Under the circumstances, Growthpoint has performed very well. Even though it was initially difficult to get to grips with operating in the unexpected conditions of Covid-19, we delivered a FY21 performance in line with that of our expectations.

Prudent financial management enabled us to continue to pay dividends to our shareholders, meet our contractual obligations to suppliers and customers and avoid the need to retrench employees. These achievements and our overall financial performance demonstrate the sustainability of our business. They were also only possible because our people are passionate about our business, assets and tenants. iam inspired by our team’s performance this year.

We entered the year awaiting clarification from the JSE, National Treasury and SARS about assistance and relief for the REIT sector. The wait delayed our AGM and dividend pay-out. The JSE allowed REITs that failed their liquidity test to retain REIT status without paying a dividend. However, this had no impact on Growthpoint as we met liquidity test requirements.

Growthpoint moved quickly to strengthen its balance sheet, and achieved this with a capital raise in November 2020 and by offering a DRIP in December 2020. This put us in a solid position to sustain operations, although it added more shares to our base.

The business has numerous components and their achievements and contributions to our performance are detailed separately. With Covid-19 as a backdrop for FY21, we continued our detailed disclosure and reporting on discounts, deferments, arrears and bad debts, as well as the influence of higher vacancy levels in South Africa on our rental income. We provided rental relief in the form of discounts and deferments and incurred R10m in expenses related to Covid-19. The impact of the pandemic on our tenants is clearly evident in our operational metrics.

Property values and loan-to-value ratios were also very much in the spotlight. Falling asset values over the past three reporting periods led to LTV’s initially going up, but this situation has now stabilised as a result of conservative debt management.

We responded to an increased number of requests to disclose the inputs that determine our fair values for both properties and debt, and provided the market with the information required.

Reporting and communication

Growthpoint won the property sector category of the Investment Analysts Society of South Africa (IAS) Excellence in Financial Reporting and Communication Awards for the 2020 financial year. We have been acknowledged by the IAS for our excellent and extensive reporting every year since 2011, an achievement which demonstrates our consistency in bestpractice reporting and sets a commendable benchmark.

This award was all the more meaningful in a year when excellence and transparency in financial disclosure and communication became more relevant than ever before due to the impact of Covid-19 on the financial performance and results of so many companies. Since March 2020, the pandemic has had a major influence on investor communication and disclosure. In Growthpoint’s case, this included providing detailed updates and insights into our South African portfolio, 50% stake in the V&A Waterfront, and international investments in Australia, Poland, Romania and the UK.

We provided updates on a wide range of actions and outcomes across the business in our six-monthly reporting and pre-close calls. Frequency and depth of reporting are needed in such times, and this has served to improve our already good stakeholder relationships.

Due to the pandemic, some traditional channels for financial communication were restricted, so we also had to find alternative ways of presenting our financial reporting to the broader investment community as well as our key stakeholders.

The past year has highlighted the fact that good relationships with funders, investors, suppliers and customers are the key to our sustainability, access to capital and income streams.

The IAS award was welcome confirmation that we successfully adapted to the changed circumstances, and is something that everyone at Growthpoint can be proud of.

ESG and collaborating for sustainability

Our reporting goes beyond amalgamating the figures for the financial disclosures required of us and includes our integrated thinking, investor relations and ESG communications. Capital providers such as the IFC are providing valuable input for our ESG disclosure. Consequently, our ESG strategy and its implementation, benchmarking and communication impacts our access to funding.

The past year has highlighted the fact that good relationships with funders, investors, suppliers and customers are the key to our sustainability, access to capital and income streams. Our finance function plays a vital role in building and maintaining these relationships. The discounts and deferrals for tenants in all the South African sectors required greater engagement with our different teams and tenants. Growthpoint’s immediate response to the financial needs of our tenants has ensured their sustainability and will have long-lasting benefits for our own sustainability.

Our good relationships with the South African Property Owners Association, SA REIT Association, South African Council of Shopping Centres and other industry organisations also proved particularly valuable this year. The collaboration of these organisations culminated in the formation of The Property Industry Group, which assisted in lobbying government on behalf of our sector, and smoothed the road for positive negotiations by creating a consensus framework for rental relief for retail tenants and small businesses.

Audit

FY21 is the second financial year that EY has been Growthpoint’s appointed auditor. Notwithstanding the limited physical interaction because of the pandemic, we have worked well together to produce timely, accurate and relevant reporting. We did not need to access any of the exceptional extensions available for reporting our results.

Automation and business intelligence

The migration to MRI, our new property and financial management system, helped us to unlock more business intelligence, add more value to our customers and keep us ahead in a competitive market. We have fully automated our group results consolidation process in the current year.

Tax and regulatory updates

By opting for an 80% pay-out ratio and continuing enjoying the benefits of being a REIT, Growthpoint was able to retain a reliable source of capital in our business to deliver on our strategic objectives. This decision was necessary because our DRIP, which has previously helped us to retain capital in the business, has decreased from over 60% participation to below 30%. However, retaining 20% of distributable income in our business means that we now have to pay tax, which we will do with due care and consideration.

Tax legislation changes in FY22 that will have the most significant impact on Growthpoint include the taxation of foreign dividends. This impacts all REITs and we will consider our response to it through our industry sub-committees.

Regarding South Africa’s carbon tax, Growthpoint does partake in listed activities (energy production from fossil fuels in generators), and cumulatively this crosses a threshold. However, all diesel and petrol emissions are not subject to direct tax as this is already paid at the pump by all consumers. Although we need to register for the tax, we will not be liable to pay at this stage. We expect to be affected by 2023.

As detailed in the treasury management report, changes in the debt-listing requirements required us to appoint a debt-listing officer, which we duly did.

Best practice

Growthpoint was an early adopter of the SA REIT Association Best Practice Recommendations version 2, and we continue to report in the recommended manner.

Simplified distribution income statement

For the year ended 30 June 2021

Simplified balance sheet

At 30 June 2021