Wrap Text
Reviewed provisional condensed consolidated financial results for the year ended 31 August 2014
DIPULA INCOME FUND
(Incorporated in the Republic of South Africa) (Registration number 2005/013963/06)
JSE share code: DIA ISIN: ZAE000158317
JSE share code: DIB ISIN: ZAE000158325
(Approved as a REIT by the JSE)
("Dipula" or "the company", and together with its subsidiaries, "the group")
Reviewed provisional condensed consolidated financial results for the year ended 31 August 2014
HIGHLIGHTS
Distributable
earnings
up 15.8% to
R249.121 million
B-linked unit
distribution
up 10% to
73.333 cents
Full year
distribution
up 7.2% to
160.837 cents.
A-linked unit
distribution
up 5% to
87.504 cents.
Portfolio value
R5.4 billion (includes
new acquisitions in process
of being transferred)
New
acquisitions
totalling
R987 million
23% reduction
in vacancies
from the
interim period
3 major
strategic revamps
completed at an
average yield of 11%
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Reviewed Audited year
year ended ended
31 August 31 August
2014 2013
R'000 Restated
R'000
REVENUE
Property portfolio 485 670 374 720
Rental income 461 036 338 301
Straight-line rental income accrual 24 634 36 419
Total revenue 485 670 374 720
Other income 5 579 13 276
Property expenses (92 017) (70 136)
Administration and corporate costs (18 327) (14 244)
Net operating profit 380 905 303 616
Changes in fair values of investment properties 69 821 126 537
Profit from operations 450 726 430 153
Net interest (113 931) (68 243)
Interest paid (121 888) (80 863)
Amortisation of debenture premium 3 980 7 146
Interest received 3 977 5 474
Profit before debenture interest and taxation 336 795 361 910
Debenture interest (248 741) (201 649)
A-linked units (134 527) (111 680)
B-linked units (114 214) (89 969)
Profit before taxation 88 054 160 261
Taxation – 39 011
Total comprehensive income for the year attributable
to equity holders 88 054 199 272
Audited year
Reviewed ended
year ended 31 August
31 August 2013
2014 Restated
R'000 R'000
Reconciliation of earnings, headline earnings
and distributable earnings
Profit for the year attributable to equity holders 88 054 199 272
Debenture interest 248 741 201 649
Earnings 336 795 400 921
Change in fair value of properties (net of deferred taxation) (69 821) (178 872)
Change in fair value of properties (69 821) (126 537)
Deferred taxation – (52 335)
Headline earnings attributable to linked unitholders/shareholders 266 974 222 049
Straight-line rental income accrual (net of deferred taxation) (24 634) (45 590)
Straight-line rental income accrual (24 634) (36 419)
Deferred taxation – (9 171)
Lease cancellation income distributed 9 493 9 511
Deferred taxation reversed on tax losses and doubtful debts – 22 467
Taxation paid – 28
Amortisation of debenture premium (3 980) (7 146)
Antecedent interest 380 13 567
Amortisation of debt raising fees 888 330
Distributable earnings attributable to linked unitholders 249 121 215 216
Total number of linked units 309 962 824 286 999 366
Number of A-linked units in issue 153 941 061* 143 499 683*
Number of B-linked units in issue 156 021 763* 143 499 683*
Weighted average number of A-linked units in issue 153 798 028* 135 074 065*
Weighted average number of B-linked units in issue 155 850 228* 135 074 065*
Basic earnings per share (cents) 28.44 73.76
Headline earnings per share (cents) 5.89 7.55
Basic earnings per A-linked unit (cents) 116.10 156.44
Basic earnings per B-linked unit (cents) 101.53 140.37
Headline earnings per A-linked unit (cents) 93.40 90.23
Headline earnings per B-linked unit (cents) 79.13 74.16
Distributable earnings per A-linked unit (cents) 87.504 83.338
– Interim 43.752 41.669
– Final 43.752 41.669
Distributable earnings per B-linked unit (cents) 73.333 66.639
– Interim 32.338 29.804
– Final 40.995 36.835
NOTES TO THE STATEMENT OF COMPREHENSIVE INCOME
Debenture interest
Debenture interest payable to linked unitholders 249 121 215 216
Less: Antecedent interest on linked units issued (380) (13 567)
Charge per the income statement 248 741 201 649
* Excluding treasury shares.
The company does not have any dilutionary instruments in issue.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Reviewed Audited
31 August 31 August
2014 2013
R'000 R'000
ASSETS
Non-current assets 4 165 368 3 779 817
Investment property 4 116 886 3 722 994
Goodwill 48 482 48 482
Other non-current receivables – 8 341
Current assets 128 916 88 071
Trade and other receivables 68 142 33 983
Cash and cash equivalents 60 774 54 088
Non-current assets held for sale
Investment property held for sale 74 800 30 250
Total assets 4 369 084 3 898 138
EQUITY AND LIABILITIES
Equity 841 956 753 902
Stated capital 427 852 427 852
Reserves 414 104 326 050
Non-current liabilities 2 803 268 2 974 791
Debenture capital 1 684 659 1 499 420
Interest-bearing liabilities 1 118 609 1 475 371
Current liabilities 723 860 169 445
Interest-bearing liabilities 506 667 –
Trade and other payables 85 880 56 793
Linked unitholders for distribution 131 313 112 652
Total equity and liabilities 4 369 084 3 898 138
Net asset value per A-linked unit (cents) 815.13 785.13
Net asset value per B-linked unit (cents) 815.13 785.13
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Stated Fair value Accumulated Total
capital reserve loss equity
R'000 R'000 R'000 R'000
Balance at 1 September 2012 427 852 175 562 (48 784) 554 630
Total comprehensive income for the year ended 199 272 199 272
Transfer of capital items to fair value reserve 224 462 (224 462) –
Balance at 31 August 2013 427 852 400 024 (73 974) 753 902
Balance at 1 September 2013 427 852 400 024 (73 974) 753 902
Total comprehensive income for the year ended 88 054 88 054
Transfer of capital items to fair value reserve 94 455 (94 455) –
Balance at 31 August 2014 427 852 494 479 (80 375) 841 956
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Reviewed Audited year
year ended ended
31 August 31 August
2014 2013
R'000 Restated
R'000
Cash flows from operating activities 14 861 29 805
Cash generated from operations 353 802 268 549
Net interest (108 862) (59 362)
Taxation paid – (28)
Distribution paid (230 079) (179 354)
Cash outflows from investing activities (346 412) (1 143 180)
Cash inflows from financing activities 338 237 1 005 310
Net movement in cash and cash equivalents 6 686 (108 065)
Cash and cash equivalents at the beginning of the year 54 088 162 153
Cash and cash equivalents at the end of the year 60 774 54 088
SEGMENTAL INFORMATION
For the year ended 31 August 2014
Extracts from statement of Retail Offices Industrial Land Toal
comprehensive income R'000 R'000 R'000 R'000 R'000
Total revenue from property portfolio 235 015 182 971 43 050 – 461 036
Property expenses (44 400) (38 043) (9 574) – (92 017)
Net property income 190 615 144 928 33 476 – 369 019
Extracts from statement of
financial position
Investment property at fair value 2 444 874 1 162 027 497 235 12 750 4 116 886
Investment property held for sale 43 750 31 050 – – 74 800
For the year ended 31 August 2013
Extracts from statement of Retail Offices Industrial Land Toal
comprehensive income R'000 R'000 R'000 R'000 R'000
Total revenue from property portfolio 182 963 109 445 45 893 – 338 301
Property expenses (34 567) (24 681) (10 888) – (70 136)
Net property income 148 396 84 764 35 005 – 268 165
Extracts from statement of
financial position
Investment property at fair value 2 148 314 1 125 055 449 625 – 3 722 994
Investment property held for sale 1 400 28 850 – – 30 250
NOTES TO THE REVIEWED PROVISIONAL CONSOLIDATED FINANCIAL RESULTS
1. Reviewed results for the year ended 31 August 2014
The results for the year ended 31 August 2014 have been reviewed by Grant Thornton (Jhb) Inc. and their
unmodified review report is available for inspection at the company's registered office. The auditor's review
report does not necessarily report on all of the information contained in these provisional condensed financial
results. Unitholders are therefore advised that in order to obtain a full understanding of the nature of the auditor's
engagement they should obtain a copy of the auditor's review report together with the accompanying financial
information from the issuer's registered office. The directors take full responsibility for the preparation of these
provisional condensed consolidated financial results. These reviewed results have been prepared under the
supervision of the Financial Director, Brigitte de Bruyn CA(SA).
2. Basis of preparation and accounting policies
The reviewed condensed consolidated financial results for the year ended 31 August 2014 are prepared in
accordance with the requirements of the JSE Limited Listings Requirements for provisional reports and the
requirements of the Companies Act of South Africa. The JSE Listings Requirements require provisional reports to
be 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 Financial Pronouncements as issued by Financial Reporting Standards
Council and to also, as a minimum, contain the information required by IAS 34 Interim Financial Reporting.
The accounting policies applied in the preparation of the condensed consolidated financial statements are in
terms of IFRS and are consistent with those applied in the previous consolidated annual financial statements,
other than for the adoption of IAS 23 Borrowing costs, IFRS 7 (Revised) Financial Instruments: Disclosures,
IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements, IFRS 13 Fair Value Measurement
and various other improvements The adoption of these accounting standards did not have a material impact
on the group results.
The comparative figures have been restated in order to give effect to the JSE's guidance to REITS as regards
the treatment of antecedent interest. While this restatement has had no impact on net profit or basic earnings
for the year, on the distributions to unitholders or on the statement of financial position, the impact on basic and
headline earnings per linked unit is as follows:
Before Restated
(cents) (cents)
Basic earnings per A-linked unit 162.30 156.44
Basic earnings per B-linked unit 144.56 140.37
Headline earnings per A-linked unit 96.09 90.23
Headline earnings per B-linked unit 78.35 74.16
3. Summary of financial performance
Reviewed Audited
31 August 31 August
2014 2013
R'000 R'000
Distribution per A-linked unit (cents) 87.504 83.338
– Interim 43.752 41.669
– Final 43.752 41.669
Distribution per B-linked unit (cents) 73.333 66.639
– Interim 32.338 29.804
– Final 40.995 36.835
A-linked units in issue 153 941 061* 143 499 683*
B-linked units in issue 156 021 763* 143 499 683*
Net asset value per A-linked unit (cents) 815.13 785.13
Net asset value per B-linked unit (cents) 815.13 785.13
Gearing ratio*** (%) 37.2 37.9
* Excluding treasury shares.
** Net asset value includes total equity attributable to equity holders and linked debentures.
*** The gearing ratio is calculated by dividing interest-bearing liabilities, excluding linked debenture liabilities, by total assets.
4. Debt facilities as at 31 August 2014
Maturity R'million
August 2015 506.7
July 2016 111.8
August 2016 293.2
July 2017 125.0
July 2018 435.4
November 2018 22.8
December 2018 31.7
January 2019 91.9
September 2027 11.1
1 629.6
5. Lease expiry profile (Unaudited)
Average monthly
GLA gross income
Vacant 52 383
Unlettable space# 7 836
Expiring before 31 Aug 2015 42 532 2 798 993
Expiring before 31 Aug 2016 113 828 9 968 297
Expiring before 31 Aug 2017 123 554 9 377 090
Expiring before 31 Aug 2018 91 644 6 187 010
Expiring After 31 Aug 2018 151 733 11 830 400
583 511 40 161 791
# Unlettable space is space that forms part of the GLA but which management considers to be structurally incapable of
being let.
6. Payment of final distributions
The board has approved and notice is hereby given of final distributions (distribution number 7) of 43.75245 cents
per A-linked unit and 40.99484 cents per B-linked unit for the period ended 31 August 2014 set out below:
The distributions are payable to A- and B-linked unitholders in accordance with the timetable set out below:
2014
Last date to trade cum distribution Friday, 28 November
Linked units trade ex distribution Monday, 1 December
Record date Friday, 5 December
Payment date Monday, 8 December
Linked unit certificates may not be dematerialised or rematerialised between Monday, 1 December 2014 and
Friday, 5 December 2014, both days inclusive.
A-linked units in issue at the date of declaration of final distribution: 153 965 561
B-linked units in issue at the date of declaration of final distribution: 156 046 263
An announcement relating to the tax treatment of distributions will be released separately.
Income tax number: 9743/798/14/3
Directors: ZJ Matlala (Chairperson)*, IS Petersen (CEO), BH Azizollahoff*#, B de Bruyn (FD), NS Gumede, SA Halliday*,
E Links*, Y Waja*
* Independent non-executive # British
On 27 May 2014 SA Halliday was appointed to the board.
Registered office: Block B, Dunkeld Park, 6 North Road, Dunkeld West, PO Box 875, Parklands, 2121
Transfer secretaries: Link Market Services South Africa Proprietary Limited
Sponsor: Java Capital
Company secretary: CIS Company Secretaries Proprietary Limited
Following the acquisition of Probity Business Services Proprietary Limited by Computershare Investor
Services Proprietary Limited ("Computershare"), CIS Company Secretaries Proprietary Limited, a subsidiary of
Computershare, was appointed as company secretary with effect from 18 June 2014.
COMMENTARY
Profile
Dipula is a REIT with significant BEE credentials. It owns a diversified R5.4 billion property portfolio (including new
acquisitions not yet transferred), comprising retail, office and industrial properties. The properties are located across
all nine provinces in South Africa, with the majority in Gauteng.
Dipula trades under the codes DIA and DIB. DIA units are entitled to a 5% preferred income growth until 2017 while
DIB units receive the remainder of the growth.
Management owns a large stake in Dipula and are long-term investors in the company. This strategic holding
ensures long term alignment with other shareholders, leads to responsible corporate behaviour and the avoidance
of decisions that may bolster short-term performance at the expense of long-term sustainable growth.
Distributable earnings
During the year ended 31 August 2014 ("the year") Dipula achieved an increase in distributable earnings of 16%
compared to the prior year, translating into a 7.2% growth in distributions per unit over the preceding 12 months
and exceeding management's guidance of between 6% – 7% announced in the interim results.
The total distribution attributable to the A-linked units is 87,504 cents per unit (2013: 83,338 cents per unit),
comprising the 43,752 cents per unit declared at interims and the 43,752 cents for the second half of the year.
This equates to a 5% increase from the previous year and is in line with the distribution policy for A-unit holders.
The total distribution attributable to the B-linked units is 73,333 cents per unit (2013: 66,639 cents per unit), which
includes 40,995 cents (2013: 36,835 cents) for the final distribution, equating to an 11.3% increase on the prior year.
Property portfolio
The portfolio consists of 181 investment properties valued at R4.2 billion with a total gross lettable area ("GLA") of
583 511m(2).
Property operating expenses averaged 20% of revenue (2013: 20.7%).
The segmental and geographic breakdown of Dipula's portfolio as at 31 August 2014 was as follows:
Sectoral profile by GLA (%)
Industrial 22%
Offices 23%
Retail 55%
Sectoral profile by revenue (%)
Industrial 9%
Offices 40%
Retail 51%
Geographic profile by GLA (%)
Eastern Cape 4.0%
Free State 4.0%
Gauteng 71.0%
Limpopo 5.0%
Mpumalanga 2.0%
North West 4.0%
Northern Cape 0.0%
Western Cape 4.0%
KwaZulu-Natal 6.0%
Geographic profile by revenue (%)
Eastern Cape 5.0%
Free State 3.0%
Gauteng 71.0%
Limpopo 5.0%
Mpumalanga 2.0%
North West 5.0%
Northern Cape 0.0%
Western Cape 2.0%
KwaZulu-Natal 7.0%
Vacancies
Vacancies relative to the prior year remained stable at 9.1%. Industrial vacancies reduced by 44.6% to 5%
(2013: 8.1%) and retail vacancies were down 7% to 7%. Office vacancies increased to 18.8% from 15% due to the
prevailing tough conditions in this sector.
Acquisitions
The group has acquired properties at an aggregate value of R987 million from 1 September 2013 to the current
date. During the year under review, properties totalling R328 million transferred. A further portfolio of R107 million
transferred post year-end and R575 million of the new acquisitions will transfer by January 2015, increasing the
portfolio value to approximately R4.9 billion.
Disposals
Properties totalling R103 million were sold during the year in line with the group's strategy of disposing of non-core
properties.
Properties held-for-sale and included in the above figure total R75 million and consist of 14 properties.
A total of 30 properties worth approximately R200 million have been identified for disposal over the next financial year.
Refurbishments, extensions and redevelopments
Refurbishments and upgrades at a cost of approximately R33 million will be undertaken over the next 12 to
18 months at an average yield of approximately 12%. During the year refurbishments totalling approximately
R42 million were completed at an aggregate yield of 11%. These projects will be funded by a combination of debt
and equity.
Commitments
Dipula has commitments for property acquisitions of R1 billion which will be funded by a combination of debt and equity.
Funding
As at 31 August 2014, the all-in blended rate of the group's debt was 8.51%. The company has total debt facilities
of R2.2 billion, with R1.6 billion utilised to date. A facility of R507 million that is due to expire on 31 August 2015,
was successfully re-negotiated post year-end for a further three years and the margin reduced from 2.2% to 1.65%
at a fixed rate of 8.75%.
An aggregate 76% of the debt has been fixed post year-end and the current blended rate is 8.67%. The average
length of fixes is 3.3 years
Private placement
On 6 September 2013, Dipula successfully raised R200 million in terms of a private placement. The purpose of the
private placement was to fund previously announced acquisitions.
In terms of the offer 10 441 378 A-linked units were issued at a price of R10.16 and 12 522 080 B-linked units at a
price of R7.50. This increased the number of A-linked units to 154 million and B-linked units to 156 million.
The issue prices included an accrued distribution for the six months ended 31 August 2013 of 78,504 cents
combined, which translated into 41.669 cents for A-linked units and 36.835 cents for B-linked units, and an accrued
distribution of 3.324 cents combined for the period 1 September 2013 to 5 September 2013. This translates to
1.716 cents for A-linked units and 1.608 cents for B-linked units. Excluding the accrued distributions, the private
placement linked units were issued at a price of R9.73 per A-linked unit and R7.11 per B-linked unit.
Property management
Dipula's property management contracts will be up for review in approximately 12 months. The company is currently
assessing its options and will decide on the way forward in due course. A new management system has been
successfully implemented and the staff complement in the Manco has been augmented.
Corporate activity
Dipula is always on the lookout for and receptive to value enhancing corporate activity such as the friendly merger
with Mergence Africa Property Fund and the acquisition of Asakhe which lead to the listing of Dipula. Corporate
activity as a means of growth enhancement of shareholder value should be supported and the company will always
act in the best interests of unitholders when appropriate opportunities arise. The company is not aware of any
corporate activity that will enhance or further the strategy of the company and be in the best interests of all its
unitholders. Management will continue to monitor activity in the sector.
Prospects
Despite South Africa having entered a period that is anticipated to deliver low economic growth combined with
possible interest rate hikes, the board and management remain positive. The electricity supply constraints will in all
probability have an impact on the sector as a whole and solutions are being sought. Dipula continues to pursue a
selective acquisition strategy for appropriate opportunities. Although current conditions pose challenges they also
offer opportunities for prudent and patient investors. The goal is to achieve asset growth of between R1 billion and
R1.5 billion for the year ahead.
On the assumption that trading conditions and the macroeconomic environment remaining stable and no major
tenant and corporate defaults, management anticipates combined distribution growth of between 7% to 8% for
2015. The forecast has not been reviewed or reported on by the group's auditors.
By order of the board
Johannesburg
12 November 2014
Website: www.dipula.co.za
Date: 12/11/2014 12:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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