Outstanding performance for one of Cape Town’s most popular malls

Growthpoint Properties says the V&A Waterfront has recorded an “outstanding performance.”

In its financial results for the six months ended 31 December 2023, Growthpoint said that its key performance indicators improved across all three of its South African sectors – retail, office and industrial.

The V&A, which the group co-owns with the Government Employee Pension Fund, stood out in HY24.

This was driven mainly by increased tourism and the positive impact this has on retail, hotels and attractions.

A 13.7% increase in distributable income received for HY24 of R380.7 million (HY23: R334.7 million).

Financials

Total revenue across the group increased by 4.0% from R6.8 billion in HY23 to R7.1 billion in HY24

Despite the impact of net property income from disposals in the current and prior periods, South African revenue, including lease income adjustments, increased by 3.4% from R3.9 billion for HY23 to R4.1 billion for HY24.

This was partly due to an increase in rental income from lease escalations and decreased vacancies in the retail and office sectors.

Although the fair-value revaluation of properties across the whole group led to a decrease of R2.3 billion (1.6%) to R139.4 billion (FY23: R140.3 billion), the South African valuations, with a portfolio value of R64.2 billion, were positively impacted by rent reversion in all three sectors and the decreased vacancies.

Fair value adjustments are done to adapt a property’s value to reflect up-to-date market conditions – and are not additional cash flow or investment.

“The valuations reflected varied valuation outcomes, which were positive in KwaZulu-Natal and the Western Cape, with reductions in Gauteng.”

“The relatively flat valuation in the retail portfolio reflected the difficult trading conditions due to increased financial pressures on consumers, offset by a decrease in vacancies.”

Moreover, despite the growth in revenue, the group said that its distributable income per share (DIPS) – which measures the underlying financial performance of the listed property sector – will drop by between 10% and 12% across FY2024.

The drop, which is expected to be greater in the second half of the year, is due to the impact of high interest rates across the group’s local and international businesses.

Headline earnings per share also dropped from R2.9 billion in HY 2023 to R1.9 billion in HY 2024, falling from 85.99 cents a share to 56.59 cents.

The group’s interim dividend also dropped from 64.3 cents in HY2023 to 58.8 cents in HY2024:

Outlook

“Interest rates, globally and domestically, are expected to be higher for longer, impacting both our domestic operations and offshore investments,” the group said.

“The second half of FY24 presents further domestic volatility with the SA national elections on 29 May
2024, coupled with ongoing load shedding and infrastructure deterioration. Global political uncertainty also remains a concern.:

“In evaluating our performance expectation in SA for the second half of FY24, it is crucial to recognise the inherent link of our business to the country’s economic wellbeing.”

However, the V&A is expected to continue to perform well, even from a high base, with high single-digit income growth expected for the rest of the year.

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