Dipula’s net asset value increases by 8.7% to R5.9bn

Izak Petersen, Chairman of the SA REIT Association
Izak Petersen, CEO of Dipula Income Fund.

Dipula Income Fund has published its financial results for the year ended August 2022 reporting a 3% increase in its revenue to R1.35 billion (2021: R1.31 billion) with property income 1.6% higher at R880 million compared to R866 million in the prior comparative year.  

The REIT’s net asset value increased by 8.7% to R5.9 billion (2021: R5.5 billion) due to positive independent property portfolio revaluations which resulted mainly from growth in its retail portfolio. Dipula’s total property portfolio increased by 4.5% to R9.6 billion (2021: R9.2 billion). 

Dipula spent R93 million (2021: R52 million) on refurbishments and capital expenditure with disposals of R56 million concluded during the year (2021: R70 million) with “no material acquisitions or disposals in the financial year, which means the revenue growth was organic,” according to Dipula CEO, Izak Petersen.

Despite management’s focus on cost efficiencies, the company reported that its margins came under pressure, mainly due to higher inflation and in respect of administered costs and municipal rates. Property expenses consequently increased 5.1% on a year-on-year basis to R467 million (2021: R444 million). Distributable earnings increased by 0.1% to R552.6 million (2021: R 552.2 million).

Dipula’s gearing (LTV) reduced to 35.9% (2021: 36.5%) despite an increase of 2.6% in debt from R3.4 billion in the prior financial year to R3.5 billion, partly attributable to debt repayment and to the increase in Dipula’s property portfolio value.

During the year, the company renewed debt facilities of R1.2 billion (2021: R987 million), at a weighted average funding rate of 8.04% (2021: 6.3%) for a weighted average period of 3.2 years (2021: 2.4 years). It repaid debt of R154 million during the year (2021: R97 million). Subsequent to financial year-end further debt facilities totaling R711 million were renewed at a weighted average interest rate of 7.84% (2021: 5.99%) over a weighted average period of 3.6 years (2021: 3.0 years). 75% of Dipula’s debt was fixed (2021: 67%) by year-end and all debt was Rand denominated.

Operationally, Dipula delivered strong leasing results, having concluded new leases (excluding residential) with a total gross lettable are (GLA) of 63 826m² (2021: 52 250m2) translating to R334 million (2021: R238 million) in lease value at a weighted average escalation of 6.9% and a weighted average lease expiry (WALE) of 3.4 years (2021: 2.9 years). In addition to this the group concluded renewals (excluding residential) with a total GLA of 136 035m² (2021: 94 961m2) amounting to gross lease income of R702 million over the lease term (2021: R398 million) with a renewal WALE of 2.6 years (2021: 2.1 years). Average rental reversions for the year were flat (2021: -2%).

Dipula’s non-residential tenant retention ratio was 72% while the portfolio occupancy level, excluding residential, contracted to 90% from 92% in the prior financial year. At year-end, the residential vacancy was 6% which is a significant improvement from the prior year’s Covid-19 related 20% vacancy.

On the 7th of April 2022, Dipula shareholders voted in favour of the repurchase of all Dipula A-shares in consideration for the issue of 2.4 Dipula B-shares for every Dipula A-share by way of a scheme of arrangement. The scheme was implemented on the 6th of June 2022. As a result, Dipula’s issued share capital on the 31st of August 2022 now consists of 895 747 744 ordinary shares compared to 264 665 819 Dipula A-shares and 264 665 819 Dipula B-shares in issue in 2021.

Despite increased distributable earnings for the year, the implementation of the scheme resulted in a significant dilution of the company’s full year dividend per share relative to the prior year. The full year dividend per share amounted to 135.17 cents (2021: 208.65 cents).

On the 5th of October 2022 following the implementation of the scheme, Dipula increased its authorised share capital to 6 billion ordinary shares which will enable the company to take advantage of strategic and consolidation opportunities in the market as they arise.

In August 2022, Global Credit Rating Company Limited upgraded Dipula’s national scale long-term and short-term issuer ratings to BBB+(ZA) and A2(ZA), respectively, with a stable outlook. The upgrade of Dipula’s issuer ratings reflected the company’s continued resilient performance, allowing it to maintain solid credit protection metrics, while financial flexibility improved through the collapsing of the dual share structure.

Dipula will further continue to explore appropriate opportunities that will support greater liquidity and tradability of its shares on a value-enhancing basis for shareholders.

“We will do everything possible to ensure that prudent capital allocation decisions are taken and that our scarce capital is utilised wisely to avoid NAV dilutive actions,” concluded Petersen.