DJ Full year audited results for the year ended 30 June 2023
Grit Real Estate Income Group (GR1T)
Full year audited results for the year ended 30 June 2023
31-Oct-2023 / 07:00 GMT/BST
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GRIT REAL ESTATE INCOME GROUP LIMITED
(Registered in Guernsey)
(Registration number: 68739)
LSE share code: GR1T
SEM share codes (dual currency trading): DEL.N0000 (USD) / DEL.C0000 (MUR)
ISIN: GG00BMDHST63
LEI: 21380084LCGHJRS8CN05
("Grit" or the "Company" or the "Group")
FULL YEAR AUDITED CONSOLIDATED RESULTS FOR THE YEAR ENDED 30 JUNE 2023
The board of Directors (the "Board") of Grit Real Estate Income Group Limited, a leading pan-African real estate company focused on investing in, developing and actively managing a diversified portfolio of assets underpinned by predominantly USUSD and Euro denominated long-term leases with high quality multinational tenants, today announces its audited consolidated results for the financial year ended 30 June 2023.
Bronwyn Knight, Chief Executive Officer of Grit Real Estate Income Group Limited, commented:
"The financial year to 30 June 2023 was a transitory year for the Group characterised by disposals of non-core assets, reducing debt and debt refinancing risks and substantial progress on the acquisition of a majority interest in GREA, the Group's development associate. GREA successfully delivered the award-winning Precinct office park and Artemis Curepipe Hospital developments in the year and is on time and on budget on the ENEO Tatu City call centre facility, expected to be completed mid 2024.
Global interest rate volatility provided headwinds to our strong property portfolio operating performance, where a 5.7% increase in net operating income (excluding properties sold) was impacted by significantly rising finance costs. Our focus will remain on sustainably growing distributable income and enhancing capital growth while continuing to target key portfolio metrics such as lowering the LTV, vacancy and cost factors and further strengthening the balance sheet and liquidity position through focused asset recycling initiatives."
Financial & Portfolio highlights as at 30 June 20231
30 June 2023 30 June 2022 Increase/ (Decrease)
IFRS diluted earnings / (loss) per share (USUSD4.90) cps USUSD2.62 cps (USUSD7.52) cps
Adjusted EPRA earnings per share2 USUSD0.72 cps USUSD3.13 cps (USUSD2.41) cps
Distributable earnings per share3 USUSD4.29 cps USUSD5.08 cps (USUSD0.79) cps
Dividend per share USUSD2.0 cps USUSD4.50 cps (USUSD2.5) cps
Contractual rental collected 101.3% 92.8% +8.5%
EPRA NRV per share2 USUSD72.8 cps USUSD79.4 cps (USUSD6.6cps)
Total Income Producing Assets4 USUSD862.0m USUSD856.7m USUSD5.3m
Group LTV 44.3% 46.7% (2.4%)
Weighted average cost of debt 8.4% 7.1% 1.3%
Portfolio highlights
Property net operating income from ongoing operations5 USUSD52.0m USUSD49.2m +5.7%
EPRA cost ratio (including associates)6 13.3% 13.0% +0.3ppt
EPRA portfolio occupancy rate7 93.6% 95.3% (1.7ppt)
WALE8 4.4 yrs. 4.8 yrs. (0.4 yrs.)
Revenue earned from multinational tenants9 85.3% 85.6% (0.3ppt)
Income in hard currency10 94.5% 91.5% +3.0ppt
Grit proportionately owned lettable area ("GLA") 298,962m2 366,926m2 (67,964m2)
Weighted average annual contracted rent escalations 3.0% 5.4% (2.4ppt)
Notes
Various alternative performance measures (APMs) are used by management and investors, including a number
of European Public Real Estate Association ("EPRA") metrics, Distributable Earnings, Total Income
1 Producing Assets and Property portfolio net operating income. APMs are not a substitute, and not
necessarily better for measuring performance than statutory IFRS results and where used, full
reconciliations are provided.
2 Explanations of how EPRA figures are derived from IFRS are shown in notes 11 to 13 (unaudited).
3 Distributable earnings per share is an APM derived from IFRS and shown in note 12 (unaudited).
Includes controlled Investment properties with Subsidiaries, Investment Property owned by Associates and
4 Joint Ventures, Deposits paid on Investment properties and other investments, property plant and
equipment, intangibles, and related party loans - Refer to Chief Financial Officer's Statement for
reconciliation.
Property net operating income ("NOI") from continuing operations is an APM and is derived from IFRS NOI
5 adjusted for the results of associates and joint ventures, excluding the impact of disposals of BHI and
LLR. A full reconciliation is provided in the Chief Financial Officers Statement
6 Based on EPRA cost to income ratio calculation methodology shown in note 13.
7 Property occupancy rate based on EPRA calculation methodology (Includes associates and excludes direct
vacancy cost). Please see calculation methodology shown in note 13.
8 Weighted average lease expiry ("WALE").
9 Forbes 2000, Other Global and pan African tenants.
10 Hard (USUSD and EUR) or pegged currency rental income.
Summarised results commentary:
Despite economic headwinds facing the global property industry, Grit's property portfolio performed well
. with revenue increasing 1.9% (Revenue from ongoing operations, which excludes the impact of BHI and LLR,
grew 7.3%). NOI (excluding properties sold) grew 5.7% and the Group collected 101.3% of contractual
revenue over the period.
The value of the property portfolio declined by 4.5%, predominantly as a result of asset disposals which
offset the increased interest in Gateway Real Estate Africa ("GREA"). Excluding the impacts of this
. corporate activity, the ongoing property portfolio experienced a 0.8% (USUSD5.9 million) decline in fair
value against a backdrop of global economic uncertainty, once again demonstrating relative stability in
the portfolio.
High interest rates impacted the group with cash WACD increasing from 7.1% to 7.97% for the year. Our
hedging policy protected us from a large part of the c3.6% increase in base rates over the year.
. Notwithstanding the hedges, group finance costs increased by USUSD11.3 million, representing a 46.5%
increase as compared to the prior year (which includes the full year impact of the Orbit acquisitions and
the developments completed during the year). The USUSD100.0 million notional interest rate hedge that
expired in October 2023 has been replaced - please refer to post balance sheet events below.
In line with the Grit 2.0 strategy, asset management fee income within the subsidiaries grew to USUSD1.4
million (an increase of 219% from the prior year comparative of USUSD0.48 million). Additionally, the
. insourcing of property management services in Ghana and Kenya resulted in net savings of USUSD0.16 million
(with the current years fees of USUSD0.11 million ending during the year). Grit's proportionate share of
on-going asset management and development management fee income from APDM (treated as a joint venture for
the financial year) amounted to USUSD3.1 million for the year.
Administrative expenses increased by 40.3% due to a combination of high inflationary pressures,
onboarding costs surrounding the increased investment in APDM and GREA, the full year impact of the
. income generating Kenyan office and the Group's investment towards future growth (in the setup costs of
Bora Africa). The administrative expenses as a percentage of total income producing assets amounted to
2.4%. This is higher than the medium-term objective of 1.8%, which the Group aims to achieve through cost
reduction initiatives and an expected increase in the asset base as a result of the acquisition of GREA.
Taking the above into account, Adjusted EPRA earnings dropped by 77.0% to USUSD0.72cps. Distributable
income dropped 15.6% to USUSD4.29cps as the company continues to obtain significant VAT credits. The 8.3%
. reduction in EPRA NRV to USUSD72.8cps was driven by a combination of property valuations (USUSD1.05cps),
provisions and write offs against property projects (USUSD1.56cps) and transaction costs related to the
GREA acquisition and USUSD306m syndicated loan (USUSD0.71cps).
During the financial year over USUSD90.0 million of cash was utilised in support of the Group's strategic
objectives of debt reduction and increased ownership in GREA and APDM. While the Board understands the
importance of dividends to our shareholders, it has elected against declaring a second half dividend.
. Total dividend for the year amounts to USUSD2.00 cps following the interim dividend of USUSD2.00cps declared
for the six months ended 31 December 2022 (46.6% pay-out of distributable earnings). Should sufficient
progress be made on implementing the new GREA dividend policy and dividend normalisation from recently
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completed GREA developments, the Board will consider either a special dividend or an increased H1
dividend.
. The Group continued to reduce debt levels with a net reduction of USUSD28.3 million in the financial year.
Group LTV dropped by 2.4% to 44.3%.
Corporate highlights - execution on strategy
The Board targeted USUSD160 million of asset disposals by 31 December 2023 and has made significant
. progress towards this target with the disposal of interests in BHI and LLR, at near book value. Capital
was redeployed to debt reduction and to the acquisition of GREA and APDM - please refer to post balance
sheet events below.
The Group unveiled its Grit 2.0 strategy and focus areas post the acquisition of GREA and APDM, which
. includes higher targeted fee income strategies and the pursuit of a capital light strategy through
industry focused substructures.
. The Group won several high-profile industry awards for a number of GREA delivered developments and for
the innovative Sustainability linked debt refinance concluded in October 2022.
Notable Post balance sheet events
On the 26th of July 2023 the Group announced the conclusion of the final phase in the acquisition of a
majority interest in GREA and APDM from Gateway Africa Real Estate Limited and Prudential Impact
Investments Private Equity LLC, which resulted in the Group owning a direct interest of 51.48% in GREA
and 78.95% in APDM. The transaction became unconditional, and the share transfer was lodged following
receipt of the Mauritius Prime Minister's Office consent, which was the final condition precedent.
Although the share transfer took place after the end of the financial year, beneficial ownership of the
. 51.48% was attained on 30 June 2023 and as such the Group treated GREA as a joint venture in preparing
its financial statements for the year ended 30 June 2023. The required final amendments to the
Shareholders Agreement (which upon signature will result in control over GREA and therefore allow for the
full consolidation of GREA and APDM - please refer to The Basis of Presentation 1.2 Critical Judgements
and Estimates), are expected imminently. On the 3rd of October 2023 GREA issued shares to APDM in terms
of the Managers Incentive Program and from this date the Group, through its shareholding in APDM, holds a
combined direct and indirect interest of 54.22%.
Bora Africa, a specialist industrial real estate vehicle, was established on 24 October 2023 when 5 Grit
owned industrial assets namely Imperial, Bollore, Orbit and two industrial land assets were transferred
. to the newly established entity. Bora is a wholly owned subsidiary of Grit and has therefore resulted in
no change to existing beneficial interests. The International Finance Corporation, a division of the
World Bank, has approved a USUSD30 million subordinated notes issue by Bora Africa to fund future pipeline
and impact focused real estate acquisitions.
On 16 October 2023, interest rate hedges over USUSD100.0 million notional against LIBOR rates above 1.58%
to 1.85%, matured. The Group concluded a new USUSD100.0 million notional interest rate hedge from this
. date, with a new two-year collar and cap instrument providing protection against rates above 4.75% on
SOFR rates while allowing savings up to 3.00% SOFR rate. The Group has therefore maintained its overall
hedged position at USUSD200 million.
FOR FURTHER INFORMATION, PLEASE CONTACT:
Grit Real Estate Income Group Limited Bronwyn Knight, Chief Executive Officer +230 269 7090 Darren Veenhuis, Investor Relations +44 779 512 3402 Cavendish Capital Markets Limited - UK Financial Adviser William Marle/Teddy Whiley (Corporate Finance) +44 20 7220 5000 Pauline Tribe (Sales) +44 20 3772 4697 Perigeum Capital Ltd - SEM Authorised Representative and Sponsor Shamin A. Sookia +230 402 0894 Kesaven Moothoosamy +230 402 0898 Capital Markets Brokers Ltd - Mauritian Sponsoring Broker Elodie Lan Hun Kuen +230 402 0280
NOTES:
Grit Real Estate Income Group Limited is the leading pan-African real estate company focused on investing in, developing and actively managing a diversified portfolio of assets in carefully selected African countries (excluding South Africa). These high-quality assets are underpinned by predominantly USUSD and Euro denominated long-term leases with a wide range of blue-chip multinational tenant covenants across a diverse range of robust property sectors.
The Company is committed to delivering strong and sustainable income for shareholders, with the potential for both income and capital growth.
The Company holds its primary listing on the main market of the London Stock Exchange (LSE: GR1T) and a dual currency trading secondary listing on the Stock Exchange of Mauritius (SEM: DEL.N0000 (USD) / DEL.C0000 (MUR)).
Further information on the Company is available at http://grit.group/.
Directors:
Peter Todd (Chairman), Bronwyn Knight (Chief Executive Officer) *, Leon van de Moortele (Chief Financial Officer) *, David Love+, Sir Samuel Esson Jonah+, Catherine McIlraith+, Jonathan Crichton+, Cross Kgosidiile and Lynette Finlay+.
(* Executive Director) (+ independent Non-Executive Director)
Company secretary: Intercontinental Fund Services Limited
Registered office address: PO Box 186, Royal Chambers, St Julian's Avenue, St Peter Port, Guernsey GY1 4HP
Registrar and transfer agent (Mauritius): Intercontinental Secretarial Services Limited
SEM authorised representative and sponsor: Perigeum Capital Ltd
UK Transfer secretary: Link Market Services Limited
Mauritian Sponsoring Broker: Capital Markets Brokers Ltd
This notice is issued pursuant to the FCA Listing Rules and SEM Listing Rule 15.24 and the Mauritian Securities Act 2005. The Board of the Company accepts full responsibility for the accuracy of the information contained in this communiqué.
A Company presentation for all investors and analysts via live webcast and conference call
The Company will host a live webcast on Tuesday, 31st October 2023 at 2:00pm Mauritius / 10:00am UK / 12:00pm South Africa via the Investor Meet Company platform, with the presentation being open to all existing and potential shareholders, and can be accessed at the following link: https://www.investormeetcompany.com/ grit-real-estate-income-group-limited/register-investor
A playback of the webcast will be accessible on-demand within 48 hours via the Company website: https://grit.group/ financial-results/
CHAIRMAN'S STATEMENT
Grit is a prominent, woman-led real estate platform providing property investment and associated real estate services across the African continent. The Group recognises its role in transforming the design of buildings and developments for long-term sustainability, especially with Africa rapidly urbanising, and focuses on impact, energy efficiency and carbon reduction in its activities. In addition to environmental responsibility, the Group prides itself on achieving more than 40% of women in leadership positions and the significant support it provides to local communities in Africa through extensive CSR and upliftment programmes. More information on Grit's Environmental, Social and Governance initiatives is available in the Responsible Business Committee's report.
Robust operational performance and record development activity
Operationally and strategically, 2023 was a challenging yet productive year and was characterised by disposals of non-core assets and substantial progress on the acquisition of a controlling interest GREA. Global interest rate volatility offset the strong performance from the property portfolio, where net operating income from ongoing operations increased 5.7%. We enjoyed good leasing and cash collections while GREA successfully delivered the Precinct office park, the first 5-star green rated development in the Indian Ocean region, and the Artemis Curepipe Hospital in Mauritius.
We aim to enhance our income and protect value through the active management of our high-quality portfolio. We are well positioned to deliver the Grit 2.0 strategy which is underpinned by long-term structural African demand drivers and the need for high quality real estate and infrastructure.
Macroeconomic factors impacting property valuations
A significant adjustment in global interest rates during the year caused a sharp increase in our overall cost of capital and impacted property yields across the global real estate sector. Our higher quality assets, underpinned by strong tenant covenants, are more resilient in the face of potentially weaker leasing markets which has largely been recognised by the valuers in our year-end property valuations. However, there remains near term uncertainty on market yields and valuations which is only expected to moderate once peak interest rates are reached.
The corporate accommodation and light industrial sectors experienced some valuation pressure which contributed to a negative 0.8% movement in fair values on the property portfolio, offsetting gains on completed developments. We expect growth sectors to stabilise, and given the favourable long-term African fundamentals, should continue to see considerable investment over the medium term.
A high-quality, diverse, and resilient platform
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We benefit from having built a business focused on quality real estate assets with strong ESG credentials, long leases to a resilient and diverse customer base that comprise more than 85% of strong multinational and investment grade tenants. Revenue from ongoing operations grew by 7.3% in the financial year to 30 June 2023, with contractual lease escalations, which are predominantly inflation-linked, helping to offset the impacts of rising interest rates in the portfolio. We notably collected 101.3% (FY22: 92.8%) of the value of contracted revenue. In the financial year we reduced exposures to the hospitality sector and now have 33 assets across 7 sectors with 94.5% of our leases in hard currency. This provides a strong foundation to our income generation and a resilient platform from which to pursue growth opportunities through active management, sector focused development substructures and external fee generation from our professional services.
Capital recycling
In the prior financial year, the Board set an asset recycling target of 20% of the value of the property portfolio, equivalent to approximately USUSD160 million worth of property assets, by 31 December 2023. I am pleased to report that we have already achieved gross property disposals of USUSD135.2 million and are making good progress on further disposals which are hoped to be announced in late 2023 or early 2024. Given the success of the current disposal programme, the Board is considering extending the targets, including co-investors into sub-structures, and will make further announcements in due course.
Notable disposals in the financial year included the disposal of the minority interest in 3 hotels to Beachcomber Hotels International and the exit of the Group's remaining 25.1% in Letlole la Rona, a listed Botswanan property company.
Proceeds from asset recycling have principally been applied towards Group debt reduction and to the increased shareholding in GREA and APDM. Since acquiring an increased interest in APDM and GREA, Grit has combined and integrated the professional teams and continues to drive operating efficiencies through the establishment of a centralised treasury programme, shared professional services and integration of other head office support functions.
Grit 2.0 strategy
At a capital markets day hosted in May 2023, we unveiled the Grit 2.0 strategy, which set our vision for the Group post the acquisition of GREA and APDM. We described the Group as "moving from income to impactful income", which is underpinned by the value we create in new developments and with our various professional services.
Post the acquisition, the Group will continue to deploy its resources within the following principal strategic areas:
1. Owning and managing a well-diversified portfolio of high-quality real estate assets across the African
continent (excluding South Africa) - which are resilient to macro-economic challenges.
Pursuing limited risk-mitigated real estate developments for existing and target tenants, predominantly
focused on the industrial, embassy accommodation and data centres sectors, driving accelerated NAV growth
2. into the future. Development exposure will not exceed more than 20% of Group gross asset value, and upon
completion, will be included in the income producing portfolio of the Group thereby underpinning future
income growth - leading to an expectation of enhanced yield and income upon completion of the
developments.
Generation of additional fee income from real estate, facilities, and development management services to
3. both internal clients and to third party clients and co-investors - expected to result in enhanced
income, with a contribution to earnings for the year of USUSD4.7 million.
Grit's strategy is to organise the Group's real estate assets into logical sector groupings and to pursue development activities, wherever possible, through GREA, and focusing on the following:
1. Developing industrial and logistics assets across Africa which are then held as investments or sold to
other investors; and
The establishment of a substructure that holds our diplomatic housing portfolio across the African
2. continent for the US Government, other countries and multinational companies which are either held as
investments or sold to investors.
The Group has made substantial progress in recapitalising GREA and have obtained shareholders' Investment Committee approval for the cash injection of USUSD48.5 million. While a number of administrative processes need to be concluded, the Board is confident that the targeted date of drawdown of December 2023 will be met. The capital injection will initially be utilised to temporarily reduce debt and associated financing costs before being deployed towards the Group's pipeline in due course.
The Group has made significant progress in sourcing funding for growth projects, with the targeted issuance of financing instruments in Bora to the IFC, a division of the World Bank. The IFC board approved transaction is set to close imminently providing additional growth capital for Bora to fund industrial and impact focused acquisitions and developments.
Financial results
The financial results to 30 June 2023 have been impacted by the corporate actions, rising interest rates and sluggish property valuations. EPRA NRV per share declined 8.3% to USUSD72.8cps (versus prior year NRV of USUSD79.4cps) predominantly due to property valuations, write offs and provisions against delayed property projects and transaction costs related to the GREA acquisition and the syndicated loan.
Grit's LTV improved from 46.7% in the prior financial year to 44.3%, predominantly from debt reductions related to asset disposals and active decisions by management to reduce the more expensive facilities in the face of rising interest rates. LTV is expected to fall further upon the planned consolidation of GREA.
Interest rates have remained higher, and for longer, than we initially anticipated introducing increased risks to the Group's financial performance in the near term. These risks are covered in more detail in the Chief Financial Officer's report below but has influenced the Board's assessment of liquidity risks when assessing current dividend levels.
Dividends
During the financial year the Group had a number of cash requirements to support the Board's strategic objectives and capital projects. The group successfully increased its shareholding in GREA (USUSD56.4 million), repaid overall quantum of debt by USUSD35.1 million and funded the upfront debt costs of the USUSD306 million syndicated loan (USUSD7.4 million). The bulk of the capital for these strategic and risk mitigating actions were funded from the asset recycling program that generated USUSD86.8 million, while USUSD12.0 million was funded from operational cashflows. The current transition from cash generative assets sold in the year to assets within the increased GREA portfolio, has resulted in a temporary disruption of normalised dividend flows from underlying properties that are expected to normalise by the end of the year. The current volatility of interest rates and continuing inflationary pressures combined with the rising tensions in the Middle East have additionally heightened the macro-economic risks faced by the Group. While we understand the importance of dividends to our shareholders, the Board has elected against declaring a second half dividend. Therefore the total dividend for the year amounts to USUSD2.00 cps following the interim dividend of USUSD2.00cps declared for the six months ended 31 December 2022. The full year distribution represents an 46.6% pay-out of distributable earnings.
A number of initiatives, including the implementation of a formal GREA dividend policy, normalisation of dividends from recently completed GREA portfolio assets and proceeds from further asset recycling, are expected to largely replenish the operational cashflows utilised to close the strategic objectives discussed above. The Board will consider either a special dividend later this year or an increased H1 dividend dependant on the progress it makes on all, or some, of these initiatives.
Changes to the Board
In February 2023 Nomzamo Radebe resigned off the Board. We thank Nomzamo for her valuable input she added to the Board.
We welcomed Lynette Finlay to the Board in March 2023 as an independent non-executive director. Lynette brings a wealth of property market experience, and we look forward to further engagements with her.
Outlook
Management and the Board will continue to focus on ongoing reduction in LTV, the asset recycling programme, and the expansion of Grit's investments in specialist development focused investment vehicles. The Board has identified a cost optimisation programme on Group administrative expenses, targeting a sustainable USUSD4.0 million reduction by December 2024.
Grit 2.0 positions the Group for growth, and with strong current cash collection, increased leasing activity, resilient assets and the potential for stronger NAV and fee income growth, the Board affirms the total return target of between 13% and 15% per annum over the medium term.
Peter Todd Chairman
CHIEF EXECUTIVE'S STATEMENT
Grit continues to refine its strategy, and as part of Grit 2.0, is looking to increasingly pursue risk mitigated and pre-leased developments and asset management activities that generate fees to compliment the sustainable property income we enjoy from our existing high quality property portfolio. Our vision statement summarises our key focus and activities:
"We are a family of Partnerships,
Setting the Global Benchmark in Africa for
Developing Smart Business Solutions &
Impact Real Estate that goes Beyond Buildings!"
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In addition to sound property fundamentals, a significant catalyst for Grit's growth continues to be our focus on strong, transparent counterparty and stakeholder relationships. This ability and know-how are what differentiates Grit and allows us to deliver smart real estate solutions on the African continent.
We identified a number of key focus areas at the start of the year and are pleased to provide the following key highlights for the period:
. We delivered a strong portfolio performance including leasing and vacancy management, strong cash
collections and growth in operational earnings from ongoing operations;
. We strengthened the Group balance sheet, including reductions in debt balances and Group loan to value
and extended debt maturities through the USUSD306 million sustainability linked syndicated facility;
. Good progress on the GREA and APDM acquisitions, with beneficial ownership of 51.48% of GREA being
obtained on 30 June 2023 and transfer of shares completed shortly after the financial year end;
. Acceleration in our asset recycling strategy with significant disposals that included three Beachcomber
hotels and the remaining stake in Letlole la Rona concluded during the financial year;
. Significant progress in our move towards a low carbon economy and achieving our 25% building efficiency
improvement target by 2025.
Key operational trends
Good leasing activity
During the year, we signed leases over 9,006 m2 of GLA in our investment property portfolio with significant activity in the office, retail, light industrial and corporate accommodation sectors, with pleasing results in the Anfa Mall and Ghana office portfolio. Although we increased our shareholding in GREA to 51.48%, the Group has been operationally controlling the completed assets since April 2022 by undertaking property management and leasing activities on their behalf via Group companies.
Balance sheet improving
In October 2022 we concluded a USUSD306 million multi-jurisdictional sustainability linked syndicated debt facility across Mozambique, Zambia, Kenya, Ghana, and Senegal, which was the largest of its kind in the real estate sector in Sub Sahara Africa (ex-South Africa).
Interest bearing borrowings were subsequently reduced by USUSD28.3 million to USUSD396.7 million in the financial year through a combination of utilising cashflows raised from asset disposals and from redirecting cash generated from operations towards debt reductions. The Group's reported LTV dropped to 44.3% (from 46.7% in FY2022) and is further expected to reduce upon the consolidation of GREA.
Accelerating fee income generation
Grit's proportionate fee income generation in the year accelerated as the first evidence of the Grit 2.0 fee income strategies started materialising. While the underlying portfolio continues to be delivered, the fixed asset management fee income component will increase steadily over time while the development management fees are expected to be linked to business activity and available growth capital and might vary year to year, with current year performance being bolstered by one off incentive fees earned by APDM on the delivery of its minimum return hurdles.
Significant liquidity redeployment
Strong cash collections of 101.3% (FY22: 92.8%) continued to support the Group's liquidity position.
Additionally, proceeds from the disposals of the remaining 25.1% interest in Letlole la Rona and the 44.2% interest in three hotels operated by Beachcomber Hotels International were applied towards both debt reductions and towards the completion of the final phases of the GREA and APDM acquisitions (where USUSD58.3m was deployed towards phases two and three of the acquisition).
Operational update
Grit's current portfolio consists of 33 assets located across 11 countries and 7 sector classes. The Group's portfolio has a 6.4% EPRA vacancy rate (FY2022: 4.7%) impacted by mix changes in the portfolio post asset disposals, and a weighted average lease expiry (WALE) of 4.4 years (FY2022: 4.8 years). More than 85% of income is underpinned by a wide range of blue-chip multinational tenants across a variety of sectors and has a weighted average contracted lease escalation of 3.0% per annum (FY2022: 5.4% per annum). Most rents are collected monthly, of which 94.5% (FY2022: 91.5%) are collected in US Dollar, Euro or pegged currencies.
Office
The global work-from-home phenomenon has been less relevant in Africa and has had limited impact on our office tenants. Office sector valuations in Mozambique remained resilient while the Ghanaian office market continues to be faced with macroeconomic headwinds despite positive leasing activity in the financial year, driven mainly by international tenants.
Corporate accommodation
The valuation of the VDE Housing Estate in Mozambique reduced to USUSD50.2 million (FY2022: USUSD55.2 million), with valuers applying conservative leasing assumptions post the current lease maturity in May 2024. The acquisition of GREA allows the Group to accelerate its provision of diplomatic housing through a strong pipeline of secured opportunities similar to the recently completed developments in both Kenya and Ethiopia, where the Group has enjoyed good valuation performance in this financial year.
Light industrial
The continent remains undersupplied for good-quality industrial property.
As part of the Grit 2.0 strategy the Group is consolidating its industrial assets into a single focused entity called Bora Africa. Bora is expected to generate both rental and capital value growth. The core income generating asset base and strong development pipeline of Bora Africa is expected to provide co-investment opportunities to our real estate partners and other equity funders.
Medical
Although a relatively small exposure for the Group at present, the GREA team successfully completed the Artemis Curepipe hospital in Mauritius in May 2023 at a total cost of USUSD18.6 million.
Retail assets
The occupancy rates of our retail assets have steadily improved since the height of the pandemic at the end of 2021. However, this sector is still targeted for further asset disposals. Our strategy of focusing mainly on smaller malls with non-discretionary food and service retailers have yielded positive results and we are encouraged by new tenant activity.
Vacancies at AnfaPlace Mall have also experienced an improving trend. This increasing footfall could bode well for the significant number of turnover linked leases currently in place.
Hospitality assets
Our hospitality portfolio now comprises two hotels post the sale of the interest in BHI - one in Mauritius and one Club Med resort in Senegal, the refurbishment of which, will be completed in November 2023, before embarking on the expansion project which is due for completion in late 2024.
Update on acquisitions and development pipeline
The acquisition of a majority stake in GREA was completed shortly after the financial year end. Control over GREA and its asset manager, Africa Property Development Managers ("APDM"), is pivotal to Grit's ambitions. These include further diversifying its asset base into defensive, high-growth real estate sub-sectors and growing fee income whilst creating positive and sustainable impacts and value to the local people and communities we serve across Africa.
The finalisation of the amendments to the shareholders agreement are expected shortly, which will result in control and the consolidation of GREA and APDM into the results of Grit from that date.
Summary of GREA developments and projects
Name Completion date Anchor tenant OBO Kenya (embassy accommodation) August 2022 US Embassy The Precinct, Mauritius (office) May 2023 Grit, Dentons, W17 Artemis Curepipe Hospital, Mauritius May 2023 Falcon Group Eneo, Tatu City, Kenya Q2 2024 CCI Artemis Coromandel Hospital, Mauritius Q2 2025 Falcon Group OBO Mali (embassy accommodation) Q2 2025 US Embassy
ESG strategy
The Group's sustainability efforts focus on community impact, the empowerment of women, energy efficiency and carbon reduction.
The Board remains committed to a five-year target of a 25% reduction in carbon emissions and a 25% improvement in our building efficiency against 2019 base figures and has made significant progress in the achievement of these targets. In addition to environmental responsibility, the Group prides itself on achieving more than 40% of women in leadership positions at Grit, more than 65% localised employees and significant support to numerous local communities through extensive CSR and upliftment programmes.
We have made significant progress in our move toward a low carbon economy based on global best practice.
The Group integrated report provides more details on our approach, our strategy, and our achievements against these targets.
Prospects
The Group has some compelling pipeline opportunities in impact real estate investing. The year-ended 30 June 2023 has been a transitionary year for the Group with significant corporate actions and asset recycling. Our focus will remain on sustainably growing dividends and enhancing capital growth. This will be done while continuing to target key portfolio metrics such as lowering the LTV, vacancy, cost factors, maintaining collections and further strengthening the balance sheet and liquidity position through focused asset recycling initiatives.
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The Board have identified a cost optimisation programme on Group administrative expenses and are a targeting a sustainable USUSD4.0 million reduction by December 2024. Although rising global interest rates continue to be a headwind for earnings our focus remains on the long-term sustainable debt strategy and managing the weighted average cost of debt alongside achieving our contractual lease escalations. The GREA acquisition and recapitalisation as well as the completion of the IFC financing instrument into Bora Africa positions us well for the Grit 2.0 strategy and for increased focus on selective impact investing in sectors such as light industrial, diplomatic housing, medical and data centre.
Bronwyn Knight Chief Executive Officer
CHIEF FINANCIAL OFFICER'S STATEMENT
Presentation of financial statements
The consolidated financial statements have been prepared in accordance with IFRS as issued by the IASB. Alternative performance measures (APMs) have also been provided to supplement the IFRS financial statements as the Directors believe that this adds meaningful insight into the operations of the Group and how the Group is managed. European Public Real Estate Association ("EPRA") Best Practice Recommendations have been adopted widely throughout this report and are used within the business when considering the operational performance of our properties. Full reconciliations between IFRS and EPRA figures are provided in notes 11 to 13. Other APMs used are also reconciled below.
"Grit Proportionate Interest" income statement, presented below, is a management measure to assess business performance and is considered meaningful in the interpretation of the financial results. Grit Proportionate Interest Income Statement (including "Distributable Earnings") are alternative performance measures. In the absence of the requirement for Distributable Reserves in the domicilium countries of the group, Distributable Earnings is utilised to determine the maximum amount of operation earnings that would be available for distribution as dividend to shareholders in any financial period. This factors the various company specific nuances of operating across a number of diverse jurisdictions across Africa and the investments' legal structures of externalising cash from the various regions. The IFRS statement of comprehensive income is adjusted for the component income statement line items of properties held in joint ventures and associates. This measure, in conjunction with adjustments for non-controlling interests (for properties consolidated by Grit, but part owned by minority partners), form the basis of the Group's distributable earnings build up, which is alternatively shown in Note 12 "Distributable earnings".
The Group made substantial progress in the current financial year toward disposal of assets accounted for as associates, and with the anticipated consolidation of GREA and APDM, expects to present largely consolidated asset results going forward.
Unaudited Unaudited Unaudited
Audited Unaudited
IFRS Income statement to IFRS Extracted from Grit Unaudited Grit Economic Distributable
distribution reconciliation Associates Proportionate Interest Income Earnings
30 June Income statement Non-Controlling Statement
2023 30 June 2023 Interest 30 June 2023
30 June 2023 30 June 2023
USUSD'000 USUSD'000 USUSD'000 USUSD'000 USUSD'000 USUSD'000
Gross property income 56,249 12,538 68,787 (9,286) 59,501 59,587
Property operating expenses (9,624) (1,798) (11,422) 2,784 (8,638) (9,609)
Net property income 46,625 10,740 57,365 (6,502) 50,863 49,978
Other income 286 22,241 22,527 (3,343) 19,184 18,799
Administrative expenses (22,578) (7,400) (29,978) 4,104 (25,874) (21,419)
Net impairment charge on (3,868) (1,581) (5,449) (59) (5,508) -
financial assets
Profit from operations 20,465 24,000 44,465 (5,800) 38,665 47,358
Fair value adjustment on (4,108) (1,005) (5,113) 1,023 (4,090) -
investment properties
Fair value adjustment on 3,625 1,948 5,573 (79) 5,494 -
other financial liability
Fair value adjustment on 264 - 264 - 264 -
other financial asset
Fair value adjustment on
derivative financial (3,085) - (3,085) - (3,085) -
instruments
Share-based payment expense (354) (7,474) (7,828) - (7,828) -
Share of profits from
associates and joint 14,300 (14,300) - - - -
ventures
Loss on disposal of (3,240) - (3,240) - (3,240) -
investment in subsidiary
Loss on disposal of (3,543) - (3,543) - (3,543) -
interest in associate
Impairment of loans and - (71) (71) (658) (729) -
other receivables
Loss on derecognition of (3,735) - (3,735) (280) (4,015) -
loans and other receivables
Foreign currency losses (2,241) (1,640) (3,881) 416 (3,465) -
Loss on extinguishment of (1,166) (25) (1,191) 114 (1,077) -
loans
Loss on disposal of
property, plant, and (888) - (888) - (888) -
equipment
Other transaction costs (2,156) - (2,156) - (2,156) -
Profit before interest and 14,138 1,433 15,571 (5,264) 10,307 47,358
taxation
Interest income 4,096 5,527 9,623 (40) 9,583 9,582
Finance charges (39,582) (6,088) (45,670) 5,585 (40,085) (36,554)
(Loss) / Profit before (21,348) 872 (20,476) 281 (20,195) 20,386
taxation
Taxation (4,225) (487) (4,712) 1,276 (3,436) (3,113)
(Loss) / Profit after (25,573) 385 (25,188) 1,557 (23,631) 17,273
taxation
NCI of associates through (385) (385) 385 - -
OCI
(Loss) / Profit after
taxation and after NCI of (25,573) - (25,573) 1,942 (23,631) 17,273
associates
VAT credits 3,312
Distributable earnings 20,585
Financial and Portfolio summary
The Grit Proportionate Income Statement is further split to produce a Grit Property Portfolio Revenue2, Operating expenses2 and NOI 2 analysis by sector. Grit's Property Portfolio revenue has increased by 1.9% after the reduction of revenue from disposed assets. Revenue from ongoing operations increased 7.3% from prior year on annual contractual lease escalations and the start of leasing operations on a number of buildings within the GREA portfolio between January 2023 and May 2023. Net operating income on ongoing operations increased by 5.7% over the twelve-month period to 30 June 2023.
Revenue Revenue Revenue Revenue Revenue Revenue Change in
FY2023 FY2023 FY2023 FY2022 FY2022 FY2022 Revenue Change in Revenue Rental
Sector Ongoing operations Collection1
Reported Change in Ongoing Restated4 Change in Ongoing Reported FY2023
ownership3 operations ownership3 operations
USUSD'000 USUSD'000 USUSD'000 USUSD'000 USUSD'000 USUSD'000 % % %
Retail 19,074 110 18,964 18,310 - 18,310 4.2% 3.6% 95.0%
Hospitality 9,164 3,889 5,275 12,510 7,481 5,029 (26.7%) 4.9% 136.2%
Office 18,163 1,078 17,085 16,577 - 16,577 9.6% 3.1% 98.0%
Light 6,229 - 6,229 3,797 - 3,797 64.1% 64.1% 105.3%
industrial
Corp 14,147 460 13,687 13,620 - 13,620 3.9% 0.5% 96.1%
Accommodation
Medical 53 11 42 - - - 100.0% 100.0% 100.0%
Data Centre 803 135 668 364 - 364 120.6% 83.5% 15.9%
LLR portfolio 1,588 1,588 - 2,788 2,788 - (43.0%) (100.0%) N/A
Corporate 1,444 - 1,444 1,389 - 1,389 4.0% 4.0% N/A
TOTAL 70,665 7,271 63,394 69,355 10,269 59,086 1.9% 7.3% 101.3%
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DJ Full year audited results for the year ended 30 -6-
Subsidiaries 56,249 1,001 55,248 51,937 - 51,937 8.3% 6.4%
Associates 12,538 5,810 6,728 16,613 10,269 6,344 (24.5%) 6.1%
SUBTOTAL 68,787 6,811 61,976 68,550 10,269 58,281 0.3% 6.3%
GREA 1,878 460 1,418 805 - 805 133.2% 76.1%
Associates
TOTAL 70,665 7,271 63,394 69,355 10,269 59,086 1.9% 7.3%
NOI NOI FY2023 NOI FY2023 NOI NOI FY2022 NOI FY2022 Change in Change in NOI
NOI
Sector FY2023 Change in Ongoing FY2022 Change in Ongoing Ongoing
ownership3 operations ownership3 operations Reported operations
Reported Restated4
USUSD'000 USUSD'000 USUSD'000 USUSD'000 USUSD'000 USUSD'000 % %
Retail 12,363 70 12,293 11,952 - 11,952 3.4% 2.9%
Hospitality 9,164 3,889 5,275 12,510 7,481 5,029 (26.7%) 4.9%
Office 16,139 870 15,269 14,664 - 14,664 10.1% 4.1%
Light 5,995 - 5,995 3,692 - 3,692 62.4% 62.4%
industrial
Corp 11,545 439 11,106 11,558 - 11,558 (0.1%) (3.9%)
Accommodation
Medical 53 11 42 - - - 100.0% 100.0%
Data Centre 148 118 30 324 - 324 (54.3%) (90.7%)
LLR portfolio 1,455 1,455 - 2,507 2,507 - (42.0%) (100.0%)
Corporate 2,023 - 2,023 2,000 - 2,000 1.2% 1.2%
TOTAL 58,885 6,852 52,033 59,207 9,988 49,219 (0.5%) 5.7%
Subsidiaries 46,625 870 45,755 43,281 - 43,281 7.7% 5.7%
Associates 10,740 5,543 5,197 15,181 9,988 5,193 (29.3%) 0.1%
SUBTOTAL 57,365 6,413 50,952 58,462 9,988 48,474 (1.9%) 5.1%
GREA 1,520 439 1,081 745 - 745 104.0% 45.1%
Associates
TOTAL 58,885 6,852 52,033 59,207 9,988 49,219 (0.5%) 5.7%
Notes
Rental Collections represents the amount of cash received as a percentage of contractual income.
1 Contractual income is stated before the effects of any rental deferment and concessions provided to
tenants.
2 Grit adjusted property portfolio Revenue, Operating expenses and Net Operating Income are unaudited
alternative performance measurements
Change in ownership relate to the impact of the disposal of BHI and LLR as well as the impact of the
3 change in the Group's proportionate share in GREA from 26.29% to 35.01% during the financial year. On 30
June the Groups interest increased to 51.4%, with the resulting effect expected to be observed in the 30
June 2024 financial period.
Prior year comparatives have been restated to reflect a change in accounting policy following
4 clarification by the IFRS Interpretation Committee ("IFRIC") in October 2022 of how lessor should account
for the forgiveness of lease payments. Details of the restatement and impact on prior year comparatives
are set out in note 2.3 'Changes in accounting policies'
The retail sector benefitted from lower vacancies, Covid-19 recovery and from favourable foreign exchange impacts, particularly on the Zambian portfolio during the year.
The hospitality sector NOI declined as a result of the disposal of the Beachcomber properties during the year. NOI from ongoing operations grew 4.9% predominantly driven by EBITDA linked rental growth at Tamassa and rentals on development capex being levied at the Club Med Skirring Resort.
The office sector NOI growth was predominantly attributable to the increased shareholding in Capital Place (50% to 70% from 30 June 2022) and a one-off termination fee relating to Commodity House Phase 1 of USUSD0.8m. The remainder of the portfolio was broadly flat over the prior year.
The light Industrial sector NOI growth substantially related to the full year impact of the Orbit Complex contributing c.USUSD2.5m to the year-on-year movement.
Corporate accommodation sector and NOI growth predominantly related to new leasing income generated from DH1 Ethiopia and DH3 Kenya completed during the year. The diplomatic housing portfolio positive trends were offset by lower rentals achieved in the VDE Housing Complex and additional costs being incurred across the portfolio.
Cost control
The financial year-ended 30 June 2023 was a transitionary year for the Group, one in which significant inflationary pressure and investment for future growth and positioning ahead of GRIT 2.0 resulted in a 40.3% increase in ongoing administrative expenses. A substantial contributor to the increase were inflationary pressures experienced in items including insurance, travel, accommodation and staff costs. Additionally, the Group invested for growth, with the staff compliment increasing during the year and the opening of a new representative office in Kenya. The property management team added to the headcount growth with new staff in Ethiopia to manage the diplomatic housing projects.
Ongoing administrative costs as a percentage of total income producing assets equate to 2.4%, increasing from 1.7% in the prior year and against management medium term admin cost ratio target of 1.8%. The group has set a target of reducing overall administrative costs by USUSD4.0 million by December 2024. This will be achieved through increased integration and efficient use of the Grit and APDM staff compliment, further digitisation of business processes, initiatives surrounding insurance requirements and a more targeted marketing spend that will underpin the growth of assets under management and the generation of other fee income streams in line with the Grit 2.0 strategy.
Administrative costs for the year included a number of once off items related to the office move to the Precinct and additional costs related to the completion of phase 2 and 3 of the GREA / APDM acquisition.
Administrative expenses 30 June 2023 30 June Movement Movement
2022
USUSD'000 USUSD'000 USUSD'000 %
Comparable administrative costs relating to the Group (excluding APDM 21,787 16,944 4,843 28.6%
recharges)
Bora representative office setup costs 532 - 532 100.0%
APDM employee costs recharged to Group 259 - 259 100.0%
Administrative expenses - IFRS 22,578 16,944 5,634 33.3%
Less: Transaction costs (1,706) (2,071) 365 (17.6%)
Total administrative expenses 20,872 14,873 5,999 40.3%
Fee income 1,348 480 868 180.8%
As an offset to the increased administrative costs, asset management fees of the subsidiaries grew to USUSD1.4 million (an increase of 180.8% from the prior year comparative of USUSD0.48 million). Additionally, the insourcing of property management in Ghana and Kenya resulted in net savings of USUSD0.16 million (with the current years fees of USUSD0.11 million ending during the year). These figures are expected to grow in line with the number of new projects delivered in the medium term and will be significantly bolstered through the deployment of the IFC funding instrument and GREA recapitalisation.
Material finance costs increases
The continued rise in global interest rates have driven the Group's cash weighted average cost of debt up to 8.0% at 30 June 2023 and including the full year impact of the Orbit acquisition, resulted in a 46.5% increase in net finance costs for the year. The increase in ongoing funding costs is partially shielded by annual contractual lease escalations over the property portfolio which are predominantly linked to US consumer price inflation. The Group also has hedging instruments in place amounting to USUSD200.0 million to mitigate the impact of interest fluctuations. Although base rates increased by c3.6% over the year, our WACD increased by 1.3% as a result of these hedges.
The additional USUSD11.3 million charge to income resulted in a significant impact on the financial results for the year. The reported net finance charge includes an amortisation of loan issuance costs and the impact of hedging activities.
Net finance costs 30 June 2023 30 June 2022 Movement Movement
USUSD'000 USUSD'000 USUSD'000 %
Finance costs as per statement of profit or loss 39,582 26,151 13,431 51.4%
Less: Interest income as per statement of profit or loss (4,096) (1,935) (2,161) 111.7%
Net finance costs - IFRS 35,486 24,216 11,270 46.5%
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DJ Full year audited results for the year ended 30 -7-
Interest rate risk exposure and management
The exposure to interest rate risk at 30 June 2023 is summarised below and the table highlights the value of the Group's interest-bearing borrowings that are exposed to the base rates indicated:
Lender TOTAL SOFR EURIBOR PLR1 FIXED
USUSD'000 USUSD'000 USUSD'000 USUSD'000 USUSD'000
Standard Bank Group 269,147 222,633 46,514 - -
State Bank of Mauritius 35,361 10,000 24,336 1,025 -
Investec Group 34,722 3,152 31,570 - -
Nedbank Group 15,635 15,635 - - -
Maubank 712 - 712 - -
Housing Finance Corporation 4,369 - - - 4,369
NCBA Kenya 17,500 17,500 - - -
Private Equity 4,725 - - - 4,725
International Finance Corporation 16,100 16,100 - - -
TOTAL EXPOSURE - IFRS 398,271 285,020 103,132 1,025 9,094
Less: Hedging instruments in place (200,000) (200,000) - - -
Less: Partner loans offsetting group exposure (21,034) (21,034) - - -
NET EXPOSURE (AFTER HEDGING AND OTHER MITIGATING INSTRUMENTS) - IFRS 177,237 63,986 103,132 1,025 9,094
Notes
1 PLR - Mauritius Prime Lending Rate
Management monitor and manage the business relative to the cash WACD which is the net finance costs before loan cost amortisation and adjusted for the effects of the hedges. Including the impact of hedges and back-to-back partner loans, the Group is 78.24% hedged on its USUSD SOFR exposure but remains largely unhedged to movements in EURIBOR and the Mauritian prime lending rate.
On 16 October 2023, interest rate hedges over USUSD100.0 million notional, which gave protection against LIBOR rates above 1.58% to 1.85%, matured. The Group re-instated a new USUSD100.0 million notional interest rate hedge from this date, with new protection level above 4.75% against SOFR 3-month rates.
A sensitivity of the Group's expected WACD and cash WACD to further movements in base rates are summarised below:
All debt Cash WACD WACD Movement vs current WACD At 30 June 2023 (including hedges) 7.97% 8.43% At 31 October 2023 (including hedges) 9.09% 9.55% 0.00% +50bps 9.30% 9.76% +21bps +25bps 9.19% 9.65% +10bps -50bps 8.88% 9.34% (21bps) -100bps 8.55% 9.01% (54bps) -200bps 7.84% 8.30% (125bps)
Asset recycling
During the year the Group continued with its asset recycling strategy and disposed of a minority interest (44.42%) in 3 hotels to Beachcomber Hotels International and the complete exit of the Group's remaining 25.1% in Letlole la Rona, a listed Botswanan property company. The impact on the financial results of the Group of these disposals are summarised below.
Disposal of Leisure Property Northern (Mauritius) Limited
The Group disposed of its whole equity interests in Leisure Property Northern (Mauritius) Limited ("LPNL"), the legal beneficial owner of Beachcomber Hospitality Investments Ltd ("BHI") and a wholly owned subsidiary of the Group during the year. At the beginning of the financial year, Grit via LPNL owned 44.42% of BHI. The following transactions occurred during the year which resulted in the disposal of LPNL and BHI.
In November 2022, BHI declared a EUR32.6 million dividend whereby shareholders had the option to elect to
receive the dividend in cash or additional shares in BHI in proportion to their current shareholding. The
. Group elected a cash payout whereas New Mauritius Hotel ("NMH"), the other shareholder of BHI, elected to
convert the dividend payout into additional BHI shares. Following the increase in shareholding of NMH in
BHI, the Group interests in the associate decreased from 44.42% to 27.01%.
In May 2023, the Group disposed of its wholly owned subsidiary LPNL (which held 27.01% of BHI at the time
. of disposal). Following the disposal of LPNL and the de-consolidation of LPNL in Grit's book, LPNL merged
with BHI so that BHI is the only surviving legal entity that remains in operation.
. Following the disposal, the New Mauritius Hotels option to acquire all of the equity held by LPNL in BHI,
expired and the call option liability that was previously recorded was reversed.
The net impact of the disposal of the LPNL and BHI on the results of the Group during the year is summarised USUSD'000
as follows
Assets disposed
Investments in associates 51,298
Cash and cash equivalents 1
Total assets disposed 51,299
Liabilities disposed
Interest-bearing borrowings (19,404)
Trade and other payables (28)
Total liabilities disposed (19,432)
Net assets disposed 31,867
Consideration received 28,880
Loss on sale of subsidiary (2,987)
Reclassification of cumulated other comprehensive income movement from foreign currency translation reserve to (75)
profit or loss
Total loss on sale of interest in subsidiary (3,062)
Fair value adjustment through profit or loss on reversal of call option held by New Mauritius Hotels 2,472
Net impact of disposal on profit or loss in the current year (590)
Disposal of equity interest in Letlole La Rona Limited
During the year, Grit Services Limited a wholly owned subsidiary of the Group disposed of its entire equity interests of 25.10% in Letlole La Rona Limited on the Botswana Stock Exchange for a cash consideration. The disposal of shares has been completed in tranches. The number of shares disposed of and the trading price at the different disposal dates were as follows:
Number of shares disposed Trading price per share Percentage interest
BWP %
19,000,000 3.48 6.79%
19,768,068 3.51 7.06%
12,600,000 3.16 4.50%
18,911,932 2.50 6.75%
70,280,000 25.10%
The net impact of the disposal of the interest in Letlole La Rona Limited on the results of the Group during the year is summarised as follows, with the largest contributor to the loss on disposal being the crystallisation of foreign currency translation differences that were recognised during the period in which the investment was held, and which arose due to the movement in the Botswana Pula against the US Dollar during the investment period.
USUSD'000 Fair value of consideration received 16,853 Less: Carrying amount of Investment in associate to be disposed 17,105 Loss on disposal of interest in associate (252) Reclassification of cumulative foreign currency translation reserve to profit or loss (3,291) Total loss on disposal of investment in associate (3,543)
Utilisation of proceeds from disposal of assets
The proceeds on the disposal of the above-mentioned assets had largely been used to partially fund the acquisition of GREA and the settlement of debt.
Portfolio performance
Income producing assets increased by 0.6% during the year under review. The increase in investment properties is largely driven by capital expenditure incurred during the year along with the acquisition of the remaining 50% interest in Buffalo Mall, which resulted in the asset being consolidated in the Group results at 30 June 2023. The acquisition of a further 25.19% interest in GREA along with an increase of 1% interest in APDM was offset by the consolidation of Buffalo Mall as described above as well as the impact of the disposal of the entire shareholding in Beachcomber Hospitality Investments as well as LLR during the year. Other loans receivable decreased through partial repayments received from partners during the year.
Composition of income producing assets 2023 2022
USUSD'm USUSD'm
Investment properties 628.8 604.5
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DJ Full year audited results for the year ended 30 -8-
Investment property included within 'Investment in associates' 197.1 203.8
825.9 808.3
Deposits paid on investment properties 5.9 8.2
Other investments, Property, plant & equipment, Intangibles & related party loans 30.2 40.2
Total income producing assets 862.0 856.7
Property valuations
Reported property values based on Grit's proportionate share of the total property portfolio (including joint ventures and GREA associates) decreased by 4.5% in the period and were principally impacted by "Asset Recycling" related to the disposal of stakes in BHI and LLR (both accounted for as associates) offset to an extent by increased stakes in the GREA assets (reflected in their various sectors) as a result of Grit's increased interest in GREA (which moved from 26.29% to 51.48%). Additions predominantly related to capex deployed to various development projects in GREA as well as the Bollore property. Fair value loss on the portfolio amounted to USUSD5.9m, equating to -0.8% on the like-for-like portfolio.
Opening Development assets Fair Closing Total
Sector Property Forex Asset completed in the Additions Change in Other value Property Valuation
Value movement recycling year ownership movements Value
Movement
USUSD'000 USUSD'000 USUSD'000 USUSD'000 USUSD'000 USUSD'000 USUSD'000 USUSD'000 USUSD'000 %
Retail 197,417 1,330 - - 371 12,322 720 551 212,711 7.7%
Hospitality 164,603 9,235 (100,057) - 2,244 - 8 3,959 79,992 (51.4%)
Office 195,823 - - 11,728 - 5,032 940 1,921 215,444 10.0%
Light 80,414 - - - 7,899 - 655 (9,518) 79,450 (1.2%)
industrial
Data Centres 6,839 - - - - 6,555 338 658 14,390 110.4%
Medical - (140) - 5,633 - 4,626 - 2,108 12,227 100.0%
Corporate 145,884 (520) - - 1,998 16,824 (793) (5,621) 157,772 8.1%
Accommodation
LLR portfolio 20,946 (6,187) (14,909) - - - - 150 - (100.0%)
GREA under 13,214 715 - (17,361) 14,506 5,167 159 (159) 16,241 22.9%
construction
Total 825,140 4,433 (114,966) - 27,018 50,526 2,027 (5,951) 788,227 (4.5%)
Subsidiaries 604,474 4,401 - - 10,531 11,769 1,710 (4,108) 628,777 4.0%
Associates 203,770 552 (114,966) - 15,088 22,576 89 (1,005) 126,104 (38.1%)
SUBTOTAL 808,244 4,953 (114,966) - 25,619 34,345 1,799 (5,113) 754,881 (6.6%)
GREA 16,896 (520) - - 1,399 16,181 228 (838) 33,346 97.4%
Associates
TOTAL 825,140 4,433 (114,966) - 27,018 50,526 2,027 (5,951) 788,227 (4.5%)
Interest bearing borrowings movements
As at 30 June 2023, the Group had a total of USUSD398.3 million in interest bearing borrowings outstanding as compared to a total of USUSD425.1 million that was outstanding at the end of the comparative period. The reduction in these balances were largely driven by the settlement of interest-bearing borrowings amounting to USUSD19.4 million held in Leisure Property Northern (Mauritius) Limited, which was disposed during the year as well as a USUSD10.0 million repayment made on the loan facility that the Group holds with the State Bank of Mauritius Limited (other loans settled during the period amounted to USUSD5.6 million). During the year the Group acquired the remaining 50% interest in Buffalo Mall Naivasha Limited and due to the consolidation of this entity at 30 June 2023 the interest-bearing borrowings that relate to this entity amounting to USUSD4.4 million was included in the Group balance as at that date.
Movement in reported interest-bearing borrowings for the year (subsidiaries) 30 June 2023 30 June 2022
USUSD'000 USUSD'000
Balance at the beginning of the year 425,066 410,588
Proceeds of interest bearing-borrowings 324,459 58,513
Loan reduced through disposal of subsidiary (19,404) (6,624)
Loan acquired through asset acquisition 4,369 6,011
Loan issue costs incurred (7,355) (4,386)
Amortisation of loan issue costs 3,368 2,765
Foreign currency translation differences 3,561 (14,836)
Interest accrued 2,798 751
Debt settled during the year (340,127) (27,716)
As at 30 June 396,735 425,066
For more meaningful analysis, a further breakdown is provided below to better reflect debt related to non-consolidated associates. At 30 June 2023, the Group had a total of USUSD457.3 million in interest bearing borrowings outstanding, comprised of USUSD398.3 million in subsidiaries (as reported in IFRS balance sheet) and USUSD59.0 million proportionately consolidated and held within its associates.
30 June 2023 30 June 2022
Debt in Debt in Total Debt in Debt in Total
Subsidiaries associates Subsidiaries associates
USUSD'000 USUSD'000 USUSD'000 % USUSD'000 USUSD'000 USUSD'000 %
Standard Bank Group 269,147 28,881 298,028 65.18% 183,496 6,516 190,012 40.30%
Bank of China - - - 0.00% 76,405 - 76,405 16.21%
State Bank of Mauritius 35,361 2,769 38,130 8.34% 57,659 16,375 74,034 15.70%
Investec Group 34,722 - 34,722 7.59% 36,129 - 36,129 7.66%
Absa Group - 14,157 14,157 3.10% 7,913 3,057 10,970 2.33%
ABC Banking Corporation - - - 0.00% 7,121 - 7,121 1.51%
Afrasia Bank Limited - 21 21 0.00% - - - 0.00%
Nedbank Group 15,635 7,772 23,407 5.12% 21,820 286 22,106 4.69%
Mauritius Commercial Bank - - - 0.00% - 7,774 7,774 1.65%
Maubank 712 - 712 0.16% 3,345 - 3,345 0.71%
First National Bank - - - 0.00% - 9,013 9,013 1.91%
Housing Finance 4,369 - 4,369 0.96% - 2,316 2,316 0.49%
Corporation
Bank of Gaborone - - - 0.00% - 727 727 0.15%
SBI (Mauritius) Ltd - 2,078 2,078 0.45% - - - 0.00%
Cooperative Bank of - 3,303 3,303 0.72% - - - 0.00%
Oromia
NCBA Bank Kenya 17,500 - 17,500 3.83% 10,700 - 10,700 2.27%
Private Equity 4,725 - 4,725 1.03% 4,725 - 4,725 1.00%
International Finance 16,100 - 16,100 3.52% 16,100 - 16,100 3.41%
Corporation
TOTAL BANK DEBT 398,271 58,981 457,252 100.00% 425,413 46,064 471,477 100.00%
Interest accrued 7,725 4,927
Unamortised loan issue (9,261) (5,274)
costs
As at 30 June 396,735 425,066
Capital commitments
Upcoming capital commitments in the current financial year include:
. Club Med Senegal redevelopment: EUR27.1 million up to January 2025; and . Drive in Trading guarantee settlement: USUSD17.5 million by March 2024.
Net Asset Value and EPRA Net Realisable Value
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Further reconciliations and details of EPRA earnings per share and other metrics are provided in notes 11 to 13.
Net asset value evolution Unaudited Unaudited
USUSD'000 USUSD'cps
IFRS NAV as reported 336,301 70.1
Derivative financial instruments (1,862) (0.4)
Deferred Tax on Properties 46,873 9.7
EPRA NRV at 30 Jun 2022 381,312 79.4
Portfolio valuations (5,113) (1.1)
Other fair value adjustments (873) (0.2)
Other non-cash items (including non-controlling interest) (20,680) (4.3)
Dividend attributable to NCI (2,397) (0.5)
Cash profits 17,267 3.6
Movement through FCTR 4,802 1.1
Dividend paid (19,188) (4.0)
Movement other equity instruments (5,568) (1.2)
EPRA NRV Before Dilution 349,562 72.8
Effect of treasury shares 94 0.0
EPRA NRV at 30 Jun 2023 349,656 72.8
Deferred Tax on Properties (48,217) (10.0)
Derivatives (789) (0.2)
IFRS NRV at 30 Jun 2023 300,650 62.6
Going Concern
The Directors' assessment of the Group's and Company's ability to continue as a going concern is required when approving the financial statements. As such the Directors have modelled a 'base case' and a 'severe but plausible downside' of the Group's and Company's expected liquidity and covenant position for a going concern assessment period through to March 2025, a period of at least 12 months following the approval of these accounts. The Directors considered the existing structure of the group, where GREA is accounted for as a joint venture, and also the forecasts under a scenario where GREA is controlled and therefore consolidated which is the stated intention of the group
The process involved a thorough review of the Group's risk register, an analysis of the trading performance both pre and post year-end, extensive discussions with the independent property valuers, a review of the operational indicators within the Group and economic data available in the countries in which the Group operates. All of this has been done in the context of the continued global market instability, previous experience of the African real estate sector and best estimates of expectations in the future.
Base Case model
The base case reflects the Directors' best expectations of the position going forward. It was modelled on board approved forecasts over the relevant period with amendments to reflect current changes in the business. The base case scenario includes the Group's and Company's financial projections and the following key assumptions:
1. Management has modelled the proceeds of both the IFC funding instrument (USUSD30 million) as well as the
recapitalisation of GREA (with a cash injection of USUSD48.5 million) to be closed from November 2023.
The initial deployment of the IFC instrument shall be utilised to acquire a sale and lease back asset
a. with a value of at least USUSD15 million (which is a requirement of the IFC instrument) with the
remaining balance being undrawn; and
The USUSD48.5 million recapitalisation of GREA is to fund new development projects and to unlock the fee
income strategies of the Group as contemplated under "Grit 2.0". The proceeds of the GREA
recapitalisation shall initially be applied to reduce debt in the short term, through the shared
Treasury policy, before being deployed towards the Group's pipeline in due course. The applicable
development fee income surrounding the deployment of the cash has been included in the model. As the
b. cash is targeted to be received in December 2023, the Directors have applied significant judgement on
the inclusion of the USUSD48.5 million capital injection in GREA. The judgement that the cash will be
received from the capital injection has been made on the basis that this has been approved by the
Board of GREA and by the investment committee of the third-party investor. For these reasons the
Directors have concluded that they have obtained sufficient evidence that the cash will be received in
due course. The Group is not compelled to inject cash of its own as part of the recapitalisation of
GREA.
Modelling the Company's contractual lease income, which at 30 June 2023 had a weighted average lease
2. expiry of 4.4 years and applying the applicable contractual lease escalations (which averaged 3.0% in the
current period);
3. Expected take up of vacancies from ordinary letting activities, updated for any leases concluded post
year end;
4. Debt is refinanced in the ordinary course of business, based on the Group's historical ability to
refinance debt as required;
5. Hedging contracts with a nominal value of USUSD200 million, which are more fully described in the CFO
statement and have been concluded post year end, are included in the model;
6. Base interest rates increase to 5.38% (in the case of US Dollar SOFR base rates) and 3.92% (in the case
of Euro base rates) before retracing to 3.91% and 1.85% respectively by March 2025;
Depreciation of the various African currencies versus the US Dollar, most notably the Zambian Kwacha
7. depreciating by 19.4% and the New Mozambique Metical depreciating by 21.3% over the period, with the Euro
appreciating by 4.2% over the period;
Property valuations that assume constant discount and exit capitalisation rates to those applied by the
8. independent valuers for the year ended 30 June 2023, while applying the cashflows and currency impacts
mentioned above;
9. Drive in Trading guarantee settlement paid in March 2024 of USUSD17.5 million;
10. Further progress towards, and extension of, the Company's stated asset disposal strategy whose proceeds
are deployed to reduce debt facilities and to fund future pipeline opportunities; and
11. Administrative expense reductions of c.USD4.6 million during FY24 and FY25.
Severe but plausible downside model
The severe but plausible downside scenario is initially applied to Grit on a standalone basis and then includes additional overlays of consolidated GREA scenarios to reflect the intention of the Directors to obtain control over GREA. A summary of the key assumption overlays to the Base Case made in the severe but plausible scenario are as follows:
As the IFC agreement has not yet been signed by the financial statement date, the initial utilisation of
the funds has therefore not been assumed. The funds from the GREA recapitalisation have been assumed to
be held in debt facilities as the projects to which they will be allocated have not yet reached
sufficient finality (most specifically binding pre-let agreements and specific project debt funding)
reducing the Group's interest costs and improving liquidity. Any fee income related to these projects
1. have also not been modelled. As the cash is targeted to be received in December 2023, the Directors have
applied significant judgement on the inclusion of the USUSD48.5 million capital injection in GREA. The
judgement that the cash will be received from the capital injection has been made on the basis that this
has been approved by the Board of GREA and by the investment committee of the third-party investor. For
these reasons, the Directors have concluded that they have obtained sufficient evidence that the cash
will be received in due course;
Base interest rates are assumed to continue to increase to levels higher than those assumed in the base
2. case, with base rates staying higher for longer and at levels increasing to c1.25% higher than the base
case scenario and then maintaining this average over the measurement period. The resultant assumed rates
are:
. SOFR base rates increase to a maximum of 6.31% up to June 24 before rate retracting 5.16% in March
2025;
. 3 month Euribor rates increase to 5.05% before retracting to 4.55% in June 2024 and 3.48% in March
2025;
All debt facilities that mature during the period to December 2024 are assumed to be repaid on the
3. current maturity date; while those beyond this date, specifically the USUSD306 million sustainability
linked syndicated loan facility maturing in 2027, the SBM Euro 22.3 million and Nedbank USUSD8 million
facilities maturing in April 2025, are assumed to be refinanced in the ordinary course;
4. Further depreciation of currencies versus the US Dollar, most notably the Euro depreciating by 4.0% over
the period and movements in various African currencies of up to 22.8%;
5. Only contractual preference share coupons are paid;
6. The ongoing refurbishment of the Club Med Cap Skirring Resort in Senegal is reduced to the contractually
obligated spend; and
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7. Administrative expense reductions of c.USUSD4.6 million during FY24 and FY25.
Given the Group's stated intention to consolidate GREA, further overlays in the severe but plausible downside scenario are applied to GREA and include:
1. Interest rate and currency sensitivities, as above, are applied to GREA debt, and debt facilities that
mature during the period are assumed to be repaid on the current maturity date;
2. Delays and cancellations to targeted asset disposals are modelled;
3. Potential delays of current development projects underway have been factored in by up to 6 months; and
4. Future projects are ceased, with no additional fee income generation from these projects or related asset
management services.
Where potential risks to covenants have been identified, the Group has received specific condonements from its financiers should the scenario modelled come to pass. This includes Interest Cover Ratio covenant condonements and Loan to Value covenant condonements during the going concern period for risks identified at the December 2024 measurement period.
Under both the base case and the severe but plausible scenario, along with certain remedies within management's control, which include actions like cuts in dividends, the Company is able to meet its liquidity and covenant positions through to March 2025. The Board has therefore concluded that it is appropriate to prepare the financial statements on the going concern basis and have concluded that there is no material uncertainty in forming that view, noting the significant judgement made in connection with the GREA capital raise.
Leon van de Moortele Chief Financial Officer 31 October 2023
PRINCIPAL RISKS AND UNCERTAINTIES
Grit has a detailed risk management framework in place that is reviewed annually and duly approved by the Risk Committee and the Board. Through this risk management framework, the Company has developed and implemented appropriate frameworks and effective processes for the sound management of risk.
The principal risks and uncertainties facing the Group as at 30 June 2023 are set out on pages 54 to 57 of the 2023 Integrated Annual Report together with the respective mitigating actions and potential consequences to the Group's performance in terms of achieving its objectives. These principal risks are not an exhaustive list of all risks facing the Group but are a snapshot of the Company's main risk profile as at year end.
The Board has reviewed the principal risks categories and existing mitigating actions and are satisfied that they remain appropriate to manage the relevant risks.
STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE FINANCIAL STATEMENTS
The responsibility statement has been prepared in connection with the Groups 2023 Integrated Annual Report, extracts of which are included within this announcement.
The Directors are responsible for preparing financial statements for each financial year which give a true and fair view, in accordance with applicable Guernsey law and International Financial Reporting Standards, of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing those financial statements, the directors are required to:
. select suitable accounting policies and then apply them consistently;
. make judgements and estimates that are reasonable and prudent;
. state whether applicable accounting standards have been followed, subject to any material departures
disclosed and explained in the financial statements; and
. prepare the financial statements on the going concern basis unless it is inappropriate to presume that
the Company will continue in business.
The directors confirm that they have complied with the above requirements in preparing the financial statements.
The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with The Companies (Guernsey) Law, 2008. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
So far as the directors are aware, there is no relevant audit information of which the Company's auditors are unaware, and each director has taken all the steps that he or she ought to have taken as a director in order to make himself or herself aware of any relevant audit information and to establish that the Company's auditors are aware of that information.
Directors' confirmations
The Directors consider that the Integrated Report and Accounts, taken as a whole, is fair, balanced, and understandable and provides the information necessary for shareholders to assess the Group's position, performance, business model and strategy.
Each of the Directors, whose names and functions are listed in pages 98 to 99 confirm that, to the best of their knowledge:
the Group and Company financial statements have been prepared in accordance with International Financial
Reporting Standards (IFRS) as issued by the International Accounting Standards Board; the Financial
. Pronouncements as issued by Financial Reporting Standards Council, the LSE and SEM Listings Requirements
and the requirements of the Companies (Guernsey) Law 2008, give a true and fair view of the assets,
liabilities, financial position and loss of the Group and profit of the Company; and
the Strategic report includes a fair review of the development and performance of the business and the
. position of the Group and Company, together with a description of the principal risks and uncertainties
that it faces.
The financial statements on pages 172 to 272 were approved by the Board of Directors and signed on its behalf by:
On behalf of the Board
Bronwyn Knight Leon van de Moortele Chief Executive Officer Chief Financial Officer
CONSOLIDATED STATEMENT OF INCOME
Audited for the year
Audited for the year ended
ended
30 June 2022
30 June 2023
Restated
Notes USUSD'000 USUSD'000
Gross property income 56,249 51,937
Property operating expenses (9,624) (8,656)
Net property income 46,625 43,281
Other income 286 80
Administrative expenses (22,578) (16,944)
Net impairment charge on financial assets (3,868) (5,301)
Profit from operations 20,465 21,116
Fair value adjustment on investment properties (4,108) 20,080
Contractual receipts from vendors of investment properties 2 - (297)
Total fair value adjustment on investment properties (4,108) 19,783
Fair value adjustment on other financial liability 3,625 (11,315)
Fair value adjustment on other financial asset 264 (371)
Fair value adjustment on derivative financial instruments (3,085) 4,501
Share-based payment expense (354) (1,238)
Share of profits from associates and joint ventures 3 14,300 20,611
Loss on disposal of investment in subsidiary 3 (3,240) (2,051)
Loss on disposal of interest in associate (3,543) (573)
Impairment of loans and other receivables - (3,101)
Loss on derecognition of loans and other receivables (3,735) -
Foreign currency losses (2,241) (5,412)
Loss on extinguishment of borrowings (1,166) -
Loss on disposal of property, plant, and equipment (888) -
Other transaction costs (2,156) -
Profit before interest and taxation 14,138 41,950
Interest income 4,096 1,935
Finance costs (39,582) (26,151)
(Loss) / profit for the year before taxation (21,348) 17,734
Taxation (4,225) (6,621)
(Loss) / profit for the year after taxation (25,573) 11,113
(Loss) / profit attributable to:
Equity shareholders (23,631) 10,443
Non-controlling interests (1,942) 670
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(25,573) 11,113
Basic and diluted (losses) / earnings per ordinary share 10 (4.90) 2.62
(cents)
Prior year comparatives have been restated to reflect a change in accounting policy following
1 clarification by the IFRS Interpretation Committee ("IFRIC") in October 2022 of how lessor should account
for the forgiveness of lease payments. Details of the restatement and impact on prior year comparatives
are set out in note 2.3 'Changes in accounting policies'
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Audited for the year
Audited for the year ended
ended
30 June 2022
30 June 2023
Restated1
USUSD'000 USUSD'000
(Loss) / profit for the year (25,573) 11,113
Retirement benefit obligation 86 154
Exchange differences on translation of foreign operations2 1,790 (5,445)
Share of other comprehensive expense of associates and joint ventures2 (43) (4,173)
Other comprehensive income / (expense) that may be reclassified to 1,833 (9,464)
profit or loss
Total comprehensive (expense) / income relating to the year (23,740) 1,649
Attributable to:
Equity shareholders (22,109) 2,587
Non-controlling interests (1,631) (938)
(23,740) 1,649
Prior year comparatives have been restated to reflect a change in accounting policy following
1 clarification by the IFRS Interpretation Committee ("IFRIC") in October 2022 of how lessor should account
for the forgiveness of lease payments. Details of the restatement and impact on prior year comparatives
are set out in note 2.3 'Changes in accounting policies'
In the current year, the Group has restated its comparative figures in its statement of comprehensive
2 income in order to split the exchange differences on translation of foreign operations between exchange
differences arising from the operations of its subsidiaries and its shares of other comprehensive
(expense)/income from associates and joint ventures.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Audited as at Audited as at
30 June 2023 30 June 2022
Notes USUSD'000 USUSD'000
Assets
Non-current assets
Investment properties 2 628,777 604,474
Deposits paid on investment properties 2 5,926 8,309
Property, plant and equipment 4,490 2,087
Intangible assets 433 670
Other investments - 1
Investments in associates and joint ventures 3 197,094 206,997
Related party loans receivable 92 515
Other loans receivable 5 21,005 -
Derivative financial instruments 91 -
Trade and other receivables 4 3,448 4,615
Deferred tax asset 12,578 12,544
Total non-current assets 873,934 840,212
Current assets
Trade and other receivables 4 18,578 29,055
Current tax receivable 3,389 1,881
Related party loans receivable 751 298
Other loans receivable 5 - 37,908
Derivative financial instruments 1,828 1,862
Cash and cash equivalents 9,207 26,002
Total current assets 33,753 97,006
Total assets 907,687 937,218
Equity and liabilities
Total equity attributable to ordinary shareholders
Ordinary share capital 535,694 535,694
Treasury shares reserve (16,306) (16,212)
Foreign currency translation reserve (389) (5,191)
Accumulated losses (218,349) (177,990)
Equity attributable to owners of the Company 300,650 336,301
Preference share capital 6 31,596 29,558
Perpetual preference notes 7 26,827 25,741
Non-Controlling interests (25,456) (22,224)
Total equity 333,617 369,376
Liabilities
Non-current liabilities
Redeemable preference shares 12,849 12,840
Proportional shareholder loans 35,733 26,716
Interest-bearing borrowings 8 318,453 242,091
Lease liabilities 3,335 545
Derivative financial instruments 1,425 -
Related party loans payable 7,195 1,205
Deferred tax liability 51,933 49,592
Total non-current liabilities 430,923 332,989
Current liabilities
Interest-bearing borrowings 8 78,282 182,975
Lease liabilities 1,265 864
Trade and other payables 46,366 31,411
Current tax payable 717 763
Derivative financial instruments 1,284 -
Related party loans payable - 1
Other financial liabilities 13,358 16,983
Bank overdrafts 1,875 1,856
Total current liabilities 143,147 234,853
Total liabilities 574,070 567,842
Total equity and liabilities 907,687 937,218
CONSOLIDATED STATEMENT OF CASH FLOWS
Audited as at Audited as at
30 June 2023 30 June 2022
Notes USUSD'000 USUSD'000
Net cash generated from operating activities 32,551 11,293
Acquisition of, and additions to investment properties (7,582) (38,996)
Deposits paid on investment properties - (2,500)
Additions to property, plant, and equipment (267) (117)
Additions to intangible assets (28) -
Additions of interests in joint ventures (56,408) (39,613)
Proceeds from disposal of interest in subsidiary 28,880 -
Proceeds from disposal of interest in associates and joint ventures 16,853 3,347
Acquisition of subsidiary, net of cash acquired 127 1,121
Dividends and interest received from associates and joint ventures 22,426 3,985
Proportional shareholder loan repayments from associates and joint ventures 2,684 10,031
Interest received 1,728 668
Proceeds from disposal of property, plant, and equipment 200 49
Related party loans receivable repaid 427 -
Related party loans receivable granted - (765)
Settlement of other financial liabilities - (639)
Deposits received 13,776 6,500
Related party loans payable paid (2,000) -
Related party loans payable received - 467
Other loans receivable repaid by partners 6,092 -
Net cash generated from / (utilised in) investing activities 26,908 (56,462)
Proceeds from the issue of ordinary shares - 54,488
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Proceeds from the issue of perpetual preference note - 31,500 Perpetual preference notes issue expenses - (1,606) Perpetual note dividend paid (2,443) (1,265) Share issue expenses - (7,943) Ordinary dividends paid (20,175) (10,535) Proceeds from interest-bearing borrowings 324,459 53,788 Settlement of interest-bearing borrowings (340,127) (27,716) Finance costs (39,662) (26,497) Proportional shareholder loans repaid (4,750) (1,967) Proceeds from proportional shareholder loans 9,589 5,576 Buy back of own shares (94) - Payment of premium on derivative instrument (433) - Payments of leases (1,415) (429) Net cash (utilised in) / generated from financing activities (75,051) 67,394 Net movement in cash and cash equivalents (15,592) 22,225 Cash at the beginning of the year 24,146 2,314 Effect of foreign exchange rates (1,222) (393) Total cash and cash equivalents (including overdrafts) at the end of the year 7,332 24,146
The Group has reclassified cash flows arising on cash movement on proportional shareholder loans, previously categorised as investing activities, to financing activities. The reclassification does not affect the Group's total cash and cash equivalents or its overall financial position. Proportional shareholder loans, inherently by virtue of how the Group structures its acquisitions, form part of the Group's capital structure. To align the presentation of proportional shareholder loans which is a financial liability on the face of the statement of financial position, the Group believes that the classification of the cash movements in the cash flow statements under financing activities is more representative.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Foreign
Ordinary Treasury currency Antecedent Accumulated Preference Non-controlling Total
Share shares translation dividend losses share Perpetual interest
capital reserve reserve reserve capital preference equity
notes
USUSD'000 USUSD'000 USUSD'000 USUSD'000 USUSD'000 USUSD'000 USUSD'000 USUSD'000 USUSD'000
Balance as at 1 463,842 (18,406) 1,495 - (176,073) 25,481 - (17,935) 278,404
July 2021
Profit for the year - - - - 10,443 - - 670 11,113
Other comprehensive
(expense) / income - - (8,010) - 154 - - (1,608) (9,464)
for the year
Total comprehensive - - (8,010) - 10,597 - - (938) 1,649
(expense) / income
Share based - - - - 138 - - - 138
payments
Antecedent dividend (3,659) - - 3,659 - - - - -
reserve
Ordinary dividends - - - (3,659) (7,903) - - - (11,562)
declared
Treasury shares - (2,906) - - - - - - (2,906)
Disposal of - 5,100 - - - - - (3,600) 1,500
treasury shares
Ordinary shares 83,454 - - - - - - - 83,454
issued
Perpetual
preference notes - - - - - - 26,775 - 26,775
issued
Preferred dividend
accrued on - - - - (1,837) - 572 - (1,265)
perpetual notes
Share issue
expenses relating - - - - - - (1,606) - (1,606)
to issue of
perpetual notes
Preferred dividend
accrued on - - - (4,077) 4,077 - - -
preference shares
Share issue (7,943) - - - - - - - (7,943)
expenses
Non-controlling
interests on
acquisition of - - - - - - - 1,414 1,414
subsidiary other
than business
combination
Reclassification of
foreign currency
translation reserve - - 906 - - - - - 906
on sale of
subsidiary
Reclassification of
foreign currency
translation reserve - - 418 - - - - - 418
on part sale of
interests in
associate
Dividends
distributable to - - - - 1,165 - - (1,165) -
non-controlling
shareholders
Balance as at 30 535,694 (16,212) (5,191) - (177,990) 29,558 25,741 (22,224) 369,376
June 2022
Balance as at 1 535,694 (16,212) (5,191) - (177,990) 29,558 25,741 (22,224) 369,376
July 2022
Loss for the year - - - - (23,631) - - (1,942) (25,573)
Other comprehensive - - 1,436 - 86 - - 311 1,833
income for the year
Total comprehensive - - 1,436 - (23,545) - - (1,631) (23,740)
income / (expense)
Share based - - - - 354 - - - 354
payments
Share of other
changes in equity - - - - 7,474 - - - 7,474
of associate
Ordinary dividends - - - - (19,188) - - - (19,188)
declared
Treasury shares - (94) - - - - - - (94)
Preferred dividend
accrued on - - - - (3,529) - 1,086 - (2,443)
perpetual notes
Preferred dividend
accrued on - - - - (2,038) 2,038 - - -
preference shares
Transaction with
non-controlling - - - - (796) - - 796 -
interests without
change in control
Reclassification of
foreign currency
translation reserve - - 75 - - - - 75
on sale of interest
in subsidiary
Acquisition of
subsidiary with own - - - - (604) - - - (604)
equity shares
Acquisition of
additional interest - - - - (884) - - - (884)
in associate with
own equity
Reclassification of
foreign currency
translation reserve - - 3,291 - - - - 3,291
on sale of
associates
Dividends
distributable to - - - - 2,397 - - (2,397) -
non-controlling
shareholders
Balance as at 30 535,694 (16,306) (389) - (218,349) 31,596 26,827 (25,456) 333,617
June 2023
NOTES TO THE FINANCIAL STATEMENTS
1. Summary of significant accounting policies
The principal accounting policies applied in the preparation of these separate and consolidated financial statements are set out below. Grit was incorporated in Mauritius and redomiciled to Guernsey as a PLC, while the place of effective management remains in Mauritius.
1.1 Basis of preparation
The Group and Company financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board; the Financial Pronouncements as issued by Financial Reporting Standards Council, the LSE and SEM Listings Requirements and the requirements of the Companies (Guernsey) Law 2008. This approach is consistent to prior years and no applicable new standards or amendments were applied to the Company during the current financial year. The financial statements have been prepared on the going-concern basis and were approved for issue by the board on 30 October 2023.
These full year audited consolidated results for the year ended 30 June 2023 do not include all the information required for full annual statements and should be read in conjunction with the 2023 Integrated Annual Report of Grit Real Estate Income Group Limited.
Going Concern
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The Directors' assessment of the Group's and Company's ability to continue as a going concern is required when approving the financial statements. As such the Directors have modelled a 'base case' and a 'severe but plausible downside' of the Group's and Company's expected liquidity and covenant position for a going concern assessment period through to March 2025, a period of at least 12 months following the approval of these accounts. The Directors considered the existing structure of the group, where GREA is accounted for as a joint venture, and also the forecasts under a scenario where GREA is controlled and therefore consolidated which is the stated intention of the group
The process involved a thorough review of the Group's risk register, an analysis of the trading performance both pre and post year-end, extensive discussions with the independent property valuers, a review of the operational indicators within the Group and economic data available in the countries in which the Group operates. All of this has been done in the context of the continued global market instability, previous experience of the African real estate sector and best estimates of expectations in the future.
Base Case model
The base case reflects the Directors' best expectations of the position going forward. It was modelled on board approved forecasts over the relevant period with amendments to reflect current changes in the business. The base case scenario includes the Group's and Company's financial projections and the following key assumptions:
1. Management has modelled the proceeds of both the IFC funding instrument (USUSD30 million) as well as the
recapitalisation of GREA (with a cash injection of USUSD48.5 million) to be closed from November 2023.
The initial deployment of the IFC instrument shall be utilised to acquire a sale and lease back asset
a. with a value of at least USUSD15 million (which is a requirement of the IFC instrument) with the
remaining balance being undrawn; and
The USUSD48.5 million recapitalisation of GREA is to fund new development projects and to unlock the fee
income strategies of the Group as contemplated under "Grit 2.0". The proceeds of the GREA
recapitalisation shall initially be applied to reduce debt in the short term, through the shared
Treasury policy, before being deployed towards the Group's pipeline in due course. The applicable
development fee income surrounding the deployment of the cash has been included in the model. As the
b. cash is targeted to be received in December 2023, the Directors have applied significant judgement on
the inclusion of the USUSD48.5 million capital injection in GREA. The judgement that the cash will be
received from the capital injection has been made on the basis that this has been approved by the
Board of GREA and by the investment committee of the third-party investor. For these reasons the
Directors have concluded that they have obtained sufficient evidence that the cash will be received in
due course. The Group is not compelled to inject cash of its own as part of the recapitalisation of
GREA.
Modelling the Company's contractual lease income, which at 30 June 2023 had a weighted average lease
2. expiry of 4.4 years and applying the applicable contractual lease escalations (which averaged 3.0% in the
current period);
3. Expected take up of vacancies from ordinary letting activities, updated for any leases concluded post
year end;
4. Debt is refinanced in the ordinary course of business, based on the Group's historical ability to
refinance debt as required;
5. Hedging contracts with a nominal value of USUSD200 million, which are more fully described in the CFO
statement and have been concluded post year end, are included in the model;
6. Base interest rates increase to 5.38% (in the case of US Dollar SOFR base rates) and 3.92% (in the case
of Euro base rates) before retracing to 3.91% and 1.85% respectively by March 2025;
Depreciation of the various African currencies versus the US Dollar, most notably the Zambian Kwacha
7. depreciating by 19.4% and the New Mozambique Metical depreciating by 21.3% over the period, with the Euro
appreciating by 4.2% over the period;
Property valuations that assume constant discount and exit capitalisation rates to those applied by the
8. independent valuers for the year ended 30 June 2023, while applying the cashflows and currency impacts
mentioned above;
9. Drive in Trading guarantee settlement paid in March 2024 of USUSD17.5 million;
10. Further progress towards, and extension of, the Company's stated asset disposal strategy whose proceeds
are deployed to reduce debt facilities and to fund future pipeline opportunities; and
11. Administrative expense reductions of c.USD4.6 million during FY24 and FY25.
Severe but plausible downside model
The severe but plausible downside scenario is initially applied to Grit on a standalone basis and then includes additional overlays of consolidated GREA scenarios to reflect the intention of the Directors to obtain control over GREA. A summary of the key assumption overlays to the Base Case made in the severe but plausible scenario are as follows:
As the IFC agreement has not yet been signed by the financial statement date, the initial utilisation of
the funds has therefore not been assumed. The funds from the GREA recapitalisation have been assumed to
be held in debt facilities as the projects to which they will be allocated have not yet reached
sufficient finality (most specifically binding pre-let agreements and specific project debt funding),
1. reducing the Groups interest costs and improving available liquidity. Any fee income related to these
projects have also not been modelled. As the cash is targeted to be received in December 2023, the
Directors have applied significant judgement on the inclusion of the USUSD48.5 million capital injection in
GREA. The judgement that the cash will be received from the capital injection has been made on the basis
that this has been approved by the Board of GREA and by the investment committee of the third-party
investor. For these reasons the Directors have concluded that the cash will be received in due course;
Base interest rates are assumed to continue to increase to levels higher than those assumed in the base
2. case, with base rates staying higher for longer and at levels increasing to c1.25% higher than the base
case scenario and then maintaining this average over the measurement period. The resultant assumed rates
are:
. SOFR base rates increase to a maximum of 6.31% up to June 24 before rate retracting 5.16% in March
2025;
. 3 month Euribor rates increase to 5.05% before retracting to 4.55% in June 2024 and 3.48% in March
2025;
All debt facilities that mature during the period to December 2024 are assumed to be repaid on the
3. current maturity date; while those beyond this date, specifically the USUSD306 million sustainability
linked syndicated loan facility maturing in 2027, the SBM Euro 22.3 million and Nedbank USUSD8 million
facilities maturing in April 2025, are assumed to be refinanced in the ordinary course;
4. Further depreciation of currencies versus the US Dollar, most notably the Euro depreciating by 4.0% over
the period and movements in various African currencies of up to 22.8%;
5. Only contractual preference share coupons are paid;
6. The ongoing refurbishment of the Club Med Cap Skirring Resort in Senegal is reduced to the contractually
obligated spend; and
7. Administrative expense reductions of c.USUSD4.6 million during FY24 and FY25.
Given the Group's stated intention to consolidate GREA, further overlays in the severe but plausible downside scenario are applied to GREA and include:
1. Interest rate and currency sensitivities, as above, are applied to GREA debt, and debt facilities that
mature during the period are assumed to be repaid on the current maturity date;
2. Delays and cancellations to targeted asset disposals are modelled;
3. Potential delays of current development projects underway have been factored in by up to 6 months; and
4. Future projects are ceased, with no additional fee income generation from these projects or related asset
management services.
Where potential risks to covenants have been identified, the Group has received specific condonements from its financiers should the scenario modelled come to pass. This includes Interest Cover Ratio covenant condonements and Loan to Value covenant condonements during the going concern period for risks identified at the December 2024 measurement period.
Under both the base case and the severe but plausible scenario, along with certain remedies within management's control, which include actions like cuts in dividends, the Company is able to meet its liquidity and covenant positions through to March 2025. The Board has therefore concluded that it is appropriate to prepare the financial statements on the going concern basis and have concluded that there is no material uncertainty in forming that view, noting the significant judgement made in connection with the GREA capital raise.
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DJ Full year audited results for the year ended 30 -14-
Functional and presentation currency
The consolidated financial statements are prepared and are presented in United States Dollars (USUSD) which is also the functional and presentational currency of the Company. Amounts are rounded to the nearest thousand, unless otherwise stated. Some of the underlying subsidiaries and associates have different functional currencies other than the USUSD which is predominantly determined in the country in which they operate.
Presentation of alternative performance measures
The Group presents certain alternative performance measures on the face of the income statement. Revenue is shown on a disaggregated basis, split between gross rental income and the straight-line rental income accrual. Additionally, the total fair value adjustment on investment properties is presented on a disaggregated basis to show the impact of contractual receipts from vendors separately from other fair value movements. These are non IFRS measures and supplement the IFRS information presented. The Directors believe that the presentation of this information provides useful insight to users of the financial statements and assists in reconciling the IFRS information to industry wide EPRA metrics. Alternative Performance Measures are not a substitute for, nor necessarily superior to, statutory measures.
1.2 Critical Judgements and estimates
The preparation of financial statements in conformity with IFRS requires the use of accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. The estimates and assumptions relating to the fair value of investment properties in particular, have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities in the subsequent financial year. Fair value adjustments do not affect the determination of distributable earnings but have an effect on the net asset value per share presented on the statement of financial position to the extent that such adjustments are made to the carrying values of assets and liabilities.
Judgements
Amongst others, some principal areas where such judgements have been applied are:
African Property Development Managers Ltd ("APDM)" as a joint venture
The Group had previously acquired an equity interest of 77.95% in ADPM. Further during the current financial year, the Group has acquired an additional equity interest of 1% bringing the total shareholding of the Group in ADPM to 78.95%. The Group has concluded that even though it holds a majority shareholding in ADPM, it does not have control of the latter because it is currently not satisfying the power criteria of control. The design of ADPM is such that decisions about the relevant activities need to be approved by the investment committee of the company. For a decision to be approved, seventy five percent of the members present need to vote in favour of the decision. Currently the Group has the right to appoint four members to the investment committee. The Public Investment Corporation SOC ('PIC') who holds 21.05% of APDM has the right to appoint two members. Given the seventy five percent threshold requirement to pass any resolution, the Group and PIC will have to unanimously agree to any decision before those are formally enacted by management. Therefore, neither the Group nor PIC on their own control ADPM. Because of the unanimous consent required by both the significant shareholders of ADPM, the Group has classified the investment in ADPM as an investment in joint venture.
Gateway Real Estate Africa Ltd ("GREA") as a joint venture
The Group has continued the announce plan to acquire a majority stake in GREA during this financial year. An additional shareholding of 25.19% has been acquired in GREA by the Group which brings the total shareholding in GREA to 51.48%. The increase in shareholding has also entitled the Group the right to appoint two additional directors on GREA board of directors in addition to the one director that the Group was already entitled to appoint. The design of GREA is such that its relevant activities are directed by its board of directors. Under the current shareholder agreement, for a decision to be approved, seventy five percent of the directors present need to vote in favour of the decision. With the Group being entitled to appoint three out the seven directors of the board, the Group will need the support of the PIC, who is entitled to appoint two directors for any decision to be approved. Therefore, neither the Group nor the PIC on their own has control over GREA. The Group and PIC will have to unanimously agree to any decision before those are adopted by GREA. Because of the unanimous consent required by both the Group and PIC, the investment in GREA has been classified as an investment in joint venture by the Group. Previously the Group had classified the investment in GREA as an investment in associate. However, with now the exit of Gateway Africa Real Estate Limited ("GWP") and Prudential Impact Investments Private Equity LLC ("Prudential") being finalized, the only remaining shareholders in the structure are Grit and PIC and they both have joint control as explained above.
Recapitalisation of GREA
The Directors' have applied significant judgement with regards to the recapitalisation of GREA. Both the GREA and Grit Board's have approved a recapitalisation of not less than USUSD48.5 million. Significant progress has been made in this regard, including the approval of the investors' respective Investment Committees. While a number of processes remain in progress, they have been carefully considered and having obtained the necessary confirmation, are deemed to be administrative in nature. The Board has obtained sufficient comfort that the process shall be completed either on, or close to the targeted date of December 2023. Further details are included in the Going Concern section in Note 1.1.
Estimates
Fair value of investment properties
The fair value of investment properties is determined using a combination of the discounted cash flows method and the income capitalisation valuation method using assumptions that are based on market conditions existing at the relevant reporting date. Further details of the valuation method are included in note 2.
1.3 Changes in accounting policies
Restatement - IFRIC Agenda Decision - Forgiveness of lease payments
In October 2022, the International Financial Reporting Interpretations Committee (IFRIC) issued a final agenda decision regarding 'Lessor forgiveness of lease payments (IFRS 9 and IFRS 16),' providing clarification on lessor accounting for concessions, specifically rental forgiveness, granted to tenants. The IFRIC clarified that when rent receivables are overdue and subsequently forgiven, lessors are required to apply the expected credit loss (ECL) and de-recognition principles outlined in IFRS 9. This entails recognizing an income statement charge upon the recognition of the loss allowance and writing off the gross carrying amount of the rent receivable against the loss allowance upon forgiving the rent receivable. Historically, the Group accounted for such rental forgiveness using the lease modification requirements of IFRS 16, recording them as lease incentives assets and spreading them as a reduction of rental income over the lease term of the respective tenant to whom the rent forgiveness was granted.
The agenda decision further clarified that forgiveness of future rent not yet due qualifies as lease modifications under IFRS 16. The impact of this forgiveness should be recognized as a reduction of rental income on a straight-line basis over the lease term, consistent with our Group's existing treatment. In light of the clarification provided by the IFRIC Agenda decision, the Group reviewed its accounting policy concerning rental forgiveness for past due amounts.
As a result of this review, the Group has retrospectively applied the requirements of IFRS 9 to the past due rent receivables that were forgiven. The implementation of this change has resulted to a restatement of the comparative figures for June 30, 2022, impacting key income statement line items such as Gross property income, Net property income, Impairment of financial assets, Profit from operations and fair value adjustments on investment properties. However, it is important to note that the total profit for the year remains unchanged.
The application of the IFRIC clarification did not have any impact on the balance sheet of the Group as lease incentives are incorporated within the carrying value of investment properties already. Therefore, any movement in lease incentives will result in an equal and opposite movement in investment property (through fair value adjustment) to avoid double counting for an asset (lease incentive asset) which is already embedded in the investment properties valuations.
The following table shows the financial statement line items which have been impacted in the Group Income statement for the prior years.
30 June 2022 30 June 2022 30 June 2022
Reported Restatement Restated
Extract of group income statement USUSD'000 USUSD'000 USUSD'000
Gross property income 50,766 1,171 51,937
Net operating income 42,110 1,171 43,281
Net impairment on financial assets (4,217) (1,084) (5,301)
Profit from operations 21,029 87 21,116
Fair value adjustment on investment properties 20,167 (87) 20,080
Total fair value adjustments on investment properties 19,870 (87) 19,783
30 June 2021 30 June 2021 30 June 2021
Reported Restatement Restated
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DJ Full year audited results for the year ended 30 -15-
Extract of group income statement USUSD'000 USUSD'000 USUSD'000 Gross property income 49,217 1,828 51,045 Net operating income 40,674 1,828 42,502 Net impairment on financial assets (7,119) (3,698) (10,817) Profit from operations 19,857 (1,870) 17,987 Fair value adjustment on investment properties (51,441) 1,871 (49,570) Total fair value adjustments on investment properties (51,297) 1,871 (49,426)
2. INVESTMENT PROPERTIES
The following movements in the portfolio occurred in the year
Transfer from associate on step up to subsidiary - The Group acquired an additional 50% equity
1. shareholding in Buffalo Mall Naivasha Limited during the year which has now stepped up from an associate
to a subsidiary.
2 Capital expenditure and construction costs incurred in the Club Med Cap Skirring Resort as well as on the
Orbit complex.
Audited Audited
Most recent Valuer (for the
Summary of valuations by reporting date independent most recent Sector Country as at as at
valuation date valuation)
30 June 30 June
2023 2022
USUSD'000 USUSD'000
Commodity House Phase I 30 June 2023 REC Office Mozambique 54,094 52,346
Commodity House Phase II 30 June 2023 REC Office Mozambique 19,727 19,264
Hollard Building 30 June 2023 REC Office Mozambique 20,847 21,012
Vodacom Building 30 June 2023 REC Office Mozambique 53,362 51,906
Zimpeto Square 30 June 2023 REC Retail Mozambique 3,303 3,395
Bollore Warehouse 30 June 2023 REC Light Mozambique 10,770 10,410
industrial
Anfa Place Mall 30 June 2023 Knight Frank Retail Morocco 73,357 71,532
Tamassa Resort 30 June 2023 AESTIMA Hospitality Mauritius 54,674 48,827
VDE Housing Compound 30 June 2023 REC Corporate Mozambique 50,238 55,180
accommodation
Imperial Distribution Centre 30 June 2023 Knight Frank Light Kenya 20,210 21,620
industrial
Mara Viwandani 30 June 2023 Knight Frank Light Kenya 2,330 2,792
industrial
Buffalo Mall 30 June 2023 Knight Frank Retail Kenya 11,036 -
Mall de Tete 30 June 2023 REC Retail Mozambique 13,675 13,804
Acacia Estate 30 June 2023 REC Corporate Mozambique 73,120 73,809
accommodation
5th Avenue 30 June 2023 Knight Frank Office Ghana 16,066 16,010
Capital Place 30 June 2023 Knight Frank Office Ghana 20,470 19,320
Mukuba Mall 30 June 2023 Knight Frank Retail Zambia 60,040 56,933
Orbit Complex 30 June 2023 Knight Frank Light Kenya 39,470 38,926
industrial
Tatu Warehouse - TIP1 30 June 2023 Knight Frank Light Kenya 6,670 6,666
industrial
Club Med Cap Skirring Resort 30 June 2023 Knight Frank Hospitality Senegal 25,318 20,722
Total valuation of investment properties directly held by the Group 628,777 604,474
Deposits paid on Imperial Distribution 2,376 2,259
Centre Phase 2
Deposits paid on Capital Place 3,550 3,550
Deposits paid on Gateway Real Estate Africa - 2,500
Ltd
Total deposits paid on investment properties 5,926 8,309
Total carrying value of investment properties including deposits paid 634,703 612,783
Investment properties held within associates and joint ventures - Group share
Buffalo Mall - Buffalo Mall Naivasha Limited 30 June 2023 Knight Frank Retail Kenya - 6,116
(50%)
Kafubu Mall - Kafubu Mall Limited (50%) 30 June 2023 Knight Frank Retail Zambia 12,865 11,965
CADS II Building - CADS Developers Limited 30 June 2023 Knight Frank Office Ghana 12,300 15,100
(50%)
Cosmopolitan Shopping Centre - Cosmopolitan 30 June 2023 Knight Frank Retail Zambia 27,570 27,199
Shopping Centre Limited (50%)
Canonniers, Mauricia and Victoria Resorts
and Spas - Beachcomber Hospitality (0.00%) - - Hospitality Mauritius - 95,055
(30 June 2022 -44.42%)
Letlole La Rona Limited (0.00%) (30 June - - Light Botswana - 14,662
2022 - 25.1%) - 19 Investment properties industrial
Letlole La Rona Limited (0.00%) (30 June - - Hospitality Botswana - 155
2022 - 25.1%) - 1 Investment property
Letlole La Rona Limited (0.00%) (30 June - - Retail Botswana - 4,160
2022 - 25.1%) - 2 Investment properties
Letlole La Rona Limited (0.00%) (30 June - - Office Botswana - 1,003
2022 - 25.1%) - 1 Investment property
Letlole La Rona Limited (0.00%) (30 June - - Corporate Botswana - 966
2022 - 25.1%) - 1 Investment property accommodation
Gateway Real Estate Africa Ltd (51.48%) (30 -
June 2022 - 26.29%) consisting of:
- DH4 Bamako 30 June 2023 Directors' Corporate Mali 8,038 5,733
valuation accommodation
- African Data Centres Phase 1 30 June 2023 Knight Frank Data Centre Nigeria 14,388 6,839
SEZ
- Falcon Curepipe Clinic 30 June 2023 AESTIMA Medical Mauritius 12,179 3,076
- Coromondal Hospital 30 June 2023 Directors' Medical Mauritius 352 -
valuation
- The Precinct 30 June 2023 AESTIMA Office Mauritius 17,039 4,390
- Adumuah Place 30 June 2023 Directors' Office Ghana 1,539 873
valuation
- Eneo Tatu City - CCI 30 June 2023 Directors' Office Kenya 8,969 -
valuation
- Metroplex Shopping Centre 30 June 2023 Directors' Retail Uganda 10,865 6,478
valuation
Total of investment properties acquired through associates and joint ventures 126,104 203,770
Total portfolio 760,807 816,553
Valuation policy and methodology for investment properties held by the Group, associates, and joint ventures
Investment properties are valued at each reporting date by independent professional reputable valuation experts who have sufficient expertise in the jurisdictions where the properties are located. All valuations that are performed in the functional currency of a group entity that is not United States Dollars are converted to United States Dollars at the effective closing rate of exchange. All valuations have been undertaken by the Royal Institute of Chartered Surveyors' ("RICS's"), accredited and registered valuers, in accordance with the version of the RICS Valuation Standards that were in effect at the relevant valuation date and are further compliant with International Valuation Standards. Market values presented by the Group have also been confirmed by the respective valuers to be fair value in terms of IFRS.
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DJ Full year audited results for the year ended 30 -16-
In respect of the majority of the Mozambican investment properties, independent valuations were performed at 30 June 2023 by REC Chartered Surveyors (2022: REC Chartered Surveyors) using the discounted cash flow method (2022: discounted cash flow method). AESTIMA has been utilised in FY23 to comply with the financiers list of approved valuers.
In respect of the Mauritian investment properties (including Mauritian investment properties held by associates), independent valuations were performed at 30 June 2023 by AESTIMA Ltd (2022: Knight Frank Chartered Surveyors) using the discounted cash flow method (2022: discounted cash flow method).
The remainder of the portfolio including investment properties held by associates was independently valued at 30 June 2023 by Knight Frank Chartered Surveyors (2022: Knight Frank Chartered Surveyors), using the discounted cash flow method with the exception of freehold land which is valued by comparable method.
The discounted cash flow method is based on estimated rental values with consideration given to the future earnings potential and applying an appropriate capitalisation rate and/or discount rate to the property and country. The capitalisation rates (equivalent yield) applied to the Group's valuations of investment properties at 30 June 2023 ranged between 7.25% and 10.00%. The discount rates applied to the Group valuations that were performed at 30 June 2023 using the discounted cash flow method ranged between 9.25% and 12.00%.
In the current year the valuations include the right of use of land, lease incentives and certain furniture and fittings.
There have been no material changes to the information used and assumptions applied by the registered valuer.
The fair value adjustments on investment property are included in the income statement.
The Directors consider that the deposit payments and capital expenditure which are carried at cost approximate their fair value at the relevant reporting date.
3. INVESTMENTS IN ASSOCIATES AND JOINT VENTURES
Audited as Audited as
at at
30 June 2023 30 June 2022
USUSD'000 USUSD'000
The following entities have been accounted for using the equity method:
Name of joint venture Country of incorporation and % held
operation
Kafubu Mall Limited1 Zambia 50.00% 12,531 11,761
Cosmopolitan Shopping Centre Limited1 Zambia 50.00% 27,495 27,173
CADS Developers Limited1 Ghana 50.00% 4,482 6,974
Africa Property Development Managers Ltd2 Mauritius 78.95% 29,073 14,247
Gateway Real Estate Africa Ltd3 Mauritius 51.48% 123,513 -
Carrying value of joint ventures 197,094 60,155
Name of associate Country of incorporation and % held
operation
Letlole La Rona Limited4 Botswana 0.00% - 17,353
Buffalo Mall Naivasha Limited5 Kenya 0.00% - 3,753
Gateway Real Estate Africa Ltd3 Mauritius 51.48% - 55,866
Beachcomber Hospitality Investments Limited4 Mauritius 0.00% - 69,870
Carrying value of associates - 146,842
Joint ventures 197,094 60,155
Associates - 146,842
Total carrying value of associates and joint 197,094 206,997
ventures
1 The percentage of ownership interest for 2023 did not change.
2 The Group interest has increased from 77.95% to 78.95% following an additional acquisition made during
the year..
The Group interest has increased from 26.29% to 51.48% following acquisition made during the year. The
3 status of the investment in light of these acquisitions changed from an investment in associate to an
investment in joint venture.
The associate status changed to an investment in subsidiary following the acquisition of the remaining
4 share capital that the Group did not own previously. Figures are included in the associate note for
comparative purposes. The Group previously owned 50% of Buffalo Mall Naivasha Limited.
5 The Group has disposed of its entire interests in the associates during the current financial year.
All investment in associates are private entities and do not have quoted prices available with the exception of Letlole La Rona Limited who is a listed entity on the Botswana Stock Exchange, but which has been disposed during the year.
Set out below is the summarised financial information of each of the Group's associates together with a reconciliation of the financial information to the carrying amount of the Group's interests in each associate. Where an interest in an associate has been acquired in a reporting period the results are shown for the period from the date of such an acquisition.
Each of the acquisitions referred to below have given the Group access to high quality African real estate in line with the Group's strategy.
Where associates and joint ventures have non-coterminous financial reporting dates, the Group uses management accounts to incorporate their results into the consolidated financial statements.
Reconciliation to carrying value in associates and joint ventures
Beachcomber Africa Gateway Cosmopolitan Buffalo
Letlole Kafubu Hospitality Property Real CADS Shopping Mall
La Rona Mall Investments Development Estate Developers Centre Naivasha Total
Limited Limited Limited Managers Ltd Africa Limited Limited Limited
Ltd
USUSD'000 USUSD'000 USUSD'000 USUSD'000 USUSD'000 USUSD'000 USUSD'000 USUSD'000 USUSD'000
Opening Balance 1 July 17,353 11,761 69,870 14,247 55,866 6,974 27,173 3,753 206,997
2022
(Sold)/Acquired during (17,105) - (51,298) 248 64,631 - - - (3,524)
the period
Profit / (losses) from
associates and joint 1,263 1,832 2,611 14,578 (5,321) (1,999) 2,178 (842) 14,300
ventures
- Revenue 1,588 1,085 3,890 - 1,717 1,321 2,400 281 12,282
- Property operating
expenses and (161) (186) - - (271) (34) (389) (129) (1,170)
construction costs
- Admin expenses and (60) (19) (25) (4,358) 696 (9) (16) (4) (3,795)
recoveries
- Other income - - - 19,3851 - - - - 19,385
- Net impairment
charge on financial 28 - - - (2,218) - - (18) (2,208)
assets
- Unrealised foreign
exchange gains/ 110 - (264) (8) (1,430) 10 (5) (53) (1,640)
(losses)
- Fair value
adjustment on other (738) - - - (738)
investments
- Impairments - - - - (71) - - - (71)
- Gain on bargain
purchase from
acquisition of - - - 77 - - - - 77
additional equity
interest
- Transaction costs - - - 2 1 - - - 3
- Loss on
extinguishment of - - - - - (25) - - (25)
loans
- Share based payment - - - - (7,474) - - - (7,474)
expense
- Interest income/ 235 1 - 3,020 - 2 - 3,258
(costs)
- Finance charges (429) (5) (848) (71) (1,276) (728) - (296) (3,653)
- Fair value movement 150 1,034 (1,496) - 2,325 (2,704) 309 (623) (1,005)
on investment property
-Fair value adjustment
on other financial - - 1,948 - - - - - 1,948
asset
- Current tax (198) (78) (263) (485) (357) - (123) - (1,504)
- Deferred tax (331) 36 1,141 170 - - 1,016
- Other movement in - - - - (386) - - - (386)
profit or loss
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DJ Full year audited results for the year ended 30 -17-
Dividends and interest (105) - (21,898) - - (423) - - (22,426)
paid to Group
Other equity movement - - - - 7,474 - - - 7,474
Repayment of
proportionate - (758) - - - (70) (1,856) - (2,684)
shareholders loan
Consolidation - - - - (89) - - - (89)
elimination
Foreign currency
translation (1,406) (304) 715 - 952 - - - (43)
differences
Associate step up to - - - - - - - (2,911) (2,911)
subsidiary
Carrying value of
associates and joint - 12,531 - 29,073 123,513 4,482 27,495 - 197,094
ventures
Comprised of a management incentive plan income of USUSD 16.6 million, recorded at fair value, representing
1 a 10% free-carry in GREA vested during the year, in addition to USUSD 2.7 million in Asset and Development
Management fees.
Investments in the year ended 30 June 2023
Additional equity interest acquired in Gateway Real Estate Africa Limited
The Group has continued its announced plan to acquire a controlling stake in Gateway Real Estate Africa Ltd ("GREA") during this financial year. In total, the Group has acquired an additional 25.19% in GREA, and the shareholding of the Group has increased from 26.29% to 51.48%. The acquisition has been performed into tranches with more details included in the table below.
Following the series of transactions, the Group obtained joint control of GREA and continues to account for GREA using the equity method. The increase of the investment in GREA has been split notionally between goodwill and the additional interest in the fair value of the net identifiable assets of the associate acquired. The notional goodwill arising on the acquisition of the additional 25.19% in GREA amounted to USUSD 11.88 million. The notional goodwill element has been included in the carrying amount of the investment in joint venture. The total notional goodwill element embedded in the carrying amount of the joint venture as of 30 June 2023 is USUSD14.17 million which is made up of USUSD2.29 million goodwill on acquisition of the additional 6.31% in GREA in the financial year 2022 and USUSD11.88 million arising on the acquisition of the 25.19% in GREA during the financial year 2023.
The table below includes the consideration paid by the Group (Both in own equity shares and cash), fair value of the net identifiable assets acquired, and the notional goodwill recorded by the Group.
Note Tranche 1 Tranche 2 Total
USUSD'000 USUSD'000 USUSD'000
Fair value of consideration paid in cash 19,440 38,852 58,292
Fair value of own equity instruments transferred 2 - 5,971 5,971
Transaction costs - 368 368
Less: Group share of the fair value of net identifiable assets acquired (17,683) (35,060) (52,743)
Notional goodwill 1,757 10,131 11,888
Additional equity interest acquired in GREA by Group 1 8.72% 16.47% 25.19%
The 8.72% additional shareholding in GREA was acquired from Gateway Africa Real Estate Limited ("GWP").
1.
The 16.47% additional shareholding in GREA was acquired from the following entities:
. 13.62% shareholding has been acquired from GWP.
. 2.85% shareholder has been acquired from Prudential Impact Investments Private Equity LLC
("Prudential").
For the GREA shares acquired from Prudential representing a 2.85% shareholding, the Company entered into
an agreement with one of its shareholders, Long Island Property Investments ("LIPI") during the year, to
facilitate the transfer of 15.7 million Grit shares to Prudential on behalf of the Company. LIPI had
previously subscribed to the Company's shares during the December 2021 capital raise but had not fully
met the payment obligations outlined within the Promissory Note.
In the prior financial statements, the Group had recognized an amount receivable from LIPI, which was
presented as part of the listing receivables within trade and other receivables. The Group enforced its
legal rights under the Promissory Note and via a tri-partite agreement between the parties (the Company,
LIPI, and Prudential). LIPI agreed to transfer 15.7 million Grit shares to Prudential when the share
price was trading at USUSD0.38 per share, equivalent to a total value of USUSD5.97 million.
The actual transfer of the 15.7 million Grit shares to Prudential by LIPI and the acquisition of the
2.85% stake in GREA from Prudential by the Company were contingent upon obtaining approval from the Prime
Minister's Office (PMO). As of 30 June, 2023, such approval had not been granted. However, it is
important to note that all legally binding agreements were fully executed and signed by the Company,
2. LIPI, and Prudential before the end of the financial year. As a result, none of the parties could
lawfully retract from the agreed shares transfer as of 30 June 2023, without being in breach of their
contractual obligations.
This position is supported by a legal opinion obtained from the Company's legal counsel. Therefore,
considering that all the necessary documents to legally execute the transactions were signed before June
30, 2023, and given evidence from previously submitted applications to the PMO for similar transactions
which were approved, the Group has determined that it is appropriate to account for the 2.85% increase in
shareholding in GREA in the current financial year.
The Group has also determined that the appropriate recording of the transaction would not be as per the
legal form of the transaction where LIPI directly transferred Grit shares to Prudential. Therefore, the
transaction has been recorded in substance as Grit having effectively re-acquired and transferred its own
equity instruments to Prudential for the acquisition of the 2.85% GREA shareholding. The difference
between the fair value of the Grit shares transferred and the sum initially recorded in and subsequently
removed from the treasury reserve has been accounted for in equity, resulting in a reduction of retained
earnings.
The table below summarises the impact of this transaction on Group equity.
USUSD'000 Number of GRIT shares transferred to acquire an additional 2.85% in GREA 15,714 Price per share in USUSD 0.38 Fair value of GRIT shares 5,971 Less: GRIT shares re-acquired and transferred from treasury reserve (6,855) Difference recorded in equity (retained earnings) (884) Reversal of expected credit loss on the LIPI promissory notes (recorded in Profit or Loss) 2,700 Net impact of the transaction on the Group equity 1,816
During the year, the Group incurred transaction costs amounting to USUSD 2.1 million, which were associated with fund-related commitments that the Group had towards GREA. The transaction costs incurred arose as a consequence of temporal misalignments between the capital calls issued by GREA and the timing of fund transfers from Grit to GREA.
Additional equity interest acquired in Africa Property Development Managers Ltd
An additional equity interest of 1% has been acquired by the Group in Africa Property Development Managers Ltd ("ADPM") in the year. The equity stake of the Group has increased from 77.95% to 78.95%. A cash consideration of USUSD 0.25 million has been paid for the additional 1%.
USUSD'000 Fair value of consideration paid in cash 248 Less: Group share of the fair value of net identifiable assets acquired (325) Gain on acquisition of additional interest (77)
The excess of the Group's share of the net identifiable assets over the cost the additional investment has been included as income in the determination of the Group's share of profit during the period.
Additional equity interest acquired in Buffalo Mall Navaisha Limited
During the year, the Group has acquired an additional equity interest of 50% in Buffalo Mall Navaisha Limited ('Buffalo Mall'). The Group now considers Buffalo Mall to be a subsidiary. The additional 50% acquisition has been finalized on 30th June 2023. Prior to 30 June 2023, Buffalo Mall was treated as an associate and therefore has been equity accounted. On the 30th of June 2023, the investment status has changed from associate to subsidiary and therefore the Group consolidated Buffalo Mall in its consolidated financial statements.
Disposal of equity interest in Letlole La Rona Limited
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During the year, Grit Services Limited a wholly-owned subsidiary of the Group has disposed of its entire equity interests of 25.10% in Letlole La Rona Limited on the Botswana Stock Exchange. The disposal of shares has been completed in tranches. The number of shares disposed of and the trading price at the different disposal dates were as follows:
Number of shares disposed Trading price per share Percentage interest
BWP %
19,000,000 3.48 6.79%
19,768,068 3.51 7.06%
12,600,000 3.16 4.50%
18,911,932 2.50 6.75%
70,280,000 25.10%
All of the disposal proceeds have been received in cash as at year-end. The impact of the disposal on profit or loss of the Group is summarised below:
USUSD'000 Fair value of consideration received 16,853 Less: Carrying amount of Investment in associate to be disposed (17,105) Loss on disposal of interest in associate (252) Reclassification of cumulative foreign currency translation reserve to profit or loss (3,291) Total loss on disposal of investment in associate (3,543)
Disposal of Leisure Property Northern (Mauritius) Limited
The Group has disposed of its whole equity interests in Leisure Property Northern (Mauritius) Limited ("LPNL"), the legal beneficial owner of Beachcomber Hospitality Investments Ltd ("BHI") and a wholly owned subsidiary of the Group during the year. BHI owns three hotels in Mauritius which are the Cannoniers, Mauricia and Victoria Hotels. At the beginning of this financial year, Grit via LPNL owns 44.42% of BHI. The following transactions have occurred during the year which resulted in the complete disposal of LPNL and BHI during the year.
In November 2022, BHI has declared a dividend amounting to EUR32.6million. The dividends declared were
scrip dividend where the shareholders had the option to elect to receive the dividend in cash or
. additional shares in BHI in proportion to their current shareholding. The Group has elected for a cash
payout whereas New Mauritius Hotel ("NMH"), the other shareholder of BHI has elected to convert the
dividend payout into additional BHI shares. Following the increase in shareholding of NMH in BHI, the
Group interests in the associate has decreased from 44.42% to 27.01%.
In May 2023, the Group has disposed of its wholly owned subsidiary LPNL (Which held 27.01% of BHI at the
. time of disposal). Following the disposal of LPNL and the de-consolidation of LPNL in Grit's book, LPNL
has merged with BHI so that BHI is the only surviving legal entity that will remain in operation.
Following the disposal of LPNL the option that New Mauritius Hotels held to acquire all of the equity
. held by LPNL in BHI expired and the call option liability that was previously recorded in the records of
the Group was reversed.
The net impact of the disposal of the LPNL and BHI on the results of the Group during the year is summarised USUSD'000
as follows
Assets disposed
Investments in associates 51,298
Cash and cash equivalents 1
Total assets disposed 51,299
Liabilities disposed
Interest-bearing borrowings (19,404)
Trade and other payables (28)
Total liabilities disposed (19,432)
Net assets disposed 31,867
Consideration received 28,880
Loss on sale of subsidiary (2,987)
Reclassification of cumulated other comprehensive income movement from foreign currency translation reserve to (75)
profit or loss
Total loss on sale of interest in subsidiary (3,062)
4. TRADE AND OTHER RECEIVABLES
Audited as at Audited as at
30 June 2023 30 June 2022
USUSD'000 USUSD'000
Trade receivables 12,733 10,298
Total allowance for credit losses and provisions (5,682) (4,782)
IFRS 9 - Impairment on financial assets (ECL) (1,496) (1,965)
IFRS 9 - Impairment on financial assets (ECL) Management overlay on specific provisions (4,186) (2,817)
Trade receivables - net 7,051 5,516
Accrued income 2,603 1,934
Deposits paid 77 57
VAT recoverable 10,293 12,186
Purchase price adjustment account 961 963
Deferred expenses and prepayments 3,695 1,781
Listing receivables - 9,900
Deferred rental - 853
Rental guarantee receivable 52 640
Dividends receivable - 506
Sundry debtors 764 798
Cash balance held in escrow account - 4,548
Other receivables 18,445 34,166
IFRS 9 - Impairment on other financial assets (ECL) (3,470) (6,012)
Other receivables - net 14,975 28,154
Trade and other receivables at the end of the period 22,026 33,670
Classification of trade and other receivables:
Non-current assets 3,448 4,615
Current assets 18,578 29,055
Trade and other receivables at the end of the period 22,026 33,670
5. OTHER LOANS RECEIVABLE
Audited as at Audited as at
30 June 2023 30 June 2022
USUSD'000 USUSD'000
Ndola Investments Limited1 - 5,130
Kitwe Copperbelt Limited1 - 5,640
Syngenta Limited1 - 19,133
African Property Investments Limited1 21,034 -
Healthcare assets - 231
Drift (Mauritius) Limited2 8,637 8,211
Drift (Mauritius) Limited3 2 2,071
Pangea 2 Limited 6 6
IFRS 9 - Impairment on financial assets (ECL) (8,674) (2,514)
Other loans receivable at period end 21,005 37,908
Classification of other loans receivable:
Non-current assets 21,005 -
Current assets - 37,908
Other loans receivable at period end 21,005 37,908
In April 2017 Bank of China provided the Group with a term loan credit facility of USD77.0 million for 5
years. The Group has now re-financed this borrowing facility through the loan syndication with Standard
Bank of South Africa. At inception of the facility, the Group has advanced loans amounting in total up to
50% of the USD77.0 million facility to the other investors in the Zambian investments namely to Ndola
Investments Limited ("Ndola"), Kitwe Copperbelt Limited ("Kitwe") and Syngenta Limited ("Syngenta"). Each
1 of these loans at inception had a 5-year term. During the year, the Group has entered in an agreement
with African Property Investments Limited ("API") who is the parent company of Ndola, Kitwe, and
Syngenta. Ndola, Kitwe, and Syngenta have ceded and assign their rights and obligations in respect of the
initial facility to API. As from the 20th of December 2022, the Group has a loan receivable from API of
USUSD21 million. The term of the loan is 4.5 years as from the 20th of December 2022. Interest is charged
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DJ Full year audited results for the year ended 30 -19-
at a fix margin of 5.80% per annum plus a compounded daily SOFR rate.
Project pre-funding 1 - Maputo Housing Project - Loan bears interest at 3-month SOFR plus 6.50%,
2 repayable within 24 months or such other time as agreed in writing between the parties. This loan has
been fully provided for at 30 June 2023.
3 Project pre-funding 2 - Tete Housing Project - Loan bears interest at 3-month SOFR plus 6.50% and was
repayable within 24 months or such other time as agreed in writing between the parties.
In the opinion of the directors, the carrying values of the above loan's receivable approximate their fair values at each reporting date.
6. PREFERENCE SHARE CAPITAL
Audited as at Audited as at
30 June 2023 30 June 2022
USUSD'000 USUSD'000
Opening balance 29,558 25,481
Preference share dividend accrued 2,038 4,077
Preference share capital at period end 31,596 29,558
During the financial year 2021, the group issued 25,481,240 class B preference shares each at a par value of USUSD1 through DIF 1 Co Limited, a wholly owned indirect subsidiary of the group to Gateway Real Estate Africa Limited, an associate of the group. The class B shares shall not carry any voting rights. The class B preference shares are entitled to a dividend at a fixed rate of 8% per annum. However, the terms of the instrument are such that the group does not have a contractual obligation to settle the preferred dividend unless shareholder loan capital, interest or ordinary shares dividends are paid to the holding company of DIF1 Co Limited that is Grit Services Limited. The preference dividends however if unpaid are cumulative until such point in time that they are settled. The preference shares are also redeemable at the option of DIF1 Co Limited only. The preference shares have been classified as equity instruments in the group consolidated financial statements as the group does not have a contractual obligation to deliver cash to settle the instruments both in terms of the principal and the preferred dividend portion. As of 30 June 2023, the cumulative preferred dividend accrued on the preference shares amounted to USUSD6.11million. Neither the principal nor the preferred dividend have been paid as of 30 June 2023.
7. PERPETUAL PREFERENCE NOTES
Audited as at Audited as at
30 June 2023 30 June 2022
USUSD'000 USUSD'000
Opening balance 25,741 -
Issue of perpetual preference note classified as equity - 26,775
Preferred dividend accrued 3,529 1,837
Preferred dividend paid (2,443) (1,265)
Less: Incremental costs of issuing the perpetual preference note - (1,606)
Perpetual preference note balance at period end 26,827 25,741
The perpetual preference note carries a preferred dividend at a rate of 9% which is payable half yearly and 4% is accrued to the note.
Included below are salient features of the notes
. The Note has a cash coupon of 9% per annum and a 4% per annum redemption premium. The Group at its sole
discretion may elect to capitalise cash coupons.
Although perpetual in tenor, the note carries a material coupon step-up provision after the fifth
. anniversary that is expected to result in an economic maturity and redemption by the Group on or before
that date.
. The Note may be voluntarily redeemed by the Group at any time, although there would be call-protection
costs associated with doing so before the third anniversary.
. The Note if redeem in cash by the Group can offer the noteholders an additional return of not more than
3% per annum, linked to the performance of Grit ordinary shares over the duration of the Note.
The noteholders have the option to convert the outstanding balance of the note into Grit equity shares.
. If such option is exercised by the noteholders, the number of shares to be issued shall be calculated
based on a pre-defined formula as agreed between both parties in the note subscription agreement.
On recognition of the perpetual preference note, the Group has classified eighty five percent of the
instrument that is USUSD26.8million as equity because for this portion of the instrument the Group at all
times will have an unconditional right to avoid delivery of cash to the noteholders. The remaining
fifteen percent of the instrument that is USUSD4.7million has been classified as debt and included as part
. of interest-bearing borrowings. The debt portion arises because the note contains terms that can give the
noteholders the right to ask for repayment of fifteen percent of the outstanding amount of the note on
the occurrence of some future events that are not wholly within the control of the Group. The directors
believe that the probability that those events will happen are remote but for classification purposes,
because the Group does not have an unconditional right to avoid delivering cash to the noteholders on
fifteen percent of the notes, this portion of the instrument has been classified as liability.
. The accrued dividend on the equity portion of the note has been recognised as deduction into equity i.e.)
reduction of retained earnings.
The incremental costs directly attributable to issuing the equity portion of the note has been recorded
as a deduction in equity i.e.) in the same equity line where the equity portion of the instrument has
. been recorded so that effectively the equity portion of the instrument is recorded net of transaction
costs. There were no transaction costs recorded during the year relating to this instrument (30 June
2022: USUSD1.6million).
8. INTEREST-BEARING BORROWINGS
Audited as at Audited as at
30 June 2023 30 June 2022
USUSD'000 USUSD'000
Non-current liabilities 318,453 242,091
Current liabilities 78,282 182,975
Total as at 30 June 396,735 425,066
Currency of the interest-bearing borrowings (stated gross of unamortised loan issue costs)
United States Dollars 294,114 319,687
Euros 103,132 104,357
Mauritian Rupees 1,025 1,369
398,271 425,413
Interest accrued 7,725 4,927
Unamortised loan issue costs (9,261) (5,274)
Total as at 30 June 396,735 425,066
Movement for the year
Balance at the beginning of the year 425,066 410,588
Proceeds of interest bearing-borrowings 324,459 58,513
Loan reduced through disposal of subsidiary (19,404) (6,624)
Loan acquired through asset acquisition 4,369 6,011
Loan issue costs incurred (7,355) (4,386)
Amortisation of loan issue costs 3,368 2,765
Foreign currency translation differences 3,561 (14,836)
Interest accrued 2,798 751
Debt settled during the year (340,127) (27,716)
Total as at 30 June 396,735 425,066
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DJ Full year audited results for the year ended 30 -20-
Analysis of facilities and loans in issue
Audited as Audited as
at at
30 June 30 June
2023 2022
Lender Borrower Initial facility USUSD'000 USUSD'000
Standard Bank South Africa Commotor Limitada USUSD140.0m 140,000 140,000
Standard Bank South Africa Zambia Property Holdings Limited USUSD70.4m 64,400 -
Standard Bank South Africa Grit Services Limited EUR33.0m 31,698 -
Standard Bank South Africa Grit Services Limited USUSD3.6m 3,633 -
Standard Bank South Africa Capital Place Limited USUSD6.2m 6,200 -
Standard Bank South Africa Casamance Holdings Limited EUR6.5m 7,198 -
Standard Bank South Africa GRIT Accra Limited USUSD6.4m 8,400 -
Standard Bank South Africa Casamance Holdings Limited EUR7.0m 7,618 -
Standard Bank South Africa Zambia Property Holdings Limited USUSD16.4m - 16,405
Standard Bank South Africa Grit Services Limited RCF - EUR26.5m - 27,091
Total Standard Bank Group 269,147 183,496
Bank of China Zambian Property Holdings Limited USUSD77.0m - 76,405
Total Bank of China - 76,405
State Bank of Mauritius Leisure Property Northern (Mauritius) EUR9.0m - 9,467
Limited
State Bank of Mauritius Leisure Property Northern (Mauritius) EUR3.2m - 3,366
Limited
State Bank of Mauritius Mara Delta (Mauritius) Properties EUR22.3m 24,336 23,457
Limited
State Bank of Mauritius Grit Real Estate Income Group Limited Equity Bridge 10,000 20,000
USUSD20.0m
State Bank of Mauritius Mara Delta Properties Mauritius RCF MUR 72m 1,025 1,369
Limited
Total State Bank of Mauritius 35,361 57,659
Investec South Africa Freedom Property Fund SARL EUR36.0m 31,571 32,950
Investec South Africa Freedom Property Fund SARL USUSD15.7m 2,722 2,722
Investec Mauritius Grit Real Estate Income Group Limited USUSD0.5m 430 457
Total Investec Group 34,723 36,129
ABSA Bank Ghana Limited Grit Accra Limited USUSD9.0m - 7,913
Total ABSA Group - 7,913
Maubank Mauritius Grit Real Estate Income Group Limited EUR3.2m - 1,837
Maubank Mauritius Freedom Asset Management EUR4.0m 711 1,508
Total Maubank 711 3,345
ABC Banking Corporation Grit Services Limited Equity bridge - 2,440
USUSD8.5m
ABC Banking Corporation Casamance Holdings Limited EUR6.4m - 4,681
Total ABC Banking Corporation - 7,121
Nedbank South Africa Warehousely Limited USUSD8.6m 8,635 8,635
Nedbank South Africa Capital Place Limited USUSD6.2m - 6,200
Nedbank South Africa Grit Real Estate Income Group Limited USUSD7.0m 7,000 6,985
Total Nedbank South Africa 15,635 21,820
NCBA Bank Kenya Grit Services Limited USUSD6.5m - 6,542
NCBA Bank Kenya Grit Services Limited USUSD4.1m - 4,158
NCBA Bank Kenya Grit Services Limited USUSD6.5m 6,500 -
NCBA Bank Kenya Grit Services Limited USUSD11.0m 11,000 -
Total NCBA Bank Kenya 17,500 10,700
Ethos Mezzanine Partners GP Grit Services Limited USUSD2.4m 2,475 2,475
Proprietary Limited
Blue Peak Holdings S.A.R.L Grit Services Limited USUSD2.2m 2,250 2,250
Total Private Equity 4,725 4,725
International Finance Corporation Stellar Warehousing and Logistics USUSD16.1m 16,100 16,100
Limited
Total International Finance 16,100 16,100
Corporation
Housing Finance Corporation Buffalo Mall Naivasha Limited USUSD4.2m 4,369 -
Total Housing Finance Corporation 4,369 -
Total loans in issue 398,271 425,413
plus: interest accrued 7,725 4,927
less: unamortised loan issue costs (9,261) (5,274)
As at year end 396,735 425,066
Fair value of borrowings is not materially different to their carrying value amounts since interest payable on those borrowings are either close to their current market rates or the borrowings are of short-term in nature.
9. Subsequent events
On the 26th of July 2023 the Group announced the conclusion of the final phase in the acquisition of a
majority interest in GREA and APDM from Gateway Africa Real Estate Limited and Prudential Impact
Investments Private Equity LLC, which resulted in the Group owning a direct interest of 51.48% in GREA
and 78.95% in APDM. The transaction became unconditional, and the share transfer was lodged following
receipt of the Mauritius Prime Minister's Office consent, which was the final condition precedent.
Although the share transfer took place after the end of the financial year, beneficial ownership of the
. 51.48% was attained on 30 June 2023 and as such the Group treated GREA as a joint venture in preparing
its financial statements for the year ended 30 June 2023. The required final amendments to the
Shareholders Agreement (which upon signature will result in control over GREA and therefore allow for the
full consolidation of GREA and APDM - please refer to The Basis of Presentation 1.2 Critical Judgements
and Estimates), are expected imminently. On the 3rd of October 2023 GREA issued shares to APDM in terms
of the Managers Incentive Program and from this date the Group, through its shareholding in APDM, holds a
combined direct and indirect interest of 54.22%.
Bora Africa, a specialist industrial real estate vehicle, was established on 24 October 2023 when 5 Grit
owned industrial assets namely Imperial, Bollore, Orbit and two industrial land assets were transferred
. to the newly established entity. Bora is a wholly owned subsidiary of Grit and has therefore resulted in
no change to existing beneficial interests. The International Finance Corporation, a division of the
World Bank, has approved a USUSD30 million financing instrument issued by Bora Africa to fund future
pipeline and impact led real estate acquisitions.
On 16 October 2023, interest rate hedges over USUSD100.0 million notional against LIBOR rates above 1.58%
. to 1.85%, matured. The Group re-instated a new USUSD100.0 million notional interest rate hedge from this
date, with a new two-year collar and cap instrument providing protection against rates above 4.75% on
SOFR rates while allowing savings up to 3.00% as rate retract.
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DJ Full year audited results for the year ended 30 -21-
10. EARNINGS PER SHARE
Audited as at Audited as at
30 June 2023 30 June 2022
USUSD'000 USUSD'000
Basic and diluted (losses) / earnings (23,631) 10,443
Reconciliation of weighted average number of shares in issue (net of unvested treasury
shares)
30 June 2023 30 June 2022
Shares Shares
'000 '000
Ordinary shares in issue at start of year 495,093 331,236
Unvested treasury shares at start of year (12,702) (10,114)
Total shares issue at start of year 482,391 321,122
Effect of shares issued in the year - 79,986
Effect of treasury shares acquired in the year (141) (2,924)
Effect of treasury shares disposed in the year - 879
Weighted average number of shares at end of year - basic 482,250 399,063
Dilutive effect of awards issued - 276
Weighted average number of shares at end of year - diluted 482,250 399,339
Basic & diluted earnings per share (cents) (4.90) 2.62
11. EPRA FINANCIAL METRICS - UNAUDITED
Non-IFRS measures
Basis of Preparation
The directors of GRIT Real Estate Income Group Limited ("GRIT") ("Directors") have chosen to disclose additional non-IFRS measures, these include EPRA earnings, adjusted net asset value, EPRA net realisable value, adjusted profit before tax and funds from operations (collectively "Non-IFRS Financial Information").
EPRA Earnings
Unaudited Unaudited Unaudited Unaudited
30 June 2023 30 June 2023 30 June 2022 30 June 2022
USUSD'000 Per Share (Diluted) USUSD'000 Per Share (Diluted)
(Cents Per Share) (Cents Per Share)
EPRA Earnings (4,656) (0.97) 6,332 1.59
Total Company Specific Adjustments 8,092 1.69 6,150 1.54
Adjusted EPRA Earnings 3,436 0.72 12,482 3.13
Total company specific distribution adjustments 17,149 3.57 7,662 1.95
Total distributable earnings before profits withheld 20,585 4.29 20,144 5.08
Distributable earnings withheld (10,989) (2.29) (2,300) (0.58)
Total distribution 9,596 2.00 17,844 4.50
EPRA NRV 349,656 72.80 381,312 79.4
EPRA NTA 335,918 69.94 366,783 76.3
EPRA NDV 300,650 62.60 336,301 70.0
Shares
Distribution shares '000
Weighted average shares in issue 495,093
Less: Weighted average treasury shares for the year (15,381)
Add: Weighted average shares vested in long term incentive scheme 573
EPRA SHARES 480,285
Less Non-entitled shares -
Less Vested shares in consolidated entities (573)
DISTRIBUTION SHARES 479,712
Unaudited
30 June 2023
EPRA EARNINGS Notes USUSD'000
Basic loss attributable to the owners of the parent (23,631)
Add Back:
Fair value adjustment on investment properties 4,108
Fair value adjustment on investment properties under income from associates 1,005
Fair value adjustment on other investments (1)
Fair value adjustment on other financial assets and liabilities (5,837)
Fair value adjustment on derivative financial instruments 3,085
Changes in fair value of financial instruments and associated close-out costs 3,735
Loss on sale of subsidiary 3,240
Loss of sale of associates 3,543
Impairment of loan 71
Goodwill written off 677
Deferred tax in relation to the above 1,785
Acquisition costs not capitalised 4,162
Non-controlling interest above (598)
EPRA EARNINGS (4,656)
EPRA EARNINGS PER SHARE (DILUTED) (cents per share) (0.97)
Company specific adjustments
Unrealised foreign exchange gains or losses (non-cash) 1 3,881
Straight-line leasing and amortisation of lease premiums (non-cash rental) 2 (149)
Amortisation of right of use of land (non-cash) 3 67
Impairment of loan and other receivables 4 4,541
Profit on sale of property, plant, and equipment 5 888
Non-controlling interest included above 6 (295)
Deferred tax in relation to the above 7 (841)
Total Company specific adjustments 8,092
ADJUSTED EPRA EARNINGS 3,436
ADJUSTED EPRA EARNINGS PER SHARE (DILUTED) (cents per share) 0.72
Company specific adjustments to EPRA earnings
1. Unrealised foreign exchange gains or losses
The foreign currency revaluation of assets and liabilities in subsidiaries gives rise to non-cash gains
and losses that are non-cash in nature. These adjustments (similar to those adjustments that are recorded
to the foreign currency translation reserve) are added back to provide a true reflection of the operating
results of the Group.
2. Straight-line leasing (non-cash rental)
Straight-line leasing adjustment and amortised lease incentives under IFRS relate to non-cash rentals
over the period of the lease. This inclusion of such rental does not provide a true reflection of the
operational performance of the underlying property and are therefore removed from earnings.
3. Amortisation of intangible asset (right of use of land)
Where a value is attached to the right of use of land for leasehold properties, the amount is amortised
over the period of the leasehold rights. This represents a non-cash item and is adjusted to earnings.
4 Impairment on loans and other receivables
Provisions for expected credit loss are non-cash items related to potential future credit loss on non-
property operational provisions and is therefore added back in order to provide a better reflection of
underlying property performance. The add back excludes specific provisions against tenant accounts.
5 Corporate restructure costs
Corporate restructure costs are one off in nature related to corporate actions by the company and not
underlying performance of the portfolio.
6 Non-Controlling interest
Any Non-Controlling interest related to the company specific adjustments.
7. Other deferred tax (non-cash)
Any deferred tax directly related to the company specific adjustments.
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October 31, 2023 03:01 ET (07:01 GMT)
DJ Full year audited results for the year ended 30 -22-
12. COMPANY DISTRIBUTION CALCULATION - UNAUDITED
Unaudited
30 June 2023
Notes USUSD'000
Adjusted EPRA Earnings 3,436
Company specific distribution adjustments:
VAT credits utilised on rentals 1 3,312
Listing and set up costs under administrative expenses 2 438
Depreciation and amortisation 3 1,364
Share based payments 4 7,828
Dividends (not consolidated out) (385)
Right of use imputed leases 280
Amortisation of capital funded debt structure fees 4,708
Deferred tax in relation to the above 186
Non-controlling interest non distributable (582)
Total Company Specific distribution adjustments 17,149
TOTAL DISTRIBUTABLE EARNINGS (BEFORE PROFITS WITHHELD) 20,585
DISTRIBUTABLE INCOME PER SHARE (DILUTED) (cents per share) 4.29
FULL YEAR DIVIDEND PER SHARE (cents) 2.00
Reconciliation to amount payable USUSD cents per share
Total distributable earnings to Grit shareholders before profits withheld (cents) 4.29
Profits withheld (cents) (2.29)
Interim dividends already paid (cents) (2.00)
FINAL DIVIDEND PROPOSED (cents) 0.00
Company distribution notes in terms of the distribution policy
1. VAT credits utilised on rentals
In certain African countries, there is no mechanism to obtain refunds for VAT paid on the purchase price
of the property. VAT is recouped through the collection of rentals on a VAT inclusive basis. The cash
generation through the utilisation of the VAT credit obtained on the acquisition of the underlying
property is thus included in the operational results of the property.
2. Listing and set-up costs under administrative expenses
Costs associated with the new listing of shares, setup on new companies and structures are capital in
nature and is added back for distribution purposes.
3. Depreciation and amortisation
Non-cash items added back to determine the distributable income.
4. Share based payments
Non-cash items added back to determine the distributable income.
13. EPRA FINANCIAL METRICS - UNAUDITED
Glossary Measure Rationale
A key measure of a company's underlying operating
EPRA EARNINGS Earnings from operational activities. results and an indication of the extent to which
current dividend payments are supported by
earnings.
Net Asset Value adjusted to include properties and Adjusts IFRS NAV to provide stakeholders with the
EPRA NAV / other investment interests at fair value and to most relevant information on the fair value of the
NRV exclude certain items not expected to crystallise in assets and liabilities within a true real estate
a long-term investment property business model. investment company with a long-term investment
strategy.
Annualised rental income based on the cash rents A comparable measure for portfolio valuations. This
EPRA NET passing at the balance sheet date, less measure should make it easier for investors to
INITIAL YIELD non-recoverable property operating expenses, divided judge themselves, how the valuation of portfolio X
(NIY) by the market value of the property, increased with compares with portfolio Y.
(estimated) purchasers' costs.
EPRA This measure incorporates an adjustment to the EPRA A comparable measure for portfolio valuations. This
'TOPPED-UP' NIY in respect of the expiration of rent-free periods measure should make it easier for investors to
NIY (or other unexpired lease incentives such as judge themselves, how the valuation of portfolio X
discounted rent periods and step rents). compares with portfolio Y.
EPRA VACANCY Estimated Market Rental Value (ERV) of vacant space A 'pure' (%) measure of investment property space
RATE divided by ERV of the whole portfolio. that is vacant, based on ERV.
EPRA COST Administrative & operating costs (including & A key measure to enable meaningful measurement of
RATIOS excluding costs of direct vacancy) divided by gross the changes in a company's operating costs.
rental income.
The EPRA NAV metrics are EPRA Net Reinstatement Value (NRV), EPRA Net Tangible Assets (NTA) and EPRA Net Disposal Value (NDV)
EPRA NRV EPRA NTA EPRA NDV
Unaudited Unaudited Unaudited
30 Jun 2023 30 Jun 2023 30 Jun 2023
USUSD'000 USUSD'000 USUSD'000
IFRS Equity attributable to shareholders 300,650 300,650 300,650
i) Hybrid instruments
Preference shares
Diluted NAV 300,650 300,650 300,650
Add
Revaluation of IP (if IAS 40 cost option is used)
Revaluation of IPUC (if IAS 40 cost option is used)
Revaluation of other non-current investments
Revaluation of tenant leases held as leases
Revaluation of trading properties
Diluted NAV at fair value 300,650 300,650 300,650
Exclude*:
Deferred tax in relation to fair value gains of Investment properties 48,217 44,311 -
Fair value of financial instruments 789 789 -
Goodwill as a result of deferred tax - - -
Goodwill as per the IFRS balance sheet - (9,832) -
Intangibles as per the IFRS balance sheet
Include*:
Fair value of fixed interest rate debt
Revaluation of intangibles to fair value
Real estate transfer tax
NAV 349,656 335,918 300,650
Fully diluted number of shares 480,285 480,285 480,285
NAV per share (cents per share) 72.80 69.94 62.60
Shares '000 Shares '000 Shares '000
Total shares in issue 495,093 495,093 495,093
Less: Treasury shares for the period (15,381) (15,381) (15,381)
Add: Share awards and shares vested shares in long term incentive scheme 573 573 573
EPRA SHARES 480,285 480,285 480,285
EPRA Vacancy rate
UNAUDITED UNAUDITED
EPRA Vacancy Rate
30 June 2023 30 June 2022
USUSD'000 USUSD'000
Estimated rental value of vacant space A 324 236
Estimated rental value of the whole portfolio B 5,048 5,070
EPRA Vacancy Rate A/B 6.4% 4.7%
OTHER NOTES
The audited consolidated financial statements for the year ended 30 June 2023 have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority, International Financial Reporting Standards ("IFRS"), the LSE and SEM Listing Rules, the Financial Pronouncements as issued by Financial Reporting Standards Council. The accounting policies are consistent with those of the previous annual financial statements with the exception of the change in accounting policy and the significant judgment disclosed in note 1.
The Group is required to publish financial results for the year ended 30 June 2023 in terms of Listing Rule 12.14 of the SEM and the LSE Listing Rules. The Directors are not aware of any matters or circumstances arising subsequent to the year ended 30 June 2023 that require any additional disclosure or adjustment to the financial statements. These audited consolidated financial statements were approved by the Board on 30 October 2023.
(MORE TO FOLLOW) Dow Jones Newswires
October 31, 2023 03:01 ET (07:01 GMT)
DJ Full year audited results for the year ended 30 -23-
PricewaterhouseCoopers have issued their unqualified audit opinion on the Group's financial statements for the year ended 30 June 2023. Copies of the audited consolidated financial statements for the year ended 30 June 2023, and the statement of direct and indirect interests of each officer of the Company pursuant to rule 8(2)(m) of the Mauritian Securities (Disclosure Obligations of Reporting Issuers) Rules 2007, are available free of charge, upon request at the Company's registered address. Contact Person: Ali Joomun.
FORWARD-LOOKING STATEMENTS
This document may contain certain forward-looking statements. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. Actual outcomes and results may differ materially from any outcomes or results expressed or implied by such forward-looking statements.
Any forward-looking statements made by, or on behalf of, Grit speak only as of the date they are made, and no representation or warranty is given in relation to them, including as to their completeness or accuracy or the basis on which they were prepared. Grit does not undertake to update forward-looking statements to reflect any changes in its expectations with regard thereto or any changes in events, conditions, or circumstances on which any such statement is based.
Information contained in this document relating to Grit or its share price, or the yield on its shares, should not be relied upon as an indicator of future performance.
Any forward-looking statements and the assumptions underlying such statements are the responsibility of the Board of Directors and have not been reviewed or reported on by the Company's external auditors.
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October 31, 2023 03:01 ET (07:01 GMT)
