- – An interim dividend of 45.0 cents per share paid
- – Core distributable earnings per share declined by 10.5% to 73.1 cents per share
- – Net asset value per share declined by 25.8% to R16.45
- – South African portfolio valuations decreased by 8.6% on a like-for-like basis
- – Investment in MAS written down by R1.3 billion to market value
- – Group gearing increased to 45.7%
- – Group liquidity improved with no facilities maturing prior to September 2021
- – Eight buildings completed in Waterfall with a further four buildings under construction
- – Reduction in Rest of Africa exposure with the disposal of interest in Manda Hill, Zambia
- – One of the highest ESG rated SA REITs by FTSE Russell
Tuesday, 22 September 2020. Attacq Limited (“Attacq”), The South African-based REIT today announced its financial results for the year ended 30 June 2020. On the back of a strong first six months performance, Attacq paid out an interim dividend of 45.0 cents per share. However, due to the uncertain economic outlook and need to preserve liquidity; it has decided not to declare a final cash dividend. Despite this decision, the company has satisfied all REIT regulatory requirements, including the minimum 75% pay-out ratio. Attacq’s core distributable earnings per share reduced by 10.5% to 73.1 cents per share on a year on year basis. This reduction is due to the performance for the last 4 months and can largely be attributed to rent relief provided to tenants in the form of rental discounts and rent deferrals as well as a lower collection rate from the South African portfolio as a result of COVID-19 lockdown restrictions. The negative impact was countered by increased net operating income growth from the newly completed buildings in Waterfall, a 13.7% increase in the dividends received from the MAS investment, as well as cash interest received from the Rest of Africa investments. Melt Hamman, CEO of Attacq, says, “There is no doubt that the last several months have been challenging, for our industry as well as the overall economy. However, Attacq started the 2020 financial year with great momentum, resulting in a strong financial performance for our interim period. We believe that our quality South African portfolio and our business model is grounded on the right foundations, however we have to optimise our capital structure by improving our gearing ratio.” During the period, Attacq’s diversified South African portfolio with a 50/50 split between retail and non- retail properties had a satisfactory performance against the subdued economic backdrop. Net profit from property operations, excluding the International Financial Reporting Standards (IFRS) adjustment for straight-line leasing and the net proceeds from the sale of sectional title units, increased by 10.8% to R1.4 billion. This increase was assisted by the completion of eight new buildings in the Waterfall precinct. Rental income of R2.2 billion was generated for the year, representing an increase of 7.4% after taking into account rental discounts, bad debt written off and expected credit losses offset by additional rental income from buildings completed over the last 24 months. The robust portfolio’s occupancy rate remained stable at 93.6% versus 93.8% at 30 June 2019. The vacancies mainly relate to 2 Eglin Road, Sunninghill which has subsequently been sold, Brooklyn Bridge Office Park and a newly completed speculative building in the Ingress development. Post year-end an additional space of 4 667 m2 was filled.
“During the past two years, Attacq developed and implemented its vision for client engagement aimed at ensuring a remarkable experience at every touchpoint. The engagement process incorporates behaviours which Attacq has adopted (1) we listen, (2) we collaborate, (3) we offer a multichannel approach, and (4) we innovate. This client-centric approach stood Attacq in good stead as the lockdown period affected clients’ businesses. This shift in mindset has ensured greater collaboration and partnership with our clients and instilled a culture of proactiveness and innovation across colleagues and client portfolios.” said Jackie van Niekerk, COO of Attacq.
Waterfall, the ideally located node, with ease of access, continues to be a key differentiator in Attacq’s core business. Despite the temporary closure of construction sites during the initial lockdown levels, developments progressed as planned, with eight buildings reaching completion. As at 30 June 2020, Attacq had four buildings under construction, namely Waterfall Corporate Campus, the new Courtyard Hotel at the Nexus precinct, Ellipse Waterfall and Midi warehouse 4. Ellipse Waterfall is poised to redefine the live, work play ethos and is the first high-rise residential development in Waterfall City and consists of four individual towers. More than 75,0% of the first phase of 269 apartments have been sold and construction is expected to be completed by September 2022. The developments at Waterfall remain a strong proposition and continues to see sturdy appetite and letting activity.
During the year under review, Attacq’s shareholding in MAS decreased to 20.7% from 22.8% in 2019 and contributed R214.9 million to the group’s core distributable earnings. The reduced shareholding is a result of an increase in the issued MAS shares. The investment in MAS was written down by R1.3 billion to its market value of R1.9 billion given the drop in the MAS share price since the onset of COVID- 19. The MAS investment provides Attacq with geographic diversification and exposure to the higher- growth economies of Central and Eastern Europe where MAS is focusing its capital allocation.
The group’s available liquidity was R1.4 billion comprising unrestricted cash and cash equivalents of R672.9 million, undrawn liquidity facilities amounting to R424.4 million and R287.5 million of undrawn development facilities at year end. Attacq’s gearing increased from 37.7% to 45.7% largely due to lower investment property values, the reduced value in the MAS investment and an increase in total interest- bearing debt.
“During the beginning of COVID-19, we increased our strategic focus on capital management. As a result, we have sufficient liquidity available to meet all operational, development and finance costs over the next 12 months. We have also extended the maturities of our debt, resulting in no facilities falling due prior to 30 September 2021.”
“As part of our debt reduction plan, we concluded the disposal of our interest in Manda Hill, Zambia and continue to seek an appropriate exit for our remaining investments into the Rest of Africa. In addition, we have earmarked some assets in our South African portfolio for disposal, some of which are at advanced discussion stages. All these initiatives are aimed at strengthening the balance sheet,” commented Raj Nana, CFO of Attacq.
Given the levels of uncertainty relating to the economy and its impact on the property sector, The Board sees it fit not to provide guidance for the 2021 financial year.
“Attacq remains focused on delivering sustainable income and capital growth by investing in real estate and developments in South Africa. Through the support of our exceptional team and the commitment to offering our clients remarkable experiences, I believe we can set Attacq apart from our peers and continue to drive long-term sustainability within the property sector,” concludes Hamman.