The company declared a dividend of 40,43 cents per share, indicating that it remains on target to deliver on the guidance provided for the full year.
Arrowhead is an opportunistic property fund, which directly holds a diversified portfolio of 49 commercial properties valued at R5,6 billion. However, through core, separately listed subsidiaries, Indluplace Properties Limited (“Indluplace”) and Gemgrow Properties (“Gemgrow”), the Arrowhead group property portfolio comprises a total of 360 buildings (189 commercial and 171 residential). The total value of the group’s investment properties had increased by 15,5% to R15 billion at the end of the interim reporting period as a result of the acquisitions by Indluplace and Gemgrow. Arrowhead also has investments in listed REITs Rebosis Property Fund (“Rebosis”) and Dipula Property Fund (“Dipula”).
COO of Arrowhead, Riaz Kader commented, “We are pleased with our results reported for the past six months, against a backdrop of subdued macroeconomic conditions and a fiercely competitive rental market. We adopted a cautious stance and positioned ourselves to ensure that we will be able to benefit from improving political and economic conditions as well as continue to create long-term sustainable value for shareholders.”
The solid results for the interim period were achieved as a result of a focus on reducing vacancies; securing favourable lease renewals and escalations in a difficult rental market; disposing of tail assets and actively managing costs. Vacancies decreased from 12,10% at the end of September 2017 to 10,63% at the end of March 2018 and it is anticipated that vacancies will improve further subsequent to the period-end. Revenue and operating costs increased, as expected, on the back of the Gemgrow and Indluplace acquisitions during the period, while the gross expense to income ratio remained stable at 38,0%.
Arrowhead company loans were R3,5 billion at the end of March 2018. According to Arrowhead CFO, Imraan Suleman, “This represents a comfortable group LTV of 31,3%, marginally up from 28,1% previously. We have fixed 73,0% of total loans and continue to maintain a well-positioned balance sheet.” With regards to the dividend declared, Suleman commented, “We are confident that we have made the correct strategic decisions, in tough macro-economic circumstances, to position the company for sustainable growth going forward.”
Arrowhead’s holdings of non-core assets Rebosis (18,6%) and Dipula (10,6%) moderated marginally through the additional share issuance by these listed entities. Arrowhead maintains positive engagements with the management of both property funds and reviews its acquisition strategy on an on-going basis to ensure that its portfolio remains positioned for future growth and value.
CEO Mark Kaplan concluded, “We have worked hard over the past six months to deliver these positive results; we maintained a disciplined and conservative approach which we believe will be rewarding in the long-term. We continue to sweat our portfolio and believe that improving consumer and business sentiment, which has started to become evident, will provide an upside to growth. Investors can expect to see the full benefits of our strategy come through in the 2019 financial year.”
