JOHANNESBURG - Delta Property Fund, the listed black-managed and substantially black-owned real estate investment trust, said yesterday that its annual profit increased to R798.1million during the year to end February, from R635m recorded during the corresponding period last year.
The group said that it managed to squeeze the increase against a general decline in rental income, which fell to R1.562billion during the period from R1.612bn last year. Headline earnings per share dropped to 91.36cents a share from 104.14c last year.
Delta chief executive Sandile Nomvete said the past six months had proved challenging for the company.
Nomvete said the group managed to maintain its costs and reduced its loan-to-value. He said Delta Property also managed to refinance nearly R1bn in debt.
“Our continued focus on property fundamentals paid dividends as we renewed 93144m² of existing leases and signed 53774m² new leases. Importantly, we successfully negotiated the approval of 59 leases for 227550m² with the Department of Public Works (DPW) as part of our bulk lease renewal programme.”
The company declared distributable earnings of R691.6m, an increase of 2.1percent, compared with the prior year, which translated to a second-half dividend of 50.84c a share and a full-year distribution of 97.24c a share.
Delta reported that its debtor days remained at 18 days, which provided a strong indication of its ability to continue achieving contractual escalations and higher than budgeted for rental income until the full implementation of the DPW’s Leasing Policy.
Debtor days refers to the average number of days required for a company to receive payment from its customers for invoices issued.
Delta’s property portfolio was valued at R11.5bn as at August 2017, including 11 assets held for sale, and consists of 105 properties with a total gross lettable area of 952428m².
During the prior fiscal year, Delta concluded sale agreements and disposed of seven non-core properties for R316m. Sale agreements for a further four assets totalling R328.5m were concluded and are in the process of transferring.
Nomvete said that the company made no new acquisitions during the year under review.
He said proceeds from disposals would be used to reduce gearing, supplement capital expenses and invest in higher-yielding assets.
“In the current constrained economic environment, there is a noticeable trend where corporates re-occupy the Durban CBD for their call-centre and back-office operations, given the lower rentals vis-a-vis prime areas, as well as the CBD’s proximity to key public transport nodes frequented by the bulk of their employees,” Nomvete said.
“During the year, we completed several long-term leases in the node, including a 10-year lease with Mr Price.”
Delta said its cost of debt increased marginally from 9percent to 9.2percent during the period. “It should, however, be noted that the expiring interest rate swop contracts were originally concluded at a historically low base.”
Nomvete said that the company expected further sovereign credit rating downgrades and its month-to-month lease profile to temporarily neutralise distribution growth until the Leasing Policy is implemented, and the empowerment transaction is concluded.
“We have renewed bank facilities totalling R941m at a blended margin of 2.6percent above the three-month Johannesburg Interbank Average Rate, and the R125m commercial paper was settled during the year,” said Nomvete.
Delta Property rose to R6.60 after the results were released yesterday, but eased later to close unchanged at R6.24.