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GEMGROW PROPERTIES LIMITED - Unaudited condensed consolidated interim results for the six months ended 31 March 2019

Release Date: 15/05/2019 07:05
Code(s): GPA GPB     PDF:  
 
Wrap Text
Unaudited condensed consolidated interim results for the six months ended 31 March 2019

Gemgrow Properties Limited
Incorporated in the Republic of South Africa
Registration number 2007/032604/06
JSE share code: GPA ISIN: ZAE0000223269
JSE share code: GPB ISIN: ZAE0000223277 
(Granted REIT status with the JSE) 
(Gemgrow or the company or the group)

Unaudited condensed consolidated interim results 
for the six months ended 31 March 2019

Highlights
* 54,54 cents dividend per A share.
* 35,31 cents dividend per B share.
* R425m in successful disposals of non-core assets in the current 
  year, of which R98m transferred during the six-month period 
  ending 31 March 2019.
* R761m of acquisitions transferred and integrated within the 
  portfolio.
* 32% loan to value to reduce debt further with cash from 
  disposals - strong balance sheet.
* >5 times cash cover on A share dividend.
* Proposed merger between Gemgrow and Arrowhead Properties 
  Limited.

Nature of business
Gemgrow is a Real Estate Investment Trust (REIT) holding a 
diverse portfolio of office, retail and industrial properties. 
As at 31 March 2019 the portfolio comprised 163 properties, 
located in all nine provinces of South Africa and valued at 
approximately R5,6 billion.

The company's financial focus is on providing increasing income 
returns to its investors on a sustainable basis in the medium to 
long term. This is achieved through escalating rentals, 
satisfactory renewal of leases with existing tenants, renting 
of vacant space within the property portfolio, managing and 
reducing, where possible, costs associated with the property 
portfolio and by acquiring revenue-enhancing properties.

Operating environment
The company continues to operate in a very challenging economic 
environment. Tenants are under pressure and the supply of letting 
space outweighs demand. This has resulted in an increasingly 
competitive rental environment where rental reductions and higher 
vacancies have prevailed. In response to these market challenges, 
our key focus is on tenant retention, competitive letting of vacant 
space and strengthening our balance sheet.

We are well under way with our strategy of defensively repositioning 
our portfolio to produce improved sustainable income with stronger 
lease covenants, an improved weighted average lease expiry profile 
and tenant demand. This has resulted in a satisfactory performance 
achieved during the period and will hopefully enable us to deal as 
effectively as possible with the market-related challenges ahead.

Changes to the business and property portfolio
During the current period the company successfully transferred 
36 properties that it acquired last year, 26 of which were acquired 
through the acquisition of a controlling interest in Moolgem Proprietary 
Limited. The remaining 10 properties were acquired directly for 
R99,9 million funded with the issue of R50 million Gemgrow A shares at 
an ex dividend price of R9,80 and debt of R49,9 million. The company 
also disposed of eight properties valued at R98 million, as part of 
its asset recycling programme. Further disposals of approximately 
R330 millionhave been concluded and are expected to transfer before 
the end of the financial year. The proceeds of these disposals will be 
used to reduce debt and decrease the company's loan to value to 
approximately 28%.

Moolgem Proprietary Limited (Moolgem)
Cumulative Properties Limited (Cumulative) a wholly owned subsidiary
of the company, acquired a majority shareholding in Moolgem, which owned
a portfolio of 26 properties valued at R704 million, on 1 December 2018 
for the purchase consideration of R634,5 million. Post the transaction, 
Cumulative is entitled to 75,62% of the voting rights and 95% of the net 
assets and income of Moolgem. The transaction had a legal effective date 
of 1 November 2018 but was subject to the fulfilment of certain conditions 
precedent, all of which were fulfilled on 1 December 2018 at which time 
the shares were transferred to Cumulative. The purchase consideration was 
funded by the issue of 10 264 434 Gemgrow A shares at an ex-dividend issue 
price of R9,74 per A share, with the balance funded with debt.

From an International Financial Reporting Standard (IFRS) perspective, 
as the controlling interest does not meet the requirements of a business 
acquisition, it has been accounted for as an asset acquisition on 
1 December 2018.

Condensed consolidated financial results 
for the six months ended 31 March 2019
R'000                                                  2019       2018
Revenue (excluding straight line rental income)     424 831    360 652
Property expenses                                  (162 977)  (133 026) 
Administration and corporate costs                  (11 312)    (5 115) 
Finance charges                                     (91 746)   (53 457) 
Finance income                                       13 890     11 668
Non-controlling interest profits elimination         (1 836)         - 
Antecedent income                                     1 403          - 
Distributable income                                172 253    180 722
Pre-effective date distribution                       6 090          -
Total dividend                                      178 343    180 722
Property expenses as a percentage of revenue -
gross (%)                                              38,4       36,9
Property expenses as a percentage of revenue -
net (%)                                                15,2       14,3
A share - dividend for the quarter ended 
31 December*                                              -     12 353
B share - dividend for the quarter ended 
31 December*                                              -     77 687
A share - dividend for the six months/quarter
ended 31 March^#                                     34 206     12 353
B share - dividend for the six months/quarter
ended 31 March^                                     144 137     78 329
Total dividend                                      178 343    180 722
Dividend per A share (cents) for the quarter
ended 31 December*                                        -      26,09
Dividend per B share (cents) for the quarter
ended 31 December*                                        -      19,18
Dividend per A share (cents) for the six
months/quarter ended 31 March^#                       54,54      26,09
Dividend per B share (cents) for the six
months/quarter ended 31 March^                        35,31      19,34
                                                      89,85      90,70

^ The dividend was declared on 15 May 2019.
* The company changed its dividend payment cycle from quarterly to bi- 
annually.
# The A share dividend has increased by 4,528%, being the latest
Consumer Price Index (CPI) change at the end of March 2019.

Commentary
Revenue
Revenue includes rental income and expenditure that is recoverable from 
tenants for the six months ended 31 March 2019 (the six-month period).

For the six-month period, the portfolio comprised 28% retail, 29% 
office and 43% industrial based on gross lettable area (GLA). In 
revenue terms, it comprised retail at 36%, office 39% and industrial 
25%.

The average gross monthly rental per m2 per sector is R101 for retail, 
R123 for office and R46 for industrial. This gross monthly rental rate 
per m2 includes parking, rates recoveries and operating cost recoveries 
but excludes utilities (water, sewerage and waste) consumed by tenants.

Vacancies increased from 7,6% to 9,0% during the six-month period as 
expected given the number of non-renewals that were forecast at the 
end of the prior year. Vacancies are expected to reduce by year-end 
post the transfer of disposals in process. At a sector level, retail 
vacancies were 6,6%; industrial vacancies 7,2% and office vacancies
14,0%.

The total GLA of the portfolio increased from 751 981m2 to 815 412m2. 
During the six-month period, contracted leases in respect of 81 082m2 
expired and 54 299m2 (67%) of this GLA was retained. Of the remaining 
26 433m2, a further 8 048m2 (30%) was re-let to new tenants. In total, 
77% of the GLA of leases that expired during the period were renewed 
to existing tenants or re-let to new tenants.

The current average contractual lease rental escalations are 7,4%, 
7,8% and 7,9% for retail, office and industrial properties respectively.

The net rental reversion on leases renewed during the 6 months over the 
entire portfolio was (2%). The net rental reversions on renewed leases 
were (4%) for retail, (3%) for office, while we achieved a 1% step up 
escalation for industrial.

Six-month letting report

                              Total      Let  Vacant    Let  Vacant
                                (m2)     (m2)    (m2)    (%)     (%)
As at 1 October 2018        751 981  694 969  57 012  92,42    7,58
Acquisitions                 89 456   85 681   3 775  95,78    4,22
Disposals                   (26 734) (16 765) (9 969) 62,71   37,29
Net adjustments                 709      774     (65)
Adjusted totals             815 412  764 659  50 753  93,78    6,22
Net (loss)/gain                   -  (22 511) 22 511
As at 31 March 2019         815 412  742 148  73 264  91,02    8,98

Income Statement
Operating costs
                                              % of              % of
R'000                                  2019  total      2018   total
Municipal expenses                  112 414     69    93 026      70
Property management                  14 696      9    11 438      10
Security                             10 305      6     9 349       7
Repairs and maintenance               6 917      4     5 121       4
Letting commission                    4 242      3     3 101       2
Cleaning                              9 519      6     4 602       3
Insurance                             2 131      1     1 783       1
Other                                 2 753      2     4 606       3
Total                               162 977    100   133 026     100

The higher operating costs includes the 36 properties acquired during 
the period. Most costs were in line with the previous year, apart from 
letting commission and cleaning costs. The increased letting commission 
is as a result of higher letting incentives incurred to renew leases 
and fill vacant space, whilst we have intensified efforts to maintain 
the appearance of our properties to improve their letting potential. 
There was also a fair amount of cleaning that was carried out on an ad 
hoc basis in the previous year and reported as Other costs, whereas in 
the current year, they were contracted for and reported under Cleaning 
costs. Security costs have decreased due to the fact that we have 
implemented offsite monitoring on many of our properties, which enabled 
us to reduce security headcount in some of our properties.

Administrative expenses and corporate costs

                                                 % of           % of 
R'000                                    2019   total   2018   total
Salaries                                6 734      60  3 054      60
Professional service fees               2 919      25    258       5
Other                                   1 659      15  1 803      35
Total                                  11 312     100  5 115     100

The higher expense in respect of salaries is due to the growth in the 
staff complement employed to achieve greater oversight of certain key 
functions during the 2019 financial year. Since last year, we have 
employed two additional asset managers, an accountant and two leasing 
consultants. Furthermore, whereas the costs of the staff incentives was 
only provided for at the end of the last year, we have forecast for this 
cost proportionately throughout the current year. The staff costs are 
therefore in line with expectation.

Professional fees were considerably higher due to the fact that we also 
forecasted for these costs proportionately throughout the period versus 
the previous period when we only accounted for them as they were incurred. 
The material costs incurred was R335 000 for consulting fees for the 
drafting and implementing of the new long-term incentive as well as the 
short-term incentive plan for the company; costs of R185 000 incurred in 
respect of accounting and tax advisory services; R350 000 for commitment 
fees in respect of access facilities created to house excess cash enabling 
us to earn higher investment returns on cash and R486 000 in respect of the 
integrated annual reports. To enhance the letting potential on certain retail 
properties, we employed a retail specialist to perform assessments on these 
properties. Other expenses relate to audit fees, management fees of 
R1,4 million paid to Gemgrow's parent company, Arrowhead Properties Limited 
(Arrowhead) for services rendered, bank charges and miscellaneous expenses. 
These costs were in line with the prior year.

Finance income
                                                % of            % of 
R'000                                   2019   total    2018   total
Interest received on bank balances
and debtors                            1 854      13   3 383      29
Interest received on loans to
executives                            12 036      87   8 285      71
Total                                 13 890     100  11 668     100

Finance income has reduced because the company has transferred funds that 
are in excess of its requirements to its loan access facilities. The 
reduction in interest income has been offset by the savings derived in 
finance costs. Interest on the loans to executives has increased due
to additional shares issued to the company's executive directors during 
the year.

Finance charges
                                                % of            % of 
R'000                                   2019   total    2018   total
Interest paid on loans                 87 197     95  50 567      94
Interest paid on interest rate swaps    3 863      4   2 753       5
Amortisation of loan raising costs        454      1       -       - 
Other interest paid                       232      -     137       1
Total                                  91 746    100  53 457     100

The increased interest on loans is as a result of additional debt funding 
used to finance the acquisitions that transferred during the period. The 
higher interest on swaps is due to the company increasing the value of debt 
hedged since March 2018.

Statement of financial position
Investment properties
The company owned a portfolio of 163 retail, industrial and office properties 
valued at R5,6 billion at 31 March 2019, located in all nine provinces of 
South Africa. The average value per property as at 31 March 2019 was 
R34,3 million.

                                        Gemgrow           Cumulative
                                       portfolio          portfolio*
                                 No. of                No. of
                              buildings       R'000 buildings       R'000
Balance at the beginning of
the period                           35   2 914 775       100   1 929 966
Acquisitions, additions and
fair value adjustments                -      14 577        10     121 768
Disposals                            (1)    (33 069)       (7)    (69 503)
Balance at the end of the
period#                              34   2 896 283       103   1 982 231

                                      Moolgem^                Total
                                  No. of               No. of
                               buildings     R'000  buildings       R'000
Balance at the beginning of
the period                             -         -        135   4 844 741
Acquisitions, additions and
fair value adjustments                26   705 413         36     841 758
Disposals                              -         -         (8)   (102 572)
Balance at the end of the
period#                               26   705 413        163   5 583 927

* Gemgrow's shareholding in Cumulative was 100% at 31 March 2019.
^ Cumulative's economic interest in Moolgem was 95% at 31 March 2019.
# The above includes non-current assets held for sale.

The value of investment property has increased from R4,8 billion at 
30 September 2018 to R5,6 billion at 31 March 2019. The increase was 
attributable to the acquisition of 10 investment properties by Cumulative 
valued at R99,9 million, 26 properties in Moolgem valued at R661 million, 
capital additions of R37 million and an upward fair value adjustment of 
R38 million in Moolgem. The company normally fair values its properties
only at year end, but because Moolgem had a 28 February 2019 year-end, 
its assets were fair valued during the current reporting period. The 
remaining assets of the Group will only be fair valued at the end of 
the year.

Loans to executives
During the period under review loans of R19,8 million were made to the 
company's executives to fund the purchase of shares in the company. The 
executives or their related entities (as the case may be) remain liable for 
the full value of the loans outstanding. These loans bear interest, which 
the company deems to be market related, at a rate equal to the dividend of 
the company for the period ended 31 March 2019. The shares have been pledged 
as security to the company for the outstanding loans and the company has 
recourse against individual executives.

Trade and other receivables
The material items comprise trade debtors of R22,0 million (against which 
a provision of R10,0 million has been raised); R24,0 million relating to 
income accruals; R28,5 million relating to amounts due in respect of 
adjustment accounts in respect of acquisitions and disposals and 
R29,5 million relating to municipal clearances.

Share Capital
The company issued 15 366 455 Gemgrow A shares to fund the acquisitions 
reported earlier and 3 142 856 Gemgrow B shares were awarded to the 
company's executives in accordance with the Scheme during the period.

Secured financial liabilities
The loan to value of the group was 32%. The interest rate swaps resulted 
in 77% of the interest payable being hedged. The effective interest rate 
for the six months ended 31 March 2019 was approximately 10%.

                         One-month  Three-month
                   Fixed     Jibar        Jibar  Prime rate
                  rate %  margin %  margin % (*)   margin %     R'000
Maturity
September 2019         -         -         2,35           -   139 000
September 2022         -         -            -   minus 1,6    50 000
October 2022           -         -         2,15           -   525 000
November 2022          -         -         2,20           -   480 000
November 2022          -         -         2,20           -    75 519
December 2023          -         -         2,25           -   200 000
December 2023          -         -         2,35           -   500 000
December 2023          -         -            -  minus 0,85    31 508
Total exposure                                              2 001 027
 
(Excluding loan initiation fees and fair value adjustments on swaps.)

* Three month Jibar at 31 March 2019 was 7,16%

Gemgrow has further entered interest rate swaps to hedge its exposure to 
fluctuations in interest rates of its debt as follows:
an interest rate swap over R40 million until 1 July 2019;
an interest rate swap over R40 million until 1 July 2019;
an interest rate swap over R80 million until 30 September 2019; an 
interest rate swap over R50 million until 1 September 2020; an interest 
rate swap over R525 million until 31 October 2022;
an interest rate swap over R600 million until 15 November 2022; and an 
interest rate swap over R200 million until 4 December 2022.

Trade and other payables
The material items comprising trade creditors are tenant deposits of 
R55,5 million; trade creditors of R8,2 million and R87,6 million of 
municipal and other accruals.

Prospects
At the end of the 2018 financial period, the company communicated an 
earning's guidance on its B share of (10%). As mentioned earlier, the 
company is operating in a challenging economic environment and there 
are a material number of leases that are yet to be finalised in the 
second six months of the year. Notwithstanding this, based on the 
assumptions made by management in respect of the lease renewals to be 
concluded, management is confident of being able to marginally improve 
on its previously communicated guidance for the current year ending 
30 September 2019.

Potential merger with Arrowhead
In April 2019, the company announced a potential merger with Arrowhead 
Properties Limited, its parent company. It is expected that Gemgrow 
shareholders will benefit through improved liquidity, a significantly 
enhanced cash cover as well as better future access to equity capital 
markets to support growth. Shareholders will be kept apprised of 
developments in respect of the proposed merger via SENS as they arise.

Status of Chief Executive Officer (CEO)
We previously reported that Mark Kaplan, CEO of Arrowhead would be 
stepping down as CEO of Gemgrow by 30 June 2019. In view of the 
announcement of the proposed merger of Arrowhead and Gemgrow, the 
board of directors has decided that it would be in the best interests 
of the company that Mark retain his current position unless the potential 
merger does not proceed, in which event a further decision will be made 
in this regard.

Summary of financial performance

                                               Six months    Six months 
                                                    ended         ended
                                            31 March 2019 31 March 2018
Dividend per Gemgrow A share (cents)^               54,54         52,18
Dividend per Gemgrow B share (cents)                35,31         38,52
Gemgrow A shares in issue                      62 718 658    47 352 203
Gemgrow B shares in issue                     408 184 961   405 042 105
Net asset value per A share at reporting
date (cents)*                                         959           985
Net asset value per B share at reporting
date (cents)#                                         804           841

* The net asset value per Gemgrow A share has been calculated on the 60- 
day volume weighted average trading price as at 31 March 2019 limited to 
the combined net asset value in accordance with the provisions of 
Gemgrow's Memorandum of Incorporation.

^ The A share grew by 4,528% being the latest CPI growth number at the 
end of March 2019.

# The decrease in the net asset value of the Gemgrow B share compared to 
the same reporting period in the prior year was informed primarily by the 
impairment of goodwill of R160 million made at the end of the last 
financial year.

Payment of dividend for the quarter ended 31 March 2019
The board of directors (Board) has approved a gross dividend (dividend 
number 8) of 54,53834 cents per A share and 35,31170 cents per B share 
for the six months ended 31 March 2019 in accordance with the timetable 
set out below:

2019
Last day to trade                                       Tuesday, 4 June 
Shares trade ex distribution                          Wednesday, 5 June 
Record date                                              Friday, 7 June 
Payment date                                            Monday, 10 June

Share certificates may not be dematerialised or re-materialised between
Wednesday, 5 June 2019 and Friday 7 June 2019, both days inclusive.

The dividend will be transferred to dematerialised shareholders Central
Securities Depository Participant (CSDP)/broker accounts on Monday, 
10 June 2019. Certificated shareholder's dividend payments will be paid 
to certificated shareholder's bank accounts on Monday, 10 June 2019.

In accordance with Gemgrow's status as a REIT, shareholders are advised that 
the dividends meet the requirements of a qualifying distribution for the 
purposes of section 25BB of the Income Tax Act, No. 58 of 1962 (Income Tax 
Act). The dividends on the shares will be deemed to be dividends, for South 
African tax purposes, in terms of section 25BB of the Income Tax Act.

The dividends received by or accrued to South African tax residents must be 
included in the gross income of such shareholders and will not be exempt from 
income tax (in terms of the exclusion to the general dividend exemption, 
contained in paragraph (aa) of section 10(1)(k)(i) of the Income Tax Act) 
because they are dividends distributed by a REIT. These dividends are, 
however, exempt from dividend withholding tax in the hands of South African 
tax resident shareholders, provided that the South African resident 
shareholders provided the following forms to their CSDP or broker, as the 
case may be, in respect of uncertificated shares, or the company, in respect 
of certificated shares:

a) a declaration that the dividends are exempt from dividends tax; and 
b) a written undertaking to inform the CSDP, broker or the company, as the 
case may be, should the circumstances affecting the exemption change
or the beneficial owner cease to be the beneficial owner, both in the form 
prescribed by the Commissioner for the South African Revenue Service. 
Shareholders are advised to contact their CSDP, broker or the company, as 
the case may be, to arrange for the abovementioned documents to be submitted 
prior to payment of the dividends, if such documents have not already been 
submitted.

Dividends received by non-resident shareholders will not be taxable as income 
and instead will be treated as ordinary dividends which is exempt from income 
tax in terms of the general dividend exemption in section 10(1)(k)(i) of the 
Income Tax Act. Any dividends received by a non-resident from a REIT will be 
subject to dividend withholding tax at 20%, unless the rate is reduced in terms 
of any applicable agreement for the avoidance of double taxation (DTA) 
between South Africa and the country of residence of the shareholders. Assuming 
dividend withholding tax will be withheld at a rate of 20%, the net dividend 
amount due to non-resident shareholders is 43,63067 cents per A share and 
28,24936 per B share. A reduced dividend withholding rate in terms of the 
applicable DTA, may only be relied on if the non-resident shareholder has 
provided the following forms to their CSDP or broker, as the case may be, in 
respect of uncertificated shares, or the company, in respect of certificated 
shares:

a) a declaration that the dividends are subject to a reduced rate as a result 
of the application of a DTA; and
b) a written undertaking to inform their CSDP, broker or the company, as the 
case may be, should the circumstances affecting the reduced rate change or the 
beneficial owner cease to be the beneficial owner, both in the form prescribed 
by the Commissioner for the South African Revenue Service. Non-resident 
shareholders are advised to contact their CSDP, broker or the company, as the 
case may be, to arrange for the abovementioned documents to be submitted prior 
to payment of the distribution if such documents have not already been submitted, 
if applicable.

Shareholders are encouraged to consult their professional advisors should they be 
in any doubt as to the appropriate action to take.
A ordinary shares in issue at the date of declaration of this dividend:
62 718 658.
B ordinary shares in issue at the date of declaration of this dividend:
408 184 961.

Gemgrow's income tax reference number: 9068/723/17/1

Events after reporting period
The company announced a potential merger with its parent company, Arrowhead on 
10 April 2019.

Dividend declaration after reporting date
In line with IAS 10 Events after the Reporting Period, the declaration of the 
dividends occurred after the end of the reporting period, resulting in a non-
adjusting event which is not recognised in the financial statements.

Litigation statement
There are no legal or arbitration proceedings, including any proceedings that 
are pending or threatened, of which Gemgrow is aware, that may have or have 
had in the recent past, being the previous six months, a material effect on 
the group's financial position.

Basis of preparation
The unaudited condensed consolidated interim results for the six months ended 
31 March 2019 have not been reviewed or reported on by the group's auditors, 
BDO South Africa Incorporated.

The financial information has been prepared in accordance with the requirements 
of International Financial Reporting Standards, the SAICA Financial Reporting 
guides as issued by the Accounting Practices Committee, IAS 34: Interim Financial 
Reporting, the JSE Listings Requirements and the requirements of the South 
African Companies Act, 2008. These results have been prepared under the 
supervision of J Limalia, CA(SA), Gemgrow's Chief Financial Officer.

The accounting policies adopted are consistent with those applied in the 
preparation of the financial statements for the year-ended 30 September 2018.

By order of the Board
15 May 2019

Directors
Gregory Kinross* (Chairperson), M Kaplan (CEO), J Limalia (CFO), A Kirkel (COO), 
C Abrams*, A Basserabie* and A Rehman*.
* Independent non-executive. All directors are South African. 

Registered office
3rd Floor, Upper Building, 1 Sturdee Avenue, Rosebank, Johannesburg,
2196; PO Box 685, Melrose Arch, 2076

Transfer secretaries
Link Market Services South Africa Proprietary Limited

Sponsor
Java Capital

Company secretary
CIS Company Secretaries Proprietary Limited

Website www.gemgrow.co.za

Condensed consolidated statement of comprehensive income

                                    Unaudited   Unaudited
                                      for the     for the Audited for
                                   six months  six months   the year- 
                                        ended       ended       ended
R'000                             31 Mar 2019 31 Mar 2018 30 Sep 2018
Rental income                         424 831     360 652     768 916
Straight line rental income
accrual                                 2 602      10 262      (1 154) 
Total revenue                         427 433     370 914     767 762
Property expenses                    (162 977)   (133 026)   (286 703)
Administration and corporate
costs                                 (11 312)     (5 115)    (13 361) 
Net operating profit                  253 144     232 773     467 698
Changes in fair values                 14 660     (12 379)    (93 643)
Profit from operations                267 804     220 394     374 055
Finance charges                       (91 746)    (53 457)   (122 827) 
Finance income                         13 890      11 668      23 369
Profit before capital items           189 948     178 605     274 597
Impairment of Goodwill                      -           -    (160 619) 
Profit before taxation                189 948     178 605     113 978
Taxation                                    -           -      (2 011)
Other comprehensive income            189 948     178 605     111 967
Profit for the period 
attributable to:
Equity shareholders of Gemgrow        185 883     178 605     111 967
Non-controlling interests               4 065           -           - 
                                      189 948     178 605     111 967

Condensed consolidated statement of financial position

                                 Unaudited at Unaudited at Audited at
                                       31 Mar       31 Mar     30 Sep
R'000                                    2019         2018       2018
Assets
Non-current assets                  5 424 576    5 334 028  4 938 077
Investment property                 5 254 617    5 022 635  4 772 341
Fair value of property portfolio
for accounting purposes             5 217 628    4 976 804  4 737 927
Straight line rental income
accrual                                36 989       45 831     34 414
Property, plant and equipment             153          168        181
Loans to executives                   168 934      148 595    148 596
Goodwill                                    -      160 618          - 
Derivative financial assets               872            -     16 959
Deferred tax asset                          -        2 012          - 
Current assets                        330 030      143 353    135 639
Trade and other receivables           103 759       70 117    102 224
Cash and cash equivalents             226 271       73 236     33 415
Non-current assets held for
sale                                  329 310            -     72 400
Total assets                        6 083 916    5 477 381  5 146 116
Equity and liabilities
Shareholders' interest              3 882 105    3 872 359  3 714 528
Stated capital                      3 379 232    3 210 314  3 209 802
Reserves                              502 873      662 045    504 726
Non-controlling interest               36 773            -          - 
Other non-current liabilities       1 864 794    1 278 660  1 034 565
Secured financial liabilities       1 858 787    1 259 978  1 033 343
Derivative instruments                  6 007       18 682      1 222
Current liabilities                   300 244      326 362    397 023
Trade and other payables              160 439      124 550    129 159
Derivative financial
instruments                               805        1 138      2 157
Secured financial liabilities         139 000      200 674    265 707
Total equity and liabilities        6 083 916    5 477 381  5 146 116

Condensed consolidated statement of changes in equity

                                                      Non-
                             Stated   Retained controlling
R'000                        capital    income    interest     Total
Balance at 30 September
2017                       3 184 041   661 969           - 3 846 010
Issue of shares               25 761         -           -    25 761
Dividends paid                     -  (269 210)          -  (269 210) 
Total comprehensive income
for the period                     -   111 967           -   111 967
Balance at 30 September
2018                       3 209 802   504 726           - 3 714 528
Issue of shares              169 430         -      33 642   203 072
Dividends paid                     -  (188 670)          -  (188 670) 
Transfer from other
components of equity               -       934        (934)        -
Total comprehensive income
for the period                     -   185 883       4 065   189 948
Balance at 31 March 2019   3 379 232   502 873      36 773 3 918 878

Condensed consolidated statement of cash flows

                                    Unaudited   Unaudited     Audited 
                                      for the     for the         for
                                   six months  six months   the year- 
                                        ended       ended       ended
R'000                             31 Mar 2019 31 Mar 2018 30 Sep 2018
Net cash utilised from operating
activities                             21 700       9 205      79 121
Cash generated from operations        288 226     229 524     447 789
Finance charges paid                  (91 746)    (53 457)   (122 827) 
Interest received                      13 890      11 667      23 369
Dividends paid                       (188 670)   (178 529)   (269 210)
Net cash utilised in investing
activities                           (557 402)   (566 634)   (514 659)
Acquisition of investment
property                             (661 517)   (572 611)   (602 672)
Proceeds from disposal of
investment property                    98 029       6 000      88 074
Acquisition of property, plant
and equipment                               -         (23)        (61) 
Repayment of loans to executives        6 086           -           -
Net cash generated from
financing activities                  728 558     574 169     412 459
Net (outflow)/proceeds from
issue of share capital                   (581)       (149)       (662)
Proceeds from issue of share 
capital - non-controlling
interest                               33 642           -           -
Proceeds from loans to
subsidiary                                  -      35 002      35 002
Advances of financial
liabilities                           695 497     539 316     378 117
Net movement in cash and cash
equivalents                           192 856      16 740     (23 080)
Cash and cash equivalents at the
beginning of the period                33 415      56 496      56 496
Cash and cash equivalents at the
end of the period                     226 271      73 236      33 415


Reconciliation of earnings to headline earnings


                                   Unaudited    Unaudited     Audited 
                                     for the      for the         for
                                  six months   six months   the year- 
                                       ended        ended       ended
R'000                            31 Mar 2019  31 Mar 2018 30 Sep 2018
Profit for the period 
attributable to Gemgrow
shareholders                         185 883      178 605     111 967
Earnings                             185 883      178 605     111 967
Changes in fair value of
investment property                  (38 430)           -     130 111
Changes in fair value of 
investment property - non-
controlling interest                   1 936            -           -
Loss/(profit) on sale of
investment property                    4 544            -     (15 448) 
Impairment of goodwill                     -            -     160 618
Headline profit attributable to
shareholders                         153 933      178 605     387 248
Number of A shares in issue*      62 718 658   47 352 203  47 352 203
Number of B shares in issue      408 184 961  405 042 105 405 042 105
Weighted average number of
Gemgrow shares in issue
Weighted average number of A
shares in issue                   59 109 187   47 352 203  47 352 203
Weighted average number of B
shares in issue                  407 079 781  403 994 895 404 199 511
Basic and diluted earnings per
Gemgrow ordinary share (cents)
Basic and diluted earnings per
A share (cents)                        39,87        39,57       24,80
Basic and diluted earnings per
B share (cents)                        39,87        39,57       24,80
Headline and diluted headline 
earnings per Gemgrow ordinary 
shares (cents)
Headline and diluted headline
earnings per A share (cents)           33,02        39,57       85,76
Headline and diluted headline
earnings per B share (cents)           33,02        39,57       85,76


Consolidated condensed segmental analysis 
for the six months ended 31 March 2019

Geographical
The entity has four reportable segments based on the geographic locations 
of the properties, which are the entity's strategic business segments. 
The company's executive directors review internal management reports 
monthly and all segments greater than 10% are considered strategic. 
All segments are in South Africa. There are no single major tenants. 
The following summary describes the operations in each of the company's 
reportable segments.

                                                  KwaZulu-   Western
R'000                                    Gauteng     Natal      Cape
31 March 2019
Contractual rental income                220 455    38 592    49 331
Straight line rental income                4 716     1 212   (11 867) 
Administration costs                         302        60        60
Operating and administration costs       (92 718)  (16 456)  (19 891)
Net operating profit                     132 755    23 408    17 633
Finance income                               597        69        55
Finance charges                             (225)       (5)       (1) 
Net operating income/(loss)              133 127    23 472    17 687
Changes in fair values                  (135 281)  (40 688)   (8 061)
Reportable segment profit before tax      (2 154)  (17 216)    9 626
Taxation                                       -         -         - 
Reportable segment profit after tax       (2 154)  (17 216)    9 626
Reportable segment assets              3 154 540   532 722   683 890
Reportable segment liabilities           (89 157)  (29 971)  (20 925)
                                       3 065 383   502 751   662 965

R'000                                Limpopo        Other       Total
31 March 2019
Contractual rental income             63 665       52 788     424 831
Straight line rental income            2 941        5 600       2 602
Administration costs                     117      (11 851)    (11 312)
Operating and administration
costs                                (17 030)     (16 882)   (162 977) 
Net operating profit                  49 693       29 655     253 144
Finance income                            57       13 112      13 890
Finance charges                           (4)     (91 511)    (91 746) 
Net operating income/(loss)           49 746      (48 744)    175 288
Changes in fair values                42 919      155 771      14 660
Reportable segment profit before
tax                                   92 665      107 027     189 948
Taxation                                   -            -           - 
Reportable segment profit after
tax                                   92 665      107 027     189 948
Reportable segment assets          1 405 354      307 410   6 083 916
Reportable segment liabilities       (12 377)  (2 012 607) (2 165 038)
                                   1 392 977   (1 705 197)  3 918 878
Sectoral
R'000                                           Commercial Industrial
31 March 2019
Contractual rental income                          183 613    107 661
Straight line rental income                         (8 007)    (1 091) 
Operating and administration costs                 (72 634)   (40 798) 
Administration costs                                     -          - 
Net operating profit                               102 972     65 772
Finance income                                         356        234
Finance charges                                         (6)      (204) 
Net operating income/(loss)                        103 322     65 802
Changes in fair values                            (157 411)   (43 038) 
Reportable segment profit before tax               (54 089)    22 764
Taxation                                                 -          -
Reportable segment profit after tax                (54 089)    22 764
Reportable segment assets                        2 322 771  1 476 353
Reportable segment liabilities                     (68 361)   (42 527)
                                                 2 254 410  1 433 826

R'000                                Retail    Overheads       Total
31 March 2019
Contractual rental income           152 344      (18 787)    424 831
Straight line rental income           7 943        3 757       2 602
Operating and administration
costs                               (52 009)       2 464    (162 977) 
Administration costs                      -      (11 312)    (11 312)
Net operating profit                108 278      (23 878)    253 144
Finance income                          264       13 036      13 890
Finance charges                         (24)     (91 512)    (91 746) 
Net operating income/(loss)         108 518     (102 354)    175 288
Changes in fair values               70 337      144 772      14 660
Reportable segment profit 
before tax                          178 855       42 418     189 948
Taxation                                  -            -           -
Reportable segment profit after
tax                                 178 855       42 418     189 948
Reportable segment assets         1 946 104      338 688   6 083 916
Reportable segment liabilities      (64 861)  (1 989 289) (2 165 038)
                                  1 881 243   (1 650 601)  3 918 878

Geographical
                                                   Western  KwaZulu-
R'000                                     Gauteng     Cape     Natal
31 March 2018
Contractual rental income                 216 874   49 020    38 142
Straight line rental income                 6 687    1 000       783
Operating and administration costs        (83 228) (17 292)  (12 931) 
Net operating profit                      140 333   32 728    25 994
Finance income                                465       60        73
Finance charges                              (131)      (1)       (3) 
Net operating income/(loss)               140 667   32 787    26 064
Changes in fair values                          -        -         - 
Reportable segment profit before tax      140 667   32 787    26 064
Taxation                                        -        -         - 
Reportable segment profit after tax       140 667   32 787    26 064
Reportable segment assets               3 146 555  679 041   553 426
Reportable segment liabilities            (52 849) (13 456)  (26 254)
                                        3 093 706  665 585   527 172

R'000                               Limpopo        Other        Total
31 March 2018
Contractual rental income            15 200       41 416      360 652
Straight line rental income             382        1 410       10 262
Operating and administration
costs                                (3 782)     (20 908)    (138 141) 
Net operating profit                 11 800       21 918      232 773
Finance income                            6       11 064       11 668
Finance charges                          (1)     (53 321)     (53 457) 
Net operating income/(loss)          11 805      (20 339)     190 984
Changes in fair values                    -      (12 379)     (12 379)
Reportable segment profit before
tax                                  11 805      (32 718)     178 605
Taxation                                  -            -            - 
Reportable segment profit after
tax                                  11 805      (32 718)     178 605
Reportable segment assets           556 265      542 094    5 477 381
Reportable segment liabilities      (13 046)  (1 499 417)  (1 605 022)
                                    543 219     (957 323)   3 872 359

Sectoral
R'000                                        Commercial  Industrial
31 March 2018
Contractual rental income                       183 941     103 485
Straight line rental income                       6 137       1 571
Operating and administration costs              (64 859)    (38 302) 
Net operating profit                            125 219      66 754
Finance income                                      328         232
Finance charges                                     (43)        (90) 
Net operating income/(loss)                     125 504      66 896
Changes in fair values                                -           - 
Reportable segment profit before tax            125 504      66 896
Taxation                                              -           -
Reportable segment profit after tax             125 504      66 896
Reportable segment assets                     2 534 390   1 388 954
Reportable segment liabilities                  (44 884)    (23 812)
                                              2 489 506   1 365 142


R'000                                 Retail   Overheads       Total
31 March 2018
Contractual rental income             73 226           -     360 652
Straight line rental income            2 554           -      10 262
Operating and administration
costs                                (27 339)     (7 641)   (138 141) 
Net operating profit                  48 441      (7 641)    232 773
Finance income                           104      11 003      11 668
Finance charges                           (2)    (53 321)    (53 457) 
Net operating income/(loss)           48 543     (49 959)    190 984
Changes in fair values                     -     (12 379)    (12 379)
Reportable segment profit before
tax                                   48 543     (62 338)    178 605
Taxation                                   -           -           -
Reportable segment profit after
tax                                   48 543     (62 338)    178 605
Reportable segment assets          1 231 379     322 658   5 477 381
Reportable segment liabilities       (43 422) (1 492 904) (1 605 022)
                                   1 187 957  (1 170 246)  3 872 359

Geographical

                                                   Western  KwaZulu-
R'000                                   Gauteng       Cape     Natal
30 September 2018
Contractual rental income               451 893     98 980    77 040
Straight line rental income accrual       4 716    (11 867)    1 213
Operating and administration costs     (184 012)   (35 566)  (28 749) 
Net operating profit                    272 597     51 547    49 504
Finance income                            1 114        113       136
Finance charges                            (373)        (9)       (3) 
Net operating income/(loss)             273 338     51 651    49 637
Changes in fair values                 (135 281)    (8 061)  (40 688) 
Impairment of Goodwill                        -          -         -
Reportable segment profit/(loss)
before tax                              138 057     43 590     8 949
Deferred taxation                             -          -         - 
Reportable segment profit after tax     138 057     43 590     8 949
Reportable segment assets             3 110 677    671 001   533 329
Reportable segment liabilities          (56 246)   (13 109)  (25 309)
                                      3 054 431    657 892   508 020

R'000                                Limpopo       Other        Total
30 September 2018
Contractual rental income             31 925     109 077      768 915
Straight line rental income
accrual                                2 941       1 844       (1 153)
Operating and administration
costs                                 (7 956)    (43 781)    (300 064) 
Net operating profit                  26 910      67 140      467 698
Finance income                            16      21 990       23 369
Finance charges                           (1)   (122 441)    (122 827) 
Net operating income/(loss)           26 925     (33 311)     368 240
Changes in fair values                42 919      47 468      (93 643) 
Impairment of Goodwill                     -    (160 619)    (160 619)
Reportable segment profit/(loss)
before tax                            69 844    (146 462)     113 978
Deferred taxation                          -      (2 011)      (2 011)
Reportable segment profit after
tax                                   69 844    (148 473)     111 967
Reportable segment assets            636 805     194 304    5 146 116
Reportable segment liabilities        (2 161) (1 334 763)  (1 431 588)
                                     634 644  (1 140 459)   3 714 528
Sectoral
R'000                                          Commercial   Industrial
30 September 2018
Contractual rental income                         373 906      213 822
Straight line rental income accrual                (8 006)      (1 090) 
Operating and administration costs               (139 212)     (82 972) 
Net operating profit                              226 688      129 760
Finance income                                        661          478
Finance charges                                      (197)        (171) 
Net operating income/(loss)                       227 152      130 067
Changes in fair values                           (157 411)     (43 037) 
Impairment of Goodwill                                  -            - 
Reportable segment profit before tax               69 741       87 030
Deferred taxation                                       -            - 
Reportable segment profit after tax                69 741       87 030
Reportable segment assets                       2 375 588    1 379 563
Reportable segment liabilities                    (46 049)     (26 840)
                                                2 329 539    1 352 723

R'000                                  Retail   Overheads       Total
30 September 2018
Contractual rental income             181 187           -     768 915
Straight line rental income
accrual                                 7 943           -      (1 153) 
Operating and administration costs    (66 420)    (11 460)   (300 064) 
Net operating profit                  122 710     (11 460)    467 698
Finance income                            365      21 865      23 369
Finance charges                           (17)   (122 442)   (122 827) 
Net operating income/(loss)           123 058    (112 037)    368 240
Changes in fair values                 70 337      36 468     (93 643) 
Impairment of Goodwill                      -    (160 619)   (160 619)
Reportable segment profit before
tax                                   193 395    (236 188)    113 978
Deferred taxation                           -      (2 011)     (2 011) 
Reportable segment profit after
tax                                   193 395    (238 199)    111 967
Reportable segment assets           1 276 390     114 575   5 146 116
Reportable segment liabilities        (41 638) (1 317 061) (1 431 587)
                                    1 234 752  (1 202 486)  3 714 528

Reconciliation of profit before tax to distributable earnings

                                   Unaudited    Unaudited     Audited 
                                     for the      for the         for
                                  six months   six months   the year- 
                                       ended        ended       ended
R'000                            31 Mar 2019  31 Mar 2018 30 Sep 2018
Profit before tax                    189 948      178 605     113 978
Changes in fair values of
investment property                  (36 494)           -     130 111
Changes in fair values of
financial instruments                 19 519       12 379     (21 019)
Loss/(profit) on sale of
investment properties                  4 544            -     (15 448) 
Impairment of goodwill                     -            -     160 618
Straight line rental income
accrual                               (2 602)     (10 262)      1 154
Pre-effective date distribution        6 090            -           -
NCI earnings net of fair value 
adjustments and goodwill
impairments                           (4 065)           -           - 
Antecedent interest                     1 403           -           -
Distributable earnings
attributable to shareholders          178 343     180 722     369 394
Number of A shares in issue        62 718 658  47 352 203  47 352 203
Number of B shares in issue       408 184 961 405 042 105 405 042 105
Weighted average number of A
shares in issue                    59 109 187  47 352 203  47 352 203
Weighted average number of B
shares in issue                   407 079 781 403 994 895 404 199 511
Basic and diluted earnings per
share (A and B combined) (cents)        39,87       39,57       24,80
Headline and diluted headline 
earnings per share (A and B
combined) (cents)                       33,02       39,57       85,76

Administration
Directors
Gemgrow Properties Limited
G Kinross* (Chairperson)
M Kaplan (CEO)
A Kirkel (COO)
J Limalia (CFO)
C Abrams*
A Basserabie*
A Rehman*
* Independent non-executive.

All directors are South African. 

Registered office
Gemgrow Properties Limited
1 Sturdee Avenue
3rd Floor
Upper Building
Rosebank, 2196
(PO Box 685, Melrose Arch, 2076)

Transfer secretaries
Link Market Services South Africa Proprietary Limited
(Registration number 2000/007239/07)
13th Floor, 19 Ameshoff Street
Braamfontein, 2001
(PO Box 4844, Johannesburg, 2000)

Sponsor
Java Capital Trustees and Sponsors Proprietary Limited
(Registration number 2006/005780/07)
6A Sandown Valley Crescent
Sandton, 2196
(PO Box 522606, Saxonwold, 2132)

Company secretary
Gillian Prestwich
CIS Company Secretaries Proprietary Limited 
(Registration number 2006/024994/07) Rosebank Towers, 
15 Biermann Avenue Rosebank, 2001
(PO Box 61051, Marshalltown, 2107)
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