Growthpoint expects modest growth for the rest of 2023

Growthpoint has forecast muted growth for the rest of 2023 as a result of higher inflation and interest rates, and local and global economic uncertainty, despite reporting an increase in property income and declaring a bigger dividend.

SA’s 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.

The company, whose portfolio includes properties in the rest of 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, [as] loadshedding is having a severe impact,” it said.

Trading in the local retail sector improved to pre-pandemic levels, with the V&A Waterfront 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, as it jumped 28% from December 2019, just before the Covid-19 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 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 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.”

Despite the strong performance of the V&A Waterfront, Growthpoint said property expenses outweighed the rise in revenue from its portfolio.

Office space remains in oversupply as many people are still working from home and the tough domestic environment means businesses are struggling, the group said,

Profit for the period fell nearly three-quarters to R1.54bn, owing to fair-value adjustments and higher finance expenses. Net cash 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, their biggest drop since December 1.