Delta Property Fund HY 2014 financial results

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Delta Property Fund listed on the Johannesburg Stock Exchange has released their Half Year Results. Check out insights into the company throygh thier predentation which appears below. Sign up to the www.investormailinglist.com to receive presentations for all listed companies in Africa

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Delta Property Fund HY 2014 financial results

  1. 1. Abridged consolidated statement of comprehensive income Unaudited Six months ended 31 August 2013 R’000 Unaudited Six months ended 31 August 2012 R’000 Audited for year ended 28 February 2013 R’000 Revenue Contractual rental income 218 950 30 630 116 867 Straight line rental income accrual 23 902 – 23 082 242 852 30 630 139 949 Property operating expenses (51 216) (2 703) (27 553) Net property rental and related income 191 636 27 927 112 396 Other income 17 – 10 Administration expenses (15 813) (481) (11 793) Net operating profit 175 840 27 446 100 613 Fair value adjustments – – 34 315 Profit from operations 175 840 27 446 134 928 Finance costs (52 586) (17 517) (55 446) Interest received 2 558 2 357 5 836 Antecedent interest 16 004 – – Transaction expenses (9 841) – (21 659) Restructuring expenses – (10 000) (20 000) Profit before debenture interest and taxation 131 975 2 286 43 659 Debenture interest (116 738) – (39 068) Profit before taxation 15 237 2 286 4 591 Taxation (7 047) (2 096) (21 916) Profit (loss) for the period 8 190 190 (17 325) Other comprehensive income – – – Total comprehensive profit (loss) for the period 8 190 190 (17 325) Reconciliation of earnings, headline earnings and distributable earnings Total comprehensive profit (loss) for the period 8 190 190 (17 325) Debenture interest 116 738 – 39 068 Earnings 124 928 190 21 743 Change in fair value of investment property (net of deferred taxation) – – (38 995) Change in fair value of property – – (49 122) Deferred taxation – – 10 127 Impairment of goodwill – – 2 893 Headline profit (loss) attributable to linked unitholders 124 928 190 (14 359) Change in fair value of financial instruments (net of deferred taxation) – – 21 005 Change in fair value of financial instruments – – 14 807 Deferred taxation – – 6 198 Straight line rental income accrual (net of deferred taxation) (17 209) – (16 619) Straight line rental income accrual (23 902) – (23 082) Deferred taxation 6 693 – 6 463 Pre-acquisition income recognised against investment property – – 6 455 Restructuring expenses – 10 000 20 000 Deferred taxation – other adjustments 354 2 096 (874) Transaction expenses 9 841 – 21 659 Impairment of other financial assets – – 2 196 Retained distributable earnings (1 176) (12 286) (395) Distributable earnings attributable to linked unitholders 116 738 – 39 068 Number of linked units in issue 359 083 615 N/A 164 935 365 Weighted average number of linked units in issue 307 268 720 N/A 53 773 448 Basic earnings per linked unit (cents) 40.66 N/A 40.43 Headline/diluted headline profit (loss) per linked unit (cents) 40.66 N/A (26.70) Distribution per linked unit (cents) 32.51 N/A 23.69 No calculation of diluted headline earnings per share has been performed as there are no convertible securities in issue. Abridged consolidated statement of financial position Unaudited Six months ended 31 August 2013 R’000 Unaudited Six months ended 31 August 2012 R’000 Audited for year ended 28 February 2013 R’000 Assets Non‑current assets Investment property 4 840 667 364 117 2 119 112 Fair value of property portfolio 4 767 706 364 117 2 070 053 Straight line rental income accrual 72 961 – 49 059 Property, plant and equipment 4 232 – 279 Other financial assets – 67 069 – 4 844 899 431 186 2 119 391 Current assets Other financial assets 26 392 34 105 25 917 Trade and other receivables 60 045 8 341 39 410 Cash and cash equivalents 76 918 30 859 56 828 163 355 73 305 122 155 Total assets 5 008 254 504 491 2 241 546 Equity and liabilities Equity Stated capital 2 261 901 – 932 232 Retained income 129 634 138 959 121 444 2 391 535 138 959 1 053 676 Liabilities Non‑current liabilities Debentures 412 946 – 189 676 Secured financial liabilities 1 787 415 290 622 832 450 Other financial liabilities – 7 009 – Deferred tax 64 255 33 637 57 207 2 264 616 331 268 1 079 333 Current liabilities Secured financial liabilities 197 978 – 33 992 Trade and other payables 36 959 4 908 35 477 Current tax payable 428 672 – Derivative instruments – 28 684 – Unitholders for distribution 116 738 – 39 068 352 103 34 264 108 537 Total liabilities 2 616 719 365 532 1 187 870 Total equity and liabilities 5 008 254 504 491 2 241 546 Distribution of 32.51 cents per linked unit met Market capitalisation of R2.98 billion Property portfolio value exceeds R4.8 billion 94.7% occupancy rate across the portfolio Leases renewed for 39 533 m2 Attractive forward funding rates of 7.7% Successful R190 million inaugural commercial paper issuance Favourable GCR credit rating Highlights condensedconsolidated interim results for the six months ended 31 August 2013 Unaudited Abridged condensed segmental analysis For the six months ended 31 August 2013 (R’000) Retail Office government Office other Industrial Total Contractual rental income 5 489 149 062 58 335 6 064 218 950 Straight line rental income accrual 344 19 266 3 196 1 096 23 902 Property operating expenses (1 061) (29 927) (19 220) (1 008) (51 216) Net property rental and related income 4 772 138 401 42 311 6 152 191 636 Fair value adjustments – – – – – Investment property 102 397 3 310 382 1 202 304 225 584 4 840 667 Fair value of property portfolio 101 946 3 244 281 1 196 991 224 488 4 767 706 Straight line rental income accrual 451 66 101 5 313 1 096 72 961 For the year ended 28 February 2013 (R’000) Retail Office government Office other Admin and corporate cost Total Contractual rental income 2 683 83 978 30 206 – 116 867 Straight line rental income accrual 107 20 858 2 117 – 23 082 Property operating expenses (restated) (802) (15 344) (11 407) – (27 553) Net property rental and related income 1 988 89 492 20 916 – 112 396 Fair value adjustments (1 341) 52 928 (2 465) (14 807) 34 315 Investment property 48 000 1 470 037 601 075 – 2 119 112 Fair value of property portfolio 47 893 1 423 202 598 958 – 2 070 053 Straight line rental income accrual 107 46 835 2 117 – 49 059 www.deltafund.co.za Abridged consolidated statement of changes in equity Retained Income R’000 Stated capital R’000 Total R’000 Balance at 28 February 2012 138 769 – 138 769 Total comprehensive profit for the period 190 – 190 Balance at 31 August 2012 138 959 – 138 959 Issue of linked units – 952 501 952 501 Capital issue expenses – (20 269) (20 269) Total comprehensive loss for the period (17 515) – (17 515) Balance at 28 February 2013 121 444 932 232 1 053 676 Issue of 24 740 304 linked units effective 06 March 2013 – 179 368 179 368 Issue of 38 739 178 linked units effective 15 March 2013 – 280 859 280 859 Issue of 6 737 700 linked units effective 22 March 2013 – 48 848 48 848 Issue of 119 047 599 linked units effective 06 May 2013 – 863 095 863 095 Issue of 4 883 469 linked units effective 26 August 2013 – 35 185 35 185 Capital issue expenses – (16 845) (16 845) Prior period antecedent interest – (44 837) (44 837) Current period antecedent interest – (16 004) (16 004) Total comprehensive profit for the period 8 190 – 8 190 Balance at 31 August 2013 129 634 2 261 901 2 391 535 Abridged consolidated statement of cash flows Unaudited Six months ended 31 August 2013 R’000 Unaudited Six months ended 31 August 2012 R’000 Audited for year ended 28 February 2013 R’000 Cash generated from operations 123 830 2 457 40 035 Interest received 2 558 2 357 3 217 Finance cost (52 586) (17 517) (50 664) Taxation paid – 457 (214) Debenture interest paid (39 068) – – Net cash from financing activities 34 734 (12 246) (7 626) Acquisition of investment property (2 680 209) – (1 591 052) Refurbishment and renovations capitalised (17 444) (1 712) (45 830) Acquisitions of property, plant and equipment (4 410) – – Business combinations – – (7 011) Movements in other financial assets (475) 14 917 49 486 Net cash from investing activities (2 702 538) 13 205 (1 594 407) Proceeds from issue of linked units 1 630 625 – 1 121 908 Capital issue expenses (16 845) – – Prior period antecedent interest paid (44 837) – – Proceeds from secured financial liabilities 1 118 951 161 544 158 Payment of derivative instruments – – (36 944) Net cash from financing activities 2 687 894 161 1 629 122 Net movement in cash and cash equivalents 20 090 1 120 27 089 Cash at the beginning of the year 56 828 29 739 29 739 Total cash at the end of the period 76 918 30 859 56 828 Commentary on results Profile Delta is a black managed property loan stock company that has been listed on the JSE Limited (“JSE”) since 02 November 2012. Delta’s primary business is long-term investment in quality, rental generating properties with a strong focus on government and other empowerment sensitive tenants. Delta has the ability to purchase C-grade and D-grade properties at favourable yields, convert them to A-grade or B-grade and thereafter secure long-term leases. The portfolio currently comprises of 49 strategically located and high grade properties, valued at R4.8 billion. Financial results A direct comparison to the previous interim reporting period, being the results for the six months ended 31 August 2012 (prior to listing), is not as meaningful as a comparison to the forecast results as previously published by the Fund on 08 April 2013. Delta achieved distributable earnings of R116.7 million for the six months ended 31 August 2013. The accrued distribution per linked unit of 32.51 cents is in line with the Fund’s expectations and forecast. Delta remains on track to meet its forecast distribution per linked unit for the full year ending 28 February 2014. Finance income includes R16.0 million of antecedent interest relating to new linked units issued in the interim period. Certain comparative figures have been reclassified. Property management fees have been reclassified from administration expenses to property operating expenses. The effect of the reclassification is as follows: Audited Year ended 28 February 2013 R’000 Reclassification of property expenses R’000 Restated Year ended 28 February 2013 R’000 Property operating expenses (21 947) (5 606) (27 553) Administration expenses (17 399) 5 606 (11 793) Property expenses have remained stable at 23.4% of contractual rental income as compared with 23.6% (restated) at 28 February 2013. Property portfolio As at 31 August 2013, the portfolio, valued at R4.8 billion, consisted of 49 properties with a total GLA of 477 680 m². SECTORAL GLA (%) Office government (55.9%) Office other (24.9%) Industrial (11.9%) Retail (7.3%) 55.9%Office government SECTORAL Revenue (%) Office government (64.6%) Office other (25.6%) Retail (6.3%) Industrial (3.5%) 64.6%Office government GEOGRAPHIC GLA (%) Gauteng (47.5%) KwaZulu-Natal (28.8%) Western Cape (7.0%) Northern Cape (6.0%) Eastern Cape (5.0%) Limpopo (3.4%) Free State (1.7%) North West (0.6%) 47.5%Gauteng GEOGRAPHIC Revenue (%) Gauteng (45.8%) KwaZulu-Natal (24.1%) Northern Cape (7.5%) Western Cape (7.3%) Eastern Cape (6.6%) Limpopo (6.5%) Free State (1.7%) North West (0.5%) 45.8%Gauteng Acquisitions During the six months ended 31 August 2013 Delta completed the transfer of the following 29 properties valued at R2.7 billion: Property name Province Building sector Tenancy (Multi/ Single) Total GLA (m2 ) Purchase price plus costs (R’000) Effective date of acquisition Weighted average rental per m2 (excl parking and storage) 539 Church Street Gauteng Office government M 4 488 41 058 01/03/2013 90.38 Hensa Towers Limpopo Office government S 14 230 294 518 15/03/2013 160.68 Bestmed Building Gauteng Office government S 3 684 65 024 25/03/2013 102.83 Anchor House Free State Office government S 2 645 29 511 01/03/2013 87.42 Hallmark Building Gauteng Office government M 26 255 318 749 02/05/2013 102.20 Manaka Heights Gauteng Office government M 18 933 226 296 02/05/2013 115.20 Manaka House Gauteng Office government M 11 528 141 358 02/05/2013 99.16 Manaka Continental Gauteng Office government S 4 133 46 621 02/05/2013 90.78 Samora House KwaZulu-Natal Office government S 6 920 63 285 06/05/2013 94.79 Embassy House KwaZulu-Natal Office government M 32 365 239 280 23/05/2013 74.35 Du ToitSpan Northern Cape Office government M 9 204 100 558 01/05/2013 105.40 13 Elliot Street Northern Cape Office government S 4 400 45 429 01/05/2013 103.15 5/7 Elliot Street Northern Cape Office government S 2 300 28 559 01/05/2013 107.11 Thema Thumo Northern Cape Office government S 2 396 27 354 01/05/2013 102.83 Harlequins Office Park Gauteng Office government M 5 450 137 032 01/07/2013 161.03 12 New Street Gauteng Office other M 2 475 36 381 03/05/2013 114.67 14 New Street Gauteng Office other M 2 795 29 476 07/05/2013 87.83 Unisa House Gauteng Office other M 10 055 101 914 17/05/2013 91.92 Damelin Building KwaZulu-Natal Office other S 3 933 51 856 01/05/2013 98.81 Edcon Building Gauteng Office other S 6 188 51 361 03/07/2013 67.38 Eskom Sunninghill Gauteng Office other S 3 585 46 714 18/07/2013 93.00 SARS Bellville Western Cape Office other M 17 270 185 734 01/07/2013 85.70 SARS Randburg Gauteng Office other S 8 496 93 598 30/08/2013 74.20 CMH Building KwaZulu-Natal Retail S 10 974 54 053 27/05/2013 38.73 Protea Coin Cape Town Western Cape Industrial S 5 700 26 274 30/04/2013 39.54 Protea Coin Pretoria Gauteng Industrial M 7 140 31 393 07/05/2013 34.30 Protea Coin Durban KwaZulu-Natal Industrial S 4 365 21 292 15/05/2013 40.99 In 2 Fruit Building Gauteng Industrial S 11 177 64 095 10/05/2013 55.53 Top Trailers Gauteng Industrial S 28 363 81 436 25/07/2013 25.74 271 447 2 680 209 The weighted average rental per m2 per sector for the properties acquired are: office government R104.90; office other R82.97; retail R60.91 and industrial R22.64. The lease expiry profile for the properties acquired shows 94% (by rental) expiring beyond 28 February 2018. The impact of delays in the transfer of certain properties was negated by savings achieved on borrowing costs through both the delayed pay-out from the facilities and achieving more favourable rates. Commitments 31 August 2013 R’000 Capital improvements in respect of investment property – Opening balance – 01 March 2013 63 151 – Refurbishments and renovations capitalised in the period (17 444) – New approvals 30 423 76 130 These commitments will be financed from available cash resources and new debt financing facilities. Lease expiry profile Based on GLA % Rental % Vacant 5.3 – 28 February 2014 5.3 5.9 28 February 2015 4.8 4.4 28 February 2016 4.2 6.5 28 February 2017 1.1 1.6 28 February 2018 0.1 0.1 > 28 February 2018 79.2 81.5 Total 100.0 100.0 During the period leases in respect of 39 533 m2 were renewed. The weighted average escalation rate across the portfolio was 8.3% at 31 August 2013. Vacancies Vacancies in the Delta portfolio at 31 August 2013 amounted to 5.3% of gross lettable area compared with 4.4% at 28 February 2013. The minor percentage increase from 28 February 2013 is due to the vacancy acquired at the Embassy building which was not paid for and once tenanted will increase the forward yield of the Fund. Borrowings Delta’s net borrowings of R1.9 billion equate to a gearing ratio of 41.0% compared with 40.9% at 28 February 2013. Gearing is calculated as total interest-bearing liabilities (excluding debentures) as a percentage of total income- producing assets. Interest rates in respect of 61.5% of borrowings at 31 August 2013 had been fixed for a weighted average period of 3.5 years. The average weighted interest rate of all borrowings was 7.5% per annum, with unutilised banking facilities in excess of R200 million. Delta has a R2 billion unsecured domestic medium term note programme and has a rating of BBB+ (long term) and A2 (short term). A total of R190 million had been issued under the programme at 31 August 2013. Current debt facilities: Facility R’million Utilised amount R’million Expiry Fixed rate % Margin over JIBAR for floating facility % Rate below Prime for floating facility % Provider and type of loan Nedbank – Fixed 350 350 2018* 7.88 Nedbank – Fixed 350 350 2016 7.74 Nedbank – Floating 150 133 2016 2.05 Nedbank – Fixed 270 270 2019 7.87 Nedbank – Fixed 180 180 2017 7.55 Nedbank – Floating 200 110 2017 1.88 Nedbank – Floating 80 80 2018 1.96 Nedbank – Floating 100 100 2018 1.96 Standard Bank – Floating 130 128 2019 2.09 Standard Bank – Floating 85 85 2017 1.91 Standard Bank – Floating 93 – 2017 1.50 Commercial Paper – Fixed 190 190 2014 7.55 2 178 1 976 * Fixed rate expires 2016. At 31 August 2013, R9 million in interest had been accrued on the above facilities. To ensure effective cash management, surplus cash is invested against revolving debt facilities. Events after the reporting period Subsequent to 31 August 2013, Delta took transfer of a further five properties at a cost of R548 million, taking the total portfolio value to R5.3 billion. The weighted average rental per m2 of these acquisitions is R132.95. Property name Province Building sector Total GLA (m2 ) Purchase price plus costs (R’000) Effective date of acquisition AZMO House Limpopo Office government 5 224 57 846 16/09/2013 CCMA Limpopo Office government 1 063 14 143 16/09/2013 Phomoko Towers Limpopo Office government 13 058 249 469 18/09/2013 Temo Towers Limpopo Office government 7 668 140 179 18/09/2013 Commission House Gauteng Office government 6 534 86 570 04/10/2013 33 547 548 207 Lease expiry profile of the post 31 August 2013 acquisitions Based on GLA % Rental % Vacant 0.8 – 28 February 2014 – – 28 February 2015 – – 28 February 2016 – – 28 February 2017 37.7 37.5 28 February 2018 – – > 28 February 2018 61.5 62.5 Total 100.0 100.0 Prospects Due to its positioning, the portfolio has performed well over the past six months. The board expects similar performance to ensue in the second half of the year and it is anticipated that the forecast year end distribution per linked unit will be achieved. We will continue to focus on our strategy of growing the Fund with yield-enhancing assets without compromising on quality. A key focus area of the executive management is to bed down all new acquisitions to ensure the optimal performance of the portfolio. In the interim reporting period Delta became a constituent of the FTSE-JSE SA listed property index which will continue to create liquidity for the Fund. Delta’s application for REIT status was approved by the JSE with effect from the commencement of its next financial year, being 01 March 2014. Delta’s empowerment credentials position Delta well for the acquisition of future government tenanted buildings. Delta has successfully renewed major government leases at prevailing rates in the interim period. This prospects statement has not been reviewed or reported on by the Fund’s independent external auditors. Debenture interest distribution Linked unitholders are advised that debenture interest distribution number 02 of 32.51 cents per linked unit for the six months ended 31 August 2013 will be paid to linked unitholders in accordance with the abbreviated timetable set out below: Last day to trade cum distribution Friday, 15 November 2013 Linked units trade ex distribution Monday, 18 November 2013 Record date Friday, 22 November 2013 Payment date Monday, 25 November 2013 Linked unitholders may not dematerialise or rematerialise their linked units between Monday, 18 November 2013 and Friday, 22 November 2013, both days included. Basis of preparation and accounting policies The unaudited condensed consolidated interim results of Delta have been prepared in accordance with the framework concepts and the measurement and recognition requirements of International Financial Reporting Standards (IFRS) and the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and contain the information required by IAS 34: Interim Financial Reporting, the JSE Listings Requirements and the requirements of the South African Companies Act, 71 of 2008 (as amended). This report has been compiled under the supervision of Bronwyn Corbett CA(SA), the Chief Financial Officer of Delta. The accounting policies adopted in the preparation of these results are consistent with those applied in the preparation of the financial statements for the year ended 28 February 2013. The results have not been reviewed or audited by Delta’s auditors, BDO South Africa Incorporated. Delta has complied with IFRS and JSE Listings Requirements by disclosing earnings and headline earnings per share. Headline earnings includes fair value adjustments for financial instruments and the straight line rental income accrual which does not affect distributable earnings. By order of the board SH Nomvete (Chief Executive Officer) JB Magwaza (Chairman) 29 October 2013 Delta Property Fund Limited (formerly Tuffsan 89 Investment Holdings Proprietary Limited) (Incorporated in the Republic of South Africa) (Registration number 2002/005129/06) Share code: DLT ISIN: ZAE000172052 (“Delta” or “the Fund”) Directors: JB Magwaza† (Chairman), SH Nomvete* (CEO), BA Corbett* (CFO), JJG Da Costa^, N Khan^# , IN Mkhari† , KE Schmidt^, PD Simpson^ *Executive † Non-Executive ^Independent Non-Executive # Lead Independent Director Registered office: Silver Stream Office Park, 10 Muswell Road South, Bryanston (PostNet Suite 210, Private Bag X21, Bryanston 2021) Transfer secretaries: Computershare Investor Services Proprietary Limited Sponsor: Nedbank Capital

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