Growthpoint Properties Limited delivered 5.4% growth in revenue and ZAR5.5 billion in distributable income for its full-year to 30 June 2020.
Taking additional new shares issued during the period into account, this translates to distributable income per share of 183.1 cents per share, which is 16.0% lower than the prior financial year. Growthpoint declared a 106 cents per share dividend for its half-year and has yet to announce its second-half dividend.
“We at all times seek to strike a balance between a conservatively managed and sustainable business and the interest of our investors in optimising distributions. While no final dividend has been declared for FY20, subject to there being no material regulatory changes or market disruptions which may have a substantially negative impact on our overall financial position between the date of publication of our results, and the date of declaration of the final dividend for FY20, the Growthpoint Board is considering declaring a final dividend based on a pay-out ratio of not less than 75% of distributable income for FY20 which will ensure compliance with current REIT legislation,” comments Norbert Sasse, Growthpoint Properties Group CEO.
This is the first time in 16 years that Growthpoint has been unable to deliver a growing dividend to its shareholders, in a period where results were negatively impacted by the COVID-19 lockdown restrictions under the national state of emergency in response to the global pandemic. The lockdown severely impacted the SA economy, which was already in recession due to low growth.
“Never before has Growthpoint experienced such a challenging operating environment. Following a detailed strategic review of short and long-term strategies, the Growthpoint Board of Directors is prioritising liquidity and balance sheet strength in the short term, considering the weak property fundamentals in SA in particular, and the current cycle of falling asset values and rising gearing levels. This will enable us to continue to pursue our strategic initiatives of internationalisation, optimising and streamlining our SA portfolio and introducing new revenue streams through third-party trading and development as well as funds management, which all remain relevant for our business,” adds Sasse.
“Growthpoint’s trading and development expertise continued to give us a competitive advantage, but in line with market conditions it is likely that the scale of activity will decrease and we have suspended speculative development for now.”
South Africa’s retail property portfolio vacancies edged up slightly but remained a low 3.7% excluding offices and space under development. Growthpoint concluded a transaction with the various acquirers of the Edcon brands which will see 90% of the related 88 680sqm of space in Growthpoint’s portfolio remain let at new market rentals. A further leasing triumph saw the previously mothballed vacancy at Lakeside Mall, Benoni, leased to two new anchor tenants, Pick n Pay and Dis-Chem as part of a spectacular upgrade to the mall.
“SA has a difficult recovery ahead with a more than 10% contraction in GDP expected this year amid a global recession. A sharp deterioration in already stressed property fundamentals will exert profound pressure on the sector. An increase in business failures will be a major factor. It is too early to understand the full extent of the structural changes taking place in the office and retail sectors. Still, we know that this environment definitely won’t be easy,” remarks Sasse.
“It is too early to quantify the full impacts of COVID-19 and the accelerating structural shifts in the retail industry on Capital & Regional’s operations, but there is no doubt that it is going to be a long road to recovery,” says Sasse.
“Growthpoint is focused on protecting its strengths and advantages in an extremely difficult environment. Our ongoing commitment to best-practice corporate governance will endure while we prioritise our good liquidity and balance sheet strength to underpin our sustainability and ultimately continue to drive our strategic thrusts,” concludes Sasse.