CAPE TOWN - DIPULA Income Fund’s hand-on management and defensive portfolio saw distributable earnings up 8.5 percent to R275 million in the six months to February 28, a pleasing result considering the figure was compared with a pre-Covid 19 period, chief executive Izak Petersen said yesterday.
This resulted in a 16.8 percent surge in B-share distributable earnings to 45.10 cents per share, while A-share distribution growth was 2.9 percent higher at 59.02c.
Petersen said in an interview this was despite tough trading conditions and continuing pressure from rising utility and rates costs, and the need for additional administration resources to cater for declining levels of municipal and utility services.
“Something has to change on this front. Property owners cannot continually shoulder the burden on these costs. There seems to be a lack of knowledge from utilities and municipalities that these costs filter down to businesses that are often operating on paper-thin margins,” he said.
Contractual rental income increased by 1.8 percent to R538m, and property-related expenses rose by only 1.6 percent to R219m. Dipula’s cost-to-income ratio was stable at 36.7 percent versus 36.3 percent last year.
Net property income came to R457m (R461m) after providing rental relief of R8.2m to tenants during the period, over and above R49m provided in the year to the end of August 2020.
“Prudent balance sheet management helped to reduce loan-to-value (LTV) ratio 11 percent to 35.7 percent. This positions us well to navigate these difficult times and be in a position to pay dividends to shareholders,” he said.
A-shareholders would be paid an interim dividend of 59.02c per share, and B-shareholders 45.10c per share.
Dipula was comfortably within its strictest loan covenant levels of 45 percent LTV, with its LTV at 35.7 percent.
The property portfolio remained stable at R9 billion, consisting of 189 properties (2020: 190 properties).
One-hundred-and-thirty six new leases were concluded at an average escalation of 7.7 percent and a weighted average lease expiry of 3.4 years, representing R138m in lease value.
The property portfolio by lettable area was 45 percent retail, 14 percent office and 37 percent industrial, with 58 percent of the property space in Gauteng.
A big proportion of tenants were essential services. There was a high proportion of national tenants. The offices were mostly occupied by government departments, while a large proportion of the industrial portfolio was tenanted by big companies.
Seventy-seven percent of tenants were retained in the period (80 percent). A negative lease reversion rate of 4.8 percent was the result of challenging market conditions.
Vacancies were 7.6 percent after good progress was made in moving some of these vacancies, which were believed not to be of a structural nature.
Dipula’s board had at this stage not provided guidance for the full-year performance because of the uncertain environment.
However, Petersen said if there were no unforeseen shocks to the trading environment, the group should produce a reasonable result for the full year.