I N T E R I M R E S U L T S 2 0 1 9
6 M O N T H S H I G H L I G H T S • Solid property performance in tough environment • Core direct property portfolio growth of 2.75% before gearing (all properties) • Escalations on expiry were overall 2.5% positive • Announced the intention to merge Arrowhead and Gemgrow
R E S U L T S No contribution Lower guidance as a Revised guidance to Interim dividend from Rebosis result of Indluplace 56 cents (from 58 cents) declined trading statement and for the year ending to 27.8 cents impact of Edcon 30 September 2019
S T R A T E G Y South African focused Pure property Across the country Specialists in in all sectors sustainable properties
A R R O W H E A D G R O U P S T A F F I N C R E A S E New deals + Increased from 12 to 26 leasing team over the last 18 months + Focused debtors + Supplement JHI resource services not replacing , + additional staff to add to the bottom line Dedicated utilities + position filled
A R R O W H E A D S N A P S H O T As at 31 March 2019 Diverse portfolio (industrial, office and retail) valued at R5.7 billion 59.6% interest in Indluplace: R1.8 billion 53.3% in Gemgrow: R1.9 billion 8.6% interest in Dipula: R354 million 16.4% interest in Rebosis: R224 million Gearing R3.5 billion. Group LTV of 41% and Company of 35%
S O U T H A F R I C A N E N V I R O N M E N T • Tough operating environment continues • Positive election outcome for SA economy • Market cautious • Greenshoots of optimism • AWA well positioned for South African bounce
T O T A L D I V I D E N D R’000 2019 2018 Revenue (excluding straight line rental income) 1 182 597 1 112 580 Listed securities income 62 402 109 980 Property expenses (471 511) (408 359) Administration and corporate costs (35 525) (28 319) Finance charges (316 941) (273 936) Finance income 40 158 47 336 Pre-effective date dividend - subsidiary 6 090 - Non-controlling interest profits elimination (net of antecedent income) (142 856) (146 348) Distributable income 324 414 412 934 Antecedent income - subsidiary 1 403 - Accrued dividend on listed securities 16 702 107 749 Listed securities income recognised in previous reporting period (62 402) (109 980) Total dividend 280 117 410 703 Dividend to the Arrowhead Charitable Trust and corporate fees* 11 138 13 793 Total dividend after effects of Arrowhead Charitable Trust 291 255 424 496 *Dividend to the Arrowhead Charitable Trust and corporate fees are added back as it is eliminated on consolidation. Corporate fees are in respect of administration costs recouped from Indluplace and Gemgrow. Property expenses as a percentage of revenue – gross 40% 38% Property expenses as a percentage of revenue – net 18% 16% Total dividend ^ 291 255 424 496 Total dividend (cents) ^ 27.80 40.43 Net asset value per share (cents) 690.44 823.83 ^ The dividend was declared on 29 May 2019
A R R O W H E A D A S A T 3 1 M A R C H 2 0 1 9 UNAUDITED FOR THE UNAUDITED FOR THE SIX MONTHS ENDED SIX MONTHS ENDED R’000 31 MARCH 2019 31 MARCH 2018 Assets Non-current assets 16 577 829 17 698 905 Investment property 15 207 306 15 036 213 Fair value of property portfolio for accounting purposes 15 072 410 14 912 089 Straight line rental income accrual 134 896 124 124 Property, plant and equipment 1 129 1 486 Loans to participants of group share purchase and option schemes 778 261 736 874 Goodwill - 337 449 Financial assets 585 655 1 584 800 Deferred Taxation - 2 011 Derivative instruments 5 478 72 Current assets 576 689 377 713 Trade and other receivables 317 464 253 539 Cash and cash equivalents 259 225 124 174 Non current assets held for sale 380 360 - Total assets 17 534 878 18 076 618 Equity and liabilities Shareholders’ interest 7 019 573 8 394 444 Stated capital 6 558 758 6 572 398 Reserves 460 815 1 822 046 Non-controlling interest 3 156 311 3 055 312 Other non-current liabilities 6 289 567 5 602 954 Secured financial liabilities 6 258 674 5 532 120 Derivative instruments 30 893 70 834 Current liabilities 1 069 427 1 023 908 Trade and other payables 370 006 323 235 Secured financial liabilities 697 000 700 673 Derivative instruments 2 421 - Total equity and liabilities 17 534 878 18 076 618
D E B T • Arrowhead loans of R3.5 billion and Group of R7 billion • Arrowhead LTV of 35%, Group of 41% • Loans fixed, Arrowhead 73% and Group 76.5% • Arrowhead weighted average interest rate of 9.69% and Group weighted average interest rate of 9.78% Debt expiry 2019 R381 million 2020 R1 116 million 2021 R205 million 2022 R924 million 2023 and beyond R910 million Total R3 536 million
N A V B R I D G E P E R S H A R E G R O U P 9.00 -0.00 0.22 0.04 -0.05 -0.02 -0.00 0.78 0.05 -0.00 8.00 -0.22 7.54 -0.59 6.90* 7.00 -0.84 6.00 NAV in R’s 5.00 4.00 3.00 2.00 1.00 0 Loans to participants of group Derivative instruments Property, plant and equipment Stated capital March 2019 Investment property Non-current assets held for sale Trade and other receivables Cash and equivalents Trade and other payables Non-controlling interest Financial assets Secured financial liabilities September 2018 share purchase and option scheme *Current discount to NAV as at 24 May 2019 was approximately 44% Balance Sheet Movement Increase Decrease Total
A S A T 3 1 M A R C H 2 0 1 9 49 commercial (industrial, office and retail) properties Retail 61%, office 31% and industrial 8% (sectoral by value) Overall vacancy 8.6% (office 13.2%, retail 6.6%, industrial 5%) Average gross rent per sector (retail R141/m 2 , office R113/m 2 , industrial R47/m 2 )
• Escalation per sector (retail 7.2%, office 7.7%, industrial 7.9%) overall 7.6% • Average lease profile 3.85 years • Reversions per sector (retail 0.3%, office 4.2%, industrial -15.3% (only 352m 2 )) overall 2.5% positive 28 493m 2 came up for renewal, 19 849m 2 retained (70%) and 2 681m 2 of 8 644m 2 • was re-let • Overall 79% of expiring GLA was retained and re-let • New deals per sector (retail 1%, office -43%, industrial 10%) overall -22%
C O R E P O R T F O L I O Indluplace 36 assets Gemgrow
O P E R A T I O N A L S U C C E S S E S Property portfolio performed as expected 1 Sturdee 100% occupied 25 Owl Street (minor revamp), let 13 810m 2 of 14 984m 2 Business Centre vacant – revamped then sold for R24.5 million Vacancy increased marginally to 8.6% (as expected in forecast) Debtors under control – business rescue on the rise, well managed
2 5 O W L S T R E E T
C H A L L E N G E S S I M U N Y E lost anchor and 3 397m 2 vacant of 6 538m 2 L Y N D H U R S T 1 441m 2 vacant of 6 352m 2 T H E A T R I U M lost large single tenant to business rescue, 2 340m 2 of 5 034m 2 vacant R O S E T T E N V I L L E 3 923m 2 vacant of 14 198m 2
S I M U N Y E
W A Y F O R W A R D O N C H A L L E N G E S S I M U N Y E R36 million, 6 538m 2 • Sourcing anchor tenant and general refurb • Potentially converting to private school • Reconsider proposal from national tenant (concept store – large investment required) • Disposal
L Y N D H U R S T
W A Y F O R W A R D O N C H A L L E N G E S L Y N D H U R S T R54.2 million, 6 351m 2 • Placed in ‘ICU’ • Additional letting resources allocated to turnaround project • Canvassing convenience centre type tenants – ie gym, pharmacy, party shop, national pizza franchise
T H E A T R I U M
W A Y F O R W A R D O N C H A L L E N G E S T H E A T R I U M R29 million, 5 036m 2 • Internal minor refurb complete • Potential for ground floor retail • Market research indicates demand for smaller offices • Conversion into school – node has large educational presence • Disposal
R O S E T T E N V I L L E
W A Y F O R W A R D O N C H A L L E N G E S R O S E T T E N V I L L E R81.6 million, 14 198m 2 • Identified challenges • Underwent feasibility and identified opportunities • Well located, high barriers to entry, low competition • Revamp (R3 million) • Hired retail consultants • Uptick in foot count approximately 15% • Existing tenants upgrading stores and potentially taking on additional space
M A R K E T O B S E R V A T I O N S • Renewals under pressure across sectors • Competitive environment, declining pool of tenants • Increasing cost of placing new tenants • Do everything to keep existing tenants • Some convenience centres under pressure – monitoring situation (Mkuze, Eersterust & Lyndhurst but Terminus, Matsulu & Sibasa performing) • Large centres defensive
A R R O W H E A D O B S E R V A T I O N S • Tenants looking for value offering • Impact of utilities – letting and occupation • Retail renewals – closer attention to trading metrics • Chasing of market share has declined • Uptick in demand on larger retail assets • Pressure on convenience centres • Ease of doing business • Lower built in escalations • Abuse of business rescue – risk to landlords • Effect of security risks
T O P S I X P R O P E R T I E S ACCESS PARK Western Cape R895 593 402 20 456m 2 Retail
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