Dipula Income Fund has released a set of robust results for the six months ended on the 28th of February 2021. The group’s solid performance was achieved against the backdrop of weak trading conditions globally and in South Africa, as the country negotiates the negative economic impact pf Covid-19 restrictions.
“We are pleased with our performance under extremely challenging trading conditions. Our hands-on asset and property management, combined with our defensive portfolio were the differentiating factors in these unprecedented times” commented CEO, Izak Petersen.
“Distributable earnings were up 8.5% to R275 million from R254 million in the comparative period which resulted in an upsurge of 16.8% in the B-share distributable earnings to 45.10 cents per share. A-share distribution growth was 2.9% or 59.02 cents per share.”
The group reported growth and improvement in most metrics for the reporting period. Contractual rental income for the period increased organically by 1.8% to R538 million (2020: R529 million) and property related expenses were well contained, increasing by a mere 1.6% to R219 million (2020: R216 million). Dipula’s cost-to-income ratio was stable at 36.7% (2020: 36.3%).
Dipula also reported net property income of R457 million (2020: R461 million) after the provision of rental relief to tenants of R8.2 million during the reporting period, which was over and above R49 million provided in the previous financial year ended 31 August 2020.
“Our prudent balance sheet management aided in the 11% reduction in the loan-to-value ratio to 35.7% by the end of period. This strengthened our balance sheet, thus positioning us well to navigate these difficult times and be in a position to pay dividends to shareholders,” Petersen remarked.
A-shareholders will be paid an interim dividend of 59.02 cents per share and B-shareholders 45.10 cents per share.
Dipula was comfortably within its strictest loan covenant levels of 45% loan-to-value (LTV) and 2 times interest cover ratio (ICR) at period end, with its LTV at 35.7% and ICR at 3.18 times.
The group’s property portfolio remained stable at R9 billion, consisting of 189 properties (2020: 190 properties) with a total gross lettable area (GLA) of 923 964m2 (2020: 916 593m2). 136 new leases totalling 25 648m2 in GLA were concluded at an average escalation of 7.7% and a weighted average lease expiry (WALE) of 3.4 years, representing R138 million in lease value.
Renewals comprised 44 114m2 of leases with a WALE of 2.5 years, amounting to gross lease income of R191 million over the lease term.
77% of tenants were retained during the period (2020: 80%). The group recorded a negative lease reversion rate of 4.8% because of challenging market conditions.
Vacancies were 7.6% at period end. The company had made good progress in moving some of these vacancies, which are believed not to be of a structural nature.
“We are making progress in refinancing our expiring debt, with R590.5 million having been refinanced by the end of the period. We have no foreign currency debt exposure and 61% of our interest rate exposure was hedged at the end of the period. We are negotiating on R320 million of debt facilities which expire in the current financial year and hope to soon conclude terms on those”.
Due to uncertain trading conditions, Dipula’s board have at this stage not provided guidance for the full year performance of the group.
“Notwithstanding current challenges, Dipula continues to take advantage of opportunities in the market and will capitalised on these as much as possible. Going forward, our teams will continue to demonstrate resolve and a pragmatic approach to the management of our business. We aim to deliver sustainable total returns to our shareholders and believe we have a resourceful team that will deliver growth by focusing on matters within our control,” Petersen concluded.