfolio.
Office space remains in oversupply since Covid has led to many people still working from home and the tough domestic economic environment means local businesses are struggling, the group added.
Profit for the period dropped nearly three-quarters to R1.54bn owing to fair-value adjustments and higher finance expenses. Net cash generated from operating activities improved 38.4% to R1.18bn, and cash and cash equivalents rose 50.3% to R3.35bn.
The company upped its interim dividend by 4.6% to 64.3c per share, which saw its payout ratio improve to 82.5%.
Growthpoint shares ended down 3% to R12.62 on Wednesday, its biggest drop since December 1.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.