Dipula Income Fund has published its results for the financial half year to 28 February 2022, declaring an interim gross dividend of 61.97 cents per A share and 42.22 cents per B-share, the REIT’s last dual share dividend payout.
In early April 2022, both classes of Dipula shareholders voted in favour of the implementation of a scheme of arrangement where Dipula will buy back and cancel all its DIA shares at a swap ratio of 2.4 DIB shares for every DIA share in issue.
“Following shareholders’ overwhelming approval to simplify the group’s capital structure, this will be the last time that the dividend will be paid according to the existing formula. We expect the scheme to be implemented immediately after the dividend payment on the 7th of June this year”, commented Dipula CEO, Izak Petersen.
The REIT’s portfolio of convenience retail centres recorded an average growth in turnover of 14% period-on-period. Contractual income across the portfolio increased by 0.6% to R541 million for the period (2021: R538 million). Property related expenses showed an inflationary increase of 5.8% to R232 million (2021: R219 million) with net property income of R441 million (2021: R457 million).
“Our defensive retail portfolio performed well despite exogenous constraints. Distributable earnings were up by 0.1% to R275.7 million (2021: R275.5 million). We maintained a 100% pay-out ratio which resulted in an A-share distribution of 61.97 cents per share (2021: 59.02 cents per share), in line with the A-share preferential entitlement of the lower of CPI or 5%. The B-share distribution was consequently 42.22 cents per share, compared to 45.10 cents per share in the comparative period”, commented Dipula CEO, Izak Petersen.
The group’s combined net asset value per share decreased slightly by 2% to R20.78 (2021: R21.18) but its portfolio value remained stable at approximately R9 billion, comprising of 186 properties (2021: 189 properties) with a total gross lettable area (GLA) of 925 251m2 (2021: 926 648m2).
99 new leases with a total GLA of 35 016m2 were concluded during the period, translating into R184 million in lease value at a weighted average escalation of 6.8% and a weighted average lease expiry (WALE) of 4 years. Dipula concluded renewals (excluding residential) with a total GLA of 70 041m2, amounting to gross lease income of R397 million over the lease term with a WALE of 3 years.
A weighted average reversion rate of 1% was recorded for the portfolio, attributable to positive reversions in its retail and industrial portfolios of 2.4% and 12.3% respectively, and a positive renewal rate of 5.4% in its office portfolio.
The portfolio vacancy factor (excluding residential) increased to 9.3% (2021: 7.6%) driven primarily by the office sector as tenants downsized space due to changing user needs and prevailing challenging economic conditions. Vacancies by sector were retail 10.8% (2021: 9.9%), offices 17.3% (2021: 11.6%) and industrial 3.9% (2021: 3.2%).
Dipula had a tenant retention ratio of 78% for the period (2021: 77%), with the office and industrial portfolios showing strong retentions of 93% (2021: 78%) and 91% (2021: 83%) respectively. Retentions in the retail portfolio of 63% was reported (2021: 74%).
Residential vacancies were 18%, mainly due to vacancies at Palm Springs in Cosmo City, which is still recovering from the impact of Covid-19 related job-losses. Occupancies at Urban Village Midrand, Bruma and Norwood were 92%, 97% and 96% respectively.
Dipula spent approximately R45 million on refurbishments and redevelopments during the period. A further R445 million has been earmarked for planned refurbishments over the next 18 to 24 months.
Disposals of R21 million were made during the period. An additional R35 million of disposals were awaiting transfer at the end of the period.
During the year, debt facilities of R1.2 billion were renewed at a weighted average funding rate of 6.0%, for a weighted average period of 3 years. On the 28th of February 2022, Dipula’s all-in weighted average cost of debt was 8.13% (2021: 7.82%). The company had total debt of R3.5 billion. The weighted average debt expiry profile was 2.17 years, and the aggregate hedge expiry period was 2.23 years. All debt was Rand denominated and 78% (2021: 61%) of the Group’s interest rate exposure was hedged.
Dipula had undrawn facilities of R131 million at period-end. Gearing for the period was 36.7% (2021: 35.7%) and its interest cover ratio was 3.22 times (2021: 3.18 times).
The group is currently negotiating the renewal of R228 million of debt facilities which expire in the current financial year.
Going forward, Dipula expects the macro-economic environment to remain extremely challenging in the short- to medium term.
“In addition to uncertainty around the ongoing Covid-19 pandemic and low economic growth, ongoing load shedding and dysfunctional municipalities add to the challenges faced by landlords,” Petersen said.
“We do not expect trading conditions to improve in the short-term, but our team will strive to run the business as efficiently as possible and ‘sweat’ the assets to the very best of our ability“.
Dipula said that management will continue to optimise the balance sheet through sensible disposals of non-core assets and carefully planned refurbishments and upgrades funded from recycled capital.